We have had a lot of listeners request information on my homeowners insurance policy after a large home renovation made some pretty big changes to that policy. It is critical to know what your policy covers but also what it does not. There are a handful of things that are not covered, and based on where you live, you may want to look into additional coverage. You should also be very sure that the quality of your home is properly insured. If you have premium upgrades in your home, you want to be sure that if the worst happens, you can have your home restored to its previous quality. We also discuss some positive changes to Vanguard's expense ratio, and we take listener questions about real estate agents, loan repayment, what to do if you have some extra cash you want to make use of, and more.


 

The White Coat Investors Homeowners Insurance Policy

After we went through my auto insurance policy on this podcast, I had a bunch of people request that I do the same thing for my homeowners policy. After renovating our home, we had to significantly alter the homeowners insurance policy. My policy is through USAA and was originally issued in 2010 when we bought the house.

For dwelling protection, it was a $422,000 house at that point. It had $105,000 in coverage for other structures, $211,000 in personal property, and unlimited loss of use protection for 12 months. It had $300,000 in personal liability and $5,000 in medical payments to others.

The deductible was 2%, so it was an $8,440 deductible. And the premium for that coverage was $555.75, which included about $147 in credits and discounts. I have several insurance policies with USAA which ensures I get pretty significant discounts for my homeowners policy.

 

What Is Not Covered by Homeowners Insurance?

It is incredibly important to know what is covered but ALSO what is not covered. There are two big things you should be aware of in homeowners insurance that usually is not covered without a separate policy.

The first is flood insurance. You may live in an area like where we lived in Virginia, where the federal government literally requires you to get flood insurance if you have a mortgage. There are lots of other places in the country where it makes sense to have flood insurance. And it's often the federal agency that you're buying it through. I recently heard an episode on “Planet Money” that said flood insurance is very often dramatically underpriced. If you live in an area where floods are a possibility, flood insurance is a no-brainer.

The second big thing that is generally not covered under a homeowners policy is earthquakes. If you want earthquake protection, you have to pay extra. We think about this one all the time, because we don't live that far from a fault in the Utah area. An earthquake is a very real possibility for us.

The problem with earthquake insurance is it's super expensive. You tend to have high deductibles, and it tends to be pretty high premiums. In fact, we actually put earthquake insurance on this house after we renovated it. Two-thirds of the premium was earthquake insurance, and the deductible for it was over $200,000.

We decided to talk to the contractor that renovated our home about how much damage we are likely to actually have in an earthquake and how much would it cost to repair. He thought it could all be done for less than $200,000 so we decided not to have the earthquake coverage and have since dropped it.

I recommend reviewing what other things are not covered under your homeowners insurance. My policy doesn't cover freezing of a plumbing, heating, air conditioning, or automatic fire protection sprinkler system. But that doesn't apply if you've maintained heat in the building. My policy also does not cover freezing, thawing pressure, or weight of water or ice (whether driven by wind or not) to a swimming pool, hot tub or spa, fence, pavement, patio, foundation, retaining wall, or bulkhead or pier, wharf, or dock.

Theft in a dwelling under construction until it's finished and occupied is not covered. Vandalism and malicious mischief or breakage of glass if the dwelling has been vacant for more than 180 days is not covered. Constant repeated seepage or leakage of water steam over a period of 14 days or more from within a plumbing, heating, air conditioner, or automatic fire protection sprinkler is not covered.

Wear and tear, deterioration, mechanical breakdown, small rust, electrolysis, or other corrosion, as well as smoke from agricultural smudging, discharge or escape of pollutants are not covered. Settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs, or ceilings are not covered. The policy also will not cover birds, rodents and insects, armadillos, bats, beavers, coyotes, ferrets, opossums, porcupines, raccoons, skunks, squirrels, or other animals owned or kept by the insured.

More information here:

5 Key Coverages for Property Insurance

 

What Does Homeowners Insurance Cover and What Does It Cost?

We did a very nice renovation to our home which increased the value of it significantly. Because of the quality upgrades to the interior and exterior, as well as to the square footage, we had to get a special premium policy that was obviously more expensive.

Instead of paying $555 for our old policy, we now pay $1,274 for insurance. Because the house is more valuable, it costs more to insure it. We don't necessarily have any more coverage on it. The home is covered for enough that we could rebuild the entire house.

We realized we didn't have nearly enough money in personal belongings coverage. Insurance companies basically require you to have half the value of the dwelling in personal belongings coverage. I don't think we have quite as much personal belongings as we have coverage, but that was what they required.

Our policy also includes coverage of any structures on the property up to $150,000. This is a fairly standard part of this kind of policy. We don't actually have any other structures so that's not doing us any good.

Loss of use in this policy is unlimited. Our personal liability is set at $300,000. Now, bear in mind, the umbrella policy sits on top of this, and the umbrella policy is what dictated that. It required us to have $300,000 in coverage on the cars, on the house, on the boat, etc. And then the umbrella policy stacks millions on top of that.

Medical payments to others were again set at $5,000. Our deductible is, again, 2% of the dwelling coverage. And so, it's significantly higher than the $8,000 we had before but it's still that 2%, which we could certainly cover out of our cash. Then we paid a little bit extra to have that higher personal injury liability. I think we're paying $14 a year for that.

 

Homeowners Insurance Discounts

Overall, it's more expensive for us, and we got more coverage. I recommend looking into what discounts you qualify for. We got a discount of $135 because we have auto and home covered through USAA. We also have a few other policies through that company, which saved $56. We saved an additional $22 because I bank with them and another $22 because I still have a life policy with them.

We got a $121 discount for the age of the home and a $189 discount for being claims free. We received a $33 loyalty discount and a $65 insurance to value discount. We got $22 off a year because we have an alarm, and since we got a brand-new roof, we got another $69 off.

Make sure when you get coverage that the company understands the quality of the house. We did a lot of premium upgrades, and we wanted to be sure if this thing burns to the ground or whatever happens to it, we actually want the insurance company to build us a new house like this one. And so, we made sure that it is appropriately insured. Don't cheap out on this. Make sure you actually tell your provider what you have so you are actually covered in the event that something happens to your home.

 

Vanguard Expense Ratio on Target Retirement Funds

I just heard Vanguard has lowered its expense ratio on its target retirement funds. It's gone down from 0.15% or 15 basis points to 0.08% a year or 8 basis points. It's not quite as low, I think, as you can probably roll yourself using the total stock market fund, total international stock market fund, or total bond market fund. Those tend to be pretty inexpensive funds at Vanguard using the Admiral shares or the ETF share classes, but that's a whole lot closer to it.

At any rate, once you get below about 10 basis points, it's pretty much free. At this point, there is no big difference between six basis points and seven basis points or seven basis points and nine basis points. They're all basically giving you the management for free at this point. So don't fixate too much on your expense ratios. But it's nice to see Vanguard passing on any savings to the company's owners, who are the investors in the mutual funds.

And the way it usually does that is by constantly lowering its expense ratios on its mutual funds. So, I'm excited to see that. It's not unusual. Vanguard comes out with a press release on this sort of thing every couple of years, as it gradually lowers the expense ratios on mutual funds. And if you go back 20 years, even at Vanguard, the average mutual fund was significantly more expensive than it is now. So, it's good to see that trend happening.

More information here:

Don't Obsess About Expense Ratios

 

Do You Really Need a Realtor?

“Hi Jim. This is Tim in Salt Lake City. My question for you today is what do you think about buying a home without a realtor? I'm trying to understand the value they add. Seems like I could do the negotiation. I could find a house on Zillow. I could have a real estate attorney go over any paperwork. I could obviously get an inspection done—3% buyer fee, buyer agent fee, 3% seller agent fee, it seems like that could potentially be a lot of money saved by doing it yourself. So, what do you think? Is buying a house something that's amenable to doing it yourself like investing is? Thanks.”

