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Public Service Loan Forgiveness for Doctors

Posted on March 13, 2016 by SmartMoneyMD

Many professionals incur significant amounts of student loan debt. The average loan debt for my medical school was $133,000 this year, which actually seems low. I incurred approximately $190,000 of loan debt that I eventually paid off. I fortunately went into a career in medicine where I have relative job stability and earn potential, unlike many poor graduate students without funding who enter a career in art restoration.

One viable option for repayment includes the Public Service Loan Forgiveness Program (PSLF). Under PSLF, your loans are forgiven after 120 payments as long as you are working for a qualified public organization. These organizations include government facilities, non-profit organizations, and certain not-for-profit facilities. Many hospitals are considered non-profit entities.

Why is PSLF a good deal?

While 120 monthly payments seems like an eternity, most of our training occurs in non-profit hospitals. What this means is that if you are financially savvy early in your career, you can strategically select a residency that qualifies for PSLF. Since many of us inadvertently spend a good 5-7 years of our youth in some form of residency and fellowship, you might as well consider saving some money in the process.

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Take, for instance, someone who wants to be an electrophysiologist. This route typically includes three years of internal medicine residency, three years of cardiology fellowship, and another year of fellowship. That’s right. Seven years to put in a pacemaker! If you do all of your training at a qualified non-profit institution, you only have three more years of minimum payment before your student loans are forgiven by Uncle Sam! You’d have to consider truly how much debt you’d be saving by going through PSLF rather than paying it off outright. In this case, how much you’d owe depends on really how much you are capable of earning during your first three years after fellowship.

For most doctors, this depends whether you remain in academics or join a private group. In our hypothetical electrophysiologist who spent seven years training at a non-profit institution, the following may be how her income plays out afterward:

	Academic Cardiologist	Private Group Cardiologist	Academic for 3 years, then private
Year 1	$325,000	$300,000	$325,000
Year 2	$325,000	$400,000	$325,000
Year 3	$325,000	$425,000	$325,000
Year 4	$325,000	$450,000	$300,000
Year 5	$325,000	$600,000	$400,000
Total	$1,625,000	$2,175,000	$1,675,000

From a strictly financial perspective, a private practice doctor will earn more money than an academic doctor. However, PSLF may be a great financial move if you definitely will go into academic medicine. It will work even better if you have a high amount of student loan debt.

Doctors whose income falls in the low six-figures regardless of academic or private practice situation would benefit from PSLF. If you’re stuck with the same income no matter what institution you work for, you might as well work in one that offers you the potential to forgive your loan debt.

Why PSLF doesn’t work for many doctors

PSLF can fall apart in a few key scenarios:

If your residency is relatively short, like in family medicine or emergency medicine (EM). This case is most egregious in EM, where residency can be as short as three years, and starting income can fall in the $300’s the first year on the job in private practice. If you need twelve years of minimal payments at a non-profit institution and your residency is only three, you have to remain in a similar environment for at least 9 years. In these 9 years, you potentially forgo large amounts of income. This added income could have been used to help repay your student loans earlier.
If you are entering a high income specialty, PSLF loses its advantage. In most cases, you should be able to repay your student loans entirely within the first five years after you start your career. It won’t come automatically, but you can live like a resident initially so that you become debt-free sooner.
If the government gets rid of PSLF, you are screwed. There is no initial enrollment process that “locks” you into the program when you are repaying your loans. Going a decade with the possibility of losing this advantage is a risk you’d have to live with.

In my case, I was not even aware of PSLF when I finished medical school. I hustled during my residency to repay my loans and eliminated them after my first year on the job. Had I known about it, I’m still not sure if I would have gone through the process. Ten years is a long time to give the government to change the laws against your favor.

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Exchanging Freedom For Income – Is it Worth It?

Posted on January 3, 2016January 3, 2016 by SmartMoneyMD

I’ve previously discussed strategies to become rich as a doctor. The formula is somewhat straightforward in that you have to hustle and discover your value. Unfortunately doctor incomes vary quite a bit among specialties, and even dramatically within a specialty.

For instance, Internist income can range from $160,000 a year for strictly outpatient care to $200,000-$300,000 in Hospitalist care, and even in the $400,000’s if you opt for locums positions on top of a full-time job. The trade-off from increasing income in this situation is that you are exchanging your time and skill set for money.

