Month: June 2017

Hacking your energy consumption

As I get busier in my career, I become less inclined to micromanage my lifestyle in order to save a few dollars. I see this in my coworkers. They don’t bother with coupons, discounts, or even budget car maintenance.  There is a fine balance between micromanaging and laissez faire.  If you let things slide too much, the dollars will eventually add up.  Do you cut back on daily Starbucks breakfasts and drinks? What about groceries at Whole Foods?  Do you get take-out dinners twice a week because you’re too busy to cook?  How much money are you actually saving?
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Likewise, there’s little point trying to save a few bucks on small dollar items if it’ll take you too much time to figure out the most economical strategy.  Electricity is one cost that I have yet to find the motivation to optimize.  It’s a fixed cost by the local utilities.  It’s not like you can turn off your refrigerator.
Come the Kill-A-Watt power meter.  I came across this little gadget at the local public library.  You can also find it online for approximately $20. It measures current, voltage, and total power consumption of any appliance that you’d plug into it. Engineers can totally geek out on it.
Handy little guy will read your power consumption! Geek out.
This device is most useful for identifying vampire appliances that might be sucking up the power in your home.  I played around with it and actually found out that my little upright freezer in the garage actually consumes more electricity than my fridge in the kitchen!
This little guy consumes more electricity than my full-sized refrigerator!
Not a bad find. I’ll have to figure out a way to replace the freezer with a more energy-efficient chest freezer.
 
Have you tried out any energy saving devices?
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Insuring your future through your health

As a healthcare worker, I should also practice what I preach. That means eating healthy, exercising frequently, and following sound lifestyle habits.  Unfortunately I’d be lying if I were to tell my patients that I adhered to all healthy behaviors. I actually see quite the contrary in the workplace.

Overweight healthcare workers.

Fast food establishments in walking proximity of the hospital.

Vending machines with credit card readers or “Flex” spending through hospital ID cards.

Fluorescent lighting in medical buildings.

Good health for healthcare workers isn’t completely a bust. I see many medical practices implement discounted gym memberships for its employees. Other incentive programs include “free” Apple watches for employees who reach certain activity milestones (but additional withholding of paycheck when you don’t meet those goals). Some hospital systems discount your medical insurance premiums if you have normal cholesterol, blood pressure, and hemoglobin a1c levels. Good for them.

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I’ve come to realize that good health habits are probably learned in childhood. My parents emphasized that I should take walks and play outdoors, but there was never any emphasis on regular exercise to become more fit. I was never athletically gifted, so I never focused my energy on getting fit.  Who knew that weak core muscles would start haunting your future self?

My eating habits were horrendous essentially up until the end of the fellowship.  Long work hours combined with limited time and money to took a toll on my health. I never felt physically “bad”, but youth was probably the only advantage I had on my side. I remember there were instances where I strained my neck, back, or arm muscles that left me aching for weeks. Yes I was in bad shape.

Jillian Michaels probably saved my career.

It’d be a huge claim to say that a single person changed my life, but I picked up a Jillian Michaels exercise video at the local library one day. We all know that the first step to better health is to stop lamenting, get off your ass, and put in some time.  Time, at least in my mind, was something that was in short supply.  Like all of my patients, I was looking for a quick fix.  An exercise video that promised great results with only 15-20 minutes of daily work sounded great to me. Yes, exercise videos are notorious for promising results with minimal effort, but I figured that in theory there should be some optimized cardiovascular and weight training in a condensed 20 minute video.

I committed to exercising at least 20 minutes a day on these workouts and failed miserably.  I came home on most days fatigued and too burned out to exercise.  Moreover, I still had to check work e-mails, deal with administrative fires, and whatever else that needed to be taken care of at home.

Don’t laugh. I’m pretty sure that I can actually finish a cardio stress test without dobutamine assist (maybe).

Daily workouts ended up becoming more like two to three times a week.  However, that was okay. I still burned calories. My muscles felt sore every single time I did them (yes I was that wimpy). After a year of doing these workouts, I came to realize that they were incredibly basic. My next door neighbor who was twice my age still had greater endurance than I did. To me, it didn’t matter.

I stopped getting neck and back pain.

