“Great achievement is usually born of great sacrifice, and it is never the result of selfishness” – Napoleon Hill
Author: Robert A Felberg MD
Topics: Physician leadership, Career Advancement, Office Politics
“1. You have get up to go up. 2. You have to give up to go up. 3. You have to grow up to go up.”
Physician success is an elusive creature. Each doctor defines success differently. Some crave recognition or a larger voice in the future of healthcare. Others desire financial rewards. All are equally valid. There are some common elements seen in successful physicians- they possess Initiative, Willingness to Sacrifice, Maturity, and Vulnerability. The first post in this series introduced these concepts and reviewed Initiative, especially as it relates to “Personal Energy”. This post will discuss the role of Sacrifice- something that doctors are quite familiar with.
[Editor’s Note: There are many great doctors out there. Unfortunately, being a superb clinician does not equate into superb leadership. Physician leadership is a topic that is often overlooked in training and the lack of this professional skillset is a cause of many of modern medicine’s troubles. This post in one of a series from physician advocates LLC, advocatesmd and medical success central exploring the vital skill of physician leadership. Please sign up for the newsletter to be kept up to date.]
In “The 21 Irrefutable Laws of Leadership”, Maxwell explained the secrets to “making it to the top” or “going up”. This involves Initiative– “getting up”, Sacrifice– “giving up”, and Maturity– “growing up”. I Also believe a leader needs to be Vulnerable– “You have to open up to go up.”
“The medical profession is a feat, it requires self-sacrifice, purity of soul and purity of thoughts” – Anton Pavlovich Chekhov
Sacrifice is a common experience for all in the medical field. We all sacrifice tremendously to enter the field. Hours of study while our friends enjoy their youth. Two day shifts without sleep so our patients can rest quietly. Delayed financial return, crippling medical school debt, and constant derision from society about the myth of the wealthy doctor.
Since personal sacrifice is part of the daily experience of every doctor, I’m going to touch on another type of sacrifice that typifies a successful physician- Financial Sacrifice.
It’s my strong belief the financially secure doctors are better clinicians. The reasons are pretty straightforward- 1. If you are making decisions under financial strain, you may choose what is best for your bank account and not what is best for the patient. 2. There are few stressors worse than financial stress. If you are focusing on your financial condition, you are taking focus away from the patient’s condition. 3. If you are financially stressed, you are probably in some level of disagreement with your employer and feel less the complete control. This combination of anger, frustration, and helplessness is on the continuum of “burnout” and that never ends well.
For the reasons above- all physicians have the professional duty to achieve financial stability.
Which gets me to my point. Doctors are really good at sacrificing their personal life for their medical career, but they are terrible at making financial sacrifices. It actually somewhat unbelievable. How can the same person who was able to sacrifice all those great parties in college turn into the same person who can’t stop themselves from spending on lavish vacations? Shouldn’t the same reserve of fortitude that allows you to work 48 hours without rest seeing 27 patients each day give you the strength to buy a used Lexus over a new Mercedes?
Here’s the problem with most doctors- You are not rich, at least not yet. Actually, you probably owe more in debt than you have in total assets. You likely have one of two false beliefs – 1. that you are rich due to your salary or 2. you are entitled to certain luxuries because you are a doctor.
Being “wealthy” is the ability to spend more money than you earn without incurring debt. Basically, if your investments and passive income allows you to purchase more than your salary, you are wealthy. If you are able to afford your lifestyle without working, you are “financially independent”. If you can afford your lifestyle without working and can spend luxuriously on your dividend returns alone then you are “rich”. Almost certainly, if you are a typical early-career physician, you are “destitute”- You owe more in debt than you have in assets. Having “zero” in personal worth would be a tremendous step up from your current negative net worth and will take several years of hard work to achieve.
So, unless you are completely debt free, own your house outright, and have saving and investments that can support your lifestyle indefinitely, then you are not even remotely rich. Where does the money come from that you are spending, if you are not currently financially independent? You may answer, “Well, my salary of course.” You’d also be dead wrong.
The assets you spend today, while you are still in debt are not coming from your present salary- They are coming from your future self! You are indebting yourself to work more years in the future to pay for your current spending.
