Bankers, Techies, Doctors, And Lawyers: You’ll Never Get Rich Working For Someone Else

There's a lot of wealth to be made in this world. And yet there's so much truth to the saying you'll never get rich working for someone else. You might think that sounds crazy. But, when you look at the super rich, you'll realize the majority of them were able to get rich by hiring others to work for them.

They are innovators, entrepreneurs, business owners, and hustlers. And, they own a lot of equity. If you want to get rich, it's beneficial to study those who already are. I'm not just talking about the 1% rich; I'm talking about the 0.1% super rich.

Being an entrepreneur is hard. I estimate an entrepreneur needs to make at least 35% more to replicate his or her day job income to run in place. But two-and-a-half years after starting this site, I began to realize how much more upside there is getting rich as an entrepreneur over working for someone else.

Back in 2012, 23-year-old graduates with one year of experience could clear $100,000 no problem. Despite ascending from Financial Analyst, to Associate, to VP, to Director within 10 years, and earning Director level compensation for three years before leaving, I still wasn't able to earn and save enough money to buy my dream home in Kahala, Oahu.

Can't Afford A Dream Home Unless You Get Rich

Dream House In Kahala, Oahu, Hawaii
Contemplating on never being able to afford my dream home

The above is a picture of me sitting on a lanai, looking down the southeast coast of Oahu towards Koko Head. This dream home is on Blackpoint Road in the exclusive Kahala/Diamond Head neighborhood. Since I was a kid, I've always dreamed about living here one day. But I've come to realize my childhood dream will likely never come true.

The asking price back in 2015 for this 6,000 sqft Kahala home with 4 bedrooms and 4 bathrooms was $3.5 million ($583/sqft). The lower level is a 1,800 sqft rental apartment that is going for a below market rate rent of $2,500 a month. Therefore, the main house is therefore not that huge.

$3.5 million is actually great value given the view and the size of the house. Other houses in Kahala are easily asking for $900/sqft or more.

If I was able to get rich and had $4 million cash, I would buy this house in a heartbeat. But it needs at least $300,000 in renovations given it is quite dated. I can't even imagine what the remodeling permits would cost on a project that big. But the lanai and the spectacular view are priceless.

All I think about when I'm looking for my dream home is being able to sit outside in 72-85 degree weather with an ice cold beer and write about various adventures. 

Calculate How Long It Takes To Afford A Dream Home

Everybody's dream home and desires are different. Some people want to get rich fast, others are content with a slower path to greater wealth. And others don't want to be rich, just comfortable.

I'm using a dream home as an example in our discussion on ways to get rich because it is almost always the biggest ticket item people want to purchase. I personally don't give a crap about driving a fancy car anymore. If I did, I wouldn't be rolling in a Honda Fit, baby.

As I was sitting on the lanai, pitying lamenting for not being able to afford such an amazing property, I began to calculate whether other occupations could allow people to afford this home. Shaking my head, I realized it's almost impossible for even some of the most well-paid workers to afford a dream home.

Here's how long it would take a person who joins an investment bank right out of undergrad to save up $4 million dollars assuming steady promotions and pay raises, 25 years of surviving economic cycles, and consistently saving 50% of his or her income without fail.

A Banker's Financial Path To Get Rich

How Long It Takes A Banker To Afford A $4 Million Dream Home In Cash

As you can see from the chart, it would take this top 1% income earner roughly 24 years to accumulate $4 million dollars, assuming no loss or gains in the market. If the banker were to pay 100% cash, then clearly s/he would have to work at least a couple more years after age 46 in order to have a cash cushion.

But, let's say the banker has no problems taking out a $2 million mortgage for the home = ~$10,000 a month PMI mortgage at 3.5%. The banker could put down roughly $2 million at age 40, have a $500,000 cushion and carry a $2 million mortgage.

Some of you in banking may look at my total compensation figures and find them to be conservative. But how many of you know bankers who last for more than 20 years?

The cyclical downturns in finance are vicious (income gets cut in half at age 36). And plenty of people top out in the mid-six figures with the structural decline in compensation due to government oversight and declining profitability. Furthermore, only a minority of people save 50% of their after-tax income, even at these levels.

