Steve* has a busy practice as a physician. He also has money troubles. Recently, he went to a medical society meeting with his colleagues. He had been agonizing for weeks over the decision to pull his kids out of the expensive private school he can no longer afford, and he and his wife decided this year to limit their Christmas spending to $600. At the medical society meeting, however, he felt obliged to buy a couple of nice bottles of wine for the table. He came close to - or matched - spending the amount he planned to spend on Christmas, just on wine. He would much rather have spent the money on the kids, but he felt pressured to keep up a good front in front of his fellow physicians.
In a doctor’s lounge, physicians will talk about how busy they are, how many patients they’ve seen that day, or perhaps a few complaints about Medicare or insurance. What they don’t do is admit that they have money troubles. In fact, it’s likely just the opposite. Maurice Ramirez, DO, the author of You Can Survive Anything, Anywhere, Every Time (Disaster Life Support Publishing, 2008) says, "Physicians will deliberately brag to the point of making their colleagues feel inadequate - about vacations, cars, gifts for their spouses, and education for their children." To hear them talk, all doctors can afford Paris in the spring and Maui in the fall. A fiscally conservative doctor listening to the jet-setter (who likely earns a comparable income) might feel like a failure.
Some doctors may even feel like they need to drive a certain car or wear the right brand of suit to fit into the group. The pressure to look successful can cause doctors to spend more than they should. That behavior can lead to trouble when income doesn’t always live up to such high expectations.
Many doctors admit they feel they must live a certain lifestyle to look successful. But who makes them feel that way?
According to Fred Dalgleish, a gynecologist in Fort Lauderdale, Florida, it’s not the patients. Doctors don’t need to impress their patients with the trappings of success anymore. "Patients couldn’t care less in this day and age. The incidence of patients socializing with their doctors is probably less than 1 percent. As far as what the doctors drive or where they live, most patients don’t have a clue."
Do family members add to the pressure on physicians to look (and spend) like big earners - even if they’re not? Sometimes. It wasn’t that long ago that a doctor was considered the ultimate catch, for both status and financial reasons. "Some spouses couldn’t care less about what neighborhood they live in. Some really put enormous pressure on their physician spouses to give them the things to which they’ve become accustomed," says Dalgleish.
Sometimes the kids spend money because they see their parents doing it. Fred Katz, a principal and CPA at Braver, a financial services company, says, "Several physicians I’m aware of have $20,000 to $30,000 in credit card debt. They can’t pay it off because they’re spending rapidly. The spouse is spending, the kids are spending. They think, ’If dad can do it, I can do it.’" In some cases, the spending may be a substitute for time spent with the kids. According to Katz, "If you’ve got nannies in the household, if you don’t spend time with your children, if you don’t have time to ask them how was school today . . . those are the people who are spending well beyond their means."
Extended family members can sometimes pressure the "successful" sibling unintentionally. According to Ramirez, when the family goes out to dinner, the expectation is the physician is the one with money. "Everybody expects you to pick up the check. If you take turns paying, every time it’s the expensive place, you get the check. It becomes habit over time." A physician may feel obligated to pay, because while she was in medical school and residency, everybody else picked up the check. "We feel like we should pay because our families helped us," Ramirez says.
Many physicians say they feel considerable pressure to look successful from fellow doctors. Like the doctors in the lounge bragging about their big expenditures, or the doctor who sent an e-mail to the entire large practice detailing his month-long vacation, some doctors seem to consciously or subconsciously want to make other doctors feel inadequate. Ramirez compares the way many physicians treat each other to child abuse. "Doctors are terrible to each other," he says.
When asked who makes doctors feel like they have to look successful, Chad Oliver, a certified financial planner in Baton Rouge, Louisiana, says, "I think it’s each other. I have a client who’s a dentist, and he’d see the other dentist drive a nice big Cadillac and think he’s making all that money. Then the client realized he makes more. On face value, people look like they’re doing extremely well, but they’re not doing well on the balance sheet. It’s the pressure within. I’ll go to the place of business and see the Mercedes and BMWs. I think they are aware of it amongst themselves."
The pressure to look like you have a lot of money extends not just to spending, but to risky investing as well. Oliver says, "They do a lot of talking amongst themselves. When one doctor says he’s doing so well on this one investment, the other doctors all want to jump in."
