Tag: medicine

Ten doctor financial mistakes you don’t want to make

Ten doctor financial mistakes you don’t want to make

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

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

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

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

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The many paths to financial freedom

The many paths to financial freedom

The challenge in achieving financial freedom is that there is no single route to reach your goal.  This means that there is no single cookbook to building wealth, only a countless number of recipes that others have written accounting what has worked for them.  The frustration that many of us have in reading about others’ success is that there is never any guarantee that you or anyone else could replicate the outcome.  But that is life; we just have to learn from others and make the best possible decision for ourselves.

Doctors are fortunate in that their occupation tends to be relatively stable despite the growing factors that erode physician satisfaction or autonomy.  To this end, most doctors can just work hard at their day (or night) jobs for income and focus on controlling expenses.  Controlling the doctor financial freedom pathway is actually pretty simple in theory.  Let’s see how we can stratify the trajectory to financial freedom below:

Allergic to debt
The majority of students, residents, and early career doctors I encounter fall into this category.  They are debt averse, maybe because they have read so many accounts of others who have been in their shoes go through living a bare-bones existence.  Discounted Pop-Tarts, 12 for $1 ramen packs, leftover grand rounds meals—you name it, these guys have done it.  Some of them avoid getting traditional loans for their education by borrowing from their parents at a set interest rate.  Some of them carve out their homes and apartments into rentals.  It’s quite creative and impressive some people go about cutting costs and avoiding debt.
The reward? Being debt-free confers a good deal of psychological affirmation.  It also gives you absolute control of where you income goes (none of it goes towards repayment of debt).  As your income rises in your career, you can put more of it towards your final net worth.  Is this method the fastest way to get to financial freedom? Some people would think so.

Career workhorse
You went into medicine because you like stability.  No gambling, no risk taking…just good ‘ole fashioned intelligence and hard work.  If you can grind through the high volume of patients and put up with ever-increasing administrators, you can get a good income.  Save as much of it as possible, and you’ve got yourself a good nest egg.

Make your move

The career workhorse is not debt averse; she borrowed for her medical school education and for her home and vehicles.  There is nothing wrong with leveraging capital in order to live a lifestyle that you worked hard to earn.  The way to financial freedom through this trajectory is simply to automate a fixed amount of savings from your paycheck.  Set your savings rate to 20% of your paycheck, go for a standard career in medicine, and you will reach financial freedom. Period.  

Income and side-hustle focused
There are also physicians who are keen on focusing on ancillary income. Real estate, book deals, courses, and whatever else that can generate income is fair game.  There is a fascination with passive income these days, where the effort is put forth ahead of time to generate income with little upkeep indefinitely.  Some of these are low yield; others, like real estate can be high risk and high reward.  Many of my colleagues have been fortunate to bet big on ancillary investments outside of their profession and built up a revenue stream independent of their work.  
The very fortunate side-income physicians have been able to supplement and subsequently supplant their primary working income as a doctor.  How common is it to be able to achieve financial freedom through this route? You be the judge.

The majority of doctors are going to be career workhorses. There is nothing wrong with that—that’s how we advise students. You should choose a career that you actually want to focus your time on.  If you happen to find another calling to supplement your income, so be it.  

Financial implications of academic medicine

Financial implications of academic medicine

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

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

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

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

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

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

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

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

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

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

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

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

Prestige or wealth? Can you have both?


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

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

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

Implications of job hopping for doctors

Implications of job hopping for doctors

A large percentage of doctors end up switching jobs within the first five years of practice.  This really isn’t surprising given that the medical training experience doesn’t necessarily correlate with the medical practice experience. Many doctors work hard throughout their entire training only to realize that their expectations do not necessarily align with reality.  Is it our fault that we don’t really know what we got ourselves into? 

You might also like: Five reasons why doctors leave their first job

Perhaps taking q3 call as a resident didn’t seem too tough in your late twenties, but getting brutalized every third night in your thirties and forties starts getting really old.  Maybe your kids’ private school tuition is really digging into your academic salary, and your escape plan might entail joining your medical school roommate whose surgical center pays out dividends the size of your salary.

