Why Doctors Aren’t Actually Rich
I come from generations of medical doctors. My grandfather broke the tradition when he left Japan and moved to Hawaii. Although for different reasons, like my grandfather, I never wanted to be a doctor either.
The man I call my poor dad, my biological father, was the head of education for the State of Hawaii, and sincerely believed in the power of education.
He constantly said, “Go to school and get good grades, so you can get a good job.”
My rich dad, my best friend’s father, also believed in the power of education. The problem was, it was not the same education my poor dad believed in. Instead, he said, “Be careful in choosing the school you attend. Entering school is like entering a cocoon. Before you enter, you better be sure you want to be what you become when you leave school.”
Rich dad warned, “most schools don’t teach you anything about money. Most schools teach you to work for money rather than learn how to have money work for you. Most schools teach you to work for the rich rather than teach you to be rich.”
When I left the Marine Corps my friends were making more income than I was as doctors, lawyers, accountants, and airline pilots. Today, I earn much more than most of them. Instead of taking a high-paying job or trading my time for money, I followed my rich dad’s advice and learned how to sell.
Trapped by Going to School
The problem is that the current school system is trapped in the tar pit of the Industrial Age.
In the Information Age, a person’s education and lifelong learning are more important than ever before. Unfortunately, going to school alone will not prepare you financially for a rapidly evolving and expanding world. Simply said, schools change too slowly, and the world is changing too rapidly.
If a person has a solid financial education, they will not cling so tightly to job security, a steady paycheck, and a pension. If a person knows the tax laws, they won’t pay unnecessary taxes. If they understand the banking system, they won’t save money. Rather than call their home an asset, they will know that it is a liability. If they understand inflation, they will not try to live below their means.
Rather than get out of debt, they will learn how to use debt to gain wealth. And they won’t mindlessly turn their money over to Wall Street bankers, financial planners, and real estate agents in the hope of obtaining a secure retirement.
Most importantly, they will question why they are going to school, who their teachers are, and where their education is leading them.
Doctors Aren’t Rich
Many doctors are high-earning professionals. They can make $250,000, $500,000, or even more in a year. But they aren’t really rich at all.
For starters, they have to go into deep amounts of debt to get their degree. Recent statistics published by Credible show just how bad it is for medical students.
A roundup of the latest statistics shows average medical school debt now exceeds $200,000. While medical school graduates can generally expect to earn six-figure salaries, nearly half plan to apply for student loan forgiveness:
- Average medical school debt → $232,300
- Average education debt after medical school → $251,600
- Average salary with a medical school degree → $210,980
- Average time to repay medical school debt → 13 years
Between their education and residency, a doctor will spend 10 to 14 years in preparation for even beginning to earn a high income.
It’s not uncommon to get to your mid-thirties or even forties and just start your high-earning period. Many doctors pile up not just high education debt but also credit card debt as they scrape by year after year.
So once they finally start making money, they are drowning in debt.
Additionally, doctors have a rude awakening when they find out how much they have to pay in taxes, the hours they have to work to make the money they earn, and they quickly get caught up in the rat race, spending to the level they’re making while doing the minimum service to their debt.
The result is a lot of money that goes away the minute it comes in. Again, being rich is about how much money you keep, not how much money you make. And that takes financial intelligence… something many doctors simply don’t have.
Why Most Doctors (or Lawyers or Accountants…) Are Poor
While you do have to go to school to become a doctor or lawyer, you don’t have to go to school to be rich.
The quadrants are not professions. For example, a medical doctor can be an E (employee), such as a doctor who works for a B (a big business such as a hospital or drug company).
A doctor can also be an S, working as a self-employed, small-business owner in private practice. A doctor can also be a B, the owner of a hospital or a drug company. And the doctor can be an I, an investor.
My CASHFLOW Quadrant® explains the difference between those who make a lot of money and those who are rich.
The left side of the CASHFLOW Quadrant is Es (employees) and Ss (self-employed). They pay the most in taxes and trade their time for money.
On the right side of the quadrant are Bs and Is. They pay the least in taxes and create or invest in assets that produce cash flow for them even when they’re sleeping.
How to Be a Rich Doctor (or Lawyer or Accountant…)
My rich dad’s #1 rule was “The rich don’t work for money.” He often said, “You will never know true freedom until you achieve financial freedom.”
By this, he meant that learning to invest is more important than learning a profession.
He said, “When you learn a profession, let’s say to be a doctor, you learn how to work for money. Learning to invest is learning how to have money work for you. The moment you have money working for you, you have your ticket to freedom.”
He also said, “The more money you have working for you, the less you pay in taxes — if you are a true investor.”
Rich dad began preparing me for the I quadrant at the age of nine using the game of Monopoly® as a teaching tool. Over and over again, he’d say, “One of the great formulas for wealth is found in the game of Monopoly. Always remember the formula: four green houses, one red hotel.”A simple game, but an important lesson.
I’m not saying real estate is the only way to invest. I use the game of Monopoly simply as an example of how the rich get richer. A person can earn income from stocks via dividends, from bonds via interest, or from oil, books, and patents via royalties. In other words, there are many ways to become rich.
Play it smart,
Editor, Rich Dad Poor Dad Daily