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Is it worthwhile to exchange time for money?

Obviously it depends on your needs and expectations. Most workers on Wall Street and businessmen would argue that if you are still young and have no dependents, it is to your advantage to build your net worth as quickly as possible. Many engineers turned early retirement bloggers did the same during their twenties have have since accumulated enough wealth to retire in their thirties. As a doctor, you exchanged your youth for earning potential later in life. The advantage that you have is that your hourly rate ought to be higher than that of an average software engineer so you could build your net worth more quickly.

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There are also consequences for a rapid growth of salaried income. Your marginal tax rates will be high, much more than if that income came from capital gains. As a service worker, you incur high amounts of stress when working harder. You have to ask yourself these questions. If you have clearly defined timelines and goals to hustle, it may be worthwhile to make this compromise. Just make sure you don’t inflate your lifestyle along with your income.

How do the ultra-wealthy get rich?

Unless your skills command an outrageously high compensation (like Taylor Swift or most professional athletes), you still don’t have enough hours in a day to generate business-mogul money. This is the wealth it takes to own skyscrapers, rent out an entire nightclub for a party, or frequently charter private jets for travel.

The fact is that you don’t need to have a stock ticker under your name to generate this wealth. The wealthy build their worth through other people’s time. If you are really successful, you build wealth through other people’s money (OPM). A multi-millionaire owner of a junk metal recycling company hires out hourly service workers to get the job done. The billionaire cellphone charging cable maker has multiple factories of workers churning out simple widgets.

Medicine has some corollaries to this rapid wealth generation phenomenon through pharmaceutical development, electronic medical records, and medical device development. Billionaire Patrick Soon-Shiong is a prime example of a medical doctor who catapulted his wealth first through drug development and subsequently in venture capital, ancillary investments, and healthcare data mining. Being a one trick pony is great, but using that trick to fuel further ventures is the key to sustain financial success.

How does that apply to me as a lowly doctor?

Treat your primary occupation as your buffer to venture into other revenue streams. If you want to work harder and longer hours as doctor, that is fine too. However, alternative income streams outside of medicine can potentially help you pay your bills if you end up not practicing medicine (downtime between job switches).

I have been exploring alternative income means outside of medicine. Obviously none of them have come to self sufficient fruition, so I still am keeping my day job in the meantime. ? However I will be documenting more of this in the future when I receive more results.

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(Photo courtesy of Christopher Dombres)

Money Does Buy Happiness

Posted on December 13, 2015January 3, 2016 by SmartMoneyMD

Doctors need to care about money. Not only because we deserve it, but it also helps provide a roof over our heads and keeps our bellies full. Those who say that money doesn’t buy you happiness are misled or lying.

Being Poor is no fun.

One could say that all college students are impoverished, but that is simply NOT TRUE. There are plenty of wealthy kids in college, especially elite private colleges. I was by no means poor in college, but felt like I was financially disadvantaged being surrounded by kids with huge bank accounts who could go to parties and enjoy expensive meals every weekend (I had no bank account). There were a lot of wealthy college kids in the U.S.

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In medical school I felt the same way, except that I had borrowed money sitting in my bank account at 6.8% interest. Since my medical school class was smaller than my college class, the concentration of wealth surrounding me seemed magnified. My classmates planned weekend ski trips and international spring break trips. I skipped out on those trips (as did many other people) simply because there was not enough money to go around.

In contrast, the business school students put the medical students to shame—their weekend and holiday excursions consisted of jetting to Europe, South America, and the Pacific. I’m sure that many business students have pre-existing bankrolls to fund their trips, but perhaps they are exercising financial leverage for their future self. Who knows?

Money Solves Problems.

I can recall that money would have solved many of the problems I have faced in my career. If I had more money to order food as a student, perhaps I could have spent more time studying or networking instead of making spaghetti for dinner! If money were not a concern, I would have sprung for a more expensive direct flight for my job interviews instead of taking a more budget friendly multi-layover flight. If I had more income, I would not have had to live in a roach-infested rent-stabilized studio during my residency.

Even as a practicing physician making a comfortable low six figure income, I would say that having more cash reserve attached to my name would give my family a larger buffer of reassurance. You never know when you might lose your job, get injured, or suddenly have large expenses.

