6. Get Life Insurance, a 529, and another Roth.
If you have a child, you need this. Immediately. Shut up. I said immediately.
Term Life Insurance
e.g. "If you die within 20 years (the term), we will pay your spouse $2M. For this coverage, you will pay us a monthly premium of $300, which will rise after ten years."
Term insurance is for a set period of time. If you live past the term, the insurance expires. Examples are 5 year, 20 year, “until age 90,” etc. For a healthy mid thirties person who neither smokes, drinks, nor takes medication, you can get a $2M 20 year term policy for about $100-300/month. However, if you are eligible (military=USAA; medical or teachers=TIAA/CREF) you can get it for much less. Premiums increase over time.
Permanent Life Insurance (also known as whole life insurance)
"Whenever you die, no matter when you die, we will pay your spouse $2M, plus any interest that has accrued from a portion of each month's premium. For this, you will pay us a monthly premium of $800, which will never change."
Whole life insurance is forever. Additionally, after the first year, part of your premium goes into the insurance as a “cash value” on which you earn interest, all tax deferred. Think of this like buying a mutual fund within an IRA, and contributing a little every month. This is because when buying whole insurance, you are basically buying insurance AND shares in the insurance company. Certain kinds of life insurance (“Mutuals”) also pay you dividends based on surplus in the whole insurance fund.
You can also use the cash value at any time to buy a home, pay for college or your retirement. And the premiums never increase.
I favor term insurance; I need another investment that pays only 4% like I need syphilis.
529 plan: I am amazed at how many people I have to kick in the teeth over this. Assume that your kid's 4 years of college will cost you $110k. At a doctor's tax rate, you'll need to have earned $180k. A 529 plan is like an IRA, but instead of being allowed to use it for retirement, you can (only) use it for "qualified education expenses:" tuition, books, travel to the college, room, food, etc, etc. Anything at all that can be associated with education.
It doesn't have to be college. It can be medical school, vo-tech; You specify each account for a specific child; but any money that isn't used you get to keep (though those withdrawals are taxed.) Or you can transfer the money to another kid, or your kid's kids.
The advantage of the 529 is that any growth of that money is never taxed, even on withdrawal (assuming it is for education.) Following this logic, in order to save $110k for college, you only need to invest $27k at the child's birth (assume 8% growth.) Think about this.
The beauty of the 529 plan is that it is essentially a legal tax dodge. You can save much more than would ever be needed for the kid's education, tax free, and keep the money after they graduate. And the money cannot be taken in a bankruptcy. Is anyone listening to me?
Roth for Kids: Did your lazy, pot smoking, iPod wearing ("it has to be white!") MySpacer make some money from that one summer he pulled it together enough to work? Declare that money, pay his taxes (i.e. $0), and put it in a Roth in his name. Maybe your kid is an industrious 9 year old who washes cars when not at Mandarin class? Declare it, pay the taxes, and put it into a Roth. Oh my God-- if you put $4000/yr into his Roth for ten years, he will have 11 billion dollars by the time he graduates. You'd be crazy not to!
7. Open a clinic and form an LLC
If you do solo private practice, you will make a comfortable living. You will not become rich. This article is not called, "How To Rot In Your Own Self-Satisfaction."
You need a clinic: one or two psychiatrists, one or two therapists, one or two NPs (these can overlap.) It is not necessary to share the same office, but you need to be in the same building. I'd argue NPs are more valuable than psychiatrists (less knowledge at the beginning but more motivated), but that's for another day.
Refer to each other. If the patient comes only for therapy, have yearly psychiatric checkups with the MD. If one of the clinicians is an expert in something but the patient is being treated by someone else, refer for a consultation.
