How to make a doctor’s salary and still feel poor—and how to fix it

how to make a doctors salary and still be poorDespite earning a good six-figure salary, most doctors never become rich for several reasons:

  1. The government penalizes big W2 incomes. That’s where most employed physicians earn their income. They spend a decade accumulating debt while earning a pittance of a stipend only to be hit by the upper federal income tax brackets. It would be better to earn a salary of $90,000 for ten years than to earn nothing for four years, $45,000 for four years, and then $240,000 for three years. Expensive states like New York, Massachusetts, or California will hit you with higher taxes, cost of daily living, and property costs.
  2. You have less time time for your savings to accumulate.
  3. Lifestyle creep.


That’s right. Lifestyle creep. It usually goes one way—up. And it’s much easier to adjust your lifestyle up to your salary than it is to adjust down. And doctors are prone to adjusting upward. Their jobs are stressful.  Patients die. Patient sue. Insurance companies make absurd cuts in reimbursements. As professionals, they are expected by society to have wealth.  Retail therapy is a common coping mechanism to justify the challenging career.

Imagine that a single physician earns $240,000 a year in W2 salary while living in Boston. Assuming roughly a 35% net federal and state income tax, she takes home $156,000 annually. A rough estimate of expenses might be:

  • $3500/month for a 1BR condo by City Hall.
  • $500/month for utilities, cable, internet. Maybe including cellphone bills.
  • $1400/month for food and restaurants
  • $1500/year for clothing
  • $6000/year for disability insurance
  • $22,000/year professional insurance, malpractice.
  • $7200/year for car lease (Mercedes)
  • $1200/year for car insurance
  • $5000/year gas
  • $5000/year vacation

That adds up to $112,700 in living expenses or $43,300 in leftover money for everything else.  Note that I did not include miscellaneous expenses, hobbies, or other entertainment costs either.  If she were to invest or save then entire amount annually, it would take over 20 years at this rate to accumulate over $1 million!

If you include family, kids, and education expenses, there really is not much left over to save. For a busy physician, there are limited hours to increase her income through her primary line of work or even branch into a second income stream. I know people who have done it, but personal time suffers.

The logical solution in this scenario is to cut the lifestyle creep. This is one variable that can be controlled immediately and positively impact your net worth immediately. There are plenty of people who do not earn doctor salaries who are rich. They accumulate net worth through diligent use of their money and time. Find out what maximizes your happiness. You might enjoy one fancy vacation per year but could do without the $80,000 gas-guzzling-money-pit vehicle. Or perhaps your recreation of choice is exercise—this is an activity that could be low cost and be beneficial to your health.

What are your interests that maximizes happiness? What lifestyle choices could you eliminate and still be content? Sound out below!

(Photo courtesy of Flickr)

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