Category: finance

Ten doctor financial mistakes you don’t want to make

Ten doctor financial mistakes you don’t want to make

It’s okay to make mistakes in life.  That’s the only way to learn.  Hopefully the major mistakes get made earlier in life so that we have less to lose and more time to “make up” for faltering. But hey, life wouldn’t be interesting if challenges aren’t presented to us.  Let’s look at ten of the common doctor financial blunders that have either happened to me or my coworkers:

  1. Borrowing too much from your future self.  The potential of having a stable career in medicine makes spending a breeze.  I still remember the day I applied for a credit card as a resident and my approved credit line was actually greater than several months of my salary! I think that there are provisions these days to prevent excessively leveraging your credit, but as doctors we are still given relatively broad leveraging freedom.
  2. Growing too quickly into your income.  This has happened to me on multiple occasions.  We work hard in our jobs. Sometimes we get a lucky break and get a bonus or raise.  It’s very tempting to use that additional income as a reward for our headaches at work.  I certainly did that once by purchasing a car in cash.  Was it better than financing the car at 2.9% for five year? It’s still not clear to me, but if you make too many of these spontaneous purchases, your wallet will eventually feel it.
  3. Buying a timeshare.  Those marketing and salespeople are fast to close the deal.  They offer free breakfasts or free show tickets for a 2-3hr timeshare session.  What’s ten or twenty thousand dollars amortized over the course of your lifetime, especially if you consider how much you could potentially spend on vacation? There are annual HOA dues to most timeshares which dig into the budget as well. 
  4. Buying a vacation home.  This is probably worse than buying a timeshare.  Perhaps you decide that you like Hawaii very much, but you don’t live or work there.  What’s wrong with buying a vacation home in Hawaii so that your family can stay there any time of the year?  There’s nothing wrong with owning a second home, but there are costs to owning relatively expensive secondary homes.  There’s only value in these investments if you sell them at an inflation-adjusted profit in the future.  You be the judge if that is likely to happen.
  5. Job hopping. You don’t like your hospital or boss.  You hunt around and find that there are other better options, but the problem is that it’s halfway across the country.  Pack up the family and move. The problem is there is opportunity cost to moving.  If you switch jobs, then you will have downtime where you will not be earning income. 
  6. Living as if you can work forever.  If you spend exactly as much as you earn, then your net worth will never grow.  I have had colleagues who do a great job spending down every paycheck.  Be aware that at some point in your career you might not be able to sustain the same work hours that you did when you were younger.
  7. Lending money to family/friends.  This is a touchy subject as different cultures treat borrowing money differently.  In some parts of the world, it is expected that more successful family members support those who were less fortunate.  Unfortunately, you may never expect to receive any repayment for family loans.  I once knew one nephrologist who ended up having to moonlight in order to help pay for his brother’s mortgage.  Tough situation.
  8. Thinking that all doctor incomes afford the same lifestyle.  Face it. There is a difference between a neurosurgeon’s and internist’s salary.  There is no way that the lower income profession can live the same lifestyle as the higher one.
  9. Thinking that you are different.  Don’t delude yourself into living a life that your existing wealth cannot afford.  Just because one of your coworkers spent her way into bankruptcy doesn’t mean that you are immune.  You aren’t.  If everyone else you know lost big on a syndicated apartment investment, don’t think that you’ll be different.
  10. Expecting a windfall.  This is a bizarre concept to me—some coworkers somehow justify a lifestyle with the expectation that a windfall will bolster their existing incomes.  It could be an expected raise, an inheritance, a winning lotto ticket, or a huge payout from an investment.  Anything could happen, but wait until the windfall comes before you make life decisions based on a particular outcome.
This windmill looks fake.

What other financial mistakes have you or your coworkers stumbled on?

You might also like: How to burn through a $1 million salary

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Financial implications of academic medicine

Financial implications of academic medicine

Apart from a minority number of academic physicians (a la @PassiveIncomeMD), nearly all of the physicians openly discussing finance matters online are either retired or in private practice.  The data might be skewed since most practicing physicians don’t work in academia anyway.  What might be interesting is to compare the percentage of financially literate academic physicians to that of those outside of academia.  I would venture to surmise that academic physicians might be more financially literate than everyone else simply because they are likely a more analytic bunch—I guess it also ultimately depends on how we define financial literacy.

Now hold it right there buddy! My medical school classmates who work in academics know squat about money!

