Category: lifestyle

Sacrificing Your Career For the Good of the Family

Our society has taught us that we need to hustle in order to succeed. Whether our goals are to get good grades in school, build our businesses, or become a gifted surgeon, hard work is mandatory. I previously described this desire as your hunger to succeed. With hunger, we develop a need to achieve our dreams.  As a result, that is how we succeed.

What is often overlooked is that we often make sacrifices to ourselves and to our families in chasing our dreams. The sacrifice usually comes in the form of lost time that could have been spent nurturing our other interests or being with family. This trade-off cannot truly be quantified or objectified. We end up making our decisions based on which one seems more important to us at the time of decision.

As doctors, we are often self-centered and focus on how hard we study, sacrifice our 20’s, and work in our jobs. Our lives revolve around our patients, and we often are called to duty during hours that are usually spent with our loved ones.  We do it for our profession. We do it for the income. We do it for the love of medicine.

How do we draw the line between career and life?

This is a challenging balance that all professional households struggle with. As recent as one generation ago, there was less of a question in a doctor household—the doctor serves as the breadwinner while the spouse cares for the rest of the family. It was a no brainer when the highest potential earning member of a family ends up being the worker since that conferred the highest level of financial security to the household.

The circumstances have evolved in modern households. Some families consist of two doctor households where both spouses have equal earning power. Some two-professional households also have similar income potential between the spouses. The prominence of technology, internet, DIY culture, and deviation from social norms have given households more flexibility in lifestyle and de-emphasized the traditional single-income family or the standard “work 30 years and then retire” mentality.

Someone has to compromise in a two-professional household.

It is very difficult for each individual in a two-professional household to have dream career opportunities in the same city. The more specialized the career, the more difficult it is to find a match.  What is more common (yet still challenging) in most circumstances is that both spouses have employment opportunities in the same vicinity but neither of them may be ideal. This is where compromise must be achieved.

I’ve come across many colleagues who had to settle on a job rather than their dream career because of spousal commitments. Point in fact:

Family where wife is an oncologist and husband is a software developer.

One of my colleagues works at Google. His wife is an oncologist. They are restricted to living in one of the cities where Google has a team. Why would a doctor ever have to settle on where to live and work because of a spouse who likely earns less that she could? Practicality. The Google developer started in his early 20’s pulling in a high $100k salary with bonuses salary that totaled the high $200’s by the end of the year. He gets 4 months of paternity leave. Additionally, there is free catered lunches at work, free child care, and a boatload of vacation time (and swag). The oncologist entered the workforce over ten years after her husband, and has a starting salary of $250k.  If she were to leave the metropolitan area, she could find a job that pays at least $350k annually.

They decided to stay in the city. The oncologist has compromised her career for the good of the family. It happens.

Do you know of other professionals who have put their careers second to the greater good of the family?

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Put Your Children’s Needs After Your Own

Due to culture, social pressures, or self-imposed obligation, providing for our children has always been a priority. This care starts with food and shelter, but quickly escalates beyond true necessity as our income rises. For many professional households, the cost of raising a child easily exceeds that of the $245,340 average that is often quoted.

Where does that money go? Start with toddler toys or that quintessential toy lawnmower that most kids have. Add in rotating collection of brand-name wardrobe that your child outgrows, fancy German and Italian model race cars, fancy family vacations, and you’re already behind the average before your child turns 6. How about daycare, the multitude of extracurriculars like little league baseball, tae-kwon do, soccer, tennis, and [insert your preferred after-school activities] you’ve hit enough to pay for a year of Ivy-league education. Oh, even though you went out of your way to buy that fancy house in the top school district of your area, you still need to send your kids to private school. Better yet, with 12 years of private school, your child will definitely get into an Ivy League college of his/her choice.

It’s okay, you’re a doctor. You can afford it. Your financial advisor has mapped out your future. Your child’s education will hopefully be funded through your 529 plans, taxable accounts, and maybe even your cash-balance plans. If the future doesn’t treat you as fairly, maybe you can work an extra few years.  Have a second or third child? Wash, rinse, and repeat.

