Why Doctors Don’t Get Rich

I recently attended a weekend conference focusing on family, legacy, and wealth. There were a lot of rich people there, but there weren’t a lot of doctors.

There were some doctors, though. Several were there because they heard about the event through this website and associated Physicians on FIRE and fatFIRE Facebook Groups. I had let people know I’d be attending the DLP Prosperity event in Asheville, and a handful of folks decided to meet me there. We were treated very well, the speakers were amazing, and you can’t beat the price of free membership (for PoF readers) when others are paying $5,000 or more!

One of the speakers that weekend actually is a doctor, although, like me, he’s reached financial independence and hasn’t seen an O.R. in a couple of years.

His name is Tom Burns, MD, an orthopedic surgeon who authored the newly released Why Doctors Don’t Get Rich.

 

Why Doctors Don't Get Rich

 

After his talk about living life beyond the spreadsheet, a presentation in which he came across as the most humble orthopedic surgeon ever to walk this earth, I had a chance to sit down and chat with him for a while, and I hope to do so again soon.

One would expect a guy who named his website richdoctor.com to come across like, well… a rich doctor, which, in my estimation, is not a flattering term. You know, the type with the red Lamborghini sporting vanity “RICH DOC” license plates. Instead, Tom Burns is a soft-spoken, mild-mannered soul with a self-deprecating sense of humor.

He’s also extremely well-traveled, having been a physician for the US Ski Team for years, and he has a strong sense of what’s important in life. When his colleagues put their careers and income first, he started looking for a way to leverage his career to better prioritize his young family and free time.

That search led him to the concept of passive income, a journey that was bolstered by a book purchase at a Texas car wash in 1997. Apparently, he was the first person in the world to buy a self-published book from an unknown author named Robert Kiyosaki.

He read it cover to cover, flew out to meet the author weeks later, and the two have remained friends for over 20 years. The first Rich Dad Poor Dad reader became a Rich Doctor. The moniker makes more sense in that context.

 

How Dr. Burns Got Rich

 

If you know anything about Robert Kiyosaki’s approach to wealth, then you probably know that real estate played a prominent role in Tom Burns’s path to riches.

He started small. In his talk, he showed us a picture of a run-down house with a cell tower next to the garage. It was his first rental home, and while the rent for the home wasn’t much, the money he got from AT&T made the place a great investment.

He also admits to making numerous mistakes over the years, always learning from them. Eventually, he and partners of his would build large residential housing complexes and even a hospital. Today, as a co-founder of Presario Ventures, he helps manage a 9-figure real estate portfolio.

While his passive income eventually eclipsed his physician income, he continued to practice on his own terms for a number of years, having retired from medicine only recently at about the age of 60. He wrote Why Doctors Don’t Get Rich to help others reach their goals while hopefully making fewer mistakes than he did.

 

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So Why Don’t Doctors Get Rich?

 

“You see, as physicians, we were never taught to be rich. We were taught to be “poor.” – Tom Burns

 

Dr. Burns says that “poor” doctors live pretty well, but they spend what they earn, leaving little room to become truly wealthy. They must work indefinitely, often with long, arduous workdays,  to maintain that standard of living.

Meanwhile, a rich doctor “is financially educated, enjoys freedom of choice, and lives life with purpose, passion, and service.”

He’s right. Most doctors receive no formal education in business or personal finance. Too many of us start living “the good life” with all of its trappings before we truly have the means to afford it. Delayed gratification gone wild.

Focusing on long-term goals like financial independence and its many benefits will serve physicians much better than directing income towards short-term wants (often confused with needs). Dr. Burns wrote this book for many of the same reasons I started this website in 2016. We’ve realized there’s a different way of living that will leave physicians feeling more fulfilled.

We do take different approaches, though. His focus has been largely on passive income and cash flow. I prefer to look at net worth and total return. He does state several times in his book that either approach is acceptable and that neither is necessarily better. He simply prefers the former approach, whereas I prefer the latter.

 

About the Book

 

Why Doctors Don’t Get Rich starts out with a whopping 25 testimonials, a foreword by the now-famous Robert Kiyosaki, and about 200 pages of text divided into 15 chapters.

