What's Your White Coat Net Worth?


I track my net worth and shares it openly with FPMD readers every 3 months. Honestly it can be a bit embarrassing. Here I am a grown man in his early thirties, yet my net worth has been stuck solidly in the red for as long as I can remember. The reality is we medical trainees are faced with a very unique set of financial challenges that make the early accumulation of wealth very unlikely. Today I want to remind you to check your "White Coat Net Worth".

What is the "White Coat Net Worth"?

I have to thank Dr. Dahle of the White Coat Investor for introducing the concept of "White Coat Net Worth" in his book the The White Coat Investor: A Doctor's Guide To Personal Finance And Investing. The concept stems from Stanley and Danko's classic work The Millionaire Next Door. Stanley and Danko introduced an easy formula to determine whether you are an average accumulator of wealth (AAW), an under accumulator of wealth (UAW) or a prodigious accumulator of wealth (PAW): 

Expected Net Worth = Age x Gross Income x 10%

Say if you are a 35 year old with a gross income of $95,000/yr, your expected net worth is

35 x $95,000 x 10% = $332,500

If your actual net worth is more than 200% of $332,500 ($665,000), then you are a PAW. Below 50% of $332,500 ($166,250)? Then you are an UAW. Between 50-200% of $332,500 ($166,250-$665,000)? Then you are an AAW. It doesn't take a rocket scientist to figure out why this formula is essentially useless for medical trainees - I am a good example. Luckily for us, Dr. Dahle modified the expected net worth formula to be more relevant for those who wear the white coat:

Expected Physician Net Worth = Salary x Years in Practice x 0.3 - $200,000

According to Dr. Dahle, if your actual net worth is less than 50% of the expected, then you are an UAW. If your actual net worth is more than 200% of the expected, then you are an PAW.

Say if you are 32 years old 1 year into your career as an attending physician, making $275,000, your expected physician net worth is therefore

$275,000 x 1 x 0.3 - $200,000 = -$117,500

The great thing about this formula? You can apply it to trainees as well!

Take myself as an example, I'm 31 years old making $57,500 as a PGY-5 resident 1 year away from becoming a full fledged attending physician. I can still use the formula by entering -1 as years in practice:

$57,500 x -1 x 0.3 - $200,000 = -$217,250

Compare that to my latest net worth of -$11,842, it would appear I'm doing quite well. So go ahead! Check your White Coat Net Worth! 

To read about how this formula came to be, check out Dr. Dahle's earlier posts on the topic, the numbers are slightly different but the concept is the same:

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Future Proof, MD

Dr. Bo Liu is an aspiring radiologist-in-training and the founder and editor of the White Coat Money Blog.  He has an interest in interventional radiology and helping his medical colleagues get ahead in this mad world of medicine and money.  When he's not crushing the list at the PACS station or typing up your next favorite blog post, you can usually find him at the local badminton club, movie theater or the most recently opened restaurant.