Smart Money MD

We focus a lot on finances and keeping realistic lifestyle standards on this website.  As doctors, we are privileged to have a relatively high standard of living compared to the rest of the population.  Of course, this does come at a price of a long incubating period before doctors “become” useful and a relatively high level of stress in our work.  What is important to realize is that despite a nice paycheck, doctors are far from immune to financial ruin and bad decisions.  Much of these bad choices come from generalized overspending and bad investment decisions.  I remember seeing an oncologist in my hometown open a Baskin Robbins and Popeye’s fast food establishments only to have them close down after a few years.  Just because you can cure cancer doesn’t mean that you can run a fast food business.  But hindsight is 20/20, as they say.  If you are going to hit it big, you’ve got balance risk and reward while adding in a touch of luck.  If I truly had that formula, I’d be selling it through my informercials.

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Diversification protects us from obsolescence.

I’ve long believed in branching out our revenue stream. It doesn’t ever seem wise to be a one-trick pony in income generation.  What if a younger, better version of yourself comes along to take your job? In middle school, I remember seeing kids trade baseball cards.  Sometimes the trades involved cash, but only in small amounts.  After all, 5th graders were limited to allowance money.

Later, Magic: The Gathering cards came about and kids started trading and selling those.  It was a mini-economy.  I remember that there was one kid who seemed to have the most valuable cards that everyone else wanted.  The kingpin.  I always considered that kid to be a successful entrepreneur until the game fell out of fashion, and no one wanted to buy any of his cards anymore.  Amateur.  He should have diversified.

You might also like: Why every doctor needs a side hustle. 

Unfortunately, most people never diversify either.  Most doctors I know certainly put all of their eggs in one basket.  Myself included.  Most of the time we just don’t have the time, energy, or interest in diversifying income.  The people I know who actually do really love money.  Sometimes more than their families. The rest of us just buy disability and life insurance and move on.

But having ancillary income isn’t necessarily a bad thing.

What is even better than income diversification is passive income diversification.  Who doesn’t love passive income? (That’s you @PassiveIncomeMD!)  Many doctors I know buy real estate, flip homes, write books, and even host wine tastings as means of additional income.  Some of it is passive. Others seem far from passive.  Many of these options do bring income outside of their primary occupations.  Who knows, at some point your hard work will actually pay off.  The book you wrote that you spent months away from your family can actually produce a lasting income stream for years. Think of it like paying it forward with delayed gratification.

Bullshit! I trained 12 years to become a thoracic surgeon, and you want me to flip used furniture on Craigslist on my hours off?

Point well taken.  You have to look at the situation in two aspects:

1) How much time do you have to spare? What are your family obligations? If you spend that extra 5 hours per week writing an ebook after being at work for 85 hours that week, will your wife divorce you? How much do you like money? How much potential earnings and gratification would you get for doing extra work?

2) Will this ancillary business venture affect your primary income stream? You see this as a recurrent theme in Shark Tank.  You have bustling entrepreneurs who aren’t willing to quit their day job yet but have potentially groundbreaking businesses that need more dedication. Which one do you choose?

You have to look at what your passion lies.  The anesthesiologist who spends his residency looking at foreclosures clearly has a passion in real estate (not in medicine).  If you are a thoracic surgeon who spent twelve years of your life to learn about cracking open chests, you’ve probably found your passion.  You probably don’t want to (or need to) find a side hustle.

Doctors really don’t need to have supplemental income. 

This goes back to my main premise—doctors don’t need to have ancillary income outside of their jobs.  We work relatively hard in our primary jobs, and make good money.  Just because some doctor you know from the hospital brags about flipping homes in his spare time doesn’t mean that you do too.  Likewise, just because some doctor blogger on the internet starved himself for two years to pay off some egregious amount of student loans doesn’t mean that you do either.

You just have to know what is important to you, play your cards strategically, and fold when you have a bad hand.  If you have a potentially lucrative hobby, you can decide whether it is worth your time to venture into commercializing it.  If not, you can still be a successful doctor even if you are a one-trick wonder.