Month: March 2017

How to become a permanent locum tenens physician

Posted on by SmartMoneyMD

In Latin, locum tenens literally means “placeholder”.  Just like in any profession, there are “placeholder” jobs in medicine.  Corporations, hospitals, and medical groups use locum tenens often as a means to continue their line of business while looking for a permanent solution.  For the locum tenens physician, this can have potential benefits.

You have to be in the right profession.

There are certain specialties in medicine that work well with temporary workers, particularly those where continuity of care is not needed. These specialties include emergency room physicians (like WCI), anesthesiologists (like PoF), interventional radiologists, critical care physician, and hospitalists.  These professionals care for people who are either acutely ill or only need services temporarily (like during gallbladder surgery). Once the patient’s condition changes, this specialist’s services are no longer needed.

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Specialties that require no direct patient contact like radiology or pathology also lend to temporary workers.  You can work from essentially anywhere and at anytime.  Radiology works great for those who like to stay up late at night.

If you are in any of these specialties, you have potential to be creative with your life and find an unconventional means to make a living and care for patients.

Locum tenens for the adventurous doctor. 

I know an emergency room doctor who lives in San Francisco but works in Minnesota.  I call that geographical arbitrage for the city slicker.  You get your higher reimbursements in the Midwest but still get to live in a large city with an inflated housing market and nightlife (No offense to everyone in Minnesota).  If he wanted to pick up a few shifts at the local urgent care in Northern California, he can make even more money on the side.

You can’t ice fish in San Francisco!

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As a temporary doctor, you can have great opportunities exploring new cities while still getting paid.  Obviously this works best if you are either single or have no children, but I know doctors who bring their family with them when they take on locums assignments.

Locum tenens as a financial strategy.

If your profession is in high demand, you might be able to find multiple locums position in the same city!  The ability to do this is contingent upon living in a relatively large city or one with populous surrounding suburbs.  Hospitalists come to my mind as a profession that allows for this flexibility.

Most locum tenens positions confer the following benefits:

  • subsidized housing
  • subsidized travel costs
  • subsidized meals

Suppose that Dr. X is a locum tenens physician for four hospitals in Phoenix.  Each hospital subsidizes a fixed cost of $1000 per week of work plus travel expenses.  Let’s say that Dr. X only works at two hospitals in a given month. She has $2000 in housing costs that could comfortably cover a month’s rent in Phoenix! Guess what? She also gets two roundtrip tickets to a city of her choice due to the travel arrangements.  This could be anywhere in the country too! This includes Hawaii or Alaska! (No offense to LiveFreeMD, I’m not sure why anyone would want to vacation regularly in Alaska though) ?

Best of all, Dr. X is an independent contractor.  This means that she is a sole proprietor who can open an Individual 401k to shell away significant portions of income ($53k!) each year while being a doctor.  This arrangement also allows for more flexible business-related deductions for further income maximization.

The benefit of part-time work is that you can work on your own time.  No, you won’t get dedicated vacation days, but you could theoretically pile up your shifts and take an extended vacation.  Spend a month in Argentina. Hike through the Serengeti. You can’t do that if you’re shackled to a regimented work schedule.

The disadvantages of locum tenens.

The advantage of being a temporary worker is also the disadvantage of being a temporary worker.  You get no stability.  No stability in income, location, or lifestyle.  Your job can be a goldmine for several months and disappear when hospitals find a more permanent worker.  Sure, you get paid a higher rate, but you pay your own taxes, arrange your malpractice coverage, and other logistics.  There are headaches to running your own business. Some doctors simply don’t have the desire or energy to manage logistics outside of medical practice.

Most families with school-aged children aren’t going to be able to travel for weeks at a time without logistical problems.  Sure you can pull your kid out from society and homeschool them, but parents in New York City are already making sure their kids play nicely at their elite private Kindergarten schools so that they can get into Yale for college.  Good luck going up against that crowd.

How does this pertain to me? 

