The Art of Extreme Saving

“The most powerful force in the universe is compound interest” -- Albert Einstein

I always find other people’s stereotypes about doctors amusing. Here’s one typical encounter that happens every so often:

As I’m placing the last chart in the discharge rack, a nurse unexpectedly asks me “What car are you driving home?”

“What car do you think I drive?” I respond. “I bet he drives a Beemer,” shouted a tech.

“I parked next to a BMW, but I drive an 11-year-old Honda with over 200,000 miles on it,” I say.

“Yeah right. Then what do you do with all that money?”

“After buying my groceries at Sam’s Club, I save it,” I reply, as I wave my still remoteless keys.

I’ve met many physicians who think “save” is a dirty four-letter word. They spend everything and live paycheck-to-paycheck. So let’s explore what some of the few simple principles of saving can do for you.

Over the past 10 years of practicing emergency medicine, I’ve realized one of the most powerful but underrated techniques to achieve financial independence: Making the most of compound interest. Compound interest simply means the interest which accrues on interest.

For example if you have $1,000 invested at an annual interest rate of 10%, then after one year you would have $1,100 ($1,000 original investment and $100 of interest). After the second year you would have $1,210 ($1000 original investment, $200 of interest on the original investment, and $10 of interest on the first year’s interest).

Combining saving with compound interest leads to my three “S’s” of saving:

1.    Save early
2.    Save often
3.    Save more

How effective are these principles of saving? Let’s consider three physicians in different stages of their career: a 30 year old (newbie), a 40 year old (mid-career), and a 50 year old (late career). Let’s assume that each one wants to retire at age 65 with a $2 million investment portfolio and each has a gross annual income of $200,000. Let’s also assume an 8% annual investment return. For this discussion, we will ignore inflation and taxes.

Save Early

For the 30 year old to reach $2 million by age 65, he would need to invest about $11,500 per year, which is less than 6% of his gross income. The 40-year-old physician would need to save $27,000 per year, or about 13% of gross income -- still an obtainable goal. The 50 year old would need to save more than $73,000 per year, or a whopping 36% of his income.

If the 50 year old has two-college aged children and a home mortgage, he may need to delay retirement, cut expenses, underfund college savings, or work more to earn more income (assuming that he stays healthy enough to do so). Looking at it another way, the 50 year old needs to save over six times more money per year than the 30 year old to achieve the same portfolio value at age 65. How many physicians can do that?

Next time, I’ll discuss the other 2 principles of saving.

Physician Leadership of Teams

Using a team charter to make sure your team is on the right track.

You could be a physician in clinical practice—or work for a medical device or pharmaceutical company.  Chances are you will need to be able to lead a team to achieve a desired outcome. 

Working in teams can be terrific—if team members work well together.  However, if people are pulling in different directions, the experience can be dreadful.  Without sufficient direction, teams can focus on the wrong objectives, fail to use important resources, or be torn apart with avoidable infighting.  What's worse is that they can fail, sometimes with dire consequences for the organization.

Creating a team charter is one of the most powerful ways a team can make sure it’s on the right track—and everyone is committed to the work of the team. A team charter is a set of agreements that define the purpose of the team, what it wants to achieve, why it is important, and how the team will work together. As the team encounters obstacles or roadblocks, the charter can serve as a “roadmap” to keep the team on course—and focused on the end result. 

As a physician leader, you can take an important step in guiding your team in the right direction. By using the chartering process, you can help your team clarify its purpose and values, develop goals and strategies to accomplish the desired outcomes, and create a written agreement that captures the common understanding.

For teams to get off on the right foot, team charters should be drawn up when the team is formed. This helps to make sure that everyone is focused on the right things from the start. However, drawing up a team charter can also be useful if a team is in trouble and people need to regain their view of the big picture.

Here is a checklist I’ve used in business to develop a team charter that can help drive momentum and keep the team focused on results:

Click to read more ...

Botox Training Course

Botox Training MD has slashed thier Botox training course membership for a limited time.

I'm not sure if this is just a temporary discount or a new pricing strategy but if you're in need of some botox or filler training this would be a great opportunity to snag all of this at a fantastic deal.