Can it be done? Yeah, it certainly can be done. I've bought a house without a realtor before. I just used a real estate attorney to look over the contract and help me make sure I had all the I’s dotted and T’s crossed. Would I have been better off with a realtor? I think I may have been in that situation. When you buy, the realtor fee is technically paid by the seller. They generally collect a 5% or 6% commission and then they split it between the two realtors.

The only reason you would ever consider not having a realtor when you come to buy is if, for some reason, the seller will reduce the selling price by 3%. If they're not doing that, well, it's their expense, not yours. Unless you're getting a pretty significant discount for it, I wouldn't necessarily do that.

I think a realtor is a little bit more useful when you're looking at a lot of houses. If you want to look at 25 or 30 houses like we did before we bought this place, I think that realtors are useful. They're certainly doing a lot more work to earn their commission.

But there's no doubt that the realtor industry is ripe for disruption. If you buy a $1 million house, 6% commission is $60,000. It's a lot of money. You can see why people are trying to disrupt that, with varying levels of success. There are many online companies that will put your listing up on the MLS and maybe send you a little cheap sign to put in the yard. They do not help very much, but they charge dramatically less than 6%.

I think this industry is going to see lower commissions over time, but it's been remarkably resistant to that. And the reason why is because people tend to only buy or sell a house two or three times during their lifetimes. Like with “do it yourself investing”, you can kind of wade in early in your life when the transactions are only $1,000, and it’s no big deal. If you screw something up a little bit, you can fix it. Well, that's not the case when you only do something twice in your life, right?

Imagine that your investing only happened twice in your life. And you had to put $1.5 million in each time. Are you going to hire a pro to walk you through that process? You're far more likely to than if you're investing every month for 30 years and got a chance to start when there just wasn't very much money on the line. So, I think it's a little bit different in that respect and that you can certainly benefit from having a realtor on your side.

If you're going to hire a realtor, get a really good one. In fact, if you're buying, you might want to consider what I did when I bought this house. I found a realtor that was specialized on the buy side. I think they are maybe a little bit better at negotiating for a buyer. If you're interested in that, I know a great person in Salt Lake City. So, shoot me an email, Tim, and I'll send you over to them. But for the most part, I think most people in this day and age probably still want a realtor, both on the buy side and the sell side.

But it's not crazy to not use one. Just realize that if you are going to do it, you've got to do it well. Just like if you're going to be your own “do it yourself investor”, you've got to do it as well as you would do it if you had an advisor. It doesn't do any good to save the advisory fee and then do a poor job of doing it, such that you lose more than the advisor would've cost in the first place. And it's the same thing with the realtor. If you screw it up enough, you would've been better off just paying the realtor.

 

Refinancing Student Loans

“My question is about refinancing federal student loans. Currently payments and interest are temporarily paused. Private interest rates are relatively low, and there remains a possibility of some amount of federal student loan forgiveness.

The possible forgiveness amounts commonly discussed are between $10,000-$50,000. Is it then reasonable to refinance all but up to $50,000 of federal loans to private loans in order to remain eligible for any loan forgiveness? Even if no forgiveness is given, the amount left in the federal loan program could then be aggressively paid off first before moving on to the refinanced loans. Let me know your thoughts and thank you for your help.”

I'm really sorry that you're left with these sorts of dilemmas. This is really the fault of the federal government and the loan servicing companies. They put these policies in place and then they change the policies and you always are wondering, “Well, is it going to change again?” It makes important decisions that affect your finances significantly more difficult to make because you don't have all the information you need to make the decision. For example, what are future policies going to be?

Right now, the way things are is that your federal student loans are going to start accumulating interest and you're going to have to start making payments as of Jan. 31, 2022. I feel like I almost have to put the date on it, anytime I say something like that. Obviously, this is at the end of September 2021. Based on the signals we're getting, I think it's probably not going to be extended again.

I think at that point, if you are not going for public service loan forgiveness or IDR forgiveness after 20 or 25 years, most people are probably going to want to refinance their federal student loans. We have lots of great deals including cash back. Right now, we're giving Fire Your Financial Advisor, our flagship online course, to anybody who refinances through the links that we have on our site. We're expecting a big rush come the end of January and February, quite honestly, because people have been holding off refinancing, because why refinance when it is 0%?

There are a few reasons why people might want to refinance, aside from the cash back and aside from the free course. A couple of the companies have been giving basically the same 0% deal, at least for a few months. Plus, a lot of people are worried that interest rates will go up, especially now that inflation has gone up, and by the time they get around to refinancing in February, March, or whenever, they'll be refinancing into higher rates than they can get right now. And so, some people are refinancing earlier rather than waiting until Jan. 31. But I think most people are waiting until Jan. 31. Obviously, your private student loans or any student loan you've already refinanced, you can refinance again, and again and again, as long as you can get a better deal. And if you're switching companies, you generally get more cash back if you're going through our links.

I'd encourage you to keep an eye on rates and anytime you can get a lower rate or you can get the same rate and still get a cash bonus, it may be worth the time to take to refinance. Once you've done this for the first time, you already have the paperwork together and it just doesn't take that long to apply again. So why not?

But as far as holding something back in hopes that there is a new law out there forgiving your student loans, I don't know that I would do that. But if you really think this is a likely possibility for you, then sure, hold on to it a little bit. I would not hold on to $50,000 though. The only people that have talked about forgiving $50,000 are the most left-wing members of the Senate.

There has never been any sort of broad consensus to refinance that much in student loans. The only thing I have heard come out of President Biden's mouth is maybe $10,000. And I suspect if that ever happened, high earners like doctors would probably be phased out of that general forgiveness.

Other than PSLF and IDR Forgiveness there has been basically no other student loan forgiveness, and there are no plans for any other student loan forgiveness other than what I've already mentioned. It would have to be a new program, a new law, a new regulation that did that. I think it's pretty unlikely, but I've been surprised before.

If you wanted to hold $10,000 out or something like that in hopes that the taxpayer will pay it off for you, I suppose you could do that. But I wouldn't hold $50,000 off, and I certainly wouldn't pay it off first. Yes, it’s going to be a higher interest rate than what you can refinance to, but that's why you're holding it out. Because you think it's going to be forgiven and you're willing to take the risk that you pay more in interest on it to eventually pay it off in order to get it forgiven. I probably wouldn't do that.

You should be able to pay $10,000 in student loans off in a month or two if you're making a typical doctor income. The average doctor income right now is $275,000. Now, obviously there are lots of doctors making less than that, but still, $10,000 ought to be an amount that you ought to be able to carve out of one or two monthly paychecks and pay off that amount of student loans.

I don’t think hoping that the rules change and that will take away their student loans is really a game doctors ought to get into. I'd just pay them off. And then if something like that pops up, you can just say, “Man, I missed out on that.” And guess what? Sometimes that happens in life. You don't get every freebie that comes down the pike.

 

To Save or to Spend?

“Hi Dr. Dahle. I've been a big fan following your blog off and on since graduating high school in 2011. I'm a second-year family medicine resident maxing out my 403(b), my HSA, and my Roth IRA. I have about $180,000 in student loans made possible by living with my parents throughout college, med school and residency. I plan to refinance at graduation and aggressively pay it off within two years of an attending salary.

I do not have disability or term life insurance outside of what my contract provides, but I plan to get it before graduating. I feel like I'm in a good spot financially, but nearly all my money is accounted for. My girlfriend is an anesthesia assistant making about $170,000. We've been together for about a year, and I plan to propose within the next year or two. We'll both be 30 when I graduate, planning to have two to four kids where she'll transition to working part-time.

My question is how much should I spend on a ring, a wedding, and a honeymoon? And how can I budget my time and money to not feel overwhelmed? Am I saving too aggressively? Should I reduce my retirement contributions, moonlight more, or ask family for financial help? Any insight is appreciated. Thanks for all that you do.”