You Need To Put Your Needs Ahead Of Your Children

With all jest aside, you are only obligated to provide a safe and nurturing environment for your children until they become adults (age 18). Financially, this approach should be the default. The better of you are prepared for retirement, the better of your children will be—they won’t have to worry in their budgets to fund your retirement. Remember, the fact that your kid has the complete line of SpongeBob accessories doesn’t mean that she will get into Harvard. What if your kid becomes the next tennis star? The $150,000 that you funded into your 529 will be left to their heirs or taxed out of your retirement fund. Worst yet, your kid may flunk out of her private high school and not even make it into college. The worst thing you can do for your kid is to give her a million dollars when she the best job she could obtain is the at the local car wash.

Take a Step Back and Assist Your Children As Needed

The best step to take in helping your children make it through this world is to become financially secure yourself. Build up your nest egg, achieve financial independence, and help them as needed. They will thank you for it in the future.

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Hunger Drives Your Will To Succeed

Ask any self-made successful person, and she will tell you that one of the key components in success is hard work. Life is rarely presented to you on a silver platter–you have to create the opportunities yourself.  Look at the top CEOs of successful companies; most wake up earlier than everyone else and work later than everyone else. Look at the work ethic of Jeff Bezos and all of the publicity that his company has received lately regarding Amazon’s tough nurturing of its employees. These successful people have the hunger.

It is the hunger that drives us to succeed. You too can invoke that hunger to achieve your goals.

Hunger Allowed You To Conquer College, Medical School, and Residency

As a medical doctor, you obviously have had the hunger and discipline to make it through adversity. You spent more hours in the library than the majority of your college peers. You spent your 20’s and early 30’s studying and specializing in your medical field. You practice medicine in a time with decreasing reimbursements and an increasingly litigious society. If you are still practicing medicine in this environment, there is still an amount of hunger within you. Whether it is the thrill of the science of medicine or the looming debt that you’ve accrued during your decade of education, there is a drive in you to keep you going.

Use That Hunger To Advance Your Life

If your definition of success involves advancing your life beyond what it is currently, you must outline some goals. Whether these goals are short or long term, the first step in achieving them is to map them out. Narrow the list to a few priority items and ask yourself how much you need to achieve them.

Do you want to lose 10 pounds in 2 months? Do you want to cut back on buying shoes? Do you want to save up enough to retire early or to buy a house? Are these goals desirable enough to drive your hunger to achieve them? What are you willing to give up in order to reach these goals? That is the most important question. You must ask yourself why these goals are important to you. Is there a special event that you need to go to that requires you to cut some inches off you waist? What are the consequences if you don’t lose those 10 pounds? Will cutting back on your weekly shoe purchasing allow you to retire a year earlier, which is your ultimate goal?

You must rationalize the need to achieve these goals. Only then will you be able to achieve them. Start small and think big. Make a ladder of goals that increase in difficulty to achieve. Keep sight of the end goal. Every minor victory counts, and track your progress.

Example: Achieving millionaire status by age 40.

Suppose you finish your cardiology fellowship at age 33 with a net worth of negative $200,000.  You take your first job with a salary of $250,000 annually with potential bonus. After two years of working, you make reach an earning potential of $350,000 annually. You want to have at least a $1 million net worth by the time you reach age 40. You have 7 years to do it. Suppose that you earn $275,000 for the first two years and $350,000 annually every year after that. In 7 years you should have a pretax income of $2.3 million. If Uncle Sam takes 40% of that, you should have a take of about $1.38 million post-tax. Subtract off $200,000 in loans that you repay, and you will have $1.18 million to play with. Assuming absolutely no appreciation in your earnings, you cannot spend more than $180,000 in 7 years (or about $25k annually). Now Mr. Money Mustache is able to spend $25k a year to feed his family of 3 in a lavish lifestyle, but you, the hotshot cardiologist can’t. You have to pay for your work clothing, commute, and living expenses.

The first step in making this goal achievable is to realize that it can be done. The numbers are close enough to work out. The second step is realizing that putting all of your unspent earnings into the bank will not be adequate. At a measly interest rate of around 1% pretax, you will not hit your goal. The solution to guarantee that you reach millionaire status by age 40 is easy: cut your expenses and earn more money.

From this point, you can further narrow down your game plan. Find out what fuels your desire to reach this goal, and act on it.

What does your hunger drive you to accomplish?

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Early Retirement Is Possible For Doctors and Professionals

Early retirement isn’t just a pipe dream for doctors or even most professionals. It can be achieved if that is your goal. You simply have to establish a plan and execute it. Routinely (but not obsessively) monitor and track your progress. There are plenty of (non-physician) bloggers who document their achievement of early retirement—many at ages where doctors only are hoping to finish residency or fellowship.  If they can do it, so can you.

