By Dr. Charles Patterson, WCI Columnist
The White Coat Investor’s mission is to help physicians and other high-income professionals get a fair shake on Wall Street. The primary audience is high-income professionals, a group that might be loosely defined as the top 25% of US earners, encapsulating many disparate professional groups and individuals. To be in the top quartile, a household would need to see an income in excess of $129,000 in 2022; the median household income in the US was around $70,000in 2022, depending on several factors including where you live.
There is, perhaps, a general tendency to seek a measuring stick. We want to know where we rank, how well we are keeping up, and what our behaviors are yielding. Intuitively, we know that income is a poor reflection of financial (or life) success, but it would be naive to ignore the data for sensitivity's sake. The fact remains that what you do with your money is far more important than how much you are bringing in, a tenet that drives the WCI mission.
Within medicine, and within WCI, there are a group of folks whose income is well above the national average but perhaps well below the median income of the standard WCI reader. As of the 2023 WCI Survey, approximately 28% of readers polled had incomes less than $250,000 and nearly 10% made less than $100,000. Because it would be a bit of a stretch to refer to us as “low-income,” I propose that we refer to ourselves as “moderate-income physicians” (or professionals, if you like).
Moderate-income physicians are a diverse group, encompassing part-time clinicians, military docs, allied health professionals, paraprofessionals in fields outside of medicine, and retirees, to name just a few. Our circ*mstances may be substantially different, from practice type and net worth to income growth potential and career progression. But for each, the same rules of investing apply. And for this reason, each benefits from prudent goal setting, lifestyle management, and participation in the WCI community. The moderate-income physician is an essential member of this readership, and the answers to our specific questions are discoverable through The White Coat Investor.
The Same Rules Apply
Reading about the seven-figure incomes of our colleagues can evoke a titillating array of emotions: joy at the thought that this could be me (it probably won’t be), jealousy (until I realize the awfulness that accompanies boat ownership), even a certain repulse that accompanies the thought of trying to keep up. Frankly, there are a number of financial concepts often discussed on WCI that simply don’t apply to those with an income less than $250,000. You may not need to go through the rigamarole of the Backdoor Roth. You are less likely to be an accredited investor. And tax-loss harvesting is typically not a priority. While the capacity to make great financial strides quickly is limited relative to the cadre of ultra-high earners, investing, in general, is more straightforward for the moderate-income physician. This can be a great thing as long as one’s strategy is sound and your execution is disciplined.
There are some unique challenges posed to the moderate-income physician. A more modest income means that reasonable savings goals will also be more modest. Thanks to the miracle of compounding interest, 20% of a rheumatologist’s salary grown over 40 years might pale in comparison to their ophthalmologist colleague who saved the same fraction of their income. Without commenting on the value of the ANA-fighting efforts of rheumatologists when compared to other specialists, all can agree that expectations are paramount to finding contentment. A smaller paycheck also means a particular susceptibility to the pitfalls of physician financial illiteracy: inappropriate whole life insurance policies, massive mortgages, and lifestyle creep among many others. By sheer scale, one can arguably get into deeper water with a larger paycheck. As emergency medicine doc Bill Yount said: “More income means greater potential to make serious mistakes.” But while these mistakes can be overcome, it's harder to dig yourself out of a hole when you’re working with a hand shovel instead of an excavator.
In reality, the same rules apply no matter the number associated with your high income: you need to have a plan, live like a resident for as long as is tenable, and invest your savings wisely. Executing your plan early while avoiding costly mistakes is the gameplan for us all. Optimizing quality of life and time to financial independence are the critical tasks of the moderate-income physician.
More information here:
The Ethics of Investing
Defining ‘Enough'
Income need not be fixed in the working years. One has the option to seek outside gigs, go back into training, pursue entrepreneurial ventures, or engage in any number of alternatives to bolster income. You can enter contract negotiations or give loc*ms a try. For the willing, geographic arbitrage can be high-yield. Universally, these strategies will take time, attention, and sacrifice of some sort (missed family time, sweat equity, perhaps even one’s own assets). There can be (a lot of) risk involved, though the return on that investment is enticing. One should first consider, however, exactly what that increased income will add to life satisfaction. While we know that money can be used for standard of living increases, financial security, and life-defining experiences, it's not a panacea for happiness.
Defining what constitutes “enough” is vital to conceptualizing the role money plays in your life. It's shocking how underappreciated this simple precept is among physicians, as this question lies at the heart of our saving and spending habits. A keen understanding of your goals, values, and sources of happiness presupposes any investment strategy. If you are taking the time to craft a written investment plan, it stands to reason that a thorough reflection of exactly what that money will do should guide the exercise.
I am a moderate-income physician. I may not be in the future (gee, wouldn’t it be swell if I could afford a Tesla?), but my happiness isn’t predicated on increased income. We have more than we need: my children are secure (and would be more so if I was pushed off a cliff), we are exceeding our savings goals, and we are active participants in our community. While more money might be nice and could help us achieve our long-term goals sooner, adding the time and attention to pursue it would detract from the precious seconds I have with my family. I paint a rosy picture, but this perspective wasn’t won—it was learned.
A while back, my wife left medicine. It was hard to experience financially, as it cut our household income by more than 30%. But interestingly, there wasn’t any lifestyle deflation, as her income always went to savings. On the contrary, our pace of living and family cohesiveness were exponentially improved. We found that we were happier despite not having the money that we weren’t spending. Though the dual income is lovely, neither of us wishes to live through the chaos of juggling two careers and a family. For other couples and families, the opposite is true: both partners may thrive in a busier home. My point is that fulfillment is found in the harmony of relationships, growth, and meaningful work. What that means to you is worth discovering, and is absolutely imperative in finding some semblance of wellness.
More information here:
How to Become a Wealthy Pediatrician
Investing in Collectibles: Is Investing in Jewelry, Coins, and Ferraris Worth It?
Moderate-Income Physicians Belong at WCI
Finally, a bit of humility. If you are a moderate-income physician, your ability to build wealth in the long term still far exceeds that of the average American. One might argue that certain specialties are undercompensated as compared to others—it's a matter capable of debate. Generally speaking, though, we work hard and are highly compensated, which seems fairer than working hard for little or no compensation.
Money challenges are specific to each of us. Whether your annual income is $1 million or $100,000, this community is here to help you plan, encourage you along your way, and celebrate your successes.
Need more info for moderate-income physicians? Check out these columns:
- A Moderate-Income Physician’s Approach to Alternative Investments
- Here’s How Much We Make, Save, and Spend as ‘Moderate Earners’
Are you a moderate-income physician? How does your lifestyle differ from those doctors who make seven figures? Are you satisfied with your salary and with your lifestyle? Comment below!