Adam, you might be my only listener and reader that started reading both in 2011 and while still in high school. This is pretty incredible. You are a serious planner. I'm a planner by nature. I plan lots of stuff. But I can't hold a candle to you. I mean, you got your life seriously planned out here just from your question. Very impressive.

Obviously, you are doing very well, and you need somebody to tell you that. You're doing great. You're going to have your student loans paid off within a couple years coming out. You're marrying another high earner. You're going to have a great income yourself. You've already got tons of money being saved. You're maxing out a 403(b) and a Roth IRA as a resident. That's head and shoulders above everybody, including me when I was in residency. You're doing great. So, you need to be told that.

What that usually means when I have a listener or reader that's doing as well as you, is that you're too cheap. And I give this advice, not in general to everybody, but to people that need it. And it's a small percentage of my readership and listenership, for sure. But there are plenty of other people in this category that simply need to spend more money.

You are going to do very well in your life financially, I can tell. You're going to hit financial independence very early, probably within 10 years of getting out of training. You're going to have an estate tax problem by the time all is said and done. So, in your case, I think you can spend a little more than what I would tell the typical White Coat Investor.

If you're not getting married for a little bit yet—and between the two of you, you're going to have at least a $200,000-plus income, if not a $400,000-plus income— you can have a pretty nice wedding, buy a pretty nice ring, and have a pretty nice honeymoon.

So, how much should you spend? Well, this depends on what you all want. If a nice ring is really something that's important to a certain member of this couple, then I would get a really nice ring. You could probably afford a $20,000 ring. And that buys a pretty nice ring these days. Realize it's a consumption item and it's OK to consume some of your money. You're doing a really great job saving it. And so, I think it's fine to consume some of it. Now, if you go looking at $100,000 rings, I might have to ask what's going on with you. Maybe that's a little too much.

Same thing with the wedding. When it comes time for the wedding, traditionally the bride’s family pays a significant chunk of this. Now you mention that your potential bride is an anesthesiology assistant making pretty good money. But you didn't mention anything about her family. And so, if the family's really well-to-do, they may put on a pretty nice wedding and pay for a big chunk of it.

On the other hand, it might be up to just the two of you, but either way, you guys make a lot of money. You can have a pretty nice wedding, right? If you look at what the average wedding cost these days, I think the last figure I saw was about $30,000.

Now, how much can you afford to spend? Well, look at your bank account. That's how much you can afford to spend. I would not go into debt for a wedding. I think when you're buying something—whether it's a wedding, a car, or a ring—you have to buy it with cash. Not borrow for it.

So, look at how much cash you have. If you can come up with $50,000 or $100,000, and you want to invite a gazillion people to a really great day, then go ahead and spend that. But if you've only got $15,000, I think you ought to have a $15,000 wedding.

Same principle with the honeymoon. Traditionally, the bride and the bride’s family have paid for the wedding, and the groom and/or the groom’s family pays for the honeymoon. That's the way it was when I got married.

And so, it comes down to how much money you have to spend on that. But I certainly wouldn't think twice about spending $10,000 on a honeymoon in your financial situation. That seems very reasonable. I guess if you want to travel the world for a month, it's going to cost you more than that.

Given your financial decision-making and where you are at this point, I think it's very unlikely that you're going to overspend on your ring, wedding, and honeymoon. So, I think you can go ahead and probably spend a little more than what you're super comfortable with knowing that you're doing great, and there is going to be plenty of money for you down the road.

Make sure, obviously, you get that insurance in place. That's probably the most important thing I heard that you said, but I wouldn't worry too much about what you're spending on your wedding and honeymoon.

 

Where to Put Extra Money

“Hi there. I just became a PGY-2. I have around $50,000 just sitting in my bank account, not doing anything. I'm doing public service loan forgiveness, at least during residency. So, I'm trying not to throw any money toward that just in case I do pursue that after residency.

My hospital doesn't offer a 401(k) so I'm not having to contribute to that. I'm trying to determine what's the best use of that money so it's not just sitting there. Any advice would be awesome.”

What a great position to be in. Ideally, in our portfolios and our budgets, we've assigned a name to every dollar. It's a retirement dollar. It's an education dollar. It's a healthcare dollar. Depending on whether it's in your 401(k) or 529 or an HSA or whatever. Or maybe you're saving it for something short-term. So, it's a Tesla dollar, or it's a second home dollar, or it's a boat dollar, whatever you're saving up for.

Early in your career, this is a particular problem for brand new attendings, but also for residents that are doing a great job saving like you. You have lots of things you can use money for, but not that much money to do it with. And so, you've got to prioritize. You've got to decide what's most important to you.

Here are some things that are frequently important to a resident doc in your position. Maybe you have some credit card debt. If you have some high-interest credit card debt, pay it off. That's a great use of some or all of your $50,000. Maybe you have a car loan. Owning that car free and clear improves your cash flow and gives you more money each month to invest or spend or do whatever you want.

Many doctors at this stage don't have much of an emergency fund. You don't need a $50,000 emergency fund as a resident, but a $15,000 emergency fund would be very reasonable. So, maybe $15,000 of it gets put toward an emergency fund and you just keep it in cash. Maybe you invest it in something like a money market fund, which pays almost nothing right now, or a high-yield savings account where it makes 0.7% or something. Maybe even put it into something like an I bond.

Paying down student loans is usually a good idea. Now you say you might be going for public service loan forgiveness. If you have private student loans, you could pay those off. But otherwise, I would probably hold it out of the student loan bucket if that is your goal.

You can start investing it on the side and call it your public service loan forgiveness side fund in case something happens to either your career or the public service loan forgiveness program. And then you'll have some money you can put toward your student loans if that happens.

You can also put it into other priorities you might have such as starting a 529 for a child’s education or perhaps saving it in an HSA. You can always save it for retirement. Even if your job doesn't offer a 401(k), even if you already maxed out your Roth IRA for the year, you can always invest it in a taxable account for retirement.

Now, if I was a resident investing a taxable account for retirement, I'd be investing pretty aggressively. It'd pretty much be all in stocks at this point. A total stock market index fund, total international stock market index fund—those sorts of investments. You could also put it toward a home. If you're going to buy a home when you become an attending, you can start saving up for that down payment now.

The truth is in the next five years, you're going to have more need for cash than you're going to have cash. And so, any or all of those are good things. It just depends on what your priorities are. And only you can decide that. So, good luck deciding. I hope that gives you some guidance there.

 

Correction

I’ve got to do a correction, and while I don't like doing corrections because it means I was wrong, it's important that we get the correct info out there. If you ever hear something that needs to be corrected please shoot us an email at [email protected]

This one comes in from one of our recommended insurance agents, Larry Keller. It says,

“I listened to a recent podcast where you mentioned to an active-duty doc that acts of war were not covered under a life insurance policy. As an FYI, this is not the case. The only thing that is not covered is suicide for the first two policy years or something specifically excluded during the underwriting process, if that's an option in your state. For example, private pilot activities. At that point, they can accept an exclusion rider or pay a higher premium.”

So, what was I thinking? Well, I was thinking about disability insurance. With disability insurance, acts of war are frequently excluded, but they're generally not excluded from life insurance policies. So, take that if it applies to you, and know the truth.

 

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Milestones to Millionaire

#34 – PSLF Forgiveness and Millionaires!

Out of school they owed $178,000, paid $20,000-$30,000 off over the next 10 years, and had the rest forgiven. Be diligent, make sure you track each payment. Getting those loans forgiven gave them a significant boost to their net worth, reaching millionaire status! Read about tips and errors to avoid when going for PSLF.

