SmartMoneyMD | Smart Money MD

Author: SmartMoneyMD

Five mistakes I made choosing my first job

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

We all have either experienced the fears of starting our first job or will eventually do so at some point in our careers. It only happens once for everyone. Those of us who are in the market for a job change will end up reliving some of the challenges in job hunting—hopefully we all have learned from our past mistakes. As I am advising upcoming graduates during their job hunt, I have decided to collate some of the mistakes I experienced when I was seeking out my first job:

Not understanding the options for academic medicine

Not all academic doctor jobs are created equally. Medical graduates really only experience one or two academic scenarios from their training. What you might not like about your own experience of academic medicine may not necessarily be reality in all cases. Not all academic doctors conduct research. Not all academic doctors actually teach, believe it or not! How one’s compensation in the academic world also isn’t necessarily tied to academic productivity or clinical productivity. In fact, there are plenty of academic jobs that essentially function identical to that of private practice.

If your attending always seems to be jet setting across the world giving lectures and attending meetings in nice places, it doesn’t mean that your life in the same setting would pan out similarly. You might not necessarily realize the sacrifices that they make to have that sort of lifestyle.

Not knowing what I could ask for

Nearly everything is negotiable. Period. The caveat is that you have to realize what authority your potential employer actually has in negotiations. If you are negotiating with a small medical practice, it is likely that anything and everything is negotiable, even a stipend for a nanny! If you are in talks with a large HMO company, it is possible that the department head may have less leverage than you realize no matter how much they want to recruit you. Having a relative sense of what a potential employer can control will give you a better sense of what can be discussed on the table.

At some point, you have to raise the price on your worth…

Underestimating the time it took to get up to speed

One of the problems with finishing your residency or fellowship is feeling that you’ve mastered your trade. It gives you a false sense of security. This rings so true especially if your training spanned an inordinate length of time. Why wouldn’t you feel confident about your skills if you spent the last six, seven, or more years doing the same thing?

In reality you really only are fluent if you remained at the same institution, and even then there with be hiccups with independent decision making. There is a difference between practicing medicine knowing that there is someone responsible for you and calling the final shots. When you take on a new job, you have to learn how the EHR works, who the hospital protocols are, where the parking garage is, and how to get from one wing of the hospital to the emergency room without getting lost.

Frankly, all of the hiccups involved with a new job can be overcome with time. It takes more time than what you’d realize to become comfortable with a new gig. A rough estimate of the timeline to fluency is as follows:

Learn where the doctor’s lounge is: 1 week
Learn hallways of the hospital system: 3 weeks
Learn electronic health system: 4 months
Feel like work is second nature: 2 years

Expecting to make a whole lot of money

I must be getting old, but I get the sense that all of the new graduates want to work four days a week and make half a million dollars. Sure, medicine still does provide a relatively stable lifestyle but there’s really no free lunch. Some doctors find ways to carve out additional green in creative ways, but I tell every new graduate (or anyone else whose asked for my opinion), DON’T GET GREEDY. If you do, you will ruin it for the rest of us.

Some specialties will have a better lifestyle or remuneration than others, but no specialty will be perfect. Some of us are okay moving out to the boonies to practice medicine in exchange for a better lifestyle or compensation. Only you (and your family) will be able to decide for yourself what is important. Don’t chase the buck. It’ll get old pretty quickly.

Not everyone is your friend

This speaks from my cynical side, but realize that there is still business in medicine. It doesn’t matter if you are negotiating with a single doctor, medical group, hospital, or venture capital firm—the negotiations have to be profitable for both sides. While not every employer will be out to squeeze every penny and second of work out of a new doctor, there is always that possibility.

The world is full of sharks. Sometimes you have to deal with them. If you are unlucky enough to be suckered by one of them you still have a chance to learn from your mistakes. Sometimes the issues arise from negotiating pitfalls, where the junior associate ends up taking the bulk of the overnight calls, or simply limitations with growing her practice. Maybe the new doctor gets shipped out to satellite offices where there is limited volume initially. Some of the dealings I’ve seen are so devious that it boils my blood to realize how much the world can take advantage of naive doctors.

Conclusion

That’s it for now. Make a checklist when you are in your job hunt. Figure out your priorities, and good luck! If you have any comments or questions, sound out in the comments section!

