James M. Dahle MD, FACEP is a practicing emergency physician and the founder of The White Coat Investor, the most widely read physician-specific personal finance and investing blog in the world. He authored the best-selling book, The White Coat Investor: A Doctor’s Guide to Personal Finance and Investing, and works tirelessly to help doctors to get a “fair shake” on Wall Street.
We’ve all heard the joke… What do you call the dumbest kid to graduate from medical school? Answer- Doctor. There may be no more prestigious occupation in the workforce than that which follows the appellation, Dr. So why then the longstanding bad rap about physicians and their relationship with money? Do they make so much income that financial planning is unnecessary? Are they so used to being looked up to that seeking advice is taboo? Are they tunnel-vision geniuses? What is it?
Today I sit down with Dr. James M. Dahle, the renowned author of “The White Coat Investor”. Together we’re going to explore this apparent disconnect and more…
KURERNA: Doctors are notorious when it comes to finance. Do you think this stereotype is warranted?
DAHLE: Absolutely. Doctors are terrible with money, but they don’t have to be. In fact, they don’t even have to become experts by virtue of their high income. If they could just apply a few basic personal finance and investing principles, they would become the wealthy physicians their family, friends, and patients think they are.
KUDERNA: What motivated you to write your book and corresponding blog, “The White Coat Investor”?
DAHLE: I saw how much freedom I could find in my life by learning and applying personal finance and realized that nobody was out there teaching this information to doctors either during or after their training. Given that the website didn’t really make any money at all for the first few years, it was really a labor of love.
KUDERNA: In your view, what’s the highest paid and lowest paid specialties in medicine?
DAHLE: It’s not a matter of opinion as surveys are regularly published on this topic, but in general pediatrics is the lowest paid and orthopedics is the highest paid. But I’ve always been more impressed by the intraspecialty differences in pay than the interspecialty differences.
KUDERNA: What’s the most common flaw a young physician makes, financially speaking?
DAHLE: The biggest problem is growing into their attending income way too quickly. All a physician really has to do to become wealthy is to live like a resident for 2-5 years after residency. The difference between a resident living standard and an attending salary is enough to pay off student loans, save up a down payment, catch up with retirement accounts, and be well on your way to being a millionaire by five years out of residency, even after the effects of a dramatically higher tax burden.
KUDERNA: We’re seeing this trend of private practices being gobbled up by hospitals, and those hospitals being absorbed by healthcare systems. Why do you think this is happening? Is there still room for the entrepreneurial doctor?
DAHLE: The consolidation of health care and the compliance burden is making it harder and harder for doctors to be self-employed. Part of this is also the doctors’ fault, as they’re not willing to learn the business of medicine and not willing to take the risks that perhaps doctors took in the past. There is certainly still room for entrepreneurship among physicians, both within medicine and outside of it.
KUDERNA: Student loan debt is grabbing headlines on a daily base, now having surpassed the total of outstanding credit card debt. What affect is this having on a career in medicine? Any changes you’d like to see?
DAHLE: Changes? Sure. I’d like to see tuition come down, but I don’t expect that to happen any time soon. At least it still makes sense to get a medical degree even if you have to borrow for it. I’m not sure that can be said for a dental, law, or veterinary degree any more.
KUDERNA: The cost of health insurance is taking a larger chunk of Americans household income every year, yet doctors are saying they’re actually making less now. Where is all this money going? Perhaps a loaded question, but any fix you could suggest?
DAHLE: On an inflation adjusted basis, some doctors are making less than they were a decade or more ago, but there’s a lot of variation on that theme. There’s this idea out there that there used to be a “Golden Age of Medicine” but it always seems it was 10 years before any given doctor went into practice. In my specialty of Emergency Medicine, we’re probably in our golden age right now. Emergency physicians have never been paid as well as they are now.
On a broader note, the main problem with health care in this country is we’re trying to use a market-based model without ensuring a functioning market. In order to make a market-based model work, there must be price transparency and everyone should have some skin in the game. Right now, there is no price transparency and most Americans don’t have any skin in the game because government or their employers are paying the lion’s share of their health care expenses.
KUDERNA: Millennials are moving out later, getting married later, and starting families later, all the while trying to find the right career and escape overwhelming student loan debt. What effect has this had on pursuing a medical career?
DAHLE: I think millennials are just doing what doctors have been doing for a long time. The “millennial plan” and the “doctor plan” are really the same thing.
Rapid Fire Segment
K: Best Investment Made? D: Going to medical school
K: Worst Investment Made? D: Whole life insurance
K: Favorite part of the medical job? D: Doing nursemaid’s elbow reductions. In 5 seconds, you’re taking a kid in pain who won’t move his arm and returned him to normal. Pays well too.
K: Favorite part of the blogging job? D: Seeing the light come on when doctors realize they can do this financial stuff.
K: As a child, what did you want to be when you grow up? D: A doctor, a writer, and a heavy equipment operator. I’ve managed to do two of the three so far.
K: Best way to make money in medicine? D: Own the business.
K: Time spent revising your financial plans? D: Oh, we do that once a decade or so. But mostly we’ve been following the plan we drew up during residency. We’re multi-millionaires now, so I guess the plan worked.
K: Biggest gripe about the financial industry? D: The low barrier to entry. Financial planning and investment management should be professions on par with law, medicine, etc., but they’re overrun by poorly trained commissioned salesmen and bad payment models.
To learn more about Dr. James M. Dahle MD or to purchase his book, The White Coat Investor, visit his website.