Sponsor: Set for Life Insurance

 

WCICON 2021

Registration is now open for The Physician Wellness and Financial Literacy Conference. The conference is in Phoenix on Feb. 9-12, 2022. Oct. 19 is the last day for Early Bird registration so don't wait to register! If you cannot attend the in-person event, we are also offering a virtual component. Get your tickets today!

 

Quote of the Day

Our quote of the day today comes from Rick Ferry who said,

“I find that newly enlightened self-managed investors can spend a considerable amount of time and energy trying to figure out a perfect portfolio by seeking a perfect asset allocation, perfect products, perfect tax efficiency, and a perfect maintenance methodology. Don't bother.”

I agree. The dream of a perfect plan is definitely the enemy of a good plan.

 

Full Transcription

Transcription – WCI – 231

Intro:
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. Here's your host, Dr. Jim Dahle.

Dr. Jim Dahle:

This is White Coat Investor podcast number 231 – How much homeowner's insurance do I need?

Dr. Jim Dahle:
Did you know that 200 million prescriptions are going filled each year because of cost? That's a lot of patients not getting the medications they need, but GoodRX can help.

Dr. Jim Dahle:
How? With free GoodRX cards that could save your patients up to 80% on retail prescription prices whenever they fill or refill. The cards work at over 70,000 US pharmacy locations, no insurance needed. In fact, they may beat insurance. For many Americans adherence to treatment depends on whether they can afford it. Help your patient save on their medications so they can get and stay well.

Dr. Jim Dahle:
To have a free GoodRX savings card delivered to your office, go to goodrx.com/wci. Once again, that's goodrx.com/wci.

Dr. Jim Dahle:
Thanks so much for what you do out there. I don’t know what you're doing right now, but if you're like most listeners, you're on your way to work. Maybe you're coming home from work. Maybe you're at the gym. Maybe you're out getting some exercise. Whatever it is, if nobody's told you thank you for the hard job that you do today, let me be the first.

Dr. Jim Dahle:
I'm just coming off a couple of shifts in the emergency department. We're certainly still seeing COVID in our emergency department, but I'm actually really excited about the trends we're seeing with COVID. It seems whatever you call this, the second peak, the third peak, whatever of COVID, it's trending down right now, both in Utah and nationwide.

Dr. Jim Dahle:
And hopefully this is the last peak we'll see, I suppose, in the future, whether there's more variants that come out, we never know. But it's pretty exciting to not see it going up still.

Dr. Jim Dahle:
It was really interesting. I had a patient this week. I took care of them for COVID related symptoms and they got symptoms one day. The next day they got their first vaccination. Then the day after that they got a COVID test. I think they started worrying they actually had COVID and had hoped the vaccination would be in time to do something about it.

Dr. Jim Dahle:
Unfortunately, I had to assure them that the vaccination was not going to help this particular illness as they already had the virus by the time they got the vaccine. But for those of you who haven't, I encourage you to go out and get your vaccine. You actually are required to get it if you're going to come to WCI con 22, at least in person. I suppose the virtual option you can do without getting vaccinated. But this podcast, let's see, we're recording this September 28th. It's going to start running October 7th.

Dr. Jim Dahle:
The deadline for WC icon to get the early bird pricing is October 19th. So, that's Tuesday coming up. If you want to come in person, I recommend that you register by that day. You'll save yourself some money.

Dr. Jim Dahle:
Of course, you can register after that day and you can register all the way to the end of the year, really. But if you want to get the swag bag, which is going to be awesome. It's got a book from all of the keynote speakers. One of my books will be in there. Michelle Singletary’s book will be in there. There'll be a book from Bill Bernstein. There'll be one from James Lang. It's a pretty good swag bag.

Dr. Jim Dahle:
I just came from a conference where the swag bag literally consisted of a hat. That's what was handed to you. It was this big, huge swag bag with a hat with a sponsor's name on it. We don't do that at our conferences. You're going to get a sweet swag bag, as long as you sign up for either in person or virtual by December 1st. It has to be by December 1st, because some of those books have to be printed. And of course, if you're coming virtual, we got to mail out the swag bag to you. So, we need a little bit of time to do that.

Dr. Jim Dahle:
The conference itself is the 9th through 12th of February. It's going to be in Phoenix. It's going to be warm and sunny. It's at this pretty awesome resort. There's going to be pickleball, golf. We're going to knock off about four each afternoon, so you have time to get out and actually do some wellness stuff. I mean it's the Physician Wellness and Financial Literacy conference. And after the last couple of years, we can all use a little more to time for wellness. If you'd like to sign up for that WCI con 22 early bird pricing ends October 19th.

Dr. Jim Dahle:
All right, I’ve got to do a correction. I don't like doing corrections because it means I was wrong, but it's important that we do corrections. And if you ever hear something I'm given that's bad advice on this podcast, please shoot us an email at [email protected] works fine and we will get that corrected, if indeed, it is wrong.

Dr. Jim Dahle:
At any rate, this one comes in from one of our recommended insurance agents, Larry Keller. It says, “I listened to a recent podcast where you mentioned to an active-duty doc that acts of war were not covered under a life insurance policy. As an FYI, this is not the case. The only thing that is not covered is suicide for the first two policy years or something specifically excluded during the underwriting process. If an option in one state. For example, private pilot activities. At that point, they can accept an exclusion writer or pay a higher premium”.

Dr. Jim Dahle:
So, what was I thinking? Well, I was thinking about disability insurance. With disability insurance acts of war are frequently excluded, but they're generally not excluded from life insurance policies. So, take that if it applies to you and know the truth.

Dr. Jim Dahle:
All right. After we went through my auto insurance policy on this podcast, I had a bunch of people request, “Hey, can you do that for homeowners?” There was an email who said, “I think it would be worthwhile to do a podcast in the future like you did recently regarding home insurance details and thoughts regarding coverages available under these types of plans”.

Dr. Jim Dahle:
So, let's talk for a few minutes about my homeowner's insurance. And I think first we'll talk about the policy as it used to be before we did our big home renovation. And then we'll talk about some of the changes that happened after doing the renovation.

Dr. Jim Dahle:
So, I've got my policy in hand here from USAA. This was issued in 2010 when we bought the house. For dwelling protection, it was a $422,000 house at that point. It had $105,000 in coverage for other structures, $211,000 in personal property, unlimited loss of use protection for 12 months. It had $300,000 in personal liability and $5,000 in medical payments to others.

Dr. Jim Dahle:
The deductible was 2%, so it was an $8,440 deductible. And the premium for that coverage was $555.75 that included about $147 in credits and discounts. I do a bunch of stuff with USAA. I have several insurance policies there, I bank there, et cetera. So, I get some pretty significant discounts for that business.

Dr. Jim Dahle:
But the most interesting thing about these policies is to actually thumb through what's covered and what's not covered, especially what's not covered. And there are two big things you should be aware of in homeowners’ insurance that usually is not covered without a separate policy.

Dr. Jim Dahle:
The first is flood. Flood insurance is one of those things that is generally not a part of your homeowner's policy. Now you may live in an area like where we lived in Virginia, where the federal government literally requires you to get flood insurance. At least if you have a mortgage. I think they require your mortgage to require you to have it, is actually how it works.

Dr. Jim Dahle:
We had flood insurance there, but we were only 12 feet above sea level there. It was a pretty smart investment I thought. At one point during a hurricane, we had the floodwaters lapping on the front porch. It wasn't a porch, it was a stone patio, whatever it was, but literally if it got a foot higher, it would've been into the first floor.

Dr. Jim Dahle:
And so, it was pretty no brainer there to have flood insurance. There are lots of other places in the country where it makes sense to have flood insurance. And it's often the federal agency that you're buying it through. And the truth is I just heard this episode on Planet Money I think it was. One of those NPR economics programs that was talking about flood insurance, which is apparently often dramatically underpriced. It's really a good deal for you if you live in a flood area, considering the risk that you're facing.

