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The Physician Life Cycle Part Three: How Much Do You Need to Save?

You know you need to put money away, but how much? Is there a proven approach?

Author: Robert A Felberg MD

Topic: Physician Finance

Keywords: Doctor retirement planning, Physician Financial independence, Savings Rate

Everywhere you look on the physician finance blog-o-sphere, the message is clear. You must save money and invest so your future self can enjoy financial independence.

And, as much as the message makes sense, very few explain how much you need to save. It’s no small matter- if you save too little you risk financial stress and not reaching your goal. If you save too much, you make painful sacrifices that can cause unneeded burden at the cost of present quality of life.

The answers out there range from the standard 10% rule (without any explanation as to why that rate is the correct one), to a series of complex formulas based on sketchy assumptions that you need a CPA degree to follow, to a general idea to save every single penny. Most articles don’t really give you an actual saving rate- they just yell at you for buying coffee or avocado toast while forecasting your impending financial doom.

[Note: Physician finances can be complex and most doctors feel uncomfortable making money-based decisions. The good news is that there is a large blog-o-sphere dedicated to educating newly minted doctors on how to maximize their net worth. The bad news is that although most blogs are loaded with great technical advice they often lack a basic explanation of why these financial moves make sense. Physicians may feel over-whelmed leading to decision paralysis and procrastination. This series presented by Physician Advocates LLC and Medical Success Central will explore the philosophical side of financial topics rather than technical details. Please be certain to sign up for the newsletter to be kept up to date]

In the first part I emphasized that need to consider the changes you will go through your physician career. This included the need to live within your means early to purchase your future financial freedom. In the second post, I explored importance of net worth and the typical different financial stages on the way from having negative value to financial independence.

If I’ve done my job right, you are excited to implement a financial plan and you are daydreaming about your future victory lap. Now comes the hard part- designing your plan. And, if you’ve done any research, you’ve probably learned that you need to save, earn, pay down debt, and invest. If your experience if like mine, you may have found a lot of very technical information involving i401ks, Roth-IRAs, or refinancing your student loans. What’s often missing is the straight-forward philosophical understanding of the basic concepts underlying these more complex topics.
So, how much money do you need to save to have a high likelihood of achieving financial independence at a reasonable point in the future?

Fortunately, there was an excellent research project titled “Life-Cycle Earning and Safe Saving Rates”  by Derek Tharp and Michael Kitces discussed in the Wall Street Journal and elsewhere. They had several very interesting findings.

At higher earning percentiles, your future earnings will change dramatically over your lifespan. If you are in the 95th percentile, your earnings should be expected to raise by 380% from age 25 to 50.

 

 

 

Because your earnings will be expected to increase, those in the higher percentiles will need to save more than they realize early on to match their future salaries and maintain future life style. If you are in the 90th percentile, you’ll need to save 18.4% over 40 years.

The problem here, is that Doctors don’t have a 40-year window- They start practice at age 30 or 35 and they will want to have financial independence at age 50 or 60.

Looking at this data, we can conclude a few things.

  • Great news. You should expect an increase of your salary by quite a bit until age 50. At age 50 your earnings typically peak and then decline slightly.
  • You will need to save quite a bit early in your career to match your future lifestyle. Since your earning will peak at age 50 and then decline, it is unlikely that future investments will make up for early delays or underfunding.
  • If you can avoid lifestyle creep and be happy living a lifestyle below your earning percentile you will be in a much better position. This includes total accumulation of wealth through increased savings and in the amount of retirement funds and returns required to maintain your lifestyle through reduced spending.

Here’s the hard numbers:

  • If you want to be financially independent after 30 years of practice (about age 60) and maintain your lifestyle you need to save 15.8%-25% of your income.
  • If you want to be financially independent at 20 years or about age 50 you need to save 21.6%-39% of your income.
  • No numbers are given for age 40 financial independence, but I’d guess 50%-55% would be about right.

Before you panic, I want to tell you that saving at this rate is completely doable. Yes, it will mean some sacrifices. You may have to suffer the torture of driving a Toyota Camry, vacationing at a rental home at the Jersey Shore, eating healthful meals at home with your family most nights, and flying with the peasants in the back of the plane drinking your pathetic one can of soda.