As I said before, your clinic should advertise as specializing in some things: Treatment Resistant Depression; OCD; Adolescents; Borderline Personality Disorder; Independent Medical Examinations (IMEs= disability evaluations; you are not the treating psychiatrist, and you get a flat fee per eval;) "treatment of impaired physicians" (a gold mine-- contact the local medical society chapters and let them know you exist); Clozaril/lithium/meds that need regular blood work. (For example, have a Clozaril Clinic: all Clozaril patients come at the same time and get their blood drawn (by the RN) and clozaril (and other meds) dispensed (by the pharmacist of your local pharmacy, who will make money on the pills)-- and you can bill each patient's insurance for the service.) And hook up with the local schools, colleges, and area internists-- get their referrals. (The best way to do this is to go there, (unannounced or by intro through a drug rep) and meet them-- it takes 8 seconds for the deal to be solidified because why not refer to you?
This will work precisely because you are a clinic and not a solo psychiatrist . Somehow, being part of a group conveys the impression of expertise, professionalism. It's like a mini-medical society. And people refer to them.
The NPs can prescribe, and there is no reason why they cannot be as skilled (or unskilled) as any psychaitrist)-- but they can also do nursing maneuvers: EKGs (bill for them,) labs (bill for them,) and preventative screenings/counselings (diabetes, smoking, etc (bill for them-- yes, you can get money for it.))
Limited Liability Company: In the past, the only way to shield yourself from liability was to incorporate your practice, "Joe's Medical Practice, Inc." (Usually an S corporation or PC.) The corporation is a separate legal entity (that has assets, like furniture and computers; and liabilities, like you). Any lawsuits would be against the corporation, and thus your personal assets can't be taken in the settlement. If the corporation gets bankrupted, your IRAs are still safe. (But if your car is a business asset, it can be taken.) On the flip side, however, you have to pay corporate taxes on the revenue and then personal income taxes on what you take home, i.e. 30% corporate + 35% personal= death. Also, you have to have recorded meetings, bylaws, paperwork, etc.
An LLC is a company, not a corporation; no corporate taxes, no double taxation, no meetings. But, it is a seaprate legal entity, so you have liability protection.
Be careful to keep the assets separate. If you use your car for work and soccer games, it is up for grabs. If you buy groceries on the business credit card, you are destroying the distinction between you and the company.
There may be some instances where an S corporation is better for your clinic. For example, LLC members (i.e. you) have to pay Medicare and Social Security taxes on all of the business' profits. S corporation members are actually shareholders-- and get paid partly through a salary (so you have to pay Medicare and SS taxes) but partly through dividends (no Medicare/SS taxes.)
Consult your local attorney for more info, I'm just a psychiatrist.
8. Save money. I know, this one sounds stupid because it is "easy." But no one does it. Listen to me, fools, listen to a story my Dad used to tell me, which I paraphrase here: Pretend you are a resident, and you "only" make $39k/year. Would you have taken the job if they only paid $35k/yr? Of course you would. Then you can put away $4000 per year-- in a Roth. Don't laugh-- do it. Maybe you make more than $100k? Open a Roth for your kid. Now. A Roth AND a 529. Consolidate your loans: doing this lowers your monthly payments but extends the life of the loan (so you'd end up paying more.) However, take the money that you now save from this and fund your Roth because after you make >$100k, you can't do this. After you start making big money, you can pay off your consolidated loans as fast as you want. The point is to get extra money now that you can save in a Roth. Because the max interest rate on federal loans is 8.25%-- you can make more than this in a Roth. Credit cards should be paid off immediately, then burned-- even GOOG can't compete with 18% interest. And if you tell me you need credit cards to survive I am going to subpoena the bills and If I see anything from Nordstrom's, I'm going to burn your shoes. Private Mortgage Insurance: If you did not put down at least 20% of the appraised value of your house, you are paying an extra 0.5%-1%. For a $400k house that's an extra $150/month. If you bought your house in the past year or two, more than likely it appraised less than you paid-- check this. If you cannot afford to put down 20% (I should ask why you are buying such a house), pay extra principal in the early months, and get the loan down to 80%-- and then call your lender to cancel the PMI, because they won't do it automatically until 78% (snakes.) Sell stuff: More than likely you have old technology, clothes, furniture, etc that you could sell on Ebay. But who needs that headache? i-soldit.com is a national chain of stores that sells your stuff on ebay (and charges 30%). But who cares? The sooner you sell that old cell phone, the more you'll get for it. Put this money into a Roth.
