Tag: money

One Less Hour of Sleep Each Night Can Make You Richer

Posted on by SmartMoneyMD

It is well known that highly successful people are able to function well on little sleep. It doesn’t matter which profession you are in—the more time you dedicate to your profession, the more likely you will be successful.  One of the principles of becoming a rich doctor is to hustle. If you wake up one hour earlier than everyone else, you will have more time to hustle.

I once knew a surgeon who woke up at 4am every morning to go swimming. He would arrive at the hospital at 6pm and review his patient charts before going into surgery at 7:30am. He did not allow his waist grow with the size of his wallet, and stayed active and healthy. His patients loved him and he took good care of them.  He also retired at age 59 with a healthy chunk of change without ever focusing on hyper-saving his income.

But wait, this guy probably netted over $300,000 a year his entire career! He could have retired 10 years earlier and still be in financial independence! If finance were that easy, why do 41% of all doctors still have less than $500,000 in retirement savings?

DISCIPLINE

The surgeon mentioned above did not have great investment acumen. In fact, he was guilty of the typical situations that chew up one’s net worth: (1) investing in gold and rare metals, (2) divorce, (3) investing in land that could never be converted to any appreciable asset, and (4) investing in properties sold by infomercial pitches.

Despite those shortcomings, he had discipline and he hustled in his career. The 4am mornings allowed him to exercise and prepare for his patients. In return, he remained healthy and was able to maintain his job throughout his career. He also did not have a lavish lifestyle but drove a 20 year-old truck.

What Can You Do With An Extra Hour?

What you choose to do with an extra hour of your day depends on what your immediate and long term goals are. Do you wish to build up endurance for your physically demanding job? Perhaps you can dedicate this time for exercise and improving your health. An hour a day of exercise for an entire year will definitely result in better health.

Perhaps you need to bulk up your financial knowledge or medical knowledge. Maybe you wish to embark on a side business or simply need additional time to clean your house. Make a list of mini-goals that you can hope to accomplish if you are able to dedicate an extra hour to during the day. As long as you aren’t vegetating on the couch watching television, extra time will definitely achieve more and get ahead.

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Should You Join An HMO Practice?

Posted on by SmartMoneyMD

Plenty of my friends from medical training have gone the way of the HMO (health maintenance organization), particular those who are working in California (read: KPMG). HMO’s were formed as a way to streamline healthcare costs whereby the healthcare system and the insurer are either the same organization or a closely knit partnership. It is sort of a top-down one stop approach to healthcare (a la Super Walmart). Presumably all specialists are available within the organization to consult and provide efficient healthcare.

Sounds like an ideal system, right? You really have to know what you’re getting yourself into.

HMOs provide a platform to jump start your career

After you become a newly anointed physician, patients still don’t know that you exist. In order to build your patient population you have to establish relationships with referring doctors and your presence in the community. However, in HMO’s the referral network has already been established. The patient volume seen by HMO doctors during their first year of employment are as high as those doctors who have been working for a decade in a metropolitan city!  This immediate volume is beneficial in that it provides a platform for instant experience. Not only that, many treatment protocols are typically in place to treat certain diseases. These “flowcharts” help ease your daily routine of medical practice.

Because you’re instantaneously busy in an HMO practice, you are generating revenue for the practice. They can afford to pay a decent salary. Since these entities are generally well-established, they also will likely have good pension, retirement plans, medical and dental insurance coverage (in their network!).

Despite advantages, practicing at an HMO isn’t a panacea

HMO practice isn’t suited for everyone. Because so many protocols are in place, it may feel like you’re practicing cookie-cutter medicine. If you need to offer treatment that is off-protocol, you might be out of luck. Then again, if you are in the private world, the patient’s insurance company may not cover off-protocol/non-standard treatments anyway.

The generous salary and benefits in HMO practices often translates into more rigidity in the daily schedule. If you need to take a Friday afternoon off for errands, you might have to use a vacation day. Need extra time off? It’s not a easy as shutting down the office for a day. Everything has to be run through the administration. The doctor, while she may be a shareholder of HMO, still functions as an employee in the system. In a way, you really aren’t the owner or controller of your medical career.

In light of a decent salary, you probably could make a whole lot more money if you saw a similar volume of patients and worked for yourself. There is no free lunch in the world, and if you are paid handsomely that means you are unlikely sitting around blogging during work hours.

Only You Will Know If You Are Suited For an HMO

HMO practices definitely offer a stable job for doctors at the expense of control of your schedule. As a summary, the pros and cons are as follows:

[vc_column width=’1/2′]

[vc_row]Pros of an HMO Practice[/vc_row]

[vc_row]Instant patient volume[/vc_row]

[vc_row]Well-established practice patterns and protocols[/vc_row]

[vc_row]Good benefits[/vc_row]

[vc_row]Less pressure to distinguish yourself[/vc_row]

[/vc_column]

[vc_column width=’1/2′]

[vc_row]Cons of an HMO Practice[/vc_row]

[vc_row]Less flexibility to innovate[/vc_row]

[vc_row]Less flexibility on scheduling[/vc_row]

[vc_row]Career success dependent upon system[/vc_row]

[/vc_column]

 

What are your opinions on HMO practices?

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Where You Live Significantly Impacts Your Ability to Build Your Wealth

Posted on by SmartMoneyMD

I’ve said this before, and I’ll say it again: Wealth = Income – Expenses. In order to build wealth, you either have to increase your income or decrease your expenses. Simple as that.

Income Building

As a physician, your income is contingent on how many patients you see, your reimbursement schedules, plus any ancillary income you can generate associated with your profession (speaker fees, real estate from surgical centers, or consulting fees). We can control this simply by working smarter (more efficiently), harder (pile on more patients per day), or longer (add in clinic hours). There is obviously an upper limit on your income.

Expense Control 

By far the highest expense for most people is housing. The problem with housing is that the costs vary wildly throughout the country. Unfortunately, physician income does not usually track cost of living well. The good news is that physician income also is relatively high so you can grow your wealth quite rapidly if you can control your expenses.  This equates to controlling where you live.

I recently found a general surgeon position at a large HMO practice in the San Francisco Bay area. The posting was for an income of $400,000 annually. At first glance, that sounds like serious money. But remember, you only get what doesn’t get taxed and what you don’t spend. I found a similar job opening in Madison, Wisconsin for the same type of specialty with income starting at $300,000. If you look strictly at numbers, it seems like a no-brainer to choose the job in San Francisco. You get paid more AND you get to live in a more desirable part of the country. With an extra $100,000 a year in income, you should be able to make up the difference in cost of living easily right?

Not really.

According to PayScale.Com, an income of $400,000 in the Bay Area is equivalent to $261,000 in Madison, WI! How is that possible? You not only pay more for housing in San Francisco, but also gas, utilities, transportation, food, and taxes. An extra $100,000 for someone in the top marginal tax bracket living in California will likely give up at least 50%  to Uncle Sam. In Madison, I can get a fifteen year mortgage on a $240,000 home for less than $1,500 a month. In San Francisco, I’d pay $3,900 a month for a studio or 1-BR rental! If I wanted a 2,000 square foot house in San Francisco, I’d have to be looking at something at least $2,000,000!

So no, $400,000 in San Francisco is actually not equivalent to $300,000 in Madison. That is the price you pay to live in the mecca of tech—as a doctor.*

* A job that actually pays that well in SF is actually quite unusual. If you take a job like that, be prepared to work hard.

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Sacrificing Your Career For the Good of the Family

Posted on by SmartMoneyMD

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

Posted on by SmartMoneyMD

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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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.

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

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.

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