If you've been in medicine for even a little while, you know there are a number of taboo subjects that just aren't discussed.
One of the most important discussions that medical students do not have while in training is the subject of money and overall financial management.
It's been very exciting for me to watch this very cool website, Uncommon Student MD, so quickly develop into the premiere source for honest, practical information for medical students. Over on Freelance MD, we've written a number of articles about investing and money management for physicians and medical students. Here are some of our prior posts:
- Physicians and The Richest Man in Babylon
- Keep It Simple
- Physician Wealth Protection
- First Things First: Handle Your Finances as a Physician
- Physician: What Are Your Assets?
I also would like to recommend to you all Dr. Robert Doroghazi's book entitled The Physician's Guide to Investing. I wrote a brief review of the book here on Freelance MD, and while I would differ from the author on a few of the finer points, I think the gist of the book is excellent.
Last, at our most recent Medical Fusion Conference I was able to sit down with Dr. Setu Mazumdar, an Emergency Medicine physician turned financial manager. Setu gives his perspective of "financial independence" in this interview. Check it out...it's worth watching. Hopefully, by learning a bit about finances while in training you'll avoid some of the common pitfalls of physicians and money.
This is Greg Bledsoe from the Medical Fusion Conference, here with one of my favorite people, Dr. Setu Mazumdar. It’s been really funny because Setu and I didn’t know each other two years ago but I read a couple of his articles in EP monthly and some of the other things that you’ve done Setu and I really liked what you have to say about financial management and I really got this pulled in with what we do with Medical Fusion. One thing led to another, we really hit it off and Setu was one of our members last year. We honestly invited him back and here he is. Setu, it’s great to see you again.
Setu: It’s good to see you, too Greg.
Greg: Tell us a little about what you do. You’re an emergency physician but you do financial management full time now. Tell us a little bit about that and then we’ll ask you some questions about the conference.
Setu: Well, the brief summary of what I do is help other physicians get their financial houses in order keep it that way. It’s not just investment management or financial planning. Those are just kind of tools we use to do the ultimate thing which is getting financial life in order. I still practice emergency medicine a couple days a month. All my clients are physicians but I saw they made a lot of mistakes in the past, I want to make sure other physicians don’t make the same mistakes that I did.
Greg: What’s interesting about your story is that you’re a normal emergency physician. You’re a normal guy but you did something really unique that a lot of physicians don’t do until much later. You got serious with your financial management early. You live frugally and you save aggressively--Fifty-percent of your income when you ride off your residency. Tell us about what did that do to you. Why is that something that’s important, why not just put it off in another 10 or 15 years?
Setu: Just one answer to that question is probably my upbringing where my parents came from India. We had basically little money or no money when my dad was also a physician who’s going through his training. I think it’s just my upbringing and my wife’s upbringing is just the same. She has Chinese and serve from an Asian background. We’re sort of always had it in our culture this issue of saving and from what our families went through and from living to this country. It’s sort of embedded in my brain to do it that way.
The other issue was later on in my emergency medicine career, I realized that it took me personally financial freedom far more valuable than buying the next Lexus or the next plasma TV. I’m not saying there’s anything wrong with buying those things but I just realized it that you can’t have it both ways. If you can have those items and you’re miserable with what you do, then you can’t serve it and at one hand complain about it either. So for me and my wife, financial independence was far more valuable than, actually priceless, compared to buying the next big thing. It’s not that we’re living in poverty, but just taking that action to take control of our lives, that’s what it is for us.
Greg: When people hear this, they’ll have this mental image that you’re making $200,000 but you’re eating Ramen noodles and it’s the middle of the winter and you’ve got your heater turned off ‘cause you’re trying to pinch pennies or whatever. First of all, that’s not true. And secondly, what’s the benefit here? You say financial independence, does that mean you basically, because when I think of that, I think of a guy that has 15 or 20 million dollars in the bank or whatever, but that’s not exactly. You can be financially independent even with less money in the bank but what that does is give you an incredible freedom. You can choose and pick the projects you work on, you can pick and choose the hours that you work, you can walk away from clinical medicine for a time or completely because you don’t have a $20,000 every month you have to cover. Am I right?
Setu: Let me answer your questions a couple of ways. When I think of financial freedom and independence, it’s not just the number, portfolio or the amount of assets you have. It’s more like a state of mind. Take for example; let’s say you’ve got a million dollar assets or a million dollar investment portfolio. The next dollar you earn on that portfolio is worth you a lot less than if you had a $10,000 portfolio. The issue is when you have enough, the extra dollar doesn’t create that much more happiness than it did a lot before. So what that number is to people, it could be you know $10 million for some people, could be a million dollar for other people, it’s really the state of mind that if you’re personal expenses are modest—I don’t eat Ramen noodles—but I don’t live in poverty. I don’t turn the heater off, I turn all those things on, but it’s a matter of saying okay, to get a car for example—Okay so I drive a Hyundai Sonata because it’s reliable, it costs me $15,000 a year, what I paid for it comes back. To me, if I bought a Lexus LS, yeah it’s a better car, I want one, too, but the extra money is not going to create that much more happiness. So it’s really just a state of mind. I’m not saying don’t buy the Lexus, just realize that if you’re going to buy it, you’ve got to sacrifice something else. What is it that you value? And to me, the value of that state of mind is far more important than those other things. It doesn’t mean you have to skimp out on everything.