Dr. Jim Dahle:
I highly recommend that if you're anywhere near a flood area. And in fact, I know someone who had a storm drain back up and flooded their house in our neighborhood, which is not someplace you would think as much flood risk. And it was the flood insurance that actually paid for a whole bunch of stuff to be ripped out of their first floor or their basement and get it redone. Flood insurance, you may want it. You really consider your risk there and consider buying a flood insurance policy.

Dr. Jim Dahle:
But as I go through these losses that we cover and that we don't cover in this policy, it's pretty interesting. For example, this policy doesn't cover freezing of a plumbing heating air conditioning or automatic fire protection sprinkler system. But that doesn't apply if you've maintained heat in the building. So, if you shut off your heat it may not cover freezing pipes and damage from that, or have shut off the water supply, I guess is another way to still have it be covered.

Dr. Jim Dahle:
Other stuff that my policy does not cover. Freezing, thawing pressure or weight of water or ice, whether driven by wind or not to a swimming pool, hot tub or spa, fence pavement patio, foundation retaining wall or bulkhead or pure warfare dock. Well, I don't have a pure war dock up here next to the mountains in Utah. But the freezing of my hot tub is apparently not covered.

Dr. Jim Dahle:
Theft in a dwelling under construction until it's finished and occupied, not covered. Vandalism and malicious mischief or breakage of glass. If the dwelling has been vacant for more than 180 days. Constant repeated seepage or leakage of water steam over a period of 14 days or more from within a plumbing heating air conditioner or automatic fire protection sprinkler.

Dr. Jim Dahle:
Wear and tear, deterioration, mechanical breakdown, small rust, electrolysis, or other corrosion. Smoke from agricultural smudging, discharge or escape of pollutants. Settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs, or ceilings. So that's a big expense. Foundation settlements are not covered in my policy.

Dr. Jim Dahle:
Birds, rodents and insects, not covered. Animals owned or kept by the insured. If your dog does the damage, it's not covered. It doesn't cover armadillos, bats, beavers, coyotes, ferrets, opossums, porcupines, raccoons, skunk squirrels. Lots of things there that you should be aware of that are not necessarily going to be covered in your policy.

Dr. Jim Dahle:
The other big one besides floods is earthquakes. Earthquakes are generally not included in a homeowner's policy. If you want that, you have to pay extra. And we think about this one all the time, because we don't live that far from a fault in the Utah area. An earthquake is a very real possibility for us. Flood, not as much. It would have to be a pretty serious backup for us to have flood in our property, but earthquake's a realistic thing.

Dr. Jim Dahle:
The problem with earthquake insurance is it's super expensive. You tend to have high deductibles and it tends to be pretty high premiums. In fact, we actually put earthquake on this house after we renovated it. And two thirds of the premium was the earthquake insurance. So, pretty expensive. And the deductible for it was over $200,000.

Dr. Jim Dahle:
So, we got to talking with the contractor that renovated our home about how much damage are we likely to actually have in an earthquake and how much would it cost to repair? And he thought it could all be done for less than $200,000. And so, we decided not to have the earthquake coverage and we've dropped that.

Dr. Jim Dahle:
It's always an interesting debate around here. Some people have it, some people don't. One of the properties that I manage here, this is the office building for my physician group. We decided to put earthquake insurance on the property just because we felt like we had a fiduciary duty to all the other investors, all the other docs that own these syndicated shares in the property. But if it was just my office building, I probably wouldn't have it. I'm willing to run that risk. But be aware your policy probably does not cover that.

Dr. Jim Dahle:
It was interesting when I went to get a policy on the new place after we renovated it. Well, we renovated it pretty nice. It’s a really nice home now. And it's got a lot of nice stuff on the inside aside from the expansion of the square footage. And so, it turned out the value was high enough that we had to get a special policy, kind of a premium policy. We actually had to talk to different people that ask a lot more questions when they're issuing you your coverage and it comes in a different category, which naturally is going to be more expensive.

Dr. Jim Dahle:
But anyway, after all the discounts, thankfully, we got a lot more discounts to go with this policy, instead of $555, we're paying $1,274 for insurance. And so, it's quite a bit more expensive. Mostly just because it's a more valuable place to insure. We don't necessarily have any more coverage on it. The dwelling is covered for enough that we could rebuild the entire house. Now you don't necessarily have to insure the land. If the place burns to the ground, you've still got the land. That hasn't changed. But you need the whole dwelling coverage covered.

Dr. Jim Dahle:
Personal belongings. We decided we didn't have nearly enough money in personal belongings coverage, number one. Number two, they basically require you to have half the value of the dwelling in personal belongings coverage. I don't think we have quite as much personal belongings as we have coverage, but that was what they required. So, about half the value of the dwelling is what we ended up having in personal belonging coverage.

Dr. Jim Dahle:
They throw in other structures covered. In this case we got $150,000 worth of other structures being covered. That's just kind of standard for the policy. We don't actually have any other structures so that's not doing us any good.

Dr. Jim Dahle:
Loss of use. Again, unlimited. Our personal liability again is set at $300,000. Now, bear in mind, the umbrella policy sits on top of this. And the umbrella policy is what dictated that. They required us to have $300,000 in coverage on the cars, on the house, on the boat, et cetera. And then the umbrella policy stacks millions on top of that.

Dr. Jim Dahle:
And then medical payments to others were again set at $5,000. Our deductible is again, 2% of the dwelling coverage. And so, it's significantly higher than the $8,000 we had before but it's still that 2%, which we could certainly cover out of our cash. And then we paid a little bit of extra to have that higher personal injury liability. I think we're paying $14 a year for that.

Dr. Jim Dahle:
Overall, it's more expensive for us. We got more coverage. It's interesting as you go into the discounts and savings to see what they actually give you discounts for. We got a discount of $135 because we have auto and home covered. We've got a discount because I have a couple other policies, including the boat that we got through USAA. That's a $56 discount. $22 because I bank with them. $22 because I still have a life policy with them.

Dr. Jim Dahle:
We got a $121 discount for the age of the home. $189 discount for being claims free. $33 loyalty count. $65 insurance to value discount. I think because we chose to insure replacement value. We got $22 off a year because we have an alarm. And because we got a brand-new roof, we got $69 off. Lots of discounts that we qualify for there.

Dr. Jim Dahle:
Make sure when you get coverage that they understand the quality of the house. We did all these upgrades. Now we have a really nice house. We had to change those qualities there. Like the interior finishes and features instead of being relatively basic, we got the premium. Same with the kitchen and bath, same with the general shape and style. Same with the exterior finishes and features. We got some nice stone work out there. It's premium. And we want the thing covered.

Dr. Jim Dahle:
If the thing burns to the ground or whatever happens to it, we actually want the insurance company to build us a new house like this one. And so, we made sure that it is appropriately insured. Don't cheap out on this. Make sure you actually tell them what you have so you are actually covered in the event that something happens to it.

Dr. Jim Dahle:
All right, enough information about homeowner's insurance. Let's talk for a few minutes about buying a home without a realtor. Tim from San Francisco is now Tim from Salt Lake City. He's apparently moved a whole lot closer to us. Let's listen to his question.

Tim:
Hi Jim. This is Tim in Salt Lake City. My question for you today is what do you think about buying a home without a realtor? I'm trying to understand the value they add. Seems like I could do the negotiation. I could find a house on Zillow. I could have a real estate attorney go over any paperwork. I could obviously get an inspection done. 3% buyer fee, buyer agent fee, 3% seller agent fee. It seems like that could potentially be a lot of money saved by doing it yourself. So, what do you think? Is buying a house something that's amenable to doing it yourself like investing is? Thanks.