Keep some perspective here. When you are earning 300k, you are really talking about a high quality lifestyle at 180k. That’s 3 times the average American family’s income! As a highly compensated physician, this type of savings is more about attitude than any true deprivation. Trying to survive at $18,000 and being expected to invest $9,000 is crazy. But, asking you to live at 100k-250k in exchange for financial freedom at age 50 is a great bargain! 99% of the earth’s population would go to war for that chance.

“All models are wrong, but some are useful”- George Box

This model is far from perfect. It doesn’t take taxes or financial fees into account. It uses only historical data to predict results. It takes a standard 60% stocks/ 40% approach and the classic 4% drawdown method for funding retirement. The retirement is assumed to be 30 years. Prepayment of students loans is not addressed as an expense or saving. I’m certain there are several other flaws.

Despite any modeling problems, there is a strong message here- Save around 25-40% and start today. This saving rate will have a high likelihood of reaching your financial goals. Save less at your future peril. Save more if you’d like, but you don’t have to. If your goal is to be financially independent very early or live an expensive lifestyle, then 50%-55% may be more appropriate.

 

Here’s some tips to consider:

  • Pay yourself first. Arrange for the money to be invested before it hits your checking account. Then feel free to spend what you have in your account worry and guilt free.
  • Avoid lifestyle creep. As you earn more, you tend to spend more. If you can minimize this leaning to balloon your spending, you’ll be able to enjoy a modest increase in your quality of life while staying on track.
  • Focus on earning more than saving more. It is exponentially easier to earn an extra thousand dollars than it is to save it. Living on half of 500k is much easier than living on half of 250k. Physicians are blessed with the ability to earn more- just work another shift or do a weekend locum tenens. Spend 3 of your 5 vacation weeks doing locums tenens and your CME time as partial vacations. Be a moonlighter and not a coupon cutter. [Editor note: Hey, I love coupons!]
  • Negotiate to earn more. The easiest way to earn more is to negotiate a better deal. After all, the money you gain by negotiation is earned without a single moment of extra work and is renewed annually. The ability to negotiate well will pay off in your house purchase, car purchase, and your salary. [Editor: I just negotiated $3,900 off of a house repair. Negotiation skills pay off handily]
  • Involve your spouse or significant other. You need your family to back you on this, especially if they are in control of spending while you are at work.
  • Your credit cards can be your enemy. Learn to budget for future large purchases. If you find yourself carrying credit card balances beyond the next pay cycle, you have an issue that will cost you considerably.
  • Sign up for Mint or similar service that allows you to track your net worth, investments, loan status, and bank balances. Having this information at your fingertips can be very motivating, as well as helping you stop leaks.

Knowing how much to save is an important first step in reaching your goal of financial independence.

Depending upon your desired age of independence and the time left to get there, you’ll need to save somewhere between 15.8% to 39% of your earnings. Saving closer to the top of the range is strongly recommended.

Sometimes, reality can be a dose of bitter tasting medicine. But, it’s much better to realize early what you need to do, than to look back in lost opportunity and regret. Having lived this advice by saving at 40% my entire career, I never truly felt deprived and certainly appreciate my current financial freedom. (I started saving long before this study was done- I took the common advice to save at 10% and added another 10% for each decade I wanted to retire early, plus the 10 years I lost in school and training. It was a complete guess and terrible model, but it worked out just fine…) Taking control of your financial future and having an evidence based plan will help you achieve your dreams.

In part four of this series I will discuss personal finances and a form of easy budgeting that should help you move forward with your plan. I promise it’ll will be a lot more exciting than you think!

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 really adds up over the next 30 years!

 

So, what do you think? Saving nearly 40% sounds crazy, right? I want to live like a Doctor, not some Joe Lunchbox! But, telling my boss “no” when she asks me to start an evening clinic does sounds sweet. And being able to stop taking weekend call sure would be nice.   Share your thoughts in the comment section below…

 

 

The Physician Life Cycle Part Two: Defining Your Wealth Status and the Importance of Net Worth

Why do high earning physicians end up financially stressed? It’s not what you earn, but what you are worth that matters!