He takes us through the process of understanding why we need rich doctors and why you should personally aspire to meeting his definition of rich.

He devotes a chapter to mindset and personal development, areas that were a focus of several talks and workshops at the conference we attended together, and topics that are rarely emphasized to physicians.

The heart of the book is devoted to teaching the reader the rules of the money game: how to think about different investments, mitigate risk, manage taxes, and protect your assets. He brings in a couple of experts to write a few pages devoted to their particular areas of expertise.

Dr. Burns closes with a chapter summarizing a wide range of investments, including real estate, business ownership, “paper assets” (I hate that term (see below)), gold, oil and gas, agriculture, insurance, and art.

I appreciate how the author touches on philanthropy numerous times throughout the text. I can imagine it’s hard to feel rich if you’re not willing and able to share some of your wealth with others.

Another approach I particularly like is his explanation of the “I” in Kiyosaki’s E/S/B/I quadrant LINK. The “I” is for Investor, but you can also think of it as becoming an Insider, or someone who knows his or her niche well and has made solid connections to others in that space.

I feel that starting this website has made me an Insider. As a result, I’ve had an incredible number of opportunities I would not have had otherwise. This includes investment opportunities, free books and courses, and the opportunity to attend DLP’s event (an opportunity you all now have — the next one’s in November) where I met Tom Burns and was among dozens to pick up complimentary copies of his and other books.

 

Where We Differ

 

I do highly recommend this book, but I want to dig a little deeper into some differences that I touched on above.

It makes perfect sense that Dr. Burns advocates for real estate investing. It’s what made him a rich doctor. To what extent survivorship bias plays a role is difficult to estimate, but there are plenty of would-be real estate investors who were wiped out in the Great Recession. An anesthesiologist friend of mine was among them; he filed for personal bankruptcy after a commercial real estate venture went south on him.

Remember that a 50% drop in the stock market cuts the value of your stocks in half, but a 30% drop in the value of real estate when you’re 70% leveraged oon it leaves you with nothing.

To the author’s credit, he does write extensively on how to mitigate known risks by talking to the right people, asking the right questions, using leverage appropriately, and generally performing adequate due diligence. Of course, the biggest risks are the unknown and unforeseeable risks, like credit default swaps toppling a house of cards or a year-long moratorium on rent collection or evictions.

The stock market burns people too, and Dr. Burns has been a victim of the “paper asset” markets, having bought into the hype by loading up on individual tech stocks in the late 1990s. The risk of massive losses in the stock market can also be mitigated by avoiding individual stocks, investing in broad-based index funds, and staying the course through bear markets, but there’s not a lot of talk of that in this book.

His bias against the stock market is clear when he puts quotes around the word “investing” when discussing making investments in the stock market. I think that’s a disservice to the reader to cheapen a mode of investing that takes little effort and has enriched millions of people.

I feel the same about anyone using the dismissive term “paper assets” to describe stocks, bonds, and the funds that hold them. Behind those shares and notes, which were once printed on paper but are now issued electronically, are factories, products, offices, and employees who create the items and services that we all rely on day in and day out.

Meanwhile, real estate remains represented by actual paper, the deed of which is used as proof of ownership. But the brick, mortar, wood, and steel that’s used to build the factories and office buildings of thousands of publicly traded companies is every bit as real as the materials used to build other (often the same) types of investable real estate.

 

Perhaps it’s just semantics, but I view “paper assets” as misguided and tired terminology that’s used primarily by those who profit from the promotion of real estate.

Evidence of an anti-stock-market bias is also evident in the brief and misinformed section on average stock market returns. He correctly states that the stock market has returned about 10% annually over the last century. The compound annual growth rate (CAGR), also known as the geometric mean or actual return, of the S&P 500 over a 100-year period ending June of 2021 has been 10.8%.