Dr. Jim Dahle:
All right. Can it be done? Yeah, it certainly can be done. I've bought a house without a realtor before. I just used a real estate attorney to look over the contract and helped me make sure I had all the I’s dotted and T’s crossed.

Dr. Jim Dahle:
Would I have been better off with a realtor? I think I may have been in that situation. The interesting thing when you buy is the realtor is technically paid by the seller. The actual thing they do is they generally collect a 5% or 6% commission and then they split it between the two realtors.

Dr. Jim Dahle:
So, the only reason you would ever consider not having a realtor when you come to buy is if for some reason the seller will reduce the selling price by 3%. If they're not doing that, well, it's their expense, not yours. Unless you're getting a pretty significant discount for it, I wouldn't necessarily do that. I’d get a realtor and just have somebody helping me out. Why not?

Dr. Jim Dahle:
I think a realtor is a little bit more useful when you're looking at a lot of houses. If you want to look at 25 or 30 houses like we did before we bought this place, I think that realtors are a little more useful. They're certainly doing a lot more work to earn their commission.

Dr. Jim Dahle:
But there's no doubt that the realtor industry is ripe for disruption. That's a lot of money. You take a million-dollar house, 6% commission is $60,000. It's a lot of money. And so, you can see why people are trying to disrupt that, with varying levels of success. There are these online companies, et cetera, et cetera. And these have been around for a long time that they'll not do much other than put your listing up on the MLS and maybe send you a little cheap sign to put in the yard. That might be all they'll do. But they charge is dramatically less than 6%.

Dr. Jim Dahle:
Likewise, now that you're local to Salt Lake City, you've seen all the billboards up for Homie. Homie is this company that's basically trying to disrupt this industry and I don't know how successful they're being, but I think they're having a significant amount of success at doing so. And I'm sure they'll have competitors as things go long.

Dr. Jim Dahle:
I think this industry is going to see lower commissions over time, but it's been remarkably resistant to that. And the reason why is because people tend to only buy or sell a house two or three times during their lifetimes. It's not something they're doing all the time.

Dr. Jim Dahle:
Like with “do it yourself investing”, you can kind of wade in early in your life when the transactions are only a thousand dollars and it’s no big deal. If you screw something up a little bit, you can fix it. Well, that's not the case when you only do something twice in your life, right?

Dr. Jim Dahle:
Imagine that your investing only happened twice in your life. And you had to put $1.5 million in each time. Are you going to hire a pro to walk you through that process? You're far more likely to than if you're investing every month for 30 years and got a chance to start when there just wasn't very much money on the line. So, I think it's a little bit different in that respect and that you can certainly benefit from having a realtor on your side.

Dr. Jim Dahle:
Now you don't want one of these part-time realtors though. If you're going to hire a realtor, get a really good one. In fact, if you're buying, you might want to consider what I did when I bought this house. I found a realtor that was specialized on the buy side. All they did was buy. They didn't do any selling. And I think they are maybe a little bit better at negotiating for a buyer, certainly had more experience on the buy side. And so, I think there were some benefits to that.

Dr. Jim Dahle:
But if you're interested in that, I know a great person in Salt Lake City. So, shoot me an email Tim and I'll send you over to them. But for the most part, I think most people in this day and age probably still want a realtor, both on the buy side and the sell side.

Dr. Jim Dahle:
But it's not crazy to not use one. Just realize that if you are going to do it, you got to do it well. Just like if you're going to be your own “do it yourself investor”, you got to do it as well as you would do it if you had an advisor. It doesn't do any good to save the advisory fee and then do a poor job of doing it, such that you lose more than the advisor would've cost in the first place. And it's the same thing with the realtor. If you screw it up enough, you would've been better off just paying the realtor.

Dr. Jim Dahle:
All right, the next question is about refinancing student loans. Let's take a listen.

Speaker:
My question is about refinancing federal student loans. Currently payments and interest are temporarily paused. Private interest rates are relatively low and there remains a possibility of some amount of federal student loan forgiveness.

Speaker:
The possible forgiveness amounts commonly discussed are between $10,000 and $50,000. Is it then reasonable to refinance all, but up to $50,000 of federal loans to private loans in order to remain eligible for any loan forgiveness? Even if no forgiveness is given, the amount left in the federal loan program could then be aggressively paid off first before moving on to the refinanced loans. Let me know your thoughts and thank you for your help.

Dr. Jim Dahle:
All right. Lots of people with questions like this, and I'm really sorry that you're left with these sorts of dilemmas. This is really the fault of the federal government and the loan servicing companies. They put these policies in place and then they change the policies and you always are wondering, “Well, is it going to change again?” And it makes for you having to make important decisions that affect your finances significantly for which you don't have all the information you need to make the decision. For example, what are future policies going to be?

Dr. Jim Dahle:
Right now, the way things are is that your federal student loans are going to start accumulating interest and you're going to have to start making payments as of January 31st, 2022. I feel like I almost have to put the date on it, anytime I say something like that. Obviously, this is at the end of September of 2021. I think it's probably not based on the signals we're getting, going to be extended again.

Dr. Jim Dahle:
So, I think at that point, if you are not going for public service loan forgiveness, or you're one of those poor souls that's going for IDR forgiveness after 20 or 25 years, at that point, most people are probably going to want to refinance their federal student loans.

Dr. Jim Dahle:
We have lots of great deals, cash back. Right now, we're giving Fire Your Financial Advisor, our flagship online course, to anybody who refinances through the links that we have on our site. Those can be found at whitecoatinvestor.com/student-loan-refinancing. We're expecting a big rush come the end of January and February, quite honestly, because people have been holding off refinancing because why refinance when it is 0%?

Dr. Jim Dahle:
There are a few reasons why people might want to refinance aside from the cash back and aside from the free course. Couple of the companies have been given basically the same 0% deal, at least for a few months. Plus, a lot of people are worried that interest rates will go up, especially now that inflation has gone up. And by the time they get around to refinancing in February, March, or whenever that they'll be refinancing into higher rates than they can get right now. And so, some people are refinancing earlier rather than waiting until January 31st. But I think most people are waiting until January 31st.

Dr. Jim Dahle:
Obviously, your private student loans or any student loan you've already refinanced, you can refinance again, again and again and again, as long as you can get a better deal. And if you're switching companies, you generally get more cash back if you're going through our links.

Dr. Jim Dahle:
And so, I'd encourage you to keep an eye on rates and anytime you can get a lower rate or heck, you can get the same rate and still get a cash bonus. It may be worth the time to take to refinance. Once you've done this once, you've kind of got the paperwork together and it just doesn't take that long to apply again. So why not?

Dr. Jim Dahle:
But as far as holding something back in hopes that there is a new law out there forgiving your student loans, I don't know that I would do that. But if you really think this is a likely possibility for you, then sure, hold on to it a little bit. I would not hold on to $50,000 though. The only people that have talked about forgiving $50,000 are the most left-wing members of the Senate.

Dr. Jim Dahle:
There has never been any sort of broad consensus to refinance that much in student loans. The only thing I have heard come out of president Biden's mouth is maybe $10,000. And I suspect if that ever happened, it would probably be high earners, like doctors would probably be phased out of that general forgiveness.

Dr. Jim Dahle:
You see articles every now and then about student loan forgiveness happening, the only forgiveness that's happening that's outside of PSLF, which is obviously happening now.

Dr. Jim Dahle:
If you listen to Milestones to Millionaire podcasts, you've heard several people that have received their PSLF forgiveness and IDR forgiveness that nobody's ever qualified for yet, because it hasn't been 20 years since that was put in place, are people that have basically either become permanently disabled or their school scammed them. The school pretended they're putting on an education they really didn't. Those student loans have been forgiven.

Dr. Jim Dahle:
But there has been no other student loan forgiveness and there are no plans for any other student loan forgiveness other than what I've already mentioned. It would have to be a new program, a new law, a new regulation that did that. I think it's pretty unlikely, but I've been surprised before.

