How to Maximize the Impact of Your Charitable Giving

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 470.

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Welcome back to the podcast. This is a podcast driven a lot of the time by you and your questions. Sometimes, however, I get to choose something to talk about. I get to choose somebody to interview and we're going to be doing a little bit of that today.

But before we get into this interview, I want to share a few things. The first is that we have a CFE course sale. This is on our Continuing Financial Education 2026 course. From now until May 12th, you can save $100 off that by using code CFE100. You'll get 30 plus hours of financial and wellness sessions from the latest wellness and financial literacy conference, the one we had at the end of March.

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QUOTE OF THE DAY

Dr. Jim Dahle:
Our quote of the day today comes from Winston Churchill, who said, “We make a living by what we get. We make a life by what we give.” What an appropriate quote to have today, because we're going to be talking about giving. I've talked about giving a number of times over the years. Maybe I don't spend as much time talking about it on this podcast as I ought to. It is a big part of our financial life, Katie's and my financial life.

We've moved past the point where we're trying to get better at earning. We've moved past the point where we're trying to get better at saving. We've moved past the point where we're trying to get better at investing. We probably have some improvements still to make in spending. I had a recent outing with what we call the Bro Down. It was a really fun event put on by a friend of mine in West Yellowstone. We played a lot with some somewhat expensive toys. Clearly, there are ways you can spend money to have an awful lot of fun and happiness.

Our focus more than ever these days seems to be on becoming better givers, that fifth money activity out there. I'm a little hesitant to talk about it on the podcast, to talk about it on the blog, to give specific amounts that we're giving or what organizations or people we're giving it to, because I fear it will come across as a humble brag. It's like saying, “I bought a Ferrari,” to say you gave away enough money to buy a Ferrari. It comes across as a humble brag either way.

I don't want to do that, but I do want to encourage people to give. The reason for that, the data is very clear, actually. Givers have been shown to be happier, healthier, and wealthier. I'm doing you a disservice by not talking more about giving.

Another reason I'm maybe hesitant to do it, and particularly to be specific, is that at times in the past, we've talked about the giving meeting our family has each year and what charities we decided to give money to that year. It's a different list every year. The kids bring something they support.

One of my daughters is relatively progressive politically. My son is less progressive politically and often chooses a veteran charity of some kind to support. We've gotten feedback on these posts in both directions from both sides of the political aisle, saying, “I can't believe you supported that charity.”

We've literally been criticized for giving money away for whom and what we gave that money to. I tend to be less specific. I don't necessarily list the charities we gave to anymore. Maybe I'm doing you a disservice by not just being willing to take that criticism, but it's a little bit painful to give away money instead of spending it yourself or saving it for later or saving it to give to your kids, and then just get whacked about it just because you don't necessarily see that as the best charity.

Of course, everybody's going to disagree about what the best charities are. You can't expect that. We all want to give effectively. We want to give toward causes we support, but we don't necessarily all support the same causes. Some charities do have a little bit of a political bent, for lack of a better word.

We're going to talk today about giving, about the nuances of giving, how to give, how to motivate yourself to give, and how to start giving. I've got a great guest. She actually lives relatively locally to me now. Let's get her on the line and start this conversation.

My guest today on the White Coat Investor podcast is Rebecca Herbst. Rebecca, welcome to the podcast.

Rebecca Herbst:
Thanks for having me.

Dr. Jim Dahle:
You've got a pretty awesome background. Rather than giving you a formalized introduction, I think maybe we start by you telling your story of how you were able to become financially independent at a time before many of the people listening to this podcast came out of training, and what you've decided to do with your life since then.

PATH TO FINANCIAL INDEPENDENCE AND EARLY RETIREMENT

Rebecca Herbst:
Unlike many of your listeners, I graduated college without any significant debt. I studied economics and directly went into the business world. I did graduate in the 2008-2009 recession, so it was a really hard time to find work and find a job, but I did manage to land a job at IBM.

Right from there, it was a crummy job, to be honest. I didn't really feel very useful or apply myself. But it was a good name. And so, that really set me up for success. I got that job out of college. And then I did 11 years in commercial real estate. I was like this researcher/economist.

I had a good-paying job, a good career. And I was naturally always a saver. I came from a family with a scarcity mindset. And I always had the big things under wrap, like rent, car. I drove a really old used car. I lived with three roommates well into my 30s.

And so, I just didn't know that there was this whole world of personal finance. I just thought that you worked hard, and you did well, and you had a “successful” job. I stumbled upon it in my late 30s. And I think most people, probably most of your listeners who are first learning about personal finance are either in debt or just beginning their journey.

When I found out about it, I was really only 3 to 5 years away from financial freedom. I just didn't know that you could have something called financial freedom before the age of 65. I just wasn't dialed into the community.

I was very lucky in that sense. I didn't have to battle the boring middle. And really, those first few years about learning about financial independence and personal finance in general were really about just getting my ducks in order, getting invested in the right things, getting my accounts. And once all that stuff was set up, I was really on track for success.

Again, I always try to empathize with the people around me about… I understand that they're on a much longer journey than I was. But I really did take some chances by pulling that “early retiree” trigger early, and I left my job at the age of 32. And my husband did as well. We did this together. It was nice to have a partner in that process.

And now it's been about 6 years since I've truly earned an active income. And today I really spend my time on what I like to think of as high-skilled volunteering. I founded a nonprofit called Yield and Spread. And we're on a mission to promote finance as a force for good. And the idea is to help people with their finances, achieve financial freedom, but with the idea of building a meaningful legacy, and to give back.

Dr. Jim Dahle:
What a fun thing to do with financial independence. There are a lot of people out there that this idea of financial independence is relatively new to them. Whether they start at 22 or start at 32, give us a sense for what that took for you guys to really not have to work for money about a decade out of school. About what percentage of your income did you save for those years?

Rebecca Herbst:
Towards the beginning, I didn't really track this information as much. As I said, I wasn't as dialed into personal finance, but I feel pretty confident that the range was between like 30 and 50%.

Dr. Jim Dahle:
Of your gross income?

Rebecca Herbst:
Yeah.

Dr. Jim Dahle:
That was a lot.

Rebecca Herbst:
Yeah. So out of college, inflation-adjusted, I was making $52,000 a year. But as I said, I was really focused on those big-ticket items. Towards the end of my career, as I gained more financial confidence, I gained the ability to advocate for myself a little bit more. Asking for raises. I left a company that was sort of just giving me that classic 5% income increase, maybe year over year, and I switched companies and effectively doubled my salary. Those big pushes in the final years really helped me. So towards the end, I was saving like 85%, which is an astronomical number.

Dr. Jim Dahle:
85% of the household gross income?

Rebecca Herbst:
Out of my income.

Dr. Jim Dahle:
Out of your income.

Rebecca Herbst:
Yeah. But that's because I was making a ridiculous salary. And then I was living with three roommates in an apartment in the Boston area. And so I didn't really climb on that hedonic treadmill the way that a lot of my peers did. And that was natural. That was not that much like reading into, “Hey, don't spend more.” That was just a natural part of who I was.

But I think towards the end, just really making those pushes and like a couple years of just like super high income, keeping things pretty tight allows for so much freedom down the line. I don't always advocate for this for other people.

I don't want people to feel as though they're miserable and sacrificing. But I wasn't miserable. Actually, I had a really good life. I traveled the world. Four years of that, by the way, I lived in Singapore, where my taxable income was like 10% to 12%. That helped a lot. But I got to do all these things.

And by the time I reached 32, I'm showcasing my age here, it was COVID. I know that these were challenging times to show up in the workplace. And I was just like, my company was doing layoffs. They were on their third round of layoffs. We were at home working at our computers, not sure what the future held. And I just was like, “You know what? Maybe include me in this round of layoffs. I think I'm ready.”

It wasn't like I hit this financial independence number; I probably could have used a year or two more, or three years more of earning income to feel really safe. But it was just that the timing was right. And we, as a couple, decided to take a leap of faith and just jump off the cliff, I guess.

