By Doug Brunk, San Diego Bureau
For as long as he can remember, Dr. Robert M. Doroghazi has been prudent with money.
"It was difficult to come by," said Dr. Doroghazi, who was raised in Granite City, Ill., as the son of a steelworker.
At age 8, he began to earn an income by helping his father mow lawns. By age 11, he started his own lawn mowing business.
"It had been my goal all along to work and save up for college," recalled Dr. Doroghazi, a cardiologist in Columbia, Mo., who is also the author of "The Physician's Guide to Investing: A Practical Approach to Building Wealth" (Totowa, N.J.: Humana Press, 2005). "When I was in high school, I worked 30-plus hours a week. I was able to pay my own way through college and medical school."
Today, he enjoys the fruits of his savings and investment practices as a young retiree. He left clinical practice in December 2005 at the age of 54. "I don't consider myself a financial genius, but my investments have gone well," he said.
Some physicians don't realize their limitations. "It's arrogance," he said. "Just because they may be the best cardiologist in the world, for example, they think that makes them a star at investing in bonds, in real estate, or in anything."
A second problem area for physicians when it comes to building wealth is their tendency to be overly trusting of others. While that trait "shouldn't change" in their relationships with patients and peers in medicine, "blind trust is disastrous in the legal world and financial world," he warned.
A third common obstacle for physicians is that many begin their careers in significant debt from medical school loans and with no training on how to handle their money when they start making a six-figure income. Dr. Doroghazi blames medical schools for this shortcoming.
Medical schools "give a physician zero instruction on how to invest their money," he said. "The average medical student graduates $120,000 in debt. But even more than that, any person who even discusses money is looked upon with disdain as some pathetic money-grubber who is not worthy of being in the fraternity of medicine. Let's face it: Why do you work hard? You work hard to make a good living for your family. A person should be given the skills to invest that money wisely."
Dr. Joseph R. Hollen started taking his personal finances seriously during his third-year rotations as a medical student at the University of Alabama. "What hit me was the long hours and how exhausted I was after the shifts," recalled Dr. Hollen, who practiced emergency medicine at Washoe Medical Center in Reno, Nev., until his retirement in 2004. "There was so much work to do, and I barely had time to eat lunch. I realized at that time, this was really work and not just play. It was different [from] being a doctor on TV, the series you'd see where it looked easy and then the guy was out there playing golf the rest of the time. I remember it hitting me: 'I need to plan ahead, because this looked easy, but it wasn't easy [taking care of people].' I realized I wasn't going to be able to do that until I was 70 or 80, that I'd better start planning."
He opened up his first individual retirement account (IRA) during his residency in the early 1980s, did day trading with a stockbroker for a few years, and in the 1990s, started investing on his own in mutual funds and index funds.
"Coincidentally, in the mid-1990s, I was a pension trustee for our 25-doctor medical group and learned a little bit more," said Dr. Hollen, who is now 53 years old and heads the Reno-based Hollen Financial Planning Ltd. "Take the tax deduction, fund the pension fully, and invest," he advised. "You have to get into the savings habit. The earlier you do it, the better."
He and Dr. Doroghazi shared the following tips for building wealth:
▸ Be thrifty. In Dr. Doroghazi's opinion, the No. 1 factor in the accumulation of wealth is thrift. For example, he said, if one physician saves $15,000 in a year and makes the standard 10% return, at the end of the year, he will have a total of $16,500.
If another physician is not as thrifty, saving only $10,000 in a year, but happens to hit an investment grand slam for a 25% return, by the end of the year he will have $12,500, but will still be behind his thriftier counterpart.