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JAMA article on Net Worth Shock and Mortality

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  • There is value to this debate.

    It is so sad when a two physician couple lives in a high cost of living area for 25 years and spends all of their earnings on housing, vacations, nannies, private schools and more so that there is nothing left to show from that income over all those years.  And they have been earning well north of half a mil’ a year for quite a while.  Tragic, no?

     

    There is value to this debate.

    It is so sad when my colleague in his late 50s comes to me to beg for an emergency loan because he has squandered all of his earnings on parties, travel, expensive rent and all he has to show for a long career with over 300k in income is a bunch of maxed out credit cards with 18% annual interest.

     

    There is value to this debate.

    My heart breaks for my colleague who had her 60th birthday, who had to borrow an advance on pay to cover the property taxes on her house, who is in default on her student loans that still have a balance and penalties that will never be paid back in this lifetime.

     

    We may be good at science, but there is value to a debate among physicians about prudent financial decision making.
    Click to expand…


    Educating people about what can happen to them later in life if they live it up as in your examples is a good idea, but I am not sure those are tragic examples.  These people probably have a lifetime of great experiences to remember.  They may have to pay for it now, but to each his own.  Certainly they won’t be living in a van down by the river in any of the cases.
    Click to expand…


    Donnie, some of these folks would love to have a choice in the decision whether or not they need to work to infinity.  And if they had chosen the 15k ski vacation rather than the 30k ski vacation, would they really have deprived themselves of a life changing experience?  Do you really need to stay at the St. Regis for your ski vacation, or would something a little bit less pricey have been just as much fun?
    Click to expand...


    Along those lines, here’s a conversation between me and a colleague/friend, walking in from the doctor’s parking lot this morning:

    Colleague: So you bought a Nissan Leaf...

    Me: Yup.

    Colleague: I am curious, you can surely afford a Tesla, why didn’t you buy one instead?

    Me: The reason I can afford the Tesla is that I don’t buy the Tesla.

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    • Deleted.

      Comment















      • There is value to this debate.

        It is so sad when a two physician couple lives in a high cost of living area for 25 years and spends all of their earnings on housing, vacations, nannies, private schools and more so that there is nothing left to show from that income over all those years.  And they have been earning well north of half a mil’ a year for quite a while.  Tragic, no?

         

        There is value to this debate.

        It is so sad when my colleague in his late 50s comes to me to beg for an emergency loan because he has squandered all of his earnings on parties, travel, expensive rent and all he has to show for a long career with over 300k in income is a bunch of maxed out credit cards with 18% annual interest.

         

        There is value to this debate.

        My heart breaks for my colleague who had her 60th birthday, who had to borrow an advance on pay to cover the property taxes on her house, who is in default on her student loans that still have a balance and penalties that will never be paid back in this lifetime.

         

        We may be good at science, but there is value to a debate among physicians about prudent financial decision making.
        Click to expand…


        Educating people about what can happen to them later in life if they live it up as in your examples is a good idea, but I am not sure those are tragic examples.  These people probably have a lifetime of great experiences to remember.  They may have to pay for it now, but to each his own.  Certainly they won’t be living in a van down by the river in any of the cases.
        Click to expand…


        Donnie, some of these folks would love to have a choice in the decision whether or not they need to work to infinity.  And if they had chosen the 15k ski vacation rather than the 30k ski vacation, would they really have deprived themselves of a life changing experience?  Do you really need to stay at the St. Regis for your ski vacation, or would something a little bit less pricey have been just as much fun?
        Click to expand…


        Along those lines, here’s a conversation between me and a colleague/friend, walking in from the doctor’s parking lot this morning:

        Colleague: So you bought a Nissan Leaf…

        Me: Yup.

        Colleague: I am curious, you can surely afford a Tesla, why didn’t you buy one instead?

        Me: The reason I can afford the Tesla is that I don’t buy the Tesla.
        Click to expand...


