“I am not young enough to know everything .”
Oscar Wilde, Irish Poet & Playwright
One piece of wisdom that I have garnered as I age is that I really should listen to those who have gone before me. Honestly, I only really came to appreciate this as I approached the age of 40. Perhaps, I am a slow learner. Prior to that, I still had a teenager-like superiority complex.
There were two main rationalizations that I had: 1) Things are different now and my elders mean well, but just don’t understand the new world in which we live. 2) I simply learned more quickly and am advanced for my age. I suspect youth felt the same way when Oscar Wilde came out with the above quote over a century ago.
Regardless, this week’s post is wisdom from a more senior colleague. You have heard many of my opinions as an early-40s physician, but I think these insights from someone further along the journey are very helpful.
About Dr. Latestart
Dr. Latestart finished training at an older age than those who took the direct sprint down the usual well-worn path from highschool. Once practicing medicine, he got thrust into the typical medical script due to his skills and promise (clinical job, academic job, and administrative/leadership role). In under a decade, he had a wake-up call with a cardiac event while on the job. Ironically, while running a code blue.
Wisely, he deviated from the script again and has gone on to have a fulfilling career, balanced life, and still has financial security. His story both “makes real”, and is lived experience of, what building holistic wealth means. The wisdom that he shares with us from his experience is reassuring for those of us who also deviate from the script by choice or unforeseen circumstance. It is also great advice for all of us, wherever we are on our career/life journey. Best lived as a journey rather than a race, and better “won” by the tortoises than the hares.
Thoughts on Financial Tortoises (by Dr. Latestart).
Everyone’s medical career path is different, but rest assured that medicine is a good career to navigate life with.
Some of us may be late out of the starting gate and this may add worry and stress to what is likely a shorter career than average. You may be a recent immigrant who has had to requalify in Canada. Or you may have made some very poor investment decisions which have left you with little net worth half-way through your career. Plans can be altered temporarily or permanently due to personal or family illness. Life will humble even the best of planners.
You can plan a route, but you also need to navigate.
Luckily, given the average remuneration for Canadian physicians (CIHI study, Globe and Mail, 2013) of $307,000, before overhead, you have the capacity to course-correct if needed. For perspective – individually, you will make 2-3 times the average Canadian family couple income before taxes (Between 83K-120K, StatsCan 2017). So, although you may slightly loosen the purse strings after years of abnegation, (unless you get extreme) the chances are that you will still be okay.
Even though you may not have a direct flight with no turbulence along the way, you can still look forward to a reasonable retirement if you don’t despair and follow certain rules.
#1 Pay for your taxes and retirement before you can be tempted.
If you are incorporated, you can determine your own income and smooth your cash flow. If you limit your expenses, there is a sweet spot of around 150K annual salary which will allow you to contribute fully to your RRSP and TFSA while avoiding the highest tax brackets. The money left in the personal corporation is thick gravy.
If you don’t incorporate, you will have to discipline yourself to not get behind on quarterly tax installments and be sure to catch up on any unused TFSA contribution room. The best way is to automatically transfer (hide from temptation) about 30-40% of your gross income into a “Tax Account” right off the bat. The 30% is based on $150K and contributing maximally to your RRSP (about 26K a year). It would be higher as you earn more – about 40% average tax rate for $300K. There are good detailed online income tax calculators to give an estimate. You may have earned the money, but it is not really all yours.
#2 You can live better than average, but not wildly so.
What will hinder you are expensive discretionary expenses: mortgage, cars and expensive travel. Yes, a mortgage is discretionary. If you can’t pay off the mortgage by the time you plan to retire, or reduce your workload, then it is too much—unless it is in a top-notch location which you plan to move out of when you retire. And a Subaru will get you from A to B just as well as an Audi for half the monthly expense.
You get much more bang for your buck by spending less than you do from working more. You save on both the sales tax and the diminishing returns from working into higher income tax brackets.
#3 Slow, steady, and consistent investing will get you there.
Even with no net worth at the outset, by contributing maximally over just 15-20 years you can have at least $1.8-2.1 million in capital. That is even in a low performing portfolio at 4.5% annual return. Plus, your house should be paid off at that point. You can use the many free online calculators that banks and insurance companies offer to prove this using your own data. That is far more than most Canadians can hope to accumulate. Steadily and consistently investing over many years will get you there. If you work more 15-20 years, then it will only grow further.
#4 Your biggest asset is your ability to work. Be a tortoise. Be steady.
Buy enough disability insurance to help eliminate worry. Worrying will eat into your ability to work. If you take care of your health and contribute maximally, then you can stop worrying. That is the middle road. Other choices are to live fast and die poor, or live poor and die rich. Then there is living sick and poor.
