Doctors make a lot of money, but that doesn’t mean they’ve achieved financial freedom. Sometimes adding passive income streams to your life can make all the difference.
Some passive income streams require work; others are 100% passive and easy addition to daily life.
What Does Passive Really Mean
Passive income is the opposite of what you earn when you work as a doctor. When caring for patients, attending to paperwork, or using your time for anything related to your profession, you trade your time for money.
You don’t actively earn money when you have a passive income. For example, some methods may require work upfront, but you sit back and earn the funds after completing the work.
Earn Money as You Sleep
Some people call passive income earning money while you sleep, and in some sense of the word, it’s true.
If you invest in certain types of assets or invest time upfront in certain opportunities, they can pay you while you sleep, aka do nothing.
7 Smart Passive Income Ideas for Physicians
There are many opportunities to make passive income, and investing is one of them.
Here are the top ways for physicians to invest for passive income:
- High Yield Savings Accounts
- Certificate of Deposit
- Dividend Stock & Bond Investing
- Real Estate Investing
- REIT Investing
- Real Estate Crowdfunding
- Peer-to-Peer Physician Lending
1. High-Yield Savings Account
A high-yield savings account is a good passive investment to keep your funds liquid. Your funds grow faster than they would in a standard bank account, but you can access them without penalty at any time.
If you invest the funds in an FDIC-insured bank, your deposits are protected up to $250,000 per depositor. If you have a lot of capital, you can usually earn the highest tiered interest rates, usually 3% to 4%.
2. Certificate of Deposit Account
CDs are another high-interest deposit product you can use to earn passive income. They are a liquid investment, but it depends on the chosen term.
The longer the CD term you choose, the higher your interest rate will be. However, you’ll tie your funds up for a longer period. If you withdraw the funds prematurely, you’ll pay a penalty usually equal to three months of interest.
3. Dividend Stock and Bond Investing
A simple form of passive income is to invest in dividend stocks or bonds.
Dividend stocks are an investment in a company’s profits. It’s mostly established or mature companies that pay dividends, and there’s no guarantee you’ll receive them, but when you do, they can be passive income.
You can choose to reinvest the dividends in the stock for more compound earnings or take the cash and use it.
Bonds provide passive income through periodic interest payments. When you invest in bonds, you are the lender for companies or the government. In return, they pay a fixed interest rate you’ll receive in regular monthly or quarterly installments. You’ll also receive a return of your principal upon maturity.
4. Real Estate Investing
Real estate investing can help you earn passive income. You can invest in single-family or multi-unit properties, collect monthly rent to cover the property’s expenses, and make profits.
However, real estate investing is only entirely passive when you hire a property management company to handle the property.
Of course, this comes with costs, but you may profit if you can charge high enough rent to cover any mortgage payment plus the real estate taxes, insurance, HOA dues, and property management fees.
To keep your profits high enough, look for real estate investments with at least a 10% cash-on-cash return. This reflects the return you earn based on the annual cash you invest in the property.
5. REIT Investing (Real Estate Investment Trusts)
If you’d prefer not to be a landlord or have the burden of managing properties yourself, consider a real estate investment trust.
This passive form of real estate investing allows you to invest in commercial properties without owning them. Instead, you invest in a real estate company that buys, manages, and sells commercial real estate.
You buy shares of the real estate company that shares 90%+ of its profits with shareholders. So, you invest in real estate without any responsibility to manage the property or tenants. Instead, your investment is in the real estate company and the decisions they make in real estate investments.
REIT investors get certain tax advantages, depending on how they receive the income. For example, some income may be dividend income, which is treated as earnings and taxed at your normal tax rate. However, a part of your earnings may be part of a capital gain or loss, which, if the property were held for one year or longer, would be taxed at the long-term capital gains rate of 0%, 15%, or 20%.
In addition, you may be a good candidate for the pass-through business income deduction that allows business owners to deduct 20% of their qualified REIT dividends from their taxable income.
6. Real Estate Crowdfund Investing
Real estate crowdfunding offers another way to invest passively in real estate. Rather than owning the properties, you invest in them with many other investors. Depending on the platform, you may invest as little as $25 in each property.
