Even with $600k to $800k ($4k to $6k per month loan payments) of student loans, they should be able to pull off a decent lifestyle and be positive net worth by their mid 40s.
Income doesn't equate to wealth. You have to look at the other side of the equation, outgo, to determine what someone's net worth is.
In addition to student loans, there's the house payment. People tend to buy a house based on what they can be approved for, not based off of a budget number they developed before talking to a bank. A 300k salary will get you pre-approved for a a lot of house in the US.
Docs and Lawyers also fall into the trap of buying practices, so that's another factor.
The biggest factor you're missing in your assumption, though, is that personal finance problems are largely behavioral. There's a parallel with personal health. The difference is that people know more about how to lose weight and be healthy - and still don't do it - then people who actually know how to make good financial decisions. Even those who know they shouldn't buy things they can't afford, routinely do so for whatever reason they have been told or have invented.
For what it's worth, the study by Ramsey Solutions says that the top 5 careers for becoming a millionaire are engineers, teachers, CPAs, attorneys, and management. While some of those are vague and capture a large range of professions, Docs are conspicuously missing.
This doesn't jive with any data or personal experience I have. The Ramsey Solutions study also seems like garbage, especially because it seems like their definition of millionaire is someone with $1M in a 401k.
But if you line up 100 teachers or CPAs and 100 doctors in the USA, you can sure as hell bet the doctors will be far wealthier than the teachers or CPAs.
It's a fact that US doctors, across the whole population of doctors, earn $200k+ per year, and outside of software engineers, I don't think any of the Ramsey careers earn anywhere near as much as a population (unless management includes high level execs in F500 companies?). Docs are conspicuously missing because Ramsey is trying to sell something to people with lower to moderate incomes/high debt, such as teachers/CPA/attorneys, etc and they're not targeting doctors. Doctors would never need the Ramsey website.
See the difference in advice on a website like whitecoatinvestor.com vs Ramsey.
As for assumptions about personal finance behaviors, I'm sure some doctors are bad at it, just like every other profession. But I would need some pretty firm evidence that doctors who are by any measure, very highly motivated and intelligent individuals, are somehow so poor at managing their finances that they squander $100k+ per year.
Well, their definition of a millionaire is someone with a net worth of greater than a million dollars. That's also my working definition of a millionaire, and I thought was the definition of a millionaire.
Can you provide your definition so that I can frame your comments with it?
Sorry, I should have said the metric of a millionaire as defined buy $1M in a 401k is not saying much.
Having $1M after decades of working at or near retirement age is the bare minimum one needs for a “decent” retirement if they want to continue their lifestyle. I know 90% of Americans don’t come close to it, but if you want security of quality of life and not worry about medical expenses, $1M will not go far in many of the places in the US that are popular.
On the other hand, when I’m putting together a real estate deal and I need a few hundred thousand dollars, I have many doctors I can call who might be able to pony up, but no teacher is going to be able to come up with that kind of investment. I know a couple of outlier engineers and CPAs who can come up with that that, but nowhere near the amount of doctors, especially as a percentage of all engineers and CPAs.
It’s just crazy to me to hear of the profession where all members are higher earners that are at $200k on the low end be put in the same bucket as teachers whose median might be $60k to $80k, in high cost of living areas.
Some doctors can get the several hundred thousand dollars, but many of them fall for scam investments and lose it all in them. Teachers are more likely be investing in safer things than a real estate deal. An index fund (or similar) will give you more diversity for the same investment and so is a lot safer, it won't grow as fast in the best case, but it won't drop nearly as far in the worst case. (I recommend target date retirement funds these days for even better diversity).
Not that real estate is a bad investment, but a single high value deal has no diversity and so it a bad investment. If you are putting several hundred thousand into a single investment your net worth really should be closer to ten million than one.
Note that I said some doctors above. If only 1% of doctors are good with money/investments, that is a lot of doctors, and they will in general have more money than any teacher.
At the amount doctors make they can pay that off in a few years. Student loans are [can be] big for doctors, but they are only a couple years after tax income even at the most expensive schools.
But not for doctors. The lower end of the household income range I listed is achievable by doctors alone. I would also presume doctors are more often than not marrying lawyers on the higher end of the income scale.
Bottom line, based on numerous personal experiences and pay data, I do not expect lawyer/doctor families to have the quality of life the person I was responding to claim they have, on average.
You are confusing quality of life with money saved for a rainy day. So long as the income holds out they are not much different, but when bad times come one is in trouble
How is flying first class to your cruise ship where you have to most expensive cabin (complete with a full size grand piano) a higher quality of life than a week camping in a nearby state park? The first vacation will set you back at least $20,000, the second $300.
If you are asking about the difference between $10k and $20k that is a big difference. If you are asking about $60k vs $600k, the difference is not nearly as big even though the first is double, with the second is 10x.
Source:
https://www.medscape.com/slideshow/2020-compensation-overvie...
Even with $600k to $800k ($4k to $6k per month loan payments) of student loans, they should be able to pull off a decent lifestyle and be positive net worth by their mid 40s.