Sometimes in life, you make good decisions without having a compelling reason, like someone who doesn’t drink alcohol simply because they don’t like the taste.  They don’t have any medical, religious, or philosophical concerns with alcohol; they just don’t like it.  Good decision, simple reasoning.   Or someone who rides their bicycle to work because there is no parking and, by default, gets the physical and mental benefits of daily exercise.  This is exactly how I look at the first few years of my medical career.  Through luck or instinct, I inadvertently made a few key choices that put me on the right financial path.  In this post, I will break down these 8 good decisions and discuss why anyone starting their career should (purposefully) make them as well. 

  1. I (inadvertently) dealt with my debt properly

     I will say up front that the numbers I am talking about may seem quaint by today’s standards.  Yes, I understand that tuition and interest rates are now higher.  However, we all play the hand we’re dealt.  Everyone’s life is a mixed bag of advantages and disadvantages.  Everyone must look at their specific circumstances and make the best decisions for them, given their hand.  However, the principles remain the same.

     I had a combined student loan debt of about $120,000 when I completed my residency in emergency medicine.  I also had about $20,000 in credit card debt that I had accumulated over the years.  I consolidated my student loans into one payment with an interest rate of 2.5%.  If I set up an automatic payment plan, I could get 0.25% off my interest rate, making it effectively 2.25%.  I aggressively paid down my credit cards as quickly as I could.  I had purchased a used car through a credit union while in residency and had been making payments for about two years.  I don’t remember the interest rate, but I believe it was in the mid 4s.  After I paid off my credit cards, I paid off the car note.   None of this was particularly planned.  I simply felt it was easier to consolidate my student loans, and the interest rates happened to be low in the mid-2000s.  My inadvertent good decision was to analyze my loans and aggressively pay off the high-interest debt and not the low-interest debt.  There were no calculations on my part.  I instinctively knew it was terrible to have 20% interest on a credit card and worked hard to pay it off aggressively.  I knew that the interest rate on my student loan was low after the consolidation, so I put the payment on autopilot and forgot about it.  

     My decisions regarding debt can be extrapolated to any medical professional’s situation.  Retiring debt can be thought of as investing money at that same interest rate.  Paying off a loan at 10% interest is the same as investing that money and getting a 10% return.  As you start your career, you should inventory all your debts; student loans, personal loans, credit cards, car notes, and anything else you have should all be categorized by the amount, the interest rate, and the monthly payment.  All “high-interest” debt should be paid.  What “high interest” means depends on the prevailing interest rates and what you believe the stock market will return over time.  All credit card debt should be paid off quickly because 16 – 24% interest rates are crippling.  If you could invest money and make 24%, you should!  This is precisely what paying off cc debt does for your finances.  

     You have more challenging decisions to make once you take care of no-brainer debt like credit cards.  Most people believe the stock market will return 8 – 11% over the long term, while savings accounts/money market accounts currently pay around 4.75 – 5% APR.  If you were fortunate enough to lock in a 2.75% mortgage, I wouldn’t aggressively pay it off when you can earn substantially more in your savings account.  To me, any debt financed at less than 5% is low-interest.  The more difficult decision comes with interest rates between 5 – 7%.   If you believe the stock market will return 10% over time, you may not want to pay off a 5 – 7% loan.  If you believe the stock market will pay 8% over time, you probably want to pay off an 8 – 9% loan as the return is guaranteed.  The ultimate answer to that question will be a personal decision.   

     If you get the obvious debt issues right, you can tailor your approach to these mid-range interest rates however you choose.  Ultimately, how you deal with debt when you leave residency will be one factor that influences your overall financial position for years to come.

  1. I (inadvertently) worked harder than I did as a resident

     I have always taken pride in working hard, probably due to my blue-collar roots.  I worked during high school and college and even had a FT job during my first 18 months of medical school (which I wouldn’t recommend).  I was a prodigious moonlighter during residency as well.  Despite working so hard, I never made much money.  When I began my first attending job, I earned $200/hr for 14 x 10-hour shifts a month.  At the time, I couldn’t believe how much money it was.  So, when the contract management company I was working for started calling me to work extra shifts, of course I said yes.  Why would I stay home and watch TV or read a book when I could work a shift and make $2,000?  It seemed almost obscene to say no when they called.  It wasn’t a conscious decision to work more; I actually felt guilty when I wasn’t working.  My dad literally (yes, I mean literally) broke his back working in a dirty coal mine, and I’m going to turn down $2k for one day in an air-conditioned ER?  Nope.  In my first full calendar year out of residency, I made $540,000, which works out to 22.5 shifts per month.  I would have worked more, but only so many shifts were available. 

