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Author: SmartMoneyMD

Just receive your first job offer? What should you do next?

Posted on January 13, 2017January 30, 2021 by SmartMoneyMD

Congratulations! After a decade of slaving away in your medical training, you’ve got your first job offer in hand! If you’re really lucky, you might have several offers to evaluate. But wait, there’s all this legalese and gibberish—nothing makes sense!

Do you just hire a contract lawyer and be done with it? How much is a good rate for a contract review anyway? You call around to your friends and colleagues who graduated a year or two before you to inquire. They give you some advice, but it turns out that they might not be too familiar either. What should you do?

There are some fundamental aspects to understanding job contracts that everyone should know. These are the things to follow:

Have someone review your contract.

Yes, this means shelling out some money and having a contract lawyer or a review company who is familiar with your area look at the contract. As much as you want to save money, this is money well spent. The last thing you want to do is move your family to a new city for a new job only to realize that you have to take call every other night even though there are ten doctors in your practice!

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This may cost you several hundred dollars up to a thousand, and it will sting especially if you are in your first job. This is something that I don’t recommend skimping out on.

Someone who is familiar with your area may know that there are certain rules or laws that pertain only to your city. Moreover, they may know the history and track record of hospitals or medical practices in the area. That information by itself is invaluable.

Read the contract yourself.

Hiring someone to review your contract simply isn’t enough. You need to spend some time reviewing the legalese as well so that you can be informed about what your contract reviewer is going to say. Here are a few key items that I considered:

Salary: How much are you going to get paid? How long is that guaranteed for? Are the any incentives to exceed the standard salary? I would compare the offer salary to what is considered the norm in your field (MGMA, AMGA), and how many years that you have been in practice. For instance, there are different ranges for starting salaries depending on your given specialty. Try to find out what they are, and figure out where you stand in the range.
Noncompete: Some contracts have restrictive covenants that prevent you from working within a certain distance and duration of the employer in the event that you decide to leave the group. The laws vary depending on which state you are in, and you can determine if any of these rules are enforceable. How much do these laws actually matter to you? If there is any possibility that you would need to stay in the area if you left your job, you should consider getting this clause removed or negotiated.
Growth: Will your job be any different after your first few years? Do you have any possibility of becoming a partner, owning any equity in the practice, or expanding? Is there any real estate in the practice that you could potentially own?
Time off: Is there PTO? Does it accrue? Is it enough for your needs?
Maternity leave: This is huge. Some hospitals or employers will stiff you on the maternity leave. They may not have a clause at all for this. If there is any possibility that you would need to invoke this benefit, negotiate this in or walk away.
Locations: Some practices have multiple offices in different locations in different cities. How much do you want to travel? Do you have to fly to satellite offices (Yes, this can happen)?

Compare your offer with others that you might have received.

You can really learn quite a bit if you have two different offers on the table. There is unlikely going to be one ideal offer that is a no brainer. You will have to settle on certain conditions. Some practices or hospitals are just arranged differently. If everyone else in the group is taking call for the entire state, it’s not likely that you can get away with negotiating that out of your contract.

Consider the overall terms of the contract.

This category includes everything that is not objective. How is the writing in the contract? Are your potential employers sticklers? Do they nickel and dime you? This really calls upon your Spider Sense. Some of us are great at identifying things that could go wrong. Others, not so much. How flexible is the employer? Do they want to hire you badly enough to amend their rules?

Remember. Don’t push your luck and burn bridges. If an employer is unwilling to agree to your terms, don’t get angry. If the subject in contention is a deal breaker for you, just walk away. I think that most people are willing to be open amenable to negotiation as long as it does not put them in a financially or logistically challenging position.

Good luck!

What other terms have you considered in contract negotiation?

(Photo courtesy of Flickr)

Why are you a doctor, lawyer, or engineer?

Posted on January 9, 2017January 30, 2021 by SmartMoneyMD

No, this isn’t an interview question, but I’m sure that all of us who are doctors, lawyers, or engineers have been asked this very question at least once in our lives. I do think that this is a valid question that we should all reassess at certain points in our careers.

Because the moment that we can’t honestly tell ourselves why we continue our daily 9-5 jobs (or 11pm – 8am shifts) is the moment that we should consider what we can do to change our situation. It’s also not wrong to tell ourselves that we’re doing it for the money either.

