Category: finance

How To Increase Your Income As A Doctor

Posted on by SmartMoneyMD

Doctors work hard to generate a high income. It takes years of training and a high price to become licensed, maintain certification, and be insured appropriately. Financially, a doctor is a decade behind her peers.  Due to the nature of our profession, we arguably have a more conservative lifestyle than our MBA counterparts who are likely to generate an even higher income. We’ve focused on growing our net worth through saving. Today we are going to focus on growing income to build our net worth.

Work Harder

If working harder is even possible for most doctors, this is one sure way to generate a higher income. For doctors on the clock like Hospitalists or Emergency Room Doctors, you will generate more income if you pick up a few shifts. Mind you, you are unlikely going to command a higher hourly rate for additional hours–in some cases an overnight shift may pay a marginally higher rate but that’s it. You will obviously be taxed at the marginal rate for extra time, but if that’s what it takes to earn more, so be it.

If you are fortunate enough to be a radiologist, there are plenty of locums and coverage opportunities abound. Many radiologists have a significant amount of vacation time, so if you get bored, you can take a per diem opportunity in another city, and even consider taking your family there for vacation while you work. I know several radiologists who generate enough income working several per diem opportunities throughout the year AND get to see another city. It all depends on how your wish to arrange your family life and free time.

For those of you in HMO practices, you are out of luck. You are probably already working a double time hustling through your day.  I have spoken to many colleagues in the Kaiser Permanente (KP) Health System, and I get mixed reports on how busy they are working. In general, KP compensates its doctors relatively well, with the assumption of a very busy clinical and surgical schedule. However, I have spoken to several endocrinologists who work for KP and appear to have light schedules.

Can anyone comment on your experiences with KP? Please shout out below in the comments!

Work Smarter

Income is certainly affected by how efficiently you accomplish your tasks, especially if your income depends on volume. Seek out ways to work smarter, starting with your commute. How long is your commute, and is it possible to live closer to work (either move closer or move your work closer to you). If you can shave off an hour of commute a day, your hourly rate (taking into account the time you wake up until the time you return back home at the end of the day) will be higher. You might not necessarily have more money in your pocket by saving time during commute, but you will be happier and have more energy for other tasks.

Can you work more efficiently at work? If you are able to see a few more patients in your clinic by working smarter, you can increase your income. Can you motivate your staff to work more efficiently? Healthcare is a team occupation and efficiency has to run from the top down to make the process better. This includes your front desk, billing staff, medical staff, and the doctor. If you own your practice or are a partner, you can increase your income by optimizing revenue by optimizing your business.

If you are salaried, can you negotiate a higher salary? Start by figuring out the range of income in your specialty. Figure out how much revenue you generate from your practice, and your operational expenses. Then find out how much of that you actually receive as income. You employer may be taking a bigger cut out of your revenue than you realize.

Ancillary Income

You can boost your income through side hustles in your free time. Income outside of your profession is going to be more challenging to come by, but still possible. The challenge is that your ancillary income stream doesn’t come from what you spent a decade of your life working towards. If you’re not working as a doctor, your earning potential will have to come from your knowledge outside of your profession.

Real Estate

I know several physicians who dabble in real estate. Some own commercial real estate; others with residential. All of them like the leverage risk and find real estate to be an income-generating hobby. In fact, real estate is a great opportunity if you have the knowledge, interest, and time to dedicate to the profession. Plenty of professionals have had career changes to real estate once they discovered that it was a field that interested in it and also made them money.

I have seen surgeons invest in surgical centers and Internists investing in Urgent Care facilities. These facilities are still medical related, so a doctor may be more able to manage and run them better than simply an office building.

Technology

A second option can involve tech. The technology sector is a field where hard work, luck, and connections can generate serious coin. Many doctors I know are familiar with technology and opt to spend their time with venture capital. Perhaps you have an idea to develop healthcare software. Or you wish to develop your own electronic health record system. Maybe you like to write. How about blogging? All of these options have potential to generate ancillary income for a doctor, but all of them require time. This is time that is spent away from your family or time that could be used to unwind after a tough carotid endarterecomy.

Service and Education

I know doctors who are involved with pharmaceuticals and run the lecture circuits. Honorariums can certainly supplement your income. You may be labeled as an industry pawn, but who cares? You’re still getting paid.

