I’m totally biting off of the Godfather here but his post deserved a reply post. So let’s talk about why California is the ideal place for doctors who want to build massive wealth. With the caveat that it’s not the kind of place one would want to live long-term.
As physicians we are comfortable moving for medical school and even residency. Therefore, moving for a high income shouldn’t be anything foreign to us.
Dr. D wrote his post comparing California to Utah. I don’t know where Utah is on the map, I figure somewhere between Cali and NY, so I don’t have a whole lot of context there. But I have practiced in WA and OR and CA. I am writing from a very different perspective than other physician bloggers, I am focused on the freedom plan in medicine, not the millions of dollars supposedly needed to retire securely.
But in all fairness, I might be wrong. Catch me in a few decades and let’s see if I’m broke as a joke or doing fine. That’s really the main purpose of this blog. Ain’t got no advice to give you, just leaving some breadcrumbs for younger doctors so that they can decide if a similar path would be worthwhile or a big bust.
Let’s get down to it.
#1 Tons of Cheap Housing Options
This one is easy. Don’t listen to the news like a sucker, look it up for yourself. Information is now free and a quick search on Craigslist will reveal numerous, gorgeous studios and 1-br for under $1,200/month in a crazy-ass expensive city like San Diego.
My favorite are the studios or granny flats for <$1,000 in neighborhoods such as Banker’s Hill or Hillcrest in San Diego. You’ll be able to walk everywhere and there are decent public transportation options as well.
Don’t like downtown? How about a nice 1-br in the Carmel Valley area. It doesn’t get more gorgeous than Carmel Valley – at least compared to the rest of the US.
#2 Business Friendly State
I agree with the Godfather that Cali taxes are terrible, topping out at 13%. But you also earn a lot for being in California. Meaning, your income potential is a lot more than Utah.
Also, if you want to start your own Urgent Care, Walk-In clinic, Primary Care, or DPC clinic, California is very friendly towards those who start businesses and you’ll get plenty of resources, such as SBDC.
And of course, if you start your own business, you can write off all of these high expenses which you’ll have in California. There is a reason why a medical office building rents for more in Cali than Utah – you make more money from one than the other.
#3 Lots of Wealthy People
One of the best things of living cheaply in a wealthy state is that there is an abundance of luxury which you can passively enjoy. The standards are so high that even the homeless live better than medical students.
You can enjoy lavish parks, free museum passes, libraries which will put the entire state of Utah to shame (jk Utah, we love you). Restaurants and cafes which make so much money that they don’t give a shit if you spend the entire day there buying 1 cup of coffee and seeing 100 telemedicine patients.
#4 MediCAL Factories
How can I be politically correct about this? Oh, wait, wrong blog, we aren’t PC on this blog and enjoy the low Google ranking due to the rogue F-bombs (fuck) and S-dumps (shit) and references to non-clinical genitalia. Medicaid isn’t a very lucrative options but when such a high population in your state depend on it, you make up for it in volume.
A crazy busy state like California is the perfect place for a MediCAL factory. Everyone is very busy and very important. They want their lattes yesterday and can’t be bothered with having to wait for their appointments.
MediCALites are often upset that you don’t speak their language and upset that they cannot see the specialist of their choice. There is a hefty dose of entitlement going on on Cali. This can make it the ideal place to have the kind of clinics many of my colleagues own or have owned.
#5 High Transportation Costs
Because transportation costs are so high, and because California is so poverty friendly, you can get public transportation for fairly cheap. You can Uber Pool Express for less than you’ll pay driving your own car.
If you are working as an Urgent Care doctor or someone who is willing to work their ass off for the time they live in California, you can avoid traffic because you’ll be at work and off of work when nobody else is on the roads.
There are tons and tons of cheap and used cars available in Cali which you cannot find in Utah or Oregon. The Medical patient just upgraded to a C-Class Benz, they would be fucking embarrassed to drive around in a 2001 Corolla.
I bought a $1,000 1991 Honda CRX and not only commuted with it to work but also rented it out on Turo for income.
#6 Stealth IRA’s and Backdoor IRA’s
I don’t do the whole Stealth IRA (HSA) or Backdoor IRA thing. I know that I’m potentially leaving $10k/year on the table which could translate to hundreds of thousands of dollars in retirement. But if your savings rate is 75% and you’re a sole proprietor who is moonlighting his ass off, it’s a less important fact.
Doctors have successfully retired and become disgustingly wealthy without an IRA, even without a 401k.
I don’t have kids so I definitely shouldn’t comment on this topic but… words are free and since I only have 4 readers – 5, counting the California Medical Board, I don’t believe in 529’s.
I believe in buying your kiddo some real estate as an investment. I believe in setting up your kids to have very healthy retirement accounts. But I don’t believe in putting money aside in a 529.
I’m sure the readers of this blog don’t make a real estate purchase because of the tax write-off alone. Furthermore, taxes are perpetually changing and physicians, as high income salaried earners, will always be big targets.
SALT, as a percentage, may have affected those living in expensive and high tax states more than others. But usually there is some correlation somewhere. The income I can earn in California is unparalleled to earning opportunities in other places.
Doctors are savvy. If the IRS tightens the tax noose on one front, we find another method of tax strategizing. Guess what, California has some of the best tax lawyers because rich people like decreasing all expenses, including taxes. Dr. D has a great list of tax strategists on his website.