Why academic doctors might be less informed about finances
Doctors as a group are intelligent—you might argue that there is a difference between intelligence and common sense, but in order to get through the training process to become anointed with an “M.D” (or D.O) not only requires a long time but an ability to troubleshoot at least the medical aspects of our jobs.  

You might also like: Are you turning away millions of dollars as an academic doctor?

Just as how any educator would assess her students, proficiency (or lack thereof) in a subject could be attributed to one reason:

Motivation — We’ve all known people who are gifted but don’t apply themselves.  I would argue that most people who didn’t flunk out of medical school should have the chops to open a Roth IRA or decide whether they can afford a new yacht every five years.  But no matter how much intelligence you have, going into a college final cold turkey can only get you so far. 

Lack of motivation could be summed up by a multitude of reasons:

  • Too busy — This is not unique to academic medicine, but if your life doesn’t afford you the time to learn about finances you’re not going to understand it.  The barrier to understanding money is somewhat low compared to understanding metabolic acidosis from oral hypoglycemics, but if you’ve spent no time learning you’re starting with an empty deck.
  • Pre-existing financial independence — It might be presumptuous to assume that one reason why you don’t spent time managing your finances is because you started out with a loaded deck. I know a few of those people in medicine, and we all wish that more people were as altruistic as these gals. Their trust funds are still being managed by somebody, however.  It would be nice if all of us had this luxury.
  • Unawareness — A number of my colleagues simply think that their six-figure salaries can buy more than they can, so they don’t really pay attention to the details.  Once the kids move off the waiting list for the highly competitive daycare that all of your coworkers send their kids to, the $50,000 a year nanny would start looking inexpensive.
  • Everything else — This is a catch-all bucket.  Maybe the lack of financial motivation is due to a combination of the aspects mentioned above.  Frankly, the norm is not to talk about finance as a doctor.  If your colleagues don’t seem to be worried about it, why should you?

Academic medicine somewhat highlights being “too busy” to be deeply knowledgeable about finance.  Aside from being a clinician, academic doctors may be responsible for a multitude of tasks:

  • Training residents, students, and fellows. This includes ACGME mandated roles for residency directors.
  • Drafting new grant requests, both within an institution or with the NIH.
  • Conducting either laboratory or clinical research, along with going through dozens of revisions on multiple papers.
  • Traveling to conferences across the globe to present their research.
  • Sitting in administrative meetings.
  • Participating in fund raisers for their departments.
  • Scut monkey for their departmental chair

There’s only so much you can throw onto your plate before it spills.  

The financial ceiling of academic medicine
While most careers will have an income ceiling, it’s pretty well known that academic medicine will usually have a lower overall income ceiling over a normal career length compared to other clinical jobs.  What this means is that those doctors whose incomes are in the lower range of physician incomes will need to be more conscientious about their finances as they might not have the financial firepower to get themselves out of negligent spending.

Prestige or wealth? Can you have both?

Conclusions

What does this mean if you are in a career in academic medicine or are considering it? All is not lost! You don’t have to resort to owning a dozen rental properties just to make ends meet. You do have be aware of the pros and cons that your career choice offers and make appropriate choices:

  • Be aware of your earning firepower, and make sure your lifestyle doesn’t exceed what your W2 shows.
  • Some academic arrangements are actually private practices with academic titles.  This might confer the benefits of being in both academics and private practice.
  • If you are working in the public sector, consider PSLF.  You could start the process while in residency and continue for a few years after you finish. It may not be as long as you think.
  • Don’t try to compare yourself with others not in your shoes.  You will only be disappointed. 
  • Make sure that you actually know what you want. Don’t make job choices based on what others think of you.  Do it for yourself and your family.

What other financial suggestions do you have for the academic physician?

How to burn through $5000 in a weekend

How to burn through $5000 in a weekend

Some people go through a lot just to save $20. Others are willing to drop a few hundred bucks just to make life easier.  The strategy in the financial game is actually to maximize your earnings with appropriate effort while judiciously managing expenses.  There are some people who are willing to spend 30 minutes a year haggling with their internet company to reduce the bill to save $200. That’s a post-tax return of $400 an hour, which is a rate that would be difficult to match elsewhere.  One would be foolhardy not to go for it, right?  For some of us, that rate isn’t worth the induced hypertension going through an endless phone tree and dealing with a salesperson whose dialogue matches that of your most difficult (read: annoying) patient.  

