Financial Rule #2 – Pay Less Tax

Your biggest expense as a physician will be paying taxes. Financially, you should try to minimize your taxes paid.

I often think about physician finances in an inverse way. Instead of focusing on your specialty and income or compounding returns on investments, I think it’s good to think about what pitfalls could ruin your path to financial independence.

The first rule was about the cost of a separation. The second most costly mistake is paying more taxes than you ought to.

Now, I am not advocating tax avoidance – that’s a crime. This is not about setting up off-shore accounts to hide your money from the government. Instead, what I advocate is that you have a responsibility to make sure you do pay your taxes, but not anymore than required.

This is not a political view. Whether you’re conservative or liberal, how much tax each individual should pay is a decision that society makes through elections and legislation. You will find that even people who are vocal and advocate higher taxes, regardless of their wealth, will not pay more taxes than required. Bill Gates, who has paid more taxes than anyone, says he should pay more taxes but won’t pay more unless required. As he should, it’s not his responsibility to give the government extra money.

Tax-Deferral

In Canada, the highest marginal tax rates are over 50%. For every dollar earned after a certain threshold, the government takes half. That is a lot of your hard earned money. If you were a new attending making $300,000 CAD gross, your tax bill (approx $150,000) your first year out will be double your resident’s salary.

Fortunately, there are strategies to reduce your taxation, or at least to defer it.

Registered Retirement Savings Plan (RRSP)

RRSPs are one way that you can reduce your tax bill. Introduced in 1957, RRSPs are a way to promote savings for retirement by reducing your taxable income. Contribution limits are calculated at 18% of your previous year’s reported income, and deductions can be carried forward. Investments in RRSPs can grow tax free, and are only taxed at the time of withdrawal.

For a great detailed analysis, check out Loonie Doctor’s take on RRSPs. There are also programs like the Home Buyers’ Plan that you can use with RRSPs.

If you’re American, these retirement saving accounts are known as 401(k), 457(b), 401(a), etc.

Medical Professional Corporation

The other big method of tax-deferral that Canadian doctors have at their disposal is incorporation. Setting up a medical corporation is essentially creating a separate legal entity that operates as a business. Your corp will have assets, debts, revenues, expenses. The main reason to incorporate is for better tax rates and to defer paying more taxes upfront. Remember, the government will always get their taxes owed, but legally you have ways to defer paying them until a later date.

The Resident Doctors of BC has a simple guide on the basics of incorporation.

Again taking our new attending who makes $300,000 a year – if she doesn’t need that much money for personal expenses, she can take out only what she needs from her corporation and save the rest for investments. For example, if she chooses to live like a resident and get by on $60,000 of expenses, she can use the remaining $240,000 to invest. The $240,000 is also taxed at a business rate, which is much lower than the personal marginal rates.

Pros of incorporating: Effective tax-deferral strategy, lower business tax rates, ability to regulate personal cash flow

Cons of incorporation: Added complexity to your finances, overhead costs (accountants, lawyers), not ideal if you need money now and can’t have retained earnings

Proper Bookkeeping – Find a Good Accountant

Whether you’re incorporated or not, as physicians your services are a business, and you need to make sure you keep track of your expenses. Buying medical equipment, paying for exams and association fees, home-office expenses, transportation costs, conferences, staff meals, etc. The list goes on and on.

You need to make sure you account for all your costs, so you deduct the expenses from your taxable income.

Be organized. Have a system to keep track of things.

I make sure I expense all the snacks and coffees I get for my medical students and residents. A well-nourished and caffeinated team works faster and creates more revenue for me. Definitely an expense that you shouldn’t cheap out on.

Giving to Charity

Even though I’m a strong believer of not paying a single cent in taxes than required, I am also a strong believer that as high-income earners, we have a duty to give back to society. I would much rather give $100 to a charity than $50 to the government.

Fortunately, the Canadian government also recognized the merit of charitable donations and gives us tax credits.

Work Less

This may seem counter-intuitive at first- how can I become more financially independent if I work less?

Due to progressive tax rates, the more you earn the more you will by taxed. Eventually you will reach a point where you will get diminishing returns.

Doctors aren’t often lacking in money, but they are often short on time. We spend our twenties in school, taking on debt, learning and surviving residency. Add in a growing family and increasing clinical duties, there never seems to be enough time. Eventually, what you’ll find most valuable is autonomy in your schedule.

After a certain point, it doesn’t make sense to do more overnight call. Spending time with your spouse and kids will be more important than the money you will make. It certainly will help with rule #1 – don’t get a divorce – if you have more time to help out at home. Similarly, if you’re burnt out working 80 hour weeks, it will do you no good for your long-term wealth if you end up hanging up the stethoscope in a few years.

