Let’s try and answer a question today. Can UK doctors realistically expect to become millionaires?
Doctors have traditionally been labelled as rich for some reason and although we’re definitely not rich compared to professionals with the equivalent amount of education, we’re certainly not in poverty either.
The average medical graduate is in their early-mid 20s so a medical career can potentially span 40+ years. Hopefully the NHS pension (or indeed the NHS) will still be around in 40 years time but regardless we should be the master of our own destinies and not rely on the state to look after us when we’re old. Remember we don’t deserve anything in life – we have to earn it with our bare hands.
The following table is my humble attempt at simulating the financial situation and savings of a typical UK doctor practising in the NHS. All figures are pre-tax and therefore paint a much merrier picture than reality and are based on a 40-hour week for fair comparison against other professions. Although medicine is a vocation, if a doctor is willing to work harder than his peers past the typical 50 hour week then he should be adequately remunerated, just like the BART janitor who earned over $200,000 last year. I’m really happy for him.
My table also doesn’t take into account inflation adjusted salaries although in the past decade there has actually been a decrease in the real purchasing power of NHS salaries so let’s not go there.
Can UK doctors become millionaires? (All figures before tax)
|Year||Salary||Cumulative 10% savings rate||Cumulative 30% savings rate||Cumulative 50% savings rate|
|Consultant Year 1||£76,001||£38,097||£114,291||£190,485|
|Consultant Year 2||£78,381||£45,935||£137,805||£229,675|
|Consultant Year 3||£80,761||£54,011||£162,033||£270,055|
|Consultant Year 4||£83,141||£62,325||£186,975||£311,625|
|Consultant Year 5||£85,514||£70,876||£212,628||£354,380|
|Consultant Year 6||£85,514||£79,427||£238,281||£397,135|
|Consultant Year 7||£85,514||£87,978||£263,934||£439,890|
|Consultant Year 8||£85,514||£96,529||£289,587||£482,645|
|Consultant Year 9||£91,166||£105,645||£316,935||£528,225|
|Consultant Year 10||£91,166||£114,761||£344,283||£573,805|
|Consultant Year 11||£91,166||£123,877||£371,631||£619,385|
|Consultant Year 12||£91,166||£132,993||£398,979||£664,965|
|Consultant Year 13||£91,166||£142,109||£426,327||£710,545|
|Consultant Year 14||£96,819||£151,790||£455,370||£758,950|
|Consultant Year 15||£96,819||£161,471||£484,413||£807,355|
|Consultant Year 16||£96,819||£171,152||£513,456||£855,760|
|Consultant Year 17||£96,819||£180,833||£542,499||£904,165|
|Consultant Year 18||£96,819||£190,514||£571,542||£952,570|
|Consultant Year 19||£102,465||£200,760||£602,280||£1,003,800|
|Consultant Year 20||£102,465||£211,006||£633,018||£1,055,030|
|Consultant Year 21||£102,465||£221,252||£663,756||£1,106,260|
|Consultant Year 22||£102,465||£231,498||£694,494||£1,157,490|
|Consultant Year 23||£102,465||£241,744||£725,232||£1,208,720|
|Consultant Year 24||£102,465||£251,990||£755,970||£1,259,950|
|Consultant Year 25||£102,465||£262,236||£786,708||£1,311,180|
|Consultant Year 26||£102,465||£272,482||£817,446||£1,362,410|
|Consultant Year 27||£102,465||£282,728||£848,184||£1,413,640|
|Consultant Year 28||£102,465||£292,974||£878,922||£1,464,870|
|Consultant Year 29||£102,465||£303,220||£909,660||£1,516,100|
|Consultant Year 30||£102,465||£313,466||£940,398||£1,567,330|
|Consultant Year 31||£102,465||£323,712||£971,136||£1,618,560|
The first observation to make is that after the initial 9 years of training (not including years out of training or years spent studying for higher degrees) the salary for a consultant is quite nice. But remember that a consultant is typically in their mid-late 30s and compared to equivalent peers in other professions who have had 10 years of postgraduate experience and have sat countless arduous and expensive exams this isn’t ridiculous. Not quite the CEO of a FTSE 100 company that earns an average worker’s yearly salary in one day…
The second observation to make is that if a doctor manages to save 10% of his salary then there is no hope of becoming a millionaire even if he works until age 65 AND doesn’t need to pay tax! Not to mention that £300,000 in 40 years time won’t be nearly as impressive as having 300 grand now…
If he increases his savings rate to 30% then he comes much closer to millionaire status. If only tax didn’t exist but with tax, a good 30 – 40% chunk is deducted from the final figure leaving him with only £600,000. In 40 years time this is probably still not enough to retire unless the NHS and state pension come to his rescue.
If our doctor were to go one step further than everyone else and increase his savings rate to a massive 50% then even after tax he finally becomes a millionaire after 40 years.
Master Your Own Destiny
The picture looks pretty grim. So what are the options?
I mean, millionaires are still impressive but not exactly that rare nowadays. If even doctors can’t become millionaires without working until 65 with a crazy 50% savings rate then what hope do most people have?
Without getting into the nitty-gritty, I’d advocate focusing on just two things:
- Avoid lifestyle inflation – as an FY1, it’s extremely difficult to save 50% of your salary if you’re only earning £22K in the first place. However you might manage a 20% savings rate if you learn to minimise your accommodation expenses and you still don’t have to compromise on things that are truly important to you. Like food. However as consultants, a 50 or even 60% savings rate may be achievable as long as we don’t spend our increased salaries on new cars or three international holidays every year. Remember that rent and bills can remain the same whether we’re earning £22,000 or £102,000.
- Learn To Invest – If we invest efficiently whilst minimising risk to our capital then the above table changes somewhat and that arbitrary £1M figure becomes a little more achievable.
In conclusion, the typical UK doctor probably may never become a millionaire, at least not in today’s currency. However, by learning to invest efficiently and avoiding lifestyle inflation, we can significantly increase our chances of succeeding. If you’re reading this in high school and one of your reasons for becoming a doctor is for money then I’d advise you to look elsewhere.
Oh and working every single day of the year for three years like that amazing janitor also helps!
P.S. I learned everything I know about finance from this book, this book and that one, amongst many others. For a more extensive list, don’t hesitate to drop me a line at firstname.lastname@example.org. If you prefer learning through listening use this link to earn a free audiobook of your choice by signing up to their 30-day free trial. Simply cancel with the click of a button if you decide later on that the service isn’t for you, no questions asked.