The Physician Life Cycle Part Two: Defining Your Wealth Status and the Importance of Net Worth

Why do high earning physicians end up financially stressed? It’s not what you earn, but what you are worth that matters!

Author: Robert A Felberg MD

Topic: Physician Finance

It’s confusing… You didn’t become a doctor to become rich, but you certainly thought that you would be financially comfortable.  Yet, here you are, earning a very respectable salary and you still can’t seem to get ahead.  Not only that, the debt never seems to go away.  And, late at night, when you do the math, you are starting to realize that you may never be able to retire.   Your dreams of financial independence and freedom are quickly slipping through your fingers.



[Note: Physician finances can be complex and most doctors feel uncomfortable making money-based decisions. The good news is that there is a large “blog-o-sphere” dedicated to educating newly minted doctors on how to maximize their net worth. This series presented by Physician Advocates LLC and Medical Success Central will explore the philosophical side of financial topics rather than technical details. Please be certain to sign up for the newsletter to keep up to date]


In part one of this series, I discussed the need to consider that the way you feel about your practice now may change over time. What is exciting now, like seeing 26 patients while being post-call, will certainly be burdensome when you hit your fifties… or possibly earlier. Planning is everything and if you make wise financial decisions now, you’ll be in control and decide how you want to practice in the future. The opposite is also true… emphasizing luxury spending, debt accumulation instead of debt elimination, and “life balance” early in career will lock your future self into the unhappy equivalent of modern debtor’s prison.

Many of the physician financial bloggers in the “blog-o-sphere” offer great technical expertise – how to back door a Roth-IRA or compare jumbo mortgages, but they often lack in establishing a strong foundation in the “philosophy” or theory underlying these financial moves. This overly technical jargon-heavy approach can lead to paradigm paralysis amongst physicians- they don’t understand what is going on so they do nothing!



This post will explore why physicians- despite their earning potential- are not wealthy. I will also review how doctors get fooled into the false sense of wealth and the typical physician financial life cycle. By understanding your true net worth, you’ll have a better understanding of the reality of your financial status and hopefully gain insight into the financial steps that will help you achieve your goals.


When it comes to wealth, most doctors make one of two logical mistakes:

  • They are under the false belief that because their salaries are high that they are rich
  • They feel entitled to luxury spending and a life of comfort because they are doctors

First, the bad news. If you are like most early or mid-career physicians, you are not rich. You are not even well-off. Most likely, you aren’t even worth zero. You have negative value or “net worth”. You are “destitute”!

Now, I can be kind and tell you that you are “cash poor, but future rich- often called a H.E.N.R.Y.”, but that bit about your future is a a lie. Why? Because you already sold your future.  Who do you think is paying for that student loan debt, mortgage, and credit card spending? It’s not the bank or the Stafford Loan Organization- it’s you!  Yes, you! You have signed a contract to work in the future to pay for today… with accumulating interest.

If you haven’t figured it out by now, “net worth” is the amount of assets you possess minus the amount you owe in debt. It’s important to realize that some elements of net worth aren’t liquid, such as equity in a house or tax-deferred retirement savings. This will be important in the future if you decide to harvest some assets for living expenses. But, for now, leave them in your net worth discussion.

There are some basic levels of net worth that define your wealth. These can help you determine the moves you need to make:

  • Destitute- You are worth less than zero. Don’t panic, most newly minted doctors start out this way. Your goal in life is to earn enough to be worth nothing. Focus on earning aggressively, paying down debt determinedly, living frugally, and investing to best maximize your returns.
    • Important note: Your actions while “destitute” will have the biggest effect on your future financial goals. [Editor note: managing this stage will be discussed in a future post]


  • Zero- Congrats! You are now worth nothing. It took me 7 years of practice to be worth zero, so be proud. With the advantage of readily available physician financial advice planning, which didn’t exist when I started out, it shouldn’t take you more than 4-7 years to become worthless. Your goal now is to continue your frugal and hardworking ways. But instead of servicing debt, turn all of those energies toward saving and investing wisely. Time and compounding interest are your friend here. Just remember, you aren’t rich yet, so don’t pretend to be.


  • “Nose above water” financial independence- Most physicians can reach this stage between age 40 and 45, but your specialty and starting debt can vary this widely. Basically, it’s an amount of assets accrued such that if you sold your house, moved someplace cheap, and did not spend on luxuries, you would never need to work again. The amount needed here is usually somewhere around 1 million. This is a great step. You’ve really achieved something. Of course, you want to be rich, not just survive…
    • Important Note: Earning complacency can trip you up in this stage


  • Financial Independence- You can now quit your job, your mortgage is paid off, and live a decent quality of life, but not equal to your full salary. I’m not saying that you should quit, I’m just saying that you can or at least back down on the aggressive earning. This is probably the happiest point to be in life. Not because of the wealth, but because of the freedom. You can start to say “no” to things you don’t like at the office. You can also focus on the things you love- teaching, travel, ministry, etc. – without having to worry about the financial rewards. This can usually be achieved around age 50 and is followed by a “victory lap” for the last decade or so of your career. [Editor note: I’m at this stage and it was worth every sacrifice and then some…]


  • Wealth- You no longer need to work and can maintain your full working salary based purely on returns from investments and passive income. The rare few achieve this early, but it the ultimate prize. Usually attained between age 59 and 76, it can be accomplished by nearly any doctor who follows the simple plan of earning a lot, spending a little, avoiding debt, and investing aggressively.


  • Rich- being able to spend luxuriously without touching your principle or saved assets. If you want to get this degree of wealth, the practice of medicine is not for you. You need to start a business, invest heavily in real estate, or invent a valuable product or service. Maybe you are beautiful and talented with a voice that makes teen aged girls yell and a face made for the silver screen. The rest of us can dream…

Knowing your true wealth as defined by your net worth is the key to understanding your goals and appropriate financial moves.

You might say, ” I get it! I want to be rich someday and I am willing to make the sacrifices to obtain that goal. But, how much do I need to save to get there?” There’s a surprising mathematical study that gives you this answer with high certainty, but the result may be a little shocking… I’ll discuss it in my next post.

Bonus Tip: The best way to improve compensation is through negotiating the best package. Get a handle on your market value, improve your negotiation skillset and take a CME approved course designed for physicians. Don’t leave tens of thousands of dollars on the table- it really adds up over the next 30 years!


What do you think? Does all work and no play make Dr. Jack a dull boy? Are you haunted by the older doctors you see in the hospital- still working like mad at jobs they hate to make ends meet, never to retire? Do you dream of practicing medicine one day without a financial care in the world? Share your thoughts in the comment section below…