By Dr. James M. Dahle, WCI Founder
Long-term readers of this blog know that it has grown into a successful business. About 20 people are writing articles for The White Coat Investor and there are 15 people, many full-time, behind the scenes running the business of WCI. The income from this business has obviously had a pretty dramatic effect on our financial lives, the lives of our employees, and our favorite charities. From time to time, I get the question, “What would your financial life look like if WCI had never taken off?”
The editorial staff has encouraged me to write this post, because they're convinced you'll like it. I'm not so sure, but let's find out!
Life Before The White Coat Investor
Those who have read the original book, The White Coat Investor: A Doctor's Guide to Personal Finance and Investing, should be familiar with our finances for the first decade out of medical school. Katie taught school during my intern year, and then she was a stay-at-home parent. I made about $37,000 a year as a resident for three years and then about $120,000 as a military physician for about four years (plus a little more from moonlighting). I spent two years in a partnership track of a small, democratic emergency medicine group making about $200,000 a year. Then, I made partner. A year after that, we were millionaires, a total of seven years out of residency on an average income of about $180,000 per year. The WCI blog was begun halfway through that partnership track. However, the business of WCI was still at least a couple of years away.
In 2011, WCI had no profit. In 2012, it had $5,000 in profit. In 2013 (the year we became millionaires), it had $20,000 in profit. Clearly, from a financial perspective, the time I put into WCI those first few years subtracted, not added, to our income and net worth. It took several more years before WCI was making enough to hire anyone to help, much less replace, my physician income. It turns out it takes years to become an overnight success.
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Hypothetical: WCI Never Got Off the Ground
What would have happened to our finances if we never had that additional income from WCI? Our original financial plan that was drafted during residency projected that we would be financially independent by the time I was 51. However, it also projected that my income as an attending would be only $225,000. By the time I was a millionaire, my full-time physician income was pushing twice that. Clearly, we would have hit our target by my late 40s at least, even if nothing else changed. I probably would have continued to work full-time right up until that point, then cut back to part-time, as was the plan from the very beginning.
Given how we've spent over the years, we probably would have been saving 30%-45% of our gross income every year and we probably would have lived a very similar lifestyle to what we've lived up until the last couple of years (no way could we have traveled as much as we now are while still working 15 shifts a month).
We would have still upgraded our boat, but it might have been a year or two later. We probably would not have done our big home renovation with the fancy new garage and kitchen, the fire pole and climbing wall, and the WCI office space and recording studio. We probably would have done a few smaller renovations, though.
Our portfolio would be smaller, but the make up of it would look pretty much the same. In fact, it hasn't changed much at all in the last 18 years.
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What About That Entrepreneurial Spirit?
WCI was a for-profit business from day 1. I was trying to make money; I just wasn't very good at it. But I told myself if I wasn't making $1,000 a month from it within two years that I would quit blogging. I barely made it.
You might be wondering what the alternative would have been. It was to build a little real estate empire. That's right, start buying and managing investment properties. I suspect I would have moved over into the short-term rental business a few years ago. I'm still convinced short-term rentals are the fastest, reasonably reliable pathway to financial independence.
Think about it. If you manage them yourself, a 20% cash-on-cash return on a short-term rental is completely reasonable. Yes, it looks a lot like a second job, and that's why it pays so well. But let's say you buy five $400,000 properties with 25% down payments. You've put down $500,000 on $2 million of properties, and you're earning $100,000 per year total on them. That's financial independence for a lot of people. It doesn't take that long to save up $500,000 on a doctor's income. No doctor is ever more than a decade away from financial independence, and with short-term rentals, it could be half that.
But if I had gone that route, of course, you wouldn't be reading this post right now.
What do you think? Do you think most doctors can become financially independent by their early 50s? Why or why not? Comment below!