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Who saves more: Doctor or teacher?

By Judy Martel · Bankrate.com
Sunday, May 6, 2012
Posted: 3 pm ET

It would be natural to expect someone who earns a high salary to be socking more money away than a lower-earning employee. But that's usually not the case.

High-status incomes, like those earned by doctors and lawyers, often come with expectations for high-status living, according to the authors of the book "The Millionaire Next Door."

Authors Thomas Stanley and William Danko developed profiles of different types of individuals to define their style of building wealth. Prodigious Accumulators of Wealth, or PAWs, have little need for expensive homes, cars and technology and typically save well more than the average person. They spend less than they earn and can often end up as millionaires even on a modest salary.

The opposite end of the spectrum is the Under Accumulator of Wealth. These UAWs have a low net worth compared with their income in part because they feel the need to measure their success based on how they compare with their neighbors. Doctors and lawyers often fall into this category. It's the "better than" theory. Others in this group include those who fall prey to the "better off" theory, meaning they are driven to prove they are financially richer than their parents by buying a larger home, luxury car, country club membership -- you get the idea.

Another intriguing belief among UAWs is that income is a readily renewable resource, resulting in confident overspending on homes, cars and luxury items. "The Millionaire Next Door" was written before the latest deep recession. I'm betting the attitude of the PAWs don't change with the state of the economy, but it would be interesting to note if it has changed among the under accumulators.

How would you define yourself: as a UAW, a PAW or somewhere in the middle?

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May 07, 2012 at 7:43 pm

It's called, "talking" Ann Marie. You do that with friends and family. And I wouldn't go so far as calling them all, "smart". Three of these people received lower grades than I did in undergraduate studies (org chem, biochem and calc in particular) and I don't consider myself to be a genius.

Teacher secure. Yes, that's hilarious. A whopping $4,000-5,000 per year into a matched pension fund for 30 years. That's $300,000 and maybe factoring in another 50-100,000 in yield from the fund if one is lucky.

$400,000 to retire on is comparable to what my parents earned while working in various jobs in the private sector and put into their 401K.

I know IR's that make $1 million per year with 14 weeks of vacation, a company car and other perks. Sure, they have to pay their own insurance, which costs about $20,000 per year, but let's not pretend as if that's a major sacrifice.

May 07, 2012 at 12:44 pm

Ever heard of a physician who was laid off or fired and was unable to secure other relevant employment? This is not an "apples to apples" comparison.

Ann Marie
May 06, 2012 at 10:15 pm

My husband and I are each sub specialists and combined earn well less than 1m. I drive a Ford, our house is paid for, as are all of our student loans, and our 3 children's educations. We employ 11 people, and pay for their health insurance, etc. We are prudent, have no vacation home and felt blessed to be able to help with our elderly parents' care. Where does someone like "Erik" think that because he "knows" these people he has intimate insight into their finances. Sure, after many years of sacrifice and you get the first bonus you may splurge. But most of us (wink, we are smart and educated) spend our money wisely. We don't need designer clothes, foreign sports cars, or Ivy league schools for the kids.. we support our staff, our church, our charities, our families, and save save save for retirement....cause when we are no longer able to do our jobs there is no union, no contract, no pension. Very much question the wisdom of our youngest choosing medicine as a career....He must love it! cause it ain't gonna make him movie star rich or teacher secure. We are 60 and all the teachers our age ARE retired comfortably. We wish them well, and hope they appreciate our contribution, too.

May 06, 2012 at 9:52 pm

Yes JD, those poor physicians. Even the lowest paid family doc still makes more than most teachers.

You also forgot to mention that most physicians don't start making a great deal of money because they don't start to get real pay until years after med school. Sure, student loans can make up a few hundred thousand, but the specialists pay that back rather quickly and live a very comfortable life while doing so.

I know interventional radiologists, anesthesiologists, internists, medical oncologists, psychiatrists and ob/gyns. They all make well into the 6 figures, with the lowest paid being the Internist and even he still makes around 150 k per year. Yes, they all had sizable student loans and they didn't start to make real money until they finished their residencies and fellowships which for most, was by the age of 30-32. But, at that point, once they joined and became a partner of a group and started working, they all began spending. The most specialized of this group makes around 1 million per year, yet because of their spending habits, they'll probably never be able to retire. They all have vacation homes that they rarely use, all drive expensive vehicles and bought expensive homes before their student loans were paid off. Only one of them is financially responsible.

The teachers that I know, meanwhile, make between 26,000 to 60,000 per year, with the latter being in the profession for 15 years with a masters degree. They do get their health insurance paid for which adds another $15,000 to their compensation package. But, even then, let's not pretend as if they retire as millionaires because of that. If you ask me, it's because teachers are forced to contribute a fixed amount into their pension and it's matched by the district which then has the fund professionally managed. There's no conspiracy going on.

All but one of the physicians I know are terrible with their money and have no clue about retirement. The most well paid of them has 500K sitting in an account bearing 0.05% interest because they haven't bothered to invest or talk with a financial adviser. Let's not forget that this is the reason that there are entire financial planning groups that cater to nothing but physicians and include this in their name and marketing. It's not a secret that many physicians and other professionals by the way, are just terrible with money and they spend it as soon as they get it on lavish things, trying to keep up with whomever (often colleagues and other people with money).

That isn't such a physician thing though, more of an American thing. Most people are brainwashed into thinking that once you're successful, you must demonstrate it to the world by spending large sums of money on things you don't need. A fancy car, house, etc., apparently says, "hey world, look how well I did in life!". All I ever think is, "wow...way to fall into the trap".

May 06, 2012 at 5:05 pm

1. Most doctors don't start actually accumulating money until well into their 30's, sometimes 40's because of student loans.
2. Many doctors are contractors and therefore responsible for their own pensions/401k/etc as well as health insurance.
3. Many doctors are on hourly rates. No work = no pay.
4. Teachers are allowed to unionize. Doctors are not.