The worst taskmaster of all, however, can be one’s self. It’s easy to see how the long journey of becoming a doctor can create a pent-up desire to be able to spend a little money at long last. Add to that a sense of having worked very hard, and being, as Katz says, "better than the average bear."
He says, "I happen to sit on a financial aid committee of a medical school. I’ve had a number of exposures to what I’ll call the students’ ’mental development.’ ’I’m smarter than you because I went to medical school. I’ve worked so hard in medical school and absolutely was stressed to the max as a resident. Now that I’m a practicing physician, I feel I am entitled to do what I want.’ After all, they may feel, ’I’m the doctor, look how much money I make, even though I don’t.’"
Ramirez says, "Most new graduates spent a decade in college, medical school, and residency, thinking, "When I get my first real paycheck, I’m going to do this, this, and this." It’s internal gratification: This is my reward.
The degree of pressure to look like a successful may depend largely on where a physician practices. Dalgleish discovered that when he and his wife moved from Maine, where "nobody cared what you drove," to south Florida a few years ago. He found in Florida, "The expectation is there that you project a successful image. Every other doctor who parks in the lot drives a pretty nice car. I drive a 1997 paid-for Saturn."
Dalgleish thinks there’s more pressure for a doctor to look the part of a successful doctor in a small town, where everyone knows what you drive. "In large suburban or urban areas, there’s no pressure. The larger the staff, the less pressure there is." In rural areas, the pressure may be different. Nobody cares if you have a Cadillac; it’s how big is your pickup or your ranch?
To add to the problem, according to Katz, doctors are often attracted to areas where competitiveness of personal trophies is important. In parts of Florida, for example, if someone doesn’t have a boat with a slip and a house next to the canal, certain people might think he must not be a good doctor.
A generation ago, a doctor was one of the highest earners in town. He tended to look and play the part. Katz tells how the typical doctor used to wear a bow tie and drive a Cadillac, and everyone said, "Dr. Jones is so successful." Patients trusted a doctor who looked like he was doing very well. They would come in and politely call him "Dr. Jones." Katz says, "Now, patients come in, and it’s, ’Hey, Bill, can you take a look at my leg?’ It’s a whole new world."
Ramirez and his wife are both physicians from medical families. They entered medical practice just as HMOs became common. Physicians had always been at the high end of disposable income. New doctors now face a different reality. Tuition has gone up so much that they may leave medical school owing $200,000 to $500,000. "They’re coming into practice with a mortgage but no house, and an immediate gap between perceived and disposable income." Paying 6 percent to 8 percent interest, they may pay $3,000 to $4,000 a month on their student loans - more than their housing costs and utility bills put together.
When it comes to finances, everyone has three options: Continue to spend and hope to make enough money forever to make up for it; buck the trend with conspicuous nonspending; or find good financial advice and create a solid, sustainable plan for your money.
Continuing to spend with disregard to the new reality can have harsh consequences. Katz tells about a physician who called and said, "I have a problem." He told Katz he is 60 years old and still has a $185,000 mortgage on his house. He’s paid for his kids’ educations and put his wife through graduate school, but he only has a small amount to retire on. His total net worth is only $1,200,000 - enough - to keep him and his family going for five to eight years at their current spending levels and have nothing left. Unless something changes, he’s very likely going to outlive his cash. "You’ve got a problem, says Katz, "if you have high debt because you’re spending, spending, spending."
Some people resist the urge to prove they are successful. They may even take delight in bucking the trend, like they are thumbing their noses at the Joneses. Dalgleish says that although there is pressure to appear a part of the group, there’s always a one person exception. "There’s always someone who sticks out like a sore thumb. They make a statement that ’I don’t have to appear successful.’ If two people drive a Cadillac, and another drives a Volkswagen, there’s a certain silent statement by the one in the Volkswagen. It’s almost mocking them."
Physicians shouldn’t have to choose between looking financially successful and actually being solvent, however. These tips enable anyone to both live well and manage money well:
Start by saving up a cash reserve. The first basic rule of financial planning, according to Oliver, is to be cash rich. Have enough money to cover three to six months of expenses in a money market or in certificates of deposit (CDs). Start building up cash reserves. Think of it this way: Be balance sheet rich, not just income statement rich. A balance sheet shows what you own; an income statement shows money coming in and going out. People who are just income statement rich are not really wealthy. They may look like they have a lot of money, but if the income flow ever stops, the party is over.