8. Save money.
I know, this one sounds stupid because it is "easy." But no one does it. Listen to me, fools, listen to a story my Dad used to tell me, which I paraphrase here: Pretend you are a resident, and you "only" make $39k/year. Would you have taken the job if they only paid $35k/yr? Of course you would. Then you can put away $4000 per year-- in a Roth. Don't laugh-- do it. Maybe you make more than $100k? Open a Roth for your kid. Now. A Roth AND a 529.
Consolidate your loans: doing this lowers your monthly payments but extends the life of the loan (so you'd end up paying more.) However, take the money that you now save from this and fund your Roth because after you make >$100k, you can't do this. After you start making big money, you can pay off your consolidated loans as fast as you want. The point is to get extra money now that you can save in a Roth. Because the max interest rate on federal loans is 8.25%-- you can make more than this in a Roth.
Credit cards should be paid off immediately, then burned-- even GOOG can't compete with 18% interest. And if you tell me you need credit cards to survive I am going to subpoena the bills and If I see anything from Nordstrom's, I'm going to burn your shoes.
Private Mortgage Insurance: If you did not put down at least 20% of the appraised value of your house, you are paying an extra 0.5%-1%. For a $400k house that's an extra $150/month. If you bought your house in the past year or two, more than likely it appraised less than you paid-- check this. If you cannot afford to put down 20% (I should ask why you are buying such a house), pay extra principal in the early months, and get the loan down to 80%-- and then call your lender to cancel the PMI, because they won't do it automatically until 78% (snakes.)
Sell stuff: More than likely you have old technology, clothes, furniture, etc that you could sell on Ebay. But who needs that headache? i-soldit.com is a national chain of stores that sells your stuff on ebay (and charges 30%). But who cares? The sooner you sell that old cell phone, the more you'll get for it. Put this money into a Roth.
9. Connect with drug companies.
Let me introduce myself to the room, I am the large elephant.
This advice is like telling people to trade stock options. It's almost guaranteed not to work except for a handful of very savvy people; but everyone else not doing it assumes those who do are making a fortune. And there's resentment all around.
At the risk of blowing the lid off the muddled symbiosis that exists between Pharma and psychiatry, let me give you the reality.
First and foremost, Pharma does not hire shills. They simply cannot. First, shills are illegal. Secondly, all of those physician-speakers are hired not by the company, but by the rep. Pharma does not pay doctors to write scripts, for the simple reason that the people paying (the reps) would lose their jobs instantly.
Let me explain:
Doctors can get money from two sources: the corporate level and the rep level.
The corporate level: Pharma decides who are the "thought leaders" in psychiatry, and gives grants to them or their university to write review articles, give Grand Rounds or CMEs, etc. In this way, the money is indirect. The doctor is doing something else (like giving a Grand Rounds) that has "nothing" to do with the drug company or the drug, per se. For example, right before Strattera came out, there were a billion articles written about the pharmacology of ADHD, behavioral phenotypes of ADHD, etc. Strattera was never mentioned (it hadn't come out yet), but you see the move. The doctor gets to write his "scientific article" and Pharma gets a market readied.
Corporate also gives grants to do research ("An open label study of Prozac in...") The doctor doesn't get the money directly, it is used to pay a portion of his salary. For example, if he makes $100k/yr (yes, that's all,) and he has grants totalling $10k, he gets 10% fewer clinical duties.
