Transcript
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Hey guys, Dr. Mike Wuing here. Welcome to another edition of Bootstrap MD, the podcast for physician and healthc care entrepreneurs. I'm a 20 plus year physician entrepreneur and today I'm going to be talking about a subject which gets a few people kind of weirded out a bit and that's about finances and specifically about building wealth.

And what I want to share with you is how at the end of this episode that maybe the ways that you think about building wealth is probably wrong at least in not the right direction that which you are going. And you know let me guess maybe you're making good money maybe even great money and you're still stressed about your finances. You've got friends from college maybe they became accountants or in tech or engineering and they seem to have more financial freedom than you even though you're probably 2x or even 3xing their their salary.

So, here's this thing and this is probably going to sting a little. Most doctors are financially illiterate. I I said it. You know, we can diagnose rare diseases.

We can perform complex procedures, but somehow we handle money medical student how they handle their their first code blue. There's panic. There's confusion. And there's a lot of hoping somebody else knows what they're doing.

And having consulted with with physician clients, I I see this nearly every day. I know doctors, they're making 300, 400K or more, yet somehow they can't afford to take a month off. There's physicians who own their own practice. They've been practicing 15 years, but they have less net worth than their office manager, attendings who are terrified of insurance reimbursement cuts because they're living paycheck to paycheck.

And even though they got really expensive paychecks, it's not a way to live. And that's, you know, what really is the worst part of it is we're conditioned to accept this. This is, you know, we say like, you know, this is how medicine goes. It's not like the good old days.

We just have to adapt to being employees. And I'm going to call BS on that because today I want to fix that. I've been reading a book called The Wealth Ladder. And what the book shows, it's a framework that completely changed how you think about money.

And more importantly, I want to show you exactly how to climb it without spending the next 30 years hoping that your 401k doesn't tank and praying that your employer doesn't let you go because they feel you're too expensive. We're going to talk about what I call the great physician money lie. And the lie in medicine is that high income equals wealth. And that's the lie that'll keep you broke.

And it's sometime and it's time somebody calls you. You know, I learned this the hard way. I was making decent money as a you know failing doctor, nice salary, nice cars, beautiful home in San Diego suburbs, but I was miserable. I was working nights.

I was doing extra call. I was doing weekends, holidays. I was, you know, missing my milestones with my kids, family vacations. And for what?

at the end of the year after taxes taxes, student loan payments, house payments, luxury car leases, private school tuition, you know, I was saving, you know, a minuscule what I was doing, probably less than 5 10%. And a a teacher with a 50k salary was probably saving better than I was doing percentage-wise. But here's the kicker. Even though I felt rich because I was spending a lot of money, I look success I looked successful from the outside.

My neighbors were seemed envious, but I was really just a high paid hamster running a very expensive wheel. And that's when I realized something that really changed everything. There's a massive difference between looking rich and being rich. Looking rich means you spend a lot of money.

Being rich means you have a a lot of money and most doctors are playing the wrong game entirely. And I don't want you to get trapped in what I see as the doctor lifestyle mythology. you know, they work hard through medical school and residency and then that you'll be set for life. Then it's the nice house in the suburbs, luxury cars, country club membership, kids in private school.

But the mythology was built in a different era. This is when doctors controlled their practices. They set their own fees. They weren't getting squeezed by insurance companies like they do today.

They have to deal with hospital administrators or government bureaucrats. And that lifestyle is a trap. It's it keeps you from working until you drop. I refer to this as the golden handcuffs.

But I see this doctors who've been practicing 10, 15, 20 years or more who still have less than 500k in net worth. It's not because they're not smart. It's because they're playing the wrong game entirely because they're optimizing for lifestyle instead of building wealth. They're thinking like employees instead of entrepreneurs.

They're focused on spending money instead of multiplying it. And that's why I see that most doctors stay broke. This is when, you know, I I see doctors making good money as ER doctors. But, you know, then they come to me because they feel stuck.

They feel financially stuck. They can't take time off. They can't keep up their hours. They can't pursue other interests.

You know, with with taxes and everything. Uh I see doctors, they're barely saving 40k a year. You know, just to make a million dollars, you have to wait over 20 years. And that's assuming that the market doesn't crash.

There's no emergencies, no major expenses. But the really problem, it wasn't just the math. It's the mindset. If you think like a cons, you need you're thinking like a consumer.

You need to start thinking like an investor. You know, every raise, every bonus went towards upgrading that doctor's lifestyle instead of building income generating assets. They're getting a nicer car, bigger house payments, more expensive vacations, private school tuitions goes up and up. And that's what really I get worried about is this trap because the more money you make, the more expensive your lifestyle becomes.

