Month: June 2015

Habits and Characteristics of Millionaires

Posted on by SmartMoneyMD

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I finally set aside some time to read the sequel to The Millionaire Next Door, entitled The Millionaire Mind, by Dr. Thomas Stanley. The author had studied the lifestyle and habits of millionaires and condensed them into two best-selling books. As high income earners with a late start on their careers, doctors do have plenty to learn from the rich. The following is a list of focal points that Dr. Stanley emphasizes throughout both of his books:

Millionaires Did Not Get Good Grades in Schools Nor Did They All Go To School

Of the millionaires polled and studied, the majority of them apparently were not seen as intelligent by their teachers and did not achieve good grades in school. Some were condemned by their teachers to a life of mediocrity. Could mediocrity serve as motivation to achieve? The author believes that by not being “book smart”, these future millionaires became more resourceful and chose careers that were less popular and had less competition. These people also learned to work harder and more intelligently than their peers and eventually became more financially successful than their peers who received better grades in school. Examples given included a millionaire businessman who owned a metal recycling company or the salesman who knew how to get widgets sold. Neither of these professions truly required much of any formal education but allowed the resourceful to succeed.

Can this apply to doctors? Hell no. Doctors succeed by working hard but also getting good grades. We survived through college organic chemistry and repeated testing of material that ultimately has little to do with our final daily routine. This hazing process was important because it filtered out the less compulsive and less determined—after all, you’d want a compulsive doctor who does not miss diagnoses. Medicine is a mesh of inexact science with art; patients can become ill and even die under the most skilled physician (and get wrongfully sued too). Can a doctor be skillful but received poor grades in school? It’s possible, but less likely.

With these conflicting conclusions, can doctors still be millionaires? Of course, but it certainly is much harder. One of my neighbors who is a retired small business owner likely has more wealth that I will ever accumulate constantly remarks how rich doctors are. Yes, doctors have good salaries, but we still need to be smart about our money and convert a high income into high net worth.

Millionaires Contract Out Tasks To Others

Apparently the typical millionaire is not the DIY-type. Home repairs, plumbing, cooking, yard work…all of these routine household tasks are either left to the spouse (the wife, according to his book) or hired help. Millionaires spend their free time relaxing with their family, playing golf, or focusing their attention to earning more through their profession. This approach allows them to enjoy their hard work, and maximize their earning potential. A jack of all trades is a master of none.

I’ve seen this mentality with my colleagues to a certain extent. We’ve trained such a long time to practice our profession; we should use that to our advantage to earn more. I recently heard that one two-physician couple hires a chef to cook for them, and each meal costs $120! It certainly is impressive that one could afford this long term, and I suppose you can interpret this to be that they are successful in their careers. Need additional income, let’s pick up a few more shifts in the ER. I know doctors who don’t know a single bit about cleaning floors, car maintenance, or how to operate their food processor. But they do know how to intubate a patient, and that’s where the easiest way for these people to obtain income.

Frequent visitors to this website know that I approach net worth as a balance between savings through lifestyle modification and income (whether from your career or alternative means). I have discussed low-risk household maintenance tasks like changing the headlights to your car, replacing toilet parts, and cleaning your toilet. By means of branching out your fund of knowledge, you can become more self sufficient and invest your hard-earned post-tax dollars for other needs. You can be smart about your money without being totally useless in practical life.

Does limiting the number of outsourced tasks mean that I will never become a millionaire? I sure hope that there’s no corollary between hiring help and becoming wealthy in today’s times.

Millionaires buy lasting furniture and older, well-built homes

One interesting statistic that Dr. Stanley found was a millionaires rarely buy new furniture but rather resurface their existing furniture. The premise is that quality solid wood furniture should last forever, and wasting money purchasing new furniture every decade is not practical. Frankly, I don’t even know any local furniture dealers who reupholsters furniture. This fact might be reflective of outdated trends. Most modern furniture (even the expensive ones) contain particleboard.

He also found that millionaires target older, well-built homes in established neighborhoods to live in. These homes tend to save their owners more long term. I don’t really know how to interpret this finding in present times. There are plenty of affluent neighborhoods especially in the northeast that undergo cycles of tear-downs and rebuilds. Some owners do it simply because they want updated floor plans or extra bathrooms. I haven’t noticed any correlation with the upper-middle class or the ultra-affluent.

Whether you upholster your old furniture or live in well-established “older” homes probably has some connection with being a millionaire or ultra-rich. Not following these statistics probably doesn’t prevent you from being a millionaire either.

Conclusion

After reading both The Millionaire Next Door and The Millionaire Mind, I do think that the author brings up goods points that apply to all of us who are trying to build up a stable net worth. There are plenty of millionaires and billionaires who were not pegged by their teachers to be successes and some who did actually receive good grades. The one unifying aspect of the wealthy is that they think differently. Everyone works hard, keeps their eye on the goal, and finds ways to reach that goal. The billionaire factory widget maker worked hard to reach his clients and sell products. The wealthy doctor needs to do the same.

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Do you have any experiences with any of the qualities of a millionaire? Comment below!

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Analyze fixed costs and destroy them

Posted on by SmartMoneyMD

This is the last post in my series on how to boost your net worth without having to increase you income.

 

Recurrent costs are expenses that we often subscribe to but may not necessarily be aware of. I often forget about certain monthly bills that I set to pay automatically. It should be good habit to reassess our needs to cut costs. Some recurring bills include:

  • Electricity bills
  • Gas bills
  • Sewage/HOA bills
  • Garbage disposal fees
  • car payments
  • rent/mortgage
  • property tax
  • vehicle registration and insurance
  • internet bills
  • cable/satellite bills
  • online subscription services: Pandora, Evernote, web server, Netflix, Hulu, Amazon Prime
  • magazine subscriptions
  • country club fees
  • golf course fees
  • telephone bills

 

Utilities (electricity, HOA, gas, sewage, trash)

These costs are mandatory, but you can still trim off the fees by paying attention to your usage. Basic supply line fees and taxes can’t be avoided, but decreasing consumption strategically will cut your bill with minimal disruption to your lifestyle. The majority of our electricity usage comes from our refrigerator, light bulbs, washer/dryer use, and air conditioning. Changing out your incandescent bulbs to CFLs or even LEDs will cut use dramatically. Insulation and increasing thermal mass of your house will help keep temperatures more stable through the day and decrease heating and cooling costs. Many modern homes aren’t designed to take advantage of the sun and the environment (which is a shame), but if you are able to find a home that has strategically placed windows (south facing windows if you are in the northern hemisphere), you can take advantage of the sun. You can track the electricity use of your appliances using a Kill-A-Watt meter. It’s surprising to see how much electricity certain appliances use. I found that my 40” LED television hardly drew any power while off, but consumed about 0.65kWh of electricity in 5 days of 1-3 hours of use. Find your appliances that have excessive phantom electricity draw and eliminate them! Options to decrease gas usage is more limited to decreasing your heat in the winter—obviously not an extremely popular option for many people to keep their homes much colder than comfortable. Again, the solution is actually to thermal insulate your home and increase thermal mass. If you can design your own home, look into Trombe walls and take advantage of the sun.

Cellphone bills

There has been an open battle among the big cellular companies and their offers to slash bills. If you are out of contract with your mainstream carrier, consider tracking your use and try some of reassess with alternative companies like Airvoice, FreedomPop, Ting, or Virgin Mobile. I was able to save at least $25 a month using Airvoice.

Internet bill

This is also a no brainer. Since the internet market is monopolized by a handful of companies, it is relatively easy to price shop. Use WhiteFence. If you live in a rural area, then your options will be more limited. Don’t be afraid to cut your provider in favor of a cheaper option.

Get cable along with Internet? Consider bundling if you must have cable or satellite, but you’d be better off cutting the cable. Likewise, if you find yourself too busy to use your Netflix subscription or online streaming memberships, considering cutting them.

Conclusion

Make it a habit to reassess your recurring costs annually. If there are services that you are not using, consider canceling. Be sure to check if you are spending too much on utilities, cellphone, or internet. I was surprised to find that many of my coworkers pay over $200 a month for bundled cable/internet!  Is premium television worth $2400 a year in after tax dollars?

What suggestions to you have to cut fixed costs? Comment below!

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How to Clean Lime and Rust Deposits In Your Toilet Bowl

Posted on by SmartMoneyMD

Previous articles on toiletology have discussed the following:

 

This article will include step-by-step instructions on removing lime and rust deposits from your toilet bowl.

 

The rental condominium that I recently moved into has nice Kohler brand toilets. Unfortunately, the previous tenant(s) did not maintain much of anything in the unit. The landlord also does not appear to care what goes on in the unit as long as the rent is paid. One gripe that I had was that the toilets all had significant lime and rust stains in the bowl and water spouts:

Lime and Rust Stain in Toilet

If prior tenants had spent any effort in keeping the toilet clean, these stains could have been easily prevented. I suspect that aside from an annual housekeeping service cleaning, there was little maintenance over the past decade. The first week I moved in, I cleaned the bathrooms as much as I could, which included scrubbing down the toilet seats with disinfectant, brushing the toilet bowl with bowl cleaner, and wiping down the tank and handles. Unfortunately, the rust stains were caked in the bowl no matter how I scrubbed.

I finally found the time to tackle the nasty rust buildup in the bowl last week. It typically comes from the high mineral content in the water and infrequent cleaning. Once a thick layer of rust and residue accumulates, it is nearly impossible to remove using standard toilet bowl cleaner. Fortunately, it only takes the proper equipment and a little elbow grease to clean things up. Here’s what I did:

Cleaning Agents

To remove rust and mineral buildup in the toilet, do NOT use bleach. Yes, bleach is great in cleaning and disinfecting many agents, but will basically smear the rust into the porcelain. Again, do NOT use bleach to clean rust.

Most caustic cleaning agents will do the trick. Remember back in high school chemistry class, sulfuric acid will burn through most objects (your hand included). Phosphoric acid also is a good cleaning agent. The active ingredient in Lime and Rust Remover is usually derived from one of these two chemicals. That is the key. I did not find my go-to product, The Works Toilet Bowl Cleaner, at Wal-mart. I did find an alternative cleaner called, “Lime A-Way”, which promised to remove rust and calcium stains. This brand does have a toilet cleaner version, my local store did not have it in stock. I just used the tile cleaner, which seemed to work okay (with extensive scrubbing).

If you are eco-conscious, you might be out of luck. Chemically, you could possibly use a lemon and salt to scrub the toilet, or even Coke! Yes, Coke! Carbonated soft drinks are acidic and actually have a low pH (and destroys your teeth). I’ve used it before, but it doesn’t work well with tough stains. Alternatively, you could also use a pumice stone as a mechanical means to clean rust stains. Be careful with pumice—you can scratch the porcelain bowl. Pumice has approximately the same hardness as porcelain, so I would expect microscopic scratches to build in the toilet. It may not make a huge difference in the short term, but over many years the shiny reflection will become dull (may not matter if you replace your toilet every decade or if you live in a rental).

How to clean

  • Turn off the water supply to the toilet. Remember, most valves are turned clockwise to shut off.
    • Toilet Shutoff Valve
  • Flush the toilet.
  • Use a toilet brush or plunger to depress the siphon to empty out most of the water in the bowl.
  • Spray or pour the cleaning agent in the bowl, aiming for the stains.
  • Use a toilet brush to scrub the stains!
  • Once stains are off, turn on the water supply, and flush.
  • If you are using a pumice, be sure to soak the pumice in water before scrubbing to soften it.
  • Make sure you have adequate ventilation and exhaust. The chemicals are corrosive and the fumes can irritate your eyes. Make sure you also have gloves.

That’s it. I ended up using several iterations of cleaning over 20 minutes to remove most of the stains:

toilet after rust removal

There are still rust stains in the bowl, but it can be cleaned in future washings.

Is it worth a doctor’s time cleaning the toilet? It depends if you have anything else more worthwhile that you could be doing. I’d imagine a professional housemaid service with specialized cleaning agents will take care of the bathroom for you, but it will come at a price. You could also ask your non-working spouse to do it. I spent $4.72 at Walmart to purchase the lime remover, and had a mail-in rebate coupon to make the item free. I’d imagine that there is enough chemical for at least 10 cleanings in a bottle.

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What are your experiences with cleaning agents? What has worked for you? Sound out below!

Complexities of a two physician household

Posted on by SmartMoneyMD

Previously we discussed a pros/cons list of a two physician household. In this article, we discuss financial considerations for a two physician household.

Doctors are busy. Most established doctors I know work at least 40 hours a week. Those running their own business tell me that their hours range from 45-55 hours a week in the office, but many of them also handle business matters after hours (in addition to taking call).  Surgeons or specialists can clock 60-80 hours a week. This doesn’t even include commute time to work or the time spent between waking up and seeing the first patient of the day.

With such a hectic work life, there are limited hours left to care for errands or everything else. Traditionally, such families have a non-working spouse who can take care of bills, repairs, and kids. As family compositions have evolved over the past decade, a larger percentage of doctor households have working spouses as well.

Obviously having a working spouse (better yet, a working doctor spouse) will add to the net income. But a dual income family does introduce both financial and logistical complexities. I have a few examples of colleagues that I know and the situations that they face:

Surgeon and School Teacher

This household has two young kids. The surgeon works 50 hours a week plus call. The school teacher works in Grades 3-5. There is a constant struggle to decide whether the school teacher should be working or staying at home. A teacher who makes $35,000 a year with a spouse who makes enough to put them in the 39+% federal marginal tax bracket will essentially give half of his earnings to federal, state, and local taxes. Ouch. Try to calculate that hourly rate. It won’t look good.

If this family has to hire a nanny for childcare, then it is a financial no brainer for the school teacher spouse to stay at home and care for the kids. It doesn’t matter if you live in Omaha or San Francisco–the nanny will more than offset the teacher’s income. At this point, the school teacher spouse could even consider home schooling the kids as a way to apply her education or branch out into alternative sources of income (a la MoneySavingMom).

Neurologist and Cardiologist

This couple also has one young child and a second along the way. While the neurologist’s salary will be in the six figure range if the job is full-time, it will still likely be taxed in the top marginal tax bracket if the cardiologist has a decent practice. In this situation, the financial options can include a part-time job for the Neurologist to keep the skills sharp while having part-time daycare. Alternatively, both spouses could consider a part-time or 0.8 status equivalent to spend some time with the children.

Another caveat for a two physician household is that it becomes harder for household chores to get done. Home maintenance, yard maintenance, dishes, laundry, cleaning, grocery shopping, and other simple tasks become exceedingly difficult to be performed during free time especially if both spouses are exhausted in the evenings. They could all be outsourced at a cost but still may be practical for the busy couple. In Thomas Stanley’s Millionaire Mind, one of the characteristics of millionaires is that they are NOT DIY-er’s and outsource tasks that aren’t directly related to advancing their net worth.

This family has more flexibility than the doctor/teacher couple mainly because their higher earning potential, but the work-lifestyle arrangement options are identical in both cases. Does the family want to focus their time on their careers? How much time does each spouse wish to spend with the children, at home, or with other secondary income streams? Would it be a waste of your many years of hard work and earning potential to give up your career?

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Do you have any working tips for a two physician household? Comment below!