You are sacrificing your future retirement, financial stability, and happiness by emphasizing work/life balance, luxury, time off, and spending today. For every dollar you spend today, with the compounded interest on that debt, you need to earn 3-4 times more money in the future to pay it off. This is not the type of sacrifice you want to make.
Several physician personal financial bloggers post about this topic in the “blog-o-sphere” so I won’t go into depth. However, the basic ideas are as follows- Live frugally, earn aggressively, pay down debt determinedly, and invest wisely. Soon, you’ll be debt free and on your way towards building enough invested assets to be achieve financial independence. The alternative is unthinkable– saddled with debt, living paycheck to paycheck, unable to slow down or retire due to a combination of divorces, luxury cars, vacations, and an inability to conquer debt in your early career. Imagine being 62 and facing that future? It’s modern indebted servitude.
Here are a few tips to help you with the financial sacrifices you’ll need to make to succeed-
- Looking at someone else and trying to determine their financial status is like looking into a fun house mirror. What you see barely reflects reality. You may look at your colleagues and see the new Condo and leased Mercedes. What you don’t see is the $450,000 in medical student debt and the inability to save a single dollar in their 401k. Ignore the financial appearance of others and any peer pressure to “keep up appearances.”
- Calculate the actual cost of purchases. The typical doctor works 60 hours/week. Although most of us work far more than that. Take a look at your taxes from last year and determine your actual take home pay- after taxes, benefits, and tax-deferred investment. Then subtract non-negotiable spending like mortgage, student loan service, gas, life insurance and internet. That left over amount is your discretionary income. Divide your discretionary income by the number of hours you work annually- 3120 if 60hr./week. That’s your hourly discretionary income return.
- For example, you earn $200,000 annually. You gross $157,000 when you take out your 401k, 457b, and traditional IRA. Then you subtract $10,400 for benefits leaving $147,300. You pay taxes in the 28% bracket + 3% state tax leaving $102,874. Then your mortgage, student loans, and utilities eat another 5000/month, leaving $42,874. You divide $42,874/3,120 hours worked annually= $13.74! That’s the spending money you earn every hour you work. Depressing right? No wonder your Dad votes Republican!
- Now, when you go to buy something consider it in terms of hours you need to work to pay it off. Is that $270 dinner worth 19 hours of work? How about the $75,000 Mercedes vs the used Camry at $24,000? That’s an extra 3,711 hours of work or entire year of labor! Not including the interest you lose borrowing to buy the car, or the compounded dividends you could make investing that money instead. Would you really trade a year or more of labor to drive one car over another? Add a few cars, a few houses, a few luxury vacations, and college for your kids. You’ll be lucky to retire at 96!
- “Work/Life balance” is for rich people. Sorry to be the one to break it to you, but you don’t have a work/ life balance option. You have a debt/future poverty issue. And the solution is to earn aggressively and pay off your looming debt now before you are buried in the avalanche of compounding interest.
You have a personal responsibility to become financially independent so you may practice your profession without conflict, burnout, or distraction.
You have to “give up” to “go up”. Learn to make the sacrifices you need to succeed, both professionally and from a monetary standpoint. Personally, I never felt a sense of loss hiking and camping with my family instead of flying first class to Paris. Over time, I just learned to appreciate the simpler things- like the peace of mind of financial stability. The stress relief of paying off my student loans in less than 5 years more than made up for anything I may have missed by luxury spending. Soon, you’ll find your debts paid off, your wealth increasing, and your financial independence a source of freedom and strength. With sacrifice and hard work you be able to succeed… really succeed.
Bonus Hint: The easiest to reach financial independence is to earn more income. And the best way to improve your compensation package is to negotiate a better deal! Get a high quality market value report, develop a solid negotiation strategy, determine your anchor number, up your skills set, and consider a CME approved negotiation and professional skills seminar developed for physicians.
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What do you think? Do you dream of an early retirement? Do you long for the day you can tell your boss to take this job and shove it? Or, do you think I’m crazy for living a modest upper middle class lifestyle and saving instead of partying like a rock star? Share your thoughts in the comment section