The Makeup of a Physician Millionaire and How to Become One
What Does It Take to Become a Physician Millionaire?
What does today’s average physician millionaire look like in terms of a financial snapshot?
The average age of a millionaire today is 61 years.
Their median income is $250,000k a year.
However, their median net worth was 3.5 million.
Nice creds, right? Are they achievable for you? YES!
Here, you’ll find out how within reach attaining physician millionaire status is for you. It takes much more than a desire. It takes the right developed actions and behavioral traits to get you there.
Do you know what those are? Let’s find out.
The Data Behind a Physician Millionaire
A good friend of mine, Sarah Fallaw, Owner of DataPoints and Author of The Next Millionaire Next Door, studies millionaires and the characteristics making them more susceptible to achieving their financial status.
The millionaires she studied filled out a 200-question survey. Some of these millionaires were very high up the personnel chain of their organization. She was surprised and amazed that they took the time to fill out the lengthy form. They were also willing to share their mistakes and regrets. Their mistakes didn’t deter them from building an impressive net worth. It didn’t deter them from continuing to invest. It appears they take advantage of their higher income bracket and build their wealth with common sense and strategic financial planning.
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During my visit with Sarah, I was surprised to learn that physicians are often what is termed as “income statement affluent”. The survey indicated they are high-income producers with a low net worth. I felt like it is understandable for a new attending physician to come out of training and have a high income and a negative net worth.
However, this should change over time—that doesn’t always happen. Some established physicians have a very high income and still maintain a low net worth.
Traits of a Physician Millionaire
Since the original book The Millionaire Next Door came out in 1996, there has been an increase in millionaires with college degrees and many have graduate level degrees. Physician millionaires cite hard work and discipline as factors to their success. They report being very satisfied with their lives and financial status.
Across the board, they tend to be very down to earth in their spending habits. A consistent finding over time is they don’t indulge in frivolous spending. For example, Sarah said she found they don’t spend more than $50 on a pair of jeans. Her studies indicated these modest spending habits were consistent for millionaires over the past 20+ years. I wondered if the research revealed any changes in key traits, habits or behaviors over the years? Here are a couple of new factors that a physician millionaire will face:
- Number of millionaires with bachelor and graduate level degrees has risen
- The amount spent on a house (even accounting for inflation)
Despite the rising cost of education and healthcare, over time there are some things that haven’t changed in the millionaire mindset. When you look at these you can see why they are transformative in allowing you to have a physician millionaire mindset:
- Confidence in your decisions
- Live a lifestyle that allows you to make good spending and saving decisions
These are things that you, as an aspiring physician millionaire, can adopt to build your financial wealth. As I’ve said before there are some external influences on your ability to build wealth. The people you are around will influence your financial thoughts and behaviors. If you are interested in learning more about how other people impact your finances, I did a podcast with Nick True called The Science Behind Positive Financial Habits, it has some great insight and examples.
Sarah shared with me, that when she first started working, she had a PhD. in Industrial Psychology and began her career at a technology firm. She told me that when she looks back, she can see that she tried to emulate the successful people around her. The leaders or employees with a better title. She also noticed what they drove and the outside activities they participated in. In hindsight, she could see there were so many influences that she wasn’t even aware of at the time.
That is all of us. We need to practice awareness of the subliminal influences around us. You may start to emulate someone who is not truly wealthy, they just appear to be because of the nice car they are driving or neighborhood in which they live. Technology is now a large part of the factors influencing us. We can see all the details of someone’s splashy vacation or their shiny new Tesla. Let’s take a closer look at technology and the physician millionaire.
Technology and the Physician Millionaire
On one end of the spectrum, there are gads of social networking sites and tons of marketing that appeal to your senses and emotions. All of it is telling you what you “need”.
On the other end, there are so many apps being introduced that help you organize tasks and finances. Technology is also great for keeping in touch with your family. The real question is does it affect your goal to build wealth?
The answer is that it does. Consider the addiction most people have to social media. Our buying decisions are likely based off what we see on those platforms. This has been proven in studies involving teenagers and is being studied in adults. In Sarah’s book, The New Millionaire Next Door, she discusses the behaviors that will boost the wealth of a physician millionaire.
Consider the following:
Awareness of your strengths and weaknesses regarding financial management
- Plan for your weaknesses (using an app, having a spouse manage your weak areas)
Decision making that is tailored for your family and household
- Having confidence that you made the best decision for your family
- Research (home, car)
When it comes down to the nitty-gritty, building an ideal life starts with our buying behaviors. What else does it come down to? Confidence.
Confidence is Key for a Physician Millionaire
How can someone increase their financial confidence eventually leading to financial freedom? Sara mentioned that less than 20% get investing advice while at home. We learn over time how saving, spending and investing work together. The journey to understanding finances is the key to confidence. Here are some questions and pointers to get you started on the road to becoming a physician millionaire confidently:
- What is financial management?
- What are the basics?
- What is the next step?
- Asking yourself: What does your ideal life look like?
- What do I want to use the money for?
- Write your goals out so you know in which direction to start
- Taking a small, well-researched decision
The questions that are included in confidence building are also useful for goal setting:
- Where do you want to go?
- What does your ideal life look like?
- What do I want to use the money for?
Now let’s say that you’ve inventoried your strengths and weaknesses and you are confident of your direction. Now you are ready to start along the path you decided upon during your goal setting session. It’s a strong start.
But—there are influences all around you. How do you stay on target when you see a friend going on an exciting vacation or move into the huge new house? There is a very important social piece to becoming a physician millionaire.
Your written goal setting questions will come into play. They will help you keep your focus on your goals. You may have a friend who loves to travel. They may make the trade-off of living in a smaller home and driving an older car, so they can afford to travel. You may decide living in a larger home is important as a gathering place for family. Your trade-off is to travel less to afford more square footage or the neighborhood you choose.
