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Stealth Wealth: Keeping Your Money Invisible

Posted on May 18, 2015May 19, 2015 by SmartMoneyMD

Without a doubt, one of the first thoughts that comes to a layperson’s mind when she thinks of ‘doctor’ is “wealth”. With doctors being historically stereotyped in well-dressed in professional attire, driving fancy cars, living in fancy houses, and large bill statements sent to patients, it is expected that doctors belong in the top 1% of America’s wealth. After all, would you want your doctor to be wearing Tevas (socks optional), a loud Aloha shirt, and driving a 20 year old Ford truck? Little do people know that doctors are not paid enough for their services, are at least a decade in financial health behind their peers, and also are unlikely have significant wealth.

Landscaping business owners, software developers, and plumbers—all of whom may have a sizable net worth—are not “expected” to portray wealth. Neither does the guy who wears torn jeans, a t-shirt, and a Hublot watch but owns several factories in Asia. Stealth wealth is easier to pull off in these scenarios.

The only thing worse than being viewed as a wealthy doctor is to actually be poor while appearing wealthy. For this reason alone, it may be worthwhile as a doctor to consider walking in the shadows for once. Below are some pros for doing so:

Pros:

Service industries will take advantage of you less. I was once at a chain brake repair garage having the brake pads on my 9 year old Impreza replaced. Another customer came in with a sub-3 year old Infiniti SUV to have an oil change was offered a “free” brake inspection and was talked into an urgent replacement of his timing belt. For those of you unfamiliar with vehicle maintenance, the likelihood of a timing belt needing replacement before year 5 is exceeding low. My timing belt at 9 years is nearing replacement, but still thick enough to function.
Jealousy from friends and even family can manifest when money is involved. Do you really deserve being wealthy? Oh of course she can afford that, she’s a doctor. You will be judged and criticized even more if you’re rich.
Solicitors will find you no matter what. If you make yourself a bigger target go ahead.

Comments or anecdotes on reasons why you keep your wealth invisible or tips to do so? Shout it out below!

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Do I need original Kohler parts for my Kohler toilet?

Posted on May 15, 2015May 14, 2015 by SmartMoneyMD

In our previous post on toilets, we discussed how to replace the Mansfield valve seal. In this article we discuss Kohler toilets. Future articles will further discuss the inner workings of the toilet and basic repairs.

Kohler brand toilets belong in the upper echelon [read: expensive] of toilets, along with Toto, Oxo, and some models of American Standard. Yes, these toilets are more expensive to purchase, but inevitably they will require maintenance nonetheless. Leaky water into the bowl, bad flush? It may be time to replace the fill valve or flapper.

Basic toilet maintenance and repair is one of the skills that can save you a lot of money. It’s not to be macho or cheap either—I’ve seen plumbers charge $50 to $160 an hour with a flat rate house call charge on top of that! I can’t think of too many low injury risk activities a doctor can do in her free time to earn/save $100 per hour post-tax.

Kohler toilets come with Kohler parts. Each model is referenced by a four-digit serial number either etched in the porcelain or ink stamped inside the tank:

The number usually starts with either a ‘3’ or a ‘4’. You can then search on the Kohler website your model number and find the list of parts that fits your toilet. Many Kohler toilet tank lids already have a label and diagram with the basic replacement parts.

For my toilet, Amazon sells the standard Kohler fill valve for $14.99. The flush valve is sold separately for $17.45, and the flapper is again separate for around $8.

In comparison, a Fluidmaster 400 flapper and fill valve kit is only $10.

Will another brand of parts fit my Kohler toilet?

Fortunately, yes. A commonly known aspect in plumbing is that Fluidmaster actually makes the parts for Kohler toilets. Sometimes they are rebranded and built to the specs for Kohler’s requests, but the innards are the same!

My Kohler toilet uses the Fluidmaster 400A fill valve despite having a Kohler cap:

Just realize that the argument for using an alternative brand will likely save you perhaps $15-30 in a single repair—you won’t be retiring early with an equipment swap, but I can think of two reasons to do this:

Good luck finding a Kohler fill valve at your neighborhood chain hardware store!
The more important reason is to learn how to deal with minor handiwork yourself. There are minimal tools required to repair your toilet, there is low risk of you hurting yourself in the process, and you can probably save $200 of post-tax income by doing this yourself. Sure, you might take 3 hours to do the repair your first time, but at least you learned. I replaced my fill valve in less than 10 minutes. The replacement of my Mansfield valve seal took 5 minutes.

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Comments or questions, please comment below on Smart Money MD!

Do you have the traits of a financially prepared physician?