You Must Define What Early Retirement Means To You

Before you embark or consider early retirement, you must establish what it means to you. Everyone will have a different goal in early retirement. The main reason why people even consider retiring early is to free up your time to pursue activities other than what you’d do in your normal routine job without being homeless. Financially, being in early retirement means that you no longer require income from your routine job. It does not necessarily mean that you no longer generate income either. In early retirement, you still may have passive streams of income or simply a source to draw your living expenses from.

Examples of early retirement include:

  1. Lawyer who retires early to travel the world with his kids and stays home to blog.
  2. Software developer who retires early to blog at home and take care of his son. (Retire by 40)
  3. Software developer who retires early to pursue his hobbies in construction work and later just enjoys life with his family and also runs a blog.  (Mr. Money Mustache)

 

Excessively Lavish Lifestyles Cannot Be Sustained. Period.

Early retirement does not mean that you can take a Four Seasons Around the World trip every year while putting two of your kids through Ivy League schools and funding a new Mercedes AMG every year. That’s just not possible unless you’re able to draw out a mid six-figure living expense fund every year.  Most doctors can’t even do that while earning their peak salaries, so it is unlikely possible if you’re not generating doctor income. Furthermore, this type of lifestyle is actually taxing physically and mentally.  Eating Michelin-star food every day can even become mundane (and unhealthy).

In order to be able to retire early, your living expenses have to be reasonable while allowing you to live comfortably and enjoy your time. It will be different for everyone. What works for the former software developer may not work for the retired cardiologist. Ask yourself what you need to be able to sustain a happy early retirement and work backwards in your financial plan.

Is Early Retirement Truly Suitable For You?

Before you embark on your financial strategy, make sure that you really know what you’d like to be doing if you gave up your medical career. We went into the field to help and heal people (it also took many years of your 20’s)—is it worth it to give it up? Make sure that you won’t be bored if you do hang up your stethoscope.

Most importantly, is your spouse in agreement? If he/she likes his/her job and wishes to continue working, will it strain your relationship if you gave up your career? What will your extended family think of your choices?

Get A Pen And Draft A Plan 

Give yourself some time. Figure out what you want to do, and jot down your goals on a notepad or on your favorite note-taking software. Keep saving money in the meantime. When you’re ready to take the leap, go for it!

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What strategies have you implemented towards early retirement, and do you think that it will work for you?

When Should You Outsource Your Chores?

Professionals are busy people. Whether you are a doctor, lawyer, stock broker, or even financial advisor, there will always be a constraint on the amount of time available per day.  What tasks do you delegate, and what should you handle yourself? This predicament applies to both our professional and household lives.

Should you or your secretary arrange flights for an upcoming business meeting? Should you stop at the grocery store after work to purchase produce and do you cook it? Should you hire a private chef or should your nanny cook the food? Who does the laundry, vacuum the house, or manage the yard?

You Must “Understand” Some Chores Yourself

Regular readers of this blog know that I have written about car and toilet maintenance.  You don’t need to be like MacGyver (hopefully you are old enough to know who he is), but competency in practical matters will only help you become a more well-rounded person.  It doesn’t matter if you earn $150,000 a year or $850,000 a year—you should know something.  My approach is that if you don’t know any practical matters Of daily living, you won’t even know if the people you hire are taking you for a ride. I’ve seen plumbers bill out 2 hours of work for a 15 minute job.  I’ve seen painters charge out 14 cans of paint for a job that would normally require six.

Understand Your Limitations

While you will benefit from being handy, you don’t want to jeopardize your career either by getting injured. Falling off of your roof while cleaning your gutters or cutting your hand while trimming some tree branches is not the greatest outcome for a cardiothoracic surgeon. Likewise, some chores may not be worth your time given your skill level. If you have never tiled a floor, you might not wish to waste an entire palette of fancy travertine tiles and go to town on a kitchen remodel. Just because you can crack someone’s chest open and revascularize their heart doesn’t mean that you are qualified to lay tiles.

Start Simple And Work Your Way Up

The best way to build your fund of common knowledge is to pick a topic and learn about it. Hit up the local resources at the public library in your free time or online. Choose an area that interests you and is low risk to yourself and low impact on your household. It can be as simple as cleaning the grout on your tiles or learning how to wash and wax your car properly. Picking a chore that doesn’t require substantial equipment is useful in case you decide that you no longer which to continue it after the first trial. As you build upon your skills, you can venture into more challenging tasks: (1) Learning to clean your toilet (2) Learning to replace the toilet seat (3) Learning to change the flush valves (4) Learning to replace the entire tank.