We’ve got to live and get to retirement somehow, right?

I would add that doing our jobs for the money is okay until we truly decide that it’s no longer fun.

I took a poll of my colleagues and acquaintances regarding why gets them out of bed every day. It’s interesting how much variation there is in their responses.

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One dermatologist told me that she wanted to eradicate all frown lines, wrinkles, and skin cancers from the world. Fair enough. She does see over 70 patients a day, so by virtue of numbers alone, she is probably fulfilling her end of the bargain. Sure, the money is good, but she’d continue doing it until she couldn’t anymore. She definitely had a strong affinity to her profession. But the money allows her to wear those $1200 heels and that $10,000 clutch.

One engineer I spoke to was not so convincing. He had an advanced degree in physics and electrical engineering so he spent a considerable number of his younger years studying these topics. He worked for a research facility conducting various tests for both private industry and the government. Even though I had a science background, I really had a tough time following what he really did. He did take advantage of his employer’s arrangements with the local university and took continuing education classes in his free time. He probably didn’t love his job, but he probably didn’t hate it either. I guess it paid the bills. I actually think that he would have wanted to become a lifelong student if he had the option. His primary job allowed him to do just that.

One of my lawyer friends who graduated from a top tier private law school actually spends her time working for both the local public radio, taking care of her kids, and writing scripts for various broadcast programs. I could tell that she loves her current occupations. I’m sure that given her capabilities, she could have also been working at a high-profile law firm. More power to her. The law degree probably cost around $150,000 at the time, as did her private university degree. That’s a $300,000 investment plus seven years of your life. Now her income has been essentially zero except for whatever scripts get accepted. I do wonder how she lives in a $2 million home, though. 😉

In contrast, another one of my lawyer colleagues works at a corporate firm. He works over 100-hrs a week on certain weeks where deadlines loom, and about 50 hours a week at other times. He lives like he has a serious income (he probably has a serious income). I’ve wondered whether he’d have any ability to retire before age 70, but it’s not clear that he does unless he has a huge inheritance at some point (he actually might).

How does this apply to me?

Hearing from the four colleagues above, I am even more convinced that money does buy happiness. The dermatologist appears to enjoy her role in helping people, and also enjoys her healthy income. The engineer probably hasn’t found his calling yet, but his current situation appears to allow him to pursue his version of happiness. Lawyer #1 clearly has lined up her priorities to her liking. I suspect that she has been able to pursue her passion only because she has a bank account to back up her standard of living. Lawyer #2 may or may not be happy. I think he has allowed his success define his occupation and lifestyle. I guess it’s probably not a situation I’d want to be in long term, but I have seen plenty of doctors get consumed by their jobs.

What I’ve concluded from this thought exercise is what I’ve pushed along on this website—we really should consider molding our lifestyle to what makes us happy. Wealth is a source of our happiness and potentially our misery. The sooner that we can free ourselves from working towards getting wealth (and have that wealth work for us), the happier we can be.

Have you asked yourself why you continue your career or what your daily activities are (if you’ve reached FIRE)?

Photo courtesy of Flickr)

How good is the real estate market now?

Posted on January 6, 2017January 30, 2021 by SmartMoneyMD

I love watching those home renovation shows where investors buy a run down crackhouse, bring in their demolition crew, and sell the property a three-times the original purchase price. Amazing eh? We know these situations are the exceptions, but how good is real estate for building wealth?

I’ve certainly zero experience in the rental or the buy-and-hold markets. The only real estate I deal with is my own home (which I sunk a foolish amount of money into fancy kitchen appliances) and a REIT fund that’s losing money in my IRA. Is real estate an investment vehicle that I hope to venture in one day? Sure. Everyone else including my mother-in-law dabbles in it and is convinced that it will be the savior for my retirement.

I believe that the financial freedom advocates are divided in their opinions of real estate. There are plenty of early retirees who are convincingly opposed to owning any home—I think several have written manifestos against property ownership. Whether or not their math is sound, the opponents to home ownership are typically the ones who basically spend their days traveling the world and country hopping.