Use The Power of Money As A Goal

Just because you understand that money buys you happiness doesn’t make you a greedy pig. You can use its allure to drive your success as a doctor. Make yourself rich doctor. Once you reach your goal, use your experience to guide others in your field, care for your patients, and make the world a better place. After all, isn’t that why you went into medicine?

(Photo courtesy of Nick Ares, Flickr)

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You must have a financial goal in mind in order to achieve it

Posted on November 23, 2015November 22, 2015 by SmartMoneyMD

Doctors undergo a regimented course throughout their training. We are used to having clear milestones during the journey to achieve our goals. What do I have to do to get into a residency? Get good grades, crush the USMLE Step 1, and get recommendation letters. Each single step can be broken down into a series of tasks and checklists. If you can sustain it for your entire medical school, residency, and fellowship, you reach your goal of becoming a doctor!

Unfortunately when it comes to securing our financial future, the goals are less defined. We all want to have a good lifestyle, enjoy our hard work, and have enough left over for retirement. That magic number is different for everyone. If you like to vacation every year in the Seychelles and want to continue doing so when you’re not practicing medicine, you might want to beef up your bank account. If you plan to live off the grid, grow your own vegetables, and farm your animals, your stash probably doesn’t need to be as substantial.

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Work with a goal in mind.

The first step in establishing a financial plan is to have a goal in place. The more concrete you can define your goal, the easier you can figure out how to achieve it. From your goal, you then build a financial map. For most people, the answer may not be clear. We all start with a vague notion of what we want. Whittle down the details as we progress in our careers. Our goals may change depending on life changes. You don’t have to figure it out right away, and that is okay. It’s taken me several years to figure out exactly what I want, and my goals are still evolving.

In the meantime, build up your nest egg.

Refine that goal.

Once you have a goal, you can start building your financial map. Is there a certain age that you want to retire from your medical career? Do you love medicine enough to practice until you die? How much are you earning now, and how much do you anticipate earning a decade from now? Map these concepts out in writing. Some people build lists, others have flowcharts. Whatever you do, put it in writing.

New questions will always arise in the process, but the first step is to estimate how much your living expenses are even if you don’t track every single penny that you spend. You have to know how much you spend in order to know how much you should save. Each decision point in your financial map should trigger new ideas, unknowns, and more immediate goals. At each step, you should ask yourself what you can do now to help you reach that step in the future.

Then act upon these mini-goals and tasks.

It is okay to change your mind.

The decision tree in creating our financial map sort of correlates with a working diagnosis in medicine. When a sick patient rolls into the emergency room, we form a series of possible causes based on signs, symptoms, and lab work. The list of possible diseases becomes refined as we establish more data. The same applies to our financial goals. If your daughter wins a full scholarship to Harvard, you can mark off tuition payments on your list and recalculate your financial needs.

Don’t be afraid to learn.

When you first encountered an unknown condition in medicine, you sought out the textbooks, research articles, and papers. In creating your financial map, you will encounter many subjects that you are unfamiliar with. Be resourceful and learn. Figure out how much you spend per year, how many years you will likely need, and calculate how much total wealth you would need to build up by the time you stop bringing in a full working income. Keep evolving as you build your knowledge and understand your financial situation more. You will make mistakes. That is okay.

Just remember, you have a lifetime to get the details right.

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How much money do doctors make?

Posted on November 21, 2015November 22, 2015 by SmartMoneyMD

Doctor salaries span a wide range depending on the specialty, work hours, and ancillary sources of income generated. It is unfortunate that many of us in the lower end of the income spectrum command less than many other professions with less involved training and risk. Many doctors actually make their career decision from limited financial knowledge or an adequate understanding of the financial consequences of their decisions. While you probably shouldn’t choose your career or specialty based on money alone, it is good to understand where the ranges are. Furthermore, realize that choosing a medical specialty isn’t as easy as picking an ice cream flavor either. Becoming a neurosurgeon is MUCH more difficult than becoming a family practitioner, no matter how you spin the argument. If you know of someone who ended up choosing family medicine over neurosurgery, please let me know.