Dr. Jim Dahle:
Now, George Foreman famously said, “It's not at what age you retire, it's at what income.” And I think a lot of people hear about someone retiring in their early to mid-30s. And they're like, “Oh, well, those guys are just super frugal. They live on $25,000 a year.”

Can you give people a sense of what being financially independent meant for you? How much did you need to be able to spend to have enough money to support your spending in order to say, “Okay, we don't have to work anymore?”

Rebecca Herbst:
Yeah, this is a good question. And it's changed. Like life is changing. When I left the workforce, I didn't have children. I wasn't married yet, in fact. And now I have a two-year-old and one on the way. At the time, we had been exploring the idea of what it would mean to spend between $60,000 a year and $80,000 a year. And what would the differences mean between how many more years do we have to work to spend $60,000 versus $80,000?

We ended up breaking it down and using the Coast-Fi model. Do you talk about that a lot?

Dr. Jim Dahle:
Sure. I think it's worth explaining. I think there are enough people on this podcast who don't know what it is that we should explain what it is.

Rebecca Herbst:
Yeah. Do you want to take a stab at it?

Dr. Jim Dahle:
Sure. Coast-Fi is simply when you get to the point that you have enough money that you don't have enough, you can actually quit working, but you can quit saving. And your money will do the rest of the growing until the age you plan to quit working, so that you'll have enough at that point that you'll quit working. So you can coast to your early retirement. It's Coast-Fi.

Rebecca Herbst:
Right. Exactly. We were well beyond that Coast-Fi number. But like a sub number within that is how much active income do you need to earn each year to supplement the income from your portfolio if you're not quite there yet? And at the time, we were living in the Boston area, but we were looking at moving to the mountains with you, Jim.

Dr. Jim Dahle:
And everybody else during COVID, it seems.

Rebecca Herbst:
And everybody else. But we basically looked at this list of six cities, and we're like, “Okay, what would it cost us to live there?” And that would largely be impacted by the value of a home, the cost of a home, and the expenses associated with that.

And what we did is said, “Okay, here's a scenario if we lived in City A, City B, City C, City D. What does our active income for each year need to look like, depending on which city we lived in?” Instead of being like, “Oh, I need to work an extra three to five years to be able to afford to live in say, California versus Utah”, it ended up being more of a discussion around, “Oh, I need a couple of thousand dollars a year to supplement my income versus $10,000 a year.” And that made the conversation much easier when we're just focusing on these much smaller numbers.

As I said earlier, we looked at our FI number in the range of spending $60,000 to $80,000 a year. Since then, though, it's been like four to five years now. We have moved from Ogden, Utah to Salt Lake City, Utah. And we went from owning a house outright in cash to spending the most on rent we ever have. And we have a child in daycare three days a week. We've gone from spending $65,000-ish a year to over $100,000. And with baby number two on the way, probably closer to like $110,000.

The thing is, we're okay. I know it's like for so many people that are not there yet, for me to be like, oh, we're basically increasing our spending by 40%. Seems like a scary concept, but we're doing okay. The thought process being, “We have this huge pot of money. If we have to go back to work for some reason, we absolutely can.” And the stakes are much lower because we don't need jobs that pay us $200,000 anymore. We don't need those things. The stakes are way lower. I see spending as the spectrum, Jim.

GIVING AS A CORE PART OF FINANCIAL INDEPENDENCE

Dr. Jim Dahle:
Well said. And often on this podcast, we talk about the five money activities in life. Earning, saving, investing, spending, giving. And I encourage people to get good at all of these things. But today on the podcast, we're going to mostly focus on giving. And explain to us, Rebecca, why that is so important to you. Why is giving such an important part of your life?

Rebecca Herbst:
I didn't grow up in a household that gave. I didn't grow up in a household that was incredibly generous. This wasn't something that was built into me. It was something that was always nagging, guilt-ridden, being pushed in the back of my mind. And it didn't really come to the forefront until I started exploring all this financial independence stuff.

As I mentioned earlier, I pulled the early retiree trigger during COVID. This was a time when so many of my friends had lost their jobs. People were struggling. And we've all struggled. We'd all have hard times. But really, for the first time, this was truly, truly smacking me in the face.

And so, I was spending a lot of time thinking about what it means to be so, quite frankly, privileged. I was really overwhelmed with guilt. And instead of letting that take over, I channeled it. I started reading a lot about philanthropy, how to point my moral compass in the right direction. And I found myself locked really into the idea of donating and giving effectively to charities that could have an impact on the world.

I realized that your community is full of people who are helping people on a daily basis. I worked in commercial real estate. There's probably a chance that I was hurting people based on the negative developments happening in the world. And for me, knowing that I could use money and use money as a really effective tool to help people, not only helped alleviate this guilt, but maybe feel really good and gave me a lot of purpose.

And from that personal development, I realized that there's so much opportunity to help others and shine a light on A, how much good we could do. B, help those who are maybe feeling similar feelings. Like, “What's the point of this whole personal finance thing? Is it just for me? Is it just for my family? Is it for anyone else?” And since then, it's just really, it's been six years, and it's been this labor of love trying to figure out how yield and spread can have the biggest impact on the personal finance world.

Dr. Jim Dahle:
Now, your plans, as I understand them, are to donate 10% of your income and eventually, upon your death, 80% of your wealth. Is that right?

Rebecca Herbst:
That's right.

Dr. Jim Dahle:
How did you end up with those numbers?

Rebecca Herbst:
Early on, when I was exploring giving and looking for habit formation and wanting to really cement a number for myself that made sense, so that I could build a financial plan around it, I took a giving pledge, and I started out with 5%. And the idea would be, let's give 5% of our income. And at the time, it was just our retirement income, which is pretty doable based on the numbers I shared earlier. Let's see how we feel. And I did that for a year. And then each year we grew to 6% and 7% and 8%.

10% is ultimately rooted in religious teachings. For centuries and centuries, many people around the world have been giving 10%. It is also a very easy and tangible number to understand. It's also doable, but meaningful. I think the stats are something like the average American in this pretty wealthy country, in this high-income country, we give about 0.7% of our income to good causes, which I actually was surprised by. I'm pretty hardened by that number.

So moving the needle to 10%, that's 10 times greater than the national average. And this, I think, meaningfully shifts the way that I would approach big world problems. For me, 10% is doable, very doable, but also meaningful. There's a sacrifice behind it.

And by the way, I think this could change. We're doing our estate planning now. If I were to pass away tomorrow, I maybe wouldn't give away 80% of my wealth because my children would be below three years old. I would want to make sure that they're set up for success. But assuming that they're adults, they're on their own, they're sufficient, that 80% for us is rooted in the idea of, “Wow, we could have a really huge chunk of money and make a huge difference on a certain project or cause area.” And the 20% is still incredibly generous to our kids.

And as you and I both know, if you have a $2 million portfolio now that you're sitting on and you run a financial simulation, you do the Monte Carlo simulations, yeah, maybe there's a 2% chance you run out of money, but there's a 25% chance that you're a deca-millionaire. That's a lot of money. I think sometimes we forget to look at the other end of the spectrum, where we could end up with a lot, a lot of money in our portfolio when we die.

Dr. Jim Dahle:
Now, I think a big question a lot of people have about giving is they tell themselves, “I'll give when I'm wealthy.” I was kind of the opposite. We've been given since we had a net worth of zero. And this has been part of our lives for our entire lives. So it wasn't unusual when we became wealthy that we started giving more, and it became an even more important part of our lives. Money, for the most part, makes people more of what they are in my experience.

For someone who didn't start this way, who has never really been a giver, can you talk a little bit about how to get started, maybe how to experiment with donating, maybe how to build a habit so it sticks?

Rebecca Herbst:
I think it's a really useful way that you frame that, that there are people out there that are like, “I'm going to wait till I'm wealthier at a certain point.” I’m like, “What is that point for people? It's probably largely personal.”