 

Financial Rule #1 – Don’t Get Divorced

The number one financial mistake that doctors, and almost everyone, can make is getting a divorce.

If you’re not married or in a common-law relationship, please ignore the following post. If you are married, or considering a life-long relationship with someone, this is for you.

I know it sounds facetious to put this as the first rule, but there are good reasons for it.

  1. Divorce and Separation from a spouse is surveyed as the #2 and #3 most stressful life event, only after the death of a spouse.
  2. You can have an extremely high saving rate or large savings, but a divorce will effectively divide up your assets and networth.
  3. A divorce will also affect your income in the future with spousal support / alimony, etc.

Furthermore, whether you’re the richest man in the world (Jeff Bezos) or financially savvy and frugal (Mr. Money Mustache), it seems that divorce can affect anyone.

What can doctors do to avoid a divorce?

The good news is that divorce among physicians are lower than the general population. A survey done by theBMJ,  showed the probability of physicians divorcing to be at 24.3%, much lower than the often quoted 40-50%. Furthermore, the divorce rate of dual-physician families tend to be even lower, with estimates around 11%. Having said that, I’ve also heard of residency programs that boast about how hardworking their residents are by their >100% divorce rates (some repeat offenders).

Make the relationship a priority

This takes intention and time, it involves hard work and may be harder than your day job. You have to cultivate and protect it. Read books in the relationship advice section and talk to people who have successful marriages. This might mean working less hours in a week, so you can spend more time building a life together. In the same BMJ article, there was a relationship that more hours worked as a female physician increased the probability of being ever divorced.

Less than a divorce vacations

A preceptor of mine, who was married to a lawyer, went on an extravagant vacation every year. He would make sure it was just the two of them, no kids, and that he would have the best time with his spouse. He had done the math – the expensive vacation in Europe was still much cheaper than the spousal support he would pay each year. He said after the trip, his partner would often forgive him for working late hours and not attending household duties during busy clinical weeks.

Sometimes you have to spend a little, to save a lot.

Outsource the pain points

When I speak to my colleagues about how they spend their money, one of the most consistent responses is how happy they are to have someone do the things they don’t like doing. Scrubbing toilets and bathtubs, mowing the lawn, food preparation, etc. Again, paying to have your time back can eliminate a lot of unnecessary arguments. As physicians we are lucky to have the financial stability to do so.

Sharing finances and professional goals (Be Unselfish)

Finally, it’s good to be transparent with your financial goals. It’s much easier to achieve the happiness when both parties are informed of the money issues.

Similarly, you have to do what’s best for both of you.

In my own life, I have changed jobs to one where I made less money. However, this change also allowed my wife to have her own career. This new job was also had more flexible work hours. Individually, it would seem to have been a demotion in pay, but collectively it was a win-win for us.

Closing Thoughts

Although this is common advice, I believe that setting up a framework for financial independence that includes other non-money aspects is crucial. I know many ophthalmologists, cardiologists and radiologists that make much more than I do. However, I’m not sure there much better off financially as their habits, and divorce(s) have really set them back.

Resident Topics

Teaching and mentoring residents is one of the most enjoyable parts of being an attending. I get to meet bright and motivated young doctors, and hopefully help contribute to their medical careers. Thinking back, I realize I am in many ways the sum of my preceptors. From the way I manage certain conditions to my teaching philosophy, I can usually attribute each part to a specific teacher.

One of the things I do regularly is focus on residency topics. What I mean by this, is topics that are pertinent to residents that they may not get elsewhere. The list includes

  1. Wellness
    • How to avoid burnout
    • How I incorporate exercise in my routine
    • Healthy eating habits
  2. How to study during a residency
    1. How to prepare for exams
  3. Physician Finances
    1. Don’t Get a Divorce
    2. Pay Less Tax
  4. Career Development
    1. How to make yourself marketable for a job
    2. How do you build a career.

Granted a lot of these topics I am still learning about. My aim is to pass on what knowledge I have already to my residents. My plan over the next few months is to write about these topics and flush it out a bit more on this site. Hopefully you will find them useful too

How to Learn Medicine in Residency

 

Learning during residency is very different from medical school. Medical school is where you are taught the basics of medicine – anatomy, pathology, terminology, physiology and a basic understanding of diagnostics and treatments of diseases. Residency is where you become a doctor and use your knowledge to treat patients.

You are no longer in the classroom. You are at the bedside making diagnoses and counselling patients. As a result, you have less time to learn. You are on call more and spend an enormous amount of time doing clinical work. In order to survive, I made changes to my learning. It’s still a work in process, but I’ve come up with several methods to learn more medicine with less time. I was able to go from average in my first year in-training exam to the top tenth percentile in my second year. I’m going to share with you ways I have been able to keep up with learning during residency.