At this point, I can confidently still say that I am at or below fitness average for my age, but that is okay. There is still room to improve, but the moral of the story is that you have to put your mind into whatever goals you want to achieve in order to succeed. I did that for medical school and in my career. There should be no reason why I couldn’t apply that to my health. I feel a whole lot better at work because I exercise.  Not a bad price to pay to insure that I can have a long working career if I choose to!

The real secret to getting rich

I wish that I actually had the secret to making a lot of money quickly—I’d sell it in a seven-part infomercial, run weekend retreat courses, and brand my own swag. That being said, I do believe that we can carve our own wealth if we plan our careers strategically.  Some of us are going to come up with great products, skills, and ideas that will change the world.  The rest of us can still do well in our own unique and amazing way.  I’ve come to realize that the one unifying factor that we see in everyone who accumulates substantial wealth is simply time.

We can talk about hustling, hard work, luck, wealth accumulation strategies, but none of these tactics will give you that financially independent wealth overnight. It just doesn’t happen.

Unless you win the Powerball (I have not).

Rome wasn’t built in a day. You’re not likely to become wildly successful overnight either.    And that is okay.

Find that goal.

Somehow we’ve been programmed by society to find ambition, achieve our goals as quickly as possible, and find other goals to tackle.  The average American takes less than two weeks of vacation annually! I was offered a job working in the tech industry that also offered two weeks of PTO annually. They even allowed you to carry-over PTO. We work more than essentially everyone else in Europe. The only countries that work more are Japan and South Korea.

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This is essentially a race to the grave. There is nothing wrong with hustling, but hustling without and end goal is counterproductive. Even worse, you could easily burn out and fail. Step number one in the wealth accumulation process is to figure out your end goal. Is your goal to quit your job by age 50? What about 40? Or is more vague, like creating a situation for yourself that would allow you to venture into other interests or spend more time with the family? The goal doesn’t have to be super ambitious. You can adapt it as you progress and determine what makes you happy.

Set that timeline.

Whether you plan to reach that goal in five years or twenty, you need to have that deadline. A definitive course gives you something to strive for, and aim for a realistic timeline.  Mr. 1500 days set his goals, reached it earlier than expected, and then adjusted his “magic number”.

We have to be flexible. Work situations change. We might end up moving. You never know. These are the cards that we’re handed, and we deal. I’ve encountered three different situations where my job trajectory could be impacted, including losing my job due to my employer shutting its doors. I fortunately have not been dealt the axe, but these instances will force us to craft out a Plan B.

Work hard, sit back, and enjoy the journey.

You life goals aren’t going to be handed out on a silver platter. You still have to work for it, and stay focused. Fortunately the journey isn’t a straight-shot to the moon (or as high risk). It’s more like an extended hiking expedition. Life is more pleasurable if you enjoy the nuances of our daily activities. Is it the espresso shot that you make every weekend? Or the trips to Costco? It doesn’t matter, because this is what it takes to help keep your eye on the prize.

Going fast is useless if you don’t know where you’re going.

Before you know it, that time will come!

(Photo courtesy of Flickr)

How much should you leave to your heirs?

In the asset management world, there is always some discussion on how you can maximize what you leave behind to your heirs. We all want to make sure that Uncle Sam gets the minimum amount of your hard-earned wealth upon your demise. Fair enough.

I think too much emphasis goes into squirreling away your money into various protected vehicles.  Cash value insurances. <shudder> Trust funds. Step-up basis. Sure, these opportunities are worth knowing about, but the main question about all of this is who in this world should benefit from your financial prowess? And how much is enough?

Leaving religion aside, one has to realize that you can’t really take any of this to the grave. Anyone other than yourself will get your wealth. Most people are going to give it to their kids, grandkids, relatives, and charity. I’ve seen this in my closer friends. It’s an interesting phenomenon to see on the outside.

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Middle class inheritance.

I have a friend who lost her parents a few years ago. Her family was a quintessential middle class family. She worked as a manager in a local small business. No one in the family had professional degrees, but they all managed well. All of the siblings ended up splitting the savings accounts and the house. As I recall, each recipient received on the order of $100,000 total.

I would take a windfall over nothing on most days, but you realize that an amount like this isn’t going to allow anyone quit their day job. Taking all of this in cash all once would probably trigger a relatively sizable tax amount for the average American too.

I’d want to take back my loved one any day in this situation.

Upper class inheritance.

