Month: April 2015

Doctors are more than 10 years of income behind their peers

Think about it. You spend at least four years in college, four years in medical school, and between three to seven years in residency and fellowship to actually practice medicine. If you take a year off for research or work in between college and medical school, you add a few more years into the mix. I even had a few classmates who started medical school in their late 20’s or even early 30’s!

Thus, most doctors aren’t able to generate a six-figure salary until they are in their 30’s—at least ten years behind most other career choices. A recent thread on Corporette had a few anonymous posts on net worth. One stuck out in my mind:

“$1.7mil by 37. $120k annual earnings.”

This author is unlikely a doctor because a doctor is unlikely to be able to accumulate such net worth in the short amount of time (maybe 6 years). Actually, according to the American Medical Association, a significant number (41%) of doctors have less than $500,000 in savings. This includes the 35 year old newly minted electrophysiologist and the 66 year old general surgeon who is twice divorced with three mortgages and a taste in fine European gas guzzlers. That is scary.

As top income earners in their 30’s and beyond who spent their 20’s accumulating negative net worth, doctors lose the advantage of at least a decade of compound interest. For instance, $100 accumulating at an annual 5% compound interest will have $163 in 10 years. Add a few zeros into the mix, and you realize how quickly ten years can add up.

Sure, a doctor can catch up in time, but many doctors never catch up due to lifestyle creep. Don’t let that happen to you. Follow SmartMoneyMD and learn how to get your net worth in line.

Questions? Sound out below!

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Should I be content with my current salary?

It is common knowledge to seek out what typical starting salaries in your field are when you are looking for employment. Knowing what median salary for those 5+ years in you field is also helpful especially if you are seeking out long term employment.

In my experience, open discussion about income (no matter if you’re a doctor, lawyer, or IT guy) also seems to be taboo as well. I suppose that not having open listings of salaries reduces price fixing, but it also prevents adequate knowledge of how much a specialty is “worth”. In order to know what is fair, you have to know how much you’re worth in order to negotiate. Thus it helps to understand how you bring in revenue for your employer. For a physician, that means understanding how you are paid (prior post) and RVUs (post).

A good starting reference for physicians also includes MGMA and AMGA, which release median data on your expected salaries given a certain amount of production. There is a hefty cost to these publications, although you could potential pitch in with several of your colleagues to pick up a copy, or check with a local academic institution that might have a copy in its libraries.

In most places of the country, physicians can still earn more for working harder (fee-for-service), but be aware if your market includes capitated contracts.  That will limit the potential revenue you can bring into a practice.

Questions? Comments? See below!

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How much house can I buy on my salary?

As a high-income earning physician, you deserve a McMansion, right? How much house can you buy on your income?

Suppose that you are the average physician that we discussed in an earlier post. You are making $200,000 annually. According to this example, you have approximately $131,000 for living expenses and miscellaneous expenses.

Unless you will be paying for a house entirely with cash, you will likely take out a mortgage. In standard home loan mortgages, a down payment of 20% will usually afford you the lowest interest rate. For a $200,000 home, you will need to scrounge up $40,000 for a down payment, plus a few extra thousand dollars for miscellaneous home expenses such as moving expenses, furniture, and additional taxes.

In our example, if our new physician rents an apartment for the first year and lives a moderately lavish lifestyle, she will have $51,000 left for savings. That leaves plenty to put towards the down payment for If that entire amount is directed towards the down payment on a home, you can purchase a $255,000 home. If our doctor wishes to have a larger home (loan of greater than $417,000), she could take out a jumbo loan.

Now, I know plenty of doctors who live in homes <$250,000, but I would venture a guess that the majority of doctors buy much larger and more expensive homes. How can this be manageable? The truth is that everyone is in a different scenario. Perhaps those with the larger home have a higher income. Perhaps they already have savings from prior jobs, the spouse, family…etc. Perhaps they’ve overextended their income. After all, a large percentage of physicians do not have much savings!

Questions or comments? Sound out below!

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Physician non-compete laws state by state

Courtesy FlickrWe’ve previously discussed how to determine how much you are worth as a physician and RVUs. You are presented with a contract with a restrictive covenant, or non-compete clause. A restrictive covenant clause often stipulates that if you leave the hospital that recruited you, you may be prohibited from practicing in a certain geography from the hospital for a period of time. Essentially it prevents you from competing with the employer for the same group of patients.
The enforceability of these clauses vary by state. You should check with a legal counsel who is familiar with your state’s laws before you consider signing any contracts. At last that I had checked, the following states deem non-competes to be not enforceable:
  • Alabama
  • Arizona (maybe)
  • California
  • Delaware
  • Illinois
  • Iowa (maybe)
  • Massachusetts
  • Montana
  • North Dakota
  • Tennessee (maybe)
  • Texas (maybe)

Questions or any other suggestions to add? Sound out below!


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Step by step instructions to replace the Mansfield toilet flush valve seal

Step by step instructions to replace the Mansfield toilet flush valve seal (lifestyle, handiwork)

This is the third installment of basic handiwork tips for the busy professional. Prior tutorials include:

This repair job involves replacement of a flush valve seal in a toilet tank. This seal forms a barrier between a toilet flapper and the porcelain tank. After many years of water corrosion, the seal often deteriorates and results in water loss into the bowl. Often with additional corrosion the seal forms a vacuum and flushing becomes more difficult.