Below is a list of various levels of physician income, with running commentary:

<$100,000

Many physicians in this income range are in the charity field, some of whom are working at nonprofit centers or abroad in international hospitals. Those doctors who I’ve known in this income level working at nonprofits full time all have a compassion for helping others at a different degree than most of us mere mortals. A few that I know are also crazily independently wealthy (think private jets, boarding schools during childhood, multiple generations of wealth).

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Most other physicians in this income range are likely working part-time. They may have spouses who are the primary breadwinners and are working to maintain their clinical skills. I once met an ophthalmologist working 3 days a week earning less than $100,000. Ouch.

$100,001 – $200,000

A large portion of all physicians have belonged and are in this salary range. Many internists and specialists within their first five years of practice also fall in this range. The unfortunate aspect of doctors who remain in this income level their entire careers is that other jobs that required much less education and stress command a similar salary. Think physician assistants, dentists, optometrists, financial advisors…etc.

$200,001 – $300,000

You are now entering an upper tier of income compared to the general professional population. The majority of doctors are in this salary range. You make good money, but you do work hard. There is no free lunch in this world. You also fall into a high income tax bracket and get hit by taxes at higher levels. This is also a generous income level to have a relatively luxurious doctor lifestyle if you are single, and nearing that if you have a family.

$300,001 – $450,000

I would expect doctors in this income range to be busy. Think ER doctors, ENTs, cardiologists, dermatologists and surgeons to be in this range. These are typically procedural specialties that can generate relatively high RVUs. This is a good income for anybody, and as long as you don’t go crazy with your expenditures, you should be able to live comfortably.

$450,001 – $600,000

You are in the upper echelon of earning potential. Trauma surgeons, cardiothoracic surgeons, orthopedic surgeons, neurosurgeons, and vascular surgeons typically fall into this range. Other specialists who have vested options in real estate or ancillary income streams (read: medical supplies) will also fall into this income range.

>$600,000

Any of the aforementioned specialties can have income in this range as well, depending on how fortunate and busy your referral stream is. Doctors I know in this income range tend to forget to pay their bills because they are so busy. I’ve seen doctors whose nonworking spouses and kids are the ones that end up enjoying their earnings. If you are okay with working 80+ hour weeks bringing in $1 million a year but only enjoy it through your fancy car and two weeks of vacation in an exotic place, good for you. Just remember that as long as you’re doing something you enjoy, that is what counts.

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Fancy Clothes Will Ruin Your Future

Posted on November 19, 2015 by SmartMoneyMD

Saving money on your clothing purchases may not make you rich, but unrestrained clothing expenditures can certainly destroy your financial future. I frequently see colleagues who wear outfits that retail upwards in the $2000 range! As a doctor, you have to appear financially fit and suited for the job, right?

Take, for instance, an outfit suitable for a business meeting:

Tory Burch Flats – $235
Kate Spade Crossbody – $325
Salvatore Ferragamo watch – $1200
Tory Burch Belt – $150
Budget Burberry Jacket: $800
BOSS power suit: $400

Perhaps your other wardrobe is slightly more modest, at $400 per day of wear. Let’s say you have 10 days worth of outerwear that costs $400 per outfit. That’s $4000 of professional attire plus maybe two sets of meeting/conference clothing at $3000 per set. That’s $10,000 of professional clothing, not including any additional shoes, cost of hair products, or underwear!

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Those of you who are not in a business/professional type career that requires formal clothing may be shocked at the seemingly frivolous scenario, but this indeed happens. I’ve seen medical residents with a similar degree of retail addiction (both women and men). The desire for fancy attire makes no concessions on your income level. In fact, the higher spending power from a high salary will only fuel consumption.

True Cost of $10,000 worth of clothing on a $200,000 salary.

Suppose you are an allergist who commands a $200,000 annually salary. You are single and unfortunately just made it into the 33% federal tax bracket for 2015. You live in New York City, and have to pay an additional 6.65% in state income tax plus $1,706 and 3.64% of you income over $50,000. Basically, you have to earn 33%+6.65%+3.64% more than what you spend at a marginal tax level. In order to buy $10,000 worth of clothing for a NYC resident, you’d have to earn at least $17,633.57 from a $200,000 salary!

That amount of pretax dollars can fund an entire year’s worth of 401k! For most people, that is serious money.

Your Behavior Towards Money Impacts Your Financial Future.