        As spoken while riding atop a giant horse :P

        Comment




        • Along those lines, here’s a conversation between me and a colleague/friend, walking in from the doctor’s parking lot this morning: Colleague: So you bought a Nissan Leaf… Me: Yup. Colleague: I am curious, you can surely afford a Tesla, why didn’t you buy one instead? Me: The reason I can afford the Tesla is that I don’t buy the Tesla.
          Click to expand...


          Since we're off topic anyway, out of curiosity why did you pick the Leaf over the other options for that kind of car?

          Comment


          • Busy week so I'm late to the conversation (which appears to be losing steam now).  After reading through all of the posts quickly it seems we just need an extra descriptive word to break things down in a specific way.  There are assets (cash, investments, home, etc) , resources (including professional license, education, health and especially time) and income.  If you want to look at it in a simple way, then you can be rich or poor in each of these three areas.

            Almost all physicians could be considered income-rich and resource-rich.  Are they asset-rich?  That seems to be the crux of the issue.  The whole idea behind WCI's work in this area is that physicians (and other high income professionals) are generally income-rich and resource-rich.  They just need a plan and basic financial education and they can become asset-rich as well.  So, the variable is assets.  That's why WCI is hyper-focused on this.  As you get older your resources start to dwindle because there is less time to put them to work.  That's what financial planning is all about.

            Someone like newbie is trying to become as income-rich and resource rich as possible (even apparently to the point of being leveraged), believing that this will lead to being asset-rich as well.  His focus is not on asset accumulation at the moment.  I think that's fine if he is young, but it's not the path most people want to take.  Most physicians and dentists focus on their clinical practice and don't have a lot of extra time to be entrepreneurs.  WCIs approach using a simple, non-leveraged path to financial security that relies only on basic personal financial management, the high income physicians almost universally will have and investing the way John Bogle would advocate is the approach that the vast majority of high income professionals could benefit from.  This is why WCI has been so successful with WCI website, book etc.  Many high income professionals are lacking in terms of basic finance and investing knowledge.  If Newbie is as successful in his business ventures as WCI then he will be in fantastic shape as well.  There is more than one path to becoming asset-rich.

            I would say that even though I haven't read the article that started this thread, if one is rich in one or two areas (assets, resources, income) then a shock to one or two of the other areas will not be as hard to take.  This seems obvious, but I think it also points out that breaking wealth into these three areas makes sense because it can help to talk about this subject in a way that people can understand.  For example, a financial planner might tell a client that they are income-rich which is good, and they have some assets, but they are resource-poor because their current job and training is in a highly specialized area that doesn't have a stable job market.  Maybe that person needs to focus on additional training and education before the shock comes and they lose their job.  If its a physician like whitebeard described then they need to focus like a laser on asset accumulation while they are still able to utilize their resources to generate a sizable income--time to tighten the belt and kick the CB plan into high gear!

            Maybe there could be a questionnaire that generates a score in each of these three areas and a computer algorithm that could then guide you on how best to improve your economic situation.  Maybe an app?

             

             

            Comment









            • Losing a medical license does not make a person poor, being reliant on it does.
              Click to expand…


              Just read that back to yourself and see if it makes sense.  You’re saying anyone that relies on their medical license to make a living is poor.  So, essentially all doctors who aren’t financially independent are poor, because they rely on their medical license to make a living?  Really?

              Here’s another way to try to think about it.

              INCORRECT:  A doc who makes a lot of money but has a ton of debt is poor, because if he loses his job it’s a disaster

              CORRECT: A doc who makes a lot of money, but has a ton of debt is not rich, because if he loses his job it’s a disaster

              The two are not the same thing.  You’re obviously thinking the second one, but writing the first one.  Just because the second one is true, it doesn’t make the first one true.  Just because someone is not rich, it doesn’t make them poor.  There are lots of other states besides rich and poor.  Just because we can’t find a single word to describe this particular condition accurately, doesn’t mean we should redefine poor in order to do it.
              Click to expand...


              So let me try this a different way: I do believe there are shades of grey to the definitions of rich/poor but I think net worth has meaning.