One of the things that's really beautiful about people like you or other people in the personal finance world who give is that we see that. We see people like you leading with that. But sometimes it does ultimately create this little space for other people to say, “Well, Rebecca and Jim have done it. They're super wealthy. I'm not there yet. So it's okay for them to give, but it's not for me.”

I understand that argument when we see peers who are much wealthier than us giving money away. The converse argument to that is habit formation. If you are waiting until you're wealthy, and maybe that point of wealth for you is 45, and then you're going to try to give away money, man, oh man, is it going to be really hard. It's like the same thing as going to the gym and eating well. If you haven't gone to the gym in 35 years, it's going to be really hard to start the habit formation, the physical ability to show up to the gym, and to take care of your body.

And so, I think exercising this muscle early on, building it into your financial plan early on, is important. So it's been years since I've been giving away 10%. I don't think about this. It doesn't require any energy. I have a plan set up for this already. For example, every month, my husband and I sit down, we have our personal finance meeting, and we do a few things. Quite frankly, this is the only time we really look at our portfolios once a month. We look at our portfolios. We look at what we spent. We prepare for our spending for the next month. We sell from our portfolios if needed. And then we also donate.

Every month, we make our monthly donation. We don't wait till the end of the year. Like a lot of people do give around giving season. We do it every single month, and it's just part of this habit that we already have.

I would say to your listeners, what positive habits do they already have? When are they sitting down to talk about finances, meeting with their partner about their goals in life? Can you incorporate the giving in there? Because the hardest step is always the first one. And now for me, it's just second nature. I think more about how to get extra items in my shopping cart to get free shipping than I do about how much I'm donating each month.

Dr. Jim Dahle:
You've said before that a formal call to action is crucial to actually change the tide of giving. You've mentioned that some people have a skill of actually being able to help people to give. Tell us a little bit more about that. And also, I think this is probably a good point to introduce the FI-lanthropy pledge, if you would.

MAKING GIVING EFFECTIVE, PRACTICAL, AND SUSTAINABLE

Rebecca Herbst:
Let's take a step back for a second, which is the idea that, “Should you donate? And if you donate, can you have an impact?” And so I think that, Jim, we're both personally of the mindset that donating money to charities that will use it effectively and in a positive way generally helps the world. And that it's our moral obligation as citizens of this world to help others. You've said that before.

Dr. Jim Dahle:
There's something to that effect, I'm sure.

Rebecca Herbst:
Yeah. For me, the idea of knowing where my money is going and getting reports back from that charity saying, “Hey, Rebecca, this is all the good that you are doing, really helps me part with that money.” I just don't want to give my money to anyone asking me on the street or to a charity that I don't know anything about. I spent a lot of time researching the causes that I care about and the charities that I think will do good.

And so, it's like the same idea of where you're investing. We want to invest in a conservative, risk-free approach that gives us some returns. We want to apply that to charity as well. So I'll start with that. And we should talk about that a little bit more.

The call to action, which is the FI-lanthropy pledge, comes in three options. The first option is this classic 10% pledge, 10% of your income. It's very straightforward. It's very clear. The FI-lanthropy pledge works in partnership with this organization called Giving What We Can. There are over 10,000 people around the world who have taken this. And so for many, many people, it's doable and real and clear.

If you're not quite ready for 10%, which is absolutely understandable. Rome wasn't built in a day. There's the trial pledge. So you could say, pledge 1% of your income for as little as six months and just see how you feel. So if you make $100,000 a year, and you want to just take the 1% trial pledge, that's $1,000 a year. That's very doable. That's less than $100 a month. That could be like a great starting point for someone who's thinking about it.

And the last option is a wealth pledge. That's donating a percent of your overall portfolio. And the reason why this exists is that for a lot of people in the personal finance world, they're no longer thinking about traditional forms of income, or maybe their traditional forms of income are kind of wild and all over the place, because they have multiple income streams. The wealth pledge allows people to think about their entire portfolio and say, “Okay, I'm going to give away half a percent of my wealth every year.”

That might look like if you're looking at the 4% safe withdrawal rate as a future analysis for your projected financial safety, you might look at 4.5%. And I think that we probably are gravitating a little bit more towards the wealth pledge ourselves as a family. But those are the three options.

The idea behind a pledge is that you're making a commitment. You're part of a community that values the same things as you. You know that from your community. The things that doctors think about, the things that dentists think about when it comes to personal finance, there's kind of this thread underneath personal finance teachings, but it's specific to them. People who are generous and charitable, to be part of something that people are thinking about in the same way.

And the last is culture. I really think it's important to normalize giving and to talk about it because typically, we don't talk about it because it's seen to be more virtuous if we're not talking about it openly. But when I see people like you or other people that are giving, and I see that they're happy and healthy and wealthy and doing well, it just creates a safer space for others to give. If my five best friends give between 1% to 10% of their income a year, I'm way more likely to give money myself.

That's kind of what I'm working on with the pledge. It's like this call to action to make it real, but to also showcase to others like, “Hey, look at all these people who have pursued financial independence or financial freedom and are giving away 1%, 2%, 3%.” And my hope is that 10 years from now, we just see this huge community in the FIRE world of people who are donating and early retired and living great lives and having their cake and eating it too.

Dr. Jim Dahle:
Let's talk for a minute. And this can't come from me because if anything, preaching to the choir, I'm a huge fan of giving personally, but I want to give you some pushback. And I'm going to quote from a fellow by the name of Phil DeMuth. And it's really funny that he said this because he later wrote a book called The Tax Smart Donor, but this is what he had to say about charity. And I want your reaction to it.

He said, “I love charity, but taxes aside, we get our charity feel-good afterglow buzz on too cheaply. It's safest to assume that any charity is a well-meaning scam until your own research proves otherwise. Of course, the people running the charity don't think of it as a scam. They think they're Mahatma Gandhi. All that proves is they're experts at rationalizing their self-interested behavior, just like the rest of us. Here's an instant screen I copied from Nassim Taleb. Does the charity have any salaried officers? If so, look elsewhere.

The next question to ask is whether they do more harm than good. I count wasted money as a positive evil. The same money could have been left in a tip jar at Starbucks, where it would have gone to hardworking young people starting out in life.

As Milton Friedman says, the most efficient operation is where you have people spending their own money on their own behalf. The least efficient operation is where you have a group of people spending other people's money on behalf of yet a third group of people, which is how charities and governments operate.

If a charity has a cost-benefit analysis of all the good they're doing for the dollars spent, bring it on. In the absence of such evidence, which they would certainly be motivated to supply if it existed, it is safe to assume the money was wasted.”

As I said, I find that quote hilarious now, given that he later wrote this book about donating money, but I want your reaction to that kind of anti-giving mindset, because I think it's fairly common. He was just daring enough, I think, to verbalize it.

Rebecca Herbst:
When it comes to the FI-lanthropy pledge, I don't know if it's going to be presented to someone who's completely anti-philanthropy, and they're going to be stoked to take it. I imagine the type of person who's going to take a pledge like that has something inside them that says, “I have something to give others.”

In terms of the conversation of trying to convert others to believe in philanthropy, this is a different conversation than cementing a financial plan around it. I know a lot of people, and I myself have been asked for money on the street and felt wary of that. How many times have you checked out at a store and they're like, “Do you want to donate to X, Y cause?” It's uncomfortable to be asked on the spot. You're not sure if your money's doing any good. You weren't prepared. You were just trying to buy some groceries to make dinner that night. You're just trying to get home, but someone in a green vest is stopping you.

People ask for money because it's a meaningful and real way for people to receive money. If you don't ask for it, you're not going to get it. So with that said, I understand the skeptics. I understand the skeptics. And there are charities out there that are not effective that do cause more harm than good.

I think for me, what really flipped the switch was learning about charitable organizations that do rigorous research on the outputs of their work. And so that I can look at it like an investment. When I give this charity $1,000, this is what I'm getting back from them.

Let me frame this another way. In the quote, I think the language was like the cost-benefit analysis of it, how much you donate to a charity and how much money ultimately goes to a cause is only one measure of efficacy.