Build Learning into your Routine

The last thing you want to do after a busy day on service is to crack open a textbook and read. Nothing will stick! It’s much better to build the learning into your day to day routine, so that it gets done without having to go out of the way to do it.

Here are the things I do almost everyday without fail

  1. Read Email
  2. Commute to work
  3. Use my phone during downtime
  4. Eat
  • Email: The key is to link learning with activities you are already doing. For example – NEJM as a great Resident e-Bulletin that sends you a short snippet of what’s important in each week’s issue. It takes about 5 minutes to read, and keeps me up to date in relevant topics. For a sample, take a look at this topic on Catheter-associated UTIs. All delivered to your inbox every Wednesday! There are similar email lists you can subscribe too – CMA’s POEM, Tools for Practice , and the list goes on and on.
  • Commuting: Similarly, listen to podcasts while commuting. You will be amazed how much you can turn an hour of lost time into studying time. Curbsiders, IMReasoning, Core IM are just a sample of some of the IM podcasts I listen too.
  • Downtime: countless phone apps are there, but I find question banks to be manageable to do throughout the day. Waiting for a page to be returned? Why not answer a few question from MKSAP?
  • Food: Often there are rounds that have free food too. Pick and choose good lectures. It’s a easy way to score lunch and a free lecture!

Prioritize Regular Studying

It’s easy to neglect hitting the books after working 80 hours a week, but early on, you have to make it a habit to read regularly and deliberately. I’ve been a long-time reader of StudyHacks, and one point Cal Newport emphasizes is developing career capital, skills and attributes that make you valuable. You have to be “So Good They Can’t Ignore You“.

The first step to being an excellent physician is competence and achieve that you need to know your stuff. No amount of communication skills, empathy and research ability can overcome a shortcoming of incompetence. You are first and foremost a medical expert. Realize that nothing having a strong medical knowledge will make you a valuable doctor in your community.

Choose and Read from a Primary Text

Each specialty has a recommended primary textbook or “Bible” that lays a strong foundation of knowledge. In internal medicine, I read from Harrison’s – an alternate would be Cecil’s. Similarly, if you’re in another specialty, find the Bible textbook for that specialty – emergency medicine (Tintinalli’s), pediatrics (Nelson’s), general surgery (Schwartz / Greenfield).

Set a goal to cover the main topics during your residency. You should plan to finish this textbook, from cover to cover, by the end of your residency to ensure a good foundation.

Some may say textbooks are dead with the number of electronic resources available like Medscape and UptoDate. However, I would argue that almost all the content covered in these textbooks are fundamentals that don’t change from year to year. Furthermore, they are important topics that were carefully selected by a group of authors as important. Working through a textbook ensures that you don’t have any glaring deficits in your knowledge and lays a strong foundation for any additional topics.

Start with the Foundation Topics

Hopefully, by the time you graduate from medical school you will already have a good foundation of medical knowledge. The next step in residency is to understand what are the core topics you need to know for your specialty. In your first year, don’t start off by reading the most recent literature on treatment of rare diseases. Start with the bread and butter topics that you will see over and over again.

In internal medicine, your first year should be focused on reading around common conditions – heart failure, pneumonia, obstructive lung disease, anemia, diabetes, acute kidney injury, etc. Worry about the atypical infections and rare inflammatory conditions afterwards. Make sure you have a mastery over the core topics, as they will be the cases you will see the most over your career.

Furthermore, once you have the basics down you will begin to notice the subtleties associated with these conditions. There are nuances with each disease condition that takes a while to grasp. I know that no matter how many times I’ve seen a certain presentation, there is always something to learn in each encounter. Make it a goal to find learning points from each case you see.

Be sure to add evidence to your understanding of these core topics. For COPD, I recommend going through the CTS guidelines. Similarly, for AFIB, you should read the CCS statements. CDA for Diabetes, etc.

See Lots and Lots of Patients

Nothing will teach you more clinical medicine faster than seeing lots and lots of patients. The more cases you see, the more “illness scripts” you will familiar with and the sharper you will be. That is why I never view new consults or patients to follow as more work to do. See them as learning opportunities.

Be enthusiastic about seeing consults. Ask and offer to cover your colleagues’ patients if they are busy or post-call. If there are patients with interesting clinical findings that other team members are looking after, ask if it’s ok for you to see them too for your own learning. Just be respectful of boundaries and don’t undermine your colleagues. For example, if a patient has a strange rash – it’s usually ok for you to examine the patient, it’s not ok for you to start making treatment plans for your colleague’s patient.