I have colleagues that volunteer their time with residents and medical students. Most of these are pro bono, but I know a few who have been able to establish a side business in tutoring or application essay coaching for both medical and college students.  Not a bad idea either; if you’ve made it far enough to be a doctor, then you hopefully did well on your MCAT, SAT/ACTs, or USMLEs.

Conclusion

Despite stressful jobs and tough work hours, doctors still have plenty of opportunities to increase their income. Time is essentially your only constraint. There are several venture opportunities that I have been exploring, and I will document for you all if they become fruitful.

[showads ad=responsive]

What side hustles have you embarked upon? Have any of them been successful enough for you to switch careers?

Do you want to get the latest Smart Money MD posts in you inbox?
Get the FREE Smart Money MD Financial Cheatsheet for signing up!

How To Maximize Your Finances As A Two Physician Household

Posted on by SmartMoneyMD

Previously we discussed the Pros/Cons of a Two Physician Household and the Complexities of a Two Physician Household. Today we will discuss tips on maximizing your finances in a two physician household.

Recently I have been seeing more families where both spouses are doctors. I don’t recall seeing any rising statistic of this phenomenon, but I suppose that many of these couples meet during their training. Medical professionals are busy—many spend their waking hours in the hospital or doing medical-related activities. They tend to meet at the workplace and hit it off. Spouses in the medical professional also understand the stresses and long hours in medicine. In theory, similar lifestyles should be more compatible. We’ve already discussed the pros/cons of this arrangement.

In this article, we will discuss tips on maximizing the one advantage of a two physician family: high earning potential.

Two Working Physicians Can Generate ALMOST Twice the Income

Two working physicians do not equate to double the income. Federal and state taxes will eat into this couple’s earnings. The income of one doctor will likely bring up the family’s federal marginal tax rate to nearly the highest bracket. This effectively puts the bulk of the second doctor’s income in the highest marginal tax bracket, which is upwards of 39%. Throw in state taxes and half of the second income is taken by Uncle Sam. If you live in tax heavy states like California, Hawaii, New York, or Connecticut, you might lose more than 50% of your income to taxes.

If both spouses are employed, then both will also be responsible for payroll taxes (FICA). That is another chunk up to the first $118,500 earned in 2015. If only one spouse were able to generate the income of both, then they will only have to pay for it through the working spouse. Double ouch.

Two Working Physicians Have HIGHER Expenses

With two working physician spouses, you double nearly all of the work expenses. This includes disability, umbrella, and malpractice insurances (serious money). You double the commuting costs, wear on your vehicle, and wear on the individual. Both individuals also need to maintain work clothing. The costs add up.

Maximize Net Worth Growth By Controlling Expenses

I do know a surgeon and internal medicine sub specialist family who brings in upwards of $1.3 million annually net. Both of them spend most of their waking hours (weekdays and weekends) involved with work related activities. They are machines. Every aspect of daily life that they do is outsourced. The AMG dealership goes to his office to switch out his car for maintenance and leaves a loaner. They have a personal chef deliver healthy dinners twice a week at a cost of around $120 a meal. You won’t see either of them cleaning the lime off of their toilets. Vacations are extravagant and extreme. The surgeon once worked up until 9pm one evening, and went straight to the airport for an international flight for vacation.

This is fine if you can generate serious coin like this couple, but most doctors cannot afford this type of lifestyle.  The way a two doctor family gets ahead financially is the same as with anyone else: controlling costs.

A two physician family where each spouse makes $150,000 a year ($300,000 combined) has plenty of options to grow their net worth:

  1. A significant portion of this family’s income should be directed towards debt and investments. If this family has consumer debt, this has to be eliminated immediately, followed by educational/student loan debt. Half of one’s spouse’s paycheck can be used for living expenses while everything else can be directed towards building net worth.
  2. Control transportation costs. A two doctor family will have double the commute. Make sure that you aren’t throwing potential savings away leasing a Mexican-made German luxury gas guzzler every 3 years. If you work in the same hospital or location, consider car-sharing if both work schedules are amenable to it.
  3. Don’t buy more house than you need.
  4. Think twice before you send your toddler to private school. While the merits of sending your toddler or 5-year old to private school can be debated in another article, it will eat into your net worth. Is it worth it? You decide.
  5. Be careful about dubious investment opportunities. It seems like many doctors I’ve spoken to are tempted by the prospects of easy money. I’ve been tempted too. Want to buy gold? How about this plot of land that your patient says has natural gas underneath that could be fracked? How about buying some real estate shared on an investment property your co-worker “has the in on”? The truth is that there is no easy money. Your earning potential as a doctor took a decade of blood and sweat to establish. Unless you can predict the future, don’t bet on a get-rich-quick scheme anyone tells you.
  6. Likewise, be wary of certain investment products pitched to you by your insurance agent. There are plenty of investment strategies like Banking on Yourself and combination insurance-investment vehicles that are clever. Many of these sound better than they really are. Make sure that you are informed about the benefits and conditions that each vehicle entails before you sign up. You can lose a lot of money if you don’t understand what you’re getting into.
  7. One spouse can consider negotiating a 4-day work week with his employer if it can make your life easier. Having a free day to run errands, pick up the kids from school, or just veg out. If you can grow your net worth by saving on daycare or minor chores, you are even get to save post-tax dollars.

The list serves as a mere guideline to follow. As you build up your net worth and F-You Money towards Financial Independence, each step will matter less.

[showads ad=responsive]

 

What money saving measures have you or your spouse implemented? Do you have any tips for two-physician households? Comment below!

What is Financial Independence And How Does That Apply To Doctors?

Posted on by SmartMoneyMD

We all build careers for two reasons: (1) We have a strong passion for a particular cause and wish to devote our time to it, or (2) We need to obtain money to sustain our families and living standards.  I would suspect that the majority of us in the workforce belong to the latter category.  Most people work to build income to establish a certain standard of living. Some people have lifestyles that exceed that of their earning ability. Others try to save during their working careers to have enough to retire.

Financial Independence is a term that has been circulating in the online finance community to loosely define a favorable financial situation that allows one to be free from the typical career.

Financial Independence = Early Retirement?

Financial Independence Early Retirement, or FIRE basically means that if you quit your day job or other conventional means of income, you still have enough to survive. There are many different interpretations to this rule, but for most of the “FIRE” online community, this means retirement. Income to sustain a living can come passively through investment vehicles like dividends or through other income like real estate rentals or asset appreciation. Those who are in the FIRE category base their financial status on the Trinity Study, which projects a certain sustainability of living based on your assets. In the broadest sense, you can withdraw approximately 4% of your investable assets each year and expect to have enough to last 25 years. Without going into the flaws and shortcomings of that study, you can also extrapolate that in bear markets or down economies, you may wish to withdraw less to sustain the longevity of your income, and vise versa in good economic times.

The first step in calculating how to achieve FIRE is to know how much you spend annually. There are online forums and calculators (like the FIREcalc) that help give you a sense of where to start and when you should be able to achieve Financial Independence.

This magical number is going to vary widely depending on your spending habits. If you send your kids to private school, take luxury vacations, or buy organic groceries at full price, you will need a larger nest egg to achieve FIRE.

Financial Independence = F-You Money?

What if FIRE is not achievable given your income, investment percentage, and spending habits? Perhaps you could define Financial Independence as having enough net worth to be able to walk away from your job without having to starve your family. That amount is F-You Money. Your nest egg is substantial enough to sustain a happy living arrangement for a certain period of time. You can’t walk away from everything yet, but you have the luxury to explore alternative means of income. This can be from consulting, managing side projects, or even per diem jobs.

How much do you need to have F-You Money? A year’s worth of living expenses? Five years? There’s no magic number, but I would still consider this number to be big. In my case, I am still trying to reach my peak earning potential for my career and build up savings that I should have accumulated during the lost years of medical training. I do not have kids yet, so I expect that my expenses will continue to rise over the next decade before I can scale back my spending.

If 25x your annual spending, as defined by the Trinity Study equates to Financial Independence, I would consider F-You Money to be at least 10x annual spending, maybe 15x. This is a good number to strive for.

How Does Financial Independence Relate to Doctors?

