The Physician Life Cycle Part One: A Pragmatic Look at Finance Over a Doctor’s Career

The Physician Life Cycle Part One: A Pragmatic Look at Finance Over a Doctor’s Career

How you feel about your physician career now will probably change dramatically as you get older. Will your financial plan keep up?

Author: Robert A Felberg MD

Topic: Physician Finance

Keywords: Doctor retirement planning, Physician financial independence, Doctor side jobs

When you first start medical practice, everything is so exciting and new! You are finally doing what you dreamed about for so long. You’re an actual attending. You have patients who depend upon you. Maybe you’ve even saved a few lives, delivered a few babies, done a few really interesting surgeries or something else that really inspires you. You are also starting to receive some decent compensation. It’s all very gratifying.

As exciting as your career may seem now, your feelings will undoubtedly change as your career advances. Running in at 3am to do an emergency C-section won’t seem as attractive when you are 45 years old. A full day of 6 patients every hour until 8pm with lunch overbooked, followed by hours of paperwork and peer-to-peer calls can become a real burden. The simple reality is that as you age and advance in your career, your interests and desires change. Some elements of medical practice that were once desirable and exciting become a downright burden.

 You can see the negative effects of this change in so many of your colleagues. They are miserable or “burned out”. They have lost the joy in the practice and seem to do whatever they can to avoid any change or innovation.  Sometimes, they treat the patients like the enemy. They are working the same hours as the new hires, but with far less satisfaction. The saddest cases are the 62-year-old doctors who still must work to make ends meet.   Their ex-wives, expensive vacations, luxury cars, and inability to plan has forced them into a form of modern debtor’s prison. The same work schedule that turn them on at 35 years old is now soul-draining torture at 55.

If your personal medical practice goals and activities are going to change in the future what can you do about it now? The straightforward solution is to trade current time and energy for future benefit. Now, trust me, I know you are under the belief that you are working too many hours right now. You desire “work/life” balance. I’m here to tell you that those dreams are costing you your future. As bad as you may think your work/life balance is now, it will only get worse as you age. My advice is the combination of “cutting costs” and “making hay while the sun shines”. Live frugally and earn as much as you can now.

The key is to understanding the issue is to perform a relatively simple calculation. Calculate how much you will be spending when you are 50+ years old or more.  First, you need to determine how much you spend every month. Take a look at your mortgage, utilities, food expenses. You may need to estimate some of these including college expenses. You can leave inflation out for now, but realize that inflation over the next 20 years can take a serious bite out of your purchasing value.

You should have determined your estimated monthly expenditures- Say $10,000. Now imagine your goal will be working part time, so cut that number in half- $5,000. That’s the amount of monthly income you’ll need to replace to start your “victory lap” switch to part time work. If you want to retire early completely, you’ll need to consider full expenses including health coverage. Next is to work backwards from that number to determine how much you’ll need to save to work one less month. To make it super easy, we’ll assume a 6% return. At that rate,your money doubles every 12 years. Let’s say your goal date is about 24 years from now. That means every $1250 you invest today will buy you one month of your dream job in the future. The more you invest now, the higher the rate of return, and the longer the money has to compound, the more value it will eventually have.

Think about this concept. A comparatively low amount like $1,250 today will lead to an enormous future value. This concept should drive your every financial decision. Do you buy a used Toyota Camry at $24,000 or a new Mercedes E-class at $54,000? The cost difference between the vehicles isn’t $30,000, it’s 2 full years of work! I certainly like heated seats and luxury sound systems, but I don’t like them that much!  Brown bag or buy lunch? At 10 dollars a meal you’ll have to work an extra two months for every year you buy to pay for that luxury. The same holds true for locum tenens or moonlighting. Doing 2 weeks of your 5 weeks of vacation as a locum, working extra weekends or shifts, and setting up a side job can easily bring in an extra $20,000+ annually. Earning aggressively and living frugally now, while you are young and relatively brimming with energy, will help guarantee your dream future. The opposite is true, emphasizing time off and luxury spending now will harm your future in ways worse than you can imagine.

Understanding that your future desires and goals will shift is important in maximizing your career satisfaction. You’ll need to keep this in the forefront of your financial decision making. In part two of this series, I’ll review the typical physician life cycle stages and the financial moves to consider. In the meanwhile, spend some time looking around your hospital and thinking about your future. Do you see the doctors who are miserable because they are forced to slave away just to make their monthly expenses? What about the doctors who have found complete joy because they are able to do what they like, not what pays the bills? What are your goals- early retirement, part time work, teaching or volunteering, medical missions or travel? With proper training and planning you can make your dreams a reality and succeed… really succeed.

Bonus Tip: The best way to improve compensation is through negotiating the best package. Get a handle on your market value, improve your negotiation skillset and take a CME approved course designed for physicians. Don’t leave tens of thousands of dollars on the table- it can really add up over the next 30 years!

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What do you think? Am I crazy to work so hard when I’m started out? Isn’t the goal to having enough “FU” or “walkaway” money to call your own shots and control your fate? How much would a universal adaption of this model lead to a reduction in burnout? Share your thoughts in the comment section.

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