The Physician Philosopher's Guide to Personal Finance has been called a two million dollar book. An overview of this excellent primer from Dr. James Turner.
Today’s Classic is republished from Physician On Fire. You can see the original here.
Dr. James Turner, an academic anesthesiologist, is the author of The Physician Philosopher’s Guide to Personal Finance: The 20% of Personal Finance Doctors Need to Know to Get 80% of the Results.
He had been writing under the moniker “The Physician Philosopher” on his own website for over a year prior to the release of his book, and his articles fit the Pareto principle theme. He teaches people the most important aspects of personal finance to understand that will get you most of the benefit.
I’d say he’s underestimating the benefit at 80%. If you read the book and practice what he preaches, I think you’re going to be in better financial position than at least 95% of your peers. One highly respected physician finance writer has called this short volume a two million dollar book.
A Two Million Dollar Book: The Physician Philosopher’s Guide to Personal Finance
Dr. Turner was able to convince WCI himself, Dr. James Dahle, to write the foreword. It begins, “This is a $2 Million book.”
How so? For years, Dr. Dahle has told high-income professionals that the first really good personal finance and investing book they read will net them that much over a lifetime of avoided mistakes, smart personal finance decisions, and sound investments.
It makes sense. Now, if you’ve already read a dozen other excellent money books, this is not a $2 Million book for you. For beginners, however, and that’s who Dr. Turner is attempting to reach — medical students, residents, and early-career attendings, this book is a great place to start.
Read it, implement what you’ve learned, and you’ll be well on your way to eventual financial independence.
I would be remiss if I did not point out that Dr. Dahle has also written a couple of books to help healthcare professionals better understand money matters. You can read my overview of his first book, The White Coat Investor, and check out the followup book, Financial Boot Camp on Amazon.
In fourteen high-impact chapters, Dr. Turner gives you sound advice explained in simple terms. He’s known at his institution as an excellent teacher, and after reading this book, I can see why.
He has a knack for taking complex topics and using analogies to make them more relatable. His affinity for cars and sports show up several times throughout the book. When’s the last time you read a personal finance book that quotes Lee Corso?
He also places an emphasis on family and work-life balance, devoting the final chapter to keeping “The Balance,” and he’s not talking about the balance of your investment portfolio. That’s Chapter 12: How Much Do I Need?
The book has 216 pages altogether, including references. You could read it over the course of two evenings or one long flight. Reading one chapter a day would take maybe 20 minutes of your time, and you’d have a great introduction to what you need to know to manage your finances in two short weeks.
Why You Should Read This Book
“What if someone told you that you could finish training, practice medicine for 10 to 15 years, and then–if you follow the steps outlined in this book–choose to practice medicine because you want to and not because you have to? That sounds pretty good, doesn’t it?” -Dr. James Turner
What he’s written is essentially a financial independence manual for young healthcare professionals. He shares the common mistakes people make, including the six-figure mistakes he has made (I’ve made some, too), and helps you avoid them yourself.
Most chapters could be the subject of an entire book, but the author distills the most pertinent aspects of each into easily digestible bites. Again, the subtitle of the book is The 20% of Personal Finance Doctors Need to Know to Get 80% of the Results.
Every chapter ends with a handful of bullet points to reinforce what you’ve read and learned.
If you’re interested in further reading to optimize, there’s plenty of that here on this site, as well as on our partner sites The White Coat Investor and Passive Income MD.
Introduction and Investing Basics
The book begins with an introduction to who the author is, what he’s learned, and why he’s sharing it. He’s a firm believer in the fact that firm financial footing can help reduce physician burnout. The opposite is also true; overwhelming debt with no foreseeable way out can enhance feelings of burnout, depression, and worse.
Covering the basics in Chapter 2, he covers compound interest with the Rule of 72, budgeting, and emergency funds. The importance of a written financial plan is emphasized, and he provides a solid outline for you to make your own.
Conflicts of Interest
Conflicts of interest are all around us. In a world where people have different incentives, they are unavoidable. What we can do is learn to recognize them where they exist for both ourselves and others. We can try to limit how they affect our own behavior and choices, and avoid working with people whose conflicts of interest may influence them (knowingly or unknowingly) to place their own interests above our own.
Dr. Turner discloses his own conflicts of interest in Chapter 3 and goes on to list some of the most common conflicts of interest you will encounter in the financial world.
Differentiating between fee-based (commission-based) and fee-only financial advisors, he advises to work “only with fee-only” advisors. They can have conflicts of their own, particularly in an assets under management (AUM) model, but not to the extent of a fee-based advisor who may earn commissions on loaded (expensive) mutual funds and inappropriate life insurance products.
Medical School and Residency
You may think there’s not much you can do about your finances as a student. Tuition is expensive, and if you haven’t saved up via another career first or have someone footing the bill for you, you’ll be taking on a whole lot of student loans.
That’s true for the most part, but it’s also true that lenders will allow to borrow lots of money, perhaps more than you should. Dr. Turner states that his bad lifestyle decisions cost him $150,000 in the end, and the lenders were happy to let him take on all that unnecessary debt.
Some costs are unavoidable, but there are steps you can take to mitigate your future debt burden. Attending in-state public schools, applying for scholarships, and being smart with housing (house hacking, roommates) can all help. Vacations are necessary, but they don’t have to be expensive.
In the residency chapter, he covers travel hacking, buying versus renting a home, car buying, and the possibility of moonlighting, which can be quite lucrative if you can find the time.