Is a $200 savings worth 30 minutes of effort, a twenty millimeters of mercury rise in your systolic blood pressure, and potentially an 8% increased risk of a myocardial infarction in ten years? This is a savings dilemma indeed.  

An example involving an earnings dilemma includes deciding whether to pack your family up to the Yukon to become the territory’s only cardiologist? (Apologies to those living in the Yukon or if the aforementioned statement cannot be verified).  A mid-seven-figure annual earnings would be guaranteed, but you’d be running the cath, EP, and diagnostics labs too.  Don’t forget that you will be at the same latitude as Siberia.  Oh, by the way, you will get run over by some elk at year five of your stint.  Be sure to resign before then if you expect to live beyond that.
All morbid points aside, the earning and spending journey has obstacles, some expected, some not. 

Some of the potential financial hiccups that doctors encounter include:     

  • Not making partnership in a practice, resulting in job hunting with relocation. 
  • Anesthesia group losing the hospital contract and dissolving.
  • Child turns out to have some chronic medical illnesses that will blow your medical bills out of the water.

Combined household and family emergency
Case in point: Let’s take a look at how easily one can burn through a good deal of money in a short amount of time, all without trying.

Thursday, 5:47am:  There is no more hot water in the house. Maybe only one component to the heater stopped working, but you can’t be bothered—it’s a big operating room day today. Plumber bill: $1300

Friday, 2:22am: You get a call that your family member across the country is deathly ill.  Your PA will see your postops, and you buy a one-way cross-country ticket. Airfare: $900.

Saturday, 7:30am: Morning joe with muffin: $8

Saturday, 11:20am: Hospital lunch: $18

Saturday, 2:12pm: Afternoon espresso: $4

Sunday, 12:18am: Family member expires.

Sunday, 03:10am: Order a casket from Costco: $1088

Sunday, 9:00am: Hospital breakfast: $13

Sunday, 11:20am: Cab to airport. $66

Sunday, 2:00pm: Flight back home, purchased one-way: $859.

Total damage: $4243

Sometimes you just have to bite the bullet no matter the cost.

You cannot avoid the unavoidable
Fortunately most doctors aren’t going to go broke with an emergency expense. The amount spent in this example might consume a paycheck or two (much less for some too). The principle, however, is that one cannot predict whether these situations will happen. These jabs to the wallet hurt, but they will hurt more if you didn’t have control of your finances beforehand. Sometimes if you run into a string of these unexpected events, they can start stinging. 

So take control of your finances.  Don’t allow these unexpected events take over your life.  If this means making that call to your Internet provider annual plus other money hacks, so be it.  If it means taking a few additional shifts in the ER, not getting that Maserati, or just acknowledging that your food will taste just fine without a kitchen renovation, so be it. 

A dissection of a doctor’s food expenses

A dissection of a doctor’s food expenses

Spend less than you make—that is the motto in beating the financial game.  Unfortunately as high-income earners, doctors can have more difficulty sticking to a budget than one would realize.  The problem is that each one of our paychecks will typically cover most impulse purchases.  If a purchase requires more than one paycheck, it also isn’t too difficult to string along a few paychecks to cover a bigger ticket item, like a fancy family vacation or a home remodel.   You can see that once the ball starts rolling down the hill, it becomes harder to stop.  Frankly, it’s not difficult for a high-earning professional to live paycheck to paycheck. Society simply makes it easy to consume.  Work your way up on your expenditures, get a few extra credit cards along the way, and somehow you’re knee deep into a $2 million home mortgage and needing a means to moonlight simply to make ends meet. 

A look inside the refrigerator

While we tend to focus on reducing large expenses as a means to control our wallet (you business types like to phrase this as low-hanging fruit), how we decide to fill our stomachs can constitute a good portion of our income.  
I have been impressed how the grocery industry has adapted to busy lifestyles.  Most stores will have shopping and delivery services for those who have no time to waste buying groceries.  Leading the pack in high-end shopping is the ubiquitous Whole Foods, or how my friends in residency referred to it, Whole Paycheck.  Most cities also have various organic farmer’s markets, Morton-Williams, West-side Markets, and Good Life Markets where you can do some serious damage to your wallet. Some of the wallet-busting consumables that my colleagues—I, too, have also been guilty of purchasing as well—have purchased include:

  • Manuka honey — This honey hails from New Zealand, and supposedly has great health benefits. If you haven’t seen this before, it is relatively high-end honey that you can buy pretty much anywhere.
  • Organic cotton candy grapes — I’ll admit, these types of grapes are some of the sweetest I’ve ever eaten.  There is a vendor in San Francisco’s Ferry Plaza Farmer’s Market that deals these for $9.99/lb! You’d be surprised how many pounds of these grapes that your kids will be able to chow down.
  • Cold-pressed juices — While shopping for produce at the farmer’s market, don’t forget to pick up a cold one. This will set you back a few extra bucks or eight.

