[This article of mine originally appeared as a guest post for the blog, Fulfilled Physicians, and I thought readers might enjoy seeing. They titled it A Physician's Guide to Financial Freedom. It sounds like a book title, but it's just a quick blog post about how a financially secure physician is ultimately a better doctor and is more fulfilled both professionally and personally. It was subsequently picked up on KevinMD.]
Correlation Between Physician Burnout and Finances
In the 10 years since I graduated from residency, I have noticed an interesting correlation between burnout and finances among my physician colleagues: The more secure we are financially, the more we enjoy our work. However, physicians working long clinic hours and moonlighting 15 times a month as a hospitalist in order to make alimony payments, boat payments, mortgage payments, or all of the above, are tired, grumpy, and frankly, dangerous to their patients.
Financial Security = Better Doctors
Financial independence requires eliminating financial concerns from our lives. When we are out of debt, adequately insured, and on track to meet our savings and investing goals, such as college and retirement, we are free to practice in the way we see fit. That might mean fewer call nights or fewer shifts. It might mean a slower pace in clinic. It might mean hiring more help such as a PA, a scribe, or an RN instead of an MA. It might mean being able to turn down the hospital trying to buy our practice so we can practice the way we want without being beholden to “the man.” It certainly makes it easier to always do the right thing for our patients. Financial security can actually make better doctors.
It is surprising how many docs do not get much fulfillment from medicine and in fact feel trapped: they have no other way to support themselves and their families in the lifestyle to which they’ve become accustomed except to see an ever-increasing number of patients at an ever-increasing pace. These are doctors who would leave medicine if they were financially independent. For these doctors, becoming financially independent often injects a new-found enthusiasm for their chosen profession, but even if it doesn’t, it allows them to leave medicine for another profession, for a non-paying or low-paying career, or even simply for early retirement.
Take a few seconds to think about the various changes that would make your career more enjoyable. If you needed one-third or less of your current income, how many of those changes could you implement? Probably all of them, and it would probably cost less than you imagine, especially once you take taxes into account.
If you are a young physician, chances are that in a decade or two you are going to want the freedom to make some changes in your career. Why not start preparing financially now? Here are some steps you can take now to ensure freedom later.
5 Ways to Increase Fulfillment by Eliminating Financial Worries
1. Never grow into your income.
Always be saving a significant percentage of your income. Many of your colleagues are using 20%, 40%, or even 60% of their gross income to pay down debt, purchase income-producing assets, and save for retirement and college. Even if all you want to do is retire at regular retirement age, it will require you to save 15 or 20% of your income throughout your career. If you get used to spending anywhere close to everything you make, you will not be able to have a comfortable retirement, much less have the freedom to make career changes when you wish.]
2. Live like a resident for a few years after residency.
“Front-load” your wealth-building activities to your early career. In the first five years out of training you are not yet used to your high salary, and so won’t miss it. Continue your resident lifestyle and direct your savings toward your student loans and retirement accounts. Long hours, disruptive patients, frequent calls, bureaucratic hassles, and late-night work do not become less oppressive as the years go by. Assume that when you’re 45 you won’t want to be working as hard as you presently are and you’ll want to be spending more. Put in the time and money now and reap the rewards later.
3. Create a plan.
Written plans have incredible power. Create a spending plan—a budget. For a physician, a budget shouldn’t really feel confining, but rather freeing. It allows you to spend your money on what is most important to you since all of us have a limited income. Also, have a written investing plan that allows you to automate your investments as much as possible and practice good behavior when your investments have their inevitable periods of poor returns.
4. Insure only against financial catastrophe.
I am often surprised to see that physicians have bought the wrong kinds of insurance. Instead of buying large amounts of health, term life, disability, and personal liability insurance, we often buy whole-life insurance and insurance on our iPhones. Why? We have no concept of the real financial risks in our lives. Build up an emergency fund you can use to pay for relatively minor expenses, like health insurance deductibles, replacement vehicles, and appliances. This not only allows you to avoid financing purchases, but reduces or eliminates insurance premiums. You don’t need an insurance plan for your microwave and lawnmower, but if you die young, your family may need millions in life insurance. When life and disability insurance is no longer needed, such as when you become financially independent, cancel it and invest the difference.
