No one ever tells you this stuff in residency. So I'm going to give you ten steps towards wealth. This isn't about being a better doctor, okay? That's what all the other posts are for. This is simply about making money.
1. Roth IRA
The Roth allows you to put away $4000 a year. It is after tax income. But anything that happens in that Roth account is never taxed. If you buy the next Google and it quintiples-- no tax. When you withdraw it, no tax.
Contrast that with regular IRAs: whatever you withdraw is taxed as income. So if you withdraw $10,000, you pay income tax on that. The logic is that when you retire and stop earning income your tax rate will be less than it is now that you work. Great. Do you know any doctors who retire? And do you believe taxes are going to go lower as the years go on?
The reason the Roth is #1 on my list is a) it is powerful; b) you must do it immediately, in residency. Once your income exceeds $100,000/yr, the rules prohibit additional contributions. You have four years. Go.
If you are an intern, you make $38,000/yr. Therefore, you can save $4000-- it should all go into the Roth. Skip meals out, moonlight, whatever. You must do this. The only reason not to put $4000 is credit card debt, which must be paid off.
You say, "I can't afford $4000 a year." False. Would you be an intern if it only paid $32,000/yr? Of course. You'd find a way. Therefore, you can save $6000/yr. All I'm asking is $4000. No buts. Just do it.
Why is it so important? Because when you save is even more important than how much you save. At 10% growth per year, money doubles every seven years. (Take 72 and divide by the interest rate, that's how many years it takes to double your money.) So if you put away $12,000 in residency, then have a kid, by the time he's ready for college you have $85,000. Tax free.
Unlike IRAs, which must be used after retirement, Roth IRAs can be passed on as gifts. So if you get rich and don't need this money, you can just give it away. It is the financial equivalent of hiding money under your mattress with a rod of plutonium and and waiting to see what happens.
Where do you get a Roth? Anywhere. All banks offer them. All brokerage houses offer them. Etrade, Vanguard, Fidelity, everybody. Also, you can invest the Roth money in anything you want. You can put it into a mutual fund, or all into Apple stock, or divide it among 90 stocks and mutual funds, etc. You can daytrade your Roth IRA money. The only thing you can't do is withdraw it before you are 59 1/2.
Sort of. Actually, you can withdraw from your Roth anytime you want-- which you will never, ever, do-- if you are going to use it for "qualified first-time homebuyer expenses." And, (unlike every other kind of IRA) you can withdraw the original contribution amount anytime, without penalty. Example: you contribute $4000. It grows to $11M. You can withdraw $4000 without penalty, because technically you already paid taxes on the income that generated the $4000. (None of this matters, because you will never, ever, withdraw that Roth money.)
2010: Something wonderful will happen
In 2010, any money you have in a regular, traditional IRA can be converted into a Roth. (Right now, anyone who makes over $100,000 can't do this.) After you convert, the money is forever immune from taxation. You can even pass it on as inheritance (a traditional IRA must be used starting at age 70.5).
I can make a prediction: you will absolutely not become rich if you do not open a Roth. The Roth is a test of self-discipline, of delaying gratification, of the ability to see the future as reality and not as potentials, fantasies. If you fail this test, it predicts you will live the rest of your life always trying to "make it," to get by. You will worry about your salary, about the mortgage, about the electric bill. You'll be doing accounting maneuvers in your head while on vacation. In short, you will become your parents.
2. Don't do a fellowship.
Every year I tell psychiatry residents not to do a fellowship, and every year no one listens to me, and every year people from previous years come and tell me they wish they had listened to me.
Unless the fellowship gives you credentialling to do something that no one else can do, it is worthless. So doing a cardiology fellowship is valuable. Doing a bipolar fellowship is not. What does a fellowship get you? Nothing. Are you telling me that a person who did a Bipolar Fellowship at Harvard is any better able to treat bipolar than someone who reads on his own and sees patients? I need an extra year of residency to learn how to use Lamictal?