               

              Though I am only 2 years into my career and still have school loan debt, I am not 100% reliant on being a doctor. You know why? I have a positive net worth. Nothing crazy but around $300k. So what does this mean if I was to lose my medical license? I could live 5 years without pay at the median American income while retooling my career. How does one with $600k unforgivable student loan manage this?

               

              Anyone living paycheck to paycheck is poor even if the large size of the paycheck helps them live in denial.

               

              I know this a semantics debate on whether poor refers to money or resources, but I would bet more would define poor as moneyless rather than lacking some resource. I guess I'm just confused how you would define poor even subjectively. My subjective definition is no money or less than none. I think that's reasonable since it does not depend on some future; it's just a picture of now.

              Comment


              • Thanks fr the summary successful dentist. If you read my posts I am alluding to what you are saying

                Without getting into an essay: a matematical model that includes NW as one of the variables can be a much superior classifier of wealth than NW alone. That is the summary of what I've been saying all along. I can make it but I'm lazy. I do understand the basis behind it though and zaphod and others do intuitively.

                All of this is forming nice Genesis of a blog that is data driven but as you say, I'm too busy hustling for income and asset ls producing income. I can expound this in blog more than a thread.

                Comment




                • My subjective definition is no money or less than none. I think that’s reasonable since it does not depend on some future; it’s just a picture of now.
                  Click to expand...


                  I agree with that.  And while you have the job that allows you to live the high life while in debt, you are still not poor. When your situation changes, you will be. Is the situation precarious? Yes.  Are you poor yet? No.

                  It seems that everyone grasps the concept of High Income, Not Rich Yet.   Why is High debt, High Income, Not Poor Yet, so hard to grasp?

                  Comment








                  •  

                     

                    Anyone living paycheck to paycheck is poor even if the large size of the paycheck helps them live in denial.

                     
                    Click to expand...


                    E gads man. This is just very wrong. Again, poverty/poor has a literal definition that can be expressed in nominal terms. However, even in the vague dictionary definition it is not true. You can be a spendthrift and not be poor, you may be dumb, but not poor.
                    poor


                    po͝or,pôr/


                    adjective




                    1.



                    lacking sufficient money to live at a standard considered comfortable or normal in a society.





                    A doctor living paycheck to paycheck is enjoying a standard of living far above comfortable and normal. I understand the desire to paint things black/white for sake of goal completion/zealotry, but when you keep saying it it just makes it seem more ridiculous. This again is purely a definition thing, not a temporal one as that makes no difference to misusing a word.







                    They dont lack sufficient money, they lack the skills and habits to turn that money into long term wealth.

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                    •  

                       

                      Anyone living paycheck to paycheck is poor even if the large size of the paycheck helps them live in denial.

                       
                      Click to expand…


                      E gads man. This is just very wrong. Again, poverty/poor has a literal definition that can be expressed in nominal terms. However, even in the vague dictionary definition it is not true. You can be a spendthrift and not be poor, you may be dumb, but not poor.
                      poor


                      po͝or,pôr/


                      adjective




                      1.



                      lacking sufficient money to live at a standard considered comfortable or normal in a society.





                      A doctor living paycheck to paycheck is enjoying a standard of living far above comfortable and normal. I understand the desire to paint things black/white for sake of goal completion/zealotry, but when you keep saying it it just makes it seem more ridiculous. This again is purely a definition thing, not a temporal one as that makes no difference to misusing a word.







                      Click to expand...


                      The thing is a paycheck-to-paycheck doc does lack the money. The "average" American who has access to a credit card could say the same. The ability to access money without actually owning it warps people's minds. "Sure I can afford it; I just won't pay my debts."

                       

                      What you are saying is a doctor has great resources and abilities so it doesn't matter that they actually don't own any money when it comes to defining if they are poor or rich. Which is ok but counter to any objective measure which will aid in personal finance.

                      Comment














                      •  

                         

                        Anyone living paycheck to paycheck is poor even if the large size of the paycheck helps them live in denial.