What I want to see is what that charity is doing. This is an example I've given before. Let's say someone comes up to me on the street and says, “Hey, do you want to donate to our local high school? What we're doing is we're providing books to kids, and it will cover the cost of their books for the next four years of high school.”

And you might walk away from that and be the type of person that's like, “Oh, I love kids. I absolutely want them to do well in school. Let me give them some money.” Or you could be the skeptic that's like, “Okay, are these even going to buy books? Who are the kids? What's going on?”

A much better representation of impact would be if someone explained to me, okay, here are the books that you're buying for these kids. And what we have found is that when you supplement this resource for them, they are five times more likely to graduate. They are seven times more likely to earn a higher income and provide for their families. They are four times more likely not to end up in jail.

These are real statistics that I can lean on and understand and decide whether or not A, “Do I want to donate to this cause?” And B, “Does this cause you any good?” I think most charities try to do some good, but they end up in that category of, “Hey, will you give some money so we can buy textbooks for kids?” Versus, “Here is the real output and impact of the efforts we have.”

And when I can see that impact, I'm much less focused on how much the executive director of the organization makes, or what percent of money is actually going to the causes, which, by the way, I do think is valuable. I don't want all of my money being blown on glossy brochures.

But again, thinking more about what the cause area is and the effect from that will be relative to that cause area. If you're donating to prevent homelessness, the impact or the effectiveness of that is going to be different than if you're donating towards lobbying for a certain cause.

Dr. Jim Dahle:
Yeah. It's very interesting. Everybody wants to give in as high an impact way, as high yield of a way as they can. And it turns out it's a lot of work. Our family, we tend to do most of our giving at one time period during the year after having a family giving meeting.

We require each of the family members to not only bring the charities they want to support that year, but they've got to have an argument for why they think we should be supporting this charity. And they've got to do some research and get some ratings and find out how much of this money is going to go to administrative and how much of it is going to go to fundraising, how much is actually going to go to the cause. Not to mention the cause itself, whether the cause is worthy.

And the biggest complaint we have about the meeting is, “Oh, Dad, this is taking so long.” And even after the meeting, there's an hour of work at least. And we've streamlined this as much as we can, just doing the actual giving, just moving the money to the charities.

I think part of the reason people don't do this is they're afraid they'll do it wrong. And they recognize that doing it right does require some work, just like spending well, just like investing well, just like saving well, and budgeting and earning well. It's not simple. It does require a little bit of work. What are some of the ways you've found to be able to be high impact and high yield while maybe minimizing that work as much as possible?

Rebecca Herbst:
I have two thoughts here. The first is you're asking your family to go out. Well, first of all, I think this is a beautiful exercise that you do. And I hope to deploy something like this once my kids are older. You're asking your family to go out and bring to the table well-thought-out research.

My first thought is, can you roll with that? Does it always have to be a new charity? If they've done the research and they like that charity and they want to continue supporting them, what's wrong with a five-year plan with continuing to support that charity?

Dr. Jim Dahle:
For sure. And to be fair, the majority of the ones we support each year are the same.

Rebecca Herbst:
Just for your list. That's actually what's happening in your family. And just for people who are listening to this. Like I always say, the work is up front. We spend time once a year researching the charities that we want to donate to in a proactive way, because I already shared I donate on a monthly basis. We spend time once a year to decide. And then that's our giving for the year. I'm not doing this each and every month. I'm just clicking the buttons on the forms for which I donate appreciated stock every month. But the strategy is figured out.

And then at the end of the year, I say, “Okay, let's reevaluate. And are we going to go with the same strategy again or not?” I will say that that's about 80 to 90% of our donation strategy. So, it's a proactive donation strategy. Then 10% for reactive stuff like a friend's running a marathon or someone's asked for money to support some cause that we feel like we're happy to support.

It's again like this. 90% of the work is proactive. 10% of the work is reactive and maybe a little less diligent around how effective the cause is to give us some freedom to be normal people. I don't want to go to my friend who's running a marathon and say, “Hey, your cause is ridiculous. I haven't researched it. There's no way I'm donating towards it.” That's not very fun and friendly. Again, coming up with a system throughout the year for which you evaluate, which you have Jim, I have as well.

The second is, how many people. And I'll relate this back to personal finance. How many people are we actually going out and encouraging them to research which stocks to buy or which bonds to buy? We're largely not doing that because it creates this system of winners and losers. We are saying, “Look, these smart people, Jack Bogle. These smart people and others have done the research for you. And here are your more appropriate options. We've done this for you. If you want, you can look into it more. Or you could just buy this three-fund portfolio or four-fund portfolio.”

How many people in the personal finance world just go ahead and buy that because it's been so researched and so well-trusted? There are other organizations that do this with charitable giving. They've done the work for you, and they've done the research for you. You've mentioned this in your work before, Charity Navigator. They have top lists of charities by cause areas, such as homelessness and emergency disaster relief.

We have other charity aggregators like The Life You Can Save, which lists about 20 charities or so that are rigorously researched by third parties. And they cover causes from combating malaria to educating girls in India who otherwise wouldn't be able to have access to direct cash transfers. The causes vary widely, but they highlight these very incredible charities. They're doing a lot of great work.

There are other area aggregators like Giving Green, if you care about climate change, or animal charity evaluators, if you're a vegan or vegetarian, and you want to think more about how you can put your money to use, versus just your consumerism. Those are just a few places to start where people have done the work for you, and you can explore what speaks to you within their platforms.

Dr. Jim Dahle:
All right, let's talk a little bit about the mechanics of it. It sounds to me that you give in a similar way to how we give in that you donate appreciated shares you've owned at least a year. That, of course, has significant tax advantages. Neither you nor the charity ever pays any capital gains taxes. You can still take a charitable donation for the entire value. And presumably, I'm assuming you're using a donor-advised fund. Is that true?

Rebecca Herbst:
The last one, I'm actually not using a donor-advised fund on.
Dr. Jim Dahle:
Tell us about that decision and why you're going that route.

Right, okay. In the simplest realm, there are lots of options. You have the option to donate cash. Yes, real cash, but paying with your credit card or from your checking account. You have the option to donate appreciated securities. You have the option to use either of those types of assets and put it into a DAF, get a huge large front tax deduction, and then slowly make those grants at overtime. The way that we've modeled our giving is we just donate appreciated stock on a monthly basis.

Dr. Jim Dahle:
Directly to the charities?

Rebecca Herbst:
Directly to the charities and all the charities to which we donate to accept appreciated stock, not all charities do, by the way. For us, we're getting the same tax deduction by doing that as if we were to put that money into a DAF and then donate it.

For me, the DAF is just an extra step. And also, I'm free to invest in whatever I want when I'm donating appreciated securities from my regular brokerage account. Whereas a DAF, there tends to be these more limited options. And then this slight additional fee, although you can get around… If you use a good DAF provider like Fidelity or DAFI, for the most part, it remains pretty low cost.

But for me, the DAF is just an extra step. It's not a harmful tool. It's just not a helpful tool. So instead, I'm just choosing to donate my stock that's appreciated the most and just slowly roll through that strategy over time. I don't think a DAF is out of the question for us. It's just not a very useful tool.

Dr. Jim Dahle:
Okay. I'm going to take about one minute and talk you into using a DAF. I had a problem with the DAF. The problem I had with the DAF is what I call the jerk move. The person who puts their money in there gets their tax deduction and never actually gives the money to charity. I have a real problem with that.

But I eventually came around and started using a DAF for a few reasons. Number one, I can just do the transfer of the shares at one time a year or whatever. That's all I have to keep track of for my taxes. I don't have to keep track of all the different charities we're giving to and all the multiple donations. It's just a super paperwork-saving step. That's reason number one.

Reason number two is I hate charity porn. What I mean by that is those glossy brochures that show up in your mailbox when a charity knows you gave to them. Worse, they make some money by selling your name and address to other charities. So you don't just get one glossy brochure, you get 10 glossy brochures in your mailbox. That kills me to know that charitable dollars that people are not spending, they're not giving to their heirs, they're not investing for their future, are being spent just trying to raise more money from me that I'm already in the habit of giving.

