Smart Money MD

Most doctors will spend anywhere from eleven to sixteen years after high school to become a fully trained and practicing physician. This is a long time to delay your income and life. Most of us go through four years of college, four to five years of medical school, and anywhere from three to seven (or more) years of residency and fellowship. Assuming that we started at age 18, we finish this journey around age 29 to 34. The only upside I can think of being old is that most of our patients expect older doctors to have more experience! (Who do you really want doing your robotic prostatectomy: a 38 year old youthful appearing surgeon or a 64 year old greying surgeon who has been practicing for thirty years?)

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Since most doctors graduate with debt, we do have to play our cards strategically to “catch up”. Unfortunately, the average doctor will not become richer than an average aggressive financially savvy IT guy or white collar worker, we can come close.

Here’s how the net worth of how a financially conscientious Hospitalist progresses:

Most Hospitalists who do not pick up a huge number of additional shifts or locum jobs have a relatively narrow range of income. On average, we expect a starting salary around $200,000, which may increase to $220,000 the second year, $250,000 the third year, and perhaps a cap around $260,000 in year 4 and beyond. For simplicity, we’d assume an effective federal income tax rate of 25%. Let’s also assume that this Hospitalist has a student debt of $250,000 upon finishing residency. We can also ignore any investment growth on the savings or interest payments on the loans.

In this simplistic example, the average Hospitalist who starts work at age 29 will come out of student debt by age 32 if she saves relatively aggressively. Those of us who have dug ourselves out of a significant amount of debt can agree how therapeutic that last payment can be. The average doctor can get herself out of debt relatively quickly with a clear strategy to tackle the debt. Obviously the growths are going to be different depending upon your profession. An ophthalmologist who starts out with a measly $165,000 salary will need to budget more carefully than the neurosurgeon who will command $500,000 out the door.

Based on this example above, we should be able to make several general conclusions regarding the financial situation of most doctors:

1. We should all be able to repay our student loans within the first five years of practice assuming that you started with an average amount of debt. Most of us should be able to repay it all within the first three years if we wanted to.
2. The average doctor may not become a millionaire by age 40 on her own income, but all of us should be millionaires by age 45. Unfortunately a million dollars really isn’t a whole lot of money now, but it sure as hell is nicer than what the rest of the general population can earn.
3. We can all make a decent living in medicine. It still isn’t easy after your grueling training, but with today’s aging population we do have job security.
4. You will not likely be able to afford the $3,000,000 mansion in Miami. Some doctors will be able to do solely through pre-existing family wealth, higher paying specialties, or through alternative streams of income.

Let’s take a look at another doctor who is an Intensivist (someone who works in the intensive care unit). Assume that she also comes out of fellowship with $250,000 in student loans. She will also have an effective income tax around 30%:

In this scenario, the Intensivist will most likely become a millionaire by year six. It’s interesting how doctor income varies among the specialties.

What is your target net worth after ten years on the job? How does it match up to these examples?

(Photo courtesy of Flickr)