Do you call it quits and seek greener pastures?  Or do you grit your teeth and adjust up your savings rate to weather the storm?  Before you decide to jump ship, you have to make sure that you are really coming out ahead.  I’ve seen plenty of doctors job change every few years, some even more frequent than that.  I cringe at the number of 401k accounts that these doctors actually have opened with all of these job changes.  What about the bank accounts that they’ve opened and closed in every city that they’ve moved to?  Every time you start afresh, you end up picking up extra baggage that you have to decide whether to purge with each move.
If you feel like you are working in living hell at your job, here are some considerations to make before deciding to jump ship:

Financial strain

Life alone can be expensive.  Bills, lifestyle creep, and unexpected repairs add up over time.  Any sort of disruption in your routine will have the potential to incur costs.  One way to analyze financially whether a move would be worthwhile to make a move is to place a hard number on the increased costs during a job change process:

You’re potentially looking at a five to six figure cost when you change jobs.

In this scenario, you might be looking an all-in expense of roughly $60,000 if you make a move.  Chances are that there will be additional costs with licensing, credentialing, and immeasurable costs. Is that worth the change of scenery? Only you can decide.

Social Disruption 

Moving elsewhere means that you will have to re-establish your social circles.  Your children will end up separating ways from their friends and school.  If they are in high school, then their chances of entering college might be affected by a move.  You might have to find a new church group.  Depending on how much you value your social environment, there can a significant opportunity cost if you end up relocating.  Ultimately, you have to decide which factors are more important to you and your family long term.  Money? Friends? Sanity at work?

Learning curve at work

No matter how seasoned you are in your profession, change comes at a cost.  New hospital environments mean that you will need to learn a new electronic health record, repeat the oft-hated online HIPAA training modules, and become acclimated to the new work environment.  You will have new coworkers, new culture, and new regulations.  Depending on what you are escaping from your original job, a new environment might be refreshing.

Family disruption

If you are the sole breadwinner in your household, you will have the additional stress that your family’s well-being is dependent upon your income.  For any of you who are in this situation, you realize that if you make the wrong decision they will also have to ensure the stress.  Are the gains worth it?

Play the long ball

Your career plans should aim to win the war.  Take into account the financial, social, and mental challenges that come with any switch and make a decision.  Life is short; you have to remind yourself to take charge of your own life and take calculated chances.  If a career move will end up costing you $100,000 for the first year but allows you to enjoy a fruitful thirty year career, it might be worthwhile.  

What risks have you taken to improve your career? 

How to wind down your medical practice

How to wind down your medical practice

A retirement plan isn’t usually a top priority for fresh doctors looking for their first jobs, whether that final date is in five years or thirty.  Perhaps knowing when to hang up your hat is immaterial so early in your career since most doctors will end up leaving their first job within the first five years anyway.  However I do wish that I had some inkling about the career paths at some point as during my medical school rotations.  Knowing how medicine is really practiced and how practice patterns affect retirement would have probably influenced my career choices.
Interestingly, the specialty that you choose determines the means that you can even wind down.  This is because  different specialties lend themselves to different work situations.

You might also like: Choosing how to practice medicine 101 for new doctors

If you are a thoracic surgeon, you could work for yourself and contract with a local hospital.  If the hospital decides to employ its own thoracic surgeons, you might have no choice but to join the party or pack for the hills. No matter how you intend to practice medicine, it is worthwhile to have some inkling how to wind down your job. 
You might decide to hang up your hat completely and leave the medical world completely. Or you might want gradually wind down your hours.  Here is the list of options to wind down your practice:

Cut down your hours
If you are a shift worker, then you have it made.  Many hospitalists, nocturnists, and emergency room physicians have the ability to ramp down their schedules by taking fewer shifts.  If you belong to a large medical group, it actually isn’t that difficult finding someone who will be willing to take extra shifts for the money.  Pare down your shifts, and you can downshift your clinical practice as you wind down. 
One of the emergency room doctors I know who is slowly transitioning to administration fills in roughly four shifts a month. I suspect that this number will eventually become zero as he renews his board certification through a non-clinical tract.

Time to ride off into the sunset.

Sell your shares
Many partner physicians working in a large group can opt to sell their shares back to the company or to a junior associate ready to become a partner.  Depending on the practice, the physician can then continue working on a part-time basis as an employee as a means to transition the patients over to junior physicians.  
Sell your practice
If you are the sole owner of your medical practice, you have several options to transition into retirement:

  • Sell to another fellow physician — Be awarded by allowing the tradition of medicine to continue.  You put in the hard work over the decades to build up a viable brand. Allow it to continue in the hands of another fellow doctor.
  • Sell to a medical investment/management group — Perhaps you will receive a healthy buy-out.  Two million? Five million? Ironically, these groups may have very deep pockets so you may get more for your practice. Who knows what the long-term viability of this type of model will last, but it’s not like you’re going to care. That’s right, you’re going to be sipping a pina colada somewhere in the South Pacific. 
  • Sell your equipment, end your lease, and pack up – This might be one easy solution—just quit.  Liquidate your equipment and office goods, fire your office staff, and call it a day.  The one downside of closing up is that you need to find a successor to continue care for your long-term patients.   