Decide How Much You Wish To Diversify

Remember, you still have a primary job. You trained for an entire decade of your life to become a doctor or professional–that’s what still pays the bills. If your side hustles or hobbies end up producing a higher income than your day job, then you’ve done something well.

What household chores do you consider to be worth your time? Where do you draw the line between DIY and outsourcing?

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When Is A Hybrid Car More Cost Effective Than A Traditional Car?

When I was choosing to buy my first car after finishing my training (read: eminent income boost), I agonized over a handful of dissonant choices: fancy vs budget, SUV vs sedan, SUV vs hatchback, sedan vs hatchback, hybrid vs traditional, and American vs Japanese vs European. Or should I just let loose and buy a Hummer?

I strongly considered getting a hybrid vehicle, not because I am environmentally conscious, but I did not want to spend as much of my time waiting at the pump getting gas. At first glance that’s a silly requirement, but you can lose 20 minutes every one to two weeks at the pump. Combine that with your daily commute and you have wasted at least 5 hours of your week in your car. The environmental advantages of a hybrid have been debated online as well, as some claim that the energy consumed from production of hybrid car batteries and components vastly outweighs any savings from pollution reduction.  While the government has ceased giving tax breaks to hybrid vehicle owners, the price differential between hybrids and their gasoline counterparts has become marginal over the past few years.

I decided to look at two categories of cars:

Mazda 3 vs Toyota Prius

I test drove both of these cars and decided that there were very similar in price point. A mid-range Mazda 3 came in roughly at $20,000 new while a Toyota Prius was around $24,000 new for the base model. I did note that the Toyota dealers in the area often added many accessories into the car, which often drove up the sticker price at least $1,500. I also considered used vehicles for added savings but unfortunately did not have the cash to make a full payment on the car, and there were limited used car options in my area at the time I needed a car. Alas that is the life of a poor doctor!

The Mazda 3 and Prius were advertised to support a 39mpg and 48mpg highway fuel economy, respectively. This was impressive since the Mazda is not a hybrid vehicle! I decided to compare the annual cost of gas for each car and made a graph:

Comparison of Gas Expenditures Between Mazda 3 and Toyota Prius

At the time I was deciding to buy a car, car prices were at an all time low, around $1.85/gal! During the past two years, I believe that the higher I would have paid for gas was around $2.60 a gallon, with averages in the $2.20 range. For the purposes of the graph, I assumed that gas was $2.50/gal. At 15,000 miles per year, the difference in gas expenditure between the Prius and the Mazda would have been $180.29! Assuming that the Mazda 3 and Toyota Prius are equivalent cars (they are not), is it worth spending $4,000 more up front for the Prius to save around $180 a year in gas? Obviously the breakeven point could change if I clocked in more mileage per year or the price of gas were higher, but cost-wise, it did not make sense in my situation to drive a Prius.

Lexus ES300h vs Lexus ES350

What if I wanted a luxury car? A hotshot doctor shouldn’t be driving a common car, right? We need leather seats, power, and class! I looked into a Lexus ES350 and its hybrid counterpart, the ES300h.  The advertised prices were $38,000 vs $40,920, respectively. There doesn’t appear to be as much of a price differential. The fuel economies were 31mpg on the highway for the ES350 and 40mpg combined for the hybrid. At 15,000 annual miles, the hybrid would save $326.61 if premium gas were $3/gal (yes I live in an area where gas is cheap!)

Annual Cost of Gas Comparison Between the Lexus ES350 and Lexus ES300h

Conclusion

At any rate, it is clear that the gas cost benefit of a hybrid vehicle increases as the price between the hybrid and its gas equivalent diminishes. The breakeven time will of course diminish as price of gas rises and number of miles driven increases (you don’t need a graph to understand that). The estimates that I used compared highway driving for the gas vehicles to combined driving for the hybrid (highway fuel economy for hybrid cars can actually be less than city driving since the gas engine has run).

There is also a huge discrepancy between the cost of the hybrids from model to model. My example of the Lexus ES350/ES300h is seems to be an anomaly at a $2,000 difference. The Lexus LS460 commands a price of $72,000 while its hybrid counterpart (LS600h, albeit with more features) comes in at $120,000!