Those two things are enough to cause me to say, “You know what? This is easier to just use a DAF.” You don't have to dole the money out in small chunks. You can donate it a week after you get it in there. As soon as everything kind of settles, you can take all the money out of the DAF. We don't keep a huge balance most of the time in our DAF. We are keeping a little bit more this year just because the charitable rules changed last year. So we put a little extra in there last year.

But typically, we pretty much clean it out every year. We're not keeping it for giving over decades or anything. We just run the money through there for the convenience and for the anonymity. And so far given to, I don't know, 30 or 40 or 50 charities a year, whatever it is, we have yet to have one we couldn't give to through the DAF. There was a legitimate charity.

Now, unlike a charitable foundation, you can't just give to an individual with a DAF. It has to be a registered charity. But I would encourage you to reconsider. It wouldn't surprise me if you change your mind on that at some point in the next few years.

Rebecca Herbst:
These are good selling points. I think the DAF will become more prominent for us as we think more about this net worth and drawing down on our portfolio concept. I also think my parents are still young, but in the event that we come into an inheritance, I definitely think that's when we'll deploy it. But your selling points are great, and I hear them.

Dr. Jim Dahle:
Yeah. All right. Let's talk a little bit about this book by Bill Perkins. It's come out in the last few years, called Die With Zero. And in that book, he talks about not only giving to heirs when the money will be most useful to them, rather than trying to die the richest doctor in the graveyard, but also giving to charity now, instead of waiting until you're dead. And one of the concerns is everyone's worried, “Well, what if I need that money and then I've already given it to charity, I can't give it back.”

He's not talking about that. He's saying, once you know you have enough, recognize you have enough, and the charity could sure use the money now, rather than later. How do you propose people decide whether to give now versus later?

Rebecca Herbst:
I don't think it's an either/or. I think it's both. Giving now reflects upon this concept of habit formation. I go back to if you're 65 years old, and you've never given a dollar away, it's going to feel really, really hard to give money away outside your family. It's just a full, full stop answer.

And it's funny, a lot of times when I want to talk about philanthropy with people in this space, they'll be like, “Well, my audience isn't, they're really young, they're not in their 60s, they're not ready to give.” And I'm like, that's not necessarily the people who are giving, we don't actually have a lot of data out there that suggests that people who are 60 give way more than people who are 30.

Again, I go back to this, give now to create a habit, A, for yourself, and B, people need the help now. People are suffering now. And so, what can you do to help now? And then you can look at your portfolio as this kind of idea of invest to give. So you're like investing these assets for your future, you're covering your butt. You're creating this financial safety security nest egg for yourself, which you need. And you shouldn't feel bad about that. At some point, you're going to grow old, you're going to have to stop working and you have to support yourself.

You have this nest egg, let it grow. And then maybe down the line, there's other causes that didn't even exist before. And so you have an opportunity to grow that portfolio and give even more.

A lot of people try to model this, like, “How much could I give now versus if I invested it and then gave it later? And would it be more money to give to charity?” And there's a lot of discussions around that. My thought to make your life simple is to do both. And I would keep it really, really simple because there's all these discussions around like, “How much should I give? When should I give?”

To me, there are basically four stages of how you should think about giving when it relates to the path of financial independence. The first stage is that you're just unstable financially. You're in crippling debt. And it just may not be your time to give until you get your act together, and that's okay.

The second stage would be stable. You're covering your life expenses, you have regular income, you can pay the bills, you have an emergency fund. At this stage, at this early stage, I would consider taking a 1% pledge. So if you make $60,000 a year, that's $600 a year. It's $50 a month. When you break down the numbers that way, it's really doable.

The third stage would be momentum. You can handle a curveball, your cash flow is predictable. You have a decent savings rate, and you can see this path forward. Maybe you can increase that pledge from 1% to 2%. See how you feel. And I think at the last stage, this sort of sufficient stage, meaning I have enough. There's a path to FI, or I'm close to FI.

I think this is when you switch from giving when being asked to giving by design. And you're really thinking about, “Okay, how am I coming up with a research plan around the charities that I want to give to the cadence, what types of assets I'm going to donate to.” I think really most of us at this stage could be giving 5%, 10% and live a really great and happy life.

Dr. Jim Dahle:
All right, let's talk for a little bit. We've mostly been focusing on charity. Charities are not the only things you can give money to. You can give money to support your alma mater. That typically qualifies as a charity as well. But you can give to people directly. You can give to work associates, you can give to people you meet on the street, you can give to family, you can give to friends, you can give to somebody in the neighborhood that something bad happened to. There are all these GoFundMes that pop up from time to time.

Obviously, you're not getting tax deductions for this non-charitable giving. But sometimes it feels like you can make a bigger impact with people that you care about a lot. So, any tips on how to balance how much goes to a formal charity versus giving to people you already know that maybe haven't been as fortunate in life as you have?

Rebecca Herbst:
I'd be curious to see what your thoughts are on this. I like this three-pot idea. You have three pots of money in your life. The first is for you and your loved ones. And that could be your kids, it could be your aging parents, it could be immediate family or what's close to family.

The second is an emotional connection. The second pot is like it could be local, it could be a GoFundMe, it could be things that you just feel like are really tugging on your heartstrings.

And then the third bucket is this impact bucket that you know when you put money towards this bucket, and theoretically, it could be a 501(c)(3) charity, but you could give money directly to someone and have a huge impact on their life, too. That can fall into that bucket. That you know that when you give money here, it's damn sure going to do something good.

So, it's like this diversified charitable strategy that works somewhere within your emotions, but also roots in the idea of, “Well, if we're going to give money, we just really want to make sure it does some good.” So, that's how I kind of think of it. Luckily for me, most of my giving of the second bucket and the third bucket has overlapped. The causes that I donate to that I know have a positive impact also pull on my heartstrings. They also make me feel connected to them and emotional about it. I'm curious how you think about giving outside of 501(c)(3) charities, Jim?

Dr. Jim Dahle:
Yeah, I think we've taken a very diversified approach for sure. Last year, some of our giving included obviously charities. We gave a lot of money to charities. We gave a fair amount of money to our church. We endowed a scholarship at our alma mater. We gave to people in need in our neighborhood that we knew of. We gave money to family. We paid out bonuses to employees.

And you look at all these different ways that you can give to all these people and all these causes you care about. And it's really challenging to decide, “Well, how much goes to these folks and how much goes to this charity?” And it was surprising how hard it is to do, even though none of it's going to you. None of it's really being invested. They might be investing it, but we're not investing it. And still, it's complicated to make those decisions. And oftentimes, especially if you're married, this is a give and take with your spouse and deciding “Well, how much are we going to give to them?” And so that's kind of been our approach. But I think we're getting better at it as time goes on, for sure.

Now, this is a financial podcast. I think for just a minute, we got to take a break and talk a little bit about the tax advantages of giving. And with some of the tax changes recently, you can give a certain amount of money to charities without itemizing and still give to them in a pre-tax manner. Basically, you get a tax deduction for your entire contribution. I can't remember when that changed. That just changed last year in 2025.

Rebecca Herbst:
Yeah. Come the 2026 tax year, there will be a $1,000 deduction for single filers, $2,000 for married filing jointly, if you donate cash to 501(c)(3) charities only. So it's not going to apply to your DAF, and it's not going to apply to appreciated securities. It's just going to be for this $1,000. And it's technically a below-the-line deduction. It's not going to lower your AGI or lower your MAGI.

Dr. Jim Dahle:
But it will lower your taxable income.

Rebecca Herbst:
But it will lower your taxable income. So, to me, it's a no-brainer.

Dr. Jim Dahle:
Yeah, right. I think for a lot of people in our audience, they're high earners, they've got a bunch of mortgage interest, maybe they have some other itemized deductions, they often get a deduction for their entire charitable donation on their Schedule A as well. And so as long as you're itemizing, and you're itemizing more than the standard deduction, that amount is, of course, a pre-tax amount as well.