Retire from your existing job and sign up for locum tenens work

If you end up selling your practice, you’ve basically closed the door on returning to work.  Fortunately there are plenty of part-time opportunities floating around in the world.  New Zealand? Sure! There are plenty of hospital systems or groups that need temporary coverage—that’s where you come in. You might be able to see a new part of the country as well. The downside is that if you intend to get rich from temporary work, you might be out of luck.  Some temporary jobs aren’t really going to be wildly lucrative unless the hiring practice is going to be incredibly desperate with deep pockets.  You have realize what you’re getting out of working part-time and what the hiring practice intends to get out of it.  
Your retirement may be decades away, but it’s worthwhile to at least have a few thoughts on how your medical practice might look like at the end of the rainbow. 

Choosing how to practice medicine 101 for new doctors

Choosing how to practice medicine 101 for new doctors

When I finished my training, I wish that I had known all of the options I could practice medicine.  Most of us categorized our options as either “academic” practice or “private practice”, but in reality these two options only cover the tip of iceberg.  Was my limited understanding a shortcoming of my medical training?  Perhaps.  I doubt  that many medical schools back then actually had seminars on practicing medicine.  Since nearly all of my attendings belonged on faculty or clinical faculty, it would have been nearly impossible for them to round up a bevy of doctors from all walks of the medical scene. 

The following is a compilation of some of the more common ways that doctors can practice medicine.  There are nuances in every category of medical practice that one would only truly understand after practicing in that venue, but here is a good introduction (along with my personal opinions):

Solo Practice
Solo practice medicine is unfortunately not as popular for a number of reasons, but it is still a viable form of medical practice.  Generally speaking, one could either purchase a practice from a retiring physician or start from scratch.  That means buying your own building or finding a lease, signing up for insurance plans, and going at it.  There is always a learning curve to starting your own practice straight out of residency, but it could be done.  Obviously some specialties in medicine may be more conducive to solo practice than others.


  • You can call your own shots.  That means taking all of the vacation you want.  Or you can work 365 days a year if you’d like.  


  • Likely to require more involvement into the practice, including the business aspects of medicine.
  • May require many years of long hours before business will flourish.
  • Insurance company in certain markets may not allow individual doctors to enroll onto their plans if there are larger medical practices that are willing to take care of more medicine for less reimbursement.
Some work situations are more conducive to cross-country trips in the winter!

Group Private Practice
Most of my classmates who decided to go into the private sector ended up joining a medical group.  These medical groups may be small, several-doctor organizations, or multi specialty behemoths.  One of the perceived advantages of joining a large group is that they may better systems in place for benefits and that the patient volumes are more mature.  Having multiple coworkers also means that you will have more opportunities to collaborate and dissent.  Group practices may be able to allow doctors to achieve higher than average salaries for their field, given that there is likely some capitalistic motivation among the group’s members.

Academic Practice
Academic medicine is synonymous with working for a university with teaching or research opportunities.  This may be the most “conservative” approach to many doctors’ first jobs since most of us trained at academic institutions (there are some training programs that are spin-offs of private practices).  Many of my classmates simply opted to remain on faculty at the institutions that they trained at after finishing fellowship.  There is familiarity with remaining at the institution that you spent the previous few years at. 


  • Familiarity with an institution that you’re already working at.
  • Good intellectual support system.
  • Likely cutting edge medicine.
  • Research support if you opt to conduct clinical/laboratory research.


  • Excessive familiarity with the institution that you’re already working at.
  • Possibly poorly organized clinical support staff.
  • Likely cap on earning potential.

Managed Care Practice
In recent years, there has been an uprising of managed care organizations, or those that have certain arrangements with health insurance to provide care.  Some healthcare systems like Kaiser Permanente have an insurance wing and a physician wing that work to cut costs and optimize care.  

  • Optimized healthcare system. Robust benefits program.
  • Stable and likely job security.