The crowdfunding platforms pool the funds from each investor and invest the funds in a single property. All details about the property, its income, risks, and any information about the investor are disclosed, and the investment is given a grade to help you determine if it’s a good investment.
The higher the grade (usually A – F), the less risk the investment poses, and the smaller the reward, and vice versa.
Crowdfunded investments usually have a long holding period, so understand the investment and its requirements.
7. Peer-to-Peer Physician Lending
Peer-to-peer lending is like crowdfunding, but you loan money to individuals instead of funding real estate deals.
The people that need peer-to-peer lending typically don’t qualify for traditional financing. In other words, they may be high-risk, but that is a part of the risk/reward relationship. Like crowdfunding, peer-to-peer platforms grade the loans, so you know the risk you’re taking when you invest.
Many platforms require only $25 per loan, so you can diversify your funds across many investments to reduce the risk and increase your reward.
Multiple Streams of Income for Physicians
In addition to investments earning physicians passive income, there are side gigs you can start to increase your income streams.
This form of passive income may require some work, but diversifying your income streams can be worth it.
1. Start Blogging and Share Your Knowledge
Blogging is an excellent form of passive income. While it requires work because blog posts don’t produce themselves, it can become passive income.
As you build your audience and share your expertise, you may be asked to do sponsored posts, have affiliate marketing links, or even be asked to do paid speaking engagements.
While this is another form of ‘work,’ it’s different from what you do in your medical practice and can provide another source of income.
2. Write and Sell Your Own Book
As a doctor, you have a lot of knowledge. You can earn passive income if you share that knowledge in a book that targets your niche audience. Books are a great way to put the work in now and reap the rewards for many years.
As long as your book is for sale, you earn commissions from the sale. Fortunately, you don’t have to knock on the publisher’s doors unless you want to. Instead, you can use Amazon’s self-publishing tool to publish your book and market it yourself.
3. Create and Sell Digital Products
Digital products are a great source of passive income. You create the product once and then can sell it as many times as people will buy it.
The sky’s the limit with creating and selling digital products, but some of the most common options include:
- Online course
- Online tutorials/videos
- Creating an app
4. Endorse Certain Supplements and Products
If there are any supplements or medical products you support, you could endorse them and earn money each time someone makes a purchase.
This works well when you have a blog, podcast, or vlog. You can share the link with your subscribers, and if they feel compelled to buy the product based on your recommendations, you’ll earn a small commission.
The amount you can earn varies by product and company, as well as with the size of your audience. Of course, the larger the audience, the more you’ll potentially make.
5. Become a Social Media Influencer
Doctors can be social media influencers too! There are thousands of them on all the major social media platforms, sharing different types of information.
If you become a social media influencer, you share value-added information that subscribers can use. For example, a migraine doctor may share tips on managing migraines or ways to improve your overall health to prevent them, and a sports medicine doctor may talk about different stretches to prevent orthopedic injuries.
Social media influencers make money, much like bloggers and vloggers. They share links to the products they talk about or advertise their business to get more patients, resulting in more passive income.
6. Seek Opportunities to Speak or Teach
As a prominent doctor in your area, you can make money speaking to large groups, such as at community centers, schools, or libraries. You may also hold classes if there are techniques or information you can share with your audience to help them feel better.
7. Physician Moonlighting
If you love your profession so much that you want to spend your free time working elsewhere, you can moonlight at a hospital, clinic, or another setting.
Many doctors who own their own practice do this to have steady hours/patients with an established practice to stabilize their income.
8. Become an Online Entrepreneur
The sky’s the limit when opening an online business. Starting a monetized blog is one example, but there are thousands of companies you can open to make more money.
Whether you do something within your profession or showcase other talents to make money, it’s a great way to add to your income streams. For example, if you are passionate about painting, you can open an online Etsy store and sell your paintings. This gives you another source of income and an outlet that lets you unwind from the pressures of the medical field.
9. Expert Witness in Malpractice Trials
An exciting way to make passive income as a doctor is to be an expert witness in malpractice trials. Depending on the complexity of the trial and your expertise, expert witnesses for malpractice trials make as much as $500 to $1,000 an hour.
10. Medical Equipment Sales
If you have a penchant for sales, you can sell medical equipment to make passive income. You can do this in person in your time off or consider an online platform to sell the products.
