5 Myths about the Dr.’s Wife (or Husband)

The 9,000+ views and counting of my recent article 5 myths about doctors our society believes made me realize that we are all interested in raising awareness on the personal and professional life of doctors with the ultimate goal of getting more support on physician wellness.
As it is definitely true that there’s a great woman behind every great man and vice versa, I hope this post will debunk some of the most damaging and isolating myths about doctors’ better halves. (In fact, it is frequently true that the doctor’s spouse is the larger half of the successful work/home life.)

1.    Gold-digger.
Did I hear you wrong? Did you mean goal-digger? Remember medicine as the ultimate career of delayed gratification, remember that doctor who has ½ million in student loan debt snowballing at 7% before he got his first attending paycheck?
Gold-diggers don’t marry doctors; they marry those in business or Hollywood.
To survive as a (candidate) spouse for a doctor for a few years, let alone a few decades, one has to be extremely diligent, resourceful, and dedicated, which is largely representative of the doctor spouses I have met and known.

2.    Trophy.
If you trophy in the sense of Jessica Simpson looking wives, you are wrong. Sure, I’ve met many doctor’s spouse fit for Hollywood stardom, but I’ve also seen them straddle 1 kid in front, holding hand of another kid, while pushing a stroller of a 3rd kid to drop off a homemade lunch for the medical student who’s studying for the 10th hour at the library.
Trophy is meant to be marveled at. Doctor’s spouses don’t even stay still for long enough to get a paparazzi picture out of.

3.    Don’t lift a finger.
Again, these individuals are as devoted to serving others as their doctor spouses. The reason they became husband and wife is because they share the same ideals and passions. Not only do you see doctor’s spouses serving their family, kids, kids’ schools, home churches, but you may find them in many more places instead of just the malls or nail salons.

4.    Spend all the money on herself.
First of all, during the first 10 years after college, there’s not much money to go around. Living under the doom of a large negative net worth while watching your spouse work to death, wondering where the end of the tunnel will be, is not for the faint or vain of heart.
Most doctors’ better halves are the thriftiest people I’ve ever met. They know by heart the value of the precious $12 dollars made as her husband is away for the 36th hour of the day. She knows the sacrifice and she takes nothing for granted.

5.    Spend all her time on herself.
Did I mention she’s busy, industrious, and goal-digging, with a heart of gold and so much love for her doctor spouse, kids, and community? There’s no time to spend on herself.
I do hope that instead the raised eyebrow of “oh, you are a doctor’s wife” and the sneaky glance at her finger anticipating a giant diamond, those at dinner parties will give this dedicated, incredible person in front them a pat on the back, “Thank you for supporting your spouse tirelessly, allowing him/her to be such an incredible doctor, an asset to our community.”
That would be a better day for doctors and their better halves.

 If you like this article, you might enjoy other DWM articles on Personal Finance, Investing, Retirement, Practice Management, & Lifestyle.

All articles by DWM are for informational purposes only and not intended as a substitute for professional advice. Please consult a professional accountant, financial adviser or lawyer, before making financial decisions.

 

5 Ways 8 Year Old Mini Makes Her Own $

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IRS is pretty strict about what you can pay your kids for. In a tax audit, paying an 8 year old 10k a year may seem hard to justify. But I think I have a case with my 8 year old Mini Wise Money (MWM).

Moneywise, it makes sense to pay Mini 10k, deduct her pay from Dr. Wise Money LLC business income, let MWM file and pay her own taxes, and then fund her own Roth IRA. Not only is MWM’s 10k AGI tax rate way lower than mine and that of DWM LLC, but also it is likely the lowest tax bracket MWM will ever enjoy going forward. Both Mini’s income and the tax rate are bound as she gets older.

As many of you know, MWM is a gifted artist. Here’s a piece of oil-painting she completed in 9 hours, over 3 Sundays as a 4 year old. Her art teacher, taught a group of 15 5-13 year old, MWM got in the group class because I convinced the teacher she was a very well behaved 4 year old.

Her art teacher loved MWM so much that when I went on residency interview trail, she offered to take MWM off of her dad’s hand. She joked she would adopt MWM if she could.