And it's really it's this vicious cycle that keeps smart people from doing stupid things with their money. Now, I don't want you to live like a monk. There's other programs that tell you to do this. It's really to understand how wealth actually works and to start playing the right game at the right level.

So, talk about this book, The Wealth Ladder. And this this book, the wealth ladder, the author Nick Nick Mulli, he's a a financial advisor and he figured out that it's net worth is is the important thing. And he he divides it up into six different levels and that each level requires completely different strategies to go on to the next level because what got you to one level does not necessarily get you to the next level.

And this is crucial because most this is different from a lot of what financial advisors think is that financial advisors think that there's like one sizefits-all. Just max out your 401k, just buy index funds. Well, that might work if you're climbing into from level three to level four. Now, I'll go through each level specifically, but it's useless if you're stuck at level one or level two.

You know, it's prescribing like the same medication for every patient regardless of the condition. It just doesn't work. So, what are these six levels? And I encourage you to go pick pick up a copy of the book uh the wealth ladder.

Level one is if your net worth is less than 10k, $10,000. Level two 10k to 100k in net worth. Level three 100k to 1 million. Level four is 1 million to 10 million.

Level five 10 million to 100 million. Level six over $und00 million. Now, I know those levels seem pretty daunting, but I want you I bet I want you to understand this is that the principle to get people to level six can dramatically accelerate your journey to whatever level you want. So, even you just want to hit level four and call it good, you need to understand level five and level six strategies will get you there years faster.

So, each level and a level does this is what he calls spending freedom. Level one, remember, is less than 10k. Les level two is 10k to 100k and he describes that is you're getting grocery freedom. You can buy food without checking prices.

Level three 100k to 1 million is where you get restaurant freedom. You can eat out without guilt. Level four 1 million to 10 million that's where you get travel freedom. You can vacation when and wherever you want.

And then it keeps going up from there. And again these levels are based on net worth not income. So it doesn't matter if you're making 500k a year. If your net worth is 50k, you're spending everything you earn.

That means you're at level two. Your lifestyle should match your wealth, not your paycheck. And again, this is where I alluded to earlier. This is where doctors get it backwards.

They live like level four players when they're actually at level two. That's why they feel broke despite their high incomes. So we'll just take level one and two. This is building your foundation.

Level one is network under 10k for doctors. Usually, this is when we're medical students and we're residents draining in debt. But if this is you, don't panic. But also, don't do what most people tell you to do.

The conventional advice being in level one is about penny pinching. Cut out coffee, eat top ramen, don't buy anything fun. That's poverty thinking and it's not going to make you wealthy. The strategy at level one isn't about clipping coupons.

It's about maximizing your future earning potential. So, if you're at level one, you're building probably the most valuable asset possible, your skills. This is what you need to do. Your medical degree, your residency training, your board certification.

These are investments that are going to pay dividends for decades. I don't want you to waste them. I remember I talked to a resident who was like stressing about his coffee habit because he had 300k in student loans. I d you I said, you know, don't skip the coffee if it makes you feel better, but your really problem isn't that, you know, $100 a month you're spending on caffeine.

It's not that you're not thinking strategically about maximizing your attending salary. Instead of obsessing over small expenses, focus on big leverage points. What can you do to establish your expertise? What can you do where you can start getting a higher hourly rate?

You could finish your training strong. You could pick up learning extra procedures to get additional certifications. Think about moonlighting or local work for extra income. But the most important thing I think is start thinking like an entrepreneur like not like a perpetual student.

You're not going to be broke forever. But don't develop broke habits that you'll need to later break later. Now, level two is 10K to 100K. Now, this is where, you know, the new the new graduate or the new attending often lands after paying down some debt.

Maybe they're building an emergency fund. So, level two, remember, that's achieving grocery freedom. You can buy food without anxiety. For most doctors, this feels like a huge relief after years of financial stress.

But this is where physicians make their first big mistake. They get their first attending paycheck. Now, they think they're rich. They're driving BMWs.

They live in expensive apartments. They're eating out every night. Don't fall into this trap. You know, if you start scaling up your lifestyle, you're just going to go back to living paycheck to paycheck in in four to six months.

You just have more expensive stuff. The strategy when you're in this level is about in but it's more sophisticated. You know, you want you want to get additional education just like in level one. This is unlock higher pay.

Maybe that's getting a fellowship. Maybe that's getting an MBA. Maybe that's learning business skills that could help you start a practice. You know, for myself, I learned about marketing.

What that allowed me to do is I I learned a skill that other people wanted to pay me for just besides my medical degree. And that's where I started to increase increase my level. But the key here on both these levels, level one and two, is increasing your income will build wealth faster than just obsessing over expenses. You can control your spending, but don't penny pinch your way to poverty.

What you want to invest in is your skills, your knowledge that can pay dividends to go up a level. Now, level three, this is where a lot of doctors are at. This is where good doctors get comfortable and then they stop growing. Level three is 100,000 to a million dollars net worth.