          Working hard early in your career gives you several tremendous advantages.  First, it helps you become good at your job.  You see more patients, get more reps, do more procedures, and refine your skills.  Second, you’ll never be hungrier and more motivated than at the beginning of your career.  You just finished training and are energized to make your own decisions and establish yourself in your field.  The fear of making mistakes and hurting someone drives you to work hard to improve.  You also have the incentive of money, as this is the first time you’ve made any on this scale.  This hunger will fade as you get older and more established, so take advantage of it now.

     Working harder also allows you to save more money.  This is far from automatic, though.  You can certainly work more and spend more, so be careful.  Think of the extra money as seed capital.  Every dollar you save or invest early in your career will grow and be worth more in the future.  Additionally, the more you work, the less time you have to spend money, which tempers lifestyle creep.  Finally, working harder doesn’t get any easier as you get older.  You are used to working hard as a resident for shamefully low wages.  Work at least that hard for the first five years.  You’re not going to need less sleep as you age.  Your sense of burnout isn’t going to get better.  Your spouse isn’t going to become more accepting of you being gone.  Now is the time.  

     Continue to work as hard (or harder) at the beginning of your career as you did during residency.  I didn’t have a plan; I did it inadvertently.  You have the opportunity to be purposeful in pursuit of your financial goals.  You can work like a resident for a set number of years, until you have paid off a particular debt, until a child is born, or until you have a specific net worth.  You get to decide. 

  1. I (inadvertently) lived below my means

     How many people do you know that finish training, move for a new job, and immediately buy a large house?  I have seen this often, especially with married graduates who feel they “owe” it to their spouse for supporting them during training.  I have also seen many single graduates move into luxury apartments and buy fancy new cars.  It isn’t that these newly minted medical professionals can’t afford these things.  They make good money and aren’t necessarily living above their means.  However, to properly construct the foundation for wealth and financial independence, you must live below your means when you graduate. 

     After starting my attending job, I kept the same used car I had purchased in residency for the next ten years.  I rented a one-bedroom apartment in a lower-tier apartment complex for $450/month, as all I needed was a place to sleep close to the hospital.  I didn’t have some grand plan; I just didn’t have any money.  My new job would only pay me monthly, so it would be two months before I would receive a paycheck.  I had not negotiated a signing bonus, so I lived on what I had made moonlighting.  I also didn’t know how long I would stay at this job, so I wanted to make sure I could leave should things go differently than advertised.  All these factors led me to a small, simple apartment that kept my expenses low.  

     Don’t get me wrong, I wasn’t living like some personal finance monk.  My used car was a bright red manual Audi TT.  If I ate rice & beans, it was because that’s what my Brazilian girlfriend cooked.  I wasn’t purposefully living a meager existence.  We went out to dinner.  We traveled when I had time off.  But I was working 20-25 days a month and studying for my boards.  I lived in a town without much to do and didn’t have time to do it anyway.  I found myself making $45,000 a month with structural expenses of $3000.  I quickly paid off my credit card debt and the remainder of my car loan.  Since I was paying only the minimum on my student loan, I had a lot of money left over each month.   This money, this delta between my after-tax income and my spending, was the rocket fuel that propelled my wealth accumulation. 

     As a medical professional, living below your means should be easy.  Whether you are a physician, APP, or dentist, you are likely making multiples of the average US income.  Even considering student loan repayment, you should have plenty of money to save and invest . . . if you don’t inflate your lifestyle.  Just because you have a new job with a high salary doesn’t mean you have to spend it.  Maintaining your residency living standard for the first 3-5 years is imperative.  I know this is easier when you are single, like I was, but even if you’re married and have kids, you don’t have to inflate your lifestyle.  You don’t have to have a big house with a pool just because you are a doctor.  You don’t have to buy your spouse a new car simply because they stuck by you during medical school and residency.  The best thing you can do for your family is prepare for your financial future.  Slowly raising your standard of living will help fight off lifestyle inflation.  No matter how big your house, how fast your car, or how fancy your clothes, eventually, it all becomes routine.  Ratcheting up your spending over time will allow you to derive new pleasure from each step up the ladder while simultaneously building the foundation for your financial future.

  1. I (inadvertently) had a high savings rate.

     Early on, your savings rate is your most important financial metric.  It is more important than your overall salary, your debt load, anything.  Your savings rate is simply the money you make minus your expenses.  If you spend less than you earn, you have a delta that you can use to save and invest.  The more you earn and the less you spend, the bigger that delta.  I inadvertently had a high savings rate because I worked harder than I did as a resident and lived far below my means.  My savings rate at the time was about 60% of my gross salary.  Since I was paying around 30% in taxes, I lived off a small percentage of my salary.  I didn’t have a plan; it just happened naturally.  After all, I was still spending more money than ever, so my lifestyle seemed just fine.  The only problem with having a high savings rate is figuring out what to do with all your money.  

increasing money

     I believe every physician should think of their career as a business, I wrote more about that here.  The first thing you need to understand is that the #1 goal of any business is to make a profit.  If not, it’s a charity.  Profit = Revenue – Expenses.  Your savings rate is analogous to the profit of a business.  You increase profits by earning more money, spending less, and preferably both.  A high savings rate is so important because you then have more money to save/invest.  The absolute minimum savings rate for any medical professional is 25% of their gross salary.  I feel every physician should strive to push it up to 50% for the first several years out of residency to supercharge their financial lives.  If you get nothing else from this discussion, take away that when you start your career, the most important thing is your savings rate.  