When you start out late, you are probabilistically closer to an event which will hinder your ability to live long and prosper (see above ECG). You can (and should) buy disability and/or critical illness insurance, but that is still the same as betting that your house will catch fire. You don’t want to have to use it!
#5 Buy the right insurance, but make your own.
What you can do proactively is maintain a basic level of physical fitness which will contribute greatly to your ability to live life to its fullest and work. The side benefits are better sleep, mood, improved insulin resistance, weight control, cardio-respiratory health, lower cancer risk, and the list goes on. If you work at a desk for a substantial part of the day, this is even more important. It is likely the most important investment you will ever make.
If you can’t find 30 minutes a day for living, then you’d better take that time to plan on dying.
Only 30 minutes a day. Or 150 minutes a week. The commonest excuse is “there is no time in my schedule”. In response, the best answer I have come across is that “if you can’t find 30 minutes a day for living, you better take that time to plan on dying”.
You don’t have to go overboard. Training for triathlons is another disease. Just do something that resembles the life of our hunter-gatherer ancestors: Move. It is the best investment in your ability to work (again, your biggest financial asset).
If necessary, even working half time you, will likely have more income than you would on disability. Plus, disability insurance won’t even continue after age 65.
Be A Tortoise
Tortoises live long, but they move every day to find food. My grandmother did as much. She didn’t have a fridge until she was 85. So, she would go out daily and buy her food fresh. She died at 113.
Move slowly, intentionally, and consistently with your spending, saving, and investing. Do this with your work also. If your work schedule really impedes some reasonable amount of physical activity, then you should question your work schedule. In medicine, work can easily flow into the off-hours and weekends with CME, academic demands, administrative tasks and extra availability (unplanned call).
Resist. Compensate. Move.
Another wonderfully relevant post, great advice and a good reminder to all !
Thanks Lyndon! Lived experience and wisdom garnered is very powerful.
-LD
thank you very much for that article
that hit the home
off topic, that ecg made me worried – we discharged a lady with similar tracings who had negative series of trops with hx of angina like symptoms (angio and stress test were negative 9 years ago). timi score 0…
Discharge is still one of the scariest decisions most of us make as physicians.
-LD
Another great post. I think I would also add that as you age medicine stops being the all consuming passion it was for most of us when we began. The “shine” starts to wear off. Give yourself permission to Pursue other things even if they seem silly, don’t make sense to others and might not make any money..things like trying to teach other doctors about money.
Totally! I also just got back from karate class. I use tortoise technique and move very slowly 😉
-LD
Thank you for sharing this with us.
LD, do you have any insight with what amounts Canadian doctors usually retire ? I am reading 10M on the white coat investor forum (so 13M canuck dollars) and I wonder if my health and time are worth this number. I have been running on a treadmill for the first eight years of my practice at the expense of my health, and I am debating how much I should slow down. I am one third of the way towards ”the number” and there are always so many people and causes I want to help financially along the way, but doing it at the expense of my own health has not been wise.
Hi Mai,
That is likely way more than what is needed and I think few Canadian docs would achieve that. $3-5M seems to be a common target. That would give $100-$160K/yr pre-tax with a conservative 3% withdrawal rate or $120-$200K/yr with the usually safe 4%/yr rate. Also, your tax-efficiency can go up since you can income split over 65, some of the money is from a TFSA, and money coming out of the corp has already been partially taxed. Plus, if you paid a salary, there is a small amount of CPP to add into the equation. Many expenses like insurance, mortgage, kids will be off the books (probably replaced by hobbies and travel though..) Much depends on your spending – that determines how much you need more than anything. Remember, that there is also an incentive for advisors to have you over-invest if they get paid a percentage. That brings me to the second point, those 3-4% withdrawal rates are also pre-advisor fees. With a 4% withdrawal rate, a 1% fee would make a $3M portfolio produce $100K/yr pre-tax instead of $120K/yr.
That said, front-loading your saving while you are young as you have been doing is very powerful – just be sure to re-evaluate and slow down before you are forced to… Again, you make more headway by spending less than working more. Over-saving for the future comes at the expense of the present and if you are eroding your human capital, then you are actually burning up both future and present.
-LD
Another great read. I’m frequently lurking here without posting but this article deserves it. I always tell my wife that slow and steady wins the race. At least it is my excuse for working less lol.
I like to think of it as working more efficiently 😉
-LD
Great solid advice.
Too often we get enticed with get rich quick schemes (the hare) and come out financially behind the slow steady course.
It is sad that people can’t carve out 30 min a day for self improvement.
How can we advocate for taking the route of the tortoise for ourselves while the trainees under us are doing 24+ hour shifts 1:4 for 5 and now often 6 or 7 years?
