Healthcare Professionals and Leverage

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Healthcare Professionals worried about LeverageMaking Your Money Work For You

Now that you understand the basics of Leverage and its importance in allowing you to get things done more efficiently and effectively, this chapter will apply those concepts to financial and legal planning. Subsequent articles will demonstrate how physicians can apply these lessons to Leverage assets and people to maximize and maintain wealth.

Financial Leverage: The Foundation Of Wealth

For thousands of years, every great construction project required the use of levers to complete the building process. This was true for moving the large stones to build the pyramids of Egypt and lifting the stones for Stonehenge. Levers were used to build all of the great castles, churches, synagogues, and mosques around the world. Financial projects are very similar to construction projects. They both can seem overwhelming at the beginning—a collection of complex tasks that must be executed with skill and precision. The success of both types of projects begins with significant and detailed planning. After the plans are drawn, they must be implemented accordingly. One person could never accomplish the implementation of such plans. Instead, the plan requires a team of people working together to accomplish the same goal—for us, that goal is building and maintaining wealth.
Without exception, every high income earner and wealthy family has relied on financial Leverage in one way or another.
Once you grasp the concept of Leverage and the financial applications of Leverage, it becomes impossible to imagine how affluence could possibly be built without it.

Type Of Financial Leverage

Physicians can use different types of financial Leverage to create and build wealth. These include:

Leverage of Effort
Leverage of effort is a way to get more out of your financial plans and investments. Since the goal of Leverage is to get more done with less effort, all forms of Leverage require that you Leverage your individual effort by including the efforts of others.
Leverage of Assets
Leverage of assets is one way to increase your financial status and get more out of what you currently possess. If you had an unlimited amount of money or land, you wouldn’t need to accumulate any more wealth; however, this is not the case for most people. Since we all have limited resources, we want to get the most wealth/asset accumulation and financial protection out of what we have with the least amount of effort and the lowest amount of risk.
Leverage of People
Savvy business owners know that they only have the capacity to do so much and that the Leverage of people is one way to get more than 24 hours out of a day. By leveraging other people’s efforts, you can increase the number of tasks you can accomplish in a day. By leveraging people with special skills and expertise you don’t possess, you can get things done in much less time than it would take you to do these same tasks—if you could accomplish them at all.
Generally speaking, physicians utilize Leverage to some degree, but they are not thorough in their application. They try to Leverage effort by working hard—we know that. Doctors also may try to Leverage assets in their practice through medical equipment for which they can bill and they may try to Leverage people through technologists, nurses, and physician’s assistants, who can generate income to the practice. Still, few physicians apply this concept broadly enough in their practices to result in any real wealth building. Even fewer Doctors effectively Leverage people or assets with respect to their personal finances.

The Diagnosis

Within each of the three categories of Leverage discussed above—Leverage of effort, Leverage of assets, and Leverage of people—there are a number of different applications. Click here to read on each of these categories, discuss how they can be used to generate wealth and explain which of these types of Leverage are more appropriate for creating wealth and which types of Leverage will best help maintain higher levels of wealth.



Physicians and Time Management

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Physicians Office Window

Work Smarter, Not Harder: Don’t Just “See More Patients”Physicians Office Window

In the last post, you read how the business of medicine has changed. The implication for you is that you can’t keep repeating the same actions time and again and expect to see the results you may have received just a few years ago. But even many of the Doctors who come to this realization still think that the solution is to “see more patients.” In this chapter, we will briefly cover the flaws of this strategy and explain the ways in which Doctors can apply the concept of Leverage to address all of their financial and legal challenges.

“See More Patients”—A Tragic Flaw

Confronted with any legal, tax, or financial setback, many Doctors follow the business strategy of “seeing more patients.” If the practice suffers because of a successful lawsuit, a sudden unforeseen expense, or an unproductive associate, Doctors try to “make up for it” by seeing more patients in hopes of billing more. The same tactic is followed by many Doctors who are behind in their retirement planning, who feel like they are paying too much in taxes, or who are getting divorced. Any financial setback seems to yield the same resulting behavior. Many physicians approach their entire career with the business strategy of working as long and as hard as possible for as long as they can physically endure it. Does this remind you of any of your peers? Do you see someone like this when you look into the mirror?
Certainly, there are many flaws to such a business strategy. Let’s examine a few of these flaws so you can understand why other strategies are better:

1. This strategy has diminishing financial returns
Even if you work harder and see more patients, each patient you see will potentially net you fewer dollars. As your marginal expenses for each additional hour of work may be the same and your taxes may increase if you hit new marginal tax levels, your “take home” may actually become less per-dollar as you work harder. Even if this is not the case, the next two limits certainly apply.

2. This strategy has financial limits
Even if you worked as hard as you possibly could and you could make more on each additional dollar earned, you only have 24 hours per day. Regardless of your specialty or sleep requirements, you cannot work 18 or 20 hours per day over an extended period of time. Thus, you are capped in the total income that you can generate by “just seeing more patients.” we will have many upcoming posts develop this concept further or you can visit the free book here.

3. This strategy will take a great personal toll on you
Extreme stress, physical ailments, divorce, decreased life expectancy—these are all common symptoms for Doctors who choose “seeing more patients” as their business mantra. Are these extreme personal costs worth it? We think not—especially given #4 below.

4. There is a “better way”
If working as hard as you could was the only alternative available to allow you to meet your financial goals, that would be one thing. However, the truth is that there is a much better concept upon which you can build your practice and personal finances. This concept will be explained below.

The Concept of Leverage

Let’s consider the following all-too-common scenario. You work a very long day and generate $10,000 of billings. The insurance companies pay your practice $3,000 for your hard work. Your practice overhead is about 50%, so $1,500 of that income is gross profit. However, the $1,500 isn’t yours. Of the $1,500 you actually receive, the Federal, state, and local tax authorities will take 40% to 45%, leaving you with only $800 to $900. In other words, less than 10% of the work you do in a given day actually results in money you keep. This means that you have to do $3,000,000 worth of work in order to generate less than $300,000 of money for you to enjoy. Unless you want to continue to work ten times as hard as necessary, you have to learn to work smarter. This is the key to this entire book. We call it Leverage.
If you refer to the Merriam-Webster Dictionary and look up the word “Leverage,” you will be presented with three definitions:
1. the action of a lever or the mechanical advantage gained by it
3. the use of credit to enhance one’s speculative capacity
We will offer very simplified interpretations of the three definitions of Leverage stated above. The first definition states that Leverage increases the amount of force exerted. To exemplify this concept, think of Leverage as the act of wedging a stick between two heavy rocks that you could not move with just your hands. In order to efficiently move the rocks, you need to push down on the stick that you wedged between the rocks. In doing so, the rock can be moved. Leverage—the wedging of a stick—allows you to move a rock you would otherwise not be able to move.
The second definition of Leverage simply states that the act of Leverage allows people to be more efficient, effective, and powerful. This can be interpreted to mean that Leverage allows people to get more done in less time. It can also be interpreted to mean that Leverage allows people to get a job done with less effort. In either case, Leverage enables people to be more effective.
The third definition of Leverage applies to credit and loans. In this definition, Leverage allows people to buy things they don’t have the money to buy in an effort for them to increase their financial capacity. To illustrate this definition, think of a home loan—the $500,000 home that is purchased by a family with only $100,000 of their own money to use as a down payment. Leverage is the ability to enjoy the use of or participate in the upside potential More