The financial disadvantages of being a doctor in California

Geographical arbitrage is a huge component to being able to build wealth in a timely manner.  For doctors, the formula for rapid wealth accumulation calls for geographical arbitrage even more strongly as our salaries do not have wide ranges across the country.  A doctor in Texas will probably command a similar salary in Arizona (maybe slightly less).  A doctor in the midwest might earn more, spend less, and work less than her equivalent in California.  By this token, who would want ever want to live in the Sunshine state?

There was a recent post on the White Coat Investor enumerating all of the financial disadvantages of being a doctor in California.  Sadly for those in California, those reasons are backed by fact — on average, you’re going to probably going to work pretty hard as a physician in California, spend $1 million on a starter home, and commute a few hours a week. By the way, gas is around $4 a gallon.

The fuel to the fire

Those of us living in California are probably aware of many other factors that make living in the area financially tough. Some of them that come to mind include:

  • Private practice physicians can’t establish as an LLC. This basically means that you have to pay a little more and deal with more logistics to get a corporation established.
  • Payor mix is skewed. There are practices that thrive on taking care of MediCal patients.  Actually, in-office visits pay horribly but if you patient needs surgery you can actually get decent reimbursement.
  • High concentration of doctors.  California has over 50,000 physicians. Many of these doctors are clumped in the larger cities so competition is tough. Many plastic surgeons in California operate on Fridays and Saturdays to capture the appropriate demographic. Think longer hours.
  • Potentially malignant physician employers.  Those doctors who have potential to join private practices will face employers who will burn and churn you. Full-time jobs at part-time salaries. You name it, and it exists.
  • Inter-office commuting.  One of my friends covers 4 offices for his practice and operates at 3 different hospitals.  By the way, he can’t expense it, because he is a W-2 employee.

California is not all bad

There are almost 40 million people living in California.  It’s got to be not all bad.  Many of the reasons that people use to justify living this fair state are emotionally charged, but there is still good reason that they are valid. Let’s take a look at some of them:

  • Ethnic diversity.  There is more benefit than face value of having diversity.  Part of this argument sounds snobby, but this is how some doctors justify working six days a week trying to pay off a $1.4 million home that they don’t really even like.  This is more than moving to Detroit to take a highly competitive Hospitalist job because it has a sizable Middle Eastern population and good Halal options.  Most doctors I know have eaten tasty dim sum rolled around a cart, but probably have no idea that the real stuff can only be found in more diverse cities like Los Angeles, New York, or San Francisco.  Does this matter to everyone? For some people, it clearly matters a lot.
  • Proximity to family.  We all know that this is important, but sometimes it’s non-negotiable.
  • Values and attitude.  We all know that type of laid-back attitude, culture, and general vibe in California. Sometimes all that you need to know that the world is going to be OK is that jogging path down by the pier, the Iranian supermarket where you can get six tangerines for $1, or the sunny weather when you go hiking.  Likewise, those die-hard New Yorkers wouldn’t trade their lifestyle for anything else.

Getting hit financially

The average physician in California will likely take longer to build up her bank account.  Some two physician households in California will only generate an earning power comparable to a single physician family in the Midwest.  The biggest question is whether that is going to be OK  with you.  If you want to be financially independent by age 40, it might be tough.  Most doctors, however, will still be able to manage a respectable living with judicious financial choices: If doctors can’t afford to live in California, then who can?  Let’s stop the hate on the Californian doctor!

“Smart Money, MD” is an ophthalmologist who blogs at the self-titled site, Smart Money MD.

Image credit: Shutterstock.com

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