Many people have offered to purchase MWM’s artwork, but parents, grandparents are not willing to part with MWM’s original art pieces. Hence MWM has only sold replica so far, but she has sold one original sculpture to my company DWM LLC at $300, and that’s with a generous discount.

MWM has generously displayed her artwork in galleries on drwisemoney.com. So for that, she’s getting compensated for $1500/year. Additionally, you noticed her pictures throughout many of my blog posts and even published on Physicians’ Money Digest. For her modeling work, she gets $1500/year flat fee.

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Mini’s been in the business of art production for 5 years now. This was her very first oil painting when she was just 4 years old. She’s certainly earned her right to make some $ from her art after half a decade of passion and dedication for art 🙂

We recently moved into our dream home (the second home I purchased in 2 years). We kept the first home in our family and got this dream home for MWM, my parents, and myself. As soon as the seller signed our purchase contract, MWM started planning parties and summer camps.

 

I was going to hire a professional party planner for MWM’s 9th birthday, but to my great surprise, Mini rose up to the occasion with quality-work that beats the professional I was going to hire. The tear-jerking party invitation letter (essay) and the party schedule (planned down the minute) certainly would have taken me more than 4 hours to produce (which is worth $388/hr x 4 to me.)

So MWM deservedly earned herself $1500 orchestrating her own 9th year old birthday party. See below for her party invitation letter, and the party schedule. I would definitely hire MWM for future company parties and events. Since at this party, we will be entertaining  & feeding business associates and conducting business meetings for DWM LLC, we can definitely justify paying MWM from the DWM LLC. So it’s definitely wonderful that I am not paying as person, but my company DWM LLC is paying Mini. When I pay Mini, it’s post-tax dollars. When DWM LLC pays mini or me, it’s pre-tax money.

party cake
From my mom, to me, to Mini, we all love entertaining. Professional party planner isn’t a bad gig, huh?

Back to MWM’s talent and hobby in art. She is designing and making our DWM LLC company uniform. The art supply and raw materials would be deducted from DMW LLC. Furthermore, MWM makes $500 for her creative design of the company T shirts. Then she gets $30/shirt purchased. I’m buying 40 shirts for business associates and volunteers. She made another $1200 here. We’re now at $6500.

 

Do you notice how many posts/articles I write are about MWM? She’s my think tank and creative juice. For every post she helps me generate, I started paying her $50 on 1/1/2016. Then I realized MWM was involved in so many posts that it was getting expensive, so we negotiated a fair deal after we discussed DWM LLC’s balance sheet.

Mini gets $2500 flat fee for the year of 2016 regardless of how many posts she help me generate. It’s already saving me money, as I have written more than 50 articles inspired by her this year, not counting all the other ones from prior year when MWM worked for free. $9,000.

 

While I can’t exactly justify Mini’s equestrian lessons as DWM LLC company expenses, I could certainly justify her art lessons as furthering employee education. Since she directly benefits DWM LLC with her digital art gallery contribution on drwisemoney.com, time she spends on improving her art skills are compensated. MWM, voluntarily on average spends 15 hours per week watching art/DIY videos and creating new art pieces: 1-2 hour on each week day; 5-8 hours on the weekend. To be safe, we will count 10 hours per week and that’s 520 hours per year. So I pay her $2,000 for her 520 hours of work, which is just south of $4/hour. Not too shabby right?

 

So MWM will have made $11,000 in year 2016. She’s a pretty good little entrepreneur, right? As her mommy, I’m more than happy to deduct her pay from my business, watch her fund her Roth IRA at the tender age of 8 years old.

 

This one-time 5.5k she contributes to Roth IRA in 2016, assuming 8% annualized return, will double every 9 years. She’d have (2 to the 5th power= 64x of 5.5k = $352,000) at retirement age of 62; tax free too. Let alone if she contributes 5.5k for the next 10 years before she starts college. The 10th 5.5k would have 4 doubling time, so still worth $171,000 at 62. Now imagine adding up all the 5.5k’s impact from 2016 to 2026.

 

I didn’t fund My Roth IRA until 30.

