HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
A friend told me about a company in the NY/NJ/CT area named FreshDirect.com. It is an online food shopping service featuring, among other things, fresh produce and pre-prepared meals. If you order by 7 PM, they deliver the next morning. If you order by 11 PM, they deliver the next evening. The convenience of not having to go shopping or prepare your meals is obvious.
You can also pay people to do just about anything else for you, from clean your home, mow your lawn, walk your dog, do your wash, or just run errands such as take your car to the garage for an oil change and tune-up. It made me think: What is your spare time worth?
Before starting out, note that I am not talking about your time at work. That’s a completely different story. That is your job, your livelihood. All a physician has to sell is their time; it must be jealously guarded. It is your obligation to be as efficient as possible. When I was a practicing cardiologist, my time was worth $200 per hour. To waste one second doing anything my nurse or secretary could do, people who made only a fraction of what I made, was mismanagement.
If you can pay someone $20/hour to do your housework, shopping, errands or any other “chores”; should you do it? Superficially, the answer would appear to be a slam-dunk yes. But let’s look more closely, because there are several other issues to consider.
First off: What are you going to do with the time saved? Say our average physician works 7A-6P, Monday through Friday. Add in some days working longer and taking call, and you have 65 hours a week. They make the average US physician’s salary of $250K per year. Since your overhead is already covered, all extra fees generated go to the bottom line. If you work one extra hour per day (10% greater workload); you can increase your take-home by 20%, to $300K. Viewed from a strictly financial viewpoint, it is easily worth your while for someone to do your food shopping (or any of your other chores or errands) so you can work more and make more money.
I learned long ago that to see if something really works, carry it to the extremes. Is it still logical and functional; or does it break down? Ex: pay someone to do everything so you can work until 10 PM every night, until it is time to come home and go to bed. You could increase your take-home by 50% or more.
But then you have no free time. If it is your desire, no matter what, to be the richest, most influential physician in town, then you should pay others to do your chores so you can just work, work, work. If you have a family, you could even pay someone to play with your children, or take them to the ballgame or fishing.
If, for whatever reason, you are in a real financial pickle (you previously thought you were in great shape because you had put all of your money with Bernie Madoff), then you do have to make as much as you can. Otherwise, I suggest that if you can’t live on $250K per year, you can’t live on $350K either.
You say there are things you really don’t like to do, such as the wash or mow your lawn, and you can afford to pay someone to do it. Here the operant word is “afford”. You do work hard, so it’s probably OK to allow yourself one luxury. But with such a mindset, you can easily rationalize that you can “afford” a lot. All of a sudden your expenses are way up. Note that it is much more difficult to cut back than not to have had something in the first place.
Want to make a nice charitable contribution? Say you spend $20 per day for someone to perform an errand or do your housework. Do it yourself and give that money to your local food bank. They can leverage it and feed a lot of mouths.
I also think it is good for privileged members of society, such as physicians, to once in a while do some things they don’t like to do, that are boring, hot or smelly. It helps provide perspective to see what the vast majority of humanity must to do to eke out an existence.
RMD
Last Wednesday, I sent out an Interim Bulletin that the precious metals had broken out. There was excellent follow-through to new highs on Friday. The entire precious metals complex was up, but silver, as my brother would say, “blew the doors off”.
The problem is the US dollar, which broke to its lowest level since late 2009 (see chart of US Dollar Index, next page). This is not happening because of the political posturing that the government might close; it is happening because the printing of paper money is out of control. As I have emphasized ad-nauseum, gold and silver and oil and wheat and cotton are nor going up in value; paper money is going down in value. Do not think of your wealth in terms of (depreciating) dollars, think of it in terms of gold, of maintaining purchasing power.
I again recommend that the core position of your entire investment portfolio be gold bullion coins in your personal possession.
I would like to make a comment about silver. In the end, the price of the precious metals is determined by demand for the physical product. Right now, people want silver. Gold is a storehouse of wealth but silver is the currency of daily commerce. The demand for physical silver is so great that I have seen several references saying the US Mint could suspend the production of US Silver Eagles at any time. I have recently made several purchases of US Silver Eagles.
(If you purchase physical gold and silver, I recommend Stephen Davidson at Blanchard and Co. (888-830-2646). Blanchard has been in business for decades and Stephen has given me good service. I receive no compensation for this recommendation. I do it as a service to you).
A subscriber recently asked me to explain to her why bonds do poorly during periods of inflation. Her father was a smart guy, and left them a nice investment portfolio, including municipal bonds. She is in a high tax bracket, and wants to maintain the tax-free exposure. Looking back, I really didn’t do a job answering her question. Moreover, this is a very basic point all investors need to understand.
Inflation causes interest rates to rise (At least it should. At present, we have inflation but the Fed is keeping interest rates artificially low). Say you buy a 30-year bond that pays an interest (coupon) rate of 5%. One year later interest rates on the same bond are 6%. No one will pay face value for your 5% bond when they can walk around the corner and buy the same bond and make 6%. If you sell your bond at this time, it must be at a discount to face value so the investor can receive a 6% return.
“But if I hold it to maturity, I get my money back”. Yes, BUT, 1) in the interim, you receive below-market interest rates. If the interim is 20 or 30 years, you have suffered decades of pain. 2) The money you receive back is worth much less than the money paid for the bond.
Someone contacted me last week that I hadn’t heard from in 4 or 5 years. He reminded me I told him at the time that eventually some endowments might get so large, and control so much wealth, that they could lose their tax-exempt status. He pointed out multiple examples in history where rulers were so pressed for money that they went after the wealth of the supposedly-protected religious institutions.
RMD comment: What is the largest pool of apparently “safe, protected” money in the US? Answer: retirement/pension funds, including your personal IRA. Could the government become so hard-pressed for funds that they confiscate or annuitize your IRA? I think it is very, very unlikely—but the chance is never zero. This is one reason why it is so important to have wealth outside of an IRA.
Or consider this: the government doesn’t need to be so brazen as to confiscate your wealth directly; they could just raise the tax rate to 90% and take it legally. It has been done before.
Grandma Nagy always emphasized how important it was to put your best foot forward: If you want to get ahead, you had to show people how smart you are.
Good is an adjective; it describes a noun. Ex: This is a good meal. Well is an adverb; it describes a verb. Ex: I feel well.
It drives me crazy when you ask someone how they are, and they say “I feel good”. Please respond “I feel well”.
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