If you’re a plastic surgeon working in a cosmetics practice, there is no financial, lifestyle, or practical gain in becoming a locum tenens doctor.  If you are still in medical school deciding on a specialty, you should be aware that these opportunities exist.  I probably wouldn’t base my residency choice solely on whether you could make a permanent career out of temporary jobs, but rather on your interests both in and out of medicine.  I know doctors who just like to climb mountains and exercise in their free time.  These guys would do great working temporary jobs because they can spend their free time outside of medicine.  I know doctors who enjoy practicing medicine—they probably would not be truly suited for a full-time part-time job.

Have you considered working as a locum tenens physician?

(Photo courtesy of Flickr)

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Low-cost investment showdown: where do you stash your funds?

Posted on by SmartMoneyMD
I opened my first investment account in medical school at E-Trade.  I was roughly $160,000 in loan debt, but I opened a Roth IRA along with a brokerage account at the same time.  I believe that stock trades at E-Trade were only $9.99 a trade, which was one of the lowest in the industry.
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I knew nothing about indexing at the time. Never heard of Jack Bogle or Vanguard. That was probably still okay, since I did not have much disposable investment income at hand. Now that I am more attuned to the available options in the market. The following are a list of where I continue to place my investments and my impressions so far:

Vanguard

This was my first custodian after I started indexing my funds.  Great low-cost options are available, along with Admiral funds for even more savings after you’ve reached a certain amount.  There are essentially no service fees as long as you commit to electronic documents. The website interface is relatively basic but functional.  I wished that Vanguard offered more detailed analyses on funds, but most of the time I already have done my homework about which funds to purchase prior to venturing on the Vanguard website.
My second pet peeve of Vanguard is that there is no easy way to calculate an annualized rate of return on my investments.  The Vanguard interface has a “Balances Over Time” tab that calculates an overall growth of your funds like this:
A 10.5% rate of return is deceptive if you don’t account for the duration investment. My annual rate of return is a meager <4%!

Sometimes you don’t want to load up a spreadsheet to do these calculations by hand. I still keep my investments in Vanguard, but I have since started to diversify even more, as we will see below.

Fidelity

I started placing funds in Fidelity over the past year, due to a slightly lower expense ratio, and the fact that they offered airlines miles on keeping funds with them.
As I had written before, you can earn up to 50,000 Delta, American, or United airlines miles by stashing at least $100,000 in Fidelity. You can also receive miles for smaller investments.  The Fidelity index fund options track all of the standard markets that Vanguard funds do, so you don’t really sacrifice much if you are a Vanguard loyalist.
I like the Fidelity interface.  There are clear cut menu options, customer service is relatively competent and prompt.  My employer uses Fidelity for its 401k custodian, so I’m able to reduce the number of logins to keep track of.

Charles Schwab

 
I opened a credit card account with Charles Schwab years ago when they offered a free iPod Shuffle after the first purchase. I promptly closed my account a year later when I realized that I was not getting any further benefits from using the card. I never even considered their investment wing until now, because their expense ratios were horrible. Not anymore:
Schwab may have the lowest expense ratios to date!

This is only a recent change since March of 2017, presumably because of the competition in the market, especially from robo-advisors who also charge minimal management fees.  I plan on placing all of my future investments in Schwab.

Where do you keep your investments?

How to save money on social events

Posted on by SmartMoneyMD

At some point in our careers, we will end up either hosting or participating in social gatherings.  The events may be as simple as meeting up with a few colleagues at the bar  or renting out an event space for a departmental party.  This is essentially what happens in the big cities like New York and San Francisco where most doctors aren’t going to have much apartment space (more importantly bathroom space) for more than a handful of people.

If you live anywhere else in the country, you could end up saving quite a bit of money if you offer to host an event in your own home.  It can be done, no matter what size of home you live in.  I once had a coworker in New York’s Upper West Side host frequent parties in his 1200 sq ft, two bedroom two bathroom apartment. I believe that we had about twenty people in the apartment at one point with room to spare!

 

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The benefits of hosting a party at home.

