Debunking the Top 10 Myths About Physician Finances
There are a lot of myths floating around out there. When it comes to physicians, overwhelmingly, we are seen as ‘rich.’ True, there is no arguing that we are not high-income earners. However, just because you make a 6-figure salary does not mean you are rich. There are a ‘wealth’ of misconceptions about physicians and ‘doctor money.’ With this post, we seek to address some of the most common myths about physician finances, from discussions with wealth and debt to everything thing in between. Here is Debunking the Top 10 Myths About Physician Finances! Let’s dive in!
Table of Contents
Myth 1: Physicians are always wealthy
The first stop on our journey Debunking the Top 10 Myths About Physician Finances is… well, finances! All physicians are wealthy, right? Wrong. I will begin this list with some of the more blatantly incorrect myths.
As I mentioned in the introduction, physicians generally make 6-figure incomes across the board. This income can be widely variable based on specialty and subspecialty, but overwhelmingly they are considered ‘high-income earners.’ However, having a high-paying job and being wealthy are two different things. I know many physicians who live paycheck to paycheck, don’t prioritize their debts, and waste their money on lavish, unnecessary luxuries.
For those who need some empirical evidence to be persuaded, just check out the 2022 Medscape Physician Wealth and Debt Report. According to this report, physicians make approximately $339,000 on average, with primary care physicians (PCPs) averaging $260,000 and Specialists averaging $368,000. However, 28% have a net worth under $500,000. Even more, nearly half of physicians have a net worth of less than one million dollars.
Now, I appreciate the amount of money we are suggesting. But I think we can all agree that if you make a quarter of a million dollars a year and still almost half the population of physicians have a net worth of less than a million dollars, then clearly building wealth is difficult and delayed for physicians.
It is a myth that physicians are ‘always’ wealthy. Most physicians (I suspect predominantly early career physicians, but not exclusively) struggle to build wealth even in their early 30s and 40s. This is mainly due to mountains of debt, duration of education, and lack of financial literacy.
Myth 2: Physicians have little debt
Well, if you read myth #1 on this list, you would already know myth #2 is clearly a misconception. Our second myth on our journey to debunking the top 10 myths about physician finances focuses on debt. Not only do physicians have debt, but according to the Association of American Medical Colleges (AAMC) 2020 update on Physician Education Debt and the Cost to Attend Medical School, 73% of American medical school graduates reported carrying educational debt. The report also stated that the median educational debt for medical school graduates in 2019 was approximately $200,000.
Now, factor in home mortgages (for those who choose to own a home during residency), as well as credit card debt, car loans, and the pressures of lifestyle inflation, and it should come as a surprise to no one that physicians carry large amounts of debt. Our future high incomes are our mightiest tool to combat this accumulation of liabilities; however, it takes patience, self-control, and years of determination after completing training (i.e., residency and/or fellowship) to eliminate this debt quickly. Easier said than done…
Physicians very commonly carry debt. For those who received federal student aid to complete medical education, this debt burden can average $200,000 or more after training. Often high-interest rates allow these debt balances to balloon during training as trainee salaries do not afford the luxury of aggressive debt elimination.
Myth 3: Physicians don’t need financial planning
Ugh, this one makes me sick to my stomach. The thought that physicians have ‘enough income’ to make endless mistakes and not pay for them is a massive myth. Despite their high incomes, physicians absolutely need help with financial planning. I would argue we are a profession that may need it more than most! Though we are a collective of bright-minded, intelligent, passionate, and selfless individuals, we also receive no formal financial education.
It is a travesty that we take individuals who have studied biological sciences for the entirety of their lives and then drop a 6-figure salary in their laps and ask them to ‘figure it out…’ This can genuinely set individuals up to make colossal financial mistakes. If trainees and early career physicians do not understand how to best save, eliminate debt, and protect their future assets, they can financially hamstring themselves for decades.