I have another distant colleague whose parents were in some shipping business. She is a general surgeon who doesn’t seem to practicing medicine anymore (I don’t know her that well, but she stopped after having kids).  Her husband was “in the finance industry”. Now, it was no surprise based on her lifestyle during medical school that she came from serious means. Nice clothing, furniture, apartment, and vacations. If I were in her shoes, I might not have even had the ambition to go into medical school, yet alone become a surgeon. When her mother passed, I recall that people spoke about “serious amounts of money” in the inheritance. Not sure what that means, but the people who spoke about it were all doctors, so I would assume that these amounts were big in my book too.

Thanks to Facebook, I now see vacation pictures from their family almost every other month. They have a nice home in the Bay Area that recently sold for nearly 8 figures.  I think that they are all happy.

How much money are you planning to leave on the table after you’re gone?

Windfalls and their impact on your lifestyle.

The easiest way to ruin any person’s self-initiative is to give them a crazy amount of money before they have established their careers. In this regard, it’s probably a good idea to set up a trust fund if you end up having significant wealth to leave behind.

Fortunately (or unfortunately) most of us will never have enough excess money to ruin someone’s life. But we should consider whether leaving an inheritance should be part of the investment equation. My strategy is as follows:

  1. Work hard and save as much as you can before you have dependents.
  2. Continue to work hard and instill work ethic into your dependents or mentees.
  3. If you are able to contribute to others’ well-being, do so. Invest in their education and work ethic.
  4. If you have excess after helping out your family and friends while you are still alive, consider the charities that you have left out.
  5. Leave behind what amount you feel is adequate after you’re gone.

That’s it. Simple and sweet. If you hustle enough in your working years to fall into the trust fund level, congratulations. You’ve gone above and beyond. Otherwise, there are more pressing matters to deal with in your lifetime.

(Photo courtesy of Flickr)

June 2017 Smart Money MD Investment Update

One of the tenants in maintaining the right financial trajectory is to reassess your plan routinely.  It doesn’t have to be weekly or even monthly—I review my financial goals at most quarterly.  The idea is that you can stay on top of your game plan without consuming yourself in minutiae that you cannot control.  Our end game is to acquire a substantial investment portfolio from which to draw from. When our investments become sizable, we will see huge swings during the daily shift of the stock markets. Sometimes these swings can means tens of thousands of dollars on a given day. If you’re checking your investment accounts daily, then you’re in for some serious stomach upset.

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Here is a list of the items on my checklist as I am assessing my financial trajectory.

Savings rate.

As always, your savings rate is a factor in your net worth that you can directly control.  You must spend less than you earn. The more that you are able to stash away early in your career, the more time your savings can work for you. When I was a resident, my savings rate averaged a meager 10-15% due to being in a HCOL area! I did not start my 401k/403b savings until fellowship when I realized that I could eventually consolidate my pre-tax accounts despite changing employers.

As we are able to generate more income, we are able to increase our savings rate once our earnings exceed our basic needs. I aim to save at least 50% of my post-tax income.

I’ve got mixed feelings about this number. In general, 50% sounds like a great number. But it all depends on how much your income is.  In my experience, it actually gets harder to increase your savings rate as your income increases.

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Your savings rate slows down with increasing income partly because of higher taxes and lifestyle inflation. I’ve discussed this before, but I can’t go to work consistently wearing 10-year old clothing.  Gender also plays a huge role in clothing recycling too. You don’t even have to look in the medical profession either. When was the last time you saw your local news reporter recycling her clothing? Yes, news reporters do have their own clothing budget, but no matter how much they save on clothing, they inevitably will spend more than people in other fields.

As much as I want to be the rabbit in the financial game, being the turtle is fine as well.

For me, 50% is an achievable number. It could certainly be much higher, but that’s what I strive to hit. Every quarter, I look at my take-home pay and how much I end up spending. If I hit the 50% range, I am happy.

Asset allocation.

I then look at what happens to the amount that I save from my paycheck. Do I put some of it in a CD? Do I invest this in an index fund? Do I pay down my mortgage?

I still owe a serious chunk of change in my primary mortgage. More than I probably should be holding at my stage in my career. No matter. My current plan is to pay the expected amount, and assess as I go along whether to eliminate the mortgage completely. It all depends on job stability and what I could otherwise do with my savings.   The amount I put towards my mortgage should count towards my savings rate.