5. Save the big money.
Many of us don’t realize where the big expenses in our lives are: our homes (including insurance, maintenance, heating, cooling, updating, furnishing, buying and selling the home) and transportation (especially if we’ve got a habit of buying or leasing a brand new car every two or three years). But one expense that few doctors realize is the lifetime costs of financial advice. It is not unusual for a physician to be paying 2% a year for investment advice and management. For a doctor saving $50,000 a year for 30 years, and then living off of it for another 30 years, the lifetime cost of financial advice could be over $7 million, dwarfing even the cost of 60 years of housing! [After 30 years, $50,000 a year at 8% grows to $6.1M, but at 6% grows to just $4.2M. 2% a year of $6.1M over 30 years adds up to $5 Million more, for a total difference of $7 Million.] It is okay to use a financial advisor, but make sure you’re getting good advice for a fair price, and realize that the more you can competently do yourself, the sooner you will reach financial independence. In my experience, it is rare for an early retiree (think late 40s or early 50s) to pay any significant sum for financial planning or investment management. Rather than trying to pinch pennies on minor expenses, just get the big expenses right and the rest will take care of itself.
Physician fulfillment is dramatically increased when financial worries are eliminated. Trust me when I say you will enjoy the practice of medicine much more when you no longer “have to go to work”. Begin now to optimize your financial life by learning as much about personal finance and investing as you can. By doing so you will not only be wealthier but more importantly, you will be happier.Take a few seconds to think about the various changes that would make your career more enjoyable. If you needed one-third or less of your current income, how many of those changes could you implement? Probably all of them, and it would probably cost less than you imagine, especially once you take taxes into account.
Did getting your finances squared away improve your home life? Your work life? Both? How? Comment below!
This is the rare essay that does not resonate with me at all. When younger, our family was double MD/ 3 kids. We’e always been flush with excess cash and money was the least of our concerns. The real stress came from our CALENDAR; that’s what we fought over.
In that situation, try spending some of your money to buy time. That’s what I’m doing now as I cut shifts and drop my overnight shifts this summer. You can also pay a lawn mower, driveway shoveler, house cleaner etc.
Excellent. Preaching to the choir in my case, obviously.
@JZ, One of the points was that having money allows you to work less (or not at all), which can do wonders for the stress that arises from the overbooked calendar. I think the message in this essay could apply to someone in the situation you found yourselves in. p.s. I like your music.
thanks on our music, PFire, me an’ my namesake, jay z , we boff rags to riches [Not on this site, even if it a lyric in a song-ed]; we boff got 99 problems , but $$ ain’t one.
Boom! Edited! Call him the Mormon Metrist! Congrats HOVA
the biggest problem is massive debt and hi loan rates; pure insanity
private dental is nearing 500k private
This resonates with me more than about any other article you’ve ever written. Thank you.
My goal was always to be able to retire young. I found that as I achieved the ability to do so in my mid-fourties I never wanted to pull the trigger. I decreased the weekend call to 1 out of 6. Finally I quit OB. Being financially secure allowed me to do this. I am still working and will do so until something happens. Maybe an illness or some new rule from CMS, or the sale of my office building. I like working much more without pressure to produce.
Choosing to work once you’re able to retire is a great example of a “fulfilled physician”. I could end up going down a similar path. I could retire yesterday based on a 4% withdrawal rate, but I don’t know what the future holds for me or my profession. I’m going to continue making hay while the sun shines, and see how I feel when I could get by with a 2% withdrawal rate. If drastic changes are afoot in the interim, I’ll have options.
“Financial security can actually make better doctors” This is an important concept and not properly appreciated in Medical Schools and residency programmes. If it were, perhaps there wouldn’t be so much “money phobia” and more willingness to have even basic financial literacy programmes established in teaching institutions. I have actually been trying to set up a lecture for final year residents, with the help of a well respected insider, on evidence based investing, but haven’t got anywhere so far.
I’m now working because I want to, not because I have to. It’s just my hobby now, and I guess I’ll keep doing it until I find another hobby I would rather do.