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Sure, but what if I wanted to stay put? Is it worth sinking in a chunk of change to own a piece of America? Let’s see:

Scenario 1: Upper East Side Manhattan Co-op

This unit is in a prime location on Park Avenue in the Upper East Side of Manhattan. You can run to Central Park and exercise every day if you’d like. I wished that I lived in a place like this. This is a 1000 sq. ft unit on the market for $1.1 million. This is more than twice the size of my apartment rental in NYC! This is actually a reasonable price per square foot. Let’s look into some statistics:

Prewar building with an HOA of $1,582 a month! If you owned this unit outright, you’d still be contributing about $2000 a month for HOA and utilities! The property tax on this unit will run about $90,000 a year. So all in, your annual upkeep on this co-op will be about $114,000! Oh yeah, don’t forget that it is also customary to tip the doorman during the Christmas holidays too. A look at the Zillow pricing history shows that the pricing for this unit has been relatively stagnant over the past few years. So much for appreciation of this property’s value:

We love dealing with 7-figure properties!

In fact, a recent report by the Eliman Group shows that Co-Op sales in Manhattan for Q3 2016 has been declining:

Courtesy of Douglas Elliman Q32016 report. High profile real estate guys in the city. www.elliman.com

Let’s suppose that you are looking at this property for investing in cash flow. I’d say that the unit could command perhaps $3000-$3500 in monthly rent as a one bedroom unit given its great location and building amenities (read: doorman).

How can one possibly get positive cash flow on this unit?

Answer: You can’t.

The rental income wouldn’t even be enough to pay for the taxes, let alone the doorman’s salary through the HOA fees. This is the sad truth of about the NYC real estate market. Many of the owners are either holding companies or longstanding owners who bought the units decades ago at the fraction of the price. Fortunately with the prime location of this co-op, the value of this property will not diminish significantly over time.

Lesson learned: If you have a huge chunk of change that needs to be parked somewhere, New York City isn’t a horrible place to put it

Scenario 2: Condominium near the University of Indiana Campus in Bloomington

I arbitrarily picked a college town in a relatively inexpensive city. Consider that you’re trying to find a unit near the university to rent to graduate students. A quick find shows that there is a condominium within walking distance of the campus:

You can get a whole lot of land for little money in the Midwest!

This is a two-bedroom, two-bathroom unit for $105,900! Modest amenities, great location, and in a relatively good complex. I would be great for two graduate students or a small family. Further details show that the unit does have an HOA of $245, which I am not thrilled about in a small suburb, but not the end of the world:

Sewage and trash are included in the HOA, so that might shave off $60 in utilities a month.

How can I get cash flow out of this property?

With a downpayment of $20,000, one could probably negotiate a 30-year mortgage to cost a little less than $400 a month. If you include the HOA fees, you’d be paying about $600 a month at the minimum to maintain. I think that one could rent out each bedroom for $500, or the entire unit for $950 a month.

Let’s say that you rent out this unit for $950 a month, and your costs are $650 a month for mortgage, HOA…etc. Assume that you only get to rent this unit for 11 months of the year. With $300 of ‘net-profit’ per month for 11 months of rent, you get about $3,300 per year. With an initial downpayment of $20,000, you’re actually getting a 15% return annually. Not bad!

This amount is not going to fund your doctor lifestyle, at least it’s positive cash flow. Let’s say you buy five or ten of these units and rent them all out. You hire a maintenance person or even a property manager. You suddenly have $10-15k a year of extra cash flow for owning approximately $1 million worth of properties that you’ve leveraged with a little over $100,000 in parked costs.

Not bad, eh?

How have you used real estate to fund your cash flow? What suggestions to you have for me to get started with real estate?

Wasteful Wednesdays – Impractical laundry hookups

Posted on January 4, 2017January 30, 2021 by SmartMoneyMD

I have an unused washer and dryer hookup in my bathroom. I currently use the space as storage for mops and other cleaning supplies. It’s been an eyesore, and I’ve been considering installing a washer and dryer for added convenience. These days, you can find relatively inexpensive washers, especially if you can find a used one. In my space, however, there seemed to be one problem.

The space seemed awfully small.

Can you identify all of the problems in this picture?

