As I help my blog through its identity crisis, I’d like to apologize to the followers who couldn’t care less about this physician income series. It is written primarily for premeds, particularly those using and contributing to studentdoctor.net, where the question of physician income, as well as “should I do medicine for the money” comes up all the time. I felt compelled to write this series for two reasons, one being to offer a dose of reality to premeds drooling over some magical $200K pot of gold at the end of the medical education rainbow, because, as you’ll see in this post, money isn’t an efficient currency with which to purchase happiness. The second reason is to show any non-physician readers that not all doctors are “in it for the money.” As someone who started down this track later in life, I was forced to think about income primarily to answer the questions “will I be able to provide for my family as a resident?” and “will I be able to manage the debt that I incur?” Not to mention the opportunity cost of leaving behind a career first to go back to college and take the prerequisites for medical school, then apply to medical school (one year process), and finally move on to medical school itself, effectively turning my back on 7 years of salary. In my circumstances that meant trading about $350,000 worth of income for ~$200,000 worth student debt. For a “nontraditional” (read: “old”) applicant to medical school, “should I do medicine for the money?” is a laughable question; reflecting on physician income is simply pragmatism, a necessary evil.
Anyway, onward to the conclusion of this series. Can money buy happiness?
I just asked google for the third time this week. It took that many running starts to get through the top hits because, well, they sucked. The articles were too long, boringly written, and extrapolated the meager results of a couple of studies into overreaching, overblown conclusions.
I see this abuse of research everywhere (forgive the digression). In education, the idea of “learning styles” (visual learning, auditory learning, kinesthetic learning), is still fairly pervasive, even though there is no significant empirical evidence that catering to one sensory input actually improves learning. I don’t actually care that people, including the majority of educators in American public schools, believe in learning styles without having any tangible evidence for their beliefs. What irks me is how people exaggerate the importance of a lack of evidence. Some psychologists did a review of the existing research on learning styles and found that no experiment in the existing fund of knowledge had been designed in a way that it could actually provide evidence for the popular model of “learning styles.” Based on that literature review, people have started completely rejecting the theory.
I’m not saying I support or reject the notion of learning styles. Maybe I’ll rant about that in a different post. What I’m saying is, this group of psychologists didn’t even conduct an experiment. They didn’t prove or fail to prove anything. They just did a literature review and said, to date, no one had supported “learning styles” with adequate research. And then people latched on to their article, sensationalized it, and started trashing the entire idea of “learning styles” as if there were suddenly a glut of new research that concretely and permanently disproved any “learning styles” theory. People just don’t understand research and it’s limitations. Digression over, perfect segue.
Plenty of different studies have examined people’s responses to money, and the results of these studies are almost always discussed by the media under the theme “can money buy happiness?” One study showed people pictures of money before giving them a piece of chocolate. Compared to the control group, which consisted of people who were not shown pictures of money, the people who did see the images consumed their chocolate more quickly.
The people who conducted the study admitted that this could mean anything. The money-viewers might have thought about all of the germs and nastiness on dollar bills, which could have prompted them to eat more quickly. The germs serve as another possible explanation for the research finding, and if the findings of your research have multiple possible causes like that, your study has “confounding variables.” If you have any confounding variables you cannot make a causal inference. You cannot say one thing causes another; in this case you can’t even say “pictures of money cause people to eat more quickly.” Although that is the phenomenon that was observed, there were confounding variables. “Fear of germs causes people to eat more quickly” is just as plausible an explanation. The experiment would need to be designed in a way that eliminated confounding variables if you wanted to directly link money, and not germs, to the people’s behavior.
In spite of that, the media grabs hold of studies like this and blows them way out of proportion. Not only do they report that money was the cause of the quickened eating, confounding variables be damned, they take it a step further and say that money takes away people’s ability to savor things. Talk about a flying leap. And don’t even get me started on how the media latched onto the studies that purported “anything over $75,000 per year doesn’t increase happiness,” or the dismal lives people have led after winning the lottery.
Can money buy happiness? Maybe. Maybe not. It depends on you more than it depends on the results of any study. Chances are, if you’re a happy, well-adjusted person you’ll be happy with or without a lot of money and other factors should dictate your career decisions. Conversely, if you’re generally unhappy, hard to satisfy, and prone to whining, no doctor’s salary is going to make that go away.
Money is rarely a primary motivator anyway. People usually pursue money as a means to some other end. Motivation is a complex psychological phenomenon. Suffice it to say, secondary motivators don’t have much leverage to improve happiness. Life outlook, personality, and attitude are much stronger correlates to happiness. Some people need nothing to be happy. Others aren’t satisfied with anything.
It helps to have your basic needs met, no doubt. It helps to have a little extra. But there are a lot of different ways to get there; medicine is just one option. If you feel like money is one of your primary motives, you’d be a fool not to consider other career options.
That’s it, no more about money for a while.
In Part 1 of this series, How much do doctors make?, we saw a wide variety of figures. A career in medicine neither guarantees nor limits you to an income of $200,000 per year, so we’re going to work with that figure as it’s neither excessive nor out of reach.
How much is $200K/year? The short answer is $8000 a month, for a doctor with sizable student loans.
The average debt for graduates of medical school is reported to be between $150,000 and $200,000, depending on the source. Many recent graduates cite much higher numbers, so again, this is a somewhat worthless approximation.