A family of four shopping for high-quality, low-volume grocery items can easily rack up a monthly grocery bill over a thousand dollars.  I once had a coworker who told me how he scores premium class airfare by earning points through his grocery purchases!  For those of you in the credit card know-how group, he earned his tickets purely from purchases and not sign-on bonuses.  He spent nearly $20,000 a year at the grocery store!  I guess that’s one way to score “free” luxury travel.  

Restaurant and prepared food expenses

My colleague who spends $20,000 a year for grocery items swears that he actually saves money by not eating out as much.  Who knows how much he actually spent before making that lifestyle change.  Unfortunately a busy career is more conducive to both unhealthy eating as well as unrestrained food expenditures.  Bars tend to be frequent stops to unwind with colleagues, and we all know that alcohol is not cheap.  A modest week’s restaurant tab for a single person might look like this:

  • Monday – Quick sandwich and pressed juice for lunch: $16. Deli at the grocery store for dinner: $17
  • Tuesday – Grand rounds lunch: free. Grubhub for dinner: $22.
  • Wednesday – Pharma lunch: free. Bar with coworker: $36.
  • Thursday – Seamless for lunch: $21. Light dinner with college friend: $45.
  • Friday – Grocery store prepared lunch: $16. Dinner: $60. Bar tab afterward: $50.

Total: $273. 

Eventually all of the happy hour bills will add up…

For a family with restaurant habits, the tab could easily triple without much effort.  If you include take-out and restaurant delivery the monthly damage can easily fall into four figures.  Anecdotally, we start seeing indiscriminate food bills rack up when the workweek starts exceeding 55 hours a week.  This number is relatively frequent in the medical field.

Summary

It’s not common that a doctor household would spend $20,000 annually on grocery bills.  It’s also not common for a restaurant-loving busy physician family would spend $35,0000 annually on restaurant bills either.  However, it really doesn’t take much effort for a typical physician household to spend half that amount. 

Only you will know whether that amount is actually sustainable based on your income.  For many of us, this amount might amount to 15-20% of our post-tax income.  That’s not chump change, especially if you take into account the mandatory living expenses such as mortgage, tuition for your kids, and basic costs. 

How much of your earnings are you putting into you stomachs?

Doctors net worth strategized

Doctors net worth strategized

There’s a fetish in the financial world to track one’s net worth.  Maybe it’s a chauvinistic means to compare one’s success to others’, or simply a means to build accountability to reach one’s goals.  I certainly felt great looking at a line graph with a positive slope documenting my net worth when I became interested in the subject.  The years that the bull market plowed ahead produced very steep slopes, while more recently the growth has been mostly stagnant.  Whether any of the positive slopes were related to my own doing, I sure felt great about it. 


We should all strive to have net worth graphs with positive slopes.  Most doctors’ net worth line graphs should have positive slopes—the only time should be if there is no income, working or from investments.  Either way, it’s not good for anyone to have a stagnant net worth slope.

One interesting discussion that we often hear from the doctor’s lounge how one’s life would have progressed differently if we had opted for a career outside of medicine.  These conversions materialize so often that sometimes it seems that all doctors are disgruntled about their jobs.  The reality, unfortunately, is that these conversions stem from burnout or some aspect of our jobs that we don’t enjoy.  

One interesting thought exercise that is often discussed is how life would be if said doctor opted for a career outside of medicine.  Let’s take a look at the financial differences in one scenario:

Software developer vs Hospitalist
These projections are relatively broad in assuming that the software developer is moderately successful in her field of choice, since her alter ego in another life ends up becoming a doctor. Both cases do assume relatively intelligent but not necessarily draconian financial comprehension.  

