JAMA article on Net Worth Shock and Mortality

[Anne]

Complete_newbie wrote:

beagler wrote:

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand…

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be “acting poor” in relation to spending — lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

“Acting rich” while having negative NW can do a lot of financial damage. I’d view negative NW as a near-emergency mode.

Click to expand…

Unerstand what the general standard is but its not like this is a scientific gold standard.

Also my negative networth is a controlled one on purpose to boost income. I can wipe that out in 1 year if I want to – that makes me rich. I am not alone in this line of thinking despite being against the grain (see Zaphod et al). What does that make me? Poor? No

Click to expand...

If you are making 600k/year and are 2-3 years into making that income and still have a net worth of -600K, you are definitely not rich.  If you started out -1.5 million, then you are well on your way to becoming rich; if you started out -700k, you are not.  If you keep your debt on purpose to build up investments, then your NW will rapidly be positive, even though you are maintaining the debt.

If you are in your first year of attendinghood and making 1 million (don't know how many docs make that much first year, but let's pretend) and have -600k NW, then yes, theoretically, depending on your taxes you could wipe that out in a year if you lived like a resident.  In another 2-3 years of that behavior with investing, you could call yourself rich.  But you can't call yourself rich because you are *going* to make 1 million and your NW is still -600k.  You're not rich until it actually happens.  I don't think you can call yourself poor either--you're somewhere in the middle.

[Hatton]

I think Newbie you are in debt because of a new business venture that hopefully will pay off.  I think the concern is the Doc who has a negative net worth with a high income who keeps adding to the debt and never really paying down any previous purchases.  I see people doing this.  Hedonic treadmill.  People living a rich life but it is really a series of payments.

[Complete_newbie]

Anne wrote:

Complete_newbie wrote:

beagler wrote:

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand…

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be “acting poor” in relation to spending — lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

“Acting rich” while having negative NW can do a lot of financial damage. I’d view negative NW as a near-emergency mode.

Click to expand…

Unerstand what the general standard is but its not like this is a scientific gold standard.

Also my negative networth is a controlled one on purpose to boost income. I can wipe that out in 1 year if I want to – that makes me rich. I am not alone in this line of thinking despite being against the grain (see Zaphod et al). What does that make me? Poor? No

Click to expand…

If you are making 600k/year and are 2-3 years into making that income and still have a net worth of -600K, you are definitely not rich.  If you started out -1.5 million, then you are well on your way to becoming rich; if you started out -700k, you are not.  If you keep your debt on purpose to build up investments, then your NW will rapidly be positive, even though you are maintaining the debt.

If you are in your first year of attendinghood and making 1 million (don’t know how many docs make that much first year, but let’s pretend) and have -600k NW, then yes, theoretically, depending on your taxes you could wipe that out in a year if you lived like a resident.  In another 2-3 years of that behavior with investing, you could call yourself rich.  But you can’t call yourself rich because you are *going* to make 1 million and your NW is still -600k.  You’re not rich until it actually happens.  I don’t think you can call yourself poor either–you’re somewhere in the middle.

Click to expand...

The standard you are applying is yours. I disagree. Thats the "live like a resident" or living within your means and gain NW with income without leverage way yes. Thats one of many. Thats the point, no set standard to get there. And no set standard to assess "rich". NW is just a variable. I feel plenty rich based on the credit I command and use. I also don't espouse to "emergency fund" for 6 months and many other philosophies here. To me its cash drag etc etc. Doesn't make me wrong.

I feel plenty rich despite being in good 2std more in debt than your average doc here.

 

[Complete_newbie]

hatton1 wrote:

I think Newbie you are in debt because of a new business venture that hopefully will pay off.  I think the concern is the Doc who has a negative net worth with a high income who keeps adding to the debt and never really paying down any previous purchases.  I see people doing this.  Hedonic treadmill.  People living a rich life but it is really a series of payments.

Click to expand...

Totally agreed. But thats what I'm getting at, there are different ways of assessing your end goal. For this board, agreed. Stay on the freeway to dublin with prescribed method - one of many. I guess NW is the best we have for this assessment.

[Hatton]

If someone really has a great entrepreneurial idea I think you should pursue it.  My problem is such an idea never came my way.