Dr. Jim Dahle:
If you wanted to hold $10,000 out or something like that in hopes that the taxpayer will pay it off for you, I suppose you could do that. But I wouldn't hold $50,000 off and I certainly wouldn't pay it off first. Why would you pay it off first if you think it's going to be forgiven? Pay all the other ones off first and then get to this one when you get to it.

Dr. Jim Dahle:
Yes. It's going to be a higher interest rate than what you can refinance to, but that's why you're holding it out. Because you think it's going to be forgiven and you're willing to take the risk that you pay more in interest on it to eventually pay it off in order to get it forgiven. I probably wouldn't do that.

Dr. Jim Dahle:
$10,000 in student loans for a doctor? Come on, you should be able to pay that off in a month. If you're making a typical doctor income, the average doctor income right now is $275,000. Now, obviously there's lots of doctors making less than that, but still $10,000 ought to be an amount that you ought be able to carve out of one or two monthly paychecks and pay off that amount of student loans.

Dr. Jim Dahle:
So, it’s not really a game I think doctors really ought to get into hoping that the rules change and will take away their student loans. I'd just pay them off. And then if something like that pops up, you can just say, “Man, I missed out on that”. And guess what? Sometimes that happens in life. You don't get every freebie that comes down the pike.

Dr. Jim Dahle:
All right, we've got a great question here coming from Adam. Let's take a listen.

Adam:
Hi Dr. Dahle. I've been a big fan following your blog off and on since graduating high school in 2011. I'm a second-year family medicine resident maxing out my 403(b), my HSA and my Roth IRA. I have about $180,000 in student loans made possible by living with my parents throughout college, med school and residency. I plan to refinance at graduation and aggressively pay it off within two years of an attending salary.

Adam:
I do not have disability or term life insurance outside of what my contract provides, but I plan to get it before graduating. I feel like I'm in a good spot financially, but nearly all my money is accounted for. My girlfriend is an anesthesia assistant making about $170,000. We've been together for about a year and I plan to propose within the next year or two. We'll both be 30 when I graduate, planning to have two to four kids where she'll transition to working part-time.

Adam:
My question is how much should I spend on a ring, a wedding and a honeymoon? And how can I budget my time and money to not feel overwhelmed? Am I saving too aggressively? Should I reduce my retirement contributions, Moonlight more or ask family for financial help? Any insight is appreciated. Thanks for all that you do.

Dr. Jim Dahle:
Adam, you might be my only listener, my only reader that started reading both in 2011 and while still in high school. This is pretty incredible. You are a serious planner. I'm a planner by nature. I plan lots of stuff. But I can't hold a candle to you. I mean, you got your life seriously planned out here just from your question. So, very impressive.

Dr. Jim Dahle:
Obviously, you are doing very well and you need somebody to tell you that. You're doing great. You're going to have your student loans paid off within a couple years coming out. You're marrying another high earner. You're going to have a great income yourself. You've already got tons of money being saved. You're maxing out a 403(b) and a Roth IRAs as a resident. That's head and shoulders above everybody, including me when I was in residence. You're doing great. So, you need to be told that.

Dr. Jim Dahle:
What that usually means when I have a listener or reader that's doing as well as you is that you're too cheap. And I give this advice, not in general to everybody, but to people that need it. And it's a small percentage of my readership and listenership for sure. But there are plenty of other people in this category that simply need to spend more money.

Dr. Jim Dahle:
You are going to do very well in your life financially, I can tell. You're going to hit financial independence very early, probably within 10 years of getting out of training. You're going to have an estate tax problem by the time all is said and done. So, in your case, I think you can spend a little more than what I would tell the typical White Coat Investor.

Dr. Jim Dahle:
If you're not getting married for a little bit yet and between the two of you, you're going to have at least a $200,000 plus income, if not a $400,000 plus income, you can have a pretty nice wedding, buy a pretty nice ring and have a pretty nice honeymoon.

Dr. Jim Dahle:
So, how much should you spend? Well, this depends on what you all want. If a nice ring is really something that's important to a certain member of this couple, then I would get a really nice ring. You could probably afford a $20,000 ring. And that buys a pretty nice ring these days.

Dr. Jim Dahle:
There are ways to save money on it. I think they're making diamonds in factories now. You don't have to mine them anymore. And I think the manufactured ones actually look nicer and are cheaper. But it's not the traditional one that was mined out of the ground. And so, that might be a way to have just as nice of a ring that saves a little bit of money.

Dr. Jim Dahle:
I can tell you this. When I got married back in 1999, I was broke, and I think I spent like $2,500 on a ring. If you adjust that for inflation, it's probably $5,000 now. Was this the world's nicest ring that has ever been on a doctor's wife's finger? Absolutely not. But I had just graduated from college. I didn't even start medical school yet. And so, I think we were in a very different situation than you are in now.

Dr. Jim Dahle:
So, if you want to get a nice ring, get a nice ring. Realize it's a consumption item and it's okay to consume some of your money. You're doing a really great job saving it. And so, I think it's fine to consume some of it. I don't know, you can buy pretty nice rings these days for $10,000 to $20,000. It seems very reasonable to me. Now, if you go looking at $100,000 rings, I might have to ask what's going on with you? What are you thinking? Maybe that's a little too much.

Dr. Jim Dahle:
Same thing with the wedding. When it comes time for the wedding, traditionally the bride’s family pays a significant chunk of this. Now you mention that your potential bride is an anesthesiology assistant making pretty good money. But you didn't mention anything about her family. And so, if the family's really well to do, they may put on a pretty nice wedding and pay for a big chunk of it.

Dr. Jim Dahle:
On the other hand, it might be up to just the two of you, but either way you guys make a lot of money. You can have a pretty nice wedding, right? If you look at what the average wedding cost these days, I think the last figure I saw was about $30,000. Now I live in Utah, nobody spends $30,000 on a wedding here. I can tell you that. Most weddings here are like $5,000 or $10,000, but that's a little unique.

Dr. Jim Dahle:
It's a little unique, like the fact that our colleges are really cheap too. Most of our colleges are $6,000 to $10,000 a year too. And I fully understand that in other parts of the country people are used to spending more. And I would think that you guys could afford to spend more.

Dr. Jim Dahle:
Now, how much can you afford to spend? Well, look at your bank account. That's how much you can afford to spend. I would not go into debt for a wedding. I just sat through a presentation at the FinCon conference. This is a conference for financial creators and it was from the founder of Maru. And what Maru is, is a buy now pay later company for weddings. Their whole spiel is that, “Hey, we're cheaper than a high interest credit card”.

Dr. Jim Dahle:
But I don't think you should be buying now and paying later for a wedding, whether you're using a credit card or whether you're using Maru. I'm not going to bring them on as an advertiser. I can tell you that right now. I think when you're buying something, whether it's a wedding or a car, whether it's a ring, you got to buy it with cash. Not borrow for it.

Dr. Jim Dahle:
So, look at how much cash you have. If you can come up with $50,000 or $100,000, and you want to invite a gazillion people to a really great day, then go ahead and spend that. But if you've only got $15,000, I think you ought to have a $15,000 wedding.

Dr. Jim Dahle:
Same principle with the honeymoon. Although these days, the honeymoon can be a whole lot cheaper than the wedding. So, that's probably not the big point here. Traditionally, the bride and the bride’s family has paid for the wedding and the groom and or the groom’s family, usually the groom pays for the honeymoon. That's the way it was when I got married.

Dr. Jim Dahle:
And so, it comes down to how much money you have to spend on that. But I certainly wouldn't think twice about spending $10,000 on a honeymoon in your financial situation. That seems very reasonable. I guess if you want to travel the world for a month, it's going to cost you more than that.