How to fund your backdoor Roth IRA via E-Trade – 2021 Edition

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

Most physicians and high income earners are familiar with the Roth IRA and its backdoor component. The advantage of a Roth IRA is that we fund it using post-tax income but any gains upon withdrawal are tax-free. The potential upside can be huge since there

Weighing the geographical arbitrage scale for doctors

Posted on January 8, 2021January 30, 2021 by SmartMoneyMD

Large cities with robust public transit and cultural hotspots are the ideal place for some of us. Vast nature and open spaces will appeal to others. Some of us can only imagine living in warm weather next to sandy beaches. Fortunately all three of these locations need healthcare. As physicians, we are likely to be able to find a job nearly anywhere we’d like. Unfortunately some more coveted regions of the country come at a cost. This cost can manifest in several aspects:

high cost of living
low wages
competitive market
extenuating commute times / traffic
natural disasters (read: southern California)

For those doctors graduating with an average debt in the six-figure range, the lifestyle of where we choose to work can strongly influence where we decide to settle. How much of a range can we expect to see? Let’s take a look at a few cities:

Honolulu, Hawaii

Who doesn’t like beautiful beaches, tropical weather, and poke all year round? There are aspects of your life that you will have to compromise on if you decide to live there.

Median home price in Oahu in 2018: $810,000

Average physician salary in Hawaii in 2018: $241,000

Pros: Great climate, natural landscape, paradise in what people otherwise would vacation

Cons: bad traffic, high cost of living, rock fever

Toledo, Ohio

Unless you have family in this area, it is unlikely that any physician would consider moving there for career reasons (other than potentially high pay/opportunity).

Median home price: $68,000

Average physician salary in Ohio: $275,480

Pros: High salary/housing ratio, no traffic, low cost of living, proximity to a Great Lake

Cons: limited culture, relatively isolated area of the country, cold, snowy winters

If your main goal in choosing between Honolulu and Toledo is to get out of debt and build up your net worth as quickly as possible, then there is no comparison. There is a good chance that in Toledo you will find a better paying job with less work, less demanding clientele, higher reimbursement schedules, and lower living costs on all accounts. Yet, there are still people who will opt to practice medicine in Honolulu over Toledo…

According to a recent Doximity poll, the majority of the income-favorable metro areas aren’t in the coasts:

San Jose may actually be an outlier on the map, but the Bay Area poses challenges mentioned above that aren’t necessarily compensated by a marginally higher doctor salary. What polls typically don’t reflect is the rigor of the daily grind. For instance, one of my colleagues currently works in a six-physician group in the Bay Area. His group has five offices and two surgical centers to commute among during the week. He takes practice call every three weeks since the practice has a rule that the senior three doctors do not have to take call. In addition, he takes shared call for five regional hospital every five weeks. Practice building events include lectures at monthly seminars and trade shows.

Using the Geographical Arbitrage Scale in job selection

I define the Geographical Arbitrage Scale (GAS) to be graded with five variables, each with a maximum score of two points (decimal points are okay!). These are common variables that physicians consider when taking a job:

Income — earning potential includes retirement options and benefits
Work/life balance — includes access to family and friends
Environment outside of work — weather and activities that you’d enjoy
Career satisfaction — opportunities to innovate or lack thereof, depending on physician preference
Cost of living — higher score means lower cost of living

The GAS comparison between Honolulu and Toledo might look like the following:

Find out what situation you are in, and adjust your career goals accordingly:

If your GAS is too low, high tail it out of your job!

It would be interesting to see how long one could tolerate a low GAS score that might offer a very high income potential. In a case like that, one could “rebalance” the GAS score after five years to achieve a happier medium.

What is your GAS score?

Quick tips to maximize your cash charitable donations in 2020

Posted on December 30, 2020January 30, 2021 by SmartMoneyMD

This year has been a whirlwind of unexpected events. Even though medicine is traditionally expected to be a stable profession, many physicians have lost their jobs, been forced into retirement, or furloughed during pandemic times. Regardless of our income situation, physicians are still hopefully in the financial position to give.

Most physicians contribute financially in the form of cash donations to charity, mainly because it is the simplest means to give. Given the tax changes in recent years, a large number of physicians no longer itemize deductions either, so donor-advised funds (DAF) aren’t necessarily an option (unless you’re donating significant assets or lumping in several years worth of donations into one).
For those who are simply donating cash to charities, there are a few pointers to help maximizing your financial situation no matter how small or large your contributions are. Consider these tips a means of “couponing” for high income folks. There’s nothing wrong with doing it, and the effort needed is minimal:

Due to the recent CARES Act provision in 2020, up to $300 in cash charitable donations are deductible even if you take the standard deduction for your taxes. If you are in the 35% marginal tax bracket, this means that a $100 donation costs you “only” $65. Be aware that in 2021, you can get $600 in charitable deductions if you are filing married.
Most charities accept credit cards for donations. If you are signing up for credit cards at the end of the year, you can certainly use them to help meet minimal spend. You can lump your planned donations for the following year to this year to increase your spend if you choose.
If you have a Chase Freedom credit card, this quarter gives you 5% back for purchases through PayPal. Many charities accept PayPal. If not, you can generate a credit card number through PayPal Key. This means that every $100 in cash donations “costs” you $95. (referral link to the Chase card gives you $200 in signup bonus)

That’s it! What other tips do you have for cash donations?

