Top 5 Money Mistakes
Woman Doctors Make
By Katherine Vessenes, JD, CFP®, RFC
The first indication I had that women doctors were going to need some extra help when it came to their finances was a beautiful 40-year-old Ophthalmologist. Frankly, she could have given up medicine and been a supermodel—she epitomized brains and beauty.
As part of my initial interview, I asked her, “how can we best help you?” Her answer threw me for a loop, “I need help finding a husband!”
It had never occurred to me that a woman who has a doctorate degree, and is obviously brilliant, would feel so insecure about her finances that she needed a husband to help her feel comfortable.
Since then I have seen this pattern many times with both single and married women. Many of our single female doctors won’t move ahead on our recommendations without checking with Dad, and a lot of our married women doctors let their husbands make all the financial decisions.
To better understand their thought process, and to help our clients, I did some research. I discovered the top 10 fears that all women have about money. When I run this list by my female clients, they confirm this study applies to women physicians/dentists, too. Here are the results:
1. Fear of running out of money
2. Fear that if they don’t marry they will not be able to support themselves
3. Fear that they are not smart enough to learn about finance
4. Fear of being fired when asking for raises and therefore, making less money over
5. Fear of falling victim to financial scams
6. Fear of becoming a financial burden to their families
7. Fear that if they take time off to raise children their finances will suffer
8. Fear their retirement will be spent helping an aging relative
9. Fear they won’t have enough cash on hand for emergencies
10. Fear that their financial decisions will let others down
With that background, let me run through five of the top problems we see with women doctors and their money, and how to avoid them:
1. Female doctors make less than male doctors, even when accounting for the same specialties and time out for children.
According to researchers from the University of Michigan Health System and Duke University, women earned an average of $12,194 less per year than men, when all the other factors remained the same. Women will earn more than $360K less in a 30-year career than men in the same specialty. This amount could buy a house! Or put kids through college. 
Researchers found they could not explain this difference based on women tending to focus on less well-paying specialties or motherhood. They finally concluded that women are less likely to negotiate for a better salary/raise than men.
We have seen this over and over in our practice. I think many women become doctors because they are kind, compassionate, caring people who really want to help others. This mind set can be the exact opposite of their sisters who went to business school. Unfortunately, when it comes to contracts, it is vital to negotiate good terms up front.
In our practice we found women who DO speak up and negotiate the terms of their contracts are likely to get financial concessions. At that stage, we see that their salaries are the same as their male counterparts.
Takeaway: women doctors, you need to negotiate your contracts. If you don’t know how to do that, let us know and we will give you a crash course in contract negotiations.
2. Women are less likely to have us review their contracts in advance.
I have never seen a contract that we couldn’t improve in some way. However, most of our requests for contract review and help with negotiations come from our male clients!
Our reviews will also point out hidden landmines that the doctor might not be aware of. For instance: we have a lovely Anesthesiologist who was moving out of state. She did want me to review her contract, thank goodness. It had a terrible clause in it that would have made her liable to her future employer to the tune of $850,000! It would take her more than four years of all of her take home pay to cover this.
Good news, I brought in another attorney who agreed with me. She eventually got a better offer and moved on. The old offer could have bankrupted her.
Takeaway: if this is not your area of expertise, have your contract personally reviewed by an experienced expert. Even if the terms look ok to you, there may be a “gotcha” that an experienced advisor could uncover.
3. Many woman doctors either remain single, or marry a person who will not be making as much money—they become the chief family breadwinner.
We have a lot of women clients in this situation. Interestingly, with one exception, they all seem happily married. None of the husbands seem troubled that their wives make more money than they do.
Women in this situation should stay involved in the family finances. The ones I see who get into trouble think their job is just to make money, and it their husband’s job to manage the money and spend it. The women can “check out” and have very little idea of what is going on with their money.
I think it is important for every spouse, no matter the gender, to at least have a cursory idea of what is going on with the family finances. Their relationships are much stronger when everyone is on the same financial page and their voices are heard.
This is particularly true of the doctors who are on a tight budget. If one partner is the “head-in-the-sand” spender, and the other one is trying to save or pay off debt, it can create a lot of stress in the relationship when the spender sabotages the budget month after month. As much as possible, we have both spouses at our meetings and make sure we create a plan that they can both live with.
Takeaway: this is your money—stay involved!
4. Women doctors have not caught up to the new financial normal: doctors in general will be working harder, making less money and paying more in taxes. There is no margin for error for today’s women doctors. If you make a financial mistake, it can take you years to recover.
Some female doctors think practicing medicine should be like the 80’s TV medical shows. All of your patients love you and you are making so much money, you have a cook and a housekeeper. Unfortunately, with high student loans, uncertain tax rates, and a choppy stock market those days are long gone.
That means you have to be much more careful about your finances than ever before. You can’t overspend. It is important to pay your credit cards off every month and set aside funds for both long term and short-term savings needs.
Spending $5,000 for a vacation to the Caribbean this winter is fun. However, if you saved that money, 40 years from now you would have an extra $40,000—which would buy a lot more than a trip to Puerto Rico!