Getting a $1 million net worth by age 36 isn’t bad. Believe or not, many software developers hit seven figure before that without any chicanery…

The software developer begins her career with only a Bachelor’s degree, although this field typically doesn’t necessarily require an advanced degree to move up the ladder.  What one can conclude on this is that you don’t have to be a doctor to become a millionaire, and all that it takes is a good steady income and time.  It doesn’t hurt that a career that only requires a Bachelor’s degree will allow an individual to enter the workforce in her early twenties, effectively adding nearly a decade to the working career.  This financially mindful software developer is able to build a net worth of $1 million before the age of 40!  With tactful financial planning and grinding away over time anyone with moderately good financial firepower ought to build a healthy net worth.

Let’s take a look at the Hospitalist financial trajectory:

You worked 16 years for this?

You can see that the doctor has to start her career later and with a hefty student loan balance compared to her software engineer alter ego.  The financial trajectory will depend largely on the doctor’s specialty and income potential—the Hospitalist in this example likely has longer hours than the software developer and only has marginally higher net income during her peak years.  I chose this example to show that your income range as a doctor really determines how much spending power you have.  There are plenty of medical specialties whose income is comparable to that of many other non-healthcare professions.  

A doctor household with a stay-at-home spouse will have less financial firepower than a household of, say, two mid-career upper management engineers.  

What this means is that just because you are a doctor, you still shouldn’t spend more than what you income allows.  This means that Pediatricians shouldn’t be buying as much as Neurosurgeons (Sorry Peds! We will keep fighting to make sure that your profession becomes better recognized for your care!)

Conclusion
If you look back at the Hospitalist net worth trajectory, she will still be able to hit a seven-figure net worth before the age of 50.  With either more income or strategic financial planning, she can still live a comfortable, but busy, lifestyle that rewards her for spending her twenties in the basement library of her medical school.  The next time you roll your eyes when the ER calls you for your eleventh admission of the evening when you have no cap on admissions, remember that as a doctor you can still build up your net worth, piece by piece.

Don’t know where to start? Consider going through some of our previous articles:

Tax filing for greenhorn doctors

Tax filing for greenhorn doctors

I no longer am surprised at the creativity of my peers in the medical community, whether one of them finishes an Ironman competition (common) or runs an army of fast food restaurants in addition to curing cancer (not common).  In medical school, I recall having classmates who wrote complete review manuals to help us ace each of our in-service exams.  This produced unintended consequences of raising the bar and convincing the course directors to conceive even more devious ways to grade their students. Ultimately, it allowed all of us to become more competent doctors.


Likewise, the collective brainpower of the Internet has allowed us to broaden our fund of knowledge.  Want to learn how to write an app? No problem!  Want to hire someone to write an app? That can be done too.  As a doctor, one of the most financially useful skill that I’ve developed was learning the basics of filing my own taxes.  I remember that the first year that I filed taxes as an intern, I paid my parent’s accountant to complete my tax return. He gave me a discount, since he already had our business.  I don’t recall exactly how much he fees were, but I assumed that I paid at least $100…maybe more.


Six months after filing taxes, I received a dreaded letter from the IRS stating that I forgot to include a special state filing form and incurred a penalty of a few hundred dollars. Ouch.


Those of you financial whizzes who have gone through the medical training are probably tasting bile in your throat at this point.  Medical interns who have no other significant source of income have only worked for half the year–this roughly translates to $25,000 of pretax income, depending on which century you underwent medical training. ?


You might also like: Why doctors should do their taxes at least once

Collect the paperwork

You will need to keep copies of all of the forms that you use to to file your taxes.  Make sure that you keep copies of your tax returns as well–there is some variability with how long you should keep your paperwork for, but seven years seems to be a plausible duration.  With the number of medical journals and textbooks that we tend to keep in the garage for decades, holding onto something as important as your tax returns for a few years should be reasonable!
Most medical residents will start receiving electronic or paper forms after January of the following year (i.e. you will receive paperwork for your 2018 taxes after January of 2019, and hopefully before April 2019). Common paperwork will include:

  • W2 form – This is a summary of your earnings broken down distributed by your employer.  The numbers in each of the blanks will eventually make sense as some of the numbers will reflect your 401k contributes or HSA deferrals.
  • 1099-INT – These forms are distributed by your financial institutions to reflect any interest income that you may have accumulated throughout the year.  This can come from interest-bearing savings accounts or certificates of deposits (CD’s) that you might have purchased. Yes, you have to pay taxes on these earnings, and you pay them at the marginal tax rates.
  • 1099-DIV – These forms will come from your brokerage firms if you have stocks that have distributed dividends.  For instance, your Microsoft stock will distribute you quarterly dividends. You have to pay taxes on these earnings too, although at qualified rates most of the time. 