Meanwhile, most of you are probably thinking the total compensation figures are absurdly high in my chart. I would have to agree. There's no other industry that I know that pays as well of a salary. Just think about this for a moment.

You enter the highest paying industry out of college and have to save 50% of your after tax income every year for almost 20 years just to be able to get a $2 million dollar mortgage.

With debt, it will force you to work at least another 5 years at the very least if you want to own your dream house. Not an easy path to get rich. No wonder why people can't break free from the golden handcuffs!

A Techie's Financial Path To Get Rich

I've been fortunate to experience the techie world for the past 12 months through my consulting gig. I've been to numerous tech happy hours and conferences, and I've read a ton about tech compensation and stock options as well.

Here's a sample income chart of a typical techie in San Francisco. They don't make as much as bankers. But, they have a lot of company perks and elusive stock options to keep their hopes alive. Let it be known that for the majority of tech workers, there is never a liquidity event.

Tech workers also tend to jump ship every three years, which means they never get to fully vest their options either. Many people in tech work insane hours and can't even think about how to get rich. They're just struggling to meet deadlines and stay awake.

How Long Does It Take A Techie To Afford A Dream Home

Based on my chart, a techie could potentially afford my dream home at the age of 44 by dumping all s/he has (~$2 million) into a downpayment and taking out a $1.8 million mortgage.

Unfortunately, she will be sweating bullets every month. She's not going to get rich quick only taking home roughly $90,000 after tax a year based on a 50% savings rate, which is equivalent to $7,500 a month. A $1.8 million mortgage costs around $9,000 a month! As a result, she'll have to lower her savings rate to 0% in order to eat.

The more realistic age when this techie can more comfortably afford a $3.8 million dollar Kahala dream home is closer to 50 years old. Her semi-liquid net worth will be around $4.2 – $5 million by then. But then again, dumping 70-90% of her net worth in a dream home might not be the wisest move.

I'm actually surprised by how little techies earn given their skill set. Plenty of them are frustrated they can't even comfortably afford a median $1.1 million home in San Francisco. Plus, we only tend to hear about the massive tech wins. The losers are often just brushed under the carpet.

Diversify To Protect Your Net Worth

Personally, I don't recommend having more than 40% of one's net worth in property. Read this post if you want to know what my net worth allocation splits should be.

The road to get rich is going to take time and risks. I never said it was going to be easy. But you'll never know what you're fully capable of if you don't try. Just make sure to protect your net worth along your journey. Now let's analyze a doctor's path to get rich.

A Good Doctor's Financial Path To Get Rich

I feel kind of sorry for doctors. When they first entered medical school 15 years ago they were promised a much higher salary than they are receiving now. The reason for the salary crunch is due to lower rates of insurance reimbursements and more red tape.

For example, my friend who has a post fellowship from Cornell Medical will be making roughly $200,000 as a cardiologist at 36 years old. When he entered medical school in 2001, he was expecting to make $300,000 – $400,000 to start!

For three years he made $40,000 – $50,000 a year as a resident after four years of medical school. Then, $60,000 – $75,000 a year as a fellow for the next three years after that. Luckily for him, his parents paid for all his medical school tuition.

The median education debt was $170,000 in 2012 according to data from the Association of American Medical Colleges, and surely much higher today.

A Doctor's Typical Financial Path

The good doctor will be able to comfortably buy my dream home when he's roughly 50 years old. He'll put down $2 million, take out a $1.8 million mortgage, and have $854,850 in liquidity or various investments. That's 50 years old folks.

Several of us won't even live until that age! Because a big mortgage has been taken, the doctor will need to work for another 5 years to feel comfortable. If he wanted to pay for the home in cash, he could potentially get there around 53, but have nothing left.

I'm being very gregarious with my total compensation assumptions for doctors. Doctor's salaries have done nothing but go down thanks to big government and difficult insurance companies. I doubt most doctors will ever make $1 million a year anymore, let alone $700,000. But I've thrown the figures in my chart anyway since this is one very special cardiologist.

Change Your Expectations On How To Get Rich

Who knows what homes will cost 15-30 years from now. If a $3.8 million dollar home rises with inflation at 2% a year, that's a $76,000 increase in cost every year. But even during your best income years at $300,000 for a techie, your salary isn't going to go up by 25% a year to keep up.

