Pearls from White Coat Investor’s Guide for Students

All medical students should read Dr. Dahle’s book, “White Coat Investor’s Guide for Students.”

I am glad that we buy such books based on price and not on their value. If not, this book would cost several hundred thousand dollars. Its price is less than its value and worth every dollar.

Serving a Wide Audience

This book would be useful not only to those in training but also to all physicians.

The earlier in training one reads this book and puts its advice into practice the more one would benefit. It is difficult to turn a ship around once it has set sail.

I share Dr. Dahle’s disappointment when physicians discourage students from medical careers. Medicine continues to be a fantastic profession. For me, it is a calling. Even if you do not see the blessing of serving others through this field, you can look at it as an awesome job. My work environment is safe. My income is in the top 5/10%. I am using my skills and working with a great team. What else should I want in a job?.

This book is WCI’s third book. The 1st one was a general overview which is still helpful to anyone in medicine. This book targets medical students and dental students early in their training. But it would be useful to anyone at any point who wants to improve their financial standing or knowledge.

Become Financially Free

Dr. Dahle believes that a financially secure physician makes for a better physician. We are able to spend time at home, take vacations, and spend time with patients. We who are free live a more fulfilling, lower-stress life.

Rick Ferri,  my personal financial advisor, wrote the book’s forward.

Inscription from WCI to Wealthy Doc
I appreciated the kindness and grace demonstrated in the inscription. He gives me more credit than I deserve by bumbling online.

Much of the basics of personal finance and investing are the same for everyone. That accounts for 80%. Another 10% may be more specific for physicians. Another 5/10% may be specific to your unique circumstances. This covers 90% of what you need to know to be financially successful in your medical career.

Here are a few of the take-home messages from this excellent book. Read the book to learn more.

Many Pearls

Getting your money straight has always been an important goal. It is even more important now since medical incomes have not kept up with inflation. And debt loads have accelerated. Losing control of your personal finances can contribute to burnout later.

Per Medscape data, one in four physicians nearing retirement does not even have a $1M in net worth. Following the recommendations in this book will ensure that you are not one of those.

Financially-free physicians can cut back work at mid-career. You may choose to reduce hours and cut out undesirable parts of your job. If you no longer have to work for money and could live solely off investments you are free. When free, you may find -as I did- that you enjoy your work even more.

Slay the Debt Demons

Minimizing the harmful effects of debt. Protect yourself from catastrophe. Allow your high income to build wealth over time. You can do this.

Other careers may provide more upside potential for income. Still, medicine’s consistency of a generous income is hard to beat. Reduce debt to a manageable level. Don’t squander money on frivolous purchases. Choose reasonable investments and you should be able to build large wealth over a career.

The average American household income is around $62K. I know physicians making 3-4 times that with only part-time work. We doctors make enough money. If able to keep our spending at a reasonable level, protect it from catastrophe, and save and invest, we will do fine. This is not rocket science.

Play a Good Defense

Even though money is not the only reason to go into medicine or even the most important reason, it is important. 

When taking out student loans keep them manageable. Loan debt should not be more than your 1st year starting salary. If student loan debt is twice your starting salary that is still reasonable. 

Choose Your Specialty Wisely

Having a debt-to-income ratio of four or above is a serious threat to your financial future.

When I started, my debt-to-income ratio was 0.33 ($70K/$210K). Current averages in my specialty would result in a debt-to-income ratio of 0.67 ($200K/$300K). That is quite doable. One could pay off student loans in 2-3 years of practice. Then tackle other financial goals.

Dr. Dahle talks a lot about keeping your debt load low. One key is going to the cheapest medical school you can get into and not taking out excessive loans. That is exactly what I did and it is what I continue to recommend. That extra $1,000 of student loans for a medical school vacation can balloon 300-400%. Be kind to your future financial self with the least debt possible.

Jim summarizes student loan debt strategies like Public Service Loan Forgiveness (PSLF).

Keep Your Costs Low

I lifted myself up by my financial bootstraps. After studying finance and economics at a young age I was able to use these strategies. They work. Most normal people don’t run scenarios on spreadsheets as a teenager as I did. A book like this can be a guide to success with money. 

Jim gives specifics about keeping costs low, living on loans, having roommates, etcetera. Those simple tips could save you thousands of dollars.

His chapter on choosing a specialty balances the financial and non-financial aspects. He stresses that you must love what you do besides making it financially viable. After all, career longevity contributes to building wealth. A very short career with a high income will not take you as far as a lower income, over a long career.

He has very important advice on how to avoid and prepare for financial catastrophes. and which insurances you need to have in place and when. 

Beware of Houses in Residency

I did not buy a house in residency or even during my 1st year or two of private practice. Transaction costs and price fluctuations make buying a house in residency undesirable. A general rule is to not buy a house if there is a significant likelihood that you will be selling it within five years. It is a longstanding rule and is still reasonable.

Insure Against Losses

I agree with his advice to buy term life insurance if you have any financial dependents. Buy disability insurance to protect your future income stream. Buy an umbrella policy to reduce your liability. Keep your investing simple and straightforward, in low-cost index mutual funds. 

Your main focus in training should be to avoid stupid money mistakes. Focus on building your human capital. The more you know and the more skills you have the more value you will provide to the marketplace. Your future income stream will be laying the golden eggs for decades to come. 

I enjoyed chapter (21) reviewing financial history. I find a fascinating. It may be more than you want or need to know though. Feel free to skip that chapter if you like. Practicing physicians can skip parts on dentists, student debt, and choosing a specialty. You will still find enough substance to make the rest worthwhile.

Know the Basics

Chapter 22 is an essential read. It covers basic concepts which are essential. They include net worth, marginal tax rates, effective tax rates, and savings rates.  He also explains financial calculators, time-value-of-money, and practical rules of thumb. You will find those “rules of thumb” useful for a lifetime. 

It still stuns me when I give talks to my fellow physicians and they do not know any of the basics from this last chapter. Spent time on that chapter make sure you understand those concepts. They will guide you for a financial lifetime.

In summary, this is the book I looked for as a medical student but never found. It is the book I thought I would write but never did. If you are in or are considering medical training, buy it, read it, & profit from it. Its guidance is solid. 

One Comment

  1. Psy-FI MD said:

    Great review Wealthy Doc. I can’t wait to read it!

    August 5, 2021

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