Author: Robert A Felberg MD

Topic: Physician Finance

It’s confusing… You didn’t become a doctor to become rich, but you certainly thought that you would be financially comfortable.  Yet, here you are, earning a very respectable salary and you still can’t seem to get ahead.  Not only that, the debt never seems to go away.  And, late at night, when you do the math, you are starting to realize that you may never be able to retire.   Your dreams of financial independence and freedom are quickly slipping through your fingers.

 

 

[Note: Physician finances can be complex and most doctors feel uncomfortable making money-based decisions. The good news is that there is a large “blog-o-sphere” dedicated to educating newly minted doctors on how to maximize their net worth. This series presented by Physician Advocates LLC and Medical Success Central will explore the philosophical side of financial topics rather than technical details. Please be certain to sign up for the newsletter to keep up to date]

 

In part one of this series, I discussed the need to consider that the way you feel about your practice now may change over time. What is exciting now, like seeing 26 patients while being post-call, will certainly be burdensome when you hit your fifties… or possibly earlier. Planning is everything and if you make wise financial decisions now, you’ll be in control and decide how you want to practice in the future. The opposite is also true… emphasizing luxury spending, debt accumulation instead of debt elimination, and “life balance” early in career will lock your future self into the unhappy equivalent of modern debtor’s prison.

Many of the physician financial bloggers in the “blog-o-sphere” offer great technical expertise – how to back door a Roth-IRA or compare jumbo mortgages, but they often lack in establishing a strong foundation in the “philosophy” or theory underlying these financial moves. This overly technical jargon-heavy approach can lead to paradigm paralysis amongst physicians- they don’t understand what is going on so they do nothing!

 

 

This post will explore why physicians- despite their earning potential- are not wealthy. I will also review how doctors get fooled into the false sense of wealth and the typical physician financial life cycle. By understanding your true net worth, you’ll have a better understanding of the reality of your financial status and hopefully gain insight into the financial steps that will help you achieve your goals.

 

When it comes to wealth, most doctors make one of two logical mistakes:

  • They are under the false belief that because their salaries are high that they are rich
  • They feel entitled to luxury spending and a life of comfort because they are doctors

First, the bad news. If you are like most early or mid-career physicians, you are not rich. You are not even well-off. Most likely, you aren’t even worth zero. You have negative value or “net worth”. You are “destitute”!

Now, I can be kind and tell you that you are “cash poor, but future rich- often called a H.E.N.R.Y.”, but that bit about your future is a a lie. Why? Because you already sold your future.  Who do you think is paying for that student loan debt, mortgage, and credit card spending? It’s not the bank or the Stafford Loan Organization- it’s you!  Yes, you! You have signed a contract to work in the future to pay for today… with accumulating interest.

If you haven’t figured it out by now, “net worth” is the amount of assets you possess minus the amount you owe in debt. It’s important to realize that some elements of net worth aren’t liquid, such as equity in a house or tax-deferred retirement savings. This will be important in the future if you decide to harvest some assets for living expenses. But, for now, leave them in your net worth discussion.

There are some basic levels of net worth that define your wealth. These can help you determine the moves you need to make:

  • Destitute- You are worth less than zero. Don’t panic, most newly minted doctors start out this way. Your goal in life is to earn enough to be worth nothing. Focus on earning aggressively, paying down debt determinedly, living frugally, and investing to best maximize your returns.
    • Important note: Your actions while “destitute” will have the biggest effect on your future financial goals. [Editor note: managing this stage will be discussed in a future post]

 

  • Zero- Congrats! You are now worth nothing. It took me 7 years of practice to be worth zero, so be proud. With the advantage of readily available physician financial advice planning, which didn’t exist when I started out, it shouldn’t take you more than 4-7 years to become worthless. Your goal now is to continue your frugal and hardworking ways. But instead of servicing debt, turn all of those energies toward saving and investing wisely. Time and compounding interest are your friend here. Just remember, you aren’t rich yet, so don’t pretend to be.