The problem with spending $10,000 in post-tax dollars every year isn’t because you can’t afford it. You can. The problem is that because you can afford it, you can also afford to purchase many other goods and services that you might not need. A $200 blow-out? Sure! A lease on the newest Mercedes C-Class is only another $500 a month! After all, you have to look the part like a doctor.

We all have our splurges. We didn’t work so hard during our younger days to keep depriving ourselves either. But as a whole, doctors don’t really have much financial sense. One of my good friends leased a 7-series BMW on his first job as a cardiologist. I’m sure it felt good. I’m sure it also is digging into his retirement fund. Is it worth spending your daily 1 hour commute in a luxury vehicle at the expense of saving one whole year of retirement in a thirty year career? If your answer is yes, then by all means, do it.

Compare Your Expenses As a Cost To Your Retirement Dreams.

Think about what your daily routine would be if you were independently wealthy. Don’t consider what you’d do for social reasons or to make yourself look good to the world. Would it be to practice medicine? Or hanging out on the golf range, or even buying clothes? Consider a realistic age to be enjoying your retirement, and then assess every big expenditure’s impact on your retirement goals. Consider whether buying those FENDI sunglasses is worth taking an extra weekend of call. Is that annual vacation to Maldives worth it to work an extra 3 years? If your retirement dreams include unrestricted clothing purchases, perhaps you could consider an alternative career in clothing testing?

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Why Doctors Are Underpaid

Posted on November 6, 2015November 6, 2015 by SmartMoneyMD

Society often portrays medical doctors as elite professionals who drive fancy cars, live in nice homes, and vacation in exotic locales. We are highly educated folks who work hard and have the luxury of a high paycheck.

The converse is true. Yes, most doctors have higher earning power than most of general society but we also paid the price in time. By the time we do achieve earning potential, we get hit by unreasonable regulations, denied by insurance companies, and short changed by decreasing reimbursements. As a profession, we are being short changed by our society. Why? Here are the top reasons:

Most Doctors Don’t Even Know How Much They Are Worth.

Most of us don’t understand billing, RVU generation, or the claims collections process. How we are paid is quite a convoluted process, but it’s certainly easier to figure out than even the fundamentals of diabetic ketoacidosis. Imagine how much hospitals actually take out of your salary or how much overhead your practice has and you start realizing that perhaps you should be commanding a higher income.

We Are Grossly Underpaid During Training.

During residency and fellowship, we go above are expected duties to deliver high quality medical care at the expense of our sanity. After our shifts finish, we prepare for presentations, study our field, and organize for the next day. Yes, we are still training, but getting a $40,000-$60,000 salary is absurd. Most physician’s assistants and nurses command a much higher rate than that.

Once we leave the sacred grounds of a university hospital, our income increases by a three to four fold. That is a serious salary hike for doing the same amount of work we did in residency. We are joyous that we even survived the lost decade in our lives and are happy to get a “good” salary.

The problem with this sudden jump in salary is that the transition distorts our perception of what our incomes should be. Sure, it’s great to go from $50,000 a year to $200,000 a year. It would be shameful if you actually should be getting $350,000 instead of $200,000.

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Discussion About Income Is Taboo.

Money is important but we don’t talk about it. Companies like the one that publicizes how much each employee makes is unheard of. Even my closest medical colleagues are apprehensive when we discuss physician incomes. I typically get answers like, “I am paid great,” or “I make really good money now.” Bullshit. These statements are meaningless without quantification. The problem with income is that we’ve associated a number toward self worth. Perhaps it is a sense of humility that we don’t talk about money. I certainly can’t help you if you tell me that you are making really good money but actually aren’t.

We Actually Think That We Are Being Compensated Fairly.

This would be an ideal situation. We actually are earning our worth and there is no need to fight the good fight. Most people I know actually aren’t getting paid enough but have no idea. Imagine this, all throughout your training, you aimed for your best.

As long as you think that you are doing fine at your current earning potential, you will not have a desire to earn more.

Ultimately, We Do What Is Necessary In Order To Be Happy.

Likewise, it makes no difference if you make $1 million a year but are unhappy. I would say the goal is to strike a balance. If your realize that your dream is to live off the grid practicing rural medicine in Botswana, by all mean do it.

Just make sure that you’ve paid off your student loans first.

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