Mini’s certainly starting early and using time value of money as her ally, rather than a foe!

 

Why Low Interest Rates Don’t Matter (Guest Post)

A common question I hear is what to do with money that you are saving for a short-term goal, such as a car replacement, a wedding, or a special trip. Let’s face it – nobody is getting rich off money markets and savings accounts in today’s world! But are you asking the right question? Let’s start with a couple of definitions:

  • An investment is a property bought with the intent of creating wealth. Investing is along-term term process, a time period for you to let your property (stock portfolio, real estate, a partnership interest) grow in value. You should not meddle with your portfolio except to rebalance periodically (yearly for me). In the long term (which I define as 5+ years), your goal is to suitably diversify, reinvest income, and, most importantly, behave appropriately as a long-term investor.
  • Savings, on the other hand, is money accumulated for a short-term goal. Since we define “long term” as at least 5 years, the short term is, by definition, a period of less than 5 years. In the short term, markets are very volatile, results are erratic and unpredictable, and we do not want to risk our savings by risking our savings for extra growth. While chances are that your investment will grow even in the short term, that’s just not good enough.

Buying property for short-term growth and income isn’t “investing” at all. It’s speculating (a.k.a. gambling). You should never count on an “investment” to grow much in the short term and you should not be surprised if it declines in value during that time frame.

Bear markets (defined as a sustained drop of at least 20% in the markets) have occurred, on average, every 5.5 years since the end of WWII. The stock market suffers a 14.1 % drop, on average, at some point every year. Is this a risk you are willing to take, knowing that you may have to put off buying a house for a 2 or 3 years? Of course, this assumes you wouldn’t panic and sell while the market is down 25%, turning a temporary drop into a permanent loss.

So what should you do with money you’ll need during the next 5 years? Actually…very little except to make sure it will be there for you. In the short term, income is of secondary importance. The fact that you may earn a bit of interest while your money waits for the next emergency is nice, but not something you should focus on.

You should allocate short-term savings as follows:

  1. Funds for unpredictable, current spending belong in a basic interest-bearing account. This includes your monthly living costs, your emergency account, and so forth.
  2. Money for “planned needs”, such as what you’ve set aside for a house when you finish training, should be loaned using debt (CDs and bonds) timed to mature when you will need it.

Remember: short-term priorities for your money are liquidity and safety. Long-term priorities for your investments are growth and income. How do you define which is which? By creating a financial plan, of course. Your plan should always dictate your financial decisions.

 

Self-Employed Options for Tax-Advantaged Savings

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I enjoy being my own boss, especially after I learn how much American businesses are supported financially from the perspective of tax efficiency.

I was also happy to learn more about the awesome flexibility, options, and much higher limits of tax-advantaged savings available to a business owner rather than an employee.

 

What is my business?

Aside from my W2 day job (sometimes night, too, sometimes around the clock… 24 hour shift) as a radiology resident, I also receive 1099 income from my tutoring/consultation business, book royalties, and this blog (even though the bog is in the deep red in terms of net profit.)

Why do I want to learn about business owner tax-advantaged savings?

After I max out the 18k limit of 401k at my residency program and the 5.5k Roth IRA, I need more tax-advantaged saving space. I much prefer to put money in a tax efficient vehicles such as individual/solo 401k, SEP-IRA, SIMPLE IRA discussed in this post, than a taxable brokerage account (although I currently do have about $1,200 play money in a free, fee-less, mobile app called Robinhood).

 

Self-employed individuals and businesses employing only the owner, partners and spouses have several options for tax-advantaged savings: an individual 401(k) plan, a SEP IRA, a SIMPLE IRA or a profit-sharing plan. Each option has distinct features and amounts that can be contributed to the plan each year. Use the self-employed 401(k) calculator to estimate the potential contribution that can be made to an individual 401(k) compared to profit-sharing, SIMPLE or SEP plans for 2008.

Read more: http://www.bankrate.com/calculators/retirement/self-employed-401-k-calculator.aspx#ixzz44izFG2jD
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2015 and 2016 401 k Contribution Limits Deadlines

The business owner wears two hats in a 401(k) plan: Employee and employer.

