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The Myth of the Rich Doctor

Article

Are you in a financial position to do what you want to do when you want to do it? Explore the relationship between physicians' income and their ability to build wealth.

Are you in a financial position to do what you want to do when you want to do it? Could you afford to retire, care for ailing parents, or reinvent your medical practice?

Wealth buys the freedom to decide how you spend your days. My investments gave me the safety net to leave my conventional surgical practice and launch into a career as an author and speaker and consultant promoting better medical outcomes.

Here’s the dirty little secret. Most physicians are economic slaves to their practices. Our high incomes do not reliably translate to high net worth and the freedom wealth buys.

Income vs Wealth

Practicing physicians earn top dollars. The US Bureau of Labor Statistics culled data from tax records to conclude that nine of the top 10 earners in the US call themselves “doctor.”

Indirect evidence supports the assertion that physicians fail to build wealth. In a recent survey, half of physicians are behind where they would like to be in retirement planning. Professional medical associations are exploring how to assess competency in older physicians who continue to practice because they cannot afford to retire.

The Reasons Physicians Fail to Build Wealth

What keeps physicians from building wealth? Here are the reasons usually cited:

  • Medical school debt
  • Late start on earning and savings
  • Failure to protect assets against know and overlooked risks
  • Poor tax planning
  • Getting investment advice from the wrong people
  • Fraud and theft

This is like saying patients become obese because they eat too many donuts. It may be true, but it fails to tell the whole story.

Further it fails to lead to sustained solutions that deliver different outcomes. Budgets work about as well as diets.

The Real Causes of Unrealized Wealth

I believe that physicians’ failure to build wealth is a symptom of a deeper financial ill: their dysfunctional relationship with money.

Physicians as a group are intelligent people who:

  • Tend to overestimate their ability to manage money, and underestimate the level of difficulty of the challenge.
  • Lack insight about what they do and do not know.
  • Turn to money to solve non-financial problems, like alleviating their guilt about spending so little time with their families.

The real barrier to financial freedom comes down to a conspiracy of silence around money. For physicians, money is the ultimate taboo topic. You cannot fix problems that you cannot talk about.

Here are three reasons physicians avoid conversations about money:

  • The culture of medicine. Just as the government calls for the separation of church and state, medical ethics calls for a separation between the care a patient gets and a patient’s ability to pay. We physicians learn to avoid conversations about money to uphold this ethic. As a practicing physician I often thought that delivering medical services was like ordering a meal off of a restaurant menu without any prices. Small wonder health care costs spiraled out of control!
  • Lack of formal education. Physicians get no courses in business or financial management in medical school or in residency.
  • Awareness of their vulnerability. Physicians experience themselves as financial prey. They turn to people they trust—their colleagues–for financial advice. I include myself in the group of physicians who have fallen for “DDD’s”–dumb doctor deals.

The Path to Wealth

Physicians have the ability to build wealth.

As Einstein says, problems are not solved on the level at which they are created. The solution begins with physicians’ willingness to tolerate the discomfort when discussing money.

Here are three steps to help physicians achieve financial freedom:

1. Coach physicians

to proactively engage in conversations with patients about the costs of medical care.

2. Explore—with compassion–the forces that drive spending.

Here are some things that struggling physicians say to themselves.

  • “I deserve nice things.” You know the sacrifices you and your family made to answer this call to medical service. When physicians finally start earning their six-figure incomes, they feel that it’s time to splurge.
  • “I can save lives and I’m smart; that means I can manage my own money.” You cannot see into your blind spot.
  • “There will always be more than enough money.” This physician fails to plan, trusting that there will be a bright financial future. Without a plan, money tends to wander off.
  • “You invested in a marijuana farm with a 200% return? Count me in!” Physicians can follow trusted colleagues into marginal investments.
  • “Look at me!” This physician wants to maintain the appearance of success at the cost of building true wealth.
  • “Sure, I trust you.” Physicians’ trusting nature makes them easy targets for embezzlement, fraud and ploys.
  • “I’m embarrassed.” Many physicians wonder how smart people like themselves could make such ill-informed choices. Disclosing mistakes can be painful.
  • “Mother Teresa took a vow to poverty; I should, too.” This physician does not feel worthy of wealth.
  • “Show me where to sign.” Physicians are often unaware of their power to negotiate contracts, or lack the skill and experience to execute.

3. Replace wealth-eroding beliefs and habits with new wealth-building tools and skills.

Just as we have mentors to guide us through the art and science of caring for patients, mentors and coaches helped me change my beliefs and behaviors around money. I offer my son—headed for medical school–basic financial literacy lessons I never got. I hope he aligns his spending habits with Einstein’s insight, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t pays it.”

Wealth-building is not a do-it-yourself job for most physicians. If you or a family member had a rare medical condition, you would not treat it yourself; you would seek the help of the expert. Manage your wealth with the same strategies you use when you manage your health.

Financial advisors know about the complexities of “referred financial pain” the same way you know about the association of right shoulder pain and an inflamed gallbladder. Could you acquire this knowledge? Absolutely. The real question is whether you want to invest the time and effort.

Physicians can achieve financial freedom. With the economic stresses posed by the Affordable Care Act, now is the time for physicians to take control of their financial destiny.

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Victor J. Dzau, MD, gives expert advice
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