The toilet that I will be repairing is a 1.5gpf Mansfield #160 toilet. The flush mechanism is a vertical flush valve without a plunger:

mansfield toilet #160

Here is a picture of the valve seal that has decayed. The seal fits like a washer and can be removed relatively easily from the plastic flush valve tower. It can be purchased at a local hardware store (Lowe’s) for about $2.

mansfield flush valve seal

Of note, Mansfield toilets must be fit using their own flush mechanisms since the tank often does not have a standard type fit.

  1. Turn off the water supply to the toilet (valve is usually next to the toilet connecting into the wall).
  2. Flush toilet to empty tank.
  3. For the Mansfield toilet, turn the flush valve tower counterclockwise to unscrew it from the tank.
  4. The flush valve seal can just be lifted from the tank and replaced with the new one.

That’s it! Comments or questions? Ask below!

Top 8 ways I increased my net worth during residency

Previously we discussed tips to supercharge your net worth during residency. The main aspect of your finances that you can truly control are your expenses. The following are some of the methods that helped me increase my net worth during rough times:

  1. I did not own a car. Fortunately I lived in a city where mass transit was somewhat reliable and I also lived close to my workplace. So I saved on car insurance, maintenance, and gas. In contrast, I did live in a high cost of living city, so rent was much more expensive than the average U.S. city. In retrospect, the higher cost of living area far exceeded what I saved by not owning a car. That being said, if I truly needed a car during residency, I would have sought out a 5+ year old used car on Craigslist, preferably from a grad student about to move out of the country and needing to sell immediately. High fuel efficiency would be emphasized, although one key component to saving is to minimize unnecessary driving trips.
  2. I maxed out my on-call allowances monthly. Our residency gave us approximately $10 for meals while on call. This was actually regulated through a meal card that contained roughly $100 a month. Maybe they assumed q3 call on a 30-day month. On days that I needed a meal, I would save on meal costs. Whatever was left over was used to purchase ancillary unhealthy snacks that I might have otherwise bought anyway. YMMV depending on how regulated your program is.
  3. I did not own any new furniture. My bed was given to me by a graduating medical student who bought it new but used it for less than one year (not sure why). My couch, desk, dining table, dresser, and corner table all came used via Craigslist. When I moved, I sold everything at a profit and more than doubled my initial investment after years of using the furniture (while maintaining it in good condition). I was quite fortunate in this regard—I doubt that I’d ever be able to replicate such bartering skills in the future.
  4. I found a Hispanic grocery store that sold dirt-cheap basic foods. Although I’m not sure how much pesticide I actually consumed from buying discount fruits and vegetables, it saved me a lot of money. Cuts of meats were also significantly cheaper than the average grocery store.
  5. I bought discounted food at Whole Paycheck. I discovered that said grocery store sold their blemished fruits at a deep discount and raided their selection every week. A bag of 6 fancy mangoes for $1.50! Or a 5lb bag of limes for $1.50! I once chatted with the fishmonger at the store and discovered that they discarded the fish heads and spines. I once bought 3 keta salmon heads/spines for $1. This is the same fish whose fillets sold for an obscene $28.99/lb. The fishmonger also did not fillet cleanly so the portions I purchased had significant amounts of meat. I used the bones to stew broth for ramen.
  6. I kept limited wardrobe. I don’t believe that I actually purchased any new clothing during residency, especially since I took care of my work clothes. This meant air drying dress shirts and ironing them myself.
  7. I cleaned my own apartment. That meant no housekeeper. Initially I thought that not having maid service as a resident was a no brainer, but it’s amazing how many of my colleagues were paying for a cleaner. It also helped that I did not have much furniture to begin with.
  8. I kept my restaurant tabs in check. I didn’t live in solitude but also kept a close eye on excess spending at fancy restaurants. Stressful jobs often lend themselves to retail therapy.

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Any other suggestions? Sound out below!

Hidden benefits of washing your own car

wash your own carDIY tasks can save you a good deal of money, especially for many trade tasks like plumbing, carpentry, or basic handiwork. Previously we’ve discussed several DIY tasks for your car:

Some of you doctors out there will argue that you have better use of your time than to repair your car, or that “it’s too risky for my career to be fixing a car”. Yes, the previous articles discuss low-risk tasks that are high-yield. How about something even easier, like washing your own car?

Better yet, what do you think of washing AND waxing your car?

The technical and hardware requirement to wash a car is incredibly low. You’d need an outdoor faucet, which I’d imagine more homeowners or even renters probably have access to. A water hose would cost maybe $15 new (or less used), a $1 water bucket, a fancy $3 spray handle, a $1 sponge, a $5 bottle of super fancy car wash solution (should last 100 washes), and maybe a microfiber towel ($5) for drying the car. If you want to wax your car (you should), spend an extra $10 for nice TurtleWax. That adds up to less than $40 for all the equipment you’d need to wash and wax your car.

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If you take your car to the carwash, you will spend at least $5 for each wash (maybe closer to $8+ for nicer washes). The last time I checked out the cost of hand waxing a car was $50!

This means that after ONE car wash/wax job, you’d recoup the cost of your supplies!

Wait a second, buddy! As a general surgeon, I’m making $150 an hour! Washing and waxing my car would take an hour of my time! I’m actually losing money by washing my own car.

That’s absolutely true if you’d rather be doing an emergency appendectomy on a weekend rather than washing your car. It’s also true if there is an emergency for you to perform. This doesn’t even take into account the stress and liability that you incur in your profession.

Aside from the financial benefits of washing your car, there are health benefits. Hand waxing a car is not easy. Forearm muscles are used, and I burned at least 200 calories for an hour of work (use your favorite calorie tracking device to confirm). This free exercise that not only saves you money but also makes you healthier!

Questions? Sound out below!