How doctors can navigate the financial crisis [PODCAST]

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“Out of the blue, a new virus popped up, and ten weeks later, it is a pandemic. Within the last ten weeks, doctors have identified this new disease, figured out how it is transmitted, identified what body fluid we need to test to determine who has contracted the disease, developed a test for it, mass-produced that test, and distributed the tests all over the world. What an incredible response we have had from the medical community. I can’t believe we could do all that so quickly. Hats off to the researchers who pulled off this incredible feat. Yet to hear it on the news, we haven’t done anything to stop the spread of the coronavirus.

Now we have been asked to use social distancing to help slow down the spread of this virus. Workers staying home from work is disrupting income all over the world. The entire travel industry has almost shut down. Cruise ships are suspending operations, professional and amateur sports have come to a halt, Broadway has shut down, even Las Vegas is putting away the red carpet. People are told to stay home. Businesses have shut down, including Disneyland. The economy has slowed to a standstill. This is even worse than the government shutdown. This pandemic highlights the need for an emergency fund.”

Cory Fawcett is a general surgeon and can be reached at Financial Success MD.  He is the author of The Doctors Guide to Starting Your Practice Right, The Doctors Guide to Eliminating Debt, and The Doctors Guide to Smart Career Alternatives and Retirement.

He shares his story and discusses his KevinMD article, “This pandemic highlights the need for an emergency fund” and his book, The Doctors Guide to Navigating a Financial Crisis.

Hosted by Kevin Pho, MD, The Podcast by KevinMD shares the stories of the many who intersect with our health care system but are rarely heard from.

Transcript

Kevin Pho: Hi, and welcome to the show, where we share the stories of the many who intersect with our health care system but are rarely heard from. My name is Kevin Pho, founder and editor of KevinMD. Today on the show, we have Cory Fawcett. He’s a surgeon and the author of the popular series The Doctors Guide to. It’s a series that talks about physician financial advice as well as practice management tips. I highly recommend it. His latest book, coming out on June 16th, is The Doctors Guide to Navigating a Financial Crisis, which is extremely topical, and we’re going to get into that book. But first, Cory, welcome to the show.

Cory Fawcett: Hey, Kevin, thank you for having me.

Kevin Pho: So tell me a little about your story and your journey to where you are today.

Cory Fawcett: Well, you know, when I was a kid, I always wanted to be a doctor, and so I just got started on that path from very young and never really strayed. I went straight through, doing everything you’re supposed to do along the way, and when I came out a trained general surgeon, I moved back home and practiced 30 minutes from where I grew up. I had lots of relatives here, and my two grandmothers were right in the neighborhood, so, you know, it just felt like coming back home.

I spent 20 years in private practice general surgery, and then I was ready to back off. Twenty years of doing trauma surgery is kind of tough on a person, and I was ready for a little lighter job. So I told my partners I was going to retire at age 50, which had always been my target. But one of my partners said, “OK, well, what are you going to retire to? Because everybody I know who retires young and doesn’t have a plan is back to work pretty soon because they’re bored.” And so, instead of retiring, I slowed down and spent some time thinking about what I would do with myself in my retirement years.

That’s when the idea came up to teach finance. I had been teaching finance for years. My wife and I led a Bible study called Crown Financial Ministries, which is a 10-week Bible study on money management, and we’ve been doing this for years. So I thought, “Why don’t I just take that message to physicians?” I started this book series and a blog and doing all kinds of podcasts and things like that, and I ended up where I am today, with book five coming out in a couple of weeks.

Kevin Pho: Well, it’s a wonderful story, and I think a lot of physicians need financial education, because that’s not something that’s taught in medical school or residency. We are in the midst of a pandemic, and we are filming this in the first week of June. One of the things that I’ve noticed is how quickly this came upon us, because back in February, the stock market was at all-time highs, and then within three weeks, it dropped 35 percent. On the private physician finance boards, there are a lot of questions from physicians: what to do with their assets, should I buy stocks, should I stay in mutual funds. A lot of questions that I read every day. So tell me about the story behind your book, and why did you decide to write it?

Cory Fawcett: Well, we were on vacation in my motor home. I’m retired now, and so we travel around a lot, and I was writing a new book on this trip. We got home, and then the pandemic shut down everything, and all of our travel just came to a halt. It also became very clear as I finished up that book that the timing for that book was off. This was not the time to release that particular book.

And so I thought, you know, what’s happening now? Like you said, there were a lot of doctors who were hurting and asking questions: “What do I do?” They’ve lost their job. I mean, doctors thought they had great jobs that were very secure, and suddenly they were unemployed, and they didn’t know what to do. So I was actually looking for a book that I could refer them to, and I couldn’t find one. All of the books I found about financial crises were about how to prepare for one, so that when it happened, it would have less effect. But I couldn’t find something on what to do when you’re in the middle of it: How do I get out of this mess?

And so I thought, “There’s a need here. I need to get that book out, and I need to do it quickly.” So I contacted my publisher, and I said, “Can we get a brand-new book out from scratch in one month?” And she said, “Well, that’s pretty ambitious, but if we pull out the stops, yes.” So I started working on this book, and I worked like an intern. I was at work before sunup, and I was at work after sundown, and that’s all we did. In two weeks, I turned in the first draft of the book to the publisher, and it’ll be coming out on the 16th of June.

I think it’s really timely. I mean, there are a lot of people always in a financial crisis. Stuff happens. We have medical problems with people, people lose their license, people get fired, people get sick, get in an accident, their house burns down. You know, there are always people in a financial crisis. But right now, the number skyrocketed, with so many unemployed people. And so I decided to write this book not just pointing right at the doctors, but so that anybody in a crisis will be helped as well. I wrote it to the doctors, but for everybody to use, because there were so many people who need this help now.

Kevin Pho: So what are the three main points that you would suggest to physicians, or anyone reading this book, during this financial crisis?

Cory Fawcett: Well, I think the biggest point that I emphasize, the one main point, is to treat this like an emergency. I talk about it in the book. As a trauma surgeon, we have the golden hour. You know, you get injured, and we’ve really got one hour to get things stabilized and get you back on track. Otherwise, your death rate starts going up. In a financial crisis, I would consider it the golden week. That very first week, when whatever it is that caused your crisis happens, is when all your action needs to take place. Because if you don’t get things stopped now, stop hemorrhaging money, stop spending money, stop having the money go out in a crisis, then you’re going to run out of money. It’s just like if you were bleeding to death from an injury: If you don’t get the bleeding stopped, pretty soon there’s no blood left to circulate, and you’re dead. And that’s what’s going to happen with your money.

Too many of us have an emergency fund, and we decide, “Well, I’ll just fall back on my emergency fund. That’ll take care of me. You know, that’s why I’ve got it.” And they don’t make any other changes. There was one doctor, and I highlighted his story in the book. He had a six-month emergency fund when his emergency happened and he could no longer work, and it would be forever: He could no longer work. His emergency fund ran out in three and a half months. His six-month emergency fund ran out in three and a half months, because he kept doing exactly the same thing he used to do, thinking, “Well, we’ll get through this. We’ll get over this.” He didn’t make those urgent changes. But if you make those urgent changes and treat this like an emergency, and in that first week you start making cuts, then your emergency fund is going to last you a whole lot longer. And you don’t want to run out of emergency money.

One of the problems is that people treat it like a paycheck: “Oh, I’ll just substitute my emergency fund for the paycheck I did have, and it will provide me the money.” When you do that, you’re going to burn through that emergency fund, and then it’s gone. What you have to do is treat this like an emergency. Stop hemorrhaging money. Make drastic cuts in your expenses. Cancel all of those upcoming vacations. No matter how badly the kids wanted to go to Disneyland, you can’t go right now. You’ve got to conserve your cash, and then only use your emergency fund to make up the gap between what you couldn’t cut and what you have coming in, so that you can make it last longer. I think that’s probably my biggest take-home point: You’ve got to treat this like an emergency. Don’t wait. Don’t think, “Oh, it’s going to be,” you know, “in a couple of months.”

I had one person who got fired because their office closed, and I offered her a job. I knew this person; it was a secretary at a doctor’s office. “You come work for me. We need another secretary. We’re about to get one. We’ll take you.” And she said, “Well, no, I’d like to take unemployment for a few weeks and take some time off.” She didn’t treat it like an emergency, and by the time she was ready to work again, she had to look for a job. She had one fall in her lap that she passed, because she didn’t treat it like an emergency. She just let it go: “I’ll take care of it later.” And then her unemployment ended, and she didn’t have a job, and she blew it. So I would say that’s the one big take-home point: Treat this as an emergency.

Kevin Pho: I think that’s great advice. And on what you said earlier about the job security of physicians, I think one of the things this pandemic highlights is that our jobs aren’t as secure as we once thought they were. I know a lot of physicians who are furloughed or laid off. As we know, a lot of hospitals and medical institutions, because elective surgeries have been canceled, lose revenue, and as a result, they lay off a lot of their physicians.

Cory Fawcett: I think this is going to last a long time. I think doctors are going to be in for a big surprise, because as they get started again, people are still going to be afraid to go to the doctor for fear of getting the virus. So not only is the volume going to maybe be down, but also expenses are going to be way up, because you’re going to have a different PPE situation. The hospitals here are doing things differently for elective surgery than they used to, and it’s costing more. So if hospitals aren’t making as much money, and many doctors are employed by hospitals, guess what’s going to happen to our salaries? Not only is our job not very secure, but I’m betting that by the end of the year, a lot of doctors are going to be making a lot less money than they’ve been planning on.

Kevin Pho: Well, that leads me to my next question. In the next six to 12 months, in terms of not only the stock market but the financial impact of the pandemic, what’s your prediction? I certainly know you don’t have a crystal ball, but what’s your best guess going forward?

Cory Fawcett: I think past the next few months, but let’s say the next 12 to 18 months, I think we had a nice, robust economy before this started, so once things get rolling again, we’re going to be in that same position. But things won’t be as profitable as they used to be. So I think companies won’t have as much profit, some of them. Now, some companies are going to have way more profit. For example, a local company here: My sons are friends with the guy who owns a bike shop in town, and the bike shop is right now on track to do the best year in history, because everybody’s stuck at home, and they’ve decided to tune up their bikes and ride their bikes around. Suddenly, he’s got all this business. So if you make PPE, if you make toilet paper, you know, if you fix bikes, you’re going to have booming business. But for doctors, I think we’re going to see our income go down a little bit.

I think the stock market’s going to recover. It’ll probably go up again, just like it always has so far, every time this has happened. Myself, I did absolutely nothing when the market dropped, because I never make a decision on investing based on what the market’s doing. I don’t do any market timing. I don’t even watch the market. If people hadn’t told me, I’d have never known the market had fallen. I just never, wouldn’t have noticed it, because I don’t change anything based on that information. I know the market’s going to go up, and I know the market’s going to go down, and I don’t pay any attention to it, because I’m investing for 40 years from now.

So I don’t think, in the long run, for those people who are in short-term investing, they may be wringing their hands a little bit, because they don’t really know what’s happening in the short term. But long term, I think things are going to do really well. I think my son invested in cruise ship stocks. The cruise ships, when they shut them down, their stock fell like 90 percent, and he thought, “Oh, there’s a great advantage.” So he tried some market timing, and he made a lot of money, because they jumped way down and then they came back up. They’re going to be back in business. Everything’s going to be back in business just like it used to be, but business will be a little bit different. So I don’t think this is going to be bad, but I don’t think doctors are going to be as profitable as they used to be.

Kevin Pho: So, wonderful tips there, Cory. Let’s take a step back. I was wondering if you could share with my audience something that you’ve been passionate about recently, or something that you’ve been curious about over the last few months.

Cory Fawcett: One of the things that’s been my passion, of course, is teaching personal plans. This book in the last month has been everything in my life, and I can tell you, I’m never doing that again. That was way too aggressive a schedule for a retired guy to have to do to put something out.

But I was really surprised at what was going to happen to real estate. Real estate is one of my passions, and the reason I was able to retire early is because I have a lot of real estate, and I even wrote a book to help people do that. But when the governor said there’s a 90-day moratorium on evictions for nonpayment of rent, I was very worried that a lot of people would take advantage of that and just not pay rent. Even though they’re working, they just don’t pay their rent for three months, keep that money, and then move at the end of the three months. And so I was very curious as to how we were going to handle this if that happened.

It turned out not to happen in my area, where I live. Now, a lot of people had a lot of trouble with their real estate. There are a lot of places where unemployment is super high. You know, New York City is terrible, and those people can’t pay their rent. So even people, you know, doctors think they’re secure. Landlords thought they were secure, until suddenly there’s a 30 percent unemployment rate and a third of their tenants can’t pay their rent. It didn’t happen to me; I’m in a great pocket. But the whole real estate thing, every time something like this happens, really piques my interest, because that’s where all my money is pointed, and it’s what I like to teach people. So that was a big passion for me.

Kevin Pho: And my final question: What’s your take-home message for the KevinMD audience?

Cory Fawcett: Nobody’s job is secure. So knowing that, what are you doing to make sure that you are secure? I have told people recently, “No.” They said, “Now is the right time to invest in the stock market; it’s really low.” And I said, “No, now’s the time to conserve cash.” And they said, “But isn’t that market timing?” My answer was, “No, I’m not doing anything with the market. We’re conserving cash for you, your safety. What if you get the virus? What if you lose your job? What if your pay goes way down?” You know, what are you doing to protect you? This isn’t about investing for the future. This is about surviving now. And so I would say the big take-home point is: What are you doing to protect you and your financial future? And if you don’t think it’s enough, what are you going to change so that it is enough?

Kevin Pho: Well, that’s fantastic advice. Wonderful tips, as always. Cory Fawcett is a retired surgeon. He’s the author of the personal finance series The Doctors Guide to, and his latest book is The Doctors Guide to Navigating a Financial Crisis, coming out on June 16th. Thank you for joining us on the show.

Cory Fawcett: Hey, thanks for having me.

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