But, if you had education loans of $200,000 paid on a 20-year repayment plan, your monthly payment would be in the neighborhood of $1520 (http://www.finaid.org/calculators/sc…anpayments.cgi). Assuming a debt of $250K, your monthly payment would be around $1900 (http://www.finaid.org/calculators/sc…anpayments.cgi). Hilariously enough, that calculator says:
|It is estimated that you will need an annual salary of at least $229,002.00 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 1.1. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $152,668.00, but you may experience some financial difficulty.|
If your debt is $300K, it suggests you need a salary of $275K to comfortably make payments over 20 years. Let’s just call the monthly payment amount $1600 for a debt amount close to $200K. If you wanted to pay it off in 10 years, you would have to pay $2300 per month.
Assuming you want to save the most you can for retirement, you’ll max out your 401K by putting in $16,500 of your pretax income each year. This will lower your taxable income in this hypothetical from $200K down to $183,500. If you maxed out an IRA each year it would be another $5,000 per year. If you owned your own practice (or another business) there could be different contribution limits and tax implications; we won’t go there in this hypothetical.
Your new pre-tax income is $183,500. The marginal tax bracket for federal income tax on that amount ranges from 18% – 25% depending on whether you file independently or with a spouse (http://www.dinkytown.net/java/TaxMargin.html). Well call it 21% for the sake of easy calculations. Tax burden varies by state, but the average is just under 9% (http://cfo.dc.gov/cfo/frames.asp?doc…fo/09STUDY.pdf), so we’re at a total tax rate of 30%.
0.3 * 183,500 = $55,050 paid in taxes. You’d be left with $128,450, but keep in mind you’ve already put $16K away for retirement.
This comes out to $10,704 per month. If you decided to max out a Roth IRA (instead of the traditional IRA that I mentioned above, but did not include in any calculations) that would require another $417 per month, leaving you with $10,287 per month.
Take out the loan payment of $1600 discussed above, and you have $8687 per month. For the 10-year repayment plan, taking out $2300 drops you down to $7987 per month. Your mileage may vary tremendously here, depending on your regional cost of living and the lifestyle choices you make.
Just for example, if you tried to buy a million-dollar home, with a 30-year mortgage at 5.5%, your monthly payment would be around $5978, leaving you with $2009 per month to pay for cars, gas, groceries, utilities, “saving for your kids’ education,” and whatever other expenses you have. Take the same mortgage terms on a $500,000 house and your payment is about $3000 per month depending on property taxes and home insurance (http://www.bankrate.com/calculators/…alculator.aspx). That could afford you a very comfortable house in many parts of the country, but I wouldn’t expect it to go far in NYC. Either way, you are left with about $5000 per month.
Assuming you’re willing to put $1000 per month toward a car or cars for you and your family (leaving you with $4000/month), you could afford $56,000 worth of vehicle (http://autos.msn.com/loancalc/newloa…nt=120&pmt=290). This could be one fairly nice car, 2 x $23,000 cars, or any other combination. If you’re willing to put $2000/month toward cars (leaving you with $3000/month for everything else), you could afford $108K worth of car. You could also put that extra money into a larger mortgage, so this is well past the point where the breakdown becomes highly individualized.
Basically, making $200K per year with a debt burden of about $200K, after maxing your retirement contributions and making the minimum monthly payment on your loans, you would be left with around $8,000 per month for mortgage/rent and living expenses, investment, or to otherwise allocate as you please. As has already been mentioned, you can live comfortably but this won’t afford you a lavish lifestyle of vacation homes and Lamborghinis.
You want to choose medicine for the money. And you want my permission. Well, go ahead.
There are 2 problems I’ve recognized every single time this question comes up.
- The person who asks it (assuming they’re asking in earnest and not just trying to get a rise out of someone) doesn’t know they’re not supposed to ask it. In other words, they’re kind of dumb.
- The (dumb) person doesn’t listen to the responses. They’ve already decided that it’s ok to become a doctor for the money, and they were simply asking as a courtesy, without the slightest intention of considering other peoples’ thoughts on the issue.
Well, in my new-found blogging spirit of “who the hell cares if people are listening to me?” I’m going to address the issue anyway, once and for all. It’s going to take a while, so I’ll do it in a series titled “Medicine for Money.” That way my non-existent readers don’t get too bored.
Because this is such a frequently asked question, I have plenty of fodder for discussion. I’d like to start by ridiculing some of the fruitless analyses other people have done on this. Don’t worry, they won’t be offended. They’ll be glad that I’ve linked people to their crappy content.
Here’s one: http://benbrownmd.wordpress.com/
And here’s the other: http://www.er-doctor.com/doctor_income.html
While I admire the effort (and I don’t begin to disagree with the point they’re attempting to make), the numbers aren’t that hard and fast. There are zillions of different possible scenarios with different debt figures, different choices of medical specialty, different investment outcomes, and myriad other things that would affect the final figures for net worth or how many years it takes for a physician to catch up to a UPS driver. It’s easy to ignore these spreadsheets because they are so hypothetical; I could spend the rest of my life creating equally plausible, yet contradictory spreadsheets where the physician comes out vastly ahead and maybe even becomes POTUS. I might pay attention if they posted 30 years of tax returns for a real UPS driver and a real physician, but the fake projections are sadly unconvincing.
This series will not rely on math to prove any points. It will not rely on hypothetical or anecdotal “evidence.” It will not make appeals to your emotions. It will just explore the reality of choosing a career in medicine for the money, and the implications of making such a choice in the high school and college years.
I hope you enjoy, and comment along the way.