Take a moment and imagine yourself in this situation: you’re sitting at home one day when you get an email from work.
You open it, and find that your annual/hourly pay has just been drastically cut. In fact, you’re told that although you’re expected to work the same amount each week, but you will now be paid 30% less.
You seem to have two choices: comply, or leave the job.
This may sound unlikely, maybe even far-fetched. After all, this scenario could never happen to a doctor right?
Wrong. Not only could it happen, but it has been happening – even before the time of COVID-19 and especially during this time.
For example, take the following situations, experienced by doctors I know personally:
- A private equity firm buys your anesthesia practice. You’re told that they will be changing the staffing model. Expect a 30% decrease in pay and the possibility that your position in the group could be eliminated altogether.
- Your health system has been having financial trouble. Out of the blue, you receive an email stating that you will be receiving a drastic pay cut.
- Reimbursement for the type of procedure that you specialize in has been significantly reduced by all commonly accepted insurance providers. Or, this procedure is no longer billable at all when paired with another procedure.
Now, even if your finances and lifestyle could handle such a reduction in pay, the real issue here is that your time has been devalued. You’re expected to put in the same amount of time and effort – but your compensation for it is decreased.
For me, this is the ultimate defeat. Your time is the most valuable thing in the world, and your goal should be to maximize the amount of value you get for your time. In fact, so many of the things I do, like hire virtual assistants, is to maximize the value of my time.
So if one of these scenarios hits, what do you do?
The Natural and Better Way To React
Well, when this has happened to me (more than once), I followed my first natural reaction – I got understandably really upset, wouldn't you? Though that initial frustration isn’t necessarily bad, perseverating in that angry state quickly becomes non-productive.
It helps to recognize that emotions like these are a sign that your expectations are not being met, and that you need a change. So, see it as a chance to reassess, and shift your focus to what you can control.
For example, let’s say you’ve just been informed that you’re getting that 30% pay cut. After the initial wave of emotions passes, it’s time to get to work and figure some things out to help you through this situation.
Here's a step by step process below if you find yourself in this situation.
Figure Out Where You're At
Do a quick review of your financial situation.
- What are your assets and liabilities?
- What assets are liquid meaning what assets can quickly be turned to cash?
- What are your expenses each month?
- What are in your reserves?
- What’s your net worth?
- What are your other sources of income?
If you haven’t already, write all of these things down. You need to have a clear idea of where you are currently. This will help you make better decisions moving forward.
Once that’s done, it’s time to move on to the next step.
Cut Your Discretionary Expenses
Even a modest reduction in pay can send shockwaves through your monthly finances if you don't have other streams of passive income and especially if you're living paycheck to paycheck (which many doctors are sadly). If you find yourself in this situation, it’s time to sit down and see if there’s anything that you can live without.
Yes it's easy to think about skipping that daily dose coffee, but start by getting the most bang for your buck. Think about the discretionary expenses that are costing 3-4 digits a month like upcoming large travel plans & expensive memberships (golf, gym, social clubs).
You may also discover that there are a few things you do use that might have to be placed on hold or restructured. For example, many gyms can hold your membership for a few months without having to cancel your contract.
You'll know what a discretionary expense is by asking yourself, “Do I want this or do I NEED this?”
Whatever you find, it may be a good time to trim any excess monthly expenses. This gives you a chance to truly see how well you can survive this pay cut in the short term.
Once this is done, it might be good to take a hard look at the job itself.
Assess, Negotiate, Then Consider
At this point, you should assess what this current job does for you – both financially and in terms of fulfillment. Both are important. Whether it meets your needs financially is simply a a matter of taking the steps above. Whether it provides fulfillment is a personal decision.
So if the current job meets your needs, first determine if there’s a potential for you to negotiate the terms of the job or even transition to another within the same organization. For this process, the general rule of thumb is that the more value you provide, the more income you can command.
When I was told that recently that my pay per hour in my current position would be cut, I did a quick assessment. I realized that thankfully because of my other income streams, I would be fine financially and that it provided a ton of fulfillment for me. I also still had the flexibility to pursue my other ventures and keep my current lifestyle. So there was absolutely no thought to moving elsewhere.
However, it wouldn't have been like that five years ago. In that situation, I would've had a very different mindset.
If the current situation isn't sustainable, consider this an opportunity to take a step back and think about how you want to shape your life moving forward for yourself and your family.
Set New Goals
Most of us get the jobs we want, then we forget to set any further goals. So we tend not to grow, unless we're forced to. A situation like a devaluing of your time will force you to re-examine and grow.
Take the answers from the previous step and base your goals around them.
- What does a fulfilling job look like?
- How much do you want to make from your ideal job?
- What are you willing to negotiate for?
- Am I living in my ideal location? Is it time to think about moving to a different area and a different market?
- Or maybe it’s time to pivot and consider different ways of making money in and out of medicine
Then, write out some goals.
- Where do you want to be in a week? A month? Five and ten years from now?
Having written goals gives you something to aim for, and a way to keep yourself on track. You should also make sure that these goals follow the SMART principle – Specific, Measurable, Attainable, Realistic, and Time-bound (read more on this here).
Whatever you decide, realize that your situation is temporary and there are always alternatives. You just have to learn to tap the creative side of you to make it happen.
Create Multiple Streams of Income
So whether you decide to stay with your current job or move onto another one, realize that the devaluing of your time can happen again and again. Let's face it – with the growing trend that physicians have less autonomy and act more like technicians, we lose leverage and fall further under the control of administration.
The only way to protect ourselves from this devaluing phenomenon is by being in control of our income streams. That means diversifying and relying less on our physician incomes.
How do you do that? Well, there are many ways to create income streams outside of your “day job.” To make it simple I always say it takes some amount of MET: Money, Energy/Effort, and Time. If you can’t give much of one, you’ll need to give more of the others.
Determine how much of each you’re able to devote to creating streams of income. If you’re low on time, more money and/or effort may be required to reach your goals. On the other hand, time and effort can make up for a lack of capital. You get the idea.
Read books, listen to podcasts (I started my own this year), and read blogs for inspiration. If you want some ideas to get started, here are two posts: 10 Perfect Passive Income Ideas for Physicians and The List of Physician Side Hustles.
Ultimately, the one solution I don’t believe in is to simply buckle down, grit your teeth, and work harder. That’s an understandable thought; after all, as physicians, we’re used to working for our goals.
But in this case, you end up working harder for the same amount of benefit, and now you’re even more trapped. You’re now running the hamster wheel at a faster pace, and eventually, you’re much more likely to burn out.
When it comes to finances, the old cliche rings true: work smarter, not harder.
So while your salary does matter, your quality of life comes from how much time and energy you have to put into getting it.
It’s important to realize your true worth – how much your time is worth. The most valuable thing you have is the choice of how to spend your time.
Who knows? You may find that what seemed like a tough blow actually helped you reach the goals you’ve always wanted.
Use these guidelines to find a way to combat the devaluing of your time and instead leverage your time to create your ideal life.