Photo courtesy of Flickr.

Why doctors have trouble controlling expenses

Posted on December 29, 2020January 30, 2021 by SmartMoneyMD

This post was first published on January 2019 on Smart Money MD.

It’s easy to judge when you don’t experience the same difficulties that others do. The classic scenario in medicine is an internist, who runs marathons and bikes to work, tells his morbidly obese patient to lose weight. How would the scenario work if the doctor were mildly overweight, or has a body mass index of 30.5?

The same judgment is frequently seen in the online financial blogosphere. Why does a doctor earning $200,000 have to moonlight to make ends meet? Or why does my Hospitalist colleague pull in nearly twice the number of shifts as everyone else still need more money? You really don’t know what someone else goes through unless you live in their shoes. They might need the money because they need fund their excessive habits, or they might just be sending 60% of their income to their family in a third world country.

Financial mindset as a baseline for financial success

Doctors or other people with relatively high incomes can spend a high percentage of their incomes before feeling the hurt, but once the hurt begins it is very difficult to reverse the damage. Most people would agree that since you (and your family members) control your wallet, you have full reign over your financial destiny. You mindset, however, is only the beginning.

How many of you know people who might have unsustainable financial mindsets?

We all need to have some understanding of what is sustainable. Most of us can make rationale decisions most of the time, but the reality is that you can’t always control everything you’re faced with.

Children and dependents

Most people are going to have children at some point in their lives. No matter how much you can control your expenses, the only time your kids will save you money is when you claim them as a dependent on your tax return. Clothing and toys just cover the tip of the iceberg. Think big expenses, like daycare, nannies, medical care, and schooling costs. You could expect to drop at least $2,000 for infant formula for the first six months of life. Daycare in metropolitan areas may run over ten thousand dollars a year, and a nanny will be at least two to three times more.
The problem with being a doctor is that our profession requires us to have relatively inflexible hours. If you end up running late to pick up junior from daycare, you are looking at paying penalties by the minute. If you want a nanny with a resume in the big cities, expect forking over $40-$50k a year. Yes, that’s more than the private college tuition that you argued with your co-worker that wasn’t worth it.

You might also like: Should you encourage your kids to attend college?

There are exceptions in every case. Some doctors’ spouses opt to become stay-at-home parents. Financially this actually makes a lot of sense if your spouse’s income after taxes was similar to that of the cost of hired help. Sometimes it still makes sense for the spouse to be working despite a wash on the financial end simply to keep one’s skills fresh. The point is that everyone is in a different situation, and don’t think that you’re going to be the demographic who doesn’t end up paying for private tuition or a nanny that consumes your spouse’s entire salary.

Elder care follows along the same line. I’ve seen some doctors renovate and expand their homes to bring in aging parents. Others have subscribed to long-term assisted living facilities for their elderly family members. Those of you who are familiar with these facilities know that they are EXPENSIVE. They are so expensive that I’ve considered looking into purchasing REIT funds for these entities. However, for those who are on the receiving end know that elder care can run into a six-figure annual expense easily.

Unexpected health expenses

There is seemingly little talk about what can go wrong with your health, and the younger financial crowd supporting early financial independence all leverage youth on their side. Sure, eating a ketogenic diet and biking to work is great to combat a sedentary lifestyle, fight obesity, and fend off hypertension, but everyone has different interests and time commitments. We can all strive to become healthy, but you clearly have to be strongly motivated to put health at the top of your priorities to succeed. If you accidentally chose a profession that consumes 65 hours of your life a week, you have to be doubly motivated to put health as a priority.
Sometimes prioritizing health isn’t even enough.

Look at Dr. Paul Kalanithi, who passed away soon after finishing his neurosurgery residency from metastatic lung cancer. There was little that he could have done to prevent getting such a devastating disease.

The healthcare conundrum is that your wallet will take a severe hit if anyone in your family develops a major medical condition. You can lower your annual income all you want to get a health subsidy for the marketplace health insurances and carry a $5,000+ deductible, but if you break a leg or develop a problem requiring recurrent care, your bills will rack up quickly. As a doctor caring for many patients in these high deductible plans, I also see how insulting the reimbursements are for providing care on these plans.

