Get out of the Report Writing Rat RaceApr 03, 2023
If you'd rather see this in video format, click here:
Let’s face it…historically, there isn’t a ton of financial flexibility for the typical mental health practitioner. The options tend to be finding a W2 job at a clinic, group practice, school, medical facility, or other institution, or else going the route of self-employment/private practice.
I have learned over the last couple of years that the best way for me to navigate this as a mental health clinician is actually to have both. I think my experience shows that the ideal situation for a mental health practitioner is to find a W2 position with the least amount of hourly input where you still get benefits. There are practices out there with low billable hour requirements – I suggest prioritizing these low billing requirements ahead of the other primary consideration folks have - percentage splits. One reason for this is because percentage splits are too variable to compare, because every practice slices them differently and has different ways they’ll take the pound of flesh in exchange. But virtually all of them need to take it to afford to employ you, so don't make the mistake of comparing 55% to 60% on its face.
Those of you in a group practice setting, if you are able to find a W2 position that works on commission and not salary, that is absolute gold because they’re typically going to have lower billing requirements since they only pay you out of the literal dollars you’ve already brought in. The reason this is the best way to balance highest earning potential with highest quality of life is because commission based work with relatively low billable hour requirements makes it actually possible to cap your work week at 40 hours including your self-employment work (which we'll talk about in a moment here). For example, less than 25 billed clinical or assessment hours, after charting and accounting for the non-billable extras that accompany billed work, would typically give you about 10 hours per week to devote to other kinds of work before you hit a 40 hour work week. So let's say you’re in a W2 practice with a 50% commission... that income plus a side hustle can add up to a pretty decent life (outside of certain areas, which is why I left CA. That's another post for another day). Plus, in a commission model, there is a much more direct relationship between your work and your income – if you need to save extra for a big vacation you’re planning, or a wedding, or ahead of time off for a child, or things like that, you can put your head down for several months and work more to make more. In a salary model, you really aren’t rewarded for doing anything more than the minimum unless there are bonuses.
This is the same reason why, if you’re working as a contractor, you can expect higher commissions – because the practice should have less overhead for you. But, if the practice is operating legally, you’re the one paying that overhead that eats into that extra percentage – as a contractor, rent, supplies, communication, equipment, and your benefits all adds up to a good 10% that should technically all come out of your pocket. So what happens is that many clinicians compare commission splits as if they’re apples to apples, and they go for the shiniest one with the highest percentage and miss out on the extra things they’re losing in taxes or benefit costs or retirement losses. The truth is, most successful practices, regardless of structure, operate within similar bands of expenses to profit, and the ones that are exceeding their means by offering all the bells and whistles plus high splits tend to go under. So if you prioritize job stability and are looking to park somewhere long term, you have to really ask yourself why that one practice is offering the moon while everyone else is in the middle of the pack. Typically, they either don't understand their costs yet, or they've got investment dollars backing them with a goal of capturing market share and then stripping back those perks slowly and progressively once they've got you inked and have choked off the other smaller practices in your area that couldn't compete.
Anyway, it is very difficult to find a salaried position that doesn’t require 40 hours of you, or potentially even more than that because their margins need to be higher to keep the practice, clinic, or organization from sinking. Either that, or if they’re grant funded or trainee funded, the position will come with other time expectations to help them continue ensuring those revenue streams. So the point here is that if you can’t find a W2 commission model with a low billable requirement, then your next best bet is to find a 40 hour salaried position that’s actually close to 40 hours, and with flexible scheduling. This is what I’ve done, and you can learn more about this pivot in the video posted above.
Basically, I got out of a job that routinely asked more than 40 hours of me, even though scheduling was flexible in that last position. Now, I work a job that allows me control over when I work so that my default schedule is “four 10s,” with some intermittent flexibility to adjust to work evenings and weekends in place of the traditional work day so that I can take care of doctor’s appointments, oil changes, etc. as needed. And now I am reliably only assigned an actual 40 hours of work, instead of a workload that was burying me. Together, this means that I work about 45-50 hours a week between my 40 hour salaried position, and my 5-10 hour a week self-employment practice.