                         
                        Click to expand…


                        E gads man. This is just very wrong. Again, poverty/poor has a literal definition that can be expressed in nominal terms. However, even in the vague dictionary definition it is not true. You can be a spendthrift and not be poor, you may be dumb, but not poor.
                        poor


                        po͝or,pôr/


                        adjective




                        1.



                        lacking sufficient money to live at a standard considered comfortable or normal in a society.





                        A doctor living paycheck to paycheck is enjoying a standard of living far above comfortable and normal. I understand the desire to paint things black/white for sake of goal completion/zealotry, but when you keep saying it it just makes it seem more ridiculous. This again is purely a definition thing, not a temporal one as that makes no difference to misusing a word.







                        Click to expand…


                        The thing is a paycheck-to-paycheck doc does lack the money. The “average” American who has access to a credit card could say the same. The ability to access money without actually owning it warps people’s minds. “Sure I can afford it; I just won’t pay my debts.”

                         

                        What you are saying is a doctor has great resources and abilities so it doesn’t matter that they actually don’t own any money when it comes to defining if they are poor or rich. Which is ok but counter to any objective measure which will aid in personal finance.
                        Click to expand...


                        They dont.

                        Demonstrably not what I said. That is really the concept of wealth, and yes your example they are definitely not wealthy. I just dont get how its so difficult to see.

                        Has nothing to do with personal finance. You keep conflating these things, they could not matter less to each other. One is just a word, that has meaning, no matter how much you try to tie it into your personal world view, that will not change in the rest of reality. You can have your own versions that help you be the best you, but its still important to realize it isnt true.

                        Nicolas Cage didnt lack money, he had a spending problem, spent over 150 million dollars and lived a life very few can or ever will. Hes an idiot, not poor. There is a massive difference.

                        Comment

















                        •  

                           

                          Anyone living paycheck to paycheck is poor even if the large size of the paycheck helps them live in denial.

                           
                          Click to expand…


                          E gads man. This is just very wrong. Again, poverty/poor has a literal definition that can be expressed in nominal terms. However, even in the vague dictionary definition it is not true. You can be a spendthrift and not be poor, you may be dumb, but not poor.
                          poor


                          po͝or,pôr/


                          adjective




                          1.



                          lacking sufficient money to live at a standard considered comfortable or normal in a society.





                          A doctor living paycheck to paycheck is enjoying a standard of living far above comfortable and normal. I understand the desire to paint things black/white for sake of goal completion/zealotry, but when you keep saying it it just makes it seem more ridiculous. This again is purely a definition thing, not a temporal one as that makes no difference to misusing a word.







                          Click to expand…


                          The thing is a paycheck-to-paycheck doc does lack the money. The “average” American who has access to a credit card could say the same. The ability to access money without actually owning it warps people’s minds. “Sure I can afford it; I just won’t pay my debts.”

                           

                          What you are saying is a doctor has great resources and abilities so it doesn’t matter that they actually don’t own any money when it comes to defining if they are poor or rich. Which is ok but counter to any objective measure which will aid in personal finance.
                          Click to expand…


                          They dont.

                          Demonstrably not what I said. That is really the concept of wealth, and yes your example they are definitely not wealthy. I just dont get how its so difficult to see.

                          Has nothing to do with personal finance. You keep conflating these things, they could not matter less to each other. One is just a word, that has meaning, no matter how much you try to tie it into your personal world view, that will not change in the rest of reality. You can have your own versions that help you be the best you, but its still important to realize it isnt true.

                          Nicolas Cage didnt lack money, he had a spending problem, spent over 150 million dollars and lived a life very few can or ever will. Hes an idiot, not poor. There is a massive difference.
                          Click to expand...


                          Sorry I didn't mean to offend. I realize that I am defining poor as someone who has no wealth or less. But I realize it seems stupid to not include standard of living and one's ability to keep that up if they stay with same income.

                           

                          I just worry others (not you obviously) will see their negative wealth as an ever present problem for them if the gravy train ends. That's what I meant about personal finance.

                           

                          The Nicolas Cage example is a great one, showing the stupidity of my definition of poor but also it's utility. Once the film roles dried up he literally was poor. If you spend all your money no matter how much, as foolish as it sounds, I consider you poor.

