The doctors' lounge or surgeons' lounge is an interesting place to hang out and listen. It's a great place to get friendly with your colleagues and network professionally. Unfortunately, it is also just a terrible, terrible (insert Charles Barkley voice) place to try and improve your financial knowledge. In fact, I have heard more financial myths discussed in the lounge than in any other single location—maybe even including the internet (ok, just kidding, the internet still holds the crown!).
But the fact remains: financial myths grow and spread like wildfire in the doctors' lounge. It is probably the #1 or #2 topic of conversation there outside of medicine. For long stretches, it even outpaces medical discussion.
I want to dig into these financial myths and debunk them here. If I am hearing them thrown about all the time, chances are that they exist in doctors' lounges across the world.
So let's stop them in their tracks!
Also, something that is not a myth is how you can earn real income from your expertise to cover the little things that have a big impact—holiday gifts, kids' activities, or the next date night.
• Most side gigs take time to build. This one pays fast.
• I do short, physician-only surveys on Sermo between cases and get paid for my input.
• They take just a few minutes and the money hits PayPal or gift cards right away.
• It’s not replacing my OR income, but it covers the little things that have a big impact—holiday gifts, kids' activities, or the next date night.
Why is the doctors' lounge a breeding ground for financial myths?
Well, it's really for the same reason that doctors in general have low financial well-being despite having very high incomes.
We have no formal financial education and very low literacy scores related to personal finance.
This means that:
- We don't know what we are talking about most of the time
- We take advice from bad advisors
- Our financial situation is often not good and therefore we are not qualified to give advice
- We have a huge negative bias towards money given the financial taboo that still hangs over medicine
It's no wonder that a gathering of doctors (A flock? Maybe a gaggle…) inherently lends itself to the spreading of financial non-truths and myths.
Here are some of the best ones that I've heard along with my explanations of why they are wrong…
Debunking 7 financial myths overheard in the doctors' lounge
In no particular order…
1. You can't get rich as a doctor anymore
I have to admit that when I was beginning my financial journey with $500K in student debt, no savings, no investments, and no financial education, I kind of felt that it was impossible to become rich as a doctor.
But I was wrong. In reality, this myth is just laughable.
At a median physician salary, doctors are still in the top 1% of income earners in the U.S., forget about the world.
Try telling someone making $65,000 annually that it's impossible to get rich (i.e., achieve financial freedom) making a median salary of $200,000. I wouldn't even be able to get the words out.
The bottom line remains that if you cannot achieve financial well-being, you have a spending problem, not an earning problem. Remember, the bare minimum that you need to do is save and invest 20% of your gross income. You can find more on this basic formula for wealth here.
No matter where you are beginning now, you absolutely can achieve financial freedom and be rich as a doctor.
2. Die with debt so that your debtors don't win
I think I dry heaved when I heard this one.
This was one doctor telling another that they planned to die with their student loans so that they would be discharged. In their mind, this was “winning” because they never fully paid off their lender.
But, the reality could not be further from the truth. When you are a lender, your ideal scenario is that your borrower never pays you back fully. That way, you just keep collecting more and more… and more interest.
Related Post:
The Wrong Way for Doctors to Think About Loans
If you want to stick it to your lender, pay off your debt aggressively and ahead of schedule. Pay back as little interest as possible. That's how you win!
Don't be fooled by small monthly payments that add up and slowly eat away at your financial freedom. Before you know it, you may be working because you have to, not because you want to…
3. Taxes are killing doctors
I may get some push back on this, but it is still one of the most popular of the financial myths.
It's true, we live in a country with a progressive tax system. In general, the more money you make, the more you get taxed.
Because of this, I hear doctors complain all the time about taxes. Saying things like, “I get taxed so much, I should just make less money.”
This is absurd. At the highest tax bracket, let's say you get taxed 40%. You really don't want the extra $60,000 you can make by earning an additional $100,000? I understand that we would all rather have $100K, but you're going to sneeze at the $60K? I really hope not.
But this isn't even my main argument for this financial myth. Doctors always complain about taxes, then take no legal tax reduction action. Things as simple as:
- Maximizing retirement accounts or contributing to an HSA as a W2 physician (Here are 4 other ways to lower your taxes as a W2 physician…)
- Learning how to use the tax advantages available for non-W2 physicians, or
- Using real estate as a tax reduction vehicle
No one likes taxes. But they do serve a purpose. You also only need to pay the amount you legally owe. So start learning, take action, and stop paying more than you owe!
That's what I did. And you can see my actual personal tax plan right here.
