[Editor's Note: This post originally published as one of my regular columns at MDMag.com. It deals with hobbies, and suggests a profitable hobby that I think many physicians may find worthwhile to pick up, at least if they find they enjoy it!]
In Thomas Stanley and William Danko’s seminal work, The Millionaire Next Door, they noted that “millionaires allocate their time, energy, and money efficiently in ways conducive to building wealth,” whereas “under-accumulators of wealth” did not. In short, that means they use their time in ways that will allow them to build the most wealth. This approach can be applied not only to your professional life and practice but also to your hobbies. Many physicians have found that having a hobby that will actually make money can be very beneficial.Hobbies That Make Money
I have seen a wide range of hobbies among physicians that actually function as a side job. It may be writing a column, authoring a book, or keeping a blog. I know of at least one doctor who applies to various credit cards and “manufactures spending” in order to get all the sign-on deals associated with those cards. He then takes several international vacations a year with the proceeds. Other doctors may have a side job with an insurance company or start their own business where they manufacture medical equipment. Others may do medicolegal work, chart reviews, or insurance exams. Doctors can also make money from the comfort of their own home, by taking online surveys, giving lectures, or participating in online forums. I know of many physicians involved in real estate investing in one form or another. One of my colleagues has even considered working a couple of afternoons a month in a bicycle shop! I started The White Coat Investor over 3 years ago as a hobby. Not only have I been able to help a lot of people, but it has also provided significant side income. A hobby that pays you may be the best kind of hobby, and it might even provide an opportunity to move entirely out of medicine should you need or desire that change.
Even if you decide not to pick up a hobby that pays you (and who could blame you given the stress and time involved in medical practice), you will likely to find it beneficial to at least consider the cost of your various hobbies. I have a number of hobbies, ranging from very inexpensive to very expensive. Running and playing basketball are very cheap. Ice hockey, rock climbing, and mountain biking can be moderately expensive. Boating, race car driving, small plane flying, and owning horses can bankrupt even high-earning physicians if they’re not careful. Not only is there a high cost to start these hobbies (priced out an airplane lately?) but there are significant ongoing insurance, maintenance, and fuel expenses. Consider how much enjoyment you get from each of your hobbies, and if the enjoyment is similar, choose the less expensive ones, especially if you’re having trouble reaching your financial goals.
A Hobby For Everyone — DIY Investing
One of the most lucrative hobbies any physician can have is doing her own financial planning and investing. Now, too many doctors simply don’t do any financial planning and invest haphazardly. That’s not what I’m talking about. I’m talking about actually dedicating some serious time up front to learning about personal finance and investing and developing the knowledge and discipline required to successfully invest. Of course, some ongoing time and effort will be required. The last thing you want to do is hire a bad advisor (yourself, if you don’t have the necessary knowledge or discipline). There is no price too low for bad advice. But when you consider the cost of hiring a competent advisor to perform these tasks for you, it quickly becomes obvious just how much this hobby could “pay you” (in savings).
Consider a physician investor who uses an advisor to make his investments. He invests $100,000 per year for 30 years and earns 8% on average before expenses. The advisor charges 1% per year, so after expenses, he earns 7% per year. After 30 years, the investor would have $10.1 million if he used the advisor. If he had instead learned to do that himself, he would have had $12.2 million. That hobby could have paid him $2.1 million. Not too bad for a side hobby. If this example seems extreme, tone it down a bit. Let’s say $50,000 invested a year for 20 years, on a portfolio that earned 7% a year before expenses and a very low-cost advisor who only charged 0.5% per year. The difference is still $125,000, or over $6,000 per year. That “hobby” would at least pay for a nice vacation every year.
In retirement, these costs matter even more. As a general rule, you can spend about 4% of your nest egg each year and expect it to last throughout a 30-year retirement. But that number is pre-expense. If you wish to pay an advisor 1% a year, then you can only spend 3% per year. This requires a portfolio that is 33% larger to provide the same payout. That may mean 4 more years of working and saving compared to a competent do-it-yourself investor.