That’s right. There are several problems with this picture. Based on the arrangement, it’s clear that the space was designed for stackable units only. The width of the space is only 27.5”, which means that you’d have to stack the units if you wanted a dryer in this picture. Okay, no problem. There are plenty of stackable washer/dryer combinations.

Not so fast buddy.

I should have know that the previous owners of my house had a strange obsession with expensive appliances. I noticed several other problems in the process of washer hunting:

There was no dryer exhaust!
The only power outlet in the corner was a 220v hookup!
There are hardly any washing machines that can fit into a 27.5” space. Like maybe two brands.

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Enter ultra-compact washing machines and dryers. This is a new category of appliances that I previously had absolutely no idea existed. These appliances are geared towards regions where space is an absolute premium. Think New York City, San Francisco, the 8th Arrondissement of Paris, or Hong Kong. These are places where you can expect to pay at least $1000 a square foot and still consider it a steal.

The only problem is that I don’t live in any of these cities.

Asko and Electrolux make compact washers and dryers. They are expensive. Think $2000 per unit. You can get a really nice LG washer that has more than twice the capacity of a compact washer for less than $1000.

Guess what? You have to buy the matching dryer too. As you can see in the picture, there is only a 220v power hookup in my wall. This is intended for a dryer hookups only. The Asko compact washer connects into the compact dryer for its power. The dryer also has a ventless hookup in case you live on the 30th floor of a 60-floor high rise.

At this point, I’ll just keep using this area to store the world’s most expensive Swiffer.

Lesson learned: you can end up spending a lot of money on appliances.

Would you buy a compact washer and dryer?

Ways to generate ancillary income as a doctor

Posted on December 31, 2016January 30, 2021 by SmartMoneyMD

Diversification is a path to reduce risk. This applies not only to our investments, but also our income. As doctors, we are sort of like one-trick ponies. I pretty much only do a handful of procedures and clinic-related activities. Most doctors are paid based on their clinical productivity.

If you are injured and cannot perform your typical duties, you are screwed. Sure, there’s disability insurance, but the cost of coverage does balloon up for most doctors in mid-career. Many of us pay almost a full month’s salary towards disability premiums in order to cover one year! This is not insignificant especially if you are trying to repay loans or build up a nest egg.

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What can doctors do to diversify their income?

Keep your primary profession

Okay, so this isn’t diversification, but it does boost your income stream, allowing you to have more to invest. The easy option is to do what you are already doing. You can rarely find something outside of your medical profession that can offer you a similarly high hourly rate. And it won’t be anything new that you’d be doing compared to your primary job. Add some shifts if you are a shiftworker. You can opt for locums opportunities or moonlighting (working a second part-time job) if your primary employer allows for it.

Some radiologists that I know actually do locums opportunities when they’re on vacation! There are many primary radiology jobs that offer significant amounts of time off. Sometimes family schedules prevent you from taking off for vacation (spouse’s job or kids’ school schedule)

One of my friend’s spouse is an ER physician. He lives in the Bay Area, but actually has several part-time options in the midwest, where reimbursements are higher!

Do things that are peripherally related to your career

I frequently receive surveys conducted by medical consulting firms with monetary compensation. Sure, the surveys will never replace your day job, but it can bring in another $50, $100, or even more depending on how involved the questionnaires are, and how well research in your profession is funded. I have noticed that professions that utilize medications more frequently will have more options for medical research related survey work.

Speaker fees: Let’s say that you are an expert in G6PD deficiency. There is a new medication on the market to treat it, and the company needs experts to vouch for their product. Yes, you will become a shill for a faceless corporation, but you can get paid for giving a talk. You won’t get rich off of these events, but it does add ancillary income.

Consulting: Likewise, you can either be an expert in the science or an expert in the process of certain treatments or specialties. You can start your own company and offer your technical knowledge of a particular subject. I have seen full-time clinicians start side consulting businesses, only to transition to them full-time when they become busier!

Find occupations outside of your primary career

I once met a doctor who ‘retired’ from clinical care at age 42 to start his financial corporation. I’m not sure what he actually does, but perhaps he sells insurance vehicles or offers wealth management services. That’s a significant 180 degree change, but I guess he likes what he is doing and is probably good at it.