4. My employer doesn't do enough to help me build my nest egg
As a high income earner and doctor, there is no way that your employer can do enough to build your nest egg. You simply make too much money. And that's not a problem.
Even if your employer offers a 401k with a match, a 457, and an HSA, you will likely still have left over savings to invest if you save at least 20% of your gross income, as you should.
That means you need to invest in other vehicles, like a taxable investment account or real estate. By the way, please don't invest significant portions of your nest egg in things like crypto…
Too many times I hear people complain about their employer while they don't take advantage of the retirement benefits that their employer does offer. So start there.
Now, in the case of an employer that offers a poor or no match, or bad funds in their retirement accounts, take things into your own hands.
Maybe you only invest in a backdoor Roth IRA and a taxable account. Maybe you put more into real estate. There are still many, many avenues to reach financial freedom. So use them!
Establish your retirement account waterfall so you maximize all of your tax advantaged accounts.
5. You need to get lucky to invest
This is purely a statement that comes from a lack of financial education. I know because I used to think this.
Hearing about investing in the stock market from short clips on TV shows, newspapers, or online headlines sure makes investing seem risky. Random ups and downs. Stories of people losing it all or making a huge windfall on a single investment.
That's because these outlets make money from attention. And boring stories like “Index fund investor reaches financial freedom after 30 years of staying the course” don't sell.
Once you recognize that passive investing in low cost, broadly diversified index funds over the long term outperforms active investing, like stock picking and timing the market, 80% of the time, investing seems less like risk or skill and more like patience. And everyone has the capacity for patience.
Related Post:
5 Reasons Index Fund Investing is Better Than Stock Picking
6. My financial advisor says this stock is a sure thing
This is a common one. Whoever said it pretty much always got played by an active advisor or salesperson whose goals do not align with the investor's.
Remember, investing in a single stock is a gamble. Studies show experts cannot reliably predict winners. Just ask those who touted Enron years ago. Ask those who recently invested in the ARKK funds just to see their value drop suddenly after many years of perceived gains.
Invest in the entire market for the long run. Rebalance once a year. Pay advisors only a fair, ideally flat, fee if you decide to use one. Otherwise, you are paying them too much.
Related Post:
7 Questions to Ask Before Hiring a Financial Advisor
7. Money doesn't matter
This is the king and queen of all financial myths. And I've heard it in many forms. Most recently, it was two doctors chatting with each other. One was telling the story of another doctor who had a lucrative private practice. The employed doctor listening to the story scoffed, “Well, I'd rather be doing work that matters. Money isn't everything.”
Now, I know nothing of the private practice doctor being discussed. But nothing from the conversation led me to believe they were doing work that doesn't matter.
This response struck me as a bit of jealousy emanating from someone who likely isn't satisfied with their compensation. And the reason most people aren't happy with compensation is because they perceive it is not enough to help them achieve their financial goals.
I would venture that if this same doctor was on the road to, or achieved, financial freedom, their response would be much more gracious.
The bottom line is this: Financial well-being increases our overall well-being. Improved well-being makes us better doctors. Money is not everything. But it is an important part of the puzzle. Especially because it is so often overlooked and made taboo by physicians.
In fact, here are 9 Powerful Ways Financially Free Doctors Can Improve Healthcare!
• Most side gigs take time to build. This one pays fast.
• I do short, physician-only surveys on Sermo between cases and get paid for my input.
• They take just a few minutes and the money hits PayPal or gift cards right away.
• It’s not replacing my OR income, but it covers the little things that have a big impact—holiday gifts, kids' activities, or the next date night.
My goal…
…with this post is not to shame or embarrass anyone who has said or thought similar things. As I mention throughout, I believed most of these myths before beginning my financial comeback.
They are not borne out of malice or deception. They are the result of misunderstanding and ignorance.
Like any similar case, the answer is awareness and education. That is why I truly believe that financial education should be a part of medical education. However, as of now this is rare.
So, in the meantime, here are some great resources if you are looking to expand your financial education and achieve financial freedom!
- Watch my Masterclass Webinar on The 12 Steps to Financial Freedom for Physicians here!
- How Much Is Enough Retirement Savings?
- Understanding the Stock Market: Firm Foundation vs. Castle in the Air Theories
- Top 5 Limiting Beliefs to Overcome on the Way to Wealth
- Physician Side Gigs to Make You Passive Money
What do you think? What financial myths have you heard spread in the doctors' lounge? Did you debunk them? Let me know in the comments below!
14 Responses
very true JF.