Importantly, these big name psychiatrists can be very haughty, holier-than-thou, because they don't "get paid to write the drug." This is disingeuous because they don't write any drugs; they don't even see patients (except in research studies.) So they really should just shut the hell up, if that's okay with everyone.
The rep level, things are different. Reps get paid by market share growth; so they target the "high prescribers." They don't call on the thought leaders, because they don't generate any scripts. They call on local, clinic, hospital and private practice people. Reps are not allowed to pay doctors to write scripts-- they will get fired. Here is the part of this you must understand, that no wants to: the drug company could not care less about an individual doctor's prescribing. It doesn't matter AT ALL to the drug company if an individual rep has grown his territory's market share by ten billion percent-- it is numerically insignificant relative to the liability if the rep did something sneaky. So if they paid the doctor to do it, that rep is GONE. (Caveat: anything can happen. I'm sure there's a rep out there trading heroin for scripts. But mostly, no.)
Reps do control a speaking/education budget. Selected doctors go through a training on a set slide deck (clinical data, rates of response/side effects, etc-- slides according to FDA specifications, and there are many) and then get paid to give lunch or dinner programs to other doctors. Only clinicians can attend-- no spouses. And the speaker must use the slide deck, because it limits liability to the company because it has been okayed by the FDA. I mention this because if you think you can go up there and blather about your version of the treatment of bipolar, forget it. Slide deck or nothing. Again, the drug company doesn't care if you douse yourself with kerosene, they just don't want trouble. Slide deck or nothing.
For this, you can get anywhere from $500 (guy with considerable experience using the drug) to $2000 (academic types, clinicians who have written papers, etc.) And there's a max per year (e.g. Glaxo=$35k, Wyeth =$50k) which almost no one ever hits. (Caveat: these are speaker honoraria, and wouldn't include grant money and other corporate payments as detailed above.)
But you have to be willing to travel. There's only so many times doctors in your area will listen to your lecture before they want to stab you in the eye. Remember, it's a set slide deck: the program is the same each time.
Here's the other important part of this you must understand: the rep doesn't care about the company-- he cares about his own market share. It doesn't matter how great a speaker you are-- if you aren't writing the drug in his territory, you are nothing to them-- unless he thinks your program would motivate other doctors to use the drug.
Every year, 1st and 2nd year residents collectively decide such speakers are drug company shills and have no respect for them or their information. And 60% of them return in their 4th year and privately ask me how to start doing it. I'll save you the trouble: either write some papers or otherwise develop a specialty; and prescribe the drug. If you like Risperdal and use it a lot, and hate Zyprexa and don't use it, the Risperdal rep will eventually ask you to speak. That's easy. Here's the tricky part: the Zyprexa rep IS NOT going to say, "if you write Zyprexa I'll let you speak for us" because they have a limited budget and you are simply not worth the risk. First, they don't know if you will ever use Zypexa; second, they don't know if your Zyprexa progam will be good enough to convince other doctors to write Zyprexa; and if you are good, then the Risperdal rep has already come to you-- and no rep will use you if you already speak for someone else because you won't be believable to the audience and thus will be useless to the rep. This part is hard for people to understand; they think that "the drug company" wants to "pay doctors to write the drug," and reps thus contribute to company profits. The reps are individuals; they compete against each other in their own company. In fact, they'd rather no one prescribe the drug except their own doctors. Their budget goes towards building their market share; but again, no nonsense, the company doesn't want the risk.
This is sales, not a cabal. The reps are interested in exceeding their quota and making a bonus; not in global hegemony.
So being a thought leader can get you pretty good money (which is helpful as academia pays nothing.) But being an ordinary speaker will not make you rich. But it does give you a not insignificant amount of money you didn't have before-- which, if you have any brains in your head at all, you will put in your 529 or ROTH and buy COP, BRK, GOOG, etc. (And I like ATI. (I own all of these.))
10. Write a blog; ask for donations.
Ok, maybe not rich. But every little bit helps.