Expected Net Worth

[spotty_dog]

So, sometimes we ask, what's so special about physician finances? Why do we need different advice from other folks at our income level? One common trait that gets brought up is that most doctors have a low net worth compared to their income, which is why docs may not really be "rich" despite their salary numbers.

I stumbled across this article today on whitecoatinvestor.com: A Net Worth Rule of Thumb for Doctors (and the followup, Part 2).

For the link-phobic, the rule is that Average Post-Residency Income X Years Since Training X 0.25 gives the expected net worth of a doctor. If your net (that would be assets minus liabilities, so real estate equity and savings minus debt) is twice the expected or greater, you're a "prodigious accumulator of wealth". If you're at half the expected or less, you are an "under-accumulator".

If you're post-training, what do you think? Is it a good measure? If you're rating as a "prodigious accumulator of wealth" what do you think puts you there? If you are an "under-accumulator" what's setting you back?

[DCJenn]

We calculate out as "PAW" but I don't think it's accurate for military people since we don't have as drastic a pay increase from resident to attending. There's also the difference in retirement pay (better to stay in longer) vs. cash income (better to get out and work in the civilian world- [caveats to that, though- it's totally specialty dependent])

In anycase, we're PAW because we were married in our mid-thirties, I already owned a home, we only have one kid to save for, I've been putting money in a retirement account since I was 23, he had no medical school debt, etc. It's as much about the people we WERE as it is the people we've become.

Jenn

[spotty_dog]

Yeah, we too have been saving forever (I think it was 23 here, too, that I got my first job with a 403(b) option) and went to some effort to stay out of med school debt, so that is certainly a help. (We come in at almost 2.5, but I dunno about counting home equity -- it feels like more of an expense/item of consumption than an asset most of the time.) Interestingly, I find that my officer family friends that plan to be in the military for good are less likely to save -- they have the military pension to count on for retirement, so they seem a bit more likely to spend what they bring in? I dunno. They aren't medical officers so maybe that makes a difference.

Do you think the other equation is more accurate for y'all? ENW = Age X 0.112 X Gross Income

[samssugarmomma]

Our net worth is so negative that I can't even think about it without having a paper bag nearby! We start getting paid at the end of August so hopefully things will start moving in the other direction soon!

[DCJenn]

Actually, I think that if the dawkter hadn't married me, the social worker with NO pension and no chance for any kind of meaningful retirement except what I was putting away for myself, he would have pissed it all away. My first husband was a firefighter and we used to laugh that halfway through training suddenly all of the beaters would be gone and there would be a training academy parking lot full of brand new cars. (He was one of them) It's the same thing. That said, when they are deployed, they're forced to make some very uncomfortable decisions about life for their famliy if they're dead. It kind of helps, sadly enough.

J

[poky]

Do you think the other equation is more accurate for y'all? ENW = Age X 0.112 X Gross Income

We're at between 1.5-2x that number, including a really rough guess at the value of the house we own outright. Last year, we would have been just about 2x, because DH's income doubled last month.

I can't use the "doctor" formula to compare, since we're not out of training yet, but yeah, it seems reasonable to me that the "standard" formula isn't all that accurate an indicator for doctors.