Takeaway: track your spending for a month. You will be surprised how much you are spending on lattes, clothes and take out. Most of our clients can find easy, painless ways to cut back if they really want to get ahead financially.
5. Some women doctors tend to trust their colleagues, or online pundits more than a qualified professional.
A couple of months ago, I had a lovely Psychiatrist (Dr. Anne) ask me what we could do for her to increase her “passive income.” I was stunned. The reason: we had been working together for 6 years and all we had been doing was investments that were creating passive income for Anne in retirement. What was I doing wrong that Anne did not realize this had been my strategy for her from the beginning?
I started digging. It turns out Anne was busy doing her online research, particularly Doc Moms Groups and finance groups. Ok, Doctor, you know how you feel whenever a patient comes to you with something they picked up on line from Drquack.com or Dr. Google? Your patient may feel like they know their real medical problem, but you, the expert, know dozens of things the patient doesn’t. You have to spend your time unwinding the bad information patients get from online. The same thing happens to us when our clients start doing their own online financial research.
I am all in favor of doctors doing research. Don’t get me wrong. I think that is a good thing. But keep in mind, many of these bloggers are not licensed, not regulated, have no over-sight, and can say whatever they want without any fear of retribution! Yes, they may be an MD or DDS, but that doesn’t mean they have the training, education, or experience to be offering advice to their doctor followers online.
A popular topic for these online groups is “passive income” for doctors. I even found a website, by an MD, who talks about this in detail. Here are a few of the things this so-called expert suggests for “passive” income:
· Locum work
· Medical directorships at nursing homes
· Medical case trial review/forensics
And the list goes on.
Looks good, right? There is only one problem. Those items, and the dozen more he listed, are NOT passive income! You heard me. They are income alright, but not passive. So, you see neither my client, nor the esteemed blogger knew what they are talking about!
Would you like to know why? Passive income is defined by the IRS and is generally considered to be: income earned through investments, real estate, limited partnerships, or other endeavors where the person is not actively involved.
As you can see, the list of activities from the bloggers all describe income, yes, but it comes from doctors being actively involved. Therefore, it is not “passive” income. The IRS calls this kind of income from active efforts “earned” income.
My point: A little knowledge can be dangerous, very dangerous.
So, the kind of investments we were using for Anne were actually passive—we were, in fact, doing what she asked for. Anne didn’t understand what she was asking for because she had been mis-led by her colleagues and online bloggers.
Sorry—one more story:
Two weeks ago, I got a semi-hysterical voicemail from Dr. Jean, a 60 year old Pediatrician, married to a 62 year old Radiologist. We are investing about $2 million for them.
Here is the anxious message left on my recorder: “Katherine, change our accounts today! All of our colleagues are moving their money to a 90/10 portfolio. We are really worried about the market and want you to move all of our investments to 90/10!”
I had six thoughts, just listening to this message:
1. Jean didn’t understand that a 90/10 portfolio, would be 90% stocks and only 10% bonds. This is a much riskier allocation than her current 70% stocks and 30% bonds that we had been investing. I think she probably meant a 10/90 portfolio, of 10% stocks and 90% bonds, which is much less risky, but it is an allocation that won’t even keep up with inflation. In case you are wondering, whenever you are discussing a stock to bond ratio, the stock number is always first! (Go impress your colleagues with that bit of trivia.)
2. Jean probably misunderstood what her colleagues were actually doing. If Jean’s colleagues were worried about market fluctuations, doing what she asked, moving from 70/30 to 90/10 dramatically increases Jean’s risk, not decreases it, as I assumed she wanted.
3. Jean’s colleagues were getting very bad advice from their advisors, or no advice at all.
4. Jean’s colleagues were in a completely different situation and what may be appropriate for them would be a disaster for her.
5. We couldn’t possibly trade on her instructions, because what Jean said she wanted was not, I think, what she really wanted.
6. Urgent call from Katherine to Jean: Let’s meet to discuss your concerns and come up with a plan of action that really meets your needs!
Takeaway: I am all for clients educating themselves. I have always felt that a better educated client is a better client. However, before you act on your colleagues’ or some blogger’s advice, please get a second opinion from a trusted, ethical professional who really does know what they are doing and what is appropriate for you and your unique situation.
In sum: this is your money, you worked hard for it. Make sure you protect it and keep as much of it as you can.
Katherine Vessenes, JD, CFP®, RFC is President/Founder of Medical Dental Financial, a concierge financial planning firm that assists over 300 physicians and dentists nationwide. She has received the following honors:
· 5 Star Advisor as a top Financial Advisor,
· Medical Economics as a top Advisor for Doctors
· Dental Products Report as a Best Financial Advisor for Dentists
· Top Woman in Finance.
She can be reached at Katherine@mdfinancialadvisors.com or 888-256-6855.
 source: Emma Johnson. "Top 10 Money Fears and What to Do About Them." Forbes Woman. 23 Sep 2010: n. page. Web. 16 Jul. 2012. <http://www.forbes.com/2010/09/22/money-