As the host, you essentially trade the hassle of traveling and parking for having to organize your own event.  You have to assess whether that is worth it to you.  But everyone can end up saving a bit of money if someone in your group volunteers to host.

Space.  For large groups, restaurants gouge you either on the space rental or on the minimum purchase amount of food needed.  That can easily run $1000 if you have an entire department to host.

Drinks.  The biggest money maker in the restaurant business is alcohol.  Beer, wine, and spirits confer the highest profit margin in any sale.  In parties, we drink alcohol.  Unless your friend Physician On Fire (who owns shares in a brewery) offers to host your holiday party at his brewery, you’re going to spend a ton of money on drinks.  A $12 drink at the bar could buy you an entire 750ml bottle of table wine. If you drink the cheap stuff, you can get 1.5l at Total Wine!

If you’ve already paid for a fancy chandelier, you might as well show it off.

Food.  Even if you cater all of the food to your home, it will be cheaper than purchasing food at a restaurant or bar.  Better yet, your hosts can each potluck items for the event.  Someone’s gotta have a Costco membership.

You might also like: The only strategy you’ll need to save money when you’re too busy to price shop.

 

How much you can save will depend on how much time you have to spend on preparing meals for your guests.

Comfort.  Most social events I’ve been to in restaurants are confined to a room where everyone is sitting around a table.  You only get to talk to the people immediately adjacent to where you’re sitting.  Larger settings in restaurants can be arranged in a cocktail-like setting, but boy are those expensive.  If you are attending an event at a coworker’s home, you’ve potentially an entire backyard for kids to run around and plenty of space for everyone to mingle or sit down.

Make sure you are adequately insured.

Liability is more of a touchy issue.  It probably won’t matter as much if you are hosting your partners at your home. However, once you have employees and ancillary staff around, there is real risk of liability.  What if someone gets injured in your swimming pool? What if one of your employees gets inebriated at your home and hurts herself or someone else? What if said inebriated employee gets into an automobile accident on the way home? If you aren’t financially independent already, you still have great financial liability that some sleazy television lawyer is waiting to sue.

Get yourself some umbrella insurance.  You might not need any if you are still a resident with a six-figure negative net worth and struggling to pay your electricity bill, but once you are an attending with some wealth attached to your name it’ll give you peace of mind.  For those of you who have already looked into it, you will likely find that your auto and home insurance company will offer umbrella insurance, but may have certain stipulations.  Most companies require you to purchase a minimum amount of auto insurance in order to meet the requirements for umbrella. Even though a $1 million umbrella policy might only cost you $400 a year, you might have to purchase a more comprehensive auto insurance that might run you an extra $1200 a year.  It doesn’t matter if you drive a 20 year old Honda or a Maserati.

Umbrella insurance itself is inexpensive, but in order to meet the qualifications, you might have to increase the coverage of your vehicles and homes.  Food for thought.

What other suggestions do you have to save money on social events?

(Photo courtesy of Flickr)

How soon should doctors be able to retire?

Posted on by SmartMoneyMD

The financial blogging world seems to be obsessed with who can retire at the youngest age. We’ve got thirty-year-olds hanging up their hats and traveling the world proclaiming that they are done with the regular workforce.  Obviously there really isn’t much of a standardized amount of money that one should have when they retire, other than a fixed multiplier of annual expenses on the oft-bastardized Trinity Study results.

25x? 35x? 36x? 40x?

Having a multiplier on your annual expenses instead of a fixed number like $10 million allows people to reach an achievable number based on individual needs.  And boy is there a wide range of net worths out there. I recall seeing that Pete of Money Mustache fame hung up his hat after accumulating around $700,000 in his early 30’s. Not bad. Pete, however, is one handy guy who has the right attitude of living like a king spending only $25,000 a year for a family of three. The math might not work if you like driving a Hummer H2 to commute 60 miles roundtrip to work each day.