Investing in residency is discussed, as are the important insurances to consider, including disability insurance and term life insurance. The author shares how he was denied disability insurance by applying at the wrong time with a somehwat questionable diagnosis. It’s another mistake to avoid.
Student Loan Debt Management
Chapters 6 & 7 alone could easily save you tens of thousands of dollars, making this book the best bargain ever if you don’t have a firm grasp on your student loan situation.
Public Service Loan Forgiveness (PSLF), income-based repayment plans, and private student loan refinancing are all given a thorough treatment. Many of these programs did not exist when I graduated from medical school in 2002, and I always learn something when reviewing the information, as Dr. Turner does succinctly and well.
If you are pursuing PSLF, this book will help you determine the best repayment plan to be on until you’ve made your 120 necessary payments.
If loan forgiveness is not in your future, you can almost certainly refinance to a lower interest rate (see below) unless you consolidated to rates of 1.75% to 2.5% that were offered years ago to me and my cohort. Halving your interest rate could save you five or six figures over the life of your loan.
Variable rates 2.80% — 5.90%
Fixed rates 3.37% — 7.02%
Discount for physicians. Inquire for details.
Variable rates 2.57% – 5.87%
- 2.99% to 6.88% (with AutoPay)
- 2.25% to 6.43% APR (without AutoPay).
- 2.25% to 6.43% APR (with AutoPay).
- 2.56% to 7.362% APR (without AutoPay)
Variable rates: 1.74% – 7.49% APR
Fixed rates 2.29% – 7.84% APR
Variable rates 1.91% – 5.25%
Fixed rates 2.95% – 7.63%
Variable rates 1.86% – 7.98%
Fixed rates 3.99%-6.99%
Student Loan Refinancing Disclosures
Life After Residency
Chapter 9 is devoted to the mantra to “live like a resident” for the first few years after residency. If you want your earnings to compound and start working for you, it’s imperative that you begin to save well early on.
In the $2 Million thought experiment, he shows how after 17 years, your investment portfolio can contribute as much to your retirement savings as your annual income does.
Life is expensive, or at least it can be, and he mentions the “big three” categories of housing, transportation (autos), and food. He adds childcare and vacations to grow that list to five. I agree; we spend as much or more on travel and our children than the traditional “big three” spending categories.
You’ll learn Dr. Turner’s 10% Rule that allows you to splurge a bit with each pay raise while still greatly improving your financial future.
The Tale of Two Doctors is a chapter that describes the fates of two physicians who make very different financial choices. I would guess there are more Dr. Joneses than Dr. EFIs (not a nod to Ether to FI, but I’ll pretend it is). Dr. Cory S. Fawcett weaved a similar tale in his book on eliminating debt, and the two docs are not unlike Drs. A & D in my Tale of 4 Physicians. It’s a lesson that belongs in any personal finance text.
Investing and Financial Independence
The chapter on investing is robust, comprised of over 40 pages or about 20% of the book. The different accounts you’ll have available to you are discussed, as are the differences between a governmental and non-governmental 457(b). You’ll learn about 529 plans, HSAs, and read about whether you should pay down debt or invest.
The simple three-fund portfolio gets some press, and you’ll learn the differences between passive and actively managed mutual funds. All important topics.
The follow up chapter is one I hold near and dear. What is financial independence and how much money will you need to have it? How should you invest to achieve it?
If you don’t know the answers, you need to spend a little more time on this site, but the book has answers that I agree with, as well.
The chapter on asset protection is light, and I feel this is an area that is not my strong suit. I am doing all the basic things recommended in the book, which is somewhat reassuring.
This is another area where conflicts of interest need to be considered. Asset protection can become much more complicated with irrevocable trusts, foreign bank accounts, exotic insurance products, and they all come with layers of fees.
Get the basics right by being a good, empathetic doctor, a caring spouse if you’re married and have appropriate insurance against the most common threats to your assets and income. That’s applying the Pareto Principle to asset protection.
Wrapping it Up
The Physician Philosopher’s Guide closes with some behavioral finance tips from the former philosophy major.
“The purpose of life is not to be happy. It is to be useful, to be honorable, to be honorable, to be compassionate, to have it make some difference that you have lived and lived well.” – Ralph Waldo Emerson
That’s how the final chapter, “The Balance” kicks off.
Dr. Turner encourages the reader to find balance in many aspects of life. Balance between living now and enjoying the fruits of your labor later. Balance between your career and your home life. Living your life with intention.
Before I tell you to buy this book for yourself, your residents, or your sons, daughters, nieces, and nephews, I need to disclose my conflicts of interest.
This post contains affiliate links to Amazon, and if you buy the book (or anything for that matter) after clicking the Amazon Smile link, this site earns a small referral fee, and you are supporting our charitable mission.
In addition, I have a small equity stake in The Physician Philosopher. A portion of his profits will become my profits. If this book becomes a New York Times Bestseller, we’ll both be happy campers.
Nevertheless, I do read a lot of personal finance blogs and books, and I was excited to partner with James, as he is an excellent writer and teacher with a healthy message. There are few books out there that will give you more bang for your buck in a matter of hours.
If you trust that I’m sincere and not just trying to make 58 cents or whatever my commission would be, please consider picking up a paper or digital copy of The Physician Philosopher’s Guide to Personal Finance: The 20% of Personal Finance Doctors Need to Know to Get 80% of the Results