The Past and Future of WCI

Transcription – WCI – 447

INTRODUCTION

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor podcast number 447 – The Past and Future of WCI.

Today's episode is brought to us by SoFi, the folks who help you get your money right. Paying off student loans quickly and getting your finances back on track isn't easy. But that's where SoFi can help. They have exclusive low rates designed to help medical residents refinance student loans. That could end up saving you thousands of dollars, helping you get out of student debt sooner.

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All right, this episode is called “The Past and Future of WCI.” I'm told I'm going to rant for a while and tell you a little bit about my personal life, my business life for the last 15 years, and maybe a little bit more about the community here that you didn't know.

Before we do that though, we should recognize that today is Thanksgiving. Happy Thanksgiving, one of my favorite holidays, and truly an attitude of gratitude makes our lives dramatically better. If we can show gratitude, if we can think gratitude, we're happier. The studies are very clear about this, and we're more pleasant to be around. We can do more good in the world.

So, let's be as grateful as we can today. And those of you out there having turkey or tofu or whatever you have on Thanksgiving, may you have an awesome meal, hopefully surrounded by those you care about most.

In celebration of this time of year, we do a sale. Technically, it's a Black Friday sale. It's not actually a Thanksgiving sale, but in our case, it runs November 24th through December 5th. You get 20% off all of our books and courses, and you get $200 off in-person WCICON. Use THANKS20 as the code at checkout, and we'd love to see you at the conference.

We'd love to see you take our courses and buy our books as well, but in particular, I like seeing you at the conference because I get to meet you, and I get to hear your story, and I get to hear your triumphs, and I get to hear your challenges, and it directs content for the next year around here. It has a very impactful, very huge impact on what we do with our time over the course of the next year.

 

QUOTE OF THE DAY

Dr. Jim Dahle:
So, what are we going to talk about today? Well, we're going to talk about success. We're going to talk about failure, which brings us to our quote of the day. Winston Churchill said, “Success is not final. Failure is not fatal. It is the courage to continue that counts.” And that includes you and your lives. Most of you have had challenges and difficulties in your careers, and you persisted through it, and now you're at the other end of that tunnel. You're a competent practitioner of whatever you do, and you're impacting other people's lives. Thank you for doing that. Thank you for pushing through.

But we're going to talk a little bit about some of WCI's challenges over the last few years, and we hope that it's helpful to you to talk a little bit about that, and to recognize why we're here, and maybe why you're there on the other side of this podcast.

Okay, this thing is dropping on November 27th Thanksgiving. Our new website went live 11 days prior to this. The last time we had a new website was literally 2016, I think. Yeah, I think it was 2016. It's been almost 10 years since we really changed the look on the website.

There's far more to it than moving from the 2010s to the 2020s. The amount of effort that has gone into this change is almost impossible to quantify. More than half of our staff, more than half of their time over the last 18 months or so, has gone into this, for lack of a better term, I say website redesign.

It's hard to just call it a redesign, because it now does all kinds of things it did not used to do, all of which are designed to serve you better, to connect you better with the good guys in the financial services industry, to get you the content easier that you're looking for, to search it easier, to give you a more less cluttered experience when you're on the website, to have the website move faster.

All these changes we've put through to try to help you to have more success in the coming years with your personal finances, with seeking happiness in your life, with not being as burnt out, with being able to help those that you care about most in your life, and be able to focus on your life, focus your life on the things you care about most.

 

THE HISTORY OF THE WHITE COAT INVESTOR

Dr. Jim Dahle:
We're going to talk a little bit about the story of White Coat Investor and some of that stuff. The last time I think I talked or wrote or did anything about the history of the White Coat Investor was in 2018. It was a blog post back in June 2018, where I wrote that I'd been blogging as a White Coat Investor for over seven years, but never really told the story all the way through.

So, let's tell the story a little bit. Some might wonder what kind of a childhood leads to life as a financial blogger. And I don't know that my childhood was particularly remarkable compared to lots of yours. As we read the White Coat Investor scholarship applications each year I look at all those people and go, “Boy, they should have my spot in medical school. They're way better people than I am.”

But I grew up in Alaska. I was the third of six kids, the son of an electrical engineer and a homemaker. I only left the state three times in 18 years before I left for college. I never did a college tour. The first time I saw my college campus was when I started college.

My parents got the big things right financially, mostly living within their income, aside from my father's vice, which was flying small bush planes. And when I'm talking about small, I'm talking about two seater planes that he will use to convince you that runways need not be paved, level, flat, long, or straight. In fact, they don't even have to be long enough to take off on when you land on them because you can improve them after landing.

But there wasn't a lot of extra money in my childhood. We drove used cars. We never stayed in hotels on vacation. We drank powdered milk because the price of real milk in Alaska was so outrageous. We ate things like uncooked spaghetti for snacks. You get the idea. We didn't starve. We were never homeless. We attended the rich public high school on the hillside, even if we lived at the very bottom of the hillside.

But my parents weren't really into saving or investing. My dad eventually finished a career with the state that qualified him for a pension, worked for a few years afterward, and built up a nest egg as an independent contractor doing similar work. But that was my upbringing.

The first investment I ever made was buying options. It's true. I spent $500 of my Alaska Permanent Fund dividend on buying an option. The option expired worthless. I lost my $500. 100% of my first investment left, which gives you some insight not only into me as whatever I was, a 14-year-old. I don't know what it was, but also into my family's level of financial literacy, that they would allow their child's first investment to be into an option, which gives you a sense of where I was coming from.

I go away to college. I went to Brigham Young University. I applied to a whole bunch of places. I got into everywhere I applied. I got into Rice, and the University of Chicago, and Colorado College, and all these other schools. Then I looked at the bottom line, and I looked at my parents, and I recognized this is on me. Brigham Young offered me a tuition scholarship, and I went to Brigham Young. That's why I went there. It was the only place on my list that I felt like I could even come close to affording.

I took out an Alaska Student Loan. It had some nice terms. The interest rate wasn't awesome. It was 8%. I took out a $5,000 loan for my freshman year. I used it to buy some climbing shoes, and a climbing rope, and a couple of cams, probably, and a set of stoppers, and then paid for my room and board. That was basically what I bought with that student loan. I went away to school, spent a couple of years on a mission, went back to school.

At that point, I was trying to put myself through. I never took out another student loan after that freshman year. I worked hard in the summers. My parents helped just a little bit with what they could. Between working during the summers, working a little bit during college, I was able to not only pay for room and board. I managed to keep that tuition scholarship. I was able to pay for room, and board, and books, and pay for my fees to play on the school club hockey team, but got through.

That's what I owed when I finished college. I owed $5,000. At that point, I was engaged to be married. Looking at med school tuition, which had just gone up 25% the year before. In state, it went from $8,000 to $10,000-something. We thought they were just crushing us. It was terrible.

Of course, I decided that I didn't really like the idea of debt. I was pretty debt-averse. I actually signed on with the Air Force. They're going to pay for school. I actually made them pay out-of-state tuition. That was $18,ooo. It was super expensive, but it did allow me to continue to get that Alaska Permanent Fund dividend for a few more years.

I went away to college. At this point, we're a young married couple. Katie's finishing up her undergraduate degree, and then worked a couple of jobs. Then went back to school and worked on a master's during my third and fourth year of medical school.

We went off to residency. At this point in my life, I've still got no interest in money, personal finance, investing, business. I was a molecular biology undergrad. I went to med school, concentrated on med school and foosball. Subsequently, matched into residency in Tucson. I went to the University of Arizona Emergency Medicine Program down there.