Hi Atticus,
I guess the other issues specific to residents are duration and goals. Fortunately, residency is a defined and limited period of time. Although Dr. Latestart is an exception, it also occurs while people are younger. You can sprint, just not for long periods of time and better when young than more aged. With the main goal of gaining a degree of expertise through residency, there is no escaping the fact that it is gained through hours of practice. They often quote 10000 hours in sports. However, it is actually variable. Deliberate practice results in quicker gains than just “banging the ball around”. Medicine has some barriers because “clinical material” isn’t presented in a step-by-step optimal sequence, but by which patients roll through the door. A simulation curriculum can help as a suppliment, but nothing will replace dealing with real people. While residency does still have long hours, it would be very unusual for someone to be doing 1 in 4 inhouse call for 5-7 years. Most don’t do that past the first 2 or 3 years anymore, nor year-round (I am actually pretty involved with postgrad medicine, but I sure that it varies by University and programme). It is probably no accident that people are extending to 6 or 7 years – some of that is increased medical knowledge in the modern era, but some is also the need for more clinical experience. I have raised the concept of a more balanced-life 3/4 time residency, but spread out over another year or two, to people. Definitely little interest – trainees want to get finished and government doesn’t want to pay for longer training. That said, I suspect that we will continue to see changes as this generation moves through the system. Plus, the good news is that residency is a limited event and then physicians have the freedom to take control of their careers in a way that most employees do not.
-LD
Response from Dr Latestart to Atticus
There’s the rub. You can always do more and try fill the bottomless pit that clinical, academic and administrative tasks represent. Part of you will be lost in that hole. Or you can choose to be balanced–working one job well–doing your share of call and keep body and soul together.
The resident situation is another issue. They have a dual role. You can advocate for them, and modulate expectations.Call out your colleagues who are inhumane. And ask yourself if you would want a cynical, depressed, anxious Doctor treating your loved one. In Canada, they are unionized and the worst abuse should be rare. It is, curiously, the only Union where everyone eventually becomes a boss. But you can’t fill all the voids. Ever.
Wonderful article, thanks for the insights Dr. LS.
Slow and steady reminds me of a tale my Advanced Placement Biology teacher told in high school.
Her son had just signed up for the cross country team as a 7th grader and had his first meet. He came in second to last on the mile run for his division. My teacher did not have the heart to inform him that the sole kid he beat ran the mile with a backpack.
Upshot: the only score that matters is the one you assign based on your inner scorecard.
No need to compare your path to others; happiness requires an n of 1.
Fondly,
CD
Hey CD,
You hit a major point there. Happiness is impacted by our comparators. An internal benchmark is a much more resilient strategy than benchmarking to our surrounding peers (a difficult to overcome part of human nature).
-LD
Lots of great points raised. Not to play the devils advocate, but I am in the work hard play hard mode until I hit 40 (5 years into practice, only 3 to go before I go into a tortoise mode) . I don’t know which category I am falling into probably “things are different now” . Between Trudeau’s attacks in 2017, public perceptions of MDs, NDPers chanting tax the rich, watching what’s happening in Alb and Ontario with bylaws and negotiations, I have a strong suspicion that real, after tax disposable incomes of physicians is going to go down. My plan is to get a head start while I can and still have the energy to put in the extra hours. I guess the key for me is going to be sticking to the plan and actually slowing down rather than going down the burnout road.
Has this always been the fear of starting out physicians or are the current circumstances a little bit worse in this regard in your view?
Hi Vancouver Doc! Was going to use VD for short, but I guess that may not be flattering. I actually subscribe to the same philosophy, but am simply a few years ahead of you. Make hay while the sun is shining. I worked like a beast up until this year – there was good work and it paid well to do the undesirable parts.
I am now 43 and the points you raised above are actually what caused me lift my head up and re-examine whether it was worth it. A feeling like your work is less valued via public propaganda and some of the shift in respect/attitudes towards physicians in the urban environment I work in (it may be different in more underserviced areas) hit me hard. I have poured a lot of my soul into medicine which makes it hard not to take those societal shifts a bit personally. After this past election, I also see things worsening and my family and I have actually decided to go down to half-time and move to a lower cost of living area effective next summer. Our quality of life should actually rise and the financial impact is negligible since I will pay radically less income tax. We would not be in this position if we had not worked like what you are suggesting. The good news is that these things often go in cycles. I started at the end of a gutting of medicine cycle in the 90s and rode the recovery up. We peaked in Ontario around 2012 and I don’t plan on riding it back down. That said, I still like medicine and it is still a big part of my identity – but I won’t make excessive sacrifices for that anymore.
I think that while you are young you have the capacity to work extra hard and medicine is very fresh and exciting. That was actually one of my new attending financial advice pointers. However, if you start medicine later or when you hit mid-career, then a more moderate pace is probably better.
-LD