Physicians absolutely need education in financial planning. So much so that some continuing medical education programs (CME) are directed at physician financial education. If you wish to learn more, there are fortunately several incredible resources online to help get you started. I have compiled a list of the Best Physician Finance Blogs. If you are interested in personal finance education outside of healthcare specifically, then make sure to check out the Best Personal Finance Blogs!
Myth 4: Physicians can’t have a work-life balance
This one is near and dear to my heart. In a post-COVID-19 pandemic era, there has been a shift away from professional loyalty and a re-direction on work-life balance, even at the expense of income. The medical field has been no exception to this, in my opinion.
Though it remains challenging to develop a perfect work-life balance, there are ample changes a physician can make in their career that can help prevent burnout and allow more time with friends and family. Some of these avenues include transitioning to academic medicine or less demanding positions, negotiating less call or nights/weekends. Even sacrificing income to prioritize time away from work can be an option to help reach a better balance.
Much of the Financial Independence, Retire Early (FIRE) movement grew out of job dissatisfaction. Your ability to negotiate a better life for yourself comes from reaching real financial security early in life. Physicians can indeed find great work-life balance, but requires self-advocacy, strong negotiation, and a long-term mentality. Myth #4 on our list Debunking the Top 10 Myths About Physician Finances… busted.
Myth 5: All physicians make similar incomes
Oh God, no! This is almost laughable. Physician reimbursement is influenced by many factors, including specialty, subspecialty, geographic location, private v. academic, and more! In the most recent Medscape Physician Compensation Report 2022: Incomes Gain, Pay Gaps Remain, there is a nearly $333,000 difference in income between the highest reimbursed in the report, Plastic Surgeons (averaging $576,000 annually) and the lowest reimbursed, Public Health & Preventative Medicine (averaging $243,000). Please also consider that these are averages, so there are individual physicians who make above and below these reported averages.
Within specialties, there remain significant variations as well. These can be attributed to gender, race, ethnicity, location, experience, career duration, etc. It remains a complete myth that physicians make similar incomes. Again, overwhelmingly, physicians essentially make 6-figure incomes, but these high incomes vary widely. Another myth debunked.
Myth 6: Physicians are not eligible for loan forgiveness programs
For those who are frequent visitors of this site, then you know good and well that this myth is not valid. There actually remain a handful of ways to receive loan forgiveness. The most well-known of these is Public Student Loan Forgiveness (PSLF). This federal program allows qualifying physicians to have their loans forgiven after they have made 120 certified payments in an accredited repayment plan. There are whole careers built around understanding the nuances of PSLF, so I will not begin to tackle this here.
Suffice it to say, PSLF should absolutely be the first option you research after you graduate medical school. Understand the nuances regarding the program, who qualifies, how you make your payments ‘certified,’ and more before proceeding down an alternate pathway. There are debt repayment strategies that can disqualify you from PSLF, so know your options first. If you want to learn more, check out PSLF on StudentAid.gov.
Aside from PSLF, there are also loan reimbursement programs. These differ slightly from PSLF in that you still pay your educational debt. However, specific programs will reimburse you for a portion (or all) of the money you put toward your debt annually. An example would be the Education Debt Reduction Program offered by the Veterans Affairs Hospital system. This program provides qualifying hires with up to $200,000 in loan reimbursement over 5 years. Again, substantial caveats remain, but that is the abridged version.
There are other avenues to loan reduction, including signing bonuses, contractual debt reimbursement, and more. So yes, physicians are indeed eligible for loan forgiveness programs and should look into every option available to them! While debunking the top 10 myths about physician finances, we learned that there are plenty of loan reimbursement programs.
Myth 7: Physicians do not need to save for retirement
Obviously, this is incorrect. On the surface, it would seem quite elementary to understand that retirement savings are necessary for physicians, much as they are for almost everyone. However, there is a common myth that because physicians have such large incomes, they do not need to save for retirement. This is entirely bogus, and I will explain why.
First, regardless of your profession, retirement planning and saving are critical. Everyone, physician or not, should periodically think about their retirement. Be it your expected retirement age or lifestyle at retirement, you do not just wake up one day, retire, and assume all will fall into place. It takes years of planning and execution to pull off a great retirement. Further, it takes maintenance and periodic course correction should your income change, grow, diminish, and everything in between.