From seeing what other money bloggers out there are doing for ‘side hustles’ or ancillary income, there is a wide range:

Food delivery / messenger: Delivery services like Postmates, UberEats, and other startups need drivers and messengers for the lazy! I’m not sure what the going rates are for messengers, but based on the pricing for customers, I’m assuming that one could command anywhere from $10-$15/hr depending on your region. @financialpanthe has reported doing this on his free time, and also the consequences of looking like a lawyer in the process! Kudos to him. I would assume not to risk running into my patients while I was making a delivery.

Uber/Lyft driver: This is the foundation of food delivery. I suppose that this is a fun way to meet interesting people while making some money. Sam @FinancialSamurai appears to have an interesting arrangement to activate his Uber activity whenever he wishes to drive across town to run an errand anyway. Nice. It is also less stressful since he already has multiple income streams that don’t require a set time commitment. Would I want to pick up an Uber passenger on my way to work? Uh, probably not.

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Real Estate: This is a big one. If buying your shares of VNQ (substitute your favorite REIT) isn’t active enough for you, you can invest in the real estate market. Plenty of money bloggers deal with real estate, like @FinancialSamurai @RetireByForty and others. There is definitely more involvement (or headaches) in real estate, but you can leverage your investments and generate significant cash flow while having a physical piece of investment property. I certainly have not had the energy to dive into the real estate market, although I would be willing to venture into this source of income if the right opportunity comes around.

Online sales: eBay, Amazon, and Etsy will have you covered. If you have a source of items that other people might want (like your handmade Russian-style finger puppets), you can have a wide audience with limited initial investment. There is still a cost of time involved in the sales process that can be time consuming. Remember, as a doctor you are trading your time and skills at a relatively high hourly rate for your services. If you are making online sales, you are doing the same thing at a lower rate. But hey, diversification is diversification.

What other means have you discovered to generate ancillary income?

(Photo courtesy of Flickr)

Wasteful Wednesdays – High flow water fixtures

Posted on December 28, 2016January 30, 2021 by SmartMoneyMD

It’s that time of the year between Christmas and New Year’s. Interestingly, Hanukkah also falls within this week—I don’t recall it falling so late in December in recent years. Most of us are relaxing with family, taking holiday vacations, and digesting that so unhealthy Turducken that we finally caved into trying out this year.

While taking a shower this morning and wondering what I could cook on my wasteful stovetop, I was reminded of another convenience that is not in keeping with conservative measures or being financially frugal—my shower head.

The rage these days is about low-flow fixtures. You have 1.6 gpf toilets compared to the classic 5-gallon toilets of the 80’s and early 90’s. I remember being able to modify those 5-gallon toilets to flush using 6-7 gallons by changing the angle of the float, just to ensure that all of the waste is flushed away. More efficient toilet design such as glazing of the trap and wider flush valve diameters (remember, I am a self-proclaimed toilet expert) allow less water to do the trick.

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Likewise, low-flow faucets and shower heads are becoming the norm, to decrease water consumption. Our local utilities company actually sent us a 1.25gpm low-flow shower head. I’ve used it before, and it does the trick using aeration holes to diffuse the water spread.

However, when we moved into a house with wasteful kitchen appliances, I started using the built-in shower head: a water-wasting Kohler 2.5gpm shower head!

It works great. Water pressure is excellent. It uses twice as much water as the low-flow units:

Boy do I love the extra calcium in the water!

Rough calculations on my water consumption and costs show that I will spend an extra $50 a year for using a high flow shower head. No, I don’t live in a drought-stricken area, but I do sometimes feel guilty of using extra water.

Do you use a low-flow shower head?

Is a degree from a prestigious medical school advantageous for doctors?

Posted on December 24, 2016January 30, 2021 by SmartMoneyMD

Some of us are overachievers. Some of us are overachieving doctors. What if you’re in-between? Let’s say that you’re an overachiever, and you want to become a doctor.

Should you go all the way up top and get that medical degree from a top private institution? Does it even matter? With tuition costs skyrocketing, you can easily spend $60,000 annually on tuition alone for each year in medical school. Add another $10-$15k in room and board, and you will be about a quarter million in the hole by the time you get out. In contrast, medical school tuition in 2016 for UT Houston for in-state resident is only about $20,000 annually. That’s a big difference.