One of my favorite ways to give, though, is for people who are at least 70 and a half, you can use a QCD qualified charitable distribution, which is awesome. If you're of RMD age 73 to 75, whatever it's going to be when you get there. This takes the place of your RMD and basically goes directly to the charity from your IRA. And so, it's awesome that way and that it fulfills your RMD. And you get a given a pre tax way, and you don't have to itemize, you can still take the standard deduction and use that qualified charitable distribution.

If you're at least 70 and a half, that's probably the best way tax-wise, for you to give to charity. And it's a little bit of a pain to get a QCD check sent, but it's not that bad, particularly if you're only doing it for one or two charities.

Rebecca Herbst:
And my husband and I have been talking about this a lot in the world of now that we're early retirees, our income's quite low. So one of the things that we focus on is Roth conversions quite a bit. So, getting money out of our traditional IRA and into our Roth IRA.

Luckily, most of our funds are not sitting in that traditional bucket. But the QCD thing comes to mind for me, even as someone in my 30s, because I'm realizing like I probably don't have to put such an emphasis on getting this money out of my traditional IRA, because I plan on making such large charitable contributions later on in life anyways. So, it's given me a moment where maybe I'll stop with the conversions for now and just leave it for QCDs later on.

Dr. Jim Dahle:
Yeah, we've decided we're not doing any Roth conversions, because we anticipate leaving more to charity than we will ever have in those tax-deferred accounts. So that's absolutely the right mindset.

Okay, let's talk about another issue I'm seeing in the statistics. Fewer people are giving to charity. If you look over the last 10 years or so, the number has decreased from something like 91% to 81% of the affluent, and from something like 56% to something like 45% of the general population. Why do you think fewer people are giving?

Rebecca Herbst:
I can't speak to the statistics, but when in other countries, when we track charitable giving, religious giving, or religious-based giving isn't included in the statistics. In the US, though, we do include that typically, in those statistics.

Dr. Jim Dahle:
And people are becoming less religious, maybe.

Rebecca Herbst:
People are becoming less religious. And by the way, I didn't look up this data, but that's probably what my hunch says, that some of that's happening. I think a lot of people in these younger generations who are facing a really expensive world that maybe some of your listeners or even I weren't facing are struggling with the concept of the cost of goods and services, and how expensive life is.

But I also see a lot of incredibly opportunistic people who do give meaningfully and regularly. I know hundreds of people personally who have taken a 10% giving pledge. So, I think it's a function of who you're surrounding yourself with and what communities you're choosing to be a part of.

When I go through my LinkedIn feed, or I go through the people that are real in my life, the majority of them are giving away money and in some sort of meaningful way, even if they haven't taken the pledge.

I'm not saying that like the cost of the world isn't an issue or that maybe some of the standards or societal expectations for giving are changing based on what we discussed earlier. But my hope is that we can create a space to normalize this more and to have people to be able to put one toe in the water and just to see that other people are giving and doing well and doing okay.

Dr. Jim Dahle:
Let's talk about one reason why maybe the financial independence community and giving don't necessarily have lots of overlap. And this criticism, for lack of a better word, probably doesn't apply to you, given what you've chosen to do after retirement, that you're here on a podcast trying to persuade other people to do more giving in their lives.

But if you continue to work full-time after you don't need the money, you could give your entire after-tax income to charity. That would be the way in which you could maximize your giving, and thus a firing person, a retiring early person, in that way is not giving as much as they could. In some ways, it's inherently a selfish act to FIRE. Do you think there's any interplay there between the FIRE community and giving that maybe has an effect?

Rebecca Herbst:
I've literally had college students ask me why I'm not doing this. They'll call it “earning” to give. You've reached FI. Why don't you just keep working and give all your money away? Well, one, I didn't pursue FI just to do that. So I think I do get to be a little selfish and that I, for example, am a new mom.

Dr. Jim Dahle:
It turns out you're human after all.

Rebecca Herbst:
Yeah, it turns out I'm human. You can ask my family. I am not a saint, you guys. I am a mom. I have two kids. And that's a lot of my time and energy in this world. And I want to spend time with these children. I pursued FI for a whole bunch of reasons. Being financially comfortable to give is one of them. Spending time doing other things I love, we have a lot of shared interests, Jim, a great love of the outdoors, and then my family. And that's okay.

I think that's the idea that I'm trying to present, let's have our cake and eat it too. Let's live these lives that we want to live. And by the way, I am also giving away 10% each year, and I feel really great about both options. That's the core message I'd want to send.

And then I think separately, when I think about giving in the FIRE community, it makes sense that there's a natural friction here, which is we have all these really smart, influential people out in the world, whether they're authors, bloggers, influencers, what have you, that are building their platforms on how to build wealth, how to accumulate wealth. So it's a no-brainer that it might be hard for people to be like, by the way, I think you should give some of that away, because that's not exactly why they came to the FIRE space.

But the FIRE community is… And you've been in it way longer than me. The FIRE community has evolved. I think we had the first stage, which is invest in low-cost index funds, save as much as possible, sacrifice, and retire as early as possible, so you can find freedom. That's probably stage one.

Stage two now is really, “How do I design a life I really want to live using money as a tool for freedom?” This is uniquely different than the first stage. We have people telling us or people showing us how to use money to take sabbaticals, the concept of Coast-FI. How can you find freedom and happiness before you reach this FI number?

I do really think that we can reach phase three, which is a legacy. What, as a personal finance community, are we doing? What is the whole point of all this? And right now, it's just a few of us crazies like me who have reached early retirement in our 30s. But at some point, when people have these tools and have access to these tools, we're going to have millions and millions of people, and we see it already that are prepared for early retirement, and we're just going to be sitting on these nest eggs. What are we going to do with them?

And so, I do think there's an opportunity to shift this mindset of, “I'm pursuing financial freedom, I'm pursuing financial freedom” to “What are we doing as a community to live the best lives we possibly can while helping others?”

Dr. Jim Dahle:
Is it morally wrong not to leave as much as you can to your kids to make their lives as easy as they could be? Especially in today's world, where housing prices are going through the roof and so many people, even on a doctor's income in high-cost-of-living areas, can't afford to buy a house. Do we have an obligation to leave as much as we can to our kids and thus not give so much money away to charity either now or later?

Rebecca Herbst:
I think this is a great question. I'm from New York. I'm from one of the most expensive states in the US, and I have little kids, and I haven't had to talk to my son about money yet. I think I would be remising like, “I figured this piece out.” I guess the idea is we can iterate on it.

I feel very confident if you do something like take the 5% pledge. Again, assuming you're in that sufficient stage, which is a lot of your listeners, that you will have plenty of opportunities to support your children. And that goes back to those three buckets, like give to you and your loved ones, the emotional connection, the impact. I think that you can do both. I think if you're really trying to optimize and die with zero, then we do get into these deeper questions of how, or estate planning. What am I specifically giving to who and to when and how?

But I'll be candid. I think I have to explore that. I don't really know how much money my son will need to buy a house in the future. Will he want to buy a house in the future? Will renting be the way? The world could change a lot 30 years from now.

Dr. Jim Dahle:
There's data out there, and let me make the case a little bit very directly to podcast listeners for giving. There is plenty of data out there that if you give money away, yes, it helps these charities and these causes and these people you're supporting, but it makes you a better person too. It makes you happier. It makes you healthier. It makes you wealthier. The data is very clear. The givers are all three of those things compared to non-givers.

And I think part of that is you're sending a very subtle, maybe not so subtle message to your psyche when you give money away. You're saying you have enough and to spare. And I think that's very powerful in creating happiness in our lives. So many people I run into are anxious about running out of money and asking, “Well, how much do you have? – $7.5 million.” I'm like, “You are not going to run out of money. What do you spend? – About $140,000 a year.”

They're not even close to running out of money, yet they lie at night worrying about it. And I wonder how many of those people, if they were to give more money away, would literally have happier, healthier, more enjoyable, less anxiety-ridden lives than they have now.