On paper, every doctor should be able to achieve financial independence given their earning potential.  I would expect all doctors to be financially independent, even with a moderately lavish lifestyle, by the time they retire at 65 years of age.  Unfortunately, that is not the case, and this is one of my motivations to operate this website. Doctors are traditionally bad at business and investing. They have been programmed to focus singularly on their profession and nothing else. Moreover, I have met plenty of doctors who are disgruntled with their profession, but begrudgingly continue because they don’t have a choice.

We do have a choice. Doctors should be able to obtain F-You Money and FIRE if they manage their income, investments, and savings appropriately. Yes, we’re a decade behind our peers, but as long as we are capable of practicing our profession, we can catch up. By achieving Financial Independence, we provide ourselves with the option of practicing medicine the way we wish to, and without the burden of having to worry about getting our bills paid or uprooting our family when our hospital fires all of their doctors.

Take Action Now

Assess what you can do to get one step closer to Financial Independence. Does that mean taking an extra ER shift at the hospital and putting that towards your debt or investments? How about finding ways to grow your net worth without increasing your income? Make a list of goals and what you can do to achieve them. Tackle that list day by day. I’m certainly doing it. And I plan to get that F-You Money and achieve Financial Independence.

What steps have you taken to achieve your financial goals?

[showads ad=responsive]

Why You Should Rent Instead of Buying a Home

Posted on by SmartMoneyMD

Should I buy a house in medical school? What about residency? What if I stay in the same area for both medical school and residency?

I heard all of these questions during my training. I even went to lectures on this matter sponsored by “financial advisors for physicians”. Those lectures were educational too. No money for a down payment? No problem! You can even take out a Doctor Loan! Buying a home while you have a temporary job like residency always seems enticing, but there aren’t too many good reasons why you should do so. Buying a home for your first job may not necessarily be a great idea either. Here’s why:

You Need More Money Up Front to Own a Home Than To Rent

Traditional loans require a deposit around 20% to obtain the best interest rate. Yes, there are Doctor Loans that require no mortgage insurance or deposit depending on how much you have in your bank account. You will still pay for it. If you don’t pay for it up front, you will pay for it in monthly increments in your mortgage payments. Unless you had a job prior to medical school or have family help (or are independently wealthy), it’s unlikely that you actually have enough to put down for a decent house that you’d want to live in. I certainly didn’t. I also had no stable income during medical school either and a three to four figure bank account balance.

As a resident, you make approximately $50,000 pretax. While many families with children live off of $50,000, there is obviously a limit to the amount of house you can purchase and have enough for living expenses. Obviously if you have a working spouse, the circumstances change…

Mortgage Interest Deduction is Less Than You Think

Mortgage deduction sounds great in theory, but remember that any deduction requires you to pay money up front. You have to SPEND money to SAVE money. Tax deductions treat a certain percentage of monies you’ve paid as untaxed income. Tax laws allow you to deduction mortgage interest from your income. So if you pay $10,000 in mortgage interest in one year and are in the 25% marginal federal tax bracket, you “save” $2,500. In other words, you still pay $10,000 in mortgage interest but at the end of the tax season, the government taxes your income as though you earned $10,000 less on your income.

Additionally, you must itemize your deductions if you wish to be eligible for a mortgage interest tax deduction! I certainly did not itemize my tax returns during my entire residency or fellowship due to limited expenses and income! By not itemizing, I actually saved even more money through TurboTax/TaxACT since it was free.

As a full-time physician, mortgage interest deductions make a little more sense simply because you are in a higher tax bracket. I still consider this more of a perk rather than a reason to own a home.

Home Ownership Has Upkeep Costs

If you rented a home, your landlord is responsible for most of the maintenance costs (unless your landlord is an asshole and puts conditionals on certain home appliances). Stuff breaks. Appliances need maintenance. Air filters need to be changed.

If you owned your home, you or your spouse is responsible for it. If you don’t know how to fix your toilet, tough luck. You hire your friendly neighborhood plumber* who hits you with a $100 house call fee and $130/hour rate on a job that takes him 32 minutes but he still bills you for the full hour. Don’t forget the 3x markup price on parts and a miscellaneous charge for shop items. Oh, and if you really knew how to fix it yourself, it’d only take you a trip to the local hardware store and 10 minutes of your time.