Keep Track and Follow Up on Your Patients

One thing I wished I did better during medical school was keeping track of the patient’s I saw. At the start of residency, I have diligently tracked all the patients I have seen, and this has turned out to be one of the most valuable activities I do.

A great reason to do this is to be able to recall specific cases for the future. The more patient encounters that you can remember, the better you’ll be able to draw from these experiences when you encounter them again. My system includes keeping a safe and secure list of patients I have seen. At first this was done in a notebook but has since moved onto a secure electronic format. On my list I include the age, gender, hospital number, admitting diagnosis, any procedures and learning points to remember. I usually add in a few particular comments – such as occupation, interesting history or physical appearance – to help me remember the case in the future.

I have found this activity of keeping track of my patients has helped me recall cases more accurately. This in turn has made me able to draw more on past experiences when making clinical decisions. I find looking at my list helps trigger me to recall my thinking process and clinical pearls I learned around the case.

Even better, I have found my diagnostic accuracy to be greatly improved because I can prospectively follow patients into the future. With current trends in medicine to decrease hospitalization time, patients often get admitted and discharged in a short span of time. For example, if you admit a patient on a Thursday call, the patient will likely to have been discharged before Monday when you get back. Similarly, you might be in clinic or”fly-in” to do a night coverage and see a patient only once.

As a result, there are a lot of open loops from patients that are never to be seen again. Was your diagnosis correct? What did the biopsy results show? With the help of the electronic health record (EHR), I can now follow up on cases to confirm whether my initial diagnosis was correct or not. This feedback helps refine my diagnostic accuracy.

Clinical Teachings – Insights and Pearls

Remember to draw on your preceptor’s experience to be a better clinician. Often there are “clinical pearls” short phrases that are memorable and contains an uncommon truth to help in clinical encounters. For example – “if there is a salt problem, the real problem is the water, and if it’s a volume problem, the problem is the salt.” This pearl helps remind trainees that if there is a case of hyponatremia (low salt levels), it’s much more important to look at the patient’s volume status (water).

Throughout your rotations, you will meet clinicians who are very sharp. Be sure to pick their brains and ask pointed questions to understand their thought process.

Then be sure to collect this information – usually in a notebook or a note-taking app. You will hard pressed to find these clinical pearls in a textbook, but I guarantee you will use them repeatedly over and over.

Dr. Brandt offers excellent advice on How to Study During Residency as she lays out a good foundation for learning during residency. She further elaborates on how using a peripheral brain like Evernote (referral link) can be make you more efficient with your learning, and how for clinical medicine she uses a 3×5 index card method.

Maintaining a Healthy Mind

In Barb Oakley’s Coursera MOOC “Learning How to Learn” (highly recommended) – she makes an emphasis on keeping a healthy mind to make sure your learning sticks.

For the large part this breaks down into three categories 1) getting enough sleep, 2) exercising, 3) eating healthy foods. I would add 4) is building relationships.

Unfortunately, sleep deprivation is entirely too common for residents, and looking after their own health is low on their priorities. It took 10 extra pounds during first year of residency, to motivate me to start exercising again and adopt healthier habits. I was surprised how much better my brain worked with a good night’s sleep and a 30 minute run.

Dr. Vineet Arora wrote a gem in 2011 on surviving residency by focusing on five F’s that reiterate the importance of balance during your career.

On Being the Best Doctor – Continue to Improve

Wellness Rounds is a blog I have followed for a few years now that offers excellent advice on all aspects of being a doctor. Dr. Brandt is a surgeon that shares her wisdom on how to balance personal and professional success. Particularly, her post on How to be the Best Intern in the Hospital offers practical advice for anyone just starting out.

If you’re in for a longer read, I would suggest Atul Gawande’s book Better: A Surgeon’s Note on Performance. One piece of advice that stuck with me all these years after reading it is to count something. He writes “If you count something you find interesting, you will learn something interesting.” For me right now, I have a system to keep track of the patients I have seen, the cases I have encountered and the procedures I have done. I can easily identify gaps in my knowledge and improve as a doctor because I have a system of keeping track of my progress.

Learning as a Lifelong Endeavor

Remember that medical knowledge is growing at a faster pace than any one person can learn. So continue to have a beginner’s mindset, and realize that this is a lifelong habit to build. Residency is a grueling time in a doctor’s medical career, but will only encompass a short duration. However, the habits you build will be with you for your entire career.

“To study the phenomena of disease without books is to sail an uncharted sea, while to study books without patients is not to go to sea at all.”   William Osler.

N.B. I find it interesting that this post almost had no overlap with a previous post about learning in medical school. Writing this post initially started during PGY2 and was completed as an attending.