 

  • “Nose above water” financial independence- Most physicians can reach this stage between age 40 and 45, but your specialty and starting debt can vary this widely. Basically, it’s an amount of assets accrued such that if you sold your house, moved someplace cheap, and did not spend on luxuries, you would never need to work again. The amount needed here is usually somewhere around 1 million. This is a great step. You’ve really achieved something. Of course, you want to be rich, not just survive…
    • Important Note: Earning complacency can trip you up in this stage

 

  • Financial Independence- You can now quit your job, your mortgage is paid off, and live a decent quality of life, but not equal to your full salary. I’m not saying that you should quit, I’m just saying that you can or at least back down on the aggressive earning. This is probably the happiest point to be in life. Not because of the wealth, but because of the freedom. You can start to say “no” to things you don’t like at the office. You can also focus on the things you love- teaching, travel, ministry, etc. – without having to worry about the financial rewards. This can usually be achieved around age 50 and is followed by a “victory lap” for the last decade or so of your career. [Editor note: I’m at this stage and it was worth every sacrifice and then some…]

 

  • Wealth- You no longer need to work and can maintain your full working salary based purely on returns from investments and passive income. The rare few achieve this early, but it the ultimate prize. Usually attained between age 59 and 76, it can be accomplished by nearly any doctor who follows the simple plan of earning a lot, spending a little, avoiding debt, and investing aggressively.

 

  • Rich- being able to spend luxuriously without touching your principle or saved assets. If you want to get this degree of wealth, the practice of medicine is not for you. You need to start a business, invest heavily in real estate, or invent a valuable product or service. Maybe you are beautiful and talented with a voice that makes teen aged girls yell and a face made for the silver screen. The rest of us can dream…

Knowing your true wealth as defined by your net worth is the key to understanding your goals and appropriate financial moves.

You might say, ” I get it! I want to be rich someday and I am willing to make the sacrifices to obtain that goal. But, how much do I need to save to get there?” There’s a surprising mathematical study that gives you this answer with high certainty, but the result may be a little shocking… I’ll discuss it in my next post.

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 really adds up over the next 30 years!

 

What do you think? Does all work and no play make Dr. Jack a dull boy? Are you haunted by the older doctors you see in the hospital- still working like mad at jobs they hate to make ends meet, never to retire? Do you dream of practicing medicine one day without a financial care in the world? Share your thoughts in the comment section below…

 

 

 

 

If You Want to Go Up (Part Two)- You’ll Need to Give Up. The Role of Sacrifice.

“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

Keywords: Financial independence, sacrifice, paying off medical student debt, doctor passive income, doctor early retirement

“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.”

John Maxwell

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-sacrificepurity 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.

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

 

 

 

If You Want to Go Up (Part One)- You’ll Need to Get Up.

“Let him who would move the world first move himself” -Socrates

Author: Robert A Felberg MD

Topics: Physician leadership, Career Advancement, Office Politics

Keywords: Doctor opportunities, effective time management skills for doctors, advancement for a doctor

“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.”

John Maxwell

John Maxwell is one of the best resources available for anyone interested in self-improvement and leadership. It’s amazing how little his work has percolated through the medical field where it could be well applied. I have listened to nearly every audiobook he has put out and have found each one to be valuable. There is no financial relationship between us. I’ve never met the man- I’m just an admirer of his work.

[Editor’s Note: There are many great doctors out there. Unfortunately, being a superb clinical 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.com 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 laid out some of the simplest advice I have ever read about “making it to the top” or “going up”. This involves Initiative– “getting up”, Sacrifice– “giving up”, and Maturity– “growing up”. Although it’s been several years since I first read that book, this has always stuck with me as powerful advice. There’s not much I could add other than a leader needs be able to be Vulnerable– “You have to open up to go up.”

I’m going to explore each of these concepts- Initiative, Sacrifice, Maturity, and Vulnerability as it related to medical leadership and success. In this post I going to discuss Initiative. In future posts, I’ll review Sacrifice, Maturity, and Vulnerability as it relates to medical leadership.  After reading the series, please consider an honest assessment of your personality traits. There is a great amount of information and mentorship available, but first you need to “know yourself” before you can really benefit.

Initiative amongst physician really takes two forms, Energy and Innovation. I will focus on Energy for the rest of this post.  Energy is one of the “4 E’s and one P” of leadership often discussed by Jack Welch. To succeed and move forward, you need to be energetic- you need to have a high level of enthusiasm, stamina, and personal fortitude. You also need to avoid the opposite of “energetic”, i.e.; laziness, apathy, and a tendency to shirk work and responsibility.