He then explains, correctly, how your actual return on investment (i.e. CAGR) can be lower than the average return when calculated by taking the arithmetic mean of the annual returns. A 50% loss followed by a 50% gain gives you 25% less than you started with. The arithmetic mean of a 50% loss one year and a 50% gain the next may be 0%, but the calculated CAGR would correctly show a loss of 25%.

What he fails to explain is that the long-term stock market returns reported by any credible source will be the accurate CAGR, not the arithmetic mean calculated by adding the annual returns and dividing by the number of years as he does in his example. The returns of about 10% over a century that he mentions are true returns of a dollar invested over that timeframe.

To be precise, $1,000 invested in June of 1921 would now be worth $48,839,145 at the 10.845% CAGR the stock market has returned (assuming no tax drag in a tax-advantaged account). Adjusting for inflation, that $1,000 in 1921 had the buying power of about $15,200 in 2021, so in real (inflation-adjusted) terms, the equivalent of a thousand 2021 dollars in 1921 (about $66 then) would now be worth about $3.2 Million today. Past returns don’t predict future results, but the stock market has done amazing things for those of us who have invested through thick and thin.

He also talks about egregious fees of up to 11.85% that can be encountered by investing in the stock market when adding up front-end loads, expense ratios, management costs, and other miscellaneous fees. He forgot to mention that all of these can be avoided by investing in low-cost index funds with fees of under 0.1%.

Why leave out that very important detail?  It’s not exactly a secret that a DIY investor can put together an extremely diversified portfolio with thousands of stocks and bonds for a few basis points. I also didn’t see a comparison to the fees of real estate investments, which are often a few percentage points (that is, a few hundred basis points), although I will say that it’s not an apples-to-apples comparison.

Finally, the tax advantages of real estate investing are championed, and admittedly, there are many. However, any mention of tax loss harvesting, tax gain harvesting, the backdoor Roth, or the 0% capital gains bracket were conveniently left out of the stock market section.

End rant.

 

 

Where We Agree

 

To be honest, there were only a few pages on the stock market in the entire book, and they were about as fair and balanced as the television channel that claims to be,  but I thought the other 98% of the book was fantastic. Tom Burns is an excellent writer who gives the reader much to ponder and improve upon.

The chapter on developing a rich mindset is full of sage advice. Just look at the headings. Reign in Your Ego. Cultivate Humility. Have a Positive Attitude. Develop Discipline and Good Habits. Always Be Growing. If you skip these steps, you may find that your actions later on don’t get you the results you’re looking for.

 

doctors-dont-get-rich

 

When defining wealth, he talks about capital. I used to think of capital as another word for money, but Dr. Burns talks about 8 types of capital: financial, living, material, knowledge, emotional, social, cultural, and time. Having an abundance of multiple types of capital leads to a richer life than having lots of money but little else.

Similarly, I typically think of leverage in terms of borrowed money, but we are reminded that we can also leverage time, knowledge, experience, relationships, and technology to reach our goals more effectively. This is sage advice.

As physicians, we have targets on our back — not only for lawsuits, but also for investment scams and lousy investment products. The author reminds doctors of the bullseye they all carry and advises them to become educated in financial matters. I couldn’t agree more.

 

The Real Reason Doctors Don’t Get Rich

 

The reason many doctors will never be rich is that they don’t take the time to read a book like this. They don’t think enough about what matters most in life and how to prioritize those things. They don’t have a roadmap to wealth or a mentor to guide them.

What do I recommend? Read Dr. Burns’ book or any of the books on my short recommended list. There’s also plenty of free material right here on this site for your perusal.

Write down your goals and dreams. Figure out what steps you need to take to achieve them and start taking them without delay.

Remember that it takes more than just money to live richly. Figure out what your rich life looks like and take action. This book will help you take that much-needed first step.

 

 

 

22 thoughts on “Why Doctors Don’t Get Rich”

  1. Thanks for reviewing this book. I heard Dr Burns on a podcast and enjoyed his story. I am going to order his book.

    You mention that physicians dont have a mentor to help them financially, and this is something that has always been on my mind. Any advise on how to go about finding one?

    Cheers

    Reply
    • It can be tough because most people are pretty tight-lipped when it comes to money matters, and those who are not are often telling only half of the story — you hear about their successes and not their failures.

