Hi all, and happy weekend! Here in Connecticut we’re gearing up for our first snowstorm of the season. Honestly I’m looking forward to it, it’s been entirely too warm here for winter. Plus I can’t wait to see the expression on my little guys face when he gets to play in the snow. Last year he was only one, and didn’t really “get” snow.
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And what better to do on a snowy day than curl up with a good financial book? I have one that I’m going to share with you today that, if you’re not a doctor, you may not have thought to pick up before. It’s “The White Coat Investor – A Doctor’s Guide to Personal Finance and Investing.”
I was gifted this copy of the book by the White Coat Investor himself at Fincon 2017. We had been chatting and he asked if I did book reviews, and gave me a copy of his book. I had actually always been interested in checking it out, because I’ve read the WCI site for many years now, but had hesitated because I’m not a doctor. Now that I’ve read it, I can say that there’s a lot of solid advice here for any high-income professional, at every stage in their career.
Although I’m not a doctor myself, I talk with a lot of them online, and many financial books I’ve read (like The Millionaire Next Door, one of the four books that changed my financial life) talk extensively about doctors and the issues they face. I’ve interviewed several of them for my Breadwinning, Six Figure, Millionaire Mom series – you can check out my interviews with Hatton1, Supertasker, DrSan1, and most recently Foreign Born MD. General high income earners have a lot in common with doctors, although there are some significant differences. So I feel a sort of kinship with them.
Now let me tell you all about the book, the solid advice within, and a bit more about some of the unique problems of physicians.
All About the Book
When looking at a new financial book, one of the first things I would do is look at the table of contents. If you’re not a doctor, you’ll immediately notice that several chapters look doctor-specific, talking about residency, medical school, and becoming a rich doctor. But after reading those chapters I can say that although some of the information is specific to doctors, much of it is just as applicable to any high-income professional at a similar stage in their career.
The book kicks off by telling you a bit about the author (James Dahle, MD if you were wondering) and his goal of becoming a millionaire by the age of 40. I can relate, because that was always my goal as well. He actually hit it early in 2013, at the age of 38, which is impressive given the late start physicians have in their careers, and the high debt they start with. He also provides a number of great stories of other doctors who have become wealthy.
Did they gain their wealth through flashy private investments, bitcoin, or penny stocks? Nope. Instead they followed the solid advice very similar to that you’ll find in the Bogleheads book. Don’t get into debt, and if you’re in debt, get out as soon as possible. Save and invest steadily over long periods of time. Don’t buy too much house or try to keep up with the Joneses, and live below your means. Have a high savings rate, but not so high that you feel deprived. Buy the expensive toys after you become wealthy, instead of before you become wealthy.
These habits start in college, and continue into your early career. If you’re attentive to the way you save and invest early on when you’re not earning a lot, then you’ll continue those same habits into your later career when you’re earning more. This is why the chapters on medical school and residency can apply to everyone – although most careers don’t have quite as long in college and don’t have a formal residency period, most people who earn high incomes will be in a school for a while and will earn less when starting their careers than later in life.
For those just starting out, the best advice is simple. Learn to save. Don’t buy a house right away. Start insuring against financial catastrophe with an emergency fund, and possibly other insurance. Use a ROTH, because you’ll more than likely be at a higher tax rate later on. Start learning about money, how to save it, how to invest it, and how to get help with it via accountants/CFP’s if you don’t want to DIY. As WCI says, it’s easier to be young and poor than old and poor. You’ll have an easier time later in life if you build solid saving and investing habits early on.
The book is a solid overview not only of what to do when starting, but also some of the basics of investing, estate planning, taxes, insurance, and living the good life. He talks about addressing the investing factors you can control, such as your savings rate, risk, diversification, expenses, tax efficiency, and your overall behavior. He also cautions against getting involved in risky or speculative investments (cough, bitcoin, cough) – salespeople tend to pitch all sorts of risky investments at doctors.
Physician Roadblocks to Wealth
Physicians face some relatively unique roadblocks to building wealth, and WCI does a great job addressing them. Sometimes us non-physicians think that because doctors earn a high income, becoming wealthy is easy. If you make $200k, $400k, or more per year, isn’t it easy to be rich?
Not really. Some of the challenges doctors face include:
- Late starts. They are in medical school for a loooong time, well after the rest of the world has started their career. As such, they miss out on early contributions to investment accounts and the magic of compounding starting in your 20’s. They need to make up for this through raw savings
- Lack of money savvy. Doctors don’t get to earn a high income through starting a business that they bootstrap to success (which gives you good money habits you carry with you when you earn more), or have a lot of free time to learn about investing. They make high incomes and see most of their peers spending lavishly-so they often follow suit. They’re also frequently targeted by salespeople drawn to the promise of someone earning a high income who will trust the salesperson to make them more money. Unfortunately that salesperson may take advantage of the doctors lack of time and money savvy, and put them into less than ideal investment options (like whole life insurance)
- Keeping up with the Joneses, and Entitlement – Doctors often feel enormous pressure to look the part of a successful doctor. Would a successful doctor drive a ten year old Honda Accord, or wear a hoodie to work? No. So a fancy house, expensive cars, fancy clothes and jewelry, private school, etc. are usually on a doc’s must-have list. They also often feel entitled to nice things after spending so long in school and training.
- Student Loans – If you think you have bad student loans, doctors have it worse. The pay in their industry is going down, their expenses are going up, and the average doctor starts their career with about $150k in student loans (in fact, check out this CBS article about how becoming a doctor is a million dollar mistake). So they start off their financial lives needing to find a way to overcome their loans, whether through paying it off via their incomes or through programs like Public Service Loan Forgiveness, military service (which is what WCI did), or something else.
- Charitable Inclinations – Doctors usually don’t become doctors for the money. Well, the money doesn’t hurt, but usually the core reason is that they sincerely want to help people. Being charitable is good, but usually having a solid financial foundation underneath you will enable you to be even more charitable in the long run.
It’s important to remember that you may have a high income, you don’t deserve to be rich unless you save and invest that income. If you build the right habits early and continue them throughout your life, minimizing and eliminating debt, living below your means – you will become wealthy. If you don’t, then you likely won’t. It’s simple but not easy.
I sincerely enjoyed reading this book. Remember, I’ve been burned out on financial books before, so I enjoy reading new and different takes on the subject. If you’re a doctor, or know someone who is currently or is working on becoming a doctor, I would 100% recommend getting this. Even if you’re not a doctor, if you earn a high income or are on track to do so, I would still recommend reading this and just glossing over the doctor-specific stuff. There’s a lot of solid advice here for any high income professional, and in fact the book could easily be re-written to address high income folks more broadly.
Have you read this book before, and if so, what do you think of it? Or if not, have you read any interesting financial books lately that I should check out? Let me know in the comments.
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