Greg: You’re hitting on this very importantly. I mean, I lost track of how many of our colleagues are now in their 30s or in their 40s and they’re frustrated. And you say if you’re so frustrated, why don’t you cut back your clinical practice a little bit, you know the emergency physicians, why don’t you go down from 20 shifts a month to 10, that’ll probably provide you a little bit relief. And when you start peeling back the surface, a lot of their frustrations is because they’re feeling slaved. They feel like they’re overwhelmed and they can’t get off the merry-go-round. It’s this rollercoaster ride and they can’t get off because they’re in this crap. And a lot of these go back to their ideas of money management. They got off their residencies and they said: “I deserve this. I’ve sacrificed…” And I see their point, that they go out and they buy an expensive home, they buy an expensive car, they join the country club, they put their kids in really expensive private schools, and they take some really big vacations which, okay not any of those things are front things, but they end up with tremendous debt and then they’re living paycheck to paycheck, they have no freedom, they have no sanity. And what you’re saying is so powerful because basically, you know I like those things, too, but I like my sanity and freedom more. That’s what I like about the advice you gave both at our conference and at online. You’re showing physicians they don’t have to live like that.
Setu: Quick comment on that—here’s the way I look at it: if you have to list the top 4 or 5 things that are the most important in their lives, I bet you these are the top 4 or 5 for almost everybody—their health, their family, career, religion for a lot of people, and money. No particular order, but the way I look at money is that it ties in to all those other things. By money I don’t mean just the amount or stuff you’ve got, but if you’ve got the right financial planning piece in place, then it relates to those other four things that are really important to you. It allows you to do those things that are important in your life. So it’s just a tool that allows you to do those other things NOT the end, just the means to get to do those other things that are important.
Greg: And it affects it because if you are living paycheck to paycheck and you’re stressed out at work and you work so much that you can’t keep yourself physically strong, it affects your health; you can’t see your family, it affects your family relations, your marriage your kids; if you can’t go to your place of worship and have some downtime and spend some time, that affects your spirituality. A lot of it goes back to poor financial decisions.
Okay, so tell us what makes Lotus unique. What I really like about Lotus is that you align yourself with your clients and you walk arm in arm with them towards the same goals. It’s not you being predatory towards them. I love this concept because physicians walk around with big targets on their backs and these financial people take advantage of their ignorance and they take advantage of the ‘doctor lifestyle’ but you’ve cut through all that and you’re providing us services. Tell us what makes you unique.
Setu: I think the couple of things that make this unique are (1) the compensation structures are paid directly by the clients. We don’t accept compensation from any other source, no referrals no commissions, no selling your mutual funds or anything—that’s one issue. There’s a plenty of good advisers out there, not plenty but enough now, but I think the second thing that makes this unique is that I tell the brutal truth. A lot of times the truth is now what you want to hear. You know a lot of independent advisers could be objective but they won’t tell you the truth. Part of that truth is things like the following: You’re guaranteed, in my opinion, to lose a truckload of money when you invest and that’s going to happen, there’s no way to avoid it. You have to face the music and you have to make sure that you take on the right amount of risk. Other things are: you can’t beat the market. There are a lot of independent advisers out there who’s claiming they can somehow beat the market but it’s not possible. Or if it is possible, the chances are so small, it’s not worth trying. And then there’s always the other issues like the fees that advisers charge. The brutal truth is that a lot of these guys are just charging way too much for things that I honestly think they should be charging for. And the other thing is that I think I bring to the table, you can side into what it’s like to be a physician with the challenges I faced because I made the same mistakes that a lot of people I see making. I kind of misadvised myself 10 years ago, got ripped off, wasn’t getting good advice, I was sold products I didn’t need, and I was trying to beat the market. Those things were the foolish things that I did and I want to impart that not only to our clients but even those who doesn’t become our client, hopefully they could avoid the same mistakes that I did.
Greg: What’s your opinion on the physician who’s trying to do it on their own. If you’re openly saying: look your chance of beating the market is slim, you’re not warning about it, these physicians who’s trying to study it for themselves, what’s your recommendation? Obviously there are people who are interested in this, they want to try it on their own, you’re not against that but you’re also saying that there’s a place for someone like you.
Setu: I have nothing wrong with somebody trying to do it themselves, but if you’re going to do it yourselves, there are four key characteristics you’ve got to possess. The first is the interest to do it, they’ve got to have the passion to read, you know statistics and investment. If you don’t have the passion to read, there’s no way that you can get to the other three characteristics. Second, you have the time to do it. If you’re a physician, you’ve got a family, you’ve got a full time medical practice and you’ve got to find the time to do it. Then you’ve got to have the knowledge of market history and all these financial planning laws and issues and deals. Let’s say you possess all those three, forget about all that if you don’t have the discipline to execute the plan, then you’re going to ultimately fail even if you have the interest, the knowledge and the time. If that’s the case, you don’t possess those four characteristics, then you need somebody who’s going to do it for you. Let’s face it, everybody’s got a financial plan—it could be yourself or you could have hired somebody but everybody’s got one. So the question is do you do it yourself or do you hire advisor. And if you’ve got someone who’s in your best interest, who understands you, usually the fee that they charge is could be worth the value that you get out of it and it shouldn’t be, because if you don’t have the interest, the knowledge, the time or discipline, the fee should be worth it.