Similarly, forensics, psychosomatics, pain. I do a lot of forensic work. It has never once come up, in court, with lawyers, no one, if I had done a fellowship or if I had taken the Forensics Boards. Why? Because no one wants an expert in forensics. They want an expert in psychiatry.
And patients certainly have no clue that you are or are not subspecialty certified.
But what about the knowledge, the training? Psychosomatics (consultation/liaison psychiatry) offers a good example. When you're not the person who is really responsible, you're only partly learning. Doing a fellowship in Psychosomatics may expose you to more patients (and even that's debatable) but you don't really, really learn how to handle them because you are not really, really responsible for them. You get much better "training" if you actually get hired as a consult psychiatrist. See? After a year of fellowship vs. a year of actually doing the job, who do you think is more qualified?
I know, you're thinking, "why would they hire me with no training?" Answer: because they have no choice: most places cannot get enough good people. (Are you good? If not, consider law.)
There is one thing a fellowship does get you: $50,000 less money then if you just went out and worked. Doing an Addiction Psychiatry Fellowship does not get you better training-- and gets you less experience and less money-- than simply working in a drug and alcohol program or even in a community mental health clinic.
$50,000 less for one year isn't a lot? Hmm. Assume you clear $30,000 after taxes. In 14 years, at 10%, that $30,000 is now $120,000. Congratulations: you can now take a year off and go back and do a fellowship.
3. Declare yourself an expert.
Declare: not just become, but declare.
Certainly you need to become an expert if you're going to succeed. But you also have to announce it to everyone who will listen. You need to be the person everyone reflexively thinks of when a certain situation arises. For example, if you like OCD, then as soon as possible-- in residency-- tell everyone you know you are (say this exactly) "interested in OCD." So that every time a resident or attending in any specialty meets an OCD patient, they immediately think of you.
The referrers actually have no way of telling whether you really are an expert or not; that's not the point. You simply want to create an immediate association between "OCD" and you. This way, you get all of the referrals. Most likely, they don't know anyone else to refer OCD patients to, so why not you? This is also why your expertise can't be in something common. There's no room for any more bipolar experts. But OCD, forensics, "medically unexplained physical symptoms"/somatoform disorders; use of ECT/MAOI/Clozaril; student issues; gay and lesbian issues; personality disorders, etc-- all these things are sufficiently niche but sufficiently in demand that you establish a name and thus career. You doubt this? Observe:
"Oh crap, I have another borderline patient."
"Oh yeah? Just refer them to X, he sees all borderlines."
It goes without saying: once you declare yourself an expert, you better fast become one. Experience AND reading. Reading all the time. I said all the time.
4. Learn Spanish or Russian. Or Chinese or Vietnamese.
If I have to explain this, it's not for you. Partial proficiency in Spanish guarantees you a 30 hr week at a salary of $150,000/yr.
5. Invest in stocks. Under no circumstances invest in pharmaceutical companies.
When doctors buy drug company stocks, it is a disaster. Doctors think they have some better knowledge of drug stocks, but their information is always flawed. Always. In fact, if a doctor tells me he is thinking of buying Pfizer, I know Pfizer is going to implode. Doctors think that because they see Geodon being used a lot that Pfizer is going to go up. Wrong, for two reasons: first, people already bet that this would happen, probably even before you knew there was a drug coming out called Geodon, so the run up has already happened. Secondly, the stock price reflects growth, not earnings. If the company made a billion dollars this year, great. But if it doesn't make more than a billion next year, the stock is dead. So Amazon, Microsoft, Intel, Dell, etc-- all great companies, all making money hand over fist-- but no significant prospects for growth. So too Big Pharma. Unless there's a great new drug in the pipeline, forget it. And by the way, if the new drug already has a name (as opposed to a numeric code) then it's too late.
If you have no stomach for this investing stuff, buy the following stocks and go back to bed: BRK.B, SHLD, GOOG, USO, COP, AAPL. (I own them all.) Call me in 20 years.
Update on these stocks here.