One of my co-residents, I think one of the senior residents, suggested, I'm sure at the advisor's instigation, that all the other residents call them up and hire them as their financial advisor. I did. I went to see him. For $100 a year, which I thought was a great deal, he was going to be my financial advisor.

Well, I learned a few things. I learned what the phrase fee-based means. It means not only are you paying fees, thankfully, not a very high fee, which is literally $100 a year, but you're also paying commissions.

I was paying a fair amount of commissions, not only on mutual funds but on insurance products, to get that advice. It wasn't all terrible advice, but enough of it was terrible that when I picked up a book and it was Eric Tyson's Mutual Funds for Dummies on a vacation during residency, I realized that if I don't start learning this stuff, I'm just going to keep getting taken advantage of over and over and over again.

I looked back over my life and I'd had an interaction with an insurance agent who had sold me a whole life policy as a medical student. I had an interaction with a realtor who talked us into buying a home we never should have bought. I had an interaction with a mortgage lender who tried to slide in some sort of early payment penalty when they knew we were only going to be in the house for a couple of more years.

Every interaction I'd had had ended poorly. I decided if I don't start learning this stuff, this is going to continue throughout my career. I was actually making money now. It wasn't a lot of money. I think when I signed on to residency, I was going to be paid $34,000 a year. By the time I started, we'd already gotten a raise. It was $37,000 a year. We thought we had money coming out of our ears. Katie had a teacher's salary. I was making $37,000 a year. We had all kinds of money building up in our bank account, and we had to figure out what we were going to do with it.

I went across the street. I lived across from Bookman's, which is a used bookstore in Tucson. I started buying books. I bought a whole bunch of books for $2 or $3 or $4 and I read them. Most of them were terrible. Looking back, I read so many terrible financial books, I can't tell you how bad it was.

But I did read a few good ones. I started to realize after a while that the good ones all said the same thing. I became, over the matter of a few months, financially literate, at least with respect to my own financial life. I fired the advisor and decided to be a do-it-yourself investor.

At this point, I was managing a four-figure portfolio. Not that big a deal. All the financial mistakes I'd made were made, for the most part, with relatively small sums of money. It never really cost us that much to become financially literate. I know a lot of people, when this happens to you when you're 45 and 50, it costs you a lot more money. It didn't cost us much money.

I found that I was just as interested in the finance as I was in the medicine. I found myself not only answering questions online, but in real life. I realized, nobody's teaching this to doctors. I started trying to do it. As I moved out of residency and into the military, I was pretty busy. They certainly got their pound of flesh out of me. I'm embarrassed to mention how far behind I came out financially for having had them pay for my very inexpensive medical school. It was a substantial sum of money, but it was still a pretty good experience to be able to serve my country.

One thing I did while I was living in Virginia and being deployed all over the world was I started teaching doctors personal finance and investing. I did this online. I did it on the Bogleheads forum. I did it on the Student Doctor Network forum. I did it on the CERMO forum.

By the time I got out of the military four years later, I'd answered the doctor questions. I knew what questions doctors had about finance and I knew the answers. And so, I got really excited about passive income one day and decided maybe I should start a blog. I pinged a couple of friends of mine, Harry Sitt, who writes the Finance Buff blog, and Mike Piper, who writes the Oblivious Investor blog. I asked them a few questions, what they thought about this idea of mine to start a blog, and they were supportive, and so I started.

We tried to make it a business from day one. I was all excited about passive income, of which this has not been so passive over the years, obviously. We put ads up the first week of White Coat Investor. It was a for-profit business from day one.

Another major motivation for me was I just didn't want to type the same thing into forums over and over and over again. I thought I could just write a blog post and link to it on the forums. It turned out that some of the forums don't allow you to post links to your for-profit blog. That idea didn't pan out nearly as well as I had hoped it would. But those were the motivations.

Now, what I found out is, it's really hard to make money online. It is not easy at all. My daughter would come home from school. At this point, she was in second grade, I think. She'd climb up on my knee and she'd say, “How much money did your website make today, dad?” I'd look and someone had clicked on an ad and I made $1.67. That was literally what the business made that day. It took a long time to figure out how to make money.

Meanwhile, the audience is growing. People are really hungry for this information. Nobody had really given it to them before in this format. Our audience, our White Coat Investor community was growing very rapidly, but I wasn't making any money doing it. At this point, it was just me. I was the chief technology officer. I was the CEO. I was the chief content guy. I was doing everything. If I didn't know how to do it, I'd Google it until I figured out how to do it.

We had this terrible looking website. If you've ever seen it, you can go back in the Wayback Machine and you can see that it was brown on blue. That's literally what the website looked like. It looked terrible. It's almost embarrassing to go back and look at it, but that was the best I could do. But the content was useful.

My goal financially was to be making $1,000 a month off this website within two years. If I didn't accomplish that, I was going to stop with this business idea I had and go do something else, probably build an empire of direct real estate investments. We barely made that.

Two years in, this is 2013 now, I'm making about $1,000 a month and thrilled. Of course, I like the trend. I like the direction it's going, but I decided, well, at this point, I have to take this business a little more seriously because I'm pouring in full-time work. I've got all this time off when I'm not at the emergency department. It's Monday morning at 09:00 AM, and emergency docs work mostly evenings. I'm not there. All my friends are at work. My spouse is doing whatever she's doing. My kids are at school. I'm sitting around at 09:00 AM typing stuff into the internet.

I'm literally putting in full-time hours over the course of the week and not getting paid anywhere near what I'm making as a physician. I got to figure out how to make money online. I went to a conference for online financial entrepreneurs. I gained a couple of insights, one of which is that we had a really valuable page of the internet that wasn't being monetized at all. I decided to start monetizing that.

The other thing was that I should write a book. I sat in a class. Mike Piper was on the panel in that class and talked about writing books, which is how he's monetized his website over the years. I decided I should write a book. The next week, we were driving to a wedding in Colorado, and I wrote a book on the way. It's called The White Coat Investor: A Doctor's Guide to Personal Finance and Investing. Basically, the first draft of that book was written while driving from Salt Lake to Denver.

By the time it got published, starting the next year in 2014, it was a halfway decent book. Not bad for a self-published book. It sold lots and lots of copies and started making money, as did the website, now that I'd finally figured out how to start monetizing it.

By that summer, though, I was leaving $100 bills on the ground. I was literally just not renewing advertising contracts. The website would go down, and I'd have a bunch of night shifts. Nobody looked at it for four days because I was busy or I was asleep. I realized I was going to need a little bit of help. Katie was pitching in where she could, but we had three small kids at this point. We'd gone from man to man to zone. We had three kids. We were a little overwhelmed in the family department. By late 2014, she was pregnant with our fourth.

We looked to hire somebody. Who do you look to hire? The first person you could find, which was my sister. I thought, oh, she could use a job. I tried to talk her into coming here and working for us. She said no. She said, “No, I'm busy. I'll look at it again at the end of the summer. I'm doing a bunch of stuff.” She put us off. At the end of the summer, I hadn't gotten around to hiring anybody else because I was busy working two full-time jobs. I hit her up again, and she agreed to come work for us and became our first business manager, our first employee. She wore a lot of hats over the years.

Well, as the years went by, we made enough money to not only pay her, but have some profit for us. Eventually, we got better and better at that. We hired a few other part-timers, mostly friends and family, neighbors.