  1. I (inadvertently) surrounded myself with the right people 

    Whether it’s the ancient proverb, “a man is known by the company he keeps,” or the self-help inspired “you are the average of the five people you spend the most time with,” with whom you surround yourself matters.  Aesop, Jim Rohn, and your mother can’t all be wrong.  When you start your medical career, it is essential to surround yourself with hard-working, ambitious, yet grounded individuals.  I inadvertently did this, and it helped me immensely in my financial journey.    

     I’m not the most social person, which is probably why I’m writing blog posts.  When I started as an attending, I socialized with a few of the other ER doctors since I didn’t know anyone else.  Fortunately, they were also recent grads, so they had no money either.  We would hang out after work and have a few drinks, but there was no competition to increase lifestyle.  Since most of the docs were flying in from out of town, they drove rental cars and stayed in hotels or apartments.  Most of them were traveling to maximize their earnings, so money, investing, and business were frequent topics of conversation.  I was inadvertently surrounded by people who worked hard, conserved their money, and were focused on building wealth.         

circle of people

     If you find yourself surrounded by older, more established colleagues who live a lavish lifestyle, you must remember to stay grounded.  Wealth is what you don’t see.  Just because the local cardiologist drives a new BMW and lives in a large house doesn’t necessarily mean she’s wealthy.  Even if she is, you’re not, so don’t try to fake it.  However, it’s easier when you’re just not tempted.  

     Keeping your lifestyle in check is easier when surrounded by like-minded individuals.  The same is true with investing, business, and entrepreneurship.  I was introduced to real estate investing by a fellow ER doc.  I founded an ER contract management group with a few early colleagues.  I started an urgent care with an ER charge nurse turned FNP.  I started this blog with a PA I met while she was a student rotating in the ER.  Being around hungry, ambitious people has pushed me to learn how to invest and start my own businesses.  As I have progressed in my career, I have made new friends and acquaintances who have challenged me and pushed me further.  As you grow, the five people around you will change.  Keep company with hard-working, humble, ambitious people.  Your financial life will be better for it, and your mom will be happy.

  

  1. I (inadvertently) started investing early.

     My first job was as an independent contractor (IC), meaning there was no 401(k) or other retirement plan.  I knew I needed to do something for retirement, so I spoke with one of my colleagues, who told me to set up a SEP IRA.  The good news is that I listened.  The bad news is that I also listened to his recommendation of a local financial advisor, who not only set up my SEP but sold me a variable life insurance policy while he was at it.  I now know this financial advisor was a salesman looking to sell insurance, put me in actively managed funds, and charge an assets-under-management fee (AUM).  Click here to find out why you should never pay AUM fees.  I choose to look on the bright side: I started maxing out my SEP right away.  This had tremendous tax implications, but most importantly, it got me investing immediately after starting my career.

     Starting early at investing is critically important.  I started at 31, which was as early as possible considering my circumstances.  I didn’t have the knowledge (or the money) before then.  But once I learned, I didn’t postpone investing to increase my lifestyle.  They say the best time to plant a tree was ten years ago, and the second-best time is today.  The same goes for investing.  Whatever your age, start today and take advantage of compound interest.  The following table demonstrates this principle.  

Start at age 22 Invest $12,000 per yearStart at age 32 Invest $24,000 per yearStart at age 42 Invest $48,000 per year
Age 22:  $0Age 22:  $0Age 22:  $0
Age 32:  173,839Age 32:  $0Age 32:  $0
Age 42:  $549,144Age 42:  $347,678Age 42:  $0
Age 52:  $1,359,399Age 52:  $1,098,287Age 52:  $695,355
Age 62:  $3,108,678Age 62:  $2,718,797Age 62:  $2,196,574
Age 67:  $4,638,067Age 67:  $4,135,603Age 67:  $3,509,085

Total Invested = $540,000

Total Invested = $840,000

Total Invested = $1,200,000

Assumes an 8% annualized return

     As you can see, starting early gives you an advantage that even large investments later in life can’t equal.  Start investing as soon as you begin your career, take advantage of compounding interest, and set yourself up for early financial independence and a secure retirement.  

