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Saturday, October 3, 1992 - Page updated at 12:00 AM

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It's Your Money

Doctors Found To Be Among The Biggest Spenders

If you aren't as wealthy as you think you should be, you might be surprised at some of the company you have.

"Why you're not as wealthy as you should be" was the headline of a recent article in Medical Economics, a magazine published for physicians.

Though the typical doctor makes enough money to be really rich, the article said, most doctors don't have the right attitudes for riches.

Most of us will never earn a typical physician's pay, estimated by the American Medical Association as $155,800 in 1989.

But all of us can practice the advice to doctors written in Medical Economics by an Atlanta author who has spent 20 years studying how people become millionaires.

Of all the highly paid professions in this country, physicians do the worst job of hanging onto their money, wrote Thomas Stanley, chairman of the Affluent Market Institute.

Stanley started his research by visiting people in posh neighborhoods. He soon discovered that many people who drive luxury cars and live in expensive homes don't have much wealth.

Though their pay is high, "they spend it all," he said he found.

"Most people have it all wrong about wealth in America," he wrote. "Wealth isn't the same as income. If you make $1 million a year and spend $1 million, you're not getting wealthier, you're just living high."

A wealthy person, Stanley says, is likely to be a businessman who has lived his entire adult life in one town, who married once and stayed married.

He's likely to live in a middle-class neighborhood "next door to people with a fraction of his wealth."

The typical millionaire is "a compulsive saver and investor" who lives by some rules, Stanley found.

The most important of those rules are:

-- Whatever your income, live below your means. Spend less than you can afford for houses, cars, vacations and entertainment. Put your money to work building wealth, not building a lifestyle that saddles you with expenses.

-- Measure your financial success by your net worth, not your income. Wealthy people plow as much of their money as they can into their businesses, stock portfolios and other assets. One reason is the IRS does not tax wealth, it taxes income. The best wealth accumulators "tend to put every dollar they can into investments, not consumption," he wrote.

-- Take time to pay attention to your money. Stanley says some doctors regard money as an "easily renewable resource" and let it slip through their pockets barely noticed.

He said the best wealth builders spend an average of 100 hours a year planning and monitoring their investments. They make their own decisions and would rather spend money on professional financial advice than on a new boat.

The worst wealth builders concentrate on the boats and cars, turning their financial decisions over to others.

Are you as wealthy as you should be? Regardless of your age or income, Stanley has a rule of thumb you can use to give yourself a quick checkup.

Multiply your age times your before-tax income from all sources except inheritances. Divide by 10, and that's what your net worth should be, he says.

What we like to regard as the lifestyles of the rich and famous are more likely to be the lifestyles of just the famous, not the rich.

The habits of wealthy people don't make good television drama. But they do make millionaires.

Send your questions to It's Your Money, Seattle Times, P.O. Box 70, Seattle, WA 98111. Or send by fax to 382-8879 or phone 464-3126.

Copyright (c) 1992 Seattle Times Company, All Rights Reserved.

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