Frankly, if I had the money to buy a used vehicle with cash, I would have done so. I opted for the best choice I could afford at the time, a Mazda 3 from the dealer. I was able to finance (cringe) the vehicle at 0% APR for 5 years! That’s right, no interest for the life of the loan. I currently average around 38-41mpg combined driving (no hypermiling tactics used) on the car and drive around 16,000 miles a year (MMM would give me a face punch for driving so much, but that story is for another time).

My selection against a hybrid (Prius or Civic) works for me because gas is so inexpensive in my area. Regular gas at its peak was only $2.60/gal!

Did I make a reasonable choice for a car purchase at the time? What car would you have opted for?

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Money Looks Better In Your Bank Than Your Garage

While the statement is a bash on impractical fancy cars that make your garage look pretty, you can substitute in any money-draining hobby, object, or recurring expense. I am not opposed to enjoying our hard earned dollars–we’ve worked long and hard enough–but it is always a good idea to reassess our desires with reality and practicality.

I once had a medical school classmate who asked me why I would ever need to buy a skillet. It was evident that she never cooked anything her entire life. Fast forward 6 months and I noticed that her closet had at least 100 different pairs of designer shoes! Despite the seemingly outrageous expenditures she had, it was clear to me that she was financially set for life. Not from savvy financial sense, but from inheritance money. Thomas Stanley calls this “economic outpatient care”, which is fine as long as the income channel never runs out. Hey, 10 years later, it really hasn’t stopped and she became an anesthesiologist (although I’m not sure if she still works).

The people who actually run into financial trouble are those whose expenditures ramp up as their earning potential increases. This applies to the majority of my doctor readership. We start out dirt poor, generate hundreds of thousands of dollars of negative net worth, and get slapped by insurance companies trying to restrict every single penny doctors deserve while bringing in a low 6-figure salary. Actually, M.B.A. grads follow a similar track, albeit at a more extreme level. I’ve met recent M.B.A. grads who managed to see 22 countries and build up elite airline status with multiple carriers all in a 2-year span during business school! Afterward, they join private equity firms and command salaries in the $300,000 starting range and up to $500,000 within a few years!  The advantage and dangers of such earning potential is that you can build up wealth quickly but can also lose it even more quickly.

If you don’t have a trust fund to fall back on, you have to play an active role in squashing out your debt and building your assets…no matter how big your paycheck is.

You Must Reassess Your Lifestyle Regularly.

Hold onto your receipts or review your credit card bills. Remind yourself what you are spending your hard earned dollars on.  Find out where your earnings are going towards and get angry at unnecessary expenses.  $2,000 a month restaurant bill? $800 heating bill in the winter? Routine last-minute cross-country airfares to visit friends? It doesn’t matter if you bring in $10,000 or $30,000 a month of income. If the expenses aren’t justified or sustainable, cut them out. I am relatively cost conscious but still find myself susceptible to lifestyle creep.

Since I rarely use cash for purchases, I track my expenses using Personal Capital. You can link up your bank and credit accounts to one system and categorize your I/O’s of your finance. Each week I can pull up a chart showing where my income and expenses were directed. They also provide a robo-investment/advisory service at relatively low costs (that is how they make money), but I currently only use the online financial information services. My investments are also categorized and I can quickly assess how much tilt or where my funds need to be rebalanced.

Direct Your Earnings Towards Your Bank

Every time you receive a raise or paycheck, be sure to pay yourself first. This means allocating a fixed amount or percentage of your income towards retirement and investments. Set realistic savings goals that are achievable. I currently allocate 50% of my post-tax income towards savings. Is that sufficient? Yes, but as high income earners who are able to control our expenses, it is conceivable to save up to 70-90% of our income!

Your savings goals will depend on your short and long term plans. Do you wish to reach FIRE? At what age? Do you have kids that you have to put through an Ivy League education? Do you want to be a millionaire or a $5 millionaire? Do you plan to quit your medical practice after five years and start living out of an RV? It makes good financial sense to draft out 5 and 10 year plans (I admit that I have yet to put much in writing either because I haven’t decided if I will settle in my current city or move on). As long as you do have an approximate plan and savings mechanism, you are much better off than the majority of our peers.

Conclusion

It is okay to spend your hard earned cash, but it is also important to reassess your financial goals regularly.

What strategies have you implemented to build your nest egg?

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