      Ideally, try to find someone who has done or is doing what you hope to do financially. If you can’t find someone like that locally, there will always be us physician bloggers putting out info online for you to consume. I thought of Jim Dahle of WCI as something of a mentor long before I met him or he even knew who I was.

      Cheers!
      -PoF

      Reply
    • Once again another article that it’s “OUR FAULT “ We aren’t rich . It has noting to do that my student loans are higher then the cost Of my first house etc etc etc

      Reply
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  3. I interviewed Dr. Burns for the Doctors Investing Group Podcast. Loved his calm and humble personality as you mentioned. The book was excellent though I agree it has a bare bones and fairly negative overview of stocks. I would recommend any physician give it a read.

    Reply
  4. Real estate is another asset class that I absolutely want to participate in.. However, I’ve gotten ridiculously lazy over the past 2 years, haha. I don’t like talking to people who are self interested and whose motivation is to charge as much money as they can (banks, for example).

    Therefore, I stuck to stocks where I can readily see if I got a bad price or not and changing hands is instant during business hours.

    Maybe that’s put me back a couple of years. I do know it is something I do want to get into at some point.

    Reply
  5. When I look back, now happily retired, it’s clear where I and my peers went right and wrong. First off, you have to save, and save a lot. Just funding your 401K won’t cut it. You don’t need that huge house, that Porsche, that vacation at the Four Seasons. You can live well without those things. Avoid those Daffy Doctor Deals-the limited partnerships, the cheap stocks, crypto-currency. You don’t need that risk. If you are married stay married! Divorce is ruinous! I invested a large percentage of my take home pay every month is a blend of index funds, municipal bonds, corporate bonds. I had fee based planners to guide me, no brokers. The doctor lounge talk was all about buying and selling stock options, real estate deals that could not miss, etc. Not me. I was the tortoise, not the hare. It worked. And, enough whining about student debt! That money bought you a very well paying career at low interest payable over a long time. In terms of investments you’ll likely never come close to the return you’ll get on that one!

    Reply
    • The difference between stocks/index funds and real estate is passive income.
      Really simple.

      That passive income buys him time and freedom.

      Any other technical jargon used by those arguing for or against either is noise.

      You get money every month.
      Passively.
      You’d need to invest 10 times the capital a real estate player does to come close to smelling the income he gets every single month.

      Any capital gains on mutual funds is just paper gain until you sell.
      And selling often depends on where the market is when you sell.

      All other percentages and play on numbers is just fudge.

      Reply
  6. In the early 1980’s I had to research money management due to my poor financial performance. I read every book in the public library on economoics, investing and money management. The upshot was I gave lectures and published an essay in a controlled circuation journal (and republished it) that was called, Get Rich Quick Slowly. The principal advise was to set a budget with equal amounts going to entertainment and savings. Over the course of a physician’s career one need only maximize contributions to an IRA, and it will add up to millions. Don’t speculate or follow “hot tips.” Especially, don’t take financial advise from other physicians. WE ARE CONTRARY INDICATORS. (In 1984 I organized a seminar for my colleagues with a top analyst from a major investment firm, who crafted a compelliing argument ow the market would recover to 10,000–or more. At the end of the day NONE of my colleagues was interested in the stock market, which on that date was at 1012). What was known 40 years ago is known now: stocks average 10% total return over the long haul, and compound interest is a miracle that takes time to appreciate as it make money your most diligent employee. The reason most doctors don’t get rich, however is the impulsive behavior that results from the deprivaions of years of “training,” which makes living within a budget intolerable. The sense of entitlement and resentment is overwhelming. We want to make up for our misery instantly. Hence divorces, conspicuous consumption, substance abuse, bad investments–an insatiable desire for instant gratification. Sic transit gloria mundi.