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Jacob Fisker of Early Retirement Extreme fame became financially independent at age 30, and “retired” at age 33. Mind you, he has a doctorate degree in physics. I have a friend who got his physics Phd at age 32 still has a negative net worth.  I don’t recall exactly what Jacob’s “magic number” was, but I do recall that he probably holds the record in spending what I consider to be almost no money. Bravo.

On the other end of the spectrum is my fellow physician blogger, Physician On Fire, whose exceptional level of fitness is matched by an exceptionally impressive net worth of around $3 million at age 41 despite only started on a real job after training in his late 20’s.  By his meticulous calculations, he is indeed financially independent and can start cutting back on his work soon enough.

Even higher up on the absolute bank account value spectrum is Sam from Financial Samurai, who truly is one hard worker living in a high cost of living area. After leaving the financial sector, Sam built up an impressive array of passive income streams that continue to fund his net worth.

In fact, many of the early retirement folks, by virtue of discussing their financial journey online, are able to generate ancillary income that supplements or even replaces income from their prior careers. Interesting world we live in, eh?

The doctor dilemma and early retirement

I finished my training in my early thirties. I had a solid negative six-figure net worth to my name then. I actually came across Money Mustache before it became a cult following, and promptly forgot about it because I didn’t think that this sort of hogwash applied to doctors. Why?

It seemed foolish to go through such a traumatic, challenging, and life-changing decade only to hang up your hat prematurely. Society has invested in your education, you’ve invested in your education, and your family has also sacrificed for your education. Are you really going to throw it away because you don’t like the way healthcare policy has transgressed?

The Smart Money MD Solution to Early Retirement

 

I like practicing medicine. There aren’t that many jobs out there that directly compensate you so well for clinical skills.  I also hate dealing with hospital politics. I am also currently not financially independent, so I still have to continue working in the meantime.  However, the goal is not to quit a soon as you can. You just need to build up enough of your net worth that your primary job as a doctor isn’t a necessity for survival.

Work at least as many years as you put into becoming a doctor.

 

If you spent four years in medical school, and three years in a family medicine residency, you need to work a minimum of seven years as an attending earning a six-figure salary.

If you spent five years in medical school, one pre-residency year of research, five years of residency, and three years of fellowship, you need to work at least 14 years.

I think that this is a reasonable number of years to help out society with your unique skills. Sure, some specialties are going to have more money in the end than others: an ER doctor spent the same number of years as a family medicine (FM) doctor training, but can earn more than twice as much as the FM doc.

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For example, let’s take a look at a hypothetical simplified situation in which a doctor earning $250,000 annually will end up with after 10 years. Suppose he is in the 25% effective tax bracket and spends $75,000 annually.

You might have even less if you started with student loan debt!

After 10 years with a conservative 5% growth, he will only have slightly south of $1.5 million. This translates to a safe withdrawal of 4% at less than $60,000 annually. Not bad, but there is not much buffer.  Obviously, there is a wide range of what you can earn and save as a physician, but not every doctor will have amazing income potential.

Afterward, go into part-time practice.

The beauty of getting close to your magic number is that you become less dependent on the B$ that is involved with work.  If you don’t like dealing with some of the politics, you cut back your hours to reduce exposure. You earn less, but you also might be happier.  In contrast, if you still need to keep that Hummer in the garage for your grocery shopping, you might need to figure out another way to fund your habit. There’s nothing wrong with staying happy. Just be aware that there is no free lunch. Your net worth simply needs to fund your expenses. Easy peasy.

 

Transition to a lifestyle existence.

You might also like: Why every doctor needs a side hustle.

 

If you plan to bail out of clinical medicine because you have enough money for eternity, you still have to figure out how to occupy your time. Sitting around the house vacuuming the carpets every day gets boring. If you made it through medical school, you probably have enough ambition to do something more with your life. It doesn’t have to be as admirable as providing healthcare to refugees either.

Do you spend your time brewing beer? Perfecting your photography skills? Volunteering for youth groups? Who knows, you might actually have a hobby that can generate additional income.

What is the Smart Money MD plan? It is still in development. I am mapping out my career roadmap, finances, and savings rate. Whatever the future brings, it will be awesome.