You've got to be making more than $700,000 a year to keep up with a $76,000 annual increase. Hopefully most bankers, techies, and doctors have more than my chart's estimates given I provide zero growth rates for savings. But I'm doubtful since life gets in the way all the time.

One obvious solution to finding your dream home is to change your parameters. If you're willing to sacrifice on size, location, food, and weather, surely you'll be able to find a dream home somewhere in America for under $2 million.

At $2 million, the banker above can achieve his dream at age 35. And the techie and doctor above can achieve their dream home by age 40. At a $1 million price tag, both banker and techie can buy their dream homes by age 30.

Six-Figure Jobs Are In Expensive Cities

The problem with finding a dream home somewhere else is the labor market. High paying jobs are usually located in expensive, urban cities. The exception is Hawaii where there are very few high-paying jobs. Yet luxury housing prices rival the housing prices in San Francisco, where six figure jobs are ubiquitous. The best bet is to live frugally, aggressively accumulate your nut in an expensive area, and then relocate.

If you don't want to relocate out of state or to a new city, look for a lower cost neighborhood in your area. There are hidden gems everywhere if you look hard enough. You can use a geoarbitrage strategy to save money.

Instead of seeking full-time employment as a banker or techie, why not try and be an entrepreneur who not only earns a modest wage, but controls a massive amount of equity as well? I spoke to the realtors of four Kahala listings between $3.5 million and $7.5 million, and they told me every single owner is an entrepreneur.

The owner of the most expensive listing runs a chain of Korean BBQ and other no-name fast food restaurants in Honolulu. The restaurants aren't that great or impressive, yet he is able to afford a $7.5 million home! Of course the $10 million house in front of him at water's edge is owned by Honda Corp's President.

Related: Strategy / Management Consulting Pay By Title

An Entrepreneur's Financial Path To Get Rich

Here are the realistic financials of a small business owner I know very well.

Entrepreneur's Journey To Afford Dream Home

This entrepreneur can comfortably afford a $3.8 million home by the time he is 40 with $5 million liquid left to spare. It would be a little too risky for the entrepreneur to buy the home before his $5 million liquidity event given he lives off a modest salary.

The reason why the entrepreneur was able to capitalize on $8 million worth of liquidity events is because the entrepreneur owns a large majority of his company. He was able to sell off minority percentages of his holdings until he finally sold everything at the age of 40 to retire. The entrepreneur paid himself a modest salary relative to the size of the business because he didn't want to pay both sides of the FICA tax.

The interesting thing about the entrepreneur's lifestyle is that often, for many years, s/he lives a very sparse lifestyle. Then one day, they hit it big and everything changes. Hence, one has to make a choice between a smoother consumption curve, or a highly unpredictable one.

For those of you who are complaining that my charts are too conservative since I don't back in any growth, feel free to multiply the figures by 130%, 150%, 200% if you wish. The path to get rich is still not easy for the normal working person.

Start Your Own Business To Get Rich

Hot Tub And Outdoor Pool in Hawaii
Hot Tub Pool Party Everyday

Clearly, being a super successful entrepreneur is a long shot. But, so is being a successful banker, techie, doctor or employee in any field for 20+ years.

The big difference is that you actually have to study hard, get good grades, and go to a pretty good school to land one of the coveted banker and techie jobs. Meanwhile, getting into medical school and passing the boards is a Herculean task that even a smaller minority can achieve.

However, if you're an entrepreneur, you can be a high school dropout and still succeed!

Another of the many benefits of entrepreneurship is the incredible satisfaction you gain from creating something out of nothing. Having the freedom to do whatever you want provides for tremendous happiness as well.

It's been over fourteen years since I started Financial Samurai. And I am fortunate the site is now a cash generating asset. Plus, I've created an asset that can be sold for a multiple of revenue.

Start Building Your Brand

Everybody should start their own website and potentially access over three billion people online. From there, you can build a business. You don't have know exactly what type of business you want to start. The key is to just start and build your brand.

If you can do something on the side while working a day job, even better. Your ideas will start coming to you as you start tinkering around. The cost to start a website is next to nothing nowadays thanks to technology.

