[Ever since MLG Capital began its journey into private real estate investing more than three decades ago, it’s had two overriding goals: preserve investor wealth and produce top-notch income and appreciation. MLG manages that by fund diversification, prioritized returns for its investors, and solid tax efficiency. Learn more about MLG Capital today and see all it can offer you!]

 

By Dr. Leif Dahleen of Physician on Fire, WCI Network Partner

In 2017, I executed a bold move based on a decision I couldn’t have imagined I’d be making in my early 40s. I made an intentional choice to slash my income by 40% while showing up for work quite a bit less.

I had been contemplating such a move for over a year. Time and time again, I have sung the praises of financial independence (FI) and all the wonderful things you can do with FI to give yourself a better life. Why was I burning the candle at both ends, working full-time while spending much of my free time spreading the word online?

I didn’t have a good answer to that question, and I wasn’t interested in taking a step back from my online activities, so I decided to pursue working less in my anesthesia job.

I didn’t think a part-time position would be readily available in my current position, but I was pleasantly surprised when we were able to make it happen. My four partners were willing to work and earn 10% more each, allowing me to work 40% less. I will always be grateful for that.

 

The Financial Implications of Part-Time Work

Part-time work is admittedly easier to arrange in some situations than in others. Factors that make such an opportunity more likely include being part of a large group, working in a shift-based specialty, and perhaps being an employed physician.

If you own a private practice and have significant overhead, are part of a small group, or are in a specialty where long-term patient relationships are paramount, part-time work may be more difficult to arrange.

If you fall into the latter categories, I wouldn’t throw in the towel. Creative solutions may allow you to work less if that’s what you really want to do. Locum tenens physicians can help fill in the gaps. They won’t replace you (no one can replace you!), but many locums docs are quite capable. Fifty-fifty job sharing may be an option—it worked for The Happy Philosopher.

You may also have the option to sell or leave the practice and be a locum tenens provider yourself. That’s all I did for the first two years of my practice, and it’s what my friend Dr. Nii Darko of Docs Outside the Box does as a trauma surgeon to create a flexible schedule that meets his family’s needs.

Likewise, the financial impact of part-time work will vary depending on your situation.

If you’re lucky, the drop in compensation will be commensurate with the decrease in your workload. If you’re really lucky or maybe just smart, you might find a way to drop the low-value hours in your workday or leverage additional hires to drop your workload significantly with a smaller reduction in earnings.

On the other hand, it’s not unusual for a physician to be in a situation where a reduction in workload results in a disproportionately large drop in pay. Working 30% less while earning 50% less is certainly far from ideal, but that may be the case if you own a clinic, have employees, or have other significant fixed expenses related to your practice.

More information here:

7 Reasons I Practice Medicine Part-Time

 

My Part-Time Work Arrangement

Again, I consider myself lucky to be in a situation where dropping to part-time was surprisingly easy. It’s not pure luck since one feature of anesthesia that attracted me was the flexibility of the schedule and lifestyle, but I’ll readily admit I had an easier time making this transition than most will.

Years ago, I worked exclusively as a locum tenens provider for the first two years after finishing residency, working hard most of the time. But I also took my first three-week vacation when I was less than a year into my anesthesia career.

My bride-to-be and I visited Iceland, England, Ireland, and Italy in one long trip. It was fantastic, but before long, I started working regular jobs and it would be over a decade before I’d be off work for that length of time again.

reykjavik

A duck keeps watch over Lake Tjörnin in Reykjavik, Iceland.

For six months, I had a three-week break nearly every month. My work schedule looked like this:

  • Work four days (usually consecutive) at our outpatient surgical center. That’s about a 40-hour workweek.
  • Work 72 hours at our hospital. Usually, at least half of the long weekend (Friday morning to Monday morning) was home call, but weekends could be busy at all hours, particularly during the summer months (all two of them in Minnesota).
  • Enjoy the remaining three-plus weeks of the month off.

This schedule represented a 40% reduction in my clinical workload from my previous full-time schedule, which was admittedly designed to allow for a very reasonable work-life balance in the first place. Still, I was quite happy to tip the scale more to life and less to work.

The result was a 40% lower salary than I had as a full-time employee. I still had full benefits, a feature that I’m told is provided for physicians working at least a half-time job in our health system.

Now, 40% less than a rural anesthesiologist’s salary is still a handsome salary. Taking advantage of geographic arbitrage here in the Upper Midwest, a place where for some reason not everyone wants to be (horrendous cold and snow, funny accent, mosquitoes in the summer), we earn an above-average salary. According to Garrison Keillor, all the children here are above average, as well.

Rounding to avoid using my exact salary, let’s say I was making $400,000 per year before. With the part-time schedule, I would make $240,000. Let’s also say the benefits package is worth $50,000.

Effectively, my total compensation dropped from a value of $450,000 to $290,000. That’s a 35.6% reduction in compensation for 40% less work. If I were to work 50% less than full-time, earning $200,000 and receiving the $50,000 in benefits, that would represent a 44.4% reduction in total compensation for 50% less work.

In a previous post announcing my part-time employment, I did a detailed analysis of the tax implications. I learned that my after-tax pay is roughly 40% higher on the shifts I’ll be working as compared to the shifts I’ve given up. That’s another tick in the win column.