Don’t try to be a do-it-yourself investor and a doctor at the same time. The pressure to look smart and successful extends into the investing arena. Many doctors like to do their own investing. "They think they are smarter than their investment advisor," Katz says. "This is unrealistic unless you have time to study the market and the world economy, the dollar, and which sector you’re in. There’s no way a doctor can follow all that. I don’t care how bright they are." The deceptive thing is that every investor wins sometimes. They may even do better than the gurus occasionally. In a bull market, everyone is a genius.
Choose good financial advisors early and carefully. Oliver warns, "When you’re just out of medical school, you’re going to be a dream prospect for banks to give you loans. That doesn’t mean you need to get those loans. Everybody is going to try to sell you something. Watch out for insurance agents. They try to sell you policies that encompass all aspects of insurance and investing. It’s going to make the insurance agent a lot of money." Insurance is good for insurance; investing should be another matter. Oliver says, "Physicians are very intelligent people, but when it comes to investing, they don’t have the time to research it. The best salesperson gets them to do things. Very scary." A professional advisor who provides family financial planning on a fee basis, not on commission for selling product, is the best bet. Listening to that person will probably ensure that the physician will do well and have enough money for short-term and long-term goals.
The sooner a doctor finds a good advisor, the better. In Oliver’s experience, "I’ll get physicians that are in their 40s to 50s. I’ll look at their portfolios, and they make very good income. They make terrible investment choices. If I get them right out of medical school, they can make better choices." If you are just starting in practice, Ramirez says, "Don’t spend your signing bonus on TVs and furniture." His warning to medical students and those coming out of school: "Sit down with an accountant. Before you spend, ask what will this [anything that might be financed] will cost you including interest. Make smart decisions."
Forget hot tips and concentrate on conservative investments. Some physicians are easily taken by hot stock picks or get-rich schemes. Oliver had a respected physician in his upper 30s tell him that he had invested $150,000 in something, but he wasn’t quite sure what it was. Now it’s worth zero. This was a sure-fire scheme, according to a friend. Oliver recommends that doctors focus on safe, conservative investments. A doctor’s biggest asset is his or her earning capacity. "Doctors don’t need aggressive investments; they should just be stacking away money, year by year."
Make a plan with the help of an advisor, and learn to live with it. It’s not about deprivation. It’s about spending intentionally by planning ahead. It’s reasonable to go out to dinner, have good wine. You can even have a nice car, but the doctor who buys two Mercedes SUVs and lives in a $2 million house, as Katz points out, may one day wonder, "I worked so hard and I make so much money, I don’t understand where it all goes?" The physician who can just buck the trend and do without some of the trappings of success for five, 10, or 15 years can end up with a lot more money than the big spenders could ever want.
Professional Coach Bonnie Schaller counseled a man whose credit was so maxed out that everything he owned was in hock. "I just remember the pressure he was under because of the disparity of how he was living and how much money he actually had. He felt like he had to keep the lifestyle going or he’d have to admit he wasn’t as successful as people thought." Schaller, who is based in Kent, Washington, says it’s easy for doctors to wrap their identity up in their career and their money, especially after all they have invested in their training. They want to look and spend like an important person.
When Schaller counsels people, she asks them to get creative. "We talk about how all those things are rather shallow anyway, and could they be creative? Would it be OK in the crowd that they work with to be a minimalist? It’s kind of in vogue now to live that kind of environmentally friendly lifestyle." For example, on one hand, riding your bike to work might be looked on as cheap; on the other, people see it as reducing carbon emissions. A doctor might start thinking of himself as more of a benefactor or as a person who cares about other people. That may turn out to be just as important. It comes down to defining one’s identity? What are the trappings of that?
Living a lifestyle a person can’t really support in the long term is stressful. Schaller sometimes has her clients read The Millionaire Next Door, (MJF Books, 2003), the bestseller that talks about wealthy people living a frugal vs. people deeply in debt with millionaire written all over their outward appearances. Schaller asks physicians to think which person he or she would rather be.
It’s not 1960 anymore. Giving in to the pressure to look successful has nothing to do with how good a doctor anyone is. Finding and following sound financial advice can spend your money can allow physicians to spend money on things that are the most meaningful to them - not things that impress other people. It’s possible to enjoy one’s earnings and still be far ahead of those who trade long-term financial security for the temporary appearance of success.
Sally Herigstad is a freelance writer based in Washington.