                          Comment




















                          •  

                             

                            Anyone living paycheck to paycheck is poor even if the large size of the paycheck helps them live in denial.

                             
                            Click to expand…


                            E gads man. This is just very wrong. Again, poverty/poor has a literal definition that can be expressed in nominal terms. However, even in the vague dictionary definition it is not true. You can be a spendthrift and not be poor, you may be dumb, but not poor.
                            poor


                            po͝or,pôr/


                            adjective




                            1.



                            lacking sufficient money to live at a standard considered comfortable or normal in a society.





                            A doctor living paycheck to paycheck is enjoying a standard of living far above comfortable and normal. I understand the desire to paint things black/white for sake of goal completion/zealotry, but when you keep saying it it just makes it seem more ridiculous. This again is purely a definition thing, not a temporal one as that makes no difference to misusing a word.







                            Click to expand…


                            The thing is a paycheck-to-paycheck doc does lack the money. The “average” American who has access to a credit card could say the same. The ability to access money without actually owning it warps people’s minds. “Sure I can afford it; I just won’t pay my debts.”

                             

                            What you are saying is a doctor has great resources and abilities so it doesn’t matter that they actually don’t own any money when it comes to defining if they are poor or rich. Which is ok but counter to any objective measure which will aid in personal finance.
                            Click to expand…


                            They dont.

                            Demonstrably not what I said. That is really the concept of wealth, and yes your example they are definitely not wealthy. I just dont get how its so difficult to see.

                            Has nothing to do with personal finance. You keep conflating these things, they could not matter less to each other. One is just a word, that has meaning, no matter how much you try to tie it into your personal world view, that will not change in the rest of reality. You can have your own versions that help you be the best you, but its still important to realize it isnt true.

                            Nicolas Cage didnt lack money, he had a spending problem, spent over 150 million dollars and lived a life very few can or ever will. Hes an idiot, not poor. There is a massive difference.
                            Click to expand…


                            Sorry I didn’t mean to offend. I realize that I am defining poor as someone who has no wealth or less. But I realize it seems stupid to not include standard of living and one’s ability to keep that up if they stay with same income.

                             

                            I just worry others (not you obviously) will see their negative wealth as an ever present problem for them if the gravy train ends. That’s what I meant about personal finance.

                             

                            The Nicolas Cage example is a great one, showing the stupidity of my definition of poor but also it’s utility. Once the film roles dried up he literally was poor. If you spend all your money no matter how much, as foolish as it sounds, I consider you poor.
                            Click to expand...


                            Sure, just saying be sure of how you use your personal definition and recognize it as such lest you look like a total jerk in mixed company.

                            Negative wealth for too long becomes a problem eventually, this is where personal finance comes in. It helps if theyre appreciating assets vs straight up bills.

                            Comment






                            • I just worry others (not you obviously) will see their negative wealth as an ever present problem for them if the gravy train ends. That’s what I meant about personal finance.
                              Click to expand...


                              This is a fine message and if you want to warn people about the dangers having a lot of debt, you can do that without misusing the word poor.

                              Donnie, explained this earlier:




                              When you use a word improperly for shock value it tells you one of two things: (i) the message isn’t good enough to stand on its own merits or (ii) the person delivering the message is unsophisticated and unable to make actually compelling arguments.  Either way, when I hear statements delivered for “shock value”, I immediately tune out
                              Click to expand...


                              In this case, the message is clearly good enough and I'm sure you can make compelling arguments.  There is no need to misuse the term "poor" to achieve your goals.  Just substitute "not rich", "at risk of becoming poor", etc.  and you're fine.

                              Comment


                              • I can't believe this thread is still going.

                                If someone REALLY wants to figure out who's rich and poor you've got to figure out a way to measure everything- assets, income, potential future income, privilege, social connections, social skills, education, work ethic, health etc. Then use whatever you call that measurement and put everyone on the spectrum.
                                Helping those who wear the white coat get a fair shake on Wall Street since 2011

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