When I started Financial Samurai in 2009, I just wanted to have a site where I could share my thoughts, connect with like-minded folks, and make sense of all the chaos during the financial crisis. I had no business plan or thoughts of making big bucks.

But two and a half years later, Financial Samurai was making enough money to give me the courage to negotiate a severance and dedicate all of my time to this site.

Since 2012, I've become much more strategic in building “Financial Samurai Inc.” I've focused on building the brand, finding fantastic product partners that add value to readers, and leveraging the site for interesting consulting opportunities. The opportunities are endless and go far beyond what I could ever imagine.

Design Your Own Dream Job To Get Rich

Below is a realistic income snapshot of what a successful blogger can make. If you don't agree that blogging is one of the best jobs, hopefully you have a job you love better. If not, start you own business and design your own dream job.

Pro Blogging Income Statement
Click to learn how to start your own.

I hope this post gives you some insights into the power of starting your own website and business. Change your thinking from being an employee to an owner. What's It Like Being An Entrepreneur?

Not only can you potentially generate a lot of online income, you can also find a new job or consulting opportunities, build new friendships, and reduce your tax liability as well. Don't let analysis paralysis prevent you from starting.

The Best Time To Start A Business Is When You Are Young, Broke, And Naive. Once you get going, the ideas and opportunities will just come to you.

Build More Passive Income Through Real Estate

Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. If you don't want to work forever, you need to invest in income-producing assets.

I currently have $810,000 invested in real estate crowdfunding that generates roughly $120,000 a year in passive income. The passive income enables me to live freely and be a stay at home dad.

Check out Fundrise, my favorite private real estate investment platform. It manages over $3.5 billion and invests predominantly in the Sunbelt region where valuations are lower and yields are higher. Technology and work-from-home are long-term trends that will help boost real estate in lower-cost areas.

Fundrise

Invest In Entrepreneurship The Easy Way

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Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

What's incredible is the investment minimum is only $10! In addition, you can see what the Innovation Fund holds before deciding to invest.

To put this in perspective, most venture capital funds require a minimum of $250,000+ just to get started. And typically you won't know what the VC fund will hold until after sometime after you've sent them your money.

Check out The Innovation Fund today and invest in tomorrow's great tech funds, today.

For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

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Anon
Anon
4 years ago

But you’re assuming that the cash sits in a savings account and doesn’t appreciate at at least the market rate. Most people in these jobs at least have 401ks. And most aren’t dumb enough to leave everything in cash for 15 years.

Anon
Anon
4 years ago

But you’re assuming that the cash sits in a savings account and doesn’t appreciate at at least the market rate. Most people in these jobs at least have 401ks. And most aren’t dumb enough to leave everything in cash for 15 years.

Chester
Chester
4 years ago

this is good, but isn’t it even easier to be a techie, banker, lawyer, etc who gets a decent piece of an existing company; like regular employees of a large conglomerate who eventually move up to won a piece of the company; like Tim Cook now has equity in Apple and is now a billionaire. Shouldn’t that be the ideal path? Being a long entrepreneur is tough and risky, I know, I am one.

2tall4lambo
2tall4lambo
4 years ago

Loved this post. I was comforted to see the comp of the different fields who are often touted as the end all be all of income. As a very typical fortune 500 ladder climber, I was happy to note I’m well ahead of the net worth and income levels of all of the other professions listed. And here I always thought I was the “loser” compared to those fancy “IB”ers, techies, and doctors…

That said, I’m fairly sure your doctors are skewed toward general practice. I know that the guy who operated on my dad when he was in the hospital was pulling down $750k/yr in a relatively small city.

Nordic Fire
Nordic Fire
5 years ago

This post is so true especially here in Nordic Countries. If you earn more than 150Keur, you pay almost 55% of your income to taxes..

– NF

Falsc
Falsc
5 years ago

But if everyone makes their own website, who will farm your food and sew your underwear?

Scott
Scott
4 years ago
Reply to  Falsc

Very insightful article. My family and I love driving around to see gorgeous homes. We always wonder what people do to afford those houses. Depending on who you ask the answer changes from Doctors and lawyers, to sales people, to entrepreneurs. Whatever they do to earn money, one thing is for sure, they are not your typical employees.