If that total is still too high for you, then you can look into a 1/2 or 3/4 time salaried position, but in my experience those often end up being half the benefits but not half the time demand. Instead, I would argue that 1. we often have more capacity than we believe, so I'd work on mindset types of changes in your thinking; and 2. that finding and building a side business that you truly love shouldn't feel like "work" all the time, which also means that it can come out of the time and energy to some of your other hobbies or creative pursuits without feeling like you're losing something. This will still be a question of balance, and a deeply personal and possibly shifting calculus for each one of us.
So let’s talk about why having both a W2 job and a self-employed job maximizes your circumstances as a mental health provider. Many of us are beholden to W2 positions for health insurance, retirement savings, and tax planning. The steady gig is something that can help us buy a house or get a loan, and it also stabilizes our incomes (as long as anyone making a W2 commission income is also consistent in their workload). The actual benefits and the emotional benefits of a W2 position are undeniable, and it’s the reason this is the common and traditional path – find a position, stay there, move up if possible.
Ok, so how does self-employment help? Well, there are some things you can do financially with self-employment that you can’t do as a W2 employee. For example, I have been able to write off purchases of computers and travel that were legitimately necessary for my side business, but that I also use and benefit from as a W2 employee. One small example – I attended the 1st Annual AAFP meeting last November, and wrote the entire trip off in my Streamline business. Obviously, in my W2 job, I’m also a forensic psychologist and benefitted greatly from the trainings and networking at that conference, too. But because of my self-employment, I didn’t have to sweat the food, lodging, plane fare, and conference fees because those were legitimate business expense write offs.
And depending on where you are, and whether your tax professional agrees, if you have a self-employment gig and you spend more than you make, it may be that those expenditures will lower your W2 tax obligations – I’m not an accountant so make sure to do your due diligence here if that’s your situation. But at minimum, if you bring in 2k in your side business and then take a 2k business trip, you won’t pay taxes on that 2k, whereas if you were solely a W2 employee and self-funded that same trip, you’re going to pay taxes on the 2k of your W2 income that paid for the trip.
There are also retirement benefits to self-employment that are otherwise solely at the discretion of your employer if you’re working in a W2 model. For example, in self-employment, you can max out your retirement savings if you choose to, and if you end up in certain kinds of tax status designations you can even have your business match your retirement savings – read more about choosing between an LLC and an S-CORP here.
Now an additional and less direct benefit of self-employment work is that it expands the kinds of work you can do, and can change the relationship between time and money. Most clinicians have to be physically present to make money in mental health work – most of the jobs are front-facing a significant percentage of the time, meaning that you’re in direct service with clients/patients/defendants, and then even if you’re doing things like record review or report writing, those hours translate to direct care billing – an hour of report writing billed equates to an hour of your work week.
The benefit of self-employment is that it can allow you to consider more passive income streams, possibly even out of the field of psychology all together. But even if you stay within mental health, passive income streams allow you to scale your business much more quickly – sometimes even small things like digital products – a fillable pdf that a therapist might purchase for a few dollars to use with their clients – those kinds of things can add up quickly without you having to oversee them at all after setup.
And then lastly, what started as an idea for a side hustle – one online course with the idea to bring gender affirming practices to forensic settings – blossomed into something much bigger. Because researching the platform led to the realization that I needed more than one course to pay for it, and developing the PowerPoints gave me other ideas about other courses, and writing the marketing gave me ideas for these blog posts, and on and on and on.
And that’s all possible because I opened the doors to this side business that has taken on some life of its own, helping me process and respond to more legacy kinds of questions like what defines me as a clinician, what role can I play in improving diversity affirming practices, and what can I give back to upcoming clinicians in this field? This has been the truest value of this self-employment, and never would have been possible as a W2 employee alone.
I have found deeper, more integral professional meaning while being able to write off my expenses along the way. This is why I think every mental health practitioner should consider self-employment as an add-on to your W-2 position, until or unless you no longer need the stability and benefits of that W2 position through the scaling of your self-employment.
Here at Streamline, we're committed to using our powers of psychology for good. Starting from the science and empirical literature but arriving at the core of what matters. Focusing on what readers and consumers truly want. Keeping sight of what clinicians need. In our blog, videos, and courses, we’re here to serve clinical and forensic assessment psychologists, especially those early-to-mid-career with an eye toward improvement, innovation, and inspiration.
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