By the time our first conference happened in 2018, there was essentially three full-timers outside doing the registration outside the room. I was running the entire room. There were 300 people in the room. We had 300 seats. We sold 300 tickets, standing room only, of course, because nobody wants to climb over 12 other people, we learned, to get to their seat. We had a wonderful conference and really realized that there was a real community of awesome people out there that we were serving and that this was a great thing we were doing.

By the end of the next year, of course, the conference itself was like total overload. We came home. We're like, we are never doing another conference. That was super hard. By the end of the next year, we'd moved out of our home. We were doing a renovation on the home.

At this point, I had cut back even a little bit at work because I could not do two full-time jobs any longer. WCI was starting to be more than a full-time job. I'd cut back to three-quarter time. I dropped my night shifts at the emergency department, but we were still totally burned out on White Coat Investor. We're living in a rental house. We're trying to run the business in this rental house with the kids running around us all day. We decided we're burned out. We have to do something different.

 

WHITE COAT INVESTOR TODAY

Dr. Jim Dahle:
Our big decision was we either need to do less or White Coat Investor has to do less. We can't produce the amount of content we're producing, number of blog posts, number of emails, number of online courses, number of podcasts. Or we need to get bigger. Either we had to get smaller and do less or get bigger and hire a whole bunch of people to help us.

We started interviewing. We figured we needed a tech person and we needed some sort of administrative person, somebody to run the business because not only was I not that good at it, I didn't like it. I certainly didn't have the time to do it and create all the content and keep seeing patients in the emergency department.

We hired a COO. He started the first week of March in 2020. Yeah, March 2020, if that date means anything to you. About a week later, we had our next conference. Right as the pandemic was taking off, we're running a conference. The NBA shut down the night of the opening reception, the first evening. By Friday of the conference, two days later, President Trump had paused all student loans. Everybody at the conference was taking flights home. Some people showed up, grabbed their swag bag and their employer told them they had to come home, so they left. Other people were renting cars in case they can't fly home.

By the last day of the conference, of the 800 people that registered to come, only about 250 were still there. Still a wonderful conference. It was great, again, to get together as a community to start having more and more people helping us with what we were trying to accomplish at White Coat Investor.

Then over the last five years since that time, we've obviously hired a lot more people to help. We're doing a lot more things to build this community and to help you become more successful in your finances because we believe that doctors in particular, but all high-income professionals, when you have your financial ducks in a row, you're a better doctor. You're a better physician, parent, partner, etc. because you're not so worried about the financial aspects of your life.

We're now 19 people working here at the White Coat Investor. It's been a really fun journey, not only making payroll every month, but continuing to be a profitable business at least most months and being able to do lots of cool things with that profit.

Aside from expanding to other things like expanding to doing a podcast, expanding to doing a YouTube channel and those sorts of things where we can reach more people, but to give back. We have the Champions Program where we try to give a copy of a White Coat Investor book to every first-year medical and dental student every year.

We have the White Coat Investor Scholarship. Thank you so much to all of you out there that judge the scholarship each year where we try to literally just give away cash to medical, dental, other professional students, etc. to reduce their burden, but also to spread the message of financial literacy.

We have a Financial Educator Award we fund every year where we recognize somebody, recognize multiple people but we give the award to one person for educating their colleagues, their peers about this financial stuff.

We've been able to do lots of cool stuff by being a for-profit business, but most importantly, we've tried to take that and serve you better. That comes with things like starting a forum. When we did that website redesign 10 years ago, we started the White Coat Investor Forum. That's going to have its 10-year anniversary in a few more months.

 

LOOKING TO THE FUTURE

Dr. Jim Dahle:
But we've also tried to do things like get the industry to change, the financial services industry to change. For example, we've tried to make sure people can get disability insurance in the right way so they can get disability insurance that's going to cover them, that they know if they're going to be declined before they apply, that they don't get hounded to buy whole life insurance while they're buying it. And so, we've made some changes in the way we interact with insurance agents in order to be able to serve you better.

Likewise, we've mentioned that on the podcast before, we've mentioned that we're starting a financial advisory company. Well, that's going gangbusters. I think we hired nine people this month. And so, that's exciting. All these planners are going to start taking clients soon. And we have all kinds of you that are interested in that service.

Now, lots of you are do-it-yourselfers. We know that. This is a financial blog. It's a financial podcast. It attracts the do-it-yourselfers. Even if only 20% of docs are do-it-yourselfers you're concentrated here in this sort of a community, and that's fine. We're not trying to talk all the do-it-yourselfers into hiring a financial advisor.

But we recognize there are a whole bunch of docs out there that do not want to be do-it-yourselfers. Some of them want to be validators. They just want a little bit of help. They want to check in with somebody every now and then. They want help coming up with their financial plan, whatever. And some people are true delegators. They're like, “I want a financial person that's going to help me do financial planning, who's going to manage my assets, et cetera.”

We're trying to create a company that serves both of those groups of people in a fair way. Good advice at a fair price. And then, of course, we know that lots of people, one member of the couple is a do-it-yourselfer. The other is not. We want to be a resource for those couples for in case something happens to the person that is the do-it-yourselfer. They have someplace they can send somebody that they know they can trust, and they know it's going to cost something.

But they know that their partner is going to be taken care of in the event that something happens to them or something happens to their ability to manage this stuff, or they just get sick of doing it and want to outsource it later in life. We've had some fun things that we've put together over the years about that.

 

WCI Q&A

Dr. Jim Dahle:
Okay, I've got some questions. Megan, our podcast producer, has put together for me that I have to answer on this podcast. So we're going to see how it goes. We've talked a little bit about where WCI started, where it is today, and where it's going. We're trying to serve you better. The mission has become more important to Katie and I every year as we've become more personally financially successful. The mission is really what WCI is all about.

So, what has worked for WCI? Well, what has worked is sticking with it. At one point, we counted 100 physician financial blogs out there. If you go try to count the number of physician financial blogs where somebody is actively writing right now, it's less than five. What worked was we stuck with it. And we found ways to not burn out on it, ways to be able to hire help. But persistence has worked a lot.

But we've done plenty of things that did not work. There are posts in the past, and you can't find most of them on the website. We've deleted them as part of the redesign. But there are posts on the website for things that did not work. We might have been trying to monetize something.

For example, I think one of the partnerships we tried to do was selling scrubs. We tried to partner with a company that wanted to sell scrubs to our audience. And it just didn't work. People didn't come to White Coat Investor because they were interested in scrubs. They come here because they're interested in finding a good financial advisor, because they need disability insurance, or they need a doctor mortgage or whatever. But they don't come here for scrubs.

Likewise, we've had some interesting content posts. I think I did a post once on colored diamonds or something. Some of that stuff didn't work. We've thrown lots of stuff at the wall over the years, both financially and content-wise. It just did not resonate with our audience.

We try to move on quickly from those sorts of things and learn from them and serve you in the way we'd like to be served. That's really where White Coat Investor comes from, is I asked myself, “What would I have wanted? What book would I have wanted somebody to hand me when I came out of medical school? What kind of service would I wanted to be given when I went to see an insurance agent or a mortgage agent or a financial advisor or a contract reviewer? What service would I have liked to have gotten?” Let's connect White Coat Investors with that service or provide that service ourselves.

Okay, Megan's next question is, “What have I changed my mind about?” Well, let's talk about a few things I've changed my mind about over the years. Maybe the most significant portfolio change, and we haven't had very many portfolio changes in our lives. We've mostly stuck with that plan we put together in 2004 when I was in residency and followed it.

But one of the things we added, I don't even remember what year it was, maybe 2012 or so, is I added some peer-to-peer loans into the portfolio, replacing a few of our bonds. And we did fine in peer-to-peer loans. We went to these crowdfunding companies and put money into them and had dozens and dozens of these peer-to-peer loans. And they paid interest rates of like 20, 25, 30%.

