If you have physician clients or family or friends, you’re in on a dirty little secret: physicians’ high incomes do not reliably translate to high net worth.
Practicing physicians earn top dollars. In fact, according to the U.S.Bureau of Labor Statistics, nine of the top ten earners in the U.S. 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 medicine 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 people are overweight 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 their guilt about spending so little time with their families.
The barrier to change 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. Further, mastering exploding volumes of medical information takes priority over learning about how to build wealth.
- Awareness of their vulnerability. Physicians experience themselves as financial prey. They turn to people they trust and attempt to avoid disclosing their financial vulnerability. One advisor says her major job is “protecting her doctors from 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 have conversations with loan officers when they take out medical school loans, with patients about the costs of medical care and with financial advisors about what it means to thrive.
2. Explore –with compassion–the forces that drive spending. Here are some things that struggling physicians say to themselves.
- “I deserve nice things.” Physicians and their families make tremendous sacrifices to answer this call to medical service. When physicians finally start earning their 6-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.” This is the physician who fails to know how much he or she does not know about money.
- “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 people they trust 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 Theresa took a vow to poverty; I should, too.” This physician does not feel worthy of wealth.
3. Replace old wealth-eroding beliefs with new wealth-building habits. This is generally not a DIY job. Physicians are best served with a financial expert who can bring a fresh perspective.
Physicians can achieve financial freedom. With the economic stresses posed by Obamacare, now is the time for physicians to take a new serious look at wealth-building.
© 2015. Vicki Rackner MD. All rights reserved. You are welcome to reproduce this blog post; please include this with this paragraph:
Vicki Rackner MD works with physicians who want to thrive in the era of Obamacare and the financial advisors who help them get there. This author, speaker and consultant offers a bridge between the world of medicine and the world of business. Contact her at (425) 451-3777.