  • Physicians may be subjected to assembly line care. 
  • May have high volume of patients
  • May have restrictions on how you can practice medicine.
  • Not necessarily conducive to elective procedures.

Governmental / VA 
In some ways, working at a VA is sort of like working at a managed care organization except that the VA may even be more slow to adjust to anything. Many of us who have worked in VA systems may have felt that the clinics and operating theaters functioned incredibly inefficiently. That being said, to each his own. Working for the government does have its perks in set working hours and mostly easy pace of life, plus the fact that you are taking care of our country’s veterans. 
What comments do you have for each of the models of practicing medicine?

Financial implications of contractor work for doctors

Financial implications of contractor work for doctors

Most doctors coming out of training have only experienced work as an employee.  As residents and fellows, doctors are employees of a hospital or university.  You receive a paycheck every few weeks, and at the beginning of a new calendar year your employer sends you a W2 form delineating your income.  We use the W2 form to help file our annual taxes. Easy peasy.

Contract work is a different ballgame.  Some companies or hospitals will opt to hire out contract physicians to cover certain lines of services.  It may be temporary or intermittent services for a set amount of time.  For the hospital, it is an easier way to deal with finding help without actually having to hire someone.  It also sounds great as a doctor, since you work for yourself as a contractor, not the hospital.  Some of us might have even gotten a taste of this line of work through moonlighting during our training.  I remember that one of my classmates moonlighted in the emergency room during residency.  He was paid $60 a hour, and received a check for $600 after finishing a ten-hour shift.  No withheld taxes.  As a resident, it was essentially free money.

But there are financial implications of being an independent contractor when you are in full-time medical practice.  Let’s look at some of the considerations:

Employer taxes

We all have to pay into Uncle Sam’s system.  Employers have to contribute to Social Security and Medicare taxes.  For 2018, that roughly amounts to 7.65% for incomes up to $200,000.  The employee also pays an equivalent amount out of his paycheck as well.

Independent contractors work for themselves, so they have to pay the employer portion of Social Security and Medicare taxes as well.  This amount does not get taken out of the independent contractor’s paystub, the physician will need to allocate out this amount to pay Uncle Sam directly.

Personal taxes

If you work for yourself you also have to estimate and allocate the amount to pay quarterly.  Most doctors are likely to have a federal and state tax bill in the six-figure range—by not handling prepayments properly you can end up footing a huge penalty.  You will have to pay more attention to your bookkeeping as an independent contractor.


Most large employers offer retirement plans like 401k/403b’s as well as basically disability and life insurance for its employees.  These benefits do not come for free.  As employees, we might not be able to perceive that there is a cost to offering these benefits.  Those of us who operate our own practices will understand that health insurance consumes a sizable chunk of our income especially if our families are under our plans.  Remember those patients who signed up Silver, Bronze, or Platinum Health Exchange plans? Their deductibles where through the roof, and yet their plans basically didn’t cover a cent of their surgeries while forcing you (the physician) to send these patients to collections.  Just remember that you just might be that person too when you have to foot the entire health bill for your family.

Malpractice insurance 

Malpractice is often covered for employed doctors.  Hospital systems and multi specialty groups have enough doctors to negotiate better premiums for its doctors.  As an independent contractor, you alone are responsible for your coverage.  Some specialties like obstetrics, neurosurgery, and vascular surgery that perform higher risk surgeries will incur a greater out of pocket cost than for internal medicine.  If you perform contract work, be prepared to pay for your own coverage.

As an independent contractor, you might have to consider insuring all of your employees, including the guy behind the fence…

Variable compensation

As an independent contractor, your pay might be dependent upon volume or surgeries that you perform.  That volume might vary from season to season.  You income may not likely be stable.  You will have situations where your income might far exceed that of what you could otherwise make as an employee.  Be prepared to deal with the rollercoaster of income, however.

The perks of contract work 

Despite the additional legwork that you have to be conscientious of with being an independent contractor, there are also financial perks, namely certain tax advantages.  Commuting between two offices? Dedicating part of your home to your business? There are certain tax strategies in being your own boss to reduce your tax burden.

Are you a points collector? Given that many of the listed expenses are big ticket items, you might be able to leverage a few percentage points back or business class airline tickets.


This list only brushes up on some of the salient points of being an independent contractor. There are doctors who have made a career out of it.  It is a viable career option if you are able to find the right fit—you might just come out ahead.

Do you work as an independent contractor? What specialty do you belong in?