Contributions can be made to the plan in both capacities.

The owner can contribute both:

Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit:

  • 2015: $18,000 or $24,000 if age 50 or over; and

Employer non-elective contributions up to:

  • 25% of compensation as defined by the plan, or for self-employed individuals, see discussion below.
  • One can contribute to an IRA, move it into a 401(k) account, and contribute in-full to 401(k). However, not all of the contribution would be a deductible contribution.
  • 401(k) employer may make an in-kind contribution to the plan. All other rules still apply – i.e., a disqualified persons may not be securing the loan.
  • Employer matching or non-elective contributions are always made “pre-tax.”  Employers cannot make Roth contributions.

 

Vanguard i401k comparison
Get a larger/printable version by clicking on this comparison table.

https://newdirectionira.com/ira-info/contributions/individual-401k

solo 401k

10 Tips to Keep More of Your $

Name of the game, it’s how much you keep, not how much you make. I’m not advocating extreme financial hoarding, I’m advocating smart stewardship of your hard earned dollars.
Like WCI always says, physicians have won half of the wealth building battle. They’ve got high income. The other half is learning to manage the high income appropriately so that high income translates into high net worth.
While many attending radiologists I know are making 300k+ per year, I’m astonished by how little their net worth is relative to that giant income. Very few of these doctors with low net-worth-to-income ratio are true spend thrifts. Where did their money go, you ask?
Here I’m sharing a few tips on how to keep more of those dollars, though on the surface seem high, when adjusted for 26 years of schooling/training, ½ million in educational costs, really isn’t very high. (Whether becoming a doctor is financially sound choice or not is a discussion for another day.)

1.     Pay taxes yesterday: Roth.
Buy your nest eggs on sale, with paying lowest taxes possible during training years. The decade spent in medical school and residency/fellowship is critical to efficient wealth building.
2.     Tax-advantaged retirement saving accounts.
Maximize tax shelter by stowing away money in Tax-advantaged retirement/ health/ education saving accounts (18k in 401k, 5.5k in Roth/Back door Roth, 53k in solo 401k, 14k per child in 529, HSA.) Don’t start a taxable brokerage account outside of these tax-sheltered saving until you max them out!
3.     Turn your hobby into a business.
Businesses pay themselves first before paying taxes. Employees like many doctors pay taxes first before paying themselves. Be a business.
4.     Pay your family, especially kid(s).
Pay your child 5.5k this year for their labor or work, and allow them to pay their own taxes and fund their ROTH IRA. If your child is Mini’s age (8 yo), by the time he/she retires, there will be more than 300k from this one time 5.5k contribution.
5.     Transfer your income into lower tax brackets.
Paying family members, kids in lower tax brackets is a great way to decrease your taxable income (high tax bracket) and increase their taxable income (lower tax brackets).

6.     Stop Churning.
If you are a supersaver and maxed out all tax-sheltered saving accounts, and started a brokerage. Don’t churn (ie. buy and sell frequently) or your return will be heavily reduced by the taxes associated with transactions.
7.     If you churn, churn with Roth dollars.
If you are vain and believe in turnover, at least do it in Roth dollars so that you are paying more taxes on top of the transaction fees.
8.     Spend your business income.
Pay yourself, your business first by investing in assets. Spending your business income on assets, will not only bring you more money (by definition of assets), but also reduce the net taxable income from your business.
9.     Spend less with your employee income.
Your income from employment is post-tax, so saving a penny equals making 2 pennies.
10.  Make tax free money.
Smart credit card use, get yourself cash back with purchases. These cold cash ARE indeed tax free. There’s debate on whether there’s a limit on how much cash back one can make before paying taxes on it. I believe there’s no such threshold. I made 4k cash back last year and did not have a tax form associated with it. But you better check with your accountant and see what he or she says 🙂

 If you like this article, you might enjoy other DWM articles on Personal Finance, Investing, Retirement, Practice Management, & Lifestyle.

All articles by DWM are for informational purposes only and not intended as a substitute for professional advice. Please consult a professional accountant, financial adviser or lawyer, before making financial decisions.