“James M. Dahle, MD, FACEP, FAAEM is a practicing emergency physician and founder of The White Coat Investor—the most widely-read, physician-specific personal finance and investing website in the world.”
Through his work on The White Coat Investor, Dr. Dahle is committed to making investing for doctors as easy as possible and demystifying personal finance’s complexities. He recently published an article called Recognizing Reality to help new doctors out of bad financial situations.
His advice is simple: embrace the reality of your situation and adjust what you can control.
He writes that occasionally he will meet a new doctor that lives in an expensive area with a low-paying job and a significant amount of student loan debt. His challenge to physicians in this situation is to make adjustments to improve their outcomes while recognizing the reality of their situation. To Dr. Dahle, this means living like a resident, finding a better job, and adjusting their student loan plan.
Let’s dive in with more detail:
Continue to Live Like a Resident
For new doctors in a bad financial situation, Dr. Dahle writes that they may need to continue living like a resident a while longer.
He says this doesn’t mean they need to “reuse Ziploc bags and paper towels,” but they should plan on being more intentional with their lifestyle decisions. While situations vary, residents typically earn around $60k per year, putting them near the median income for American households. So when it comes to buying a home, physicians could consider purchasing an average home rather than an $800k home.
The same goes for cars, vacations, and other lifestyle purchases. By living like a resident, new doctors may begin to dig out from under their student loan burden and set themselves up for financial success.
Get a Higher-Paying Job
Next, Dr. Dahle highlights his journey as a physician.
He started his career as a military doctor, earning $120k per year at a time when the average emergency physician made around $250k. Over four years, he estimates that he earned close to $500k less, although he was able to finish without student loans.
For new physicians, he recommends closely examining their current situation.
Dr. Dahle writes:
“…the reality is that the intraspecialty variation in pay is far more than the difference between the average pay of a preventive medicine doc or a pediatrician and a plastic surgeon or orthopedist. There are emergency docs making $140,000 a year and emergency docs making $600,000 a year. There are pediatricians making $80,000 a year and pediatricians making $900,000 a year. There are orthopedists making $250,000 a year and orthopedists making $2.5 million dollars a year.”
He challenges new doctors with low-paying jobs to do what they can to find a better-paying job.
That means job hunting, moonlighting, and not being afraid to make a transition. He continues:
“If you’re in a crummy job, you should be job hunting. As soon as you line up that better job, you should take it. Remember that might be joining a partnership or even hanging out your own shingle.”
Dr. Dahle’s advice on this one is clear: If you’re not a “less-than-average doc,” you shouldn’t settle for less-than-average pay.”
Adjust Your Student Loan Plan
In the end, Dr. Dahle writes that to have financial success, these four areas need to balance out:
- Your income
- Your student loan plan
- Your lifestyle
- Your house
He takes readers through an example scenario highlighting the difference between a job with public service loan forgiveness (PSLF) and one without. It’s essential to realize that adjustments in one area of your financial plan can free up or limit possibilities in other areas of your financial plan.
For example, Dr. Dahle offers a scenario with a new doctor making $150k per year at a non-PSLF job, owing $500k in student loans, wanting to buy an $800k house, and living a lifestyle of $120k per year.
He writes: “That doesn’t pencil out. Not even close.”
But, he explains, by finding a new PSLF qualifying job earning $210k per year, with IDR payments of $20k per year for the student loans, spending $78k in lifestyle costs per year ($6.5k per month), and buying an average home of around $300k, the new doctor could be well on their way to financial success.
Ultimately, Dr. Dahle explains that physicians need to understand which levers they have available and make changes accordingly. He writes:
“If you find that you are in a bad place financially, recognize reality and start “penciling” until everything pencils out. It will probably require you to make some hard decisions and do some difficult things that not all of your peers and colleagues have to do. But it will work.”
IMAFS Is Here to Help
If you’re a physician interested in working with a fiduciary CFP® professional to help understand and adjust your financial situation to reach your life goals, then IMAFS is here to help.
IMAFS offers the top physician financial services in Boise, ID. We focus on helping our physician clients build long-term wealth while maximizing the enjoyment they receive from their money. We do this by pairing our clients with a dedicated CFP® professional backed by an incredible team.
For our team at IMAFS, it’s about so much more than money. It’s about serving families all across Utah and helping them achieve freedom and flexibility in their lives. To learn more or schedule a no-cost consultation, contact us at your convenience.