The only winners are those who buy into these plans but never gets ill. The statistics for being healthy are still on your side, but you might have less control over your health than you realize. Doctors, by virtue of working long hours, may even be more prone to developing health issues.

Herd susceptibility

Finally, there is the bucket of expenses that doctors mostly have control over but are tempted to buckle when compared to her peers. Most of the expenses are within our control, but it’s not that difficult to want to buy more. The most common issue is that many doctors’ incomes are in the six figure range, but not necessarily significantly higher than that of many other professions. Therein lies the problem—maybe doctors work too hard in residency for such low pay that by the time they get their first job, they mistakenly believe that a six-figure salary can purchase more than they realize. Maybe the work to income ratio for doctors is skewed in that we expect to have a much more “luxurious” lifestyle than what our incomes would allow us to have.

There is something about our profession that leads us to set our financial mindset level higher than what it should be. When that happens, we lose our ability to control our expenses.

What other variables interfere with your financial mindset?

Seven top physician job interview mistakes

Posted on December 26, 2020January 30, 2021 by SmartMoneyMD

All of us have or will encounter a job interview during our careers, either as the applicant or the employer. How we fare in these stressful situations often correlates with the number of prior interviews we’ve participated in, but some of us seem to make the same mistakes no matter how many situations we’ve encountered. We’re all capable of learning from experience, but unless you’re a professional job seeker (or interviewer) you don’t have that many opportunities to improve your interview game.

Sometimes you can be in over your head without knowing it!

Ironically the name of the game is to avoid having to go through so many interviews in our careers. You want to find a job and hold onto it until you retire. After all, with every new start comes additional stress, disruption of a routine, and financial strain. Clinical medicine is different from the business administration realm where everyone is expected to move on after a few years.
With the job hunt in mind, the following are some of the more common mistakes that we see with applicants:

Asking about income on the first interview — Even though income is the most obvious criterion for most people, discussing this appears to violate societal norms. This formality applies to all other industries as well. You don’t discuss salary until you get an offer. Some recruitment personnel also seem to break with convention by asking applicants how much they are willing to accept—that’s also against convention. Do not give a recruiter your income expectation if asked. Remember, any job is about the fit. It is your job to assess all of the non-income aspects of the job during your interview. There is a different and more appropriate time to discuss financials. It is also a moot point to inquire about salary as it conveys to the employer that they would offer you the job even though they haven’t.

Asking questions to the wrong people — I often see applicants ask physicians details about the benefits or other questions more pertinent for human resources. There is nothing wrong with doing so, but realize that the physician may not necessarily be attuned to all of the details. Likewise, if you are interviewing with the CEO of a practice it’s important to realize what is a useful and appropriate question to ask.

Not identifying what they can bring to the table — The interview provides an opportunity for the applicant to display her strengths that aren’t perceived on paper. There is obviously a delicate balance so that you don’t appear to be a braggart. How you can highlight your strengths is an art form, but this is an important aspect about the interview process especially if the position you are seeking is in a competitive market.

Accepting a contract as a final offer — Most physicians are going to have a contract reviewer or lawyer review the contract. Many large institutions and hospitals, however, have boilerplate contracts that they would rather not pay their legal team to revise. The take-home for the applicant is that everything is negotiable, but it has to be within reason. You can’t just ask for minutiae changes just because you’d don’t like the wording. If your employer really thinks that you’re a good fit, they will likely try to work with you.

Not willing to compromise — Just as how you shouldn’t settle on things that are dealbreakers, one of the most annoying things is to act like you’re doing a favor to a potential employer by letting them hire you. It is important to know your value, but also realize that there are financial and logistical constraints to a new hire, no matter how valuable that person may be to the organization.

Appearing to lack interest — We have all gone through interviews and know that being interested in the job goes a long way. These interview days are often long, tiring, and repetitive. Sometimes there’s simply nothing exciting about a potential job. Even though you might not be interested, you should still pay attention out of courtesy. All of the parties involved in your interview have volunteered their time. An uninterested applicant simply conveys a lack of respect to others. Don’t make that mistake.

Asking for feedback — We are all going to apply for jobs where we don’t receive offers for. Rejection is never fun, and we want to improve so that we don’t make the same mistakes in the future. I’ve seen advisors recommend applicants ask the employer for interview feedback. Don’t do this. Only your closest friends are willing to tell you the truth. A potential employer is not going to be able to tell you exactly why they decided not to make you an offer. Don’t try to put them in an awkward situation. This is why corporate folks simply say that an applicant “wasn’t a good fit”.

