Book Review: Physician Finance

Next up through the Kindle Unlimited tour of “free” books written for physicians is Physician Finance: A Personal Finance Guide for Doctors by KM Awad.

This book’s style is very casual. Normally that’s fine, but I wonder if perhaps among the jokes and looseness if the message is maybe diluted (some may appreciate it more than me; I found it tiresome but it certainly keeps things light). This book covers the basics. In fact, every book covers the basics. And in practice, the basics can always be summarized in a few bullet points.

• Spend less than you earn. If you can, spend a lot less.
• Housing and transportation are people’s two biggest expenses. If you can, definitely spend less on these.
• Pay off your debts as fast as you can: the higher the interest rate, the faster you need to pay it off.
• Invest for retirement (in tax-advantaged accounts like 401(k)s, 403(b)s, 457(b)s, and Roth IRAs). The earlier you start and the more you save, the better.
• Seriously, stop spending so much money.

But here, some of the “details” are wrong. And if not wrong, some are definitely fringe viewpoints expressed like facts.

Incorrect view of credit cards and credit card perks

Credit cards aren’t the work of the devil; they’re a (potentially dangerous) tool of convenience. No one likes the idea of being in debt (or actually being in debt), but Awad writes with an almost irrational fear of it (to the point that otherwise reasonable arguments begin to lose steam). There’s been a recent push among some authors to encourage people to use cash over plastic, as it’s been shown in some studies that people spend more per purchase with credit cards than cash. This may be true, but using cash is super inconvenient (and try booking a hotel without a credit card). Credit card perks are in fact real (and there are whole sites dedicated to this), and while it’d be silly to think that the card companies are doing this for charity, if you pay on time, it’s the merchants you buy from who are paying the fees, not you. The only people who should really be staying away from cards are the ones carrying around high-interest credit card debt month to month.

Poor understanding of car leases

Don’t get me wrong, no one is being “frugal” when they they get a car lease (or buy a new car at all), but Awad is wrong on some basic lease facts. Anyone who simply writes that leases are always worse than buying is equally wrong as someone who says renting is always worse than owning. A simple common misconception. Don’t get me wrong, ideally everyone should buy a three year old Honda in cash. But given that not every reader is going to do that, this treatment comes across as ridiculous. If you are going to go get a brand new vehicle, then you should know that whether you lease or buy, the vast majority of all that money goes to depreciation. Even if you buy, there’s minimal equity after a typical three year lease term. So whether leasing is worse than buying depends entirely on the terms of your lease versus the terms of your purchase as well as how long you plan on holding on to the car. It’s not that leasing is always worse than buying, it’s that getting a new car every few years is a costly luxury.

Poor understanding of mortgages

Treatment of mortgages is also overly simplistic and somewhat misleading. Awad is particularity wrong regarding adjustable rate mortgages, particularly with regards to loans like 5-year ARMs, where the rate is fixed for a set amount of time and then adjustable afterwards. Again, you can get in a lot of trouble if you use a nice low rate on an ARM to buy a house you can’t afford, but depending on your plans, an ARM may make perfect sense.1For example, if you were to decide to buy a reasonably priced starter home in a strong area for a 5-year surgical residency knowing you will want/need to buy a family home later, then buying a 7-year ARM may make good sense and save you money without any meaningful risk.

He also argues for a 15 year over a 30 year mortgage without any consideration of their tax consequences, for example. No one would argue that a 15 year costs less (it does) or will have a better interest rate (it will), but that doesn’t mean that depending on the interest rate difference that a 30 year isn’t a better choice, say for someone getting a super low fixed rate and who has plenty of tax-deferred retirement space left to invest the excess.

Useless discussion of student loans

The biggest, most complicated, most-“physiciany” issue facing young docs is their large student loan burden.This book does a terrible job discussing student loan debt, being both too succinct and simplistic, out of date, and also inaccurate. Awad spends time discussing subsidized loans, which you can’t get anymore for medical school. He recommends deferment, which you also can’t get anymore (forbearance is different and with worse terms). No meaningful discussion on any of the actual payment options, IBR, PAYE, REPAYE, consolidation, or private refinancing. Nothing about PSLF. This topic is one of the things that actually deserves some detail in a finance book from docs and is conspicuously absent.

Overall

One downside to Awad’s viewpoint of extreme debt fear is the potential quality of life hit. The purpose of money is to make you happy (i.e. many of us “work to live”). Sometimes trying to save a buck here and there results in a big happiness hit, especially during the medical school time period. It’s not always worth it, and it’s silly to pretend it is. It’s at least as alienating as it is inspiring.2Ironically the author promotes his super stingy living expenses during medical school as a way to save money on top of his private school tuition (as opposed to mentioning the massive and likely bigger savings from going to a public medical school)

The core message of the book is fine. The core message of the book is also the core message of every personal finance book, which could also be a blog post (which is true of every self-help book). The details though, from credit cards to loans to retirement, are just too patchy to recommend.3Another random example, he discusses the Sep IRA for the self-employed without mention of the solo 401k, which is an overall better vehicle for most people and enables you to also contribute to the “backdoor Roth IRA.”

Verdict: While this book is free for KU subscribers, anyone paying should just read The White Coat Investor, which while definitely not perfect (and particularly lacking for student loans), is a substantially better book overall.