Posted on May 13, 2015May 10, 2015 by SmartMoneyMD

The AMA recently released a paper (more like a survey result) of the top 6 traits of a financially prepared female physician. It probably would be the same list regardless of gender…

I do agree with most of the survey results, but I think that we can really do better. Point number 4 states that two out of three “financially prepared” doctors have a financial advisor. I also believe the converse—you do not have to have a financial advisor in order to be “financially prepared”. It certainly gives us piece of mind to have a “professional” helping us, but Jim Dahle, an ER physician who runs White Coat Investor, has been a strong DIY advocate. I am probably more on the neutral side, although I can think of a few reasons why a financial advisor might work for you:

You work 88 hours a week as a vascular surgeon, and frankly have no time to figure out the basics of your finances.
You want to build a nest egg, but really do not have any desire to spend any time with financials and only want to be informed of good choices you can make.
You put all your money in a Robo-investor firm, but need someone to help guide the planning and protection aspects of your finances (insurance, trusts…etc)

The subject of financial advisors is long and can belong in a series of books, but feel free to comment if you have questions or ideas.

The fundamental tenant of being financially prepared is to have a good idea of your annual living expenses, your current income and income potential, and action plan to have adequate finances to support your future living expenses after retirement plus something extra to leave to heirs if you wish. Yes, this is a loaded condition, but I have confidence that it can be achieved (and certainly has been by others).

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If you have questions, please comment below! – Smart Money MD

How a UAW can become a Mustachian

Posted on May 11, 2015May 9, 2015 by SmartMoneyMD

Can the textbook definition of Under Acccumulator of Wealth (UAW) ever become a Mustachian? Stanley and Danko, in their The Millionaire Next Door, defines the UAW as someone who lives in luxury and makes life choices based on present desires over accumulating future net worth. In contrast, a Prodigious Accumulator of Wealth (PAW) is someone whose lifestyle choices are conducive to increasing net worth. A Mustachian by definition makes wise lifestyle choices similar to those of PAWs but with a focus on minimizing excess consumption, simplifying lifestyle needs, and possibly “retiring” early to free up time for learning.

A doctor in training is the epitome of a UAW. A premedical college student spends a large amount of time preparing for the MCAT, paying for review courses, and applying to and interviewing at large number of medical schools (read: expensive). After getting into a top medical school, she lives off of student loans (or a spouse), buys expensive “professional” clothing for rotations, and then spends more money applying to and interviewing for residency. The process continues through fellowship. If there is a family with kids, then expenses are compounded. After this decade long process the young doctor is likely knee deep in a six-figure debt, yet has to continue living under the guise of a wealthy professional: fancy car, house, expensive clothing to fit the degree, and nice vacations for the family.

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How can the UAW doctor dig out of debt, become a PAW, or better yet, a Mustachian? It can be done. Steps that I have taken to become a Mustachian include:

For a physician, these are small yet significant steps towards Mustachianism.

What changes have you made to become a Mustachian? Sound out below!

My car’s check engine light on! What do I do?

Posted on May 8, 2015May 8, 2015 by SmartMoneyMD

Sometimes the simplest explanation is the answer, but the solution becomes obvious only after the fact. My check engine light turned on last week, and I sort of panicked. My car was relatively new with a good maintenance schedule—why is it flipping error codes on me?

For most passenger vehicles built after 1996, on-board diagnostics (OBD2) is able to produce error codes that help you troubleshoot your vehicle. There is a serial port-like output often on the lower left side of the steering wheel where you can plug in the scanner. An OBD2 scanner can be purchased for less than $30 on Amazon.com for self-troubleshooting. If you go to your local AutoZone, O’Reillys, or your local dealer, they will have the device to scan your vehicle.

Common causes for check engine light include:

Gas cap loose – A loose gas cap on a modern vehicle will flip the check engine light. The gas tank belongs to a complex system that allows your car to remove and dispose of vapors in the tank. ACGO has a great overview of this system.
The oxygen sensor needs to be replaced. The sensor detects the amount of unburned oxygen in your exhaust. If it malfunctions, you can still drive your car, but the fuel economy will likely decrease.
Other items upstream of the oxygen sensor: spark plugs, air flow sensor, catalytic converter.
Evaporative vacuum hose leak.
Not so common: if you’re messing with your car alarm system or recently installed an aftermarket remote starter kit, you might want to check your wires.

In any case, most of these faulty devices will cost you hundreds (thousands if your dealer rips you off) to replace.

Fortunately for me, my fuel cap was loose:

Subaru gas cap — Tighten your gas cap or your check engine light will turn on!

The cap actually has printed instructions to tighten it!

If you have any questions or comments, sound out below! Any car problems to troubleshoot? Sound out below!

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Should I marry my partner if he has debt?

Posted on May 6, 2015 by SmartMoneyMD

I am always surprised when I hear this question. Yes, there is something inherent wrong about asking this question with a straight face but apparently this is a serious question for many.

There is some merit in addressing the practical side of this question, however. I think the logical approach would be to explore the issue more thoroughly and determine if there is a solution:

How did you acquire this debt?

There is difference between consumer debt and educational debt. Consumer debt typically comes in the form of credit card debt, layaway items, and other means of borrowing money to for recreational items or vacations. I would be more forgiving of educational debt since most consumer debt is not intended to further your future self. After all, education debt is supposed to be an investment into your future, right? 😉

It also makes a difference if your educational debt was acquired from a degree in web design at a for-profit online “universities” or a medical degree at a reputable school. That helps us figure out how to eliminate debt. This brings us to our next question.

Do you have a plan to eliminate this debt?

If your six-figure debt was from medical school, then logically you should have relatively easy (albeit disciplined) means to get rid of it, because hopefully you will have a decent income. It would also be nice if you have thought out how you plan to eliminate this debt (i.e. which loans to repay first, how quickly you can repay them, and approximate time frame to do so.

Are you willing to eliminate this debt?

This is more important than the previous question. As long as you are willing to ask for help and modify your lifestyle as needed to cut the debt, you are salvageable! Are you also willing to prevent acquiring similar debt in the future?

Do you have habits that can contribute towards debt, and can you modify your lifestyle without sacrificing your happiness?

Loaded question, but if you had to ask the first one, you might as well ask this one.

Comments or suggestions? Comment below!

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Frugal vs cheap – doctor edition

Posted on May 5, 2015May 4, 2015 by SmartMoneyMD

There are many articles on the web that argue the differences between frugality and cheapness. One of my favorite summaries include one article by Mr. Money Mustache. Much of his ramblings are applicable to all walks of life.

For professionals such as doctors, there is a strong emphasis on presentability. If you want to be frugal, you have to make sure you don’t look cheap.

The rule of thumb on material wealth is to have enough to sustain happiness, but not in excess. The criterion for every person will be different, but as a doctor or high income professional you probably will have a more lenient threshold before you result in financial bankruptcy (but there are plenty of doctors that end up in financial ruin).

Clothing: This is where you can go buck wild with your expenditures. You have to look like a doctor right? Some frugal suggestions that I have been given and tried over the years include:

Men and women: air dry blouses, dress shirts, and dresses. Some dry clean only clothing can be hand washed or spot cleaned. Remember, you probably aren’t waddling in mud during the day. Press your own clothing.
Great resources for discount fashionable clothing include: Nordstrom Rack, Ross, and even Goodwill.

Cars: I’ve concluded that the appearance of a doctor’s car matters very little. I’ve seen internists with high-end German luxury cars, and vascular surgeons with 13 year old pickup trucks. The key is to have a reliable car that is well-maintained.

A new car will depreciate immediately it leaves the dealer’s lot. Most cars depreciate 40% over 3 years. By 5 years, the car will lose approximately 60% its original value. Fancy cars like the Mercedes AMG63 depreciate about 50-60% over 3 years. Think about it, there aren’t too many fancy toys that you buy for $100,000, plow through 15 miles/gal of premium gas, cost a ton to maintain, and be worth only $50,000 after 3 years.
Go for a reliable, used car. Get a fancier one once you cash in your first million, and maybe a fancier one once you become financially independent. (yes, high income people like to work with big numbers).

House:

Unless you entertain frequently, the size of your house is dependent upon your personal and family preferences. Make sure you don’t buy more house than you can chew (like taking out a jumbo mortgage before you are truly settled in your practice).
Profitability from buying a house will be limited to the market and also how long you plan to stay in the area.
Obviously if you have a family and kids, you will want to look at the appropriate school district to send your kids to school. I’ve met people who toil over what school districts are best, pay top dollar for a house in the area, and end up sending their kids to private school. Not the most financially brightest decision, I might say.

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Lifestyle: I would say that if your “frugal” lifestyle choices don’t disrupt others or embarrass you, your family, or others, go for it:

Opt for OTA television channels versus cable/satellite channels. You can save good deal of money long term by cutting the monthly fees, assuming that you aren’t a television junkie.
Exercising at a home gym, outdoors, or even through home chores can save you time and money over a gym membership.
Be careful about hypermiling. Yes, you can save on gas, but do you really want to piss off other drivers on the road? If no one is behind you, go on ahead. Otherwise, be wary of your surroundings (which you are anyway if you hypermile)
If you decide to bike to work or on errands, be mindful of the traffic around you. I’ve seen plenty of bikers using the main road (speed limit 55mph) with a Class I bike lane that is parallel to it. I guess those bikers like to be on the same road as a Hummer. I wouldn’t.

Comments or suggestions? Please sound out below!