I also appreciate your encouragement to build a website and brand. This is great advice!

Griffin
Griffin
5 years ago

If you’re currently making 500k a year wouldn’t you be able to afford your dream house in ~6 years if you lived frugally?

John
John
6 years ago

Good post. I am 51 yo physician have seen medicine change significoantly. I have 2 side jovs in addition to my occupation.

Chris Hanson
Chris Hanson
7 years ago

Everyone should read “The Millionaire Next Door”.

Eric Ching
Eric Ching
7 years ago

It seems to be that if a person starts a business that they really like, then after paying their dues for a couple of years the business succeeds on its own. Whereas if a person is only working for a paycheck or starts a business that they are not passionate about, then it languishes in mediocrity.

The “doing what you love” part is important.

Btw, I live on Oahu (and used to live in the Bay Area) therefore like to read about your personal experiences.

Thanks.

808 racer
808 racer
9 years ago

Great post! I live not far from where you took that pic, it is heaven on earth. :)

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[…] briefly look at Homejoy’s business model. For aspiring entrepreneurs like myself, it’s important to learn from failures to avoid future […]

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[…] Bankers, Techies, Doctors: You’ll Never Get Rich Working For Someone Else […]

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[…] The great irony is that for the first year, I was probably working just as hard, but I was enjoying every minute of it because there was a 100% correlation with effort. My old job had dissolved into a somewhat communistic structure where high performers or high performing departments subsidized low performers or low performing departments. It’s a team sport in the rocky world of finance, but I wanted to see what I could do on my own. […]

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[…] I didn’t fulfill my fantasy due to fear and economics. You either have to come from money, be an entrepreneur, or be a doctor to afford the $1.5 million+ home that I so desired. Given that I no longer had a […]

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[…] a year due to the recurring Restricted Stock Units he receives. He works just as hard as any doctor, lawyer, or banker, but he makes 30X more than a $500,000 a year income earner. Entrepreneurship or inheriting money […]

Josh
Josh
10 years ago

Why do you need a 6,000SF house in Hawaii? Why does anyone really need a 6,000SF house?

nope
nope
10 years ago

Holy crap do you have a completely distorted impression of how much techies make. $100k at 25? $300k salary, later on? Maybe if you’re a CEO or other executive – in which case you’re an MBA; not a techie. A techie is looking at $100k with a good idea of experience or in an area of particularly rare expertise. It’s even harsher, now, in a world where people are being undermined by outsourcing (we just canned 500 engineers at our company and replaced them with a bunch of guys in Romania who will work for half the price, at most – and are younger).

Stevie Wonders
Stevie Wonders
8 years ago
Reply to  nope

Totally concur with this. Outside of the coastal tech hubs, salaries are much lower, often shockingly so, even at fortune 500. In so small part due to rampant H1-B visa abuse and offshoring. Six figure salaries are just for the most senior people. Many must go into management for this, which of course is a totally different skill set. And the supposed tech worker shortage doesn’t exist in the “hinterlands”. Bay area is very unrepresentative of the field at large.

Untemplater
10 years ago

Really good food for thought in this one Sam. Who would have thought that a fast food chain like that could make someone that rich. That is one amazing balcony! That’s really mind blowing too that all of the owners of those incredible houses are all entrepreneurs. Makes sense after looking at your tables!

Andy in Denver
Andy in Denver
10 years ago

Hawaii is overrated. Unless you grew up there, most mainlanders don’t last more than 18 months before they feel isolated and move back to the mainland. Life is a journey, not a destination, and if your goals are all based on “obtaining” the item that will “finally” make you happy, you’ll never be happy. Happiness comes from joy in everyday things.

Islander
Islander
10 years ago
Reply to  Andy in Denver

I would be bitter too if I could only afford to live in Denver where it is 18 degrees at night.

Hawaii is amazing.