Energy as it relates to medical leadership has a few characteristics. The first is embracing challenges and accepting the work that needs to be done. When your business partner calls in sick do you spend 40 minutes whining to whoever will listen about the unfairness of it all? Do you internally seethe in anger at the injustice? Or do you quickly get over the change in plans and rally your team to get the work done? Although, you may feel like acting the first way, the second course of action is clearly the role of a leader and will lead to personal success.

“Action creates opportunity”- Unattributed

A bias towards action characterizes energetic people. When given two choices, they will choose the one that leads to increased value and mutual benefit over the one that defends the current status quo. They are willing to take the risk to grow the business over protective policies designed to just hang on to a shrinking share.

Another, often overlooked characteristic of Initiative is personal fortitude or “grit”. This is the quality that leads to perseverance and an optimistic outlook when faced with adversity. It’s my belief that this personality trait is learned through experience. How else is it possible for a doctor to learn to cover a 36 hour shift or see 27 patients in a day? Clearly, it’s not something you can do the first day of internship. You slowly gain the experience and confidence facing continued challenge and triumphing over it. This leads to a personal sense of accomplishment and a reservoir of fortitude. Your dad was right- mowing the lawn in the rain does build character.

Many physicians lack personal energy for many different causes. The most common manifestations are laziness and shirking of responsibility. Often physicians express the combination of sarcasm, insult, and blaming best defined as “snarky”- a defensive mechanism consisting of low-level attacks with the hope that the requesting person avoid the unpleasantness in the future. It’s sort of the personality equivalent of porcupine quills.

All of these low energy traits have one attribute in common- they are geared towards short term benefit. They all trade immediate gain against long-term relationship, future program development, or care delivery improvement. Leadership is primarily focused on the future, often at the cost of the immediate. It’s easy to see why low-energy physicians are considered to have poor advancement and leadership potential.

Here are some tips to help you “Go up by Getting Up”:

  • “I wasted time and now doth time waste me.”- Shakespeare. Learn the difference between “restorative rest” and “dawdling”. I love surfing the net and posting cat pictures to facebook as much as everyone else. But, I do those activities after I get my important work done. At the same time, learn to take useful breaks during the day- whether that involves meditation, pleasure reading, or contemplative walking.
  • Pomodoro is more than fancy talk for tomato. It’s amazing how much you can accomplish if you just focus. The Pomodoro technique leverages this idea. You set aside 25 minutes of uninterrupted, highly-focused work. Then you do it. Then you take a short break and do it again. After a while, your task is done, but it’s done so much more quickly than you ever imagined possible. As a neurologist, I could lecture for several hours about how this method ideally harmonizes brain function and neurotransmitter regeneration, but suffice it to say- it works and is the “secret sauce” to my success (tomato pun intended).
  • “As a man thinketh in his heart, so is he”- Proverbs 23:7. Much can be said about how your inner thoughts influence your life. Try to pay attention to your “inner dialogue”. If your thoughts turn negative or start to move towards the “snarky” beliefs mentioned above, try to get a handle on them. Change your inner dialogue to one of action, teamwork, success, and triumph. This may take practice, but will lead to solid personal fortitude. Consider “As a Man Thinketh” by James Allen. Be aware that J. Allen was a man of his times and several of his characterizations would be considered outdated by modern criteria. Nonetheless, it’s an excellent read.
  • Develop an Internal Locus of Control. People with an external locus of control believe that they have very little power over what happens to them and that external forces- the hospital, the government, fate, luck, karma, vast hidden conspiracies- have ultimate control over their lives. Those with an internal locus believe that, although unable to regulate every circumstance, they have considerable influence over the events in their life. Work to achieve an internal locus of control. This will give you a sense of leverage when facing difficult times and the motivation that will give you the energy to achieve.
  • Dedication trumps motivation every time. We all have passions. Many of us attempt to turn these passions into businesses or careers. Yet, despite being passionate, many of us fail. Not because the idea is poor, but rather we lack the energy to follow through. The reason is that passion relies on motivation and motivation is an uphill battle. You are fighting entropy, laziness, and 2 million years of human evolution trying to convince yourself to do something out of love when there are other activities that lead to actual gains.