As I always say:
You can have anything, but you can’t have everything.
Is Your Spouse Helping You Become a Physician Millionaire?
I smile when I think about one of the physician bloggers said to “pick your spouse wisely, because if you don’t, that is half your stuff”! While it is true being able to talk to your spouse, being on the same page with finances is a happier ending for all! An interesting fact of the physician millionaire is they work closely with their spouse on building their wealth. The details may be left up to negotiation but they:
- They know where they stand.
- They know what their joint goals and plans.
They manage their financial life to meet a joint vision. Remember, a good approach to being on the same financial page with your spouse is by going on a money date. So far, that’s been one of the best strategies for a lot of physician families I know.
Residents, New Attendings, and The Path to Becoming a Physician Millionaire
There were people upset when the first book, The Millionaire Next Door came out because the subjects studied were all millionaires. Everyone wanted to know what happened to people who had the same behaviors and the same lifestyles but couldn’t achieve millionaire status. My work is looking at behaviors that allow anyone to build wealth, regardless of their income or age.
For the residents and new attending physicians who want to become a millionaire, the data indicates some common denominators in character, behavior, and personality traits. Sarah’s research looked at behaviors that allowed people to build wealth over time—regardless of their income or age.
They looked for data that will work for a new attending physician to become a physician millionaire.
Here are the behaviors:
- Be disciplined with your finances (living below your means, having a budget or spending plan, spending and saving with your long-term goals in mind)
- Be aware of what is happening with your finances and accounts
- Avoid being influenced by what other people are doing
- Plan your finances; create a financial plan
- Desire to become financially independent
Perseverance is a very strong factor in becoming a physician millionaire. According to the survey mentioned earlier, they continue to persevere despite anything else going on in their lives! Set aside time to write out a life plan, create a financial plan, and eliminate debt.
This is an easy way to get some focus on exactly it is that you want. Sarah said looking at her accounts is not something she typically thinks about doing, but she reports that it is a behavior that will predict net worth. Financially successful people don’t put their head in the sand. They stay aware of what is going on in their accounts and financial lives. They basically know how to manage their personal finances like a business.
Something that is contrary to the traits that help create a physician millionaire is when a resident or new attending physician is attempting to become the Facebook version of themselves. This would disrupt all your goals and plans. It will interrupt the discipline needed to become a physician millionaire. According to Sarah, physicians or their spouses who find themselves attempting to live up to a Facebook version of themselves can put the brakes on the behavior.
Here is her advice:
- Don’t view yourself through the lens of what others are doing; it’s very draining.
- Be aware of influences when making a purchase.
- Why am I making this purchase?
- Am I trying to emulate someone else?
- Ask yourself how you and your family were socialized to make saving and spending decisions.
As you can see, there are a variety of components to consider on the journey of becoming a physician millionaire. However, you can get there armed with knowledge, making traits into habits and knowing where you are headed with a written plan are the stepping stones to success as a physician millionaire.
I thought the book was amazing. If you are interested in finding out more about Sarah’s work check out Datapoints.com. There are a lot of resources and blogs. They write about finance and psychology. The book she wrote is a wonderful resource. It looks at consistent behaviors, lifestyles and habits that allow new attendings to become physician millionaires. It looks at the data from the work her father, Tom Stanley did in 1996, and 2001. There is information from other studies he conducted. We follow that up with recent research. The book covers the behavior that individuals who are successful at managing their finances exhibit.
I was struck by a quote in the book: “Income is what you bring home today. Wealth is what you have tomorrow, and the next day and the next day.”
Are you on the path to financial success? Do you want to become a physician millionaire? What steps are you planning to take to get there? Are you currently on track to becoming a physician millionaire? Let us know what stage you are currently in the Financial Residency Facebook Community.
Journal Club: Wealthy Doc – “Dad, Are We Rich?“
The article posted on the site wealthydoc.org titled, “Dad, Are We Rich?” is written by one of my favorite bloggers and I can’t wait to highlight it.
In it, Wealthy Doc tries to answer the question of, “Dad, are we rich?” He does it in such an interesting way by saying, yes, we are rich – at least on a world scale.
Some of the data he provides is eye-opening. A household wealth level of $1.36m puts you at the 97.5 percentile in the country. Every physician regardless of specialty or field will get there if they truly want it.
As he says, and I quote “The bad news is that 1M isn’t what it used to be. It would take 20M to match the buying power of 1M from a century ago. Using the popular “4% rule,” 1M would generate 40K per year before taxes – hardly a way to live in style! That income is less than 80% of the average U.S. household income. The millionaire group also isn’t that unique or rare in America. There are an estimated 10M households who have a wealth level of $1M or more.
This also brings up the issue of “the 1%.” There was a political backlash against this group after the 2008 financial collapse.
Just who are these 1 %?
The top 1% of households – assuming 125M U.S. households – would represent the top 1.25M households with a wealth level at 4M.
Are you in the 1% based on this? If so, congratulations! You likely have reached financial freedom if your spending is reasonable (under 13K per month. (4% of 4M = 160K/year).”
Ok, let’s stop talking about millionaires and let’s talk about residents. Let’s say the average resident makes $60k. Where does that put them on a world-wide scale? Well, they are solidly within the top 1% in the world. (Your monthly income could pay the monthly salaries of 226 doctors in Kazakhstan.)
Maybe you are primary care and feeling a bit poor compared to the subspecialties. Well, if you earn $200k, you are in the top 5% of earning for the US and on a world scale, you are at 0.04%.
Excellent article and I really love the perspective on income and net worth. Wealthy Doc thanks for showing us how to do it. Here’s the link to the article: https://wealthydoc.org/are-we-rich/