Dr. Jim Dahle:
But if you want to go spend a week in the Caribbean, you ought to be able to do it for that, no problem, and have a varying nice week and be able to stay wherever you want and drink whatever you want and do whatever activities you want. You can pay for a pretty nice vacation these days with $10,000. So, maybe not if you fly first class there and back, I don't know.

Dr. Jim Dahle:
Given your financial decision making and where you are at this point, I think it's very unlikely that you're going to overspend on your ring, wedding and honeymoon. So, I think you can go ahead and probably spend a little more than what you're super comfortable with knowing that you're doing great, and there is going to be plenty of money for you down the road.

Dr. Jim Dahle:
Make sure, obviously, you get that insurance in place. That's probably the most important thing I heard that you said, but I wouldn't worry too much about what you're spending on your wedding and honeymoon.

Dr. Jim Dahle:
Our quote of the day today comes from Rick Ferry who said, “I find that newly enlightened self-managed investors can spend a considerable amount of time and energy trying to figure out a perfect portfolio by seeking a perfect asset allocation, perfect products, perfect tax efficiency, and a perfect maintenance methodology. Don't bother”. And I agree. The dream of a perfect plan is definitely the enemy of a good plan.

Dr. Jim Dahle:
All right. The last last question today comes in from Chad who said, “What to do with $50,000?” Let's listen to his question on the Speak Pipe.

Chad:
Hi there. I just became a PGY-2. I have around $50,000 just sitting in my bank account, not doing anything. I'm doing public service loan forgiveness, at least during residency. So, I'm trying not to throw any money towards that just in case I do pursue that after residency.

Chad:
My hospital doesn't offer a 401(k) so I'm not having been construed to that. I'm trying to determine what's the best use of that money so it's not just sitting there. Any advice would be awesome. 

Dr. Jim Dahle:
All right. What a great position to be in. To have money that you haven't assigned a name to yet. Now, ideally in our portfolios and our budgets, we've assigned a name to every dollar. It's a retirement dollar. It's an education dollar. It's a healthcare dollar. Depending on whether it's in your 401(k) or 529 or an HSA or whatever. Or maybe you're saving it for something short term. So, it's a Tesla dollar, or it's a second home dollar, or it's a boat dollar, whatever you're saving up for.

Dr. Jim Dahle:
Early in your career, this is a particular problem for brand new attendings, but also for residents that are doing a great job saving like you. You got lots of things you can use money for, but not that much money to do it with. And so, you've got to prioritize. You got to decide what's most important to you.

Dr. Jim Dahle:
Here are some things that are frequently important to a resident doc in your position. Maybe you have some credit card debt. If you got some high interest credit card debt, pay it off. That's a great use of some or all of your $50,000. Maybe you have a car loan. Owning that car free and clear, improves your cash flow, and gives you more money each month to invest or spend or do whatever you want with. So, paying off car loan is a great thing to do with it.

Dr. Jim Dahle:
Many doctors at this stage don't have much of an emergency fund. You don't need a $50,000 emergency fund as a resident, but a $15,000 emergency fund would be very reasonable. So, maybe $15,000 of it gets put toward an emergency fund and you just keep it in cash. Maybe you invest it in something like a money market fund, which pays almost nothing right now, or a high yield savings account where it makes 0.7% or something. Maybe even put it into something like an I bond.

Dr. Jim Dahle:
But the idea is this is your emergency fund. It's something that you can get to relatively easily and spend if you need to for something. So, that would be a reasonable thing to do.

Dr. Jim Dahle:
Paying down student loans is usually a good idea. Now you say, you might be going for both public service loan forgiveness. If you have private student loans, you could pay those off. But otherwise, I would probably hold it out of the student loan bucket if that is your goal.

Dr. Jim Dahle:
Now you can start investing it on the side and call it your public service loan forgiveness side fund in case something happens to either your career or the public service loan forgiveness program. And then you'll have some money you can put towards your student loans if that happens.

Dr. Jim Dahle:
You can also put it into other priorities you might have. Maybe you have a kid and you're starting a 529 for their education. Maybe you are using an HSA, probably not typical for residents. Most residents have pretty good health insurance. It's not a high deductible plan. So maybe that's not an option for you.

Dr. Jim Dahle:
But you can always save it for retirement. Even if your job doesn't offer a 401(k), even if you already maxed out your Roth IRA for the year, you can always invest it in a taxable account for retirement.

Dr. Jim Dahle:
Now, if I was a resident investing a taxable account for retirement, I'd be investing pretty aggressively. It'd pretty much be all in stocks at this point. A total stock market index fund, total international stock market index fund, those sorts of investments. But all kinds of things to do with it.

Dr. Jim Dahle:
You could also put it toward a home. If you're going to buy a home and you become an attending, you can start saving up for that down payment now. That's not a bad use of your funds.

Dr. Jim Dahle:
The truth is in the next five years, you're going to have more need for cash than you're going to have cash. And so, any or all of those are good things. It just depends on what your priorities are. And only you can decide that. So, good luck deciding. I hope that gives you some guidance there.

Dr. Jim Dahle:
Breaking news. I just heard Vanguard has lowered its expense ratio on its target retirement funds. It's gone down from 0.15% or 15 basis points to 0.08% a year or 8 basis points. It's not quite as low I think as you can probably roll yourself using the total stock market fund, total international stock market fund, total bond market fund, because those tend to be pretty inexpensive funds at Vanguard using the Admiral shares or the ETF share classes, but that's a whole lot closer to it.

Dr. Jim Dahle:
At any rate, once you get below about 10 basis points, it's pretty much free. At this point, there is no big difference between six basis points and seven basis points or seven basis points and nine basis points, right? They're all basically giving you the management for free at this point. So don't fixate too much on your expense ratios. But it's nice to see Vanguard passing on any savings to the owners of the company who are the investors in the mutual funds.

Dr. Jim Dahle:
And the way they usually do that is by constantly lowering their expense ratios on their mutual funds. So, I'm excited to see that. It's not unusual. Vanguard comes out with a press release on this sort of thing every couple of years, as they gradually lower the expense ratios on mutual funds. And if you go back 20 years, even at Vanguard, the average mutual fund was significantly more expensive than it is now. So, it's good to see that trend happening.

Dr. Jim Dahle:
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Dr. Jim Dahle:
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Dr. Jim Dahle:
To have free savings cards delivered to your office go to goodrx.com/wci.

Dr. Jim Dahle:
Don't forget about WCI con 22. You can register for that at whitecoatinvestor.com/wcicon22. Early bird pricing ends October 19th. The last day to get a swag bag is February 1st.

Dr. Jim Dahle:
Thanks to those of you who have left us a five-star review and told your friends about the podcast. Our most recent one comes from D. Upton who said “Excellent resource. Dr. Dahle has created a fantastic financial resource for the high-income professional. Easy to listen to during a commute or workout. Doctor Dahle has even taken the time to respond to my financial questions by email which demonstrates his generosity and commitment to educating others on the world of personal finance”.

Dr. Jim Dahle:
On that note, you can email me at [email protected] We love hearing your feedback about the podcast. I do answer questions by email. I can't be your financial advisor if you come back with 30 different replies. I'm probably not going to be able to answer them all, but thus far, I've been at this for over 10 years and I've responded personally to every personal email I've gotten. Hopefully, I’ll be able to keep that up in the long run. We'll do the best we can.

Dr. Jim Dahle:
In the meantime, there is a fantastic resource at whitecoatinvestor.com. Be sure to check it out. Use the search bar. Chances are good somebody else has had the question you have, and I've written a blog post about it. And if you type the subject into that search bar, you're probably going to find it.

Dr. Jim Dahle:
Keep your head up, shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor podcast.

Disclaimer:
My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He’s not a licensed accountant, attorney or financial advisor. So, this podcast is for your entertainment and information only and should not be considered official personalized financial advice.