Like many entrepreneurial minded folks, I enjoyed reading Rich Dad Poor Dad and Cashflow Quadrant. While I’m not a Kiyosaki fanboy by any means, I do think these are fundamental books that everyone should check out at some point.
One of Kiyosaki’s famous teachings is this concept of the Cashflow Quadrant. It’s really a simple concept, but very powerful and one that every physician or future physician should understand. Here it is:
Admittedly as a pre-med, medical student, resident and embarrassingly enough as an early career attending I had no idea what this meant. What is especially interesting is I thought I was financially savvy. I did all the right things like keep my med school debt to minimum, live well below my means, max out retirement accounts and live like a resident which I continue to do 4 years into my career.
It wasn’t until I got to the OBL as a third year attending and had the role of “business owner” bestowed upon me that I had to take my financial knowledge to the next level and embrace concepts that the majority of the working world really has no idea about.
As physicians we train very hard to build a unique and in-demand skill set. This is particularly true in interventional radiology where we train for a long period of time and perform procedures that add tremendous value to both patients and the healthcare system as a whole. As such, despite my misgivings with the way we are valued in most hospital based settings, we are clearly paid very well in the grand scheme of things.
What may not be readily apparent to the average young physician, trainee or medical student is the idea that we are training to become employees. We are learning a high end trade. No one is training us to become business owners. Of course in hindsight this makes perfect sense because we are being trained by academic physicians who are largely employed physicians.
Look, there is nothing wrong with being an employee. We need to be good employees and do our jobs well because we owe this to patients. And of course, we can’t expect that everyone should be a business-owner. Despite this, I have two major concerns with our lack of financial awareness and understanding as young physicians or trainees. One of these concerns is specific to interventional radiology.
- When you are an employee, you are simply exchanging your time for money and our commitment as physicians is often exploited by others who may not have the same moral commitment as us.
- Regardless of practice setting, modern clinical interventional radiology practice involves many aspects of being a business owner including the marketing and business development endeavors many of us will never learn in training.
Having had the experience of being an active participant in all four-quadrants there is a time and place in our lives for each endeavor. The problem for physicians is we largely spend most of our lives as employees. For those of us who are financially savvy, or wish to retire one day (which is most of us), we are also investors largely through employer sponsored investment plans like 403bs, and 401ks. We work hard for 30 years and call it quits at that point.
I’m of the personal opinion that being a good employee is much harder to do in medicine now than it was maybe even 10-20 years ago. Personally, I can’t imagine doing it for 20-30 years which is expected of us. And it’s not all about money. While salaries are lower than what they were in the past, at least in relation to inflation, I think the bigger problem we face as physicians is control over our time. As we grow into our incomes, there is a constant pressure to produce and generate revenue. This can result in unfavorable practice environments where we have to do more and more each year to keep salaries where they are. And those of us who would rather work less (be it for better patient care or to just remain sane) may not have the option if your partners don’t support that. Specifically with respect to interventional radiology, when we are predominantly hospital based, we are essentially required to support the needs of the hospital which can be downright exhausting and not always intellectually satisfying.
Ultimately, many of us will experience significant burnout at some point. When you work for the man, which can be a large healthcare system/PE firm, a group of 40 radiologists or some non-physician owned OBL, you can easily lose control over your immediate work environment. We are conditioned to more or less get with the program and accept that this is what we do because it is expected of us, for the good of patient care. After all, we’ve been getting with the program for all of our adult lives. Why stop now?
To make matters worse, the organizations which many of us work for may not be up to speed with the realities of a modern day clinical interventional radiology practice. As such, my generation of interventional radiologists is charged with changing the attitudes and practice patterns of individuals who have been conditioned to think and act a certain way for the last three decades or so. This requires significant work establishing buy-in, creating financial models/business plans to justify our clinical IR existence and changing the minds which often cannot be changed.
To really change our collective financial lives for the better and to give us the leverage to say no to subpar practices, I believe it is imperative that we seek financial independence. Understanding how you build wealth in each of these four quadrants can really help give you better clarity. So what should you do to improve your financial situation?
Exist in all four quadrants.
You need to be a good employee, you need to own your own job, you need to be an investor and you need to establish a business. Diversify your income streams, cover your living expenses and take “risks” so you can live life on your terms doing what you love. For me, that love includes being the best IR I can be, teaching and mentoring others and working on this blog!
So what have I done?
- Be a good employee
As much as I hate having anyone tell me how I should do my job, maintaining at least one source of W2 income is practical for several reasons. It provides a safety net. Many W2 jobs come with essential benefits like health insurance. It allows us to readily qualify for mortgages when it comes time to buy a home. For me this is essential as I build my real estate portfolio. My W2 source of income is a teleradiology position that I can do on my own time. This position has helped me fund my IR endeavors which is great because if I fail at everything else professionally, I’ll still have this wonderful job utilizing skills which I worked hard to obtain. I do feel it helps me be a better IR.
- Be self-employed.
Leaving a W2 IR job in a traditional IR/DR group to being a 1099 contractor for my own OBL and subsequently a locums 1099 for hospitals and other OBLs was the best business decision I made.The ball is in my court when it comes to work. I can choose when I work, how much I want to work and I have far greater leverage for negotiating pay. Better yet, I can deduct significant expenses and lower my tax burden. I can invest in retirement plans based on my decisions and not be subject to a given plan by a larger system or group. I am not held to ridiculous non-competes and am free to pursue endeavors both inside and outside of medicine as I wish.
- Be an Investor.
Many of us are investors, but really we all have to be investors to eventually achieve a nest egg to allow us to retire. I view investing a bit differently. I want my investments to not only support me through retirement, but I want them to cover my living expenses and lifestyle as soon as possible so I can take really big risks while I’m young and not have to rely on a less than ideal job to make a living. For me, this involves keeping my pre-tax investments in traditional broad based index funds for retirement purposes, building a decent sized taxable brokerage account in index funds, but also devoting a sizable proportion of my after-tax portfolio to income producing assets. Once the tax-advantaged monthly and quarterly checks start rolling in, you’ll realize pretty quickly that you are never more than 10 years from financial independence as a physician, even less when you’re blessed with the income of a diagnostic and/or interventional radiologist.
- Be a Business Owner
For physicians, this can be particularly difficult. Owning and operating your own practice becomes harder and harder each year due to many factors in healthcare. It’s really funny when you think about it though, because all these “practice building endeavors” and “quality improvement” projects that we engage in as physicians are more or less business development. We are tasked with creating clinical interventional radiology programs in many settings. Or we are spending energy and effort to convince others why being clinical is important. So in essence most of us in IR interested in a modern practice have to be entrepreneurial. So why not just do it for yourself and stop making other people (particularly non-physicians) rich?
Oh I hear so many excuses. It’s different when you have kids…I don’t have the training…I know nothing about business..etc etc. I hear these in conversations every week. But let me tell you something: when your back is against the wall and you need to do this to survive, you’ll find a way to make it happen. I learned this when I was forced to do it in a brand new OBL which I invested a six figure amount into. Turns out that I did just fine and I’m by no means special.
We are so resourceful as physicians. We really are smarter and more committed than most people. If we exerted the same effort we did in medical school and residency towards business endeavors, we’d likely be just as successful.
But we are inherently risk averse. And as such, we complain and we get taken advantage of. We’re entitled and feel like these high salaries with generous vacations are owed to us. Having experienced OBL ownership, I 100 percent believe the benefits are worth the headaches. I think many of you would feel the same if you had a similar experience. It requires vision and careful execution.
But I encourage you to think beyond healthcare as a business. You can develop new businesses totally unrelated to healthcare. For example, the same principles I learned regarding OBL ownership I’m now leveraging to other business endeavors including a short-term rental business . Who knows? Maybe one day even this blog will generate a single cent. Lots of potential out there. Dig deep and try something new.
Conclusion
Know where you stand in the greater financial picture. We are mostly employees and investors. We get to do cool things and save lives. But we can regain control of our time and take exciting risks by having a better understanding of personal finance and building wealth. Use the cashflow quadrant to help clarify your financial picture.
“So in essence most of us in IR interested in a modern practice have to be entrepreneurial. ” This hits home. As a young trainee part of the challenge of IR I am anticipating is getting other people to know what services we can provide. Even in an academic hospital-based setting – need to learn how to market and “practice build” to grow service lines.
You are anticipating a very real challenge. Practice building is difficult, but rewarding. And yes, very important regardless of practice setting or financial incentives. It certainly adds additional meaning to the great work we do. I’m glad you’ve found this post helpful!
Wow, thank you so much for your excellent work. Im an R2 interested in going into IR when I found your site, and I love your content. I’ve probably read 60 percent of your blog posts- binge style.
Thanks for checking out the site!