Rely on dedication instead.  This blog is a great example –   I am tremendously passionate about teaching and helping the next generation of doctors succeed.  But, when I first started, I could barely convince myself to complete one post monthly. Finally, I stopped treating the blog like a hobby and approached it like a business. I set a goal of 4 blog posts weekly. Now I rely on dedication rather than waiting for the proper mood to strike with much better results.

 

Initiative is one of the personality traits that characterize successful physicians. By embracing change, challenges, and action you will quickly become a physician leader.  Like all physician professional and medical business skills, changing your approach to obstacles and building personal fortitude can be difficult at first and is something you can master with practice and experience.  Having a solid skillset will give you the tools you need to implement the changes you desire.  Up your skillset and consider taking a CME approved course designed for physicians. Through study, practice, and hard work you’ll be able to achieve your dreams and succeed… really succeed.

What do you think? Is there a formula to physician success? Do you have any advice? How have you overcome procrastination? Share your thoughts in the comment section below.

 

 

When Doctor Contract Negotiations Go Bad (Part Two)- Avoid the Behavior Mistakes that Sour the Relationship.

Every time you negotiate, you run a risk. Learn the advanced techniques to avoid the negative actions that have the potential to worsen the outcome.

Author: Robert A Felberg MD 

Topic: Negotiation, Conflict management

Keywords: Physician Negotiation, Doctor contract negotiation tips, conflict management for doctors, physician employment checklist Paying off student loans through negotiation

When it comes time to negotiate, it’s every doctor’s greatest fear. You want to negotiate a fair compensation package based upon your well-researched market value report, but instead you end up getting so emotional that the deal is withdrawn, or the relationship is forever soured or harmed.  Most of the time, if a physician contract negotiation goes bad it’s a good thing, as covered in another post.  But sometimes, the fault lays squarely in your lap.

[Editor’s Note: To truly succeed in your medical career you’ll need three complementary skill sets.  Of course, you need to be skilled in the practice of medicine.  Secondly, you’ll need to understand physician personal finance.   Finally, you’ll need a well-developed Professional and Medical Business skillset.   Of all the professional skills, negotiation is the most important.  This is one of an ongoing series from Physician Advocates and Medical Success Central introducing the science and practice of negotiation to healthcare professionals.  Sign up for our newsletter to be kept up to date.]

How you act will have a direct role on the negotiated outcome.   As discussed in another post, Doctors tend to have very poor conflict management styles.  Some physicians tend to be immature and border on childish in their responses. They are also quick towards brinksmanship, and don’t understand the long-term role of relationship as a vital part of the final outcome.

You want the negotiation to focus on the mutual benefit and increased value of the parties involved, not on your negative actions.

One simple screening process is to ask yourself, “Am I removing the focus off the deal and onto my personal qualities in a negative way?”  Are you representing your desired brand? Or, are you going to make your future boss wonder how much time they’ll need to spend defending you?   It may be as simple as applying the golden rule– how would you judge the other party if they acted this way?

Now, I need to halt the discussion here and bring up the fact that sometimes you may feel you are being treated poorly and believe you must reply in kind.  This form of conflict response is called “retribution or revenge” and it is considered a highly dysfunctional conflict resolution technique.  Unfortunately, I see many physicians turn to this as a standard response.  They believe they are being abused by the ED doc and abuse them back.  They feel they have been insulted by a low initial offer and insult the other party back in a direct manner i.e.; “Your stupid little hospital can shove it if you think I’ll work for that little!”

The proper response to perceived abuse is to point out the action, express why it is abusive, and explain in a non-aggressive manner that you will not tolerate this type of behavior.  Then, ask them to supply a proper behavior.  If they do not act properly, state that negotiations can not continue as they are, and we will take a break.  Then leave the table.  They will come back and will understand the message.  In the rare case they don’t, you’ve avoided a disaster and you move on with your BATNA  [Editor note: I’ll discuss BATNA in a future post. Please be sign up for our newsletter and check on our blog posts frequently].