Rebecca Herbst:
I love that sentiment. I think it's such a signal to your brain. I have enough. I am okay. And by the way, you can iterate. It's not stuck. It's not like you make this decision and are stuck in cement. You can iterate. If you're not sure, just try. Just do something like give 1%, give $100 a month. Do you miss the money? If you put $10,000 in a DAF, set some time on your calendar for three months from now. Do you miss that money? Have you thought about it? What did it do? Where did it go? Just take the step and try. And especially if you're that person with $7.5 million in their portfolio, just please give it a try.

Dr. Jim Dahle:
All right. Well, Rebecca, this is a topic I feel very passionately about. And so, I don't mind this has gone a little bit longer than most of our typical interviews on this podcast, but it's probably time we start getting closer to wrapping up. If somebody wants to take the FI-lanthropy pledge, how can they do that?

Rebecca Herbst:
The easiest way to do it is to head over to my website, yieldandspread.org. And on the website, you'll see at the top, the pledge, you can learn more about the pledge itself. You can learn about other people who have taken it. You can see the differences between the trial pledge, the 10% pledge, and the wealth pledge. And you're also very welcome to reach out to me and ask me any questions. I'd be happy to chat with you personally.

And then also on my website, there are other free resources. For example, the philanthropy calculator. You can put in all your information in there and say, “I'm thinking about taking the trial pledge.” And you can see how it would actually impact your timeline to FI.

And then I also do some light coaching with people who are exploring, taking a giving pledge, and want to understand how it impacts their plans for financial independence and financial freedom. So, lots of good stuff on yieldandspread.org.

Dr. Jim Dahle:
Okay. We'll include a link to that in the show notes, if it's hard to remember while you're driving, of course, as it often is as a podcast listener. Rebecca Herbst, we've had on here. Thank you so much for being willing to come on and encourage us to maybe be a little more charitable than we have been in the past. And thank you so much for what you've done for your family and for the world and for the financial independence community.

Rebecca Herbst:
Thanks, Jim.

Dr. Jim Dahle:
Okay. I hope that was a helpful conversation for you. As I said, the link to her site, if you want to take the FI-lanthropy pledge, will be in the show notes. There are lots of ways to give. Not just the money that we talked about today. You can give time. You can give stuff you're not using anymore. You can give that to charity, whether that's Goodwill or in our area, it's an organization called Deseret Industries that most of that stuff goes to. Whatever you can give is wonderful.

There are times, however, in my life when I've said, maybe I'd retire, and then I can volunteer more. And I really support the food bank. I'd go out there and pass out food. Then I got to thinking, well, maybe I ought to just see patients do a lot of good there, make the money, take the paycheck, and give that money to the food bank. That's probably doing more good for the food bank to have them get a check for what I would have earned in that shift than for me to actually have spent that shift down there passing out groceries to people.

There are lots of different ways to do this. If you're not in a position where you can give money or give much money yet, consider giving some of your time and maybe some of that stuff that you're not using anymore. Free up space, maybe reduce your housing costs because you don't need as big of a house to store and heat and ensure all that stuff that you don't actually need at all anyway.

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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 273.

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INTERVIEW

We've got a fun interview today from a well-known doc. Let's get him on the line. My guest today on the Milestones to Millionaire podcast is Tommy. Tommy, welcome to the podcast.

Tommy:
Hey, thank you so much for having me.

Dr. Jim Dahle:
Tell us a little bit more about you, where you're at in your career, what part of the country you live in, how far you are out of training, what you do for a living, etc.

Tommy:
Yeah, perfect. My name is Tommy Martin. I'm a combined internal medicine and pediatrics physician. I'm currently about four years out of training. My wife as well, she's a pediatrician and she is also four to five years out of training. We did our training in Arkansas, but now we are working up in Massachusetts in the Boston area.

Dr. Jim Dahle:
Awesome. Those are two very different areas of the country. I'm curious what ended up causing you to go from Arkansas to Boston.

Tommy:
You know you'll do anything for love, right? So, happy wife, happy life. My wife is from Massachusetts, whereas I'm from Missouri/Arkansas. I would have loved to stay in that area. But with all of her family being from the East Coast, we moved back up here. Also, our son has a really rare genetic disorder. We found an extremely good school for him to attend up here. It's truly been such a blessing.

Dr. Jim Dahle:
That is such a good description that we will do anything for love. It's true. Clearly, there's more than one person in your life you love and more than one person in your life that loves you, which in a lot of ways is the definition of success, right?

Tommy:
That's wealth. That is a wealthy life.

Dr. Jim Dahle:
Yeah, exactly. But it is a financial podcast, so we do have to talk about some financial stuff. Let's talk a little bit about where you're at in your financial life. You're a handful of years out of training. How are you balancing your financial goals? Tell us what you're working on right now.

Tommy:
Growing up in my family I was a first generation doctor. Neither of my parents finished high school and we did not have much money growing up. And so, a lot of my schooling in college and medical school, all of that fell upon me, which I am very grateful for. And I know that sounds crazy, but it has taught me a lot about hard work, budgeting money, managing finances and all of those things. So very grateful for all of those.

My undergraduate, I had loans from undergraduate. I did get a lot of my schooling paid for, for football and my academics. But then going to medical school, my wife and I, we actually met at St. George's University, which is a Caribbean medical school. And if the listeners know anything about that, Caribbean medical schools can be rather expensive or extremely expensive in our case.

And so, when my wife and I both finished medical school and started our first job into residency, we were both around $400,000 in debt from medical school. Now, thankfully, a lot of my undergraduate had already been paid off through working in college and things of that nature. But medical school, those were very, very large finances.

And where we are at currently is one is I work at an institution that qualifies for PSLF. I am in that program, and I have two years in that program in which after serving for 10 years, your debt then would be paid off or paid for. My wife, she works private practice pediatrics. And she does not have that same luxury as being able to be in PSLF.

And so, kind of our mindset here were a couple things. One is we still wanted to be able to live life, be able to vacation with our family, and live a life that we thought would be fulfilling to us.

Two is pay off the debt as aggressively as we could while maintaining that life. And three would be investing in not only for our future, but also our son's future. And so, those were the three pillars that we wanted as we went on this journey.

Currently, I'm going to continue out PSLF. And then we are hopeful to have my wife's debt paid off by the end of this year, maybe the end of next year. And that some of that ties into some investment things that we're doing and some other reasons why we're not paying it off immediately.

Dr. Jim Dahle:
Were you enrolled in an income driven repayment program during training? Or did you just start as an attending, enrolling in PSLF?

Tommy:
I started in residency doing PSLF on an income driven repayment program. Now throughout COVID, if many of the listeners may know, but a lot of payments were deferred during that time, but they still counted as credit towards qualified payments towards PSLF. And so, my four years of residency training has counted. And now my four years come a couple of months of attendinghood accounts. So that would give me eight years in it right now. And then I have two years left.

Dr. Jim Dahle:
Yeah. So two years left for you. And it sounds like you're probably done with her loans in another year and a half, two years as well. Is that correct?

Tommy:
Yeah. We planned it out that way so that we would be debt free at the same time. I just thought that would be kind of cool to make it work that way. And so that's kind of how we've scheduled it out and structured it.

Dr. Jim Dahle:
Yeah. Pretty awesome. $800,000 in student loans in something like seven years or so, right?

Tommy:
Yeah, that would be correct. Yeah.

Dr. Jim Dahle:
Pretty awesome. Okay. Now you guys both went to St. George's. And this going to a Caribbean medical school is not only expensive, but a lot of people that go there struggle to match. So they end up with $400,000 in student loans and don't have what you guys have, do not have the high paying physician job. What were your thoughts about that when you were selecting a medical school and deciding “I'm going to go for it, I'm going to be one of those that does match and has success”, etc.

Tommy:
Yeah, how to describe this. I was probably too naive, but I had no doubt in my mind that I would not become a doctor regardless of what school I attended. Even all throughout my childhood and growing up, I've always been told I couldn't do X, Y, and Z because of my situation or because of my family's history or my past. And I never let any of that define or decide what I could or could not do. I did not have any doubt that I would become a doctor that I would get a residency position, and that I would be attending one day. And so, I had zero doubts.