These are considerations that are rarely taught or even discussed. If you are planning to go to medical school, it does pay to consider the consequences thoroughly before you proceed.

Does a prestigious degree help get you a better job?

It depends. It depends on where you plan to work. In clinical medicine, you can either work at an academic institution or in the private sector. Many job situations in the academic world require teaching, research, or involvement in administration. If I were a departmental chair looking to bring on a clinician-researcher, I’d want someone who not only can practice medicine well, but also has strong writing skills, coherent presentation abilities, and innovative characteristics. If two candidates had similar track records with similar recommendations and charisma, I might lean towards going for the gal with the Ivy-league degree, especially if I am running an Ivy-League department.

If I needed a doctor in the private sector, the institution that granted the degree is unlikely going to matter much at all. Yale? Great. Wayne State? That’s okay with me. You just need to be ethical, hard-working, and reasonable to deal with. For all other qualities, the verification process in each state and governing medical board can do the rest.

Do doctors from prestigious institutions make more money?

It depends again. To understand this question, you should understand how doctors make money to see whether an Ivy-League degree will translate to higher dollars. This is also contingent upon how you are using your medical degree, whether you are practicing medicine, performing administrative work, or consulting. Remember, you don’t have to be a doctor to get rich. Or you shouldn’t become a doctor if your main goal is to become rich.

If we are considering doctor worth from revenue alone obtained through clinical practice, insurance companies make no distinction between where you obtained your degree. U.S. grad, international grad, it doesn’t matter. As long as you pass your boards (sometimes you don’t even have to do that!), you’re golden. From clinical practice alone, you’re not going to make more money having gone to a top college or medical school. Period.

Now having that special degree CAN get you more business, depending on which part of the country you practice medicine. This is particularly true (and sometimes annoyingly so) in the New England area. Patients in New Caanan Connecticut do (in general) care where you obtained your degree. They may or may not even be highly educated, but the high concentration of Ivies in that region predisposes this behavior. Unless you have significant street cred and have been working in the area for a long time, your patient may doctor shop your degree.

Okay, I sank $200,000+ into an Ivy-league medical degree, what am I going to get in return?

Many of us, under the guidance of family, friends, or schooling, end up enrolling in well-known [read: expensive] private universities and medical schools.

DESPITE the equivocal conclusion by Smart Money MD.

Don’t fret. You’re not totally screwed. If you have a good inheritance coming your way or an alternative means to fund the process, you’re actually in great shape.

If the above doesn’t apply to you, don’t fret either!

Step 1. Pat yourself on the back.

Congratulations. It is not easy getting in. It is SIGNIFICANTLY more difficult to get in medical school than law school, business school, or college. Kudos to you.

This is a fact. By numbers alone. There are simply fewer number of available positions in medical school. The Class of 2018 Stanford Graduate School of Business has 417 new students. Last I checked, the Stanford medical school had fewer than 90 students per class. I think the acceptance rate in the medical school was about 2-3%, while the business school acceptance rate was 6%. If you compare these numbers to that of an average public medical school and public business school, you’ll see that the class sizes will be larger and the acceptance rate will also be higher.

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Step 2. You’ve got a lifetime of prestige attributed to your name.

Yup, your mother can brag about her daughter at every holiday party. Your distant relatives will direct their children to you for advice. Your alma mater will also hit you up for donations every single year. You can volunteer with your local alumni group and have “exclusive parties”.

You have a lifetime of memories and connections to potentially successful friends and colleagues.

This is not a bad situation to be in.

Step 3. Clear your mind and get to work.

Get yourself back into the real world. Don’t let anything else cloud your judgment. You’re probably not even that smart. Your coworker at the hospital who came from Portugal probably is one the smartest gals in her country. She memorized Harrison’s twice to pass her country’s exams. Oh yea, she also repeated residency in the U.S. and passed all of her U.S. board exams…in English.

That’s right, her native tongue is Portuguese, and she learned Spanish as her secondary language. English was her third language.

Get yourself out of debt if you funded your education through loan sharks. If I dug myself out of debt, so can you. Save up your money. Figure out how much you are worth.

Figure out what makes you happy. Then work to get there. Easy peasy.

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(Photo courtesy of Flickr)