We knew there was going to be a default rate. Most of the people taking these personal loans, there's no collateral on these loans. Most people taking them were refinancing credit card debt. So, they're lowering their credit card debt from 30% to 22%. Well, of course, a bunch of those people are going to default.

But I calculated how many of them could default and I'd still have an acceptable return. And I figured about 20% were probably going to default and I'd still do fine with a double-digit return. And if 40% of them defaulted, I'd probably break even on the investment. And so, we did that for a number of years.

We had some advertisers that offered these peer-to-peer loans as well. And we did fine in them. By the time we exited five years later or so, our return was actually 8 or 9 or 10%. It was fine. Might have even been 12%. We did fine in the asset class.

But I recognized that I could do about that well with real estate debt in first lien position. That literally if somebody decided they weren't going to pay us back, we could foreclose on the property via a fund. And I just thought that was a much smarter way to earn that sort of a return. And so, I moved out of peer-to-peer lending. Our portfolio changed and we added a little bit more real estate about that time. We went from 7.5% real estate to about 20% real estate. When we're talking about changing our mind, maybe that's one area in which I changed my mind.

Another area might be financial advisors. I had been burned so many times by financial professionals. I had run into lousy financial advisor after lousy financial advisor after lousy financial advisor. People who are either not giving good advice, which was very common because the conflicts in the industry, or were just charging too much to do it.

But one thing I've changed my mind about is that, I still think the majority of people out there calling themselves financial advisors are doing one or the other. They're either giving bad advice or they're charging too much for it. But there are some good advisors out there. And so, one of the things we started doing after a few years was referring people to those good advisors.

That list of course has given me more angst than anything else we've ever done with White Coat Investor. And it was one of the reasons that we're kind of trying to create the ideal financial advisory company ourselves. But that's maybe something I've changed my mind about.

Not necessarily about an asset under management model. I don't actually have a problem so much with an asset under management model. As long as the client does the math every year. As long as they calculate out what fees they're paying and are paying a fair enough fee.

I still think you're probably better off as White Coat Investors in particular, not primarily paying via an asset under management model, especially for financial planning. It doesn't make any sense at all to use that model for financial planning. But as long as people are doing the math, I can tolerate that sort of a model. At least it's a fee only model, which is so much better than a commission model where you're just being sold to the whole time.

Whole life might be another area I've changed my mind about. I'm still not pro whole life by any means. I think it's a product that's dramatically oversold. But my real problem with it is the way it's sold. If somebody actually understands what they're buying and they buy a whole life policy and they want that thing, I don't have a problem with them buying it at all. The problem is it tends to be a product designed to be sold, not bought.

So, it gets sold to people who think it's another retirement account or another Roth IRA that's going to have these awesome returns. And then they're disappointed when they realize the returns are kind of relatively low, even if you hold onto the thing long-term, they're kind of bond-like returns. And of course, you have to qualify for the insurance. And if you surrender it, any gains you have in it are taxed at ordinary income tax. There's all these problems with it, especially if you don't hold it your entire life.

But I've recognized there's a few uses for it. It can be used as a kind of a no hassle asset in an irrevocable trust, for instance. It can be used for buy-sell agreements. It can be used in some other types of business planning. It can be used for the guarantees because you want to leave a certain amount of money to your kids or to whoever, your favorite charity, whatever, no matter when you die.

Well, life insurance can give you a guarantee that regular investments cannot. So if you die young, your kid still gets a million dollars, even if your money hasn't had time to compound to a million dollars. Now, on average, the insurance, of course, has to underperform the investments that the insurance company's investing money in. It has to underperform or the insurance company would go out of business. But if the guarantee is valuable to you, well, that might be a place that you can use it.

Another place maybe I've changed my mind about. I'm still a fan, if you're trying to build wealth, of paying cash for inexpensive cars. I really haven't changed my mind about that. And I've never told people that have money to not buy expensive, nice cars, especially if they really like them.

I bought very cheap cars and drove very cheap cars for a long time. As an attending physician, I bought a car that cost $1,850. It was sold four years later for $1,500. All I put in it was a new set of windshield wipers, a new battery and four used tires. That was it. It was a great financial deal. But I've also driven a $90,000 truck. And when you have the money, don't feel bad about spending it on stuff that you enjoy or that you like or that's going to make your life better or make you happy.

But the truth is most physicians, most people listening to this podcast either already have or soon will have a multi-six figure income. Whether you buy a cheap car as a resident or as a young attending probably isn't going to be the factor that determines how successful you are in life.

And if you want to go get a $20,000 car loan, that's the only financial “mistake” you make in your life, that's probably not going to keep you from retiring as a multimillionaire at a time of your choosing. Can you get wealthy a little faster by driving a cheaper car? Almost surely. But do you have to optimize everything? No.

And that's kind of the next thing I've changed my mind about. When I first started out and got excited about personal finance, I was very much a hyper optimizer. I was trying to optimize everything. Your asset allocation and your asset location and your budget and your retirement accounts and travel hacking.

I remember our last year in residency, we funded our Roth IRAs using credit cards, 0% deals. Katie was staying home with our oldest daughter and I'm like, “We'll have the money by the end of the year when I'm an attending physician. We don't necessarily have it now, but let's fund it now. These guys are giving us 0%.” So we did. We funded our Roth IRAs that year with a 0% credit card deal. And of course, when it came, the interest started accumulating 12 or 15 months later, we did have the income and we paid off those credit cards.

And I don't know, maybe we came out a couple of hundred dollars ahead doing that sort of a thing. But I've changed my mind about the importance of optimizing, of playing those games or travel hacking and credit card hacking, those sorts of things. I've recognized that only a few things really matter when it comes to you as a high income professional being financially successful.

The first one is making sure you get to that high income. Making sure you're being paid fairly. That means getting through school, getting through residency, getting a job and getting paid. Because that is the source of your wealth is that income.

The second thing that matters, of course, is your savings rate. You've got to carve out a significant portion of that income and use it to build wealth, use it to pay off debt, use it to invest, use it to fund retirement accounts, et cetera. And so, that matters. How much of that high income you're using to build wealth matters.

And the other thing that matters is having some sort of a reasonable plan that you can stick with long-term. And I've never dictated a White Coat Investor asset allocation. I've never told you, you have to invest this way or you're not going to be successful. And that's because there are lots and lots and lots of ways to invest and be successful. You want to put 5% of your money in Bitcoin? Knock yourself out. You want to have a whole bunch of your money in real estate? Great. There's some cool advantages with real estate.

As long as you're not doing something crazy with your money, you're gambling on options and you have half your money in art and half of it in some newfangled cryptocurrency and you're chasing performance with stocks and that sort of a thing. As long as you have a reasonable plan, you've funded adequately and you stick with it long-term, you're going to retire at a time of your choosing as a financially independent multimillionaire.

Those are the things that matter. Yes, you need to buy some insurance to protect yourself against bad things happening along the way. But if you can make a high income, you can carve a big chunk of it out. You can put it into some reasonable investing plan and stick with that plan long-term. This is all going to work. You don't have to fund your Roth IRA using a 0% credit card deal. You don't have to drive an $1,800 car.

So, yeah, I've changed my mind about a few things over the years, but I wouldn't say that I've had some dramatic change in what we've been preaching here, which is if you pay attention to your finances, you're going to be happy you did so. It's just not that complicated.