  1. I educated myself 
Finance books

     Once I had taken care of my debts, built up a significant cash reserve, and maxed out my retirement savings, I was forced to find something to do with the money I was continuing to accrue.  This search (inadvertently) led to my journey of learning about personal finance and investing.  A colleague of mine always talked to me about the benefits of real estate investing, so I finally bought a book and read it.  That one book, randomly chosen from Amazon, led to dozens of other books on the topic.  Podcasts and blogs soon followed.  I learned about residential RE, commercial RE, RE finance, and RE adjacent businesses.  Here are just some of the RE books I have read.                

     My deep dive into real estate eventually led me to the world of personal finance and investing.  I consumed a similar amount of content about these new topics and then immersed myself in the world of business.  After taking in all the free content I could, I paid for some more by going back to school to get my MBA.  I now teach residents and fellows about personal finance and the business of medicine.  

     These topics have become my passion, which is why I’m writing this while sitting by the pool in Hawaii.  You don’t have to be similarly obsessed, but you do need to educate yourself on the basics.  Don’t let your medical education write checks that you can’t cash.  Doctors are known to be lousy investors.  And pilots.  Google “The Doctor Killer.”  Just because you’re good at one thing doesn’t automatically make you good at something else.  Don’t let your ego convince you that you have some unique insight into investing because you don’t.  You must educate yourself about anything that you want to pursue.  A doctor can be a good pilot; however, they must train as much as everyone else and stay humble.  The same goes for investing.  Education and humility are essential.   

  1. I took (calculated) risks

     Good decisions, intentional or not, lead to increased opportunity.  A trauma attending once told me that in medicine, “the eye cannot see what the mind does not know.”  The same goes for your career.  You can’t see all the opportunities right now, but once you have completed steps 1-7, your eyes will open, and opportunities will abound.      

     After 18 months of working like a resident and keeping my expenses low, I took my first calculated risk.  I quickly learned that I didn’t want to run into a patient I diagnosed with a STD while shopping at Walmart.  Awkward.  So, I wanted to move from where I lived to the next town.  I decided to buy a house but still wanted to keep my options open.  After a few weeks of looking, I found two houses on the same day that I liked, and I couldn’t decide between the two.  I had been approved for a considerable loan amount, so I bought two smaller houses instead of one big house.  I moved into one and rented out the other.  This was not something I had planned, but since I had been studying real estate, it was a chance I was willing to take.  This initial investment laid the foundation for my real estate holdings, which now total eight figures.      

     The next substantial risk that I took was joining a start-up ER group.  After two years of working in the same ER, the hospital administration became dissatisfied with the large contract management group that employed me.  They approached a few of us about starting our own group.  They fired the CMG, paid our buy-outs, and helped us start a new business.  I was able to take this risk two years out of residency because of my previous good decisions.  The risk was more than just financial; it indefinitely tied me to the area.  You might think anyone would take this risk, but several docs about my age declined.  They stayed and worked for us but wanted to avoid assuming the risk and responsibility of owning the group.  

calculated risk

     Fast forward about five years, and things were going well with RE investing and the ER group when another opportunity presented itself.  I started an urgent care with two partners, which required us to purchase a commercial building and invest significant operating capital.  Because I had maintained my lifestyle despite my prior successes, I could assume the risk.  Fortunately, the business succeeded, and we have grown into a small chain of urgent care clinics and family practice offices.

     These calculated risks have allowed me to multiply my wealth over time, but they all began with the good decisions I made to start my career.  I wouldn’t have purchased the first investment property without a high savings rate and education.  If I had not continued to keep my costs low and my options open, I would have passed on the ER group.  If I had increased my lifestyle after a few small victories, I wouldn’t have had the capital to start the first urgent care.  Purposefully making the first 7 decisions discussed here will allow you to see the opportunities that present themselves and have the capacity and knowledge to pursue them.    

Final thoughts

      Your medical career starts with excitement, challenges, and tough choices.  You must balance learning how to practice your craft with learning how to manage your newly acquired resources.  Ignore either at your peril.  I inadvertently made 8 good decisions that accelerated me toward financial freedom.  Now that you’ve read this, you must answer these 8 questions.  

  1. Will you follow a plan to deal with your debt, or will you struggle with it for the rest of your life?
  2. Do you choose to work harder than you did as a resident for a few years or work less?  
  3. Will you inflate your lifestyle or stay humble and grounded?  
  4. Can you maximize your savings rate?
  5. Will you start investing early or wait?   
  6. Will you surround yourself with hard-working, ambitious, grounded individuals, or will you be influenced by those who live beyond their means?  
  7. Do you educate yourself or stay in the dark about business and financial matters?  
  8. Will you take calculated risks, or will you play it safe?  

How you answer these questions will have an outsized effect on the rest of your financial life.  The questions are simple, which does not make the answers easy.  However, if you can purposefully follow the path I stumbled upon, you will also find yourself financially free.  Good luck on your journey.