#20 Why Many Doctors Live Paycheck to Paycheck

Welcome to the Passive Income MD Podcast, where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now, let's get on with the show. Hey, everyone. Hope you've had a great week. This week, I wanted to talk about a topic that is absolutely essential to physicians to understand. My hope is that after hearing this, a lot of you will change the way you see your career, your future, your money. Let's get right to it now. I'm just curious how many of you have been affected or are currently affected by what's happened with COVID especially in the medical field. I mean, the thing is that we thought our profession in terms of medicine was pretty bulletproof. Now, we've gone through many recessions. I mean, for me, I started my practice back in 2010, 2011, so I kind of missed the whole 2007, 2008 Great Recession. I was around, I was in residency, and it didn't quite affect me, but I did see how it affected many others. So I've only known some good times. And so this whole recession or this economic downturn during COVID was a new phenomenon for me. And the funny thing is, I had been talking to people way before this that our jobs in medicine are not quite as secure. I found that out the hard way, not because of any sort of economic recession, but of some political stuff that happened to me at work. And I realized that I was not in control of my time, my income, and that sort of thing. And I think it was one of the greatest things that happened to me, looking back, is because it prepared me for a moment like today. Since that moment, I've been totally scared that medicine is not secure. And it's been a mission of mine to tell people about that. Fortunately, a lot of people just did not take that seriously because we've only been physicians in the good times. But it's crazy to see how a worldwide global pandemic. I know it's a very, very unique situation, but it can really take medicine and our careers to our knees. And now we've seen who has the real power in medicine. I think it's very obvious it's not the physicians, unfortunately. My hope is that that changes through a lot of things that are happening, but I'm not fully optimistic that that'll be the case. And I've been preparing, and I will continue to prepare for a scenario where physicians are totally not in Control of medicine. And so what was one of the most troubling things for me to hear, especially in this whole time, was when physicians, when they were furloughed or their billing was cut or their cases were cut, I mean, I'm an anesthesiologist, there weren't enough cases to go around in the hospital. A lot of people were kept off the schedule and they weren't working and they weren't billing for their time. They were truly concerned about whether they would be able to pay their bills in the next month or two. And that's a scary thing, especially as a physician. We became physicians to help people, to heal people. But we expected the return and the benefit on the backside would be that we would live very good, stable, secure jobs. I think most of us didn't go into it thinking that we would be living in these huge mansions and driving Ferraris. Maybe some of you had that thought, but I think the majority of us just expected to live good, safe, secure lives. Unfortunately, we found out that, yes, we are not immune to it. It can happen to us too. And so we actually found out who were the physicians that were essentially living paycheck to paycheck. Now you hear that term in the media, on financial websites quite a bit about regular workers out there in the world living paycheck to paycheck. And that's a crazy American phenomenon. But the thing we found out is that physicians live essentially the same way. Yes, we are highly paid hourly workers, we get paid more, but our lifestyles have grown to accommodate that. It just turns out that we're essentially highly paid paycheck to paycheck workers. I mean, that's a crazy thought. When I tell my non physician friends that there are physicians out there making $250,000 to $400,000 and they are essentially living paycheck to paycheck. If their income dropped, especially like it did during COVID that they're going to run into financial issues and it blows their minds. But I remember doing a post early on in the blog exploring this whole topic and I went through a whole breakdown of a physician living in Los Angeles with I guess a normal mortgage according to standards here, paying taxes at the highest tax bracket, still paying off their loans again, having to pay a decent sized mortgage and put their kids through schooling and having childcare, paying all their typical insurances and things like that. And I remember totaling it all up and it's amazing how quickly expenses add up because when a physician is making $250,000 and they have an effective tax rate in the 30% or so, their net income can be somewhere in the 12 to $14,000 range. You start adding up these expenses. As many of you know, many of you are paying student loans in the thousands of dollars and you add your mortgage in there. Especially in LA with property taxes and insurance and that sort of thing, it's not uncommon to pay mortgages in the 5 to $7,000 range. I know for those of you who are living in the Midwest, you guys think that's crazy, but that is the life out here. And unfortunately for physicians living in high cost of living areas, our incomes don't make up for it. In fact, many of you, especially living in low cost of living areas, will essentially have higher incomes. It's a thing that I think is very particular to medicine and you won't find that in other fields. Oh, and I'd love to hear from you, especially if you know of any other fields that have that kind of condition, where people in high cost of living areas make less and people in low cost of living areas make more. So when you start looking at some of those numbers, a physician might make anywhere from 12 to $15,000. And their expenses are absolutely in that same ballpark. The same goes for any of these physicians that make $500,000. They typically buy homes in nicer areas and it all comes out even. So there isn't much left at the end of the day to save, to invest. So unfortunately, they just dig themselves into a deeper hole and they become more reliant on medicine. And unfortunately, when there's a situation like I've seen many times, it's happened to me even recently where things happen, the economy changes and decisions are made from one day to the next where you might get a drop in 25 to 30% of your income. And it does happen, then you're all of a sudden left wondering whether you'll be able to pay your expenses the next month. And that's a scary place to be. And honestly, I feel like as a physician, we shouldn't be in that position and we don't have to be. Yes, we can move, we can do all these sort of things. But I think the better solution is to create a system to break free from the whole medicine is my sole source of income situation. And how do we do that? We have to create other streams of income. Before I thought, hey, it'd be a nice optional thing to have. But especially with everything that's gone on recently, I realized it is an absolute necessity for every physician in My opinion, to create other streams of income, especially an employed physician outside of medicine, that's the only way you're going to have control over how much you work, how you work, even how you practice. That is the only way. I'd love to hear if you actually differ from me on that now, how you achieve that goal. There's so many different vehicles to do that. Yes. Who have done it through the stock market. I know people have done it through inventing a device or all these sorts of things. I mean, that's part of the reason we had the Leverage and Growth summit recently, is to show people that there are so many different avenues that physicians can take to create other streams of income. You have the degree, you have the ambition, you have the work ethic. Oftentimes whenever you walk into a room, you are the smartest person in that room. There's no reason why you can't create the life that you want and you see other people doing that. I personally believe that real estate investing is one of the best ways to do that, and that's why I talk about it so much on the blog. I think it's one of the greatest ways to create passive income. It doesn't happen immediately, but it takes time. With planning and strategy, you can make that happen. But my hope is that everyone here listening to this will figure something out that works for them to help them create their ideal lives. If you are in that situation right now where you're a doctor, you're living paycheck to paycheck, please know that there are other physicians who have been in the situation, have figured it out. So it is possible. I'd at least love to get you thinking about it and somehow take steps on that journey. My goal just. Just to make it absolutely clear is not to have physicians leave medicine. I think we need good doctors in our society. You put a lot of time, energy and effort into being a physician. There's a reason why you chose this profession. I still think it's absolutely noble. You're doing great work. And that's why, in spite of being financially free, I continue to work as a physician. But I continue to do it because I'm passionate about it. And I think that translates into better care, better patient care. And honestly, it allows me to be a better physician at the end of the day. But I think that choice today is absolutely important more than ever, to decide how you want to practice medicine. And that starts by figuring out how not to live paycheck to paycheck. And so that's my charge for you. I hope you have a great week. Thank you. Take care. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Are you a part of our community yet? Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. You can join us on our Facebook group Passive Income Docs, and you can always learn more at our website passiveincomemd.com thanks again for allowing me to be a part of your journey. See you next time.