The next question Megan's given me, “What do you want to bring to WCI and the community going forward?” Well, we've brought some things in-house when we felt like we could do them better than what we were seeing in the industry out there.

One of those things was student loan advice. We started Student Loan Advice back in 2021. We have served hundreds and thousands of white coat investors over the years. I think the average client saved something like $160,000 or $180,000. Now, a lot of that was public service loan forgiveness they were able to qualify for and receive, but it was a huge benefit.

Other things we've done, I wouldn't say we brought insurance in-house because we don't really sell insurance policies. We still send you to our partners to sell policies, but we've brought it in-house enough that we can make sure they're doing the right thing. And we meet with them in person once a year to make sure they're doing the right thing. We think these are the best insurance agents to send you to, to buy your term life insurance and your disability insurance, of anybody in the country. And if there's a problem, we fix it.

And by kind of bringing that in-house, by starting an insurance company, we're able to have insight and to have visibility and transparency into what they're doing to make sure they're doing the right thing. They're better agents than they were before and they're serving you better. And so, that's pretty awesome.

We've also got the White Coat Planning starting up. This is another way in which we're bringing things in-house. That list has given me angst over the years. We've partnered with lots of really great financial advisors, but the vast majority of really great financial advisors fill their practice with 75 or 100 families. And we tend to fill them up in a year or two. If they're advertising here at the White Coat Investor, we send them enough clients so their practice fills. And then we can't send them people anymore. All these great financial advisors that you hear about or you read their books or whatever, all their practices are full.

That does not help solve the problem that there are hundreds of thousands of doctors who need a good financial advisor out there who gives good advice at a fair price. So we're trying to bring this in-house, as well, so we don't have to worry about the few things about a firm we're referring to that I might not like. We're still going to have other people to help us serve White Coat Investors. We've still got a list of recommended firms, but there's just not enough of them to be able to serve all the White Coat Investors who need this service. And so, we're starting White Coat Planning. It's going to be pretty awesome.

Other things we've thought about in the future. People have always thought about “Start another conference.” Well, conference is one of the hardest things we do. Number one, it takes a ton of effort. The entire team goes to the conference. It basically eats up an entire week plus of the entire staff of White Coat Investor to do our conference once a year.

And it's not exactly the most profitable part of the company. In fact, every year is probably our biggest financial risk. If you've ever signed your name to 1400 room nights at a resort and a multi-hundred thousand dollar food and beverage minimum, you know what I'm talking about. We put seven figures on the line to put on that conference each year and we're now doing it three years in advance.

The excitement to put on two and three and four and five conferences a year, maybe isn't there, but it's always possible that we could put together some sort of other conference aimed at some portion of the White Coat Investor that might make sense to do. Maybe isn't quite so financially risky for us to put on that maybe will show up at some point down the line.

Are we going to write any more books? Well, if we see a need that we think we can fill. I've thought about tax books in the past. The problem with the tax book is it goes out of date in like three months. So you're constantly updating the tax book. There may be a retirement book that goes along with a retirement course that I'm trying to work on. But this is a huge undertaking and it's not moving as fast as we'd like it to. Maybe because we're working on so many other things and falling off mountains and all that at the same time.

Megan asks, “Would I ever write a memoir?” I don't think anybody'd be interested in a memoir, but who knows? Lots of people write memoirs as they get older, but I'm just not sure I've lived an interesting enough life that anyone would really be interested in hearing a memoir, but who knows? We'll see where White Coat Investor goes and it might be interesting to do something like that with a lot of our staff that have been here since close to the beginning.

We don't have plans to start an estate planning attorney firm or anything like that. But we'll keep an eye out. When there's things that you think we can use to serve you better, let us know. We'll see if they seem to be practical or doable with our current limitations and we'll consider those things.

Okay, next question. Megan asks, “Talk about your near burnout, whether that could happen again. Why you decided to go all in instead of abandon WCI back in 2019?” Well, we do think about selling WCI every now and then. We've had offers over the years, offers that were lots and lots of money, life-changing money for most people. And at the end of the day, we turned them all down because they weren't right. Not necessarily they weren't enough money, but they just weren't right for the mission we're trying to accomplish.

And at this point, Katie and I are now seven, eight years out from financial independence. The money is no longer much of a consideration. And so, as long as we can continue to direct WCI, we think we're going to be involved in WCI. But is it possible that ownership changes at some point in the future? Probably. It does for most companies. I don't know what those conditions would look like, but if you want to give us lots and lots of money for WCI, we'll entertain all offers. We'll at least consider them. So feel free to make us an offer if you want, but we're certainly not chomping at the bit to get rid of WCI as a business.

All right, our next question is, “How will I know when I'm ready to be done?” That's a great question. For the last eight years, I've had an existential dilemma every morning when I wake up of what I want to do with the rest of my life. But it seemed really silly to me to change what I wanted to do with my life just because I don't need money anymore.

I spent my 20s in medical school and residency because I wanted to be a doctor. I thought I could be a good doctor because I thought I could make a difference in one of the worst days of people's lives. So just because I have enough money that I don't have to practice medicine doesn't mean that I'm just going to quit immediately. So I didn't.

For the last eight, nine, 10 years, whatever, WCI has made enough money that I don't have to practice medicine. And certainly since we've been financially independent, I don't have to practice medicine. But I still practice medicine. People are always amazed at this when I meet them in person, at a speaking gig or at the conference. They ask, “Do you still practice medicine?” I'm like, “Yeah, why would I stop? Is it that bad? I didn't realize it was that bad.”

It's pretty hard to burn out with what I'm doing right now, which is six day shifts a month. That means I go to work on average a day and a half per week. That's a pretty nice life. And it allows you to sit back and chat with your friends at work and to sit down with somebody that can really use your expertise, can really use your skills and make a difference in their lives one-on-one, which is honestly what I like best about WCI is that one-on-one interaction, whether it's an email or talking to somebody at a conference or whatever, and being able to help them with their situation one at a time.

Now, obviously it does more good if I can do that 20,000 people at a time than if I can do it one at a time. And so, we try to do that as well. But what I really like is that kind of personal ministry interacting with people at WCI. Okay, I don't know when I'm going to be done. I'll let you know when I know, all right? No secret there.

Let's talk a little bit about the website. If you guys have not been by the website in the last 11 days, go to the White Coat Investor website. whitecoatinvestor.com. We have changed everything. And change is hard. I get it. Nobody likes change. Maybe you got to look around a little bit to find what you were looking for.

But pretty much everything's better. The site's faster. For years, you've told us “Have less ads, have less ads, have less ads, have less ads.” We have less ads. We think they're going to be more effective ads for those who are interested in advertising to you, but there are a lot fewer of them. You'll notice you're not looking at nearly as many ads as you have in the past.

We think the pages that connect you with the resources you're looking for, whether they're free resources, whether they're resources we provide, whether they are partners in the financial services industry, they're a lot more straightforward to work with. They're packed with much more information. It's much more high yield than it used to be. And that's what we're looking for, especially as docs, especially as emergency docs We're always looking for the high yield stuff.

And we don't want to waste our time. You have better things to do in your life than become financially literate and optimize your finances. So, we want to use as little of your time as we can to accomplish those things.

But you will find as you surf around the website that it's very useful to you. It's way better than it used to be. And it makes our staff much more efficient so they can spend more time helping you and focusing on that stuff that really matters the most. And so, we're excited about that. But check out the new website. We've got all kinds of fun stuff going on. We've got a sale going on right now.