Check out what's included in this offer:

As A Botox Training MD Member You'll Have Access To Everything You Need To Know To Add High-Profit Botox & Dermal Filler Treatments To Your Practice:

• Hands-On Botox & Filler Training Videos: Learn how to perform all common Botox and dermal filler treatments with 11 detailed video overviews and demonstrations; Brow lifting, crows feet, gummy smile, smile lift, lower face treatments and more!
• Comprehensive Training & Resource Guides: Illustrated PDF treatment guides showing exactly how each treatment is performed and how it can be modified for the best results. Resource Guides show you where to find the best deals on products and services to grow your cosmetic practice, from legal services to marketing resources.
• Insider Secrets From Experts: 5 interviews with physician experts that are already raking in cash that give you insider info on exactly what works; marketing, consultations, up-selling, pricing and more! Our experts spill the beans on everything from perfecting your consultation, to training your staff, to exactly how to prevent unhappy patients. These interviews give you access to information you can't get ANYWHERE else and are easily worth the membership all by themselves.
• 5 Special Bonus Products: Q&A sessions, patient marketing tips, consent forms, before and after pictures for your use, and the special Ultimate Botox Guide, a 35 page patient marketing eBook to distribute to your existing or prospective clients to position yourself as the expert in your market!

• FREE Botox Marketing Mini-Course: Just ask to be notified above (you don't have to by anything) and we'll send you a free mini-course on marketing your new cosmetic services! You'll find out how to set up your legal structure, where to outsource and where to do-it-yourself, and how to train your staff. It's completely free and without any obligation!

See the training course here: Botox Training MD

Physician Investing: Why Indexing Works

Watch this short video from Vanguard to learn why index funds beat actively managed funds.

Here are a few highlights from the video:

1. Investing is not a zero sum game but active management is a zero sum game. What this means is that when you invest in the market you are expected to be rewarded over long periods of time with market returns. As a group active managers must have the same performance as index funds BEFORE fees. After fees, active managers as a group always underperform an index. This has to be the case because the market is made of active managers and passive investors. So if the passive investors are getting the market return then it has to be the case that active managers are also getting the market return.

2. There will always be active managers from one year to the next who outperform an index. The problem is that the active managers who outperform in one year are unlikely to repeatedly outperform in the next few years.

Remember that active managers are smart people. I'm not suggesting they are dumb or incompetent. What I'm saying is that the competition between active managers is so high that it's almost impossible to outperform an index consistently in the long run.

Do You Understand Your Investments?

Do you really understand all of your investments and wealth strategies as a physician.

I’m fairly certain that when I see patients, they have no clue what most of the medical terminology means, such as “cholecystectomy,” or “conjunctivitis,” or “myocardial infarction.”

So I try to say these things in terms they understand, such as, “You have stones in your gallbladder and they need to be removed,” or “You have pink eye,” or “You’re having a heart attack.” Now those are concepts they can grasp.

It’s the same way in investing. If you’ve hired a financial advisor, you need to know what you are invested in and why. But I bet that you don’t know what you’re invested in, and I’m almost certain you don’t know why you’re invested in it.

I’ve got a theory about why financial advisors purposefully make investing far more complicated than it should be: Many want to confuse clients in order to justify their high fees -- either that, or they’re just plain incompetent.

Here are some things you need to understand and ask about your own investments, whether you do it yourself or hire an advisor:

Why do I own these particular individual stocks?

There are close to 15,000 publicly traded stocks in the world. If you own just 50 or 100 of them, then what about the other 14,000-plus stocks out there? How do you or your advisor know that those few that you have are the winning stocks? Think about it. If you have 50 individual stock in your portfolio, you’ve covered less than 1% of the number of publicly traded stocks in the world. Academic data show that only a small portion of stocks in each asset class drive most of the returns within an asset class. What if you choose the losers? That gets to another point: Excluding all these other stocks out there implies arrogance -- that you know more than the collective wisdom of millions of investors out there. What’s the chance of that?

Why do I own these mutual funds?

Just like individual stocks, there are thousands of mutual funds out there. You need to understand what role each fund is playing in your overall portfolio. Mutual funds are simply tools to fit your asset allocation, which is the mix of broad investments that is right for you. If the title of the mutual fund does not make sense, then you’ve seriously go to question the fund’s role in your portfolio. For example, if you own Oppenheimer Quest Opportunity Value Fund, what the heck does that invest in? The name makes no sense and I know you or your advisor don’t know what it does. Instead if you own Vanguard Large Cap Index you know that it’s an index fund that owns every U.S. large company.

In a future post, I’ll give you more thought-provoking questions you need to ask yourself about your investments.

The bottom line: Ask yourself, ‘Why do I invest in this but not that?”

Medical Fusion Conference Lecture Videos Available

Freelance MD has become a great place for physicians to learn more about ways they can leverage their medical training in order to advance their careers.  This web hub is a great distance-learning tool to connect like-minded physicians and promote learning.