There are fees for lawn care, cleaning, maintenance, property taxes, and home association fees. Even if you can outsource all of the basic tasks, you will still have to deal with the hassle of calling for help. As a renter, you don’t have to worry about this. If you are a busy medical student, resident, or have any busy career, you want to minimize tasks outside of your work life.

Your Money Is Tied Down in Your House

Equity in your house is illiquid unless you have a buyer. Even with a buyer, it may still take weeks to months to even close unless you have a cash offer. The problem with equity in real estate for medical trainees and young doctors is that their jobs may be transient. Medical school and residency only spans a set period of time. Most doctors do not stay at their first jobs forever either. Professionals who are early in their careers cannot afford to have equity tied down in real estate if they have to move.

Real estate value cycles. If the housing market is down when you need to move, you either have to sell at a loss or hold onto the home until the next housing peak. If you rent, the money that isn’t tied down can be used to invest elsewhere.

Example

The benefits of renting vary depending upon locale. For example, homes in one neighborhood in my town are selling for approximately $350,000. Rent for a similar unit goes for around $1800 a month. The Price-to-Rent ratio is roughly 15.4, which means that the cost of renting is equal to that of owning.

Assuming a 30-year mortgage at 3.5% interest with 20% down and closing costs rolled into the mortgage, this is what I estimate:

Rent

Own
$1900 monthly rent $1304 monthly mortgage
$4830 annual property tax
$10,500 closing costs on first year
$3500 annual maintenance
$1853 monthly payments with taxes, insurance, and mortgage insurance

So based on this projection, owning this home can possibly save you around $47 a month at the expense of tying down a portion of your money and dealing with home ownership. Obviously if you can cut down your annual maintenance costs, you will save even more. The breakeven point for a house in this price range will be at least 3-4 years. Remember, most markets have at least a 6% seller fee.

Conclusion

While I know many intelligent medical students and residents who own homes, most of them have no business owning one. Many of them have spouses who stay at home to take care of the kids, so they often have limited income. After 3 years of residency, some end up moving to a different city and either rent or put up their home for sale. Those that stay in the area even move simply to live in a larger home. It does not seem worthwhile to go through the hassle of home ownership with such a busy day job.

Did you own a home during medical school? What benefits did you find in home ownership? Sound out below!

[showads ad=responsive]

Habits and Characteristics of Millionaires

Posted on by SmartMoneyMD

I do receive commission from Amazon from the book links listed on this page.  I do think that it’s a worthwhile small investment for your financial future. I appreciate your help in sustaining this website!

I finally set aside some time to read the sequel to The Millionaire Next Door, entitled The Millionaire Mind, by Dr. Thomas Stanley. The author had studied the lifestyle and habits of millionaires and condensed them into two best-selling books. As high income earners with a late start on their careers, doctors do have plenty to learn from the rich. The following is a list of focal points that Dr. Stanley emphasizes throughout both of his books:

Millionaires Did Not Get Good Grades in Schools Nor Did They All Go To School

Of the millionaires polled and studied, the majority of them apparently were not seen as intelligent by their teachers and did not achieve good grades in school. Some were condemned by their teachers to a life of mediocrity. Could mediocrity serve as motivation to achieve? The author believes that by not being “book smart”, these future millionaires became more resourceful and chose careers that were less popular and had less competition. These people also learned to work harder and more intelligently than their peers and eventually became more financially successful than their peers who received better grades in school. Examples given included a millionaire businessman who owned a metal recycling company or the salesman who knew how to get widgets sold. Neither of these professions truly required much of any formal education but allowed the resourceful to succeed.

Can this apply to doctors? Hell no. Doctors succeed by working hard but also getting good grades. We survived through college organic chemistry and repeated testing of material that ultimately has little to do with our final daily routine. This hazing process was important because it filtered out the less compulsive and less determined—after all, you’d want a compulsive doctor who does not miss diagnoses. Medicine is a mesh of inexact science with art; patients can become ill and even die under the most skilled physician (and get wrongfully sued too). Can a doctor be skillful but received poor grades in school? It’s possible, but less likely.