Jacob
Jacob
10 years ago
Reply to  Islander

You’ve obviously never lived in Denver. Also, Hawaii is only “awesome” if you’re already rich or happily poor. Your state produces nothing and educates no one.

lol - salt
lol - salt
9 years ago
Reply to  Jacob

lol! so much salt towards hawaii
colorado and hawaii are both cool
calm down, calm down..

g
g
10 years ago

I will never be as rich as I would like to be with my current job. Period. I cannot take up jobs with more responsibility than what I do now without sacrificing my kids’ lives. So the only thing I can do is move from SF to another smaller city that will allow me to live in a 2500 sqft home with a fraction of the cost, a more fruitful life enjoying simpler things in life. So Charlotte – here i come in May 2015!

Zambian Lady
10 years ago

I would like to be an entrepreneur but in what? I am sure the entrepreneurship gene skipped me, even though I want to be one.

MoneySheep
MoneySheep
10 years ago
Reply to  Zambian Lady

The key is mentality —the action mentality. Those that are rich are not smarter than you, but they do act while the public masses pontificate and being armchair critics.

As Samurai mentioned above, BBQ restaurant venture can make you rich. How about a home renovation contractor, well I know one who is a multi-millionaire and you cant tell it when he is at the work site.

Dont let what appears to be “lowly”, “unclassy” work etc hold you back. There are rich people in every type of businesses.

The question often asked is “What should I do with my life?”
My answer is, first figure out what you truly enjoy doing, then find out how to make money doing that. If being a hairstylist is what you really want to do, I can guarantee that there are many people in hairstyling business that are multi-millionaire.

Tell us and the world what you truly enjoy doing.

John
John
5 years ago
Reply to  MoneySheep

MoneySheep is correct … There is money to be made in EVERY type of business!

I have a good friend that is extremely wealthy running his own business His business’ motto: “Striving to be #1 in the #2 business!” His business: Portable toilet rental! He also says quite a bit “People don’t realize how much green there is in the yellow and brown.”

Cheers!

MoneySheep
MoneySheep
10 years ago

Samurai, Since you could go in to see those houses on Blackpoint Road you are 75% looking like an owner. Last time I was there I drove my friend’s beat up Honda Civic, and the realtors refused to let me in!

It takes a special kind of character to be an entrepreneur, not anyone can be one. But if you dont try you dont know.

So I always say to any kids who want to listen to go do something daring –like starting a venture or start a water-well project to help the drought strike areas for example– before 34 years old. Live like a monk if they have to, it is an adventure. If they succeed, they know they dont have to worry about money again or have leave their mark. If they fail, it is ok, not everyone is cut out to be one. They can still have 30 years to work for someone, in the end they will still be ok.

I did what I say, and I retired at an early age.

Mr zombie
Mr zombie
10 years ago

Hi,

It is inspiring that a lot (most?) successful entrepreneurs are running a “normal” business and it is not a tech breakthrough that has made their millions.

This is also an interesting read.

https://m.bbc.co.uk/news/business-29660624

Mr Z

Mr Zombie
Mr Zombie
10 years ago

Superb effort in replying to so many comments :)

Of course if you are in a well paid job, say in finance, you are already above the mean in terms if take home and it’s hard to make the jump. Perhaps once you are near FI it could be tempting!

Franchising maybe…

Sr
Sr
10 years ago

According to this article, 64% of 30 mil plus net worth individuals are entirely self made, and only 17% fully inherited their wealth. I believe it. One generally doesn’t know how to hang on to wealth if they didn’t make it themselves.

I am in healthcare too and I think your doctor chart is pretty accurate for a high income specialty early on. Many or most doctors would need to cut those income numbers in half and most these days have 200k plus in loans. (many in med school now will have 400k by the time they graduate!) I don’t think the income usually jumps like that toward the end of a career unless you are doing something unusual ie fee for service plastic surgery, etc. In my experience, income after reaching partner (which happened after a year) has been flat or slightly decreasing. One can only see so many patients or do so many procedures and the reimbursement for these is set by medicare and insurance companies which have been slashing rates. This forces you to work harder for the same income. Also, consider that it is quite difficult to save much during residency and fellowship, during which you are living in larger more expensive cities. I agree that becoming a doctor is a way to a stable good income but not the way to afford a 4 mil house! :)

That being said, I am ahead of the savings curve in your chart in my late 30s due to market gains, realestate, a more aggressive savings rate of 70% of post-tax income, and living in an inexpensive area.