Physicians are particular in that they have enormous incomes, but because of the duration of the training, they often get a late start on building their nest egg. As such, it is critical that they max out their retirement contributions and even consider other savings vehicles, like backdoor Roth IRAs (among others). Do not fall prey to the illusion that retirement planning and saving are unimportant for physicians. It is both vital and nuanced for physicians. To learn more, check out How Much Do Doctors Need to Retire?
Myth 8: Physicians should handle their own finances
Now, here is a debatable one. Early in my financial education, I would have told anyone that physicians should handle their finances. I bet ‘past me’ would have sat you down and convinced you that if you cannot manage your finances, you are destined to be shackled to your career for all eternity! Fortunately, as the years have gone on…I have changed my tune somewhat.
I still hold the sentiment that every physician should know enough about their finances to participate in discussions and understand where their money is going. You should know enough to have truly knowledgeable and engaging conversations with others about your financial situation. However, I have realized that ‘one size does not fit all.’ Some individuals are too busy to devote the time required to manage their finances. Others have such complex finances that an advisor is almost necessary.
Lastly, some physicians honestly just do not care. Now I suspect if you navigated to this website, then likely that is not you, but those individuals exist. I do not fault them; that just may not be their priority. If this is you, please pay someone to treat your finances as if they were their own (i.e., a fiduciary financial advisor). Also, if you hire a financial advisor, I recommend finding an individual reimbursed using a ‘fee for service’ model instead of an ‘assets under management (AUM) model, as the latter sometimes can induce conflicts of interest. Debunking the top 10 myths about physician finances also proves there are avenues to ask for financial help.
Myth 9: Physicians are immune to financial challenges
Absolutely not. Physicians feel the same financial pressures and hardships as everyone else. Further, for physicians working to build large nest eggs or retire early, market volatility highly influences their savings. Beyond this, I argue that physicians keep an emergency fund of approximately 3 to 6 months of living expenses. Physicians can also be caught off guard by unexpected expenses like home repairs, car accidents, and unemployment.
Do not be fooled by the high incomes our profession provides. Physicians feel economic pressures too. Our mission at The Motivated M.D. is to help others make intelligent financial choices, ease the burden of economic hardships, and make long-term financial prosperity an inevitability…but that is difficult to do. Number 9 on our list debunking the top 10 myths about physician finances shows physicians are not immune to financial challenges.
Myth 10: All physicians are guaranteed generational wealth
This myth is essential to debunk. In college, I assumed that all physicians, dentists, lawyers, and other high-income professions rode off into the sunset with millions in their pockets. Boy, was I delusional!? Currently, no physician is guaranteed generational wealth. I would argue it is becoming uncommon for physicians to build generational wealth from their careers. Between rising physician burnout, job dissatisfaction, complex reimbursement systems, rising educational debt, and inflation, having a sizeable 7-figure nest egg is becoming less common. Even more, having 8-figure savings (my definition of generational wealth) is rare.
Please do not be fooled into thinking that becoming a physician will guarantee you and your next two generations to ‘have it made.’ This is relatively uncommon. If you are smart, work hard, save appropriately, invest intelligently, and eliminate debt quickly, you can build real wealth, but this is easier said than done.
Take home points
There you have it, Debunking the Top 10 Myths About Physician Finances! There are a lot of myths and misconceptions regarding physician finances, but these (in my opinion) are the most important ones. As you navigate your career, do not fall prey to some of the falsehoods regarding our profession. If you want to build wealth (even generational wealth), then get started early with some straightforward tips:
- Live below your means
- Save at least 20%
- Max out your retirement accounts
- Get the employer match (if offered)
- Invest in index funds
- Eliminate your debts as fast as possible (highest interest debt first)
- Avoid significant lifestyle creep
- Prioritize continuing personal financial education
I hope you found this article helpful. As always…
Stay motivated!
The Motivated M.D.
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