This article, and a few other recent articles along a similar vein, are striking a very close chord. My wife and I have been having lots of discussions of what we want the shape of our lives to look like. Is it more and more responsibility and “prestige” from work? Or is it endless laps at Alta after a 20″ storm? (Don’t think I haven’t been reading the ski report in Utah like a hawk this week Jim!)
We’ve both chose to step off the hamster wheel and work a bit less and get outside more. It is those activities that nourish us and allow us to be dedicated clinicians.
But the reason we are allowed to even think about working less and taking a $100K or more cut to our income is because of principles you preach on this site: pay off your debt, save aggressively for retirement, don’t grow into your income and spend your money on the things you love.
I hope you realize how grateful we are for your lessons. Its not about the money. Its about the freedom the money gives you!
Why do you have to rub in the fact that there were 6 inches in my driveway as I left for my flight to Arkansas this morning? We’ll have to meet up on Collins one of these days.
I am a family physician, 13 years out of residency, first to go to college in my family, main breadwinner in the family, not a rich doctor by a long-shot but I am very frugal. I have negligible debt. Will likely not retire before 65, but I love my job. I switched from primary care to hospitalist due to higher income, and I love it. (Primary care was becoming drudgery but I enjoyed it for years). I moonlight in the ER on my weeks off when I can. I have always sought additional sources of income even when I did mostly primary care but I still have time for family. Hopefully my kids will choose medicine and I will steer them to more lucrative specialties. I joyfully take on the sacrifice of not being the millionaire, but hopefully my children will be the rich doctors. I am an international grad so my perspective might be skewed from others, I came to this country to work and I am glad I got the opportunity and once I have the strength, I have no problem working to age 65 – if that is what I need to do.
If you work until 65, I have no doubt you will be the millionaire, most likely a multimillionaire. I would guess you’re well on your way after 13 years of living a frugal lifestyle and picking up extra shifts.
Very admirable, I’m in a cushy lucrative specialty and I will admit there are some days when I still hate my job
As “nice and enviable” as my position is, I’m still trying to sock away 50% of my gross so I at least have the option of going part time sooner rather than later
“Financial independence requires eliminating financial concerns from our lives. ”
For me, this is the best advice to give to anyone. I do believe in putting some money to work in order to create the needed safety nets that can support us if things go wrong. For me, this means setting up health insurance, a good solid emergency fund, a well thought financial plan.
Things like that allow me to start living my life by design sooner.
This is an absolutely spot-on post. As I near a Mustachian (alas, not yet WCI) level of FI, I am amused to find myself thinking more of what medicine does for me, not how I am beholden to it. And surprisingly it has made it easier not to quit, but to appreciate the reasonably steady paycheck and intellectual challenge. It has also allowed me the freedom to be less stressed about my job and less worried about the headaches of modern healthcare.
I also can’t help but think that if more physicians were financially stable, we would have so much more bargaining power! You can’t put a price on what docs do, and with FI we could turn the tables so easily and wrest our power, profession, and respect back from the bureaucrats. Love it when locums comes a-calling and I can just say no thanks, you need to sweeten the pot. Imagine what would happen if we were all in such a position!
I will definitely admit in my life, the less I have to work for money, the more I enjoy going to work. I don’t even mind staying late on a shift because it is really busy and I am here to help out.
This article is so elegantly written – simple and beautiful. Yet, I know Physicians and other high income professionals who have spent a lifetime avoiding having to learn the 5 principles discussed. And they find the fault elsewhere for difficulties in their life.
“Happiness is not the absence of problems; it’s the ability to deal with them.” – Steve Maraboli.
Learning to manage our finances has increased our ability to deal with life problems, thus our happiness.
sadly the professional schools only let salesmen into the schools to sell products
That’s true. At a recent Anesthesia meeting I attended, one of the talks in the Resident’s Section was from a local “wealth management” firm, pushing their expensive actively managed stuff. I guess the University thinks it’s better to have an “expert” from of wealth management industry rather than a doctor talking about evidence based investing.
I tried to get the dental school to let me talk to the students and never received a response
ONE HOUR and some hand outs and they will do better than 99% of their colleagues