Potential Risks of Having Only One Income Stream for Physicians
Doctors often assume they make enough money and don’t need to rely on another income stream, but there are risks of only having one income stream, including the following.
- Mental Health Risks: Putting all the pressure on one income stream can put your mental health at risk. You could lose sleep at night, wondering what would happen if the practice closed or you were part of a malpractice suit. Knowing you have multiple income streams to rely on can provide peace of mind, helping you live a happier, healthier life.
- Physical Disability Risks: Working so hard that you don’t care for yourself can be risky. Your physical health could decline prematurely, putting you at risk of not being able to work at all. However, when you have multiple income streams, you don’t have to work so hard and can rest assured you’ll be taken care of if you can’t work any longer.
- Addiction Risks: Working in the medical profession is stressful, and many medical professionals risk becoming addicted to gambling, drinking, drugs, or spending money. Taking the pressure off yourself by having more than one income stream may make you less likely to suffer.
- Malpractice and Coverage Risks: You could lose everything if you rely only on your medical position and suffer a malpractice suit. If, instead, you had ‘backup income,’ you’d be more prepared for any emergencies.
- Medical Staff Membership Loss Risks: If the practice you work for can no longer employ you, it can be devastating financially. Diversifying your income protects you from this risk.
- A Disruptive Physician Accusation Risk: You might lose your job if you have a bad day and make choices that aren’t the best for your practice. Having the money to back you up during this time can make it less stressful.
- Decreased Reimbursement Risks: If your practice loses a contract with an insurance company or Medicare and loses a large portion of your patients, you may have trouble staying afloat.
Benefits of Passive Income for Physicians
As you can imagine, multiple income streams have many benefits, including passive income for physicians.
- Higher and Additional Income: Relying on one income stream can be dangerous, even for a doctor. But, even if you don’t need the extra money to make ends meet, it can help you build your net worth, reach your financial goals, and set yourself up for retirement. Besides, if something goes wrong with your practice, or the practice you work for closes, you’d have other streams of income to fall back on.
- More Tax Advantages: Some passive income streams, such as real estate investments, may have tax benefits. For example, you may be subject to the 20% pass-through deduction or able to write off certain expenses for running the business. Other side hustles may have deductions, such as travel, food, or operational expenses.
- Guaranteed Walk Away Income: If there are issues with your current practice and you must cut ties, you’ll have money to rely on and not worry about your livelihood. Without other income streams, you might be forced to move to another location, sell your house, and update your licensing to work in another location to abide by any non-compete agreements you signed.
- Additional Security: Having extra money provides an extra level of security. Whether you use it to increase your retirement portfolio, invest in other assets, or put it away for a rainy day, there’s a sense of peace knowing you have the money available should you need it.
- Enjoyment and Additional Professional Development: Working a side hustle, even if it’s in your same profession, allows you to explore your passions and do what you love. This doesn’t mean you don’t love being a doctor, but sometimes you need a change of pace, and a side hustle can be just what you need.
- More Opportunities for Loved Ones: When you have multiple income streams, you don’t have to work as hard at your profession and may have more time to spend with family and friends. Income is important, but you cannot replace time spent with loved ones.
- Lower Need for Insurance: If you have other income streams and can increase your net worth, you may be able to carry less life insurance but still, know your family is taken care of when you die.
Frequently Asked Questions
Passive income for physicians is not a new topic, but it’s increasing in popularity. Here are some common questions about it.
When should you consider passive income for physicians?
Everyone should consider having several income streams, even physicians. Consider implementing at least a few options described to increase your income and net worth as early as you can.
How many income streams should a physician have?
There isn’t one specific number of income streams a physician should have; however, millionaires often have seven streams of income, so the more, the better.
Is getting a side hustle worth it?
A side hustle may feel like more work but think of it as a way to increase your net worth and financial security. As long as you don’t feel burnt out, a side hustle can be well worth the time and effort.
Passive Income for Physicians – The Bottom Line
Passive income for physicians is a key way to achieve financial freedom. The more income streams you have, the more stable you’ll be financially now and when you die
You’ll set your loved ones up for financial security and be able to reach your long-term goals so that when you retire, you’re able to enjoy life to the fullest!