Smart Money MD

There’s a fetish in the financial world to track one’s net worth.  Maybe it’s a chauvinistic means to compare one’s success to others’, or simply a means to build accountability to reach one’s goals.  I certainly felt great looking at a line graph with a positive slope documenting my net worth when I became interested in the subject.  The years that the bull market plowed ahead produced very steep slopes, while more recently the growth has been mostly stagnant.  Whether any of the positive slopes were related to my own doing, I sure felt great about it. 

We should all strive to have net worth graphs with positive slopes.  Most doctors’ net worth line graphs should have positive slopes—the only time should be if there is no income, working or from investments.  Either way, it’s not good for anyone to have a stagnant net worth slope.

One interesting discussion that we often hear from the doctor’s lounge how one’s life would have progressed differently if we had opted for a career outside of medicine.  These conversions materialize so often that sometimes it seems that all doctors are disgruntled about their jobs.  The reality, unfortunately, is that these conversions stem from burnout or some aspect of our jobs that we don’t enjoy.  

One interesting thought exercise that is often discussed is how life would be if said doctor opted for a career outside of medicine.  Let’s take a look at the financial differences in one scenario:

Software developer vs Hospitalist
These projections are relatively broad in assuming that the software developer is moderately successful in her field of choice, since her alter ego in another life ends up becoming a doctor. Both cases do assume relatively intelligent but not necessarily draconian financial comprehension.  

The software developer begins her career with only a Bachelor’s degree, although this field typically doesn’t necessarily require an advanced degree to move up the ladder.  What one can conclude on this is that you don’t have to be a doctor to become a millionaire, and all that it takes is a good steady income and time.  It doesn’t hurt that a career that only requires a Bachelor’s degree will allow an individual to enter the workforce in her early twenties, effectively adding nearly a decade to the working career.  This financially mindful software developer is able to build a net worth of $1 million before the age of 40!  With tactful financial planning and grinding away over time anyone with moderately good financial firepower ought to build a healthy net worth.

Let’s take a look at the Hospitalist financial trajectory:

You can see that the doctor has to start her career later and with a hefty student loan balance compared to her software engineer alter ego.  The financial trajectory will depend largely on the doctor’s specialty and income potential—the Hospitalist in this example likely has longer hours than the software developer and only has marginally higher net income during her peak years.  I chose this example to show that your income range as a doctor really determines how much spending power you have.  There are plenty of medical specialties whose income is comparable to that of many other non-healthcare professions.  

A doctor household with a stay-at-home spouse will have less financial firepower than a household of, say, two mid-career upper management engineers.  

What this means is that just because you are a doctor, you still shouldn’t spend more than what you income allows.  This means that Pediatricians shouldn’t be buying as much as Neurosurgeons (Sorry Peds! We will keep fighting to make sure that your profession becomes better recognized for your care!)

Conclusion
If you look back at the Hospitalist net worth trajectory, she will still be able to hit a seven-figure net worth before the age of 50.  With either more income or strategic financial planning, she can still live a comfortable, but busy, lifestyle that rewards her for spending her twenties in the basement library of her medical school.  The next time you roll your eyes when the ER calls you for your eleventh admission of the evening when you have no cap on admissions, remember that as a doctor you can still build up your net worth, piece by piece.

Don’t know where to start? Consider going through some of our previous articles:

• Weighing the geographical arbitrage scale for doctors
• The daily life of a pediatrician
• Losing sight of the forest amidst the trees