How do I come up with the $60,000 in savings? I had online income that, when combined with my larger clinical income, pushed me closer to or into the 32% federal income tax bracket. Add on the 1.45% Medicare tax and a 9.85% Minnesota state income tax, and my marginal tax rate on the $140,000 I wasn’t earning is 43.3%, resulting in a tax savings of about $60,000 in six months.

I continued this schedule for the better part of the next 18 months, returning to full-time work for a short spell to cover a colleague’s military obligation, before retiring from medicine completely in 2019.

While I did earn less as I finished out my career, the total tax savings was about $200,000 over 20 months of part-time work.

More information here:

Life After Financial Independence: Two Perspectives

 

Part-Time Work with Fixed Costs

If I were still working exclusively as a locum tenens provider, the math wouldn’t look so rosy. My benefits would represent a fixed cost rather than a fixed benefit. Let’s say working full-time as a locum, I could gross $500,000 with $50,000 in fixed costs to cover my benefits. That works out to the same total compensation of $450,000 for full-time work.

Working 40% less would result in $300,000 in gross income, minus $50,000 in benefits for total compensation of $250,000. Now I’m earning 50% less for a 40% lighter workload. Working half-time at 50% less works out to $200,000 in total compensation, or a 60% reduction in net income to work half as much after accounting for the $50,000 in fixed costs.

The math can look much worse for a solo practitioner with fixed overhead that could add up to tens of thousands of dollars per week. If you have to shut down the office while you’re away, the actual cost and opportunity cost of taking time off can be enormous. This is where more creative solutions to keep the practice running in your absence can be invaluable.

 

What Do You Do with 3 Weeks Off per Month?

That’s a great question! What would you do with three weeks off per month? It’s fun to think about, isn’t it?

In our first month of partial freedom, I attended a couple of four-day conferences in the latter part of the month—one for anesthesiologists and the other for bloggers.

My wife’s primary job has been to raise our boys. When they were both in grade school, she had done a little substitute teaching at their public elementary school, but it was a very flexible position with maybe a few shifts a month if she was interested.

Our boys’ teachers and principal were generously flexible, allowing us to disappear for a few weeks at a time as long as they stayed in touch and got some schoolwork done while away.

More information here:

A $4,300 Family Vacation in Paris and Reykjavik

 

We Travel!

In November 2017, we took our first big trip, spending three weeks in Guanajuato. The getaway was a wonderful family experience. We learned some Spanish, explored Mexico’s central highlands, and spent all of our days together, rather than running in different directions as we so often do at home.

December brought the holidays, and we were able to spend ample time with family in two states. I was hoping to have a reason to travel to a decent college football bowl game, but alas, my home team struggled in 2017, so I had to wait for another year or 10 for that.

January had me traveling twice as the Physician on FIRE. Early in the month, I flew to Florida to hang out with some awesome people at various points along their FI paths at Camp FI near Gainesville. I was off to New York City at the end of the month to see a few friends and witness the ringing of the closing bell as a guest blogger at the New York Stock Exchange. Such a cool experience, and I totally got on TV, lurking behind the talking heads on CNBC.

By February, we were overdue for another family getaway. I had registered for a four-day anesthesia seminar in Hawaii, and we decided to tack on another 19 days before and after, exploring three of the Hawaiian islands. It wasn’t a frugal trip by any stretch, but you can’t witness the grandeur of the Hawaiian mountains, beaches, volcanoes, and waterfalls without spending some dough. Money well spent.

I went straight from Oahu to Park City, Utah to be a speaker at the first White Coat Investor Financial Literacy Conference in early March, and by the time I got back to work, I hadn’t been home in a month and hadn’t seen an operating room in about six weeks. To make up for lost time, I performed double duty with a busy work schedule in March.

That spring, my family and I traveled to Honduras for a medical mission. I performed anesthesia at a surgical center while my wife and boys spent time with the children at the on-site orphanage, which provides a home for up to 500 children.

I didn’t work as much, but I was no less busy than I was before. I was just busy doing more things I’ve been wanting to do, spending less time doing the things I felt I had to do. Financial independence gave us the freedom to make that choice.

 

Is Part-Time Work a Viable Option?

I certainly recommend it for those who can afford it and find a way to make it happen.

How do you determine whether you can afford part-time work? That’s a personal and family decision; you’ll have to examine your current financial situation before deciding if a lighter workload makes sense for you. I can provide a little guidance, though.

If you’re in debt, early in your career, and rely on a single income, you’re not a great candidate for part-time work. Conversely, if you’re debt free and/or have a substantial net worth, are later in your career, or have a second household income, you can start formulating a plan today.

Most likely, your circumstances lie somewhere in between. Some people work part-time from day 1 after residency and do quite well maintaining a favorable work/life balance in a full-length career. Others choose to make hay while the sun is shining, not knowing what the future of healthcare will mean for their livelihood.

If you fall into the latter camp, as I did, I recommend getting at least halfway to financial independence before considering a substantial reduction in your income. By the time you’ve got 12-15 years of expenses saved up, in most years your investments will contribute significantly toward your progress to FI, lifting some of that heavy burden off your shoulders.

I’ve written a post examining the effects of beginning part-time work at different points in one’s career. Unsurprisingly, making bank in those early years is key. Full-time income that has time to compound is instrumental in achieving FI or other net worth goals. The closer you are to your goal, the more flexibility you will have.

Have you worked part-time? How did you handle that transition financially? What do you do (or would you do) with the additional free time? Comment below!