Since I am still early in my career, my primary investment vehicle is in the stock market. I keep my holdings simple through index funds, which are primarily held in the total stock market.  I try to contribute approximately 10% of my holdings into fixed assets such as CD’s, T-Bills, or bond funds, whichever I find to be most lucrative at the moment.  This means that I essentially go full-tilt into stock market.

Tax-loss harvesting? Not yet. Until I get a substantial amount of funds in play in the market, I do not plan to do any exchanges for tax advantages.

Long-term goals.

This bucket includes assessing my career goals. Do I want to look for a new job? Do I want to retire? How much longer should I be working? Based on the strategy of the wise Physician On Fire, going to a part-time status should be my next major career goal. This allows us to hedge against obsolescence, preserve earning power, and free up time to explore other interests.

My career trajectory is still a bit murky as I have had unpredictable levels of income over the past two years, which has made retirement planning a little tricky.  At my current course, I am hoping to cut down to part-time work over the next decade, hopefully within the next five years.  Can that be done? Perhaps. It all depends on the savings rate and asset allocation planning.

What is interesting in my checklist is that it’s really simple.  No fancy magic. It takes me about 30 minutes to log into my investment accounts and check in on what’s been happening to my earnings. I certainly don’t need an advisor [yet] to manage my earnings any time soon.

Where am I at in this financial checklist? I’m still staying the course. No lottery winnings yet, but slow and steady wins the race.

(Photo courtesy of Flickr)

Work is still bad for your health

Work is still bad for your health

Over the past two months, my work has been on a tear in a not-so-good way.  I’ve been clocking more hours than I ever had in my attending career.  The time I spend in the office and operating room is more intense than ever.  Ironically, I doubt that the hard work will even translate into additional year-end income.  The rationale behind such irrational aspects of medicine can only be partially explained through a PhD dissertation, but this is the life of medicine that we’ve signed up for.  Now, this post isn’t intended to be a rant session, but it does serve as data for me to reflect upon.

Longer/Strenuous Work Hours = Less Time Off

We only have so many hours in a day.  You have to rob Peter to pay Paul. Longer hours for me means that I have less time with the family, less time to clean the house, and less time to devote to the Smart Money MD website. More strenuous hours also mean that I am more exhausted when I get home.  Caffeine can only get you so far, so many of my evenings have been entirely unproductive or degraded into menial tasks like dozing off while having the television on.

Long-term this can’t be good for the psyche.  Unless you really love your job.

Someone else benefits off of your labor.

In the field of medicine, we try to cure diseases.  The more time you spend working in medicine, the greater number of people you will help. Helping people alone is a powerful feeling. I am happy every time I am able to help someone out with my medicine knowledge.

But medicine isn’t all for altruism.  We get paid to help people too.  And that pay isn’t necessarily bad.  A good paycheck is useless if you don’t have the time to enjoy it.  If you spend the bulk of your time at work, who exactly enjoys your hard-earned dollars?

No, we shouldn’t blame stay-at-home spouses or the kids! A physician’s family by default signs up for both the pains and joys of the physician member. I know plenty of partners and spouses of physicians who have equally challenging or more demanding jobs than they do. But family members also have to deal with missed recitals, holiday events, family gatherings, and other joys of being with friends and family.

The truth is that I’ve seen plenty of physician households that enjoy luxuries that probably don’t afford a significant increase in happiness and otherwise wouldn’t have been chosen if it weren’t for a good income.

Things like getting a $120,000 car instead of a $30,000 car for a four-person family. It’s bad when your trunk release in your expensive car fails to open and all of your fancy groceries spoil (yes, true story).

Image that your $100,000+ car is holding your $150 steaks in the trunk hostage in the dead of the summer.

Or getting a house so large that you need three hot water heaters in order to supply all of the faucets.

Or buying into a subdivision that requires a well-maintained lawn with grass even though you live in a drought-stricken area?

You end up throwing money unnecessarily to solve problems.

In keeping along the lines of the scenarios above, I’ve seen busy doctors throw money at their problems simply because they don’t have time to deal with them.  Ordering take-out more than four times a week is one example.  I’ve had another colleague who ended up paying for an entire hot water heater system (his was like 4 years old) because the first plumber told him that replacement was the only fix!

All of these scenarios have played through my mind as I’ve stayed late at work these past few months.  Is that something that I truly want to deal with long term?

It does, however, sound like a reminder how important maintaining your financial health is to our future.

(Photo courtesy of Flickr)