 

 

Here are some hints to help you avoid negatively affecting your negotiation:

  • Always thank the other party when they offer a concession.  Gaining a concession in a negotiation is a positive step to achieving your desired agreement.  Always be gracious.
  • Be wary of using “you” in an accusing way.  Don’t put the other party on the defensive or make them feel unappreciated.  Instead of saying, “You need to pay me more” try, “Can we do a little better?”  Be certain to say “you” in a positive flattering manner as in, “I really like your program.”
    • Bonus hint- If you really want to move a negotiation along use the word “our” to describe the negotiation, “I’m really looking forward to seeing how we can improve our clinic throughput.”  Use this sparingly and with discretion.  You don’t want to come across as disingenuous or manipulative.
  •  Avoid threats. Threats, even when backed up will almost always backfire. Your long-term relationship will sour, and you will come across as shrill. Eventually, the other party will tire of the threats and call you on them. No one likes to be held hostage to a demand. Try this- instead of, “If you can’t come up with something better, I’m going to walk”, consider , “I really like your program, but the compensation is not what I’m being offered at other programs. Is there any way to improve the salary offer?” The message is clear- I have other offers, but it’s not presented as a threat, rather as a fact that we will work through together to mutual solution.
  • Avoid Brinksmanship. Do not push a situation to the edge on purpose with the hope of gaining a big concession. Avoid pushing to the point of deadline or collapse of a deal. If you are buying a house and you know the other party must sell by a certain day to get the mortgage on their new house, then go ahead and use that leverage to your best advantage. But, if you expect to maintain a relationship afterwards, this type of technique must be used with caution or avoided altogether.
  • Be Honest. Do not lie about the services you can provide.  Expect the same from the other party.  Remember, everything related to duty will be included in the doctor contract and you will be held accountable if you are in breach. Be up front if there are any issues- credentialing, license, start date, hours, call schedule, physical limitations, etc.
  • Do not get overly emotional.  Becoming visually angry, anxious, tearful, or distraught will only harm your negotiation and give you a reputation as a bully, pushover, or another less than ideal characterization. Remember, It’s OK to have emotions.  It not OK to let emotions have you.  If you find yourself running into an issue of controlling your emotions, call for a break.  You can ask for a bathroom or water break. You can just say, “I need to take a few minutes break here. This is going a little longer than I thought, and I have a quick call to make.” Whatever you do, don’t return to the table until you are in control.  Don’t worry about how the other party will react. Chances are, they will be sitting there in silence for a few anxious minutes thinking that they soured the deal.  They may even offer you an apology or concession the second you come back.
  • Learn how to step away from the table with grace and without prematurely ending the negotiation.  We all know how to do this.  Your cousin calls you and insists you come over for his bowling team awards dinner.  You’ve got other things you’d rather do, but you still may decide to go.  So, you say, “sounds good, but I need to check with my wife first.” Then later, after considering other options, you finalize plans.

 

You can do the same with your offer. If you come to a deadlock, walk away from the table in a polite manner.  Imagine you are looking at a great practice, but you want to earn more.  However, even if they don’t up the offer, you’d still like to take the job.  You can say, “Thanks for discussing the position. I’m excited by it. I have another offer on the table and they will be calling me on Tuesday.”  Then later that week you call and say “I really like your program and want to join your organization. But, the other program is offering 15k more.  Is there anyway we can improve the salary offer?” Even if the offer is not matched, you set a gracious way to concede earlier in the conversation.  You can say, “I’m disappointed that we’re not able to come up with a better salary, but I really like your program and I’m willing to join at the salary we discussed.”

There are certain standards of behavior that are expected when the negotiation goal includes strengthening the long-term relationship.  These will differ significantly from other bargaining scenarios like selling a used car or haggling at a flea market.  Keep in mind to always screen your behaviors and consider the “golden rule.” Also, watch for the behaviors listed above and try the techniques suggested to correct any issues. Certainly, this is something that improves with experience and you will get better at it with practice.  Remember, the negotiation goes both ways and you should not tolerate bad faith or bad actions from your negotiating partner.

The great thing about negotiation, just like other physician professional and business skills, is that they can be learned and mastered.  As you plan your next negotiation, be certain to learn your market value, up your skill set, and consider taking a CME approved negotiation course designed for physicians. With study, hard work, and practice you can become a great physician negotiator. You will be able to reach your dreams and succeed… really succeed.

What do you think? Should I even care this much about what the other side thinks? Have you ever gone over the line in a negotiation and caused it to go bad? What did you do to recover? How have you dealt with bad behaviors from the other side? Share your thoughts in the comment section below.