Some might refer this as middle class wealth and it's where most mid-career physicians end up. You've paid off your student loans, maybe you're maxing out your retirement accounts. You can eat out with guilt. Life is comfortable.

And that's exactly the problem because comfortable is the enemy of being wealthy. I see too many doctors to get comfortable and they stay there for decades. They're making good money. They're living well.

Their kids are in good schools. They take nice vacations. So why rock the boat? Because comfortable doesn't give you options.

Comfortable doesn't protect you from insurance cuts, hospital layoffs, being replaced by AI practice closures. Comfortable doesn't let you work less, travel more, or pursue other interests. comfortable just expensive mediocrity. Now, this strategy for level three is investing in income producing assets, not just retirement accounts, assets that generate cash flow while you sleep.

This could be stocks, real estate. I went this route about owning my own businesses, getting involved in startups, anything that pays you whether you show up to work or not. You know, people got excited about this in the FIRE movement. And this is where you you know this is where they recommend in the book you need to aggressively save and invest even often 50% or more your income.

Now I know most of us think that's impossible because of our lifestyle expectations. What that allows you to do is allows you to grow instead of spending money on the latest you know gadget or the most the the most uh luxurious car you know you could building four uh real estate properties. Now you're generating cash flow. Now you're building passive year passive income.

Again, the key is on this one is accumulating knowledge. Don't just buy properties randomly. Educate yourself on the strategies you want to invest in. Real estate investing.

Maybe you're going to get get into a syndication. Learn how to analyze deals. You know, learn how to buy areas in strong rental demand. You have to treat real estate like how you treat your medicine, right?

with expertise and with precision. Then you find out you start developing passive income. Guess what you can do? You can start cutting down your shifts.

Maybe you go from full-time to part-time. What this does is give you options. And that's really the power of level three here is where you take your active income into passive income. Okay, your high salary is great, but it only lasts as long as you keep working.

If your income is dependent on the number of patients you see, I say this again and again, then this is where you know you're one step going from level three and down to level two here. You know, don't optimize comfort, but instead focus on growth. You don't need to buy bigger houses, but you need to start thinking smartly. You know, just hey, just because you spend a lot of money on a house, it's just an expensive place to live.

It's not generating income for you. It's generating expenses. Property taxes, maintenance, insurance, community costs on the down pay, you know, community u your your HOA, the opportunity cost on the down payment. And that's that's keeping you that expensive house is keeping you at level three and not helping you reach the next level, which is level four.

So level four is 1 million to 10 million net worth. Congratulations. You now you're a millionaire. This is where most people consider this upper middle class wealth.

Now you got travel freedom. This is where you can vacation when and where you want without have to worry about the financial impact. Now this is where many physicians hope to be traditional retirement age. But again the thing you can only reach there is if you're strategic about it.

So what does a level four physician have? They've got substantial investments across multiple accounts. They own real estate. Maybe they have equity in a medical practice or other businesses.

passive income here might be covering 30 to 50% of your living expenses. By most people's standards, you're financially secure and successful. But this is where I think the book really gives you its most powerful insight because what got you to level four won't get you to level five. Because up until now, you build wealth primarily through high earned income and smart investing.

But to reach the next level, $10 million net worth, you need to fundamentally change your approach. And this is where most successful pro professionals, this is where they plateau. They've optimized the employee investor game, but they haven't learned the business owner game. And without that shift, you're never going to really truly reach financial freedom.

So from level four to level five, this is where they really need to own a business. Not just being self-employed, but own a realist real business. And this is a massive difference that most doctors don't understand because when you're self-employed, it means you own a job. You stop working, the money stops coming in.

But I see this with doctors who own their own solo practices. They might make good money, but they can't take a vacation without losing income. They're tied to their practice like they were tied to their hospital shifts. So that's not freedom.

That's expensive self-employment. You really want to create a business that makes money without you. It's got systems, employees, processes that generate revenue whether you're there or not. So for physicians, that's what might mean you're running multiple clinic locations.

You're building a tele medicine platform, starting a medical device company, maybe you're creating health rellated online businesses on on here. Now, I'm not going to say it's easy. I own a business. It's not easy.

There's risk. There's a steep learning curve and requires developing entirely new skills. And most of us aren't trained in entrepreneurship, leadership, marketing, or business management. However, I'm happy if you're a listener to me.

I hopefully I've educated a few of these things on here. And you're going to make mistakes. You're going to face stepbacks. You're going to deal have to deal with employees.

You're going to have to handle responsibilities you never learned in medical school. But for most, getting to that next level is is worth the effort to do it. It requires a fundamental shift in mind. Um, and again, there's nothing wrong if you want to stay at level four.

