Are Doctors Millionaires?
Many physicians are HENRYs (High Earners, Not Rich Yet). They make great money but spend more than they earn.
With proper financial literacy, doctors can invest their salaries and become millionaires. However, the road to fatFIRE is not as easy as most would think. Many factors need to be considered.
1. Earning Potential
Doctors are one of the highest paid professions. They can afford to live in a nice house, buy fancy cars and have kids attend top schools. However, they may not feel rich because of the influence around them. Their friends and coworkers have bigger houses, drive cooler cars and take more exciting vacations.
If a physician can learn to control the influence and avoid lifestyle inflation, then they should have no problem becoming rich. But the key is saving and investing wisely. For example, a physician who saves 10% of their income every year can reach a net worth of $2.5 million in 30 years at a 6% return rate.
This is even if they have hundreds of thousands of dollars in debt from undergrad and medical school and pay close to 50% in taxes (state, local, federal and sales) along with mandatory costs like health and auto insurance. The trick is keeping the savings rate high and learning to invest in passive ways such as syndications.
2. Student Loans
Many doctors have significant student debt, and this can make it hard to become a millionaire. Doctors typically go through medical school and residency during their twenties and early 30s, so they can have a lot of debt to deal with after graduation. This can be difficult to overcome, but as their salaries increase with experience, they may be able to build up a substantial nest egg.
If they learn to save aggressively, invest wisely, and avoid lifestyle inflation – which can be difficult in the social circles of physicians – they may be able to achieve their goals. It is important for them to take steps to prioritize paying off their debt and consider alternative income streams like consulting, real estate, blogging, and speaking engagements.
It is also important for them to stay informed and work with a financial planner who understands the unique circumstances of physician wealth building. With the right knowledge and effort, doctors can reach their goals and become millionaires in retirement.
Considering how long it takes to complete medical school, residency, and then start earning, doctors come out of training a little behind their non-physician, financially savvy peers. It’s not uncommon for physicians to have more than $1 million in student debt when they begin their income-producing careers.
Physicians have the ability to build large net worths if they make savings a priority and are careful with spending. However, many docs struggle to stay on track when they see their friends buying huge houses and going on lavish vacations. This is referred to as “keeping up with the Joneses” and it can really mess with your financial goals.
The truth is, most physicians can achieve a net worth of $10 million or more by the time they retire if they save and invest their money wisely. But it won’t be easy and some sacrifices will need to be made along the way. That’s why I created this podcast to help doctors make the right choices so they can reach their wealth goals.
While the salary doctors make puts them in one of the highest tax brackets, many still struggle to build a substantial net worth. This is primarily due to the large amount of student debt they carry, high overhead costs (insurance, utilities, etc.), and a late start to their career.
Doctors should focus on budgeting and spending their income wisely. Using the power of compounding, they can quickly turn small amounts into large sums over time. However, they must be careful not to overspend or lose money on bad investments.
To maximize their investment potential, physicians should look into options such as equity mutual funds or real estate. Investing in these assets allows them to earn an attractive rate of return and can help grow their wealth even faster than savings accounts. It’s also a great way to take advantage of tax benefits that are exclusive to investors such as deferred capital gains taxes. This can significantly reduce your tax bill in retirement.