#9 Sole Proprietor Has No Fees
Sole proprietor seems like a decent way to go when it comes to moonlighting. And if your lawyer suggests otherwise, I would ask for reasons why you would need to be anything but a SP. Ask for some proof using case studies.
#10 All Asset Protection Laws Are Weak
California is the ideal state to accumulate wealth in and not a state to hold your wealth in. That’s said, many states are terrible at asset protection. Asset strategizing is an even more complex topic than tax strategizing and worth hiring an expert for.
Other than Florida, it’s hard to pinpoint a state which is favorable regarding asset protection. And who is to say that asset protection laws won’t change in the future?
#11 Affordable Disability Insurance
I paid $479 a month for my disability policy until I retired from medicine. I started the policy 5 years after starting work. Is that high? I’m not sure. But I was making nearly $400,000 a year as a Kaiser Permanente physician. Paying 2% of that money towards protecting my biggest asset at the time, seemed reasonable.
#12 Fair Laws…?
I’ve practiced medicine in WA and OR and CA and though I am rather naive when it comes to legislature, I can’t say that over my 13-year career I have noticed any major differences between the states.
#13 High Income Potential
I tell other doctors that I made $427,000 as a Family Medicine physician in 2014 at Kaiser Permanente and they don’t believe me. Even after showing my partnership K1, they think that it was an isolated incident and not repeatable.
I’m sure nobody will believe me that I earned $85,000 as a moonlighting 3rd year Family Medicine resident. Or $180,000 as a 4th year chief resident.
But there are a few like me out there, I know, I’ve met you. We hit the moonlighting circuit hard. We work the ER’s, Urgent Cares, Primary Care clinic, Aesthetic clinics, and anywhere else where physicians are needed.
And, shit, we didn’t even have telemedicine back in my day. I’ve earned $250/hour as a telemedicine doctor.
#14 Investment Opportunity
We give some doctors a hard time for buying excessively luxurious real estate. Like a GI doctor buying a $2M house in La Jolla – the gall!
What many don’t realize is that $2M is chump change for La Jolla. That little bungalow, however, will go up a ton in value. Real estate bubble or not, the wealthy don’t care. They’ll pay a premium for a property they want or they think has future value, often in cash.
California is an awesome state to house hack in as an investment, if you’re gonna buy. Otherwise you can rent for <$1,000 in San Diego while everyone will tell you that it’s impossible to rent for that low. They said the same thing about my $825 studio in Banker’s Hill which I was renting from 2013-2015.
#14 Career Opportunity
A day might come when you’re tired of only seeing patients in the clinic. Maybe you want to do some medical director work. Maybe you want to be a healthcare consultant. Or you want to be an executive for a hospital.
California is one of the best places to get such experience. There is a huge need for such positions. Not only that, people are always busy moving up the ladder, freeing up a ton of new opportunities for the upcoming docs.
If you want to manage a SNF or own you own, California is a great place to whet your whistle.
Ever worked in Portland as a doctor? That’s as close to the opposite of diversity as it gets. It’s actually hard to find Indian doctors there – yea, I know!
Why is diversity important? Because some fool at some point in your future will offer you a great job but ask if you speak medical Spanish. Whether you’ve worked with immigrant populations. If you’ve worked with homeless youth. If you have any experience with transgender sex workers – yes, you proclaim, and unlike in Utah, not just socially.
#16 Business Opportunity
Do you want to start an aesthetic practice? A DPC practice? A concierge medical group? Do you want to open a travel medicine clinic?
Where are people willing to spend more money than necessary? California! There is a lot of wealth there and people are willing to pay for access and convenience. If you know how to market then you can do really well for yourself in such a state.
Your target can be the rich surfer crowd or the wealthy geriatric population. And, of course, it can be a Medicaid factory which, shockingly, nobody bats an eye at.
#17 Unhealthier Population
There is a lot of sedentation and stress going on in California. That’s insulin resistance, that’s obesity, that’s high blood pressure, high cholesterol, prediabetes, and autoimmune diseases.
Sure, you can find even unhealthier people in the midwest but they don’t have the income of the rich California. Nor will they argue with you when you point out that their extra 45 lbs isn’t just due to bone volume.
This sense of superiority and unawareness, along with the deep pockets, makes for an incredible earning opportunity for the physician. Yes, I’m such an evil opportunist, I know. Making money off disease! Terrible.
#18 Higher Standards of Living
The reason that higher cost of living is advantageous to the frugal wealth-accumulating physician is that there are more opportunities to live far below the median income.
The logic might be a little odd to follow. But when everyone is trying to live bigger and in a more luxurious fashion, when they are trying to buy more shit and travel to more places and fight gravity with a scalpel, it leaves you with the opportunity to get nicer stuff for far less.
As I already mentioned, nicer used cars are cheaper in California. Second-hand clothes are usually name brand. You can rent a massive room in a massive house for next to nothing. You can rent out a granny flat on a huge parcel of land, totally separated from the main house, for cheap.
#19 Better Welfare
If someone decides to put you out of business, if you can’t practice medicine for some reason some day and are forced to go begging the gov’t for cheese, Cali is the best place to be.
You don’t want to live on welfare in Chicago, too cold. You don’t want to do it in Oregon, too rainy. You want to do it in either Florida or California. And since CA will offer you much more money, you can live well if you’re willing to live frugally.