I would say that my wife had a lot more fear and anxiety behind it just because of going to a Caribbean medical school and the stigma behind that. And so, in saying that when it came to interviews, I only wanted to interview at between eight to 10 places, and I thought we'd completely fine. But my wife said no.

Dr. Jim Dahle:
While couples matching, right?

Tommy:
Right. While couples matching, yeah. And my wife was like, “No, we have to get a spot. I'm so nervous.” So we ended up, I think, going on 18 interviews throughout that process, and we ended up matching at our number two spot. And so, it is very true that it's hard to get a residency position coming in, or it's harder to get one coming from a Caribbean medical school. I will say that St. George's, if you make it through St. George's, the statistics of match rates are pretty good. Now, whether that be your number one or five spot, I have no idea, but the match rates are pretty good coming out of St. George's.

And so, again, I was fairly confident that I would get into a residency. And I did choose MedPeds, which when you think of competitiveness, it's a little hard to say, people will say it's more competitive, but then, like the board scores and the match rates, I don't know if it completely goes aligned with that. But either way, we got into residency and very happy with the journey that we went on.

Dr. Jim Dahle:
Yeah. As you looked around at your class, did you feel like there was a significant portion of your class that was not on a pathway to graduating from medical school?

Tommy:
It's such a great question, and it's hard to answer exactly. I will say in term one, which is your very first term, I think the answer to that would be yes. But by the time you get to term five, I think the people that weren't going to make it are kind of gone at that point. And then by term five, it's the people that's made it through the struggle, has made it through the hardship to get to the end. And I think that group of term five students or the end of medical school students have a very high likelihood of matching.

Dr. Jim Dahle:
Especially at one of the big four schools, big four Caribbean schools like St. George's.

Tommy:
Yeah.

Dr. Jim Dahle:
Did they ever talk to you, the ones who dropped out after a semester or two about their student loan burden and what their plans were to deal with that once they owed $50,000 or $100,0000 or $200,000 in student loan?

Tommy:
Yeah, for sure. I still have some friends that didn't finish and some of them end up going to a different Caribbean medical school and finding their way to becoming a doctor. And some have had success in that. But obviously, the expenses continue to add up. I have had another friend who decided not to pursue medicine and ended up becoming a pilot. And so, a pilot is still an incredible career and have high income potential. And so those things help.

But unfortunately, some of the ones that maybe I lost connection with in the first term or second term, I'm not 100% sure what their plans are. I will say overall, a lot of my friends are either in PSLF or they are working towards paying off their loans aggressively.

And when you have $400,000 in debt, obviously, that is very challenging. And what that means is your lifestyle changes pretty drastically to make sure that you can afford to pay off those loans as fast as you want to, because as many of our listeners know, the interest is absolutely insane. And so, if you're not paying it off aggressively or if you're not in a forgiveness program, then that loan burden is just going to keep climbing and climbing and climbing.

Dr. Jim Dahle:
Yeah. Now, I'm not an expert in this, but I understand not all Caribbean medical schools qualify for U.S. federal loans. Was that a significant factor for you in deciding where to apply and where to go to school?

Tommy:
Again, I was very naive going into all of this. And so, when I was applying to medical schools, I was waitlisted to one U.S. school. And then I literally just heard about St. George's from a doctor in town. I was like, “Oh, great, I'll apply.” I applied, got in, and I literally went within two and a half weeks. And so I didn't think about any of it. All I knew is that I was going to become a doctor. I got into a medical school and I would worry about the debt later.

Dr. Jim Dahle:
Yeah. If you had somebody come to you now, they come to you and say, “Hey, I hear you went to St. George's. Now you're chasing your dream. I've been accepted at a Caribbean school, but that's all. Should I go?” What advice would you give them? Would you tell them, “Yes, go for it? No, wait another year, apply to more stateside schools.” What advice would you give that person?

Tommy:
There's two sides of this coin. And the first one, I would say it doesn't matter to what school you're going to. And that is to count the cost being a physician. And what I mean by that is to count the financial cost, count the sacrificial cost of your life. You're going to spend eight to 12 years of your life dedicated to medicine, where that is the sole thing and the only thing that truly will be involved in your life during that time. And that is a very, very large sacrifice.

I would say count the cost of sacrificing time with your family, missing family events, and then count the cost of the financial situation, whether that be a state school or a Caribbean medical school. And if you count that cost, and at the end of all of that counting that you did, which is a very large number of sacrifice, if you still believe that being a doctor is worth it, then I would say pursue being a doctor.

Now the next side of that is after you've counted the cost and you say “No matter what the sacrifice is, I think being a doctor is worth it”, then you have to decide, “Would a Caribbean medical school be right for me?” And in that decision, a lot of it needs to come from how independent are you? And you make it on your own.

And not saying that if you go to a Caribbean medical school, there's zero help. But you're often going to an island where you will know absolutely no one. You may not have the resources that you have in the United States. You may not have your favorite food, your favorite drinks, your favorite restaurants, you may not have any of those things and maybe comfort things that you're used to, you will not have. Would you be able to handle all of those additional factors? Also knowing that oftentimes the cost is more expensive, and the schooling may be harder to make it through.

So, you have to decide, would you be able to succeed in that environment? There's no right or wrong answer. Everybody's different. I'm extremely independent. And so for me, I was like, “Hey, if it's just me on that island, I'm going to make it happen.”

And so, you have to decide, “Would you be able to succeed in that environment?” If the answer is yes, and you're okay with the additional cost, then I would say do not delay and go. If your answer is, “I don't know, I might need my friends. I might need my family. I'm scared about the financial cost.” Then I'd say wait and you know, try to get into a state school.

Another caveat to that is what specialty do you want to go into? I would never tell anybody that they would never get into orthopedic surgery, go into Caribbean Medical School, but I would tell them you need to be real. And you need to know how extremely challenging it is to get into orthopedic surgery, dermatology, plastic surgery, interventional radiology some of these high earning careers, but also very competitive careers. Because if that's your dream, it may be beneficial to wait and go to a state school.

Dr. Jim Dahle:
Let's turn a page and talk a little bit about balance. What specialty is your wife in?

Tommy:
She's pediatrics.

Dr. Jim Dahle:
Okay, you guys have moved a large student loan burden, you're in a relatively high cost of living area, not necessarily in specialties that have the highest average pay. Obviously, there's a huge range of pay within every specialty. Talk to us a little bit about how you balanced all those factors since you've been out of residency doing some investing, paying off some student loans, paying those high cost of living expenses. Talk to us about how you guys have found a balance that works for you.

Tommy:
For sure. I would say that we try to steer away from luxury items. For example, we did not buy new cars out of residency. If people have watched some of my videos, they will see that I still mainly drive, I think it's a 2010 Scion XD with 200,000 miles on it. Her name is Rolly, and she's a great car. My wife has a Telluride that we actually paid off in residency, we were fortunate enough to be able to do that. And so, we did not buy new crazy high expenses.

When we were looking for a house, we did decide to buy a house. And in doing so, we did not buy the most expensive house that we could find. But we bought one outside of the city limits in the suburbs that were was much more affordable. That makes our mortgage every month very, very doable as well. I will say it's probably close to a forever home just because of our neighborhood that we live in and things.

And then outside of that, we really tried to budget our money on things that are most important to us, and then put the rest of our money towards student loans and investing. And so, for us, vacationing is pretty important to us. And we want to still be able to vacation as a family every year. And we do that as affordable as possible.

We go to Disney a lot, but I'll say our in-laws have a Disney Vacation Club for those that like to go to Disney. And so, the expense of us going to Disney, I would say is truncated by that.

One example of a vacation we recently went on is we went to Savannah, Georgia. And all of our family and friends are like, “Why are you going to Savannah, Georgia?” And well, it's because the flights were $69 each, and it was warm. We went to Savannah, