Month: May 2016

A financial plan for busy people

financial plan for busy peopleOne the fundamental rules of sustaining and growing your hard earned money is to create a financial plan and stick with it. I’ve seen all sorts of guidelines and plans from financially independent bloggers. Some plans fit on a 4”x6” index card. Others include extravagant spreadsheets that include Trinity Rule references, real estate investments, tilt, and often brilliant means to reduce your tax burden.

All of these strategies will work in each individual case, particularly for those who stay on top of their finances and methodically track their money. This only works in two basic situations: (1) Your job allows you enough time either during work or after hours to focus on your finances, or (2) You’ve already reached financial independence and aren’t forced to live the cubicle or daily grind to generate income.

 

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This type of lifestyle doesn’t work well for guys who are running to stroke codes all day long or dealing with 60 clinic patients a day. If that is your day job, you probably aren’t going to have much energy after you get home to do much of anything else. If anything, many professionals do the opposite—we vegetate, justify splurge purchases because we “earned it”, and neglect to focus much time to our financial future.

I still have those busy days (almost every day), but I also have tried to simplify my financial strategy to the level that I can relate to and automate.

 

Stick with the plan, but be willing to adjust throughout your working career. 

Some financial principles should be non-negotiable no matter what stage of your career you are in. You must save more than your spend in order to grow your financial stash. Period.

Everything else is variable depending upon your income level and net worth. Here are my principles depending upon your situation:

 

Student and resident (<$80,000)

  1. Pay off at least $2,500 in student loan interest per year. This is a deductible event. If you are accruing interest on your loans, this is the best time to reduce your tax burden. Once your income exceeds the ceiling for student loan interest deduction, you are out of luck.
  2. Contribute to your Roth IRA fully. Remember that a Roth IRA holds post-tax income. The earnings in this vehicle will not be taxed no matter how much they grow. Since the annual contribution amounts are relatively small, you are limited by how much time you have to build up the cash. I knew financially savvy college students who maxed out their Roth IRAs through part-time jobs. Their parents (upper middle class) were willing to max their salaries to give them spending money. Not a bad way to build up your Roth IRA amounts with time.
  3. Keep your Traditional IRA bucket empty. Most doctors and highly paid professionals will exceed the standard Roth IRA limits once they increase their earning potential. You can still contribute to your Roth IRA through backdoor method. If you have no money in your Traditional IRA, the conversion process is much easier, and you can avoid taxes.
  4. Save the rest of your earnings toward repayment of student loans or ancillary investment vehicles. I know a few medical residents who are landlords and generate a reasonable cash flow from their properties. Doesn’t always work out once they graduate and end up moving away.

 

Mid-career professional

  1. Contribute to the maximum limit in all of the investment vehicles available to you. This includes Roth IRAs, 401k/403b plans, Profit-Sharing Plans, and even better, Individual 401k’s. Be wary of profit-sharing plans and the terms. Some plans require you to work a certain minimum number of years before you’re fully vested. This won’t work well if you end up having move between jobs.
  2. Invest in a taxable account. Unfortunately maximizing your tax-deferred and tax-advantaged accounts will unlikely generate enough nest egg for you to retire on. I would roughly assume that a high-income professional would want to retire on at least $100,000 a year. Gotta have those fancy vacations, right? The 4% Trinity rule would say that you need to have $2.5 million in the bank, and that amount needs to be liquid too. It would be tough to build up that amount solely within a 401k.
  3. Buy umbrella insurance. If your net worth minus your protected accounts (401k’s, cash-value insurance…etc) is around $1 million or above, buy some umbrella insurance. The annual premiums won’t likely be much, and can give you more piece of mind. More on this in a later article…
  4. Figure out what other options you would feel comfortable with placing your money to diversify. Is it real estate? Is it stock market? Is it crowd-funding lending? Gambling? Restaurant franchises? This is your chance to make good on the hard work you’ve put in to get to where you’re at.
  5. Track your net worth growth. If you’re going to exceed the federal limit for estate tax, congratulations. You’ve won the game. Spend the rest of your time figuring out how to reduce your estate tax.
  6. Contribute to 529’s if your state allows tax reduction. You can make accounts for your kids, your nieces and your nephews. If you play your cards right, you can potentially have enough for the family.

 

Retirement

  1. At this point, if you played your cards well, you might still be under 60 years old. Perhaps even less than 50. Your money should run on auto-pilot. Work on your estate tax plans.
  2. Stay active. Volunteer. Travel. Start a blog. Spread the gospel. Teach other medical professionals. Do what you’ve always wanted to do.
  3. Stay out of trouble and don’t invest in get-rich schemes, no matter how much you have stashed for your retirement.

That’s it. Basic. Simple. As you become more well-versed in your career, you will have more time to study your finance or whatever else you like.

What other finance plans have your implemented in your strategy?

(Photo courtesy of Flickr).

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Occupational injuries among doctors are more common than we realize

occupational injuries among doctors are commonSuccess in our careers can be defined by a number of criteria. Two of the most important qualifiers in my book include both financial and physical/mental health. After all, your pool of money serves you no good if you are not healthy enough to enjoy it. Interestingly, I came across an article published in the 2010 issue of the Journal of the American College of Surgeons that surveyed health of surgeons. One of the key findings was that 86.9% of respondents reported symptoms of physical discomfort! The group of oncologic surgeons surveyed stated that the bulk of the physical ailments come from cervical spine pain, musculoskeletal fatigue, and vertebral disc injuries.

 

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This is a frightening finding that is unfortunately true and common. After a long day at work, I come home with various aches and pains. As doctors, we all are subjected to repetitive tasks whether it is operating on patients, clicking through the electronic health records, or simply examining patients. We are all subjected to higher volumes of patients as reimbursement levels decline. I think the stress of our workplace contributes to the physical ailments we experience.

 

How to reduce the likelihood of injury

The best way to insure your health for the future is to prevent injury. I keep a handwritten list of reminders at my office to help me step back and reassess what I need to focus on, especially during a tough day:

  1. Don’t forget to breathe. This means that no matter how chaotic your workday is, make time for yourself. Take that extra 3-5 minutes to go to the restroom, eat your breakfast, and find sanity. The sky will not fall if you take care of yourself first. If you are ill, then you won’t be able to care for others.
  2. Meditate. Yoga and meditation exercises are great to clear your mind. Sometimes you need that extra 10 minutes in the evening to unwind, clear your mind, and reset. It doesn’t hurt to pause.
  3. Make time to stretch and exercise.  Repetitive task-related injuries are most common in the workplace. The best way to prevent these is to reduce the repetitiveness. Stretch. Strengthen your core.
  4. Improve your core strength. The stronger your central muscles are, the less likely you will become injured. Moreover, the stronger you are, the faster you will likely recover from injury.
  5. Find a balance between work and relaxation. If you are a surgeon, limit the number of surgeries that you perform in a reasonable manner. If you are employed by a large corporation, make sure that you have the appropriate negotiation strategy to justify your worth. If you are self-employed, ask yourself how much money is worth it to you. Is it worth risking your well-being to perform an extra few appendectomies? Don’t be so sure.

What other strategies do you employ to maintain your mental and physical health?

(Photo courtesy of Flickr)

When does owning a fancy car no longer seem special?

when_does_owning_a_fancy_car_no_longer_feel_specialMost of us want to be different. Some like to have the latest fashion accessories or gadgets. Others want to have nice clothing, cars, and houses. Those of us who are financially aware will agree that material wealth does not represent actual wealth—many people who sport the latest Apple Watch may have a net worth substantially lower than what it should be for an Apple Watch owner. In fact, it’s the ones who practice stealth wealth who may actually have the greatest net worth to material wealth ratio.

While stuck in traffic on Highway 101 (“The 101”) last week, I tried to entertain myself by counting the number of luxury automobiles I could see in a ten-mile stretch of highway. It was frightening how many there were: over 50 Mercedes including at least 5 AMG’s, 11 Tesla Model S’s, one Tesla Model X, another dozen Maseratis, one Lamborghini, another 30+ BMW’s, and a similar number of Lexus and Infiniti’s priced over $50,000 MSRP.

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I think that there were more Mercedes than Honda Accords on the highway! In this case, does driving a luxury automobile actually distinguish you from the working masses? Does leasing a 5-series BMW or an AMG even show that you are a class above the rest? I don’t think so.

If you happen to live in a city or region with large numbers of wealthy residents, you might actually be fortunate that you might be priced out of wealth portrayal! If everyone around you drives a Mercedes, Hummer, Beamer, or Tesla, you don’t have many other options leftover to be unique. Maybe if you decide to splurge $2000 a month to lease a Bentley Continental GT, you can join the masses and still be stuck in traffic, but in style.

Likewise, if all of your coworkers wear Loubs, you might not feel unique if you wore them either. I find it to be an interesting phenomenon that the more blatant display of wealth that surrounds me, the less tempted I am to own expensive material.

Hey, it’s not all bad if everyone around you drives a Mercedes. You know that not everyone can really afford one, and you might not be as tempted to own one yourself.

Does this approach to wealth impact you in the same way?

(Photo courtesy of Flickr)

How Working Abroad Can reduce your taxable income by $100,800!

working abroad can reduce your taxesMany doctors have volunteered in foreign countries during medical school, residency, and even while in practice. It’s a great opportunity to see the world and provide much needed expertise to many people in need. Some of us end up working abroad for many years before moving back home, simply because the opportunity arises.

One financial perk of earning income abroad is that it can significantly reduce your tax burden. Firstly, you are unlikely to incur state taxes if you are living abroad. For many of us, this translates into at least a 5-6% reduction in tax burden. Moreover, thanks to the Foreign Earned Income Exclusion rule, your first $100,800 in income (based on 2015 rules) is federally tax exempt! For single doctors earning $300,000 gross income, this can potentially translate to a marginal tax rate reduction from 33% to 28%! What is more important is that a doctor earning $300,000 abroad will likely save approximately $33,333 in taxes compared to a doctor with the same income working within the United States!

 

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What options do you have to work abroad?

As far as large hospital entities go, I’ve seen options to work abroad through Johns Hopkins in Saudi Arabia, Cornell University in Qatar, and Cleveland Clinic in Abu Dhabi. Since these hospital systems are based in the United States, their counterparts abroad (which are typically operated by a foreign entity anyway) allow doctors who have trained in western Europe or the United States to practice without having to recertify.

There are other smaller foreign corporations and hospital systems (mostly in English-speaking countries) that also allow U.S.-trained doctors to work abroad. Keep a look out in your specialty’s job bulletin.

Will working abroad work for me? 

Obviously you have to assess whether or not working abroad will fit your life goals and your family’s needs. If you were single and adventurous, it would be a no-brainer—you can work abroad, learn about new cultures, and even save some taxes in the process.   Many of these cities offer international schools if you have kids, and access to entertainment much like what you would find in the U.S.

Have you considered working abroad? What was your situation that led you to decide to make your decision?

 

(Photo courtesy of Flickr)

The Daily life of a Moh’s surgeon

The Daily life of a Moh’s surgeon

daily life mohs surgeonMoh’s surgeons typically focus their careers on removal of cancers on the skin. They are dermatologists by training, but have completed a fellowship (often lasting one year) on microscopic removal of cancerous lesions. The Moh’s fellowship society tends to limit the number of trainees in their field for various reasons, so availability is scarce. Competition into the field is fierce, since there are already a limited number of dermatology spots and only a handful of Moh’s fellowship positions yearly.

 

Daily practice 

Full-time clinical Moh’s surgeons are either in the office or in the procedure room on most days. Clinical days are spent seeing referrals for skin lesion removals. Most of these referrals come from dermatologists or internists. I would say that a high number of referrals end up requiring surgery. The clinical volume of a Moh’s surgeon runs around 20+ patients a day. This is significantly less than what a general dermatologist will see.

 

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Surgery days (or half days) are spent removing skin lesions, waiting for histology to assess clean margins (if possible), and closing up the skin lesions. These procedures are tedious, but the RVUs generated are very high. Very busy Moh’s surgeons can have 8-10 procedures a day.

The overall lifestyle of this profession is relatively good. There are very few emergencies. Most of the procedures are planned. Many Moh’s surgeons can structure a 4-day workweek, simply because there are sometimes limited number of cases that need to be performed and revenue rate per procedure is very high. Some Moh’s surgeons starting out in their practice will also see general dermatological cases.

Income generation

Many starting salaries for Moh’s surgeons being around $300,000. I’ve seen salaries around $250,000 in highly competitive markets. A well-established Moh’s surgeon who also owns a histology department can earn serious amounts of money. I once met a Moh’s surgeon who worked 4 days a week and took 2 months of vacation per year tell me that she made approximately $1.5 million (pretax)!

The ability of a Moh’s surgeon to generate high income comes from multiple revenue sources. The professional fees for the surgery itself are relatively high given the complexity of the procedure. However, I would estimate that the revenue stream coming from a histology lab (charges insurance for analysis) would more than double the income of an efficient surgeon.

 

Conclusion

Sounds great being a Moh’s surgeon, right? The truth is that there are still stresses with the job. You are mostly dealing with cancer. There is limited room for mistakes given that clinical management will change depending on surgical outcome.

Would you want to be a Moh’s surgeon?

 

(Photo courtesy of Flickr)