White Coat Investor is going to keep going. We spent a whole lot of time and effort and money over the last year and a half developing this thing to keep it going for you. And for those who are in fifth grade right now and might be a doctor in a decade or two or three. Those are the people that are also going to need White Coat Investor just as much as you do. And we're hoping to have it here for them. Whether I'm involved, whether I'm not involved because I fell off another mountain or whatever, we want the resource here for you to continue fulfilling this mission long term.

Thank you for being part of our community. What you're doing with your life matters. What you do with regard to your peers and colleagues to boost their financial literacy matters. And so, we're grateful for everything that you are doing out there as well. We recognize that it is not just the 19 of us here are doing this. There are forum moderators and people on the subreddit and the Facebook group. There are people judging the scholarship. There are contributors to the website. There are guest posters. There are people who come on the podcast as guests. It's a huge community and we're grateful for all of you for contributing to it.

 

SPONSOR

Dr. Jim Dahle:
As I mentioned at the beginning of the podcast, SoFi could help medical residents like you save thousands of dollars with exclusive rates and flexible terms for refinancing your student loans. Visit sofi.com/whitecoatinvestors to see all the promotions and offers they've got waiting for you.

SoFi student loans are originated by SoFi Bank, N.A. Member FDIC. Additional terms and conditions apply. NMLS 696891.

Don't forget about our Black Friday sale. The code is THANKS20. That's 20% off all our books, all our courses through December 5th. You can get $200 off WCICON as well in person through December 5th, same code, THANKS20.

Thank you for leaving five-star reviews. They do help us spread the word about this podcast. A recent one came in from Jagster. “Love the show, only wish I found it sooner. Great primer to stimulate learning about finances for a doc, especially for someone who isn't quite ready to dive into reading a few financial books.” Five stars. It's a great review, thank you for doing that.

All right, that's it. Keep your head up, shoulders back. You've got this, we're here to help. You're going to be successful. All you got to do is do the few things right that need to be done right. You can optimize as much as you want beyond that. Don't feel like you have to, though. Just get the big things right. And we'll see you on the other end of this where you become a financially independent, multimillionaire retiree, and make a huge difference in your career and in the rest of your life. Thank you.

 

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.

Transcription – MtoM – 250

INTRODUCTION

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 250 – Emergency physician wipes out $500,000 in student loans in three years.

This podcast is sponsored by Bob Bhayani of Protuity. He is an independent provider of disability insurance and planning solutions to the medical community in every state and a long-time White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies.

If you need to review your disability insurance coverage or to get this critical insurance in place, contact Bob at www.whitecoatinvestor.com/protuity. You can email [email protected] or you can call (973) 771-9100.

All right, don't forget about our Financial Bootcamp. This is a free email, of course. It's your fast track to being debt free within five years of residency, and can help you become a millionaire, just like those that we interview on this show. You can sign up for that at whitecoatinvestor.com/bootcamp.

All right, we're going to talk for a few minutes about public service loan forgiveness after this episode, so stick around.

 

INTERVIEW

Dr. Jim Dahle:
Our guests on the Milestones to Millionaire podcast today are Andrew and Colleen. Guys, welcome to the podcast.

Colleen:
Thank you.

Andrew:
Yeah, thanks for having us.

Dr. Jim Dahle:
Okay, tell us a little bit about yourselves. Andrew, you're the doc, is that right?

Andrew:
Yes, yes, correct.

Dr. Jim Dahle:
And Colleen, what do you do for a living?

Colleen:
I'm a physical therapist.

Dr. Jim Dahle:
Okay, a doc and a physical therapist. Tell us what part of the country you're in, and how far you are out of school and training.

Andrew:
You can go first.

Colleen:
Sure, yeah. We're in the Midwest. We're in Louisville, Kentucky, and I am eight years out of training.

Andrew:
Yeah, and I'm a little bit more than three years out of training.

Dr. Jim Dahle:
And tell us what you have accomplished.

Andrew:
I paid off around $509,000 in student loans.

Dr. Jim Dahle:
How much?

Andrew:
$509,000.

Dr. Jim Dahle:
$509,000? Were those just yours?

Andrew:
Yeah, undergrad and med school.

Dr. Jim Dahle:
Wow, okay. So how much did undergraduate tuition cost?

Andrew:
I initially moved from out of state. It was out of state tuition, and it was for a sports scholarship, which ended up changing throughout the undergrad years. But it was an expensive out-of-state school, as you can see.

Dr. Jim Dahle:
Yeah, okay. All right, how much of this was PT school debt?

Colleen:
Oh, I have my own debt from PT school.

Dr. Jim Dahle:
You have your own debt too. Have you both paid off all your debt, or we just paid off Andrew's debt?

Colleen:
Just Andrew's. I have two more years of PSLF.

Dr. Jim Dahle:
Okay, you're going for PSLF with yours. Okay, very cool. Andrew, do you not have a PSLF qualifying job?

Andrew:
Well, I did. I guess right before COVID, actually right before entering residency, I got own occupation disability insurance, and then refinanced out of the federal program for half the interest rate.

When I was graduating, there was like such a small percentage of people successfully getting PSLF, and it just seemed somewhat subjective. I just wanted a very definitive plan, and I knew that I would attack the student loans for the first three years, just how you'd always recommend it in all your education.

Dr. Jim Dahle:
You just went and dropped an anvil on it in the corner, because you still wouldn't qualify for PSLF for four more years or so, right?

Andrew:
Correct, yeah, yeah.

Dr. Jim Dahle:
Very cool. Okay, how long have you guys been together?

Colleen:
Since our senior year of college. So, a long time.

Dr. Jim Dahle:
A long time, this whole journey, this whole pathway you've been together. So when you were talking about going to med school and PT school, and the debt from that, what kind of discussions did you have about borrowing that much money?

Andrew:
I felt like there wasn't a lot of conversation about it. It was just kind of like, “This is the reality.” We both come from, I would say, probably like lower middle class income families, and we were both the first in our family to go to postgraduate training program. We knew we were both kind of like treading uncharted territory to a certain extent. And I guess it was just kind of like the nature of the beast.

Dr. Jim Dahle:
Yeah, yeah. There weren't any parents writing big checks for you to go to grad school, correct?

Colleen:
No.

Dr. Jim Dahle:
Okay, so tell us how you did this. Obviously, you've got the decent income, emergency physician plus a physical therapist. You're both working full time?

Andrew:
Yeah, correct.

Dr. Jim Dahle:
What kind of income are we talking about over the last three years or so combined?

Andrew:
Combined, I was looking at the WTs from last year, and I think it's right around like $600,000 or so.

Dr. Jim Dahle:
You guys are working hard.

Andrew:
We’re trying to.

Dr. Jim Dahle:
When I add up the average PT salary and the average emergency physician salary, it doesn't add up to $600,000. You guys are doing a lot of hard work. So good on you for that. And how much of that do you think you sent to your student loans every year?

Andrew:
I don't know. I should have calculated the percentage wise. I know that we would get paid every two weeks. And I know that the initial base pay for the refinance loan was around $5,000 or $7,000. And I know that the subsequent two-week paycheck would be around a take home of like $12,000 to $14,000. I know around like $10,000 of that would go right to the bank too. So it was around $15,000 to $20,000 per month, which was rough when it was happening. But I'm so glad it's done.

Dr. Jim Dahle:
Yeah. You sent your lender $15,000 plus a month.

Andrew:
Basically, yes.

Dr. Jim Dahle:
It's amazing how quickly half a million dollars in loans goes away when you do that. This required, I don't know if sacrifice is the right word, but a lifestyle choice. You made a lifestyle choice that instead of spending $15,000 a month, you were going to send it to the lender. Tell us what that required. What may be some of the things you felt the most, the biggest sacrifices maybe from doing that.