    Reply
    • Great points!! I went to a physician financial management talk once that was titled the 10 mistakes not to make. The first 5 were 1. Don’t get divorced; 2. Don’t get divorced…..5. Don’t get divorced! Lol! Divorce DEFINITELY cuts into your longterm personal wealth, but it can still be done. I’ve been divorced for 15 years, but started investing in stocks with a Schwab acct 15 years before that (1992). Best thing i’ve ever done!! I made a lot during the dot.com era (unrealized gains), and lost most of it! But i stuck with it, sold some, but held a LOT more and learned to buy on downturns and be a contrarian. It all rebounded over 6-8 years. Then bought even more during the banking crisis 2008-10 which has increased incredibly! BUT you have to SAVE cash so you have it available during downturns! Physicians (and really everyone) need to learn below their means to accumulate cash!

      Reply
  7. Some great comments on this. As a physician, i’ve done very well and am indeed rich, and although i’ve done very well in real estate and i recommend it, i definitely recommend the stock market. Not only have i done even better in the stock market than real estate, but i love the easy liquidity of the market and less work. Although I’m an investor (not a trader), i love the fact that i could sell all my stocks tomorrow if i had to. This is much harder with real estate. My biggest suggestion though is learn to live below your means, so you have money during market down turns to buy, whether it’s real estate or stocks. I too know too many physicians that spend everything they earn, even if its $400/year when they should save.

    Reply
  8. The fallacy of financial obesity.
    Though many physicians now enter medicine for wealth, a sizable number, especially in the past were called to be in medicine to heal, they quite frankly didn’t care about wealth accumulation. But now having lost connection to our heart account/source of health and inner wealth we now are left only to focus on our bank account . We now have lost connection to the roots of medicine, a wonderful enriching connection to humanity and secondarily, our family. Our problem is we don’t understand the difference between enriched and rich. We have not been taught to be rich, (everyone rich? not possible) and even if we are, we remain empty on the inside. Ironically we want what is unseen, a full heart. Then we realize wealth as a focus for life fulfillment is a fallacy (as experienced with the mid life crisis). There is never enough money to fulfill our our lives. Only when we are taught how to love and heal deeply and expansively are we freed from our attachment to more and more stocks, sugar, sports, sex, stimulants, stuff, trying to be special that make our lives incomplete. What we focus on creates our reality! Wealth accumulation or love/healing accumulation.

    Reply
  9. One of the reasons Doctors don’t get rich is their training and mindset – “indulge in the Proven ways, like in treating any patient”. In business and stock investments the mindset needed is “take risks and be enterprising”. As you can see they are polar opposites. We end up investing in a stock/business that proved successful – exactly the time for the stock to nosedive!!

    Reply
  10. I am not sure I would trust a “guru” who clearly knows so little about the stock market! Neither would I trust an investor who is “all in” on tech stocks during the dot com boom (and bust). This guy is both!
    It’s like taking advice from a lottery winner on how to buy a ticket. I am happy fo him that he won. That’s all.

    Reply
    • I don’t think Tom Burns would call himself a guru, but I feel he is someone who has learned from mistakes and continues to be open to learning from others. Rather than take offense at my mixed review, he praised me and invited me to share my views on the stock market with his audience.

      While we didn’t see eye to eye on those few pages devoted to the stock market, I thought the book provided a great framework for learning to build wealth and live a rich life.

      Cheers!
      -PoF

      Reply
  11. I have not read the book. Yes,there are a few of us who seem to have a knack when it comes to financial matters.Most do not.
    A great majority of my urologist colleagues continue to get soaked by the large brokerage firms that handle their IRAs.My wife and I suffered that fate until we hired a true “fiduciary” financial advisor.His office is not on the top floor of a skyscraper, nor is his title “senior vice-president”.
    Since being under his stewardship, our portfolio has done very well.As opposed to the all mighty brokerage firm that continued to cause us losses during the huge rally of the past 10 years.Those mega firms prey on the egos of physicians.

    Another point:It takes a lot of time and work to be able to competently manage your own portfolio.
    After a grueling day in the O.R., or a non stop call weekend, sitting down in front of the computer and studying Yahoo finance for 3 hours every evening requires determination and dedication.
    If you go down that road, say goodbye to any outside pursuits or hobbies you may wish to pursue.

    Reply

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