That's fine. But if you want to dream bigger, this is what you need to do. And again, you know, I I what I was found out is really there's really two ways to build significant wealth as a physician. You could be an extremely high earner who saves aggressively for 30 plus years or you can become a business owner who builds equity that compounds much faster than savings.

Most people choose option one and that's not by default. That's by default, not by design. They work harder. But you know, I think the second one is if you do it, this allow you to get off that hamster wheel.

And vision ownership is different. Again, it takes time. It struggled for quite a bit. Um, but now I'm able to work when I want, whenever I want.

I can retire if I need to. Um, and if you follow the cash flow quadrant, this is very similar to what he talks about in the wealth ladder. You know, you have to go from being an employee or self-employed to becoming a business owner and investor. Most doctors are highly paid employees and that's fine with it as long as you know what you can do.

But the wealthy ones figure out that they need to become business owners who then reinvest their profits into other assets. Then you got level five and level six. This is 10 million to 100 million and beyond. This is where you move from building wealth to having genuine impact on the world.

And realistically, most doctors will never reach these levels and that's completely fine. But understanding the principles can accelerate your journey to where you want to go. At level five, you got house freedom. You could buy your dream home without major financial strain.

At level six, you got impact freedom, the ability to use your money for major philanthropic philanthropic projects, funding research, making large-scale investments that can change industries and change communities. And the strategy from climbing from level five to level six is to scale businesses, not just owning one profitable business, building systems that create multiple income streams, taking a companion tanking company national or global. Uh Dr. Patrick Sunsh went from a surgeon to a billionaire through biotech ventures.

He owns the LA Times and lots of different ventures. I think he's part owner of of sports teams. And again, the principle is leverage because now he's using other people's time, money, and expertise. And he's multifs far beyond what, you know, most of us can think of in individually.

And again, you don't have to go to level six. You don't have to go to level five. But I just wanted to show you what the book shows is the potential is there and that you have to understand using strategies for each level to get you there. So enough about this.

I hope you you know encourage you to pick up the pick up the book. But if you want to if you want some take-home advice on here, the first step is calculate your net worth. Not what you think it is, but what you actually is. Assets minus liabilities.

This includes your savings accounts, your investment accounts, retirement accounts, home equity, business equity, and then subtract everything that you owe. Student loans, credit cards, mortgage loans, other debt on there. And it might be uh, you know, shocking when you find out and a lot of a lot of us are because they doing well because they get paid a good hourly rate, but often their net worth tells a different story.

So once you find out your net worth, see, figure out what level you are and for each level. If you're if you're at level four, but you're using level two strategies, stop it. Remember, level one or level two is faxes focuses on maximizing your income, getting your hourly rate, increase your hourly rate, building skills. Level three is focus on investing and and developing income producing assets.

Level four, start thinking seriously about business ownership. And again, whatever you do, stop that lifestyle inflation. You don't have to keep keep up with the Joneses. Your lifestyle should match your net worth, not your income.

Okay? I'm not telling you that you need to live like a monk, but be intentional about your spending. You know, ask yourself this. The next big purchase you make, is this move me closer to financial freedom or am I going away from it?

Fourth, I want you to start thinking like an owner, not an employee. Have that owner mindset on here. What can you do? Pink skills um that others would pay for.

Maybe it's consulting with hospitals. Maybe it's creating online courses for their doctors. Maybe it's creating a medical app or a device. Maybe it's building a cash pay practice that serves patients better than insurancebased medicine on here.

Now, the goal isn't to completely quit your job and start your business. It's start thinking about ways to create value that aren't directly tied to your time. Then fifth, build your education. Build your financial education.

Medicine didn't come naturally to you. Financial might be a different beast, but you still need to learn from mentors. Make mist, you know, you're going to make mistakes, but it's better to learn from others who who've already experienced the same mistakes. Read books about investing, listening to podcasts like this.

Attend conferences. We've got PDCON that's coming up in September. I'd love for you to attend. You're going to be like with like-minded individuals who who think about these same things.

Join physicians groups focused on financial independence and business development. Most importantly, I want you to take action. Maybe you read about it. I know the doctors, they love to research everything till the cows come home, but it's time you need to start thinking about building assets.

You got to start building something. And again, this isn't easy. We were taught this stuff in in in medical school. The wealth ladder isn't guaranteed to be easy, but I think it's a proven path that financial freedom to financial freedom that you know physicians before you have done and this is what they did to to get there here.

Um, so it's time to stop trading time for money and to start building systems that work for you. Pick up his book. I don't know the author. I hope to meet him, but it really resonated with me and that's why I wanted to share with you um this book to you.

And again, physicians, we're going to have our ups and downs, especially and as entrepreneurs, but you got to do something a little each day that gets you closer to your goals and keep moving forward.