In my experience, 90% of Drs are woefully ignorant of simple financial facts regarding their accumulation of wealth.
Absolutely! The sooner any doctor can start, the better. But, while the best day is yesterday, the next best day is today!
Actually, what this article overlooks is a basic but powerful financial principle: it’s often smarter not to rush to pay off low-interest student loans, especially if you can instead invest that money in the stock market and earn a higher return. Saying “I’d rather die with my school loans” might sound dramatic, but it’s not always bad advice, if your interest rate is low and your investment returns are higher, you come out ahead.
Using a platform like Charles Schwab’s Intelligent Portfolios is a no-brainer for this strategy. It’s low-fee, diversified, and fully automated. You can set it and forget it, and they only charge a small advisory fee (or none, depending on the portfolio). This way, instead of just throwing money into loan principal, you’re letting compound interest work in your favor.
Of course, this doesn’t mean ignore your debt forever, it means use smart math and strategy, not just fear or peer advice from the doctor’s lounge.
I definitely agree with your concept here! The key is to know yourself behaviorally. Way too often I see people cite interest arbitrage as the reason they don’t pay their debt down…saying that they are going to invest the money earmarked to pay off the debt early. But then expenses come up or they buy other things instead of actually investing the money. That’s why I am overall a fan of paying down debt. But if you are disciplined, arbitrage can def accelerate your ability to build wealth!
Remember that when you pay principal on a loan that accumulates 6% interest, that’s like getting a 6% guaranteed return. A lovely great uncle of mine who went from being a 16 year old orphan to a multi millionaire through conservative investing and stock options taught me that. Of course, you can do better than 6% in the stock market, but there is nothing like the feeling of paying off debt early and then you can direct more money to investing.
This right here! No investment has a GUARANTEED and IMMEDIATE return like paying off debt!
Another issue is that doctors, self included, often think that they are smart enough to outperform the market. Just not true. That leads to more risk and usually worse returns. I have told my children for more than a decade that if I had put all my savings into the S&P from the beginning I would be retiring with at twice as much as I have. Its too easy to put money into pre ipos or a friends business venture. These typically are not successful stratagies. Real estate has been a successful strategy but tends to be a distraction from ones career.
Yes! Especially when it comes to investments in the medical space where we think our insider knowledge translates to some advantage! (It rarely does)
Good article but I disagree on #2 and #3.
#2 Student loans are forgiven if they are federal debt after 10 years with PLSF so running out the clock saves huge. I absolutely plan am leveraging that program to make minimal payments and letting that clock run out rather than paying them off even though i could if i wanted to.
#3 Taxes to do kill doctors and high earning W2 people. Most people i know work for healthcare systems and are W2. Sure you can start a practice out of fellowship and take out a ton of liability debt but as an orthopedic surgeon where you are just learning how to operate in your first few years the added stress of creditors, negotiating with payers and ASCs is not what you want. As a W2 there are very few ways to write off active income as opposed to everyone else i know who gets paid a small salary and mostly through stock grants taxed at cap gains. Its complete BS. Sure you can put away $23K per year pretax, what is that? you cant use the money for 50 years and most investment options in 401k plans are super limited relative to brokerage. How will you write off 500-600k in active income and still allow it to be directed how you want like everyone in finance does? Perhaps you should take about using microcaptive insurance premiums or short term rentals real estate. Cheers
Great points!
For #2: I agree, if you will qualify for PSLF then it makes sense to pay income based minimums until you get the rest forgiven. But for those who won’t qualify or for private loans, you gotta pay off ASAP.
For #3: Taxes are an issue for sure. But you can’t let the tax tail wave the dog. I do recommend all docs to generate some 1099 income to maximize tax efficiency. I also use real estate and my wife has REPS so we address taxes that way as well!
Fewer than 3% of PLSF applications are approved. I didn’t like those odds, so paid mine off asap. Agree that all these are myths.
Way to go! Question though – where do you see this data on PSLF?
Doctors gave up a lot of their ability to make money when they quit private practice and moved under the “wing” of a health care entity – be it hospital, medical corporation, or some other group that runs your practice. As an employed physician you have few options available to you financially. As an owner of a private practice there are many tax breaks and advantages that you can use to protect and grow your finances. Sure – it’s easier to let someone else do all the work but you are working hard for less income.
100% – and I say this as an employed physician. This is where the power of financial freedom comes into play in my mind. To not need a paycheck means we can practice our way and stand behind it even when we are employed. (Because we can just leave if the administration doesn’t support it.)