The live/physical version of Freelance MD is our Medical Fusion Conference which occurs every November in Las Vegas.  At the Medical Fusion Conference we bring together experts from a variety of niche areas-- many of whom write for Freelance MD-- in order to network and connect person to person.  It's an event that only happens once a year, so we eagerly promote it here on Freelance MD with the hope that our readers will pencil the event into their busy schedules.  We want to meet our Freelance MD members and we know you'll benefit from the speakers we've assembled.

Over the past few weeks we've reorganized our Medical Fusion Conference website to make it more interactive and give potential participants an idea of what happens at this innovative event.  We recently added a blog to the Medical Fusion Conference website and we've posted a few lecture clips from past Medical Fusion Conferences.

Check out the videos below to get an idea as to what goes on at the Medical Fusion Conference.  We'll be posting more lecture clips in the near future, so stay tuned to Freelance MD.  

Video clip #1:  In this video, we assembled a team of venture capitalists to discuss VC and how clinical physicians can become a part of this interesting career.  Dr. Bruce Robertson, Managing Director of H.I.G. Bioventures, Dr. Josh Resnick of Prism Ventures, and Dr. Joe Smith, VP of Emerging Technology at Johnson & Johnson are the members of this interesting panel discussion.

 Video Clip #2:  Dr. Michael VanRooyen in the director of the Harvard Humanitarian Initiative and a well-known expert on humanitarian disasters.  However, Dr. VanRooyen is also an experienced entrepreneur and has helped start and develop four businesses, one of which, Ibex, was eventually bought by Picis for millions.  In this lecture, Dr. VanRooyen discusses the culture of start-up companies and how clinical physicians can develop their business skills in order to be more effective in enterprises like these.

Video Clip #3:  Dr. Mike Woo-Ming, a Family Physician who retired from medicine at the age of 35 years old in order to focus on his internet businesses, discusses internet marketing and internet entrepreneurship.  "Dr. Mike" as he is known in internet circles, offers advice to those who are interested in using the internet to leverage their clinical knowledge in a variety of ways.

Mid-Year Career Strategy

Have You Updated Your Personal Development Plan For 2011?

Why not? 

This is a good way to do some serious self-reflecting.  It will help you identify and pinpoint your internal and external strengths and weaknesses.   Most importantly, it will help you prioritize your projects for the rest of the year and plan for the direction you’d like your career/life to go in 2012.

To make sure this happens mid-year (and that’s now), you will want to do two things.

Deal with your resistance to planning

Maybe you don’t have extra time now to devote to planning for your future.  It’s summer, the weather is nice and family vacations are taking up your time and energy.  It may seem better to do a task like this several months from now when there is less going on so you can do the best job possible.  

Failing to plan now can leave you without clear direction three months from now and before you know it, Christmas will have come and gone and you won’t have made any progress towards your career or personal goals.  Time will inevitably pass and by taking a proactive approach you can put yourself in the driver’s seat to take charge of your life and career.

Set time aside this week

Make room in your week for working on this.  Commit to spending one to two hours on it.  Sometimes just getting started gets your momentum going and motivates you to continue and finish. Better yet, getting started now may reveal some key planning or action items you need to take care of this month so you can be that much closer to where you want to be two months from now.

How should you get started if you haven’t ever created a personal development plan?

Business school and Executive Management/Leadership training taught me about the SWOT method.  SWOT stands for strengths, weaknesses, opportunities, and threats.  You can use SWOT as a framework for building your career strategy.  Here’s what to consider:

Strengths

Internal positive aspects are under your control and you can capitalize on them in planning for your career/life goals. These would include:

• Work experience
• Education, including value-added features like certifications, etc.
• Strong technical knowledge within your field (e.g. hardware, software, programming languages)
• Specific transferable skills (e.g., communication, teamwork, leadership skills)
• Personal characteristics (e.g., strong work ethic, self-discipline, ability to work under pressure, creativity, optimism, or a high level of energy)

Weaknesses

Internal negative aspects that are under your control and that you may plan to improve could include:

• Lack of work experience in correct field
• Wrong career choice
• Weak networking skills
• Negative personal characteristics (e.g., poor work ethic, lack of discipline, lack of motivation, indecisiveness, shyness, too emotional)

Opportunities

Positive external conditions that you do not control but of which you can plan to take advantage. These may include:

• Positive trends in your field that will create more jobs (e.g., growth, globalization, technological advances)
• Geography
• Your personal network and mentors

Threats

Negative external conditions that you do not control but the effect of which you may be able to lessen. These include:

• Negative trends in your field that diminish jobs (downsizing, obsolescence)
• Obstacles in your way
• Limited advancement in your field because advancement is cut-throat and competitive
• Limited professional development opportunities in your field

Action Plan

 Your key task here is to set specific timetables and deadlines for yourself.  Plan to get started this week.