“Money problem may be the root of your burnout”

By Dr. John Crosby

I recently spoke on the phone with Dr. Vu Kiet Tran a Toronto emergency, family and long term care physician about doctors and money (and money problem). He has a podcast called “How is my financial health, doc?” that it is accessible on platforms such as Spotify, Stitcher, Apple Podcast, Google Podcast, iHeart Radio, Amazon Music, and Podbean.

Dr. Tran says that most doctors have very little knowledge about money and money management. It can be the root of burnout. That is because physicians who are constantly chasing after the next paycheque (and bigger and bigger paycheque) end up working earlier and later in the day and miss breaks and lunch. When you ask them how to increase wealth, most (if not all) can only give you one answer: work more, longer, faster, or harder. Obviously, this is not a solution that is efficient or practical. At some point, something has to give; it is either health (physical or mental), relationships, or both. The only solution they have been taught (well, to be honest, mainly they observed from their predecessors) is not sustainable or healthy. This is magnified multiple times by the fact thatmost come out of training with a $300,000 in the hole. They get further into debt by buying a “modest” $2,000,000-3,000,000 home and $60,000 car.Then they sprint on the hedonic treadmill and begin their “purchasing cascade” whereby a luxury home begets a luxury car, luxurious furniture, and luxurious schools (private school for the kids). Chasing after the Joneses only ends at retirement when they realize they do not have enough saved for such retirement. By doing this this way, they borrow from their future self and wealth to fund our current lifestyle and luxury. They have seen it done by our predecessors and they think it is the only way to succeed. How wrong are they. Not only are they borrowing from our future, they are not meeting current life necessities such as risk management (disability insurance, life insurance and critical illness insurance) because after spending it all, “I have no money for insurances. They are too expensive”. They set themselves a house of cards that will crumble the moment they face one of life’s curve balls.

This type of behaviour is a testament of the failed adult “marshmallow test”. When physicians come into money, we immediately throw away the lifelong skill we have mastered so well during our entire training. That is skill is Deferred Gratification. We have been “hungry and deprived” for so long, we binge like a kid inside a candy store the moment we see a salary jump. But we need to re-internalize our deferred gratification into a “reasonable deferred gratification”.

How do they cope?

Dr. Tran says that as doctors have very bad financial role models so far. We are used to ‘see one, do one and teach one’. We have an apprenticeship system. We also use evidence-based medicine. But whenit comes to financial management, we fail to use financial best practices (“evidence-based” in the financial industry).

Like with everything you have to start with the fundamentals. “Pay your yourself first” and automate savings. If it is automatically deduct it you won’t even miss it.What you do not see you do not spend. That means automating saving 20% of your annual income and pay down bad debt (without scarifying compounded interest). This seems impossible in the early years but if you go from a resident’s salary of $60,000 per year to a graduate’s salary of $400,000 or more, you can have your cake and eat it too. For high-income earners like physicians, saving 20% is very reasonable if we know how to channel of inner “reasonable deferred gratification”. You can save 20% which is $80,000 (in this example) and still live comfortably on $320,000 per year.

The Power of Compound Interest (Eight Wonder of the world)

The power of compounding is dependent on 4 factors:
1. Initial amount (the larger the initial amount, the larger the final amount)
2. The rate of return (the higher the rate, the larger the final amount)
3. The compounding frequency (weekly vs monthly vs annually)
4. Time compounding (the longer the time compounding uninterrupted, the larger the final amount). It is the most power factor.

The most important factor is time.

Once you start saving you get interest on your interest. For example if you save 20% of $400,000 which is $80,000 and invest it at 10% (actual annualized return of the S&P 500 Index is 9.8%) you make $8,000 per year but in year two you get 10% of $88,000 or $8,800 and then so on.

If you invest $80,000 every year, with a rate of 10%, you get

By 10 years you have $1,500,000.00

By 20 years you have $5,100,000.00

By 30 years you have $ 14,600,000.00

By 40years you have $39,000,000.00

So, isn’t better to have your army of dollar bills work for you instead of you working for you? That only happens with an initial amount (savings) and time (start early – not after paying the “modest” house and all the luxuries). This is a more efficient way managing money. It is also evidence-based (oops, I mean best practice).

So your money is working for you. Proper money management gives you back time. Time is the only true asset we have. Proper money management gives you choice and flexibility. You can enjoy more time off, shorter days and get more breaks, which will help you avoid burnout.

You can enjoy work because you don’t have to work longer, faster, and harder. You can work because you want to, not because you have to.

You can break the shackle of the paycheque and dissociate the relationship between caring for patients and making an income. You can enjoy the practice of medicine again.

Live more modestly initially. Start with a truly modest home and trade up as your army of dollar bills allow you.

When do you start? Yesterday. Time is the true magic behind the Eighth wonder of the world. Albert Einstein is reputed to have said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

email me your thoughts at drjohncrosby@rogers.com.

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