Learning to manage your own investments is easier than learning medicine, but it does require some interest, a fair amount of discipline, and some time, especially up front when designing the plan you are going to follow. However, a few hours spent managing your own investments can be the highest-paying hours you work each year. Choose your hobbies wisely and you may find they not only bring you a great deal of enjoyment but also allow you to become wealthy.
Totally agree. In my case, I officiate hockey from the lowest levels to nearly the highest level. It has 1) provided me with income (savings) at a very young age 2) Paid for my college 3)provides secondary income now.
Also, keeps me active and sharp.
Great article! For those who are not aware, I recommend Early Retirement Extreme (both the blog and book) by Jacob Lund Fisker aka Jacob to the FIRE folks out there. He basically demonstrates that being a “generalist” in life, meaning you can fix your own car, maintain appliances, cook healthy food etc., you can make life really inexpensive. Thus, he takes the concept of a hobby that pays and applies it to all aspects of life. It is a really good book for anyone, even for the person who does not plan to retire early. The book basically helps you to look differently at the world in a philosophical way.
I just fired up my personal blog on bicycle commuting last week (thanks to a Christmas present from my wife) and am looking forward to pursuing this. I don’t plan to make money per se but I plan to gain a ton of knowledge unrelated to medicine. Learning things outside of your own specialty is sort of like diversifying your financial portfolio. In the unlikely event that your current specialization becomes obsolete, you have other more generalized knowledge to fall back on from which you could make additional income.
Interestingly, Jacob who has been financially independent for some time now, now works for an investment firm.
Preaching to the choir. Every doc should learn how to invest on their own
It’s the best return on your invested time hands down
Trust no one with your money as Andrew Tobias says
Interesting perspective…I never really thought about investing as a “hobby”, although I have thought about the differences of using an advisor vs not. Thinking of it like a hobby that pays me makes it more attractive somehow, even though the principal doesn’t change. Thanks,
Investing is like coding. At first you think you don’t want to do it, or shouldn’t have to do it, or it isn’t doctor like or something along those lines pretending it should be offloaded to someone else. Later you realize that doing it yourself makes sure it is done correctly and that you will enjoy medicine and your life more bc of doing it.
I play music as my hobby, as does my wife (who has a masters in clarinet performance). We make a pittance here and there, but probably will never earn as much as our nice instruments cost (about $35,000 between two trumpets and three clarinets).
I also gain about as much income from the medical iOS app that I wrote (LI-RADS) to cover my yearly developer fee. See my linked website if you’re a radiologist and this app sounds interesting (click my name).
On the other hand, I have quit hobbies after taking stock and realizing the enjoyment I derived from them wasn’t worth the time, money, or both.
That’s such an interesting statement: “I have quit hobbies, after taking stock and realizing…”
So by this, you are saying having any hobby is a distraction from the more important things in life? So, just work as much or as little as you need to, maintain health/finances/etc., but then all the rest of your time is “hobby-free” and… just spent with your family and traveling?
I think he answers the question when you finish his sentence:
“…the enjoyment I derived from them wasn’t worth the time, money, or both.” He’s not saying don’t do hobbies. He’s saying make sure you’re only doing the ones that are worth it to you.
As always great article.
I do like to buy and sell undervalued classic cars. I started with an $1800 ride at age 16 and have restored and repaired as needed, flipping for a profit. I think I am on car 12 or 13 now. Just bought one in July and sold a couple of weeks ago. No big money (1-2k profit each time), but have never lost $ and I find it highly enjoyable. You learn from each one.
Thanks to this blog, I have immersed myself in the hobby of travel hacking, including a credit card churn and an initial accumulation/manufacture of upwards of 300,000 travel rewards points/miles. The number and depth of travel hacking blogs out there is dizzying, and I can see why so many people get sucked into this interesting and lucrative hobby.
I’ve also invested a good chunk of my real estate allocation in the crowd-funding real estate websites that were introduced here — in my estimation, this can be a less risky way to play the loan game than Prosper and Lending Club.
Keep the diverse blog entries and guest posts coming, WCI! I look forward to finding my next hobby!