We all know the importance of compound interest in building wealth. The fuel for compound interest is time — the longer you are committed, the greater chance your investments will grow. This applies not only to financial growth but also to essentially everything else. As a rule of thumb, the more you study for a test the better you ought to do. The longer you have practiced medicine, the more likely you will have brand recognition by the public. If you bought a few homes in remote parts of Astoria, New York in the 1970s, your properties will still be worth a lot without any effort. Time builds. Time erodes. The key is to strike a balance.
The hungriest doctor gets the best dinner
The medical training environment can make even the most satiated student hungry. I’ve witnessed, during medical school, a seemingly mundane presentation on bezoars evolve into a history lesson on surgical management of gastrointestinal obstructions to the cocaine addictions of William Halsted. That’s right. This five-minute presentation after morning rounds probably took an all-nighter to prepare. I sure felt sorry for the student who had to present a topic after this gunner.
The longer you can stay hungry, the higher the chance you can achieve your goals. There are studies on successful people, with the most successful people having characteristics nearing hypomania and insomnia. If you are in that category, you are engineered to be highly productive. The rest of us normal people will undoubtedly run out of gas if we operate at 110 percent all of the time.
If we want to become financially successful, we really need to tap into that hunger and stick with the plan as long as possible.
Financial success is multifactorial
We already have the formula for financial success — spend less than you earn. If we can stay hungry on both our earning and savings power, we can accelerate toward financial freedom sooner.
Staying hungry on your earnings is not easy. Early into your career as you are still mastering the clinical routines, nuances in the workplace, and billing terminology of your work, you are hungry. Everything is still new and hopefully challenging. Most of us in this period are building our practices and are building up to our earning potential. Eventually, your routine becomes routine. Perhaps you max out on your earning potential at your job, or worse yet, start earning less. For instance, hospitalist medicine is one field that often plateaus early in one’s working career and become dependent upon quality metrics for bonuses. If you are finding that you are losing your hunger for earning, it’s time to figure out how to continue your financial success.
You could explore secondary responsibilities in your existing job, like participating in quality review committees. Sometimes these extracurriculars come with certain stipends—more money in the bank. Alternatively, you could start exploring alternative income streams to build upon your income.
One of my colleagues decided to cut back on his work schedule to four days a week. This was a means to reduce exposure to stress in the workplace, combat burnout, and prolong his overall working career. Due to logistics in his work situation, his income dropped by more than 20 percent for going down to a 0.8 FTE, but he is much happier. Doing so will likely prolong his working career by at least another five years — five more years of working income to help build the retirement fund.
On the savings front, it is easy to loosen the reins as we build our net worth. Maybe we decide to upgrade to a nicer car when we hit our first million, or a larger house when we hit two. Junior might need to enroll in private school or join the lacrosse team. One method to remain focused on saving is to stick with your financial plan.
Creating a financial plan is one of the fundamental steps in achieving financial success. Part of the plan should include how much of your income you intend to allocate to savings. As long as you meet your savings goals, you can feel less guilty about making larger purchases. As your income grows with your career, you can adjust your expenditure guidelines in your financial plan.
There’s really no rocket science in financial success as a doctor. Focus on your career. Create a plan for success. Stick to the plan, and modify as needed. It doesn’t matter if the plastic surgeon in your hospital is getting rich from real estate ventures or timeshares. Getting rich doesn’t have to be sexy.
“Smart Money, MD” is an ophthalmologist who blogs at the self-titled site, Smart Money MD.
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