[Complete_newbie]

hatton1 wrote:

If someone really has a great entrepreneurial idea I think you should pursue it.  My problem is such an idea never came my way.

Click to expand...

Its risk Hatton1. Your blog is your idea - go nuts! Also coming from someone near retirement, I think telling younger physicians to take some calculated risks is good advice. Plenty are employment focused and too much debt averse to realize downstream benefits.

[Donnie]

I think I’ve made this point on here before, but skid row is not littered with docs making $500k a year. Sure many docs spend more than they should, but that only means they may end up working until 70...gasp! It does not mean they are poor. Words have meanings. Poor means struggling to meet basic needs. This is not applicable to docs making $500k, no matter how much debt they have. Calling a person making $500k poor, suggests a general lack of awareness of the genuine struggles of the impoverished.

[Hatton]

Yes I took several "risks" in my younger years.  I think owning a practice is a calculated risk that I took.  Owning a business is an entrepreneurial risk that unfortunately few new docs seem willing to make.

[beagler]

Complete_newbie wrote:

beagler wrote:

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand…

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be “acting poor” in relation to spending — lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

“Acting rich” while having negative NW can do a lot of financial damage. I’d view negative NW as a near-emergency mode.

Click to expand…

Unerstand what the general standard is but its not like this is a scientific gold standard.

Also my negative networth is a controlled one on purpose to boost income. I can wipe that out in 1 year if I want to – that makes me rich. I am not alone in this line of thinking despite being against the grain (see Zaphod et al). What does that make me? Poor? No.

Click to expand...

If you have investments/assets of 600k and loans/liability of 600k -- NW is zero. To get -600k NW you'd have 600k of investments and 1200k of loans -- networth -600k = not rich despite income. How are you boosting income with negative networth? You mean investment income/return? You can carry a loan to invest, but it does not affect networth. You could pay off the loans with your assets, again doesn't affect networth.

Networth does not directly relate to income, only assets/liabilities. High income potentiates high net worth but not without some eventual savings (includes paying off loans).

The guy that makes and spends 500k yearly and saves nothing -- is he rich with zero networth? High networth is what we are all aiming for. Rich is just a subjective word. Basically most people in the US are rich compared to the rest of the world.

[Zaphod]

This totally depends on situation and years out and of course what the assets are. Calling a doctor with 500k income that has the ability to turn it around (not that they do) when values change is really really insensitive to actually poor people with little means of changing their situation (and coming from that situation myself).

I have a scary amount of liabilities on paper and a neutral net worth, but the asset side is also good but not fully liquid. However, if I just wanted to be rid of the "debt" I could sell my house and rental and most of my liabilities (and some income) would be instantly gone, even if I took a small loss. Wait a few years and these things will likely be contributing greatly to my net worth. Composition and direction matters a lot, net worth is just a snapshot and without supporting details its foolish to make assumptions.

[Anne]

Complete_newbie wrote:

Anne wrote:

Complete_newbie wrote:

beagler wrote:

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand…

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be “acting poor” in relation to spending — lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

“Acting rich” while having negative NW can do a lot of financial damage. I’d view negative NW as a near-emergency mode.

Click to expand…

Unerstand what the general standard is but its not like this is a scientific gold standard.

Also my negative networth is a controlled one on purpose to boost income. I can wipe that out in 1 year if I want to – that makes me rich. I am not alone in this line of thinking despite being against the grain (see Zaphod et al). What does that make me? Poor? No

Click to expand…

If you are making 600k/year and are 2-3 years into making that income and still have a net worth of -600K, you are definitely not rich.  If you started out -1.5 million, then you are well on your way to becoming rich; if you started out -700k, you are not.  If you keep your debt on purpose to build up investments, then your NW will rapidly be positive, even though you are maintaining the debt.

If you are in your first year of attendinghood and making 1 million (don’t know how many docs make that much first year, but let’s pretend) and have -600k NW, then yes, theoretically, depending on your taxes you could wipe that out in a year if you lived like a resident.  In another 2-3 years of that behavior with investing, you could call yourself rich.  But you can’t call yourself rich because you are *going* to make 1 million and your NW is still -600k.  You’re not rich until it actually happens.  I don’t think you can call yourself poor either–you’re somewhere in the middle.