Colleen:
I think we continued to just live off of my salary essentially. And then his salary was pretty much loans.

Dr. Jim Dahle:
And taxes, I suppose. Your tax bill went up dramatically, right?

Colleen:
Yes, for sure. But I think we continued living like we were when he was in residency. We didn't really change our lifestyle. We did buy a house. That changed, house payment, at some point in the three years of him paying it off. But other than that, we pretty much just lived very frugally.

Andrew:
And we bought a house after residency. It wasn't during.

Dr. Jim Dahle:
So, what you're telling me is “live like a resident” works. You can wipe out even half a million dollars in student loans in three years.

Andrew:
Absolutely.

Dr. Jim Dahle:
You know how much pushback I get on that recommendation? It's a lot of pushback. People are like, “You shouldn’t do that. You can't do that. It won't work.” And I'm like, “Actually, I meet people every week for whom it worked.”

Andrew:
Yeah. Whenever you started these podcasts here, like the MTM shows, I would always just look at the prior guests and just look at their student loan burden and their take home pay and leaving medical school. I knew that I was completely on the far end of the curve as far as student loan debt. And it was definitely nerve wracking. And it felt like you're kind of betting on yourself to a certain degree. But I think if you go in with a plan, it's doable. I think you just have to stay focused and have great spousal support throughout all of it.

Dr. Jim Dahle:
One of the things that sometimes is not talked about as much, “live like a resident” sometimes doesn't just refer to how you're spending. It actually refers to how you're working too. How many shifts a month have you been working the last three years?

Andrew:
Probably around 15 to 16.

Dr. Jim Dahle:
8s, 10s, 12s. What are they?

Andrew:
They're around 10s, like 10 on average, probably.

Dr. Jim Dahle:
Okay. So this is more than full time emergency medicine. People got to realize this, right? Full time emergency medicine is 15 eights or 12 twelves. That's really what full time is. You're working more than that because you're working 15 or 16 tens. So that's why your income was higher than the average emergency physician. Was that intentional? Did you deliberately work more in order to wipe out these loans faster? Or was that just what they happened to need? And you're like, “I can do that.”

Andrew:
Probably the second. I would say I'm fresh out of training. I feel like I have energy to work. And I felt like most of my peers around my age group were working that average. So I kind of didn't really question it. So it wasn't intentional.

Dr. Jim Dahle:
But it worked out well because you write these $15,000, $20,000 checks every month to your lender and get rid of those student loans. Okay. There's lots of people out there like you, maybe like me that didn't necessarily come from upper middle class background. No help for school at all. It's on you. Whether you figure out some public service loan forgiveness path, whether you refinance them and pay them off yourself, it's on you. What advice do you have for those people?

Andrew:
I was thinking about the question. I think if you obviously choose a medical specialty because you love it, and you feel like you can do it for a long time. And I know that some medical specialties pay up tremendous amounts. Some pay, I would say like pretty low amounts, just the nature of the beast. But I would say if your student loan, debt to potential gross income ratios approaching that more than two to one ratio, you should really become financially literate and have a definitive plan.

I think if it was around a one to one ratio, I think you could probably just kind of get by and it would be okay without too much. But I know the debt amount was a huge nidus for just becoming literate and trying to absorb as much information and trying to have a definitive student loan plan payoff.

Dr. Jim Dahle:
Colleen, when did you learn about public service loan forgiveness?

Colleen:
I think after PT school, maybe at the very end of school or a few months into, “Oh, I have all these loans, what do we do with them?” But I felt like I was gambling going into it, because I started it in 2017. And that's when the first group of people was applying for forgiveness.

Dr. Jim Dahle:
And getting denied mostly. Getting denied was what all the news in 2017 was, because nobody had actually made 10 years of payments yet.

Colleen:
Yes, that was kind of scary. I was like, “Well, I hope this works.” And I guess in two years, I guess I'll still be saying, I hope it's still working.

Dr. Jim Dahle:
Now a million people plus have received public service loan forgiveness. We're pretty darn sure it works at this point, right?

Colleen:
Yeah.

Dr. Jim Dahle:
Did that affect your job decision? Was this the job you would have taken either way, do you think? Or did you actually choose a job deliberately to make sure you got PSLF?

Colleen:
No, I think I'm still in the realm of PT that I would have chosen, regardless of PSLF, though, when I was looking for jobs, it did change what I was looking for, I guess. But overall, no, I'm where I would choose to be.

Dr. Jim Dahle:
How much did you owe when you came out of PT school? And how much do you expect to receive in forgiveness?

Colleen:
$185,000.

Dr. Jim Dahle:
About that amount is what you expect to get forgiven?

Colleen:
Yes.

Dr. Jim Dahle:
Well, that's not surprising given the pathway that federal student loan management has taken over the last few years. For three and a half years, you didn't have to make payments, right?

Colleen:
Yeah, yeah.

Dr. Jim Dahle:
So this has worked out pretty well for your time period.

Colleen:
Yeah, there's definitely a point where my debt just kept climbing. But I think during that three-year period, it kind of steadied. So that's been good.

Dr. Jim Dahle:
Okay. All right. Have you guys been working on any other financial goals in the last three years or was pretty much everything you could squeeze out of your budget been going to these loans?

Andrew:
No, just “live like a resident” mentality. Throughout the first three years out of training, we were able to max out two HSAs, two backdoor Roth IRAs, and close to max out our 403(b)s, at least to get their matching close. I think you max it out every year. We've been able to do that. I think the retirement and long-term savings has not been the largest goal, obviously. But I know that you'll frequently refer to as paying down debt as like a negative bond. That was something that was in the back of my mind.

Dr. Jim Dahle:
What you're telling me is you could have paid off these student loans even faster if that was all you're doing.

Andrew:
Yes.

Dr. Jim Dahle:
Very cool. Very cool. A typical moderate and balanced approach is what most people do. There's certainly nothing wrong with that at all. So how much have you acquired in investments? What's your investment portfolio look like at this point?

Andrew:
I take into account, home equity, our 403(b) accounts, HSAs and Roths. I think it's around $500,000, probably, give or take with market changes and things. And I guess we also have a high yield savings account that we have for an emergency fund. So it's around $500,000 as we speak.

Dr. Jim Dahle:
That's a heck of a swing from minus $500,000 to $500,000 in three years.

Andrew:
Yeah, it's pretty crazy.

Dr. Jim Dahle:
You should be pretty proud of that. The amazing thing too is that that's the slow one, right? That million is the slowest. The next million goes a lot faster. So it's pretty awesome.

Well, you guys have done fantastic. You should be very proud of yourselves. Do you have any final advice for those out there who are where you were three or four or five years ago and want to accomplish what you've accomplished?

Andrew:
Actually when we were sitting through our exit counseling, student loan counseling appointment in our fourth year of med school, I remember I was sitting right next to my good friend. I remember I was like, kind of sounds bad, but I stopped reading medical information that last half of fourth year and just started reading financial information. I was listening to a lot of your podcasts and I read your book at that time and I remember sitting next to him and I was like, “I'm going to pay it off in three years. Here's my student loan debt.” And he's like, “No, you're not.”

Dr. Jim Dahle:
Awesome. You showed him. I hope he listens to this podcast.

Andrew:
Yeah, yeah. A couple months ago, I actually called him and I was like, “Hey, man, I paid it off.” He's like, “No, you didn't.”

Dr. Jim Dahle:
I bet that felt pretty good. Yeah, I bet that felt pretty good. Awesome. You still had his number to call him. That's pretty cool.

Andrew:
Yeah, yeah.

Dr. Jim Dahle:
Yeah. Very cool. Well, congratulations to both of you. You've done very well. You've obviously smashed it out of the park on student loan management. What's next for you? What goal is your next financial goal to work on?

Colleen:
I think we're doing some renovations to the house. Even through this saving and paying off loans, we've always set aside money to still go on one or two vacations a year. So we did try a lot for fun in the midst of it. Because I think we would have gone crazy otherwise. But I think we want to just continue traveling. And from a financial perspective, I think continuing to build our portfolios, but also eventually pay off the house in the next five to 10 years, I think would be our next goal too.

Andrew:
I think hitting millionaire status would be pretty amazing. I think just trying to get a good work life balance and spend more time with family, do more vacations, things like that.

Dr. Jim Dahle:
I'm guessing you hit millionaire status about the time you received PSLF, Colleen. I'll bet that's about when you guys are millionaires, which is pretty awesome. So, awesome. You guys are crushing it. You should be proud of yourselves. I got to go on to another interview unfortunately, we're recording six of these today. But I'm going to let you go and just tell you to keep going, man. You're doing awesome. This is going to give you so much flexibility in your careers and in your personal lives that you're going to be super happy that you concentrated at the beginning of your careers on your finances and really giving yourself so many options.

Andrew:
Well, thank you very much.

Colleen:
Yeah, thank you.

Dr. Jim Dahle:
Okay, I hope you enjoyed that. It's pretty amazing how well “live like a resident” actually works when people actually do it. Half a million dollars in student loans gone in a year, plus another half million dollars in net worth in addition to that. It's a million dollar swing in net worth in three years.

“Live like a resident” works. Do you have to do it? No, it's optional, it's your life. You get to choose what you want to do. But most docs probably ought to do at least a brief “live like a resident” period to really jumpstart their finances. It gives you so many more options by mid-career in what you do with your career, what you do with your life. And you'll be surprised how many of those you want.

The burnout rate right now is 50%. So you got to assume you're going to deal with at least some burnout during your career and having the financial wherewithal to make changes in your job, to make changes in your financial life is very worthwhile.

 

FINANCE 101: PUBLIC SERVICE LOAN FORGIVENESS (PSLF)

Dr. Jim Dahle:
All right, I promised you I was going to mention PSLF at the end of this podcast. PSLF, Public Service Loan Forgiveness, program that essentially started in 2007. It requires you to make 10 years of payments while being employed full time, 30 plus hours a week for a non-profit or government employer, or if you're in Texas or California, contracting with a non-profit. That doesn't work in any other state, unfortunately, but in those two states, it does.

And if you will make your payments for 10 years in a qualifying program, programs seem to change all the time, but in a qualifying program, 10 years of payments, whatever you still owe after 10 years is forgiven tax free. That's way better than the forgiveness available through some of the income driven repayment programs that require you now to make payments for 25 or 30 years. And when it is forgiven, that forgiveness is taxable. So, if you get $600,000 in student loans forgiven after 25 years, you now owe taxes on that $600,000, which might be about the same amount you borrowed to start with.

So, it's not necessarily a great pathway, but if you qualify for it, PSLF usually is a great pathway. If you're in a PSLF qualifying job, this is almost surely the way you ought to manage your federal student loans.

The program works. Yes, it started in 2007. The first people that could have gotten it were in 2017 after 10 years of payments. But a lot of people, they couldn't figure it out. It was complicated. They're applying for forgiveness or the government's not counting it right. And they're reporting that nobody's getting it in 2017. Well, it wasn't actually true. The people who qualified for it were getting it in 2017. There just weren't very many people that qualified for it. They hadn't made 10 years of payments, or they weren't in the right program, or the government couldn't figure out how to count to 120, or whatever the problem was.

But as the years have gone by, the government's figured out how to do this. They're a lot better at processing the applications, and people understand the rules a little bit better. When people are applying now after having made 10 years of qualifying payments, they are indeed receiving public service loan forgiveness, over a million people.

We've had tons and tons and tons of White Coat Investors who have received this. They've been on this podcast, a few of them, but most of them have not been on the podcast. This happens all the times. Doctors get $200,000, $300,000, $400,000, $600,000 forgiven, tax-free. It really does work. If you qualify for it, go for it.

A lot of people worried about public service loan forgiveness this summer when the One Big Beautiful Bill Act was being debated back and forth in Congress. They feared there were going to be some changes. There were basically no changes made to public service loan forgiveness.

Now, there were changes made to the income-driven repayment programs, which are the payment programs that most doctors are in while going for public service loan forgiveness. And the truth is that they're not quite as awesome as the last version under the Biden administration was, which got stalled in court anyway. So, you may not get quite as much forgiveness as you would have if you were under that plan, but it's still a very nice way to take care of federal student loans.

Now, future medical students aren't going to have nearly as much of their education paid for with federal loans. So, it's only going to take care of part of their student loans, because most of them are going to need some private loans as well, because they're only going to be able to borrow up to $50,000 per year in federal student loans, and that just doesn't cover the cost of attendance at most medical schools.

But for those who are currently in school or who are residents or fellows or attendings now, most of their educational debt, pretty much all of it for most of them, can be forgiven via public service loan forgiveness.

So, don't discount it. Don't overlook it. Maybe this would have worked out even better for Andrew than taking his student loans into a corner and dropping an anvil on them. But that's also a very effective technique. You send them $15,000 a month, even huge student loans go away pretty quickly. So, don't be afraid of that method either, especially if you don't like the uncertainty of worrying about legislative change or executive change to some of those federal student loan programs.

But that's the way PSLF works. Be aware of it. It's a great way to help you to pay for medical, dental, et cetera, school. But you got to become financially literate. Having the combination of financial literacy and financial discipline is so rare in our society that if you have both of them, it's like having a superpower.

And after a while, you start looking around going, “Nobody else knows this stuff. Nobody else is doing this stuff. Why aren't they?” And you realize that you're getting ahead. Not that it's a competition against other people, but you're getting ahead in moving toward your financial goals and how you want to live your life.

 

SPONSOR

Dr. Jim Dahle:
This podcast was sponsored by Bob Bhayani at Protuity. One listener sent us this review. “Bob has been absolutely terrific to work with. He has quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications underwriting process in a clear and professional manner.”

Contact Bob at www.whitecoatinvestor.com/protuity or by emailing [email protected] or calling (973) 771-9100 to get your disability insurance in place today.

Thanks for listening to this podcast. You can come on it. Just apply whitecoatinvestor.com/milestones. Use the White Coat Investor community. We have these great online communities. We have a subreddit, mostly younger people there. We have a forum, mostly older people there. We have a Facebook group, mostly Facebooky people there. We even have a Financially Empowered Women's group.

But there is a community that can help you answer your questions and provide support as you move down this road, as you tick off milestone after milestone after milestone toward becoming a millionaire and beyond.

You're not doing this alone. There are people walking alongside you. Don't let the financial services industry put you in a silo where you think you're all alone and can't talk about money to anybody else. You can. It's not a taboo subject. You can talk to your colleagues. You can talk to your peers.

Please talk to your trainees and students about it. I'm sick of seeing doctors and other high income professionals being taken advantage of and have financial stress that affects the way they do their daily work. It's not right. We're trying to stamp it out here at the White Coat Investor. Help us to do so by spreading the word.

See you next time on the Milestones to Millionaire podcast.

 

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.