A new year always brings the same resolutions: eat less, drink less, and exercise more. Why not make this the year you take huge strides with your finances instead? I’m not talking about just any type of action. I’m talking about the type of massive action that made you endure 7-8 years of med school and residency and pushes you to see several crashing patients at the same time when you’re alone on a night shift with sphincter tone maxed out.
What I’m about to tell you is unorthodox and unconventional and your first thought might be “This doesn’t apply to me” or “There’s no way I can do that!” But I can assure you from personal experience that acting on even one of these strategies can have a powerful impact on your financial life.
#1: Chop off 10% of your shifts
I took my first ABEM board exam in 2001 and recently passed my ABEM Concert recertification exam. Boy have things in the ER changed in the past decade – much of it for the worse. Patient satisfaction scores seemed like a fad; now they’re used to determine what we’re paid. Electronic medical records were rare. Soon they’ll be required. With all these changes and job stress, no wonder almost 60% of EPs experience at least one symptom of burnout and why depression and suicide rates are higher among physicians. I think you’ll agree that working just 1 or 2 less shifts per month can have a positive impact on your lifestyle, your mood, and your family.
What you might not realize is that this won’t necessarily mean making less income.
Why? Because you’ll probably last longer. Let’s say you work full time and make $300,000 in annual income. By working 10% less shifts, you’ll make $270,000, but you might be able to work 13 years by working less shifts versus only 10 years by working more shifts. Your lifetime income actually increases by almost $500,000, and you do it with less stress.
#2: Demand a 20% raise
No matter which ER group I worked for, there was always a shortage of doctors, holes in the schedule, and an ever increasing number of patients to be seen.
If you’re an independent contractor or hospital employee – and especially if you’re well liked by the nursing staff, patients, and consultants – what’s stopping you from demanding more money?
Let’s face it: money is the 10,000 pound elephant in the room. Doctors are scared to ask for more of it because they think they’ll get fired. Our attitude is “put up and shut up” with all the nonsense that’s thrown at us. Unfortunately, that doesn’t benefit you.
If you don’t ask for more money, contract management groups, hospital admin, and everyone else will trample all over you. They’re watching their bottom line, not yours. Step up to the plate and tell them, “I provide incredible value to you, the hospital, the community, and to patients, day and night, weekends and holidays. I generate revenue for you. It’s because of me that you have a job.”
Do this: If you’re making $125 per hour, ask for $150 per hour. If you’re making $150 per hour, insist on $180 per hour. That won’t dent your boss’s bottom line, but it’ll do wonders to yours.
#3: Sock away 30% of your gross income
Suppose you (and your spouse if married) make a combined gross income of $350,000 this year. The government takes 30% of it, so you’re left with about $250,000 in income after taxes. That’s about $20,000 per month to do whatever you want.
If that’s not enough money to “live” on, then you’ve probably got a spending problem. Make your next car a Nissan instead of an Infiniti. Voila! You just freed up over $10,000 and you’ll still make it to your next ER shift on time.
Quite frankly if you can’t contribute $50,000 to your retirement portfolio every year, then be prepared to work for a long, long time. The government sure isn’t going to be sympathetic to you since you already make “too much money” and you aren’t paying your “fair share” in taxes.
Do this: Max out your SEP IRA or 401(k), contribute to a traditional IRA, and then invest in a taxable account. Total contributions should equal at least $100,000. That still leaves you with $150,000 to spend or over $12,000 per month. C’mon, if that ain’t enough, don’t bother reading the rest of this article.
#4: Pay off 50% of your mortgage – all at once
When most people talk about their mortgages, they talk about refinancing from their current 4% rate down to 3% to save a few thousand bucks a year. Or they talk about paying a bit extra every month to pay it off 2 or 3 years earlier.
There’s a compelling reason right now to keep your mortgage since interest rates are so low in the hopes of earning higher returns with outside investments. But the psychological impact of paying it off completely is worth a lot more than the uncertain investment return you’d get by keeping it.
Do this: if your mortgage balance is 25% or less of your gross income, whatever cash you have after basic living expenses and taxes, apply half of that to your mortgage. Do the same next year and kiss it goodbye. Think about the smile you’ll have on your face the day after you pay that last payment.
#5: Dump 100% of your junk investments
Remember when you bought some Facebook stock on its IPO only to see your investment tank in a matter of weeks? What about that real estate venture that turned out not to be such a sure thing? Or all those investments your financial advisor persuaded you would beat the market but didn’t?
Time to clean house. Here’s a simple question to ask yourself: “Do I understand every investment I own?” Every investment you answer “no” to should be axed, and if a financial advisor sold the junk investment to you, think about tossing him too.
There you go. Five big steps – or rather leaps – to sprint ahead this new year. It takes some guts to do it, but in the end you’ll be glad you did.
Setu Mazumdar, MD, CFP® practices EM and he is the president of Lotus Wealth Solutions in Atlanta, GA www.lotuswealthsolutions.com