Frankly, that’s all of the paperwork that I accumulated as an intern. I did not own any property, had no other income, and did not have any itemized deductions. 


Use tax filing software

The easiest way out is to use a tax filing software. Years ago, the only option was TurboTax, but the market is now saturated with competitors.  You can even find free software for the simple tax situations like the one above.   Even with more complicated tax situations, I am still able to file using the software. These services also offer electronic filing for both federal and state forms. Nothing has to go in the mail, and you can fill out your data over several weeks as you obtain more forms.

File your taxes manually

The traditional way to file your taxes is to go to your local library to pick up tax forms, an instruction manual, and comb through the tax rules.  You can still do that now, and it’s actually never been easier to manually file.  It’s actually conceivable to file your taxes this way even through moderately challenging income scenarios, but it is quite daunting to start in this manner unless you have the most rudimentary tax situations.

Conclusion

Filing your taxes as a resident really isn’t that challenging, and it is worthwhile to go through the motions at least once in your working career.  You actually can get a better idea of what each of your financial forms is useful for—if you end up using an accountant later in your career you will at least know what paperwork she will need in order to complete your tax return. 
Happy New Year!

Umbrella insurance 101 for new medical graduates

Umbrella insurance 101 for new medical graduates

Asset protection is a term that gets tossed around quite a bit when we discuss how long and difficult the journey is for doctors to establish their careers.  You always want to protect what you’ve worked hard for, right? The principles for asset protection apply not only to doctors but essentially anyone who wishes to have some sort of security for their assets. The key is to make sure you don’t over insure, but have enough to get your family by in case disaster strikes.  If you ever get to a point where you are financially secure, it is okay to reassess whether you actually still need the coverage.

Umbrella insurance can essentially be viewed as added protection onto your auto and home insurance.  For instance if your auto insurance covers $250,000 in liability and you lose a suit for $1 million, you may be liable for the difference.  If you aren’t able to pay up, then your creditors can try to go after your savings.  Now there is a semantic argument about how unlikely it is that someone will go after your bank for that much money, but in theory it could happen.

Why I didn’t buy umbrella insurance for many years

Umbrella insurance exists to cover what is in excess of what your existing auto and homeowner’s policy already covers.  So for instance if your home is covered for up to $300,000 in damages, you would want to have an umbrella policy underwritten that begins in excess of $300,000 until the limit that you decide to purchase.  It is possible to have a gap in coverage if your policy is written incorrectly.

Most umbrella policies have a minimum coverage requirement that you have to purchase in your auto and homeowner’s policy.  Depending on how much your other policies cover, you may have to increase your base coverage beforehand.  As a resident, I owned a 16 year-old car that was insured for $10,000 in liabilities.  The premium each year was no more than $100!  A base umbrella policy for $1 million would likely have a premium of several hundred dollars a year, but would have required a $250,000 minimum auto coverage.  To bring up my auto policy to those minimums would have raised my premiums to several thousand dollars!

So for a resident with a wildly negative net worth, limited liability, and only future earning potential on hand, I made the decision not to have umbrella coverage. Was it the right decision? Maybe, maybe not.  You will have to decide for yourself and your family.

Considerations when you purchase umbrella insurance

Umbrella insurance is likely the least expensive insurance that any doctor will buy, but that doesn’t mean that you should over insure yourself.

Thank goodness for laws and government. Some of your net worth is protected by law:

  • Employee-sponsored retirement plans that qualify under the Employee Retirement Income Security Act (ERISA) such as 401k’s and profit-sharing plans are protected from creditors.
  • Non-ERISA retirement plans such as IRA’s can be protected from creditors depending on the state that you live in.
  • Cash-value life insurance plans (Gasp!)

Take the amount that you have in your 401k and IRA’s, and subtract that out of your net worth.  Check to see if you live in a Homestead state that protects your primary residence from lawsuits as well.

Aspects about your home that could increase the liability (read: cost) of umbrella insurance include:

  • Home is used for commercial purposes (business).
  • Presence of swimming pool.
  • Presence of trampoline.
  • Presence of pets (Yes, Sparky can knock over that oil-filled lantern and set your entire home on fire!).

Have a duck pond in the backyard? Check with your insurer!

Consideration for your umbrella insurance premiums shouldn’t be a reason not to get a swimming pool or trampoline, but there are financial consequences to luxury.

Did you purchase umbrella insurance during your medical training?