Click to expand…

The standard you are applying is yours. I disagree. Thats the “live like a resident” or living within your means and gain NW with income without leverage way yes. Thats one of many. Thats the point, no set standard to get there. And no set standard to assess “rich”. NW is just a variable. I feel plenty rich based on the credit I command and use. I also don’t espouse to “emergency fund” for 6 months and many other philosophies here. To me its cash drag etc etc. Doesn’t make me wrong.

I feel plenty rich despite being in good 2std more in debt than your average doc here.

 

Click to expand...

Command of credit does not make you rich--it can be a means to an end (i.e. with the right combo of skill and luck it can make you rich...eventually...but I don't see how anyone can call themselves rich with a negative NW--that's different than having a lot of debt.  You can have several million worth of debt but if your NW is 100 million--i.e. your assets are much greater than your debt--you are definitely rich).   And you can gain NW with or without leverage--i.e. you can have 4 million in assets and 1 million in debt, NW of 3 million.  That's fairly wealthy.  Or you can have 3 million in assets and no debt--still end sum NW, still fairly wealthy.  But having -600k and a lot of access to credit is not wealthy.  It's a gamble, that will hopefully one day lead to you being rich.  But not yet.

Like I said earlier, it doesn't make you poor either.  I know poor, and if you are making anywhere in the ballpark of a physician's income (even the lowest paid pediatrician), you are not poor.  But whether you become wealthy or not depends on how you manage that income.

[Dr. Mom]

Always interesting the direction you guys can go with a given topic.  Just because the study population was the general population does not make it less meaningful to me.  Net worth is an assessment tool that may or may not be meaningful personally to each of us.  The fact that this article was in a medical journal mainly read by physicians is great, as far as I am concerned.  Any discussion about finances, net worth, and behavior to me is moving the needle away from having these subjects be taboo in our society.

[hightower]

Donnie wrote:

The White Coat Investor wrote:

I also like the phrase “asset poverty” as if that’s somehow different from regular poverty. If you have a negative net worth, you’re poor, I don’t care if you’re a trauma surgeon making $500K a year.

Click to expand…

While I get the point you are making, this simply isn’t true.  A family making $50k per year with $50k of cc debt and no assets is poor.  A surgeon making $500k per year with $500k of student debt and no assets may not be rich, but he certainly isn’t poor under any standard definition of the word.

Click to expand...

Well, if he/she suddenly lost their 500k income they'd be poorer than the family making 50k per year  So, I think it's fair to say they are also poor.  Not admitting that to yourself is part of what will keep your net worth low your entire life.

That's what really got my attention when I started looking at my net worth and my income.  I realized that if I suddenly couldn't work or got fired and couldn't find another job, I'd be poorer than anyone I knew.  That's not a good feeling for someone who sacrificed so much of their younger life to get the job they have.

[hightower]

beagler wrote:

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand…

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be “acting poor” in relation to spending — lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

“Acting rich” while having negative NW can do a lot of financial damage. I’d view negative NW as a near-emergency mode.

Click to expand...

Yes, this is what I was getting at.  Docs making high salaries have the potential to become rich IF they behave themselves.  If they instantly start thinking of themselves as rich, even when buried under debt, they have a much higher chance of staying poor.  We've all seen it happen right?

[bean1970]

Dr. Mom wrote:

Always interesting the direction you guys can go with a given topic.  Just because the study population was the general population does not make it less meaningful to me.  Net worth is an assessment tool that may or may not be meaningful personally to each of us.  The fact that this article was in a medical journal mainly read by physicians is great, as far as I am concerned.  Any discussion about finances, net worth, and behavior to me is moving the needle away from having these subjects be taboo in our society.

Click to expand...

There also (at least to me) is a big difference between being 25K in debt due to a lingering school loan and a few final mortgage payments and 25K in debt on credit cards from eating out and buying extra lives on Xbox..... There is no return on the later.....money out the door and sadly there are many people who live the life of the later and have near to nothing saved. The numbers are becoming staggering in America on credit card/consumer debt and savings (lack thereof). Crazy scary if you think about it.....