Interviewees, please take notes of these scenarios and think about the last times you’ve gone in for a job and what instances could have been changed to improve the outcome for both parties.

What other interview mistakes have you seen?

Passive Income is a lie

Posted on December 19, 2020January 30, 2021 by SmartMoneyMD

As a child I remember watching superstar athletes like Wayne Gretzky glide so effortlessly on the ice and dreaming about how easy life would be to be blessed with innate talent. “Talent would make my life so easy,” so I thought. I had no clue how much work had to be invested to make talent look seamless. A little later in life, I remember hearing the quip coined by Thomas Edison that [sic] “genius is 1% inspiration and 99% perspiration”. I naively assumed that talent combined with a bit of elbow grease would really go far in life. Only after two decades, some gray hairs, and a lot of mental and physical pain during my medical training did I better understand what Thomas Edison meant (maybe). Success is even more difficult if you lack the talent to begin with!

Success undoubtedly requires sacrifice. Professional swimmers dedicate years of training and a controlled caloric consumption without lapse. There is indeed an incredible amount of work behind the scenes to obtain the intended result. The audience only sees the end result, and makes whatever judgment they perceive.
Everyone wants to be lucky. That is why lotteries exist. Luck gives you a story to tell your friends. And this is why it’s important to remind oneself that free lunches are few and far in between. The same goes for free money.

Even this guy had to find the water to cool down.

Passive should be in quotes

Passive income sounds sexy. It connotes income hitting your bank account without any effort. By having passive income, we can focus our most precious resource, time, to what is important to us. Examples of passive income include:

Owning a swimming pool maintenance company with managers handling a full staff of employees. Income just gets deposited into your bank account automatically.
Owning multiple rental units with property managers handling all of the tenants and daily operations. Even the rent checks are deposited electronically.
Participating in several syndicated investment ventures in commercial real estate. Dividends are paid out quarterly, and facilities are refinanced every five years resulting in big payouts to investors.

All of these scenarios are real and result in passive income, but it is important to realize that there was undoubtedly unmeasured amounts of effort and time into developing these income streams.

The swimming pool maintenance company owner inherited his business from his father, who took roughly three decades to establish the income generating behemoth that it is today. This is probably the closest that one could get to being passive income. Even then, the founder of the swimming pool company had to put in the work initially.

The point about passive income is that it only becomes a passive endeavor once the income stream has been established and stabilized. Even then, chance can still intervene for or against you—you can have deadbeat tenants, find that the land on your property is spewing out toxins, or hit the jackpot when a tycoon decides to offer you ten times the amount your property is worth. And the biggest unknown is the amount of work that you have to put into developing a reliable passive income stream.

It could be months or likely years of toiling around before true success can be quantified. If you decide to embark on finding a true passive income stream, you have to be prepared to put in the work.

Buying a rental property is not passive

Let’s suppose you decide to purchase a four-unit apartment complex for $500,000. Assume that all of the legwork in hunting for the unit to purchase has already been done, and you make a down-payment of $100,000. After mortgage interest and operational costs, you profit a handsome $15,000 per year. That is a pretax cash-on-cash return of 15% ($15.000 on a $100,000 investment). Not bad right?

Mathematically, this sounds like a winner, although the amount of background work invested into this cash-flow property is far from passive. Most successful investors in these venues clearly have a strong interest learning the in’s and out’s of the business or a strong desire for money. You should have both. For this endeavor to financially supplant your primary job as a physician, you’d better own another dozen of these units. Obviously the process becomes easier with practice, but the upfront work can be substantial.

Doctors shouldn’t quit their day (and night) jobs
For busy professionals, this homework has to be done on your free time. I would venture to argue that all successful passive income ventures require a pre-existing stable primary income source. This income source could be from a spouse or even a hefty emergency fund, but it has to exist.

If you are a fresh attending in your first five years of medical practice with limited savings or family money and three mouths at home to feed, it is unlikely that you will be spending your free time side hustling ventures that risk your family’s financial safety. This is especially true if your primary physician job is unstable, or if you are still learning the ropes of your profession. The residents or medical students who have the courage to leverage their time and money for passive income pursuits probably shouldn’t have entered the medical profession to begin with. Their primary profession is medicine, and it ought to be mastered before pursuing another passion.

You might also like: Doctors need to understand their worth

It’s okay to not like medicine or desire a way out. It’s also important to remember that medicine still provides a stable career path. You don’t have to find creative money making endeavors just because the doctor in the physician’s lounge says that it worked for her.

Do you agree with the points of developing passive income?