With these conflicting conclusions, can doctors still be millionaires? Of course, but it certainly is much harder. One of my neighbors who is a retired small business owner likely has more wealth that I will ever accumulate constantly remarks how rich doctors are. Yes, doctors have good salaries, but we still need to be smart about our money and convert a high income into high net worth.

Millionaires Contract Out Tasks To Others

Apparently the typical millionaire is not the DIY-type. Home repairs, plumbing, cooking, yard work…all of these routine household tasks are either left to the spouse (the wife, according to his book) or hired help. Millionaires spend their free time relaxing with their family, playing golf, or focusing their attention to earning more through their profession. This approach allows them to enjoy their hard work, and maximize their earning potential. A jack of all trades is a master of none.

I’ve seen this mentality with my colleagues to a certain extent. We’ve trained such a long time to practice our profession; we should use that to our advantage to earn more. I recently heard that one two-physician couple hires a chef to cook for them, and each meal costs $120! It certainly is impressive that one could afford this long term, and I suppose you can interpret this to be that they are successful in their careers. Need additional income, let’s pick up a few more shifts in the ER. I know doctors who don’t know a single bit about cleaning floors, car maintenance, or how to operate their food processor. But they do know how to intubate a patient, and that’s where the easiest way for these people to obtain income.

Frequent visitors to this website know that I approach net worth as a balance between savings through lifestyle modification and income (whether from your career or alternative means). I have discussed low-risk household maintenance tasks like changing the headlights to your car, replacing toilet parts, and cleaning your toilet. By means of branching out your fund of knowledge, you can become more self sufficient and invest your hard-earned post-tax dollars for other needs. You can be smart about your money without being totally useless in practical life.

Does limiting the number of outsourced tasks mean that I will never become a millionaire? I sure hope that there’s no corollary between hiring help and becoming wealthy in today’s times.

Millionaires buy lasting furniture and older, well-built homes

One interesting statistic that Dr. Stanley found was a millionaires rarely buy new furniture but rather resurface their existing furniture. The premise is that quality solid wood furniture should last forever, and wasting money purchasing new furniture every decade is not practical. Frankly, I don’t even know any local furniture dealers who reupholsters furniture. This fact might be reflective of outdated trends. Most modern furniture (even the expensive ones) contain particleboard.

He also found that millionaires target older, well-built homes in established neighborhoods to live in. These homes tend to save their owners more long term. I don’t really know how to interpret this finding in present times. There are plenty of affluent neighborhoods especially in the northeast that undergo cycles of tear-downs and rebuilds. Some owners do it simply because they want updated floor plans or extra bathrooms. I haven’t noticed any correlation with the upper-middle class or the ultra-affluent.

Whether you upholster your old furniture or live in well-established “older” homes probably has some connection with being a millionaire or ultra-rich. Not following these statistics probably doesn’t prevent you from being a millionaire either.

Conclusion

After reading both The Millionaire Next Door and The Millionaire Mind, I do think that the author brings up goods points that apply to all of us who are trying to build up a stable net worth. There are plenty of millionaires and billionaires who were not pegged by their teachers to be successes and some who did actually receive good grades. The one unifying aspect of the wealthy is that they think differently. Everyone works hard, keeps their eye on the goal, and finds ways to reach that goal. The billionaire factory widget maker worked hard to reach his clients and sell products. The wealthy doctor needs to do the same.

[showads ad=responsive]

Do you have any experiences with any of the qualities of a millionaire? Comment below!

Analyze fixed costs and destroy them

Posted on by SmartMoneyMD

This is the last post in my series on how to boost your net worth without having to increase you income.

 

Recurrent costs are expenses that we often subscribe to but may not necessarily be aware of. I often forget about certain monthly bills that I set to pay automatically. It should be good habit to reassess our needs to cut costs. Some recurring bills include:

  • Electricity bills
  • Gas bills
  • Sewage/HOA bills
  • Garbage disposal fees
  • car payments
  • rent/mortgage
  • property tax
  • vehicle registration and insurance
  • internet bills
  • cable/satellite bills
  • online subscription services: Pandora, Evernote, web server, Netflix, Hulu, Amazon Prime
  • magazine subscriptions
  • country club fees
  • golf course fees
  • telephone bills

 

Utilities (electricity, HOA, gas, sewage, trash)

These costs are mandatory, but you can still trim off the fees by paying attention to your usage. Basic supply line fees and taxes can’t be avoided, but decreasing consumption strategically will cut your bill with minimal disruption to your lifestyle. The majority of our electricity usage comes from our refrigerator, light bulbs, washer/dryer use, and air conditioning. Changing out your incandescent bulbs to CFLs or even LEDs will cut use dramatically. Insulation and increasing thermal mass of your house will help keep temperatures more stable through the day and decrease heating and cooling costs. Many modern homes aren’t designed to take advantage of the sun and the environment (which is a shame), but if you are able to find a home that has strategically placed windows (south facing windows if you are in the northern hemisphere), you can take advantage of the sun. You can track the electricity use of your appliances using a Kill-A-Watt meter. It’s surprising to see how much electricity certain appliances use. I found that my 40” LED television hardly drew any power while off, but consumed about 0.65kWh of electricity in 5 days of 1-3 hours of use. Find your appliances that have excessive phantom electricity draw and eliminate them! Options to decrease gas usage is more limited to decreasing your heat in the winter—obviously not an extremely popular option for many people to keep their homes much colder than comfortable. Again, the solution is actually to thermal insulate your home and increase thermal mass. If you can design your own home, look into Trombe walls and take advantage of the sun.

Cellphone bills

There has been an open battle among the big cellular companies and their offers to slash bills. If you are out of contract with your mainstream carrier, consider tracking your use and try some of reassess with alternative companies like Airvoice, FreedomPop, Ting, or Virgin Mobile. I was able to save at least $25 a month using Airvoice.

Internet bill

This is also a no brainer. Since the internet market is monopolized by a handful of companies, it is relatively easy to price shop. Use WhiteFence. If you live in a rural area, then your options will be more limited. Don’t be afraid to cut your provider in favor of a cheaper option.

Get cable along with Internet? Consider bundling if you must have cable or satellite, but you’d be better off cutting the cable. Likewise, if you find yourself too busy to use your Netflix subscription or online streaming memberships, considering cutting them.

Conclusion

Make it a habit to reassess your recurring costs annually. If there are services that you are not using, consider canceling. Be sure to check if you are spending too much on utilities, cellphone, or internet. I was surprised to find that many of my coworkers pay over $200 a month for bundled cable/internet!  Is premium television worth $2400 a year in after tax dollars?

What suggestions to you have to cut fixed costs? Comment below!

[showads ad=responsive]

Do not own more house than you need

Posted on by SmartMoneyMD

This is the second article in a following series on saving money. 

Housing costs in America are cheap. If you look at the cost of rent of an average city in Western Europe, you will see that it is several times higher than most of the larger cities in the U.S. How about Tokyo or Hong Kong? Equivalent housing in New York is similar in pricing yet the GDP of Hong Kong is much lower than that of the U.S. If you are looking strictly in doctor income, you will come out ahead significantly in the U.S. If you compare the overall financial health of a doctor in an average midwestern city like Omaha to one in Hong Kong, the Omaha doctor wins by a landslide. A $3000/month mortgage in Omaha will get you a giant 4500 sq ft house with 4+ bathrooms while you get a 800 sq ft apartment in Hong Kong with questionable bathroom plumbing!

You can definitely make the payments as a doctor. But it doesn’t mean that you should splurge on your housing. Standard recommendation for housing is that you shouldn’t spend more than a third of your monthly income on housing. A doctor who still has student loan debt or is in her first five years of practice should not be spending nearly that amount. If you spend $1000 less a month on rent or mortgage, you’d save $12,000 in one year! A smaller home will also require less energy to heat and cool, less space to furnish, and less maintenance.

The perk of being a doctor in America is that you have a higher potential income and cheaper cost of living. Use that to your advantage. The amount saved can be used to fund your Roth IRAs or taxable investment accounts. Even with tax drag, a 4% annual growth on $12,000 will result in $21,611.32 after 15 years. Contribute this amount every year and you will have a hefty sum.

Ask yourself where you priorities are, and what activities, hobbies, or goods make you happy? Is it a new pair of Loubs every year? Is it an extended vacation? Or a fancy house?

[showads ad=responsive]

 

Do you choose to put your money in your house? What do you do to control costs in your home? Sound out below!