My friend V. is an attorney and she’s more than willing to earn some extra income but doesn’t have the opportunity for overtime work. She has never had to battle the debate of the utility of overtime work.
Should you work overtime if you have the option to do so? Overtime means working more than the arbitrary 40 hours and getting paid for that extra work.
Physicians and other medical professionals often have such an opportunity. It allows a Family Medicine doctor to take their $300k salary up to $400k especially if the extra hours are remunerated at a higher hourly rate.
Burnout is the biggest financial risk to working overtime. But your mental and physical health are the biggest risk overall.
As physicians we lose sight of why we are working in the first place. Is it to earn an income? Is it to pursue our passion? Or is it to enjoy living life? I lean towards the latter category and once I figured that out it was much easier to make my subsequent decisions.
Unfortunately, I got caught up with trying to reach financial independence a little too quickly and instead of spending less I decided to work more. This led to my burnout in 2016.
Extra Time Spent
We don’t work 40 hours a week to earn a full-time income. In order to hold down a full-time job we are closer to 55 hours a week because you must factor in time spent away from home, commute time, prep time, and license maintenance.
To work overtime you will need to commute a few extra days to work or you might stay at your job a few hours longer. It’s not a 1:1 ratio either way. If you earn $100/hour and you want to earn an extra $100 then you’ll likely have to spend 1.5 hours to earn that money – it’s the nature of our work.
We’re not salespeople. If I sell laptops to a company and I can sell them 10 extra units then I’ll earn quite a lot more money for a little more work. When you are an employee then your extra time spent to earn extra income is a weak financial proposition.
What about the time lost? Shouldn’t it be proportional to the time spent? We only have 24 hours in a day, after all.
Much like your dollar, each minute can be spent efficiently or it can be wasted. 24 hours is not 24 hours. Just like my 8 hours of sleep is not the same 8 hours of sleep of a person with insomnia.
In order to work extra you will need to shave off time from your enjoyable activities and from the time you need to spend to run your household. One hour lost to exercise means 5 future hours you’ll have to spend to catch up on your health and diet and mental health.
Ambien and Lipitor might make me fat dollars as a Family Medicine doctor but it doesn’t improve the quality of life nor extend the life of the patients who are convinced otherwise. Equally, you cannot replace the quality-time you lose by future spending or medications.
Physicians are time-poor. You don’t have the luxury of excess time to spend on overtime work.
Medicine is a stressful profession. So is being a cop or a firefighter but the difference is that the government doesn’t offer you a pension at age 45. You also aren’t protected against lawsuits.
Health maintenance, especially emotional health maintenance, is critical to prevent burnout. The more you work the higher risk you’ll have of getting burnt out.
When you work overtime then you are putting in more distracted time. You are seeing patients and performing surgeries and delivering babies when your focus is more precarious.
Seeing more patients by itself is higher risk. The more patients you see the higher chance for errors, the more individuals who can sue you.
Could you strategize your overtime work so that it benefits you the maximum amount possible?
I can see overtime working in the short-term and I can see it working well during opportune moments.
Short-term Overtime Work
Let’s say that you have $2,500 left to pay on your car loan (hopefully you never, ever take out a car loan) and you want to pay it off before the end of the month.
In such a scenario it might make sense to work a few hours of overtime because you are driven by a particular goal and you can plan for it strategically.
Opportune Overtime Work
Your employer might offer 1.5x pay for staffing a flu clinic. Or maybe your hospital had a few surgeons quit or commit suicide at the same time and they are desperate for hospital rounders and will offer you an extra $10k to do it.
Either way, these premium-pay opportunities are sometimes worth capitalizing on. Again, only for a few hours and only in the short-term.
You need to be a master budgeter before you consider any overtime work.
Working extra means extra income but it is stupidly inefficient for healthcare professionals. In order for it to be worthwhile you need to make sure that you prevent lifestyle inflation when pursuing overtime work.
The extra money that’s earned needs to be held onto much more aggressively than your regular income because you spent so much more effort earning it.
Money Earned ≠ Money Saved
Unless you are masterful in budgeting it makes very little sense to bring in more income. More income rarely will solve financial problems despite the fetish people have with it.
Minimum wage earners aren’t poor because they don’t earn enough but because they are living the lifestyle of high-income earners and making compounding poor decisions.
A higher income almost always is immediately relegated to higher spending in order to make that busier lifestyle function.
Because our minds are incapable of mathematic tracking we also believe that we have more money than we think.
A $300k/year income versus a $400k income might seem like a 33% increase in income but it’s far from that. Our income taxes aren’t linear but marginal. And the extra of time we need to spend to earn that extra income is exponentially harder to part with.
It’s clear by now that our financial problems aren’t a result of inadequate income but excess spending. In fact, this is the problem of every single nation that is financially broke. Greece, Spain.
Whenever life gets more complex we spend more. Which is why Americans spend a lot. This seemingly simple life of commuting several hours for work and then having to figure out taxes and dealing with bills and the logistics of daycare and insurance wreaks havoc on finances.
Fortunately you aren’t required to live that lifestyle even though the majority of us choose to do it. That’s why I blog on here because I am a single male physician who has been able to live an alternative lifestyle to avoid higher spending.
Saving the Extra Income
The extra $100k you might earn that year working overtime, of which you’ll see $50k, will need to pay for the exponentially higher effort required to earn that income.
The average physician will easily inflate their spending by 25-30% in order to earn that income. This leaves you with about $30,000 or $2,500/month for which you worked an extra 25 hours per week.
If you manage to save this $2,500/month then it would seem that you’ll be sitting pretty. But how long can you keep that up for? 1 year? 2 years? 5 years?
Value of Overtime
So you’ve managed to work like an immigrant for 5 years and earned an extra $2,500 for 5 years. By the end of the 5 years you are completely burnt out and have all the classic US lifestyle diseases that comes along with a stressful life.
5 Years of Overtime
What do you have to show for it financially? If you were able to save that $2,500/month and you diligently invested the money in a good economy then you’ll probably have around $200k of assets to show for it.
$200,000 is an incredible sum. $150k of it is actual earnings and the other $50k is what your investment would return.
I get a chubby thinking about an extra $200k but let’s put it into perspective. How else could you add that $200k of assets to your net worth?
Furthermore, what is the value of an extra $200k to your net worth?
On one hand the question could be asked in terms of whether you could change your lifestyle so that you wouldn’t need the extra $200k. On the other hand there might be a far less painful way of earning that extra money.
Increasing Net Worth by $200,000
Let’s say you bought your house at the low of the real estate market in a neighborhood that’s in the top 5% of desirable US neighborhoods.
Most likely your property is worth $1M+ and though you’ll have spent an egregious amount of money to maintain that home over the years, the appreciation will likely be just as shocking. There’s your $200k right there.
Or you could invest $200/month for 30 years. Earning an extra $200 a month should cost you only a couple of hours a month – not a big sacrifice.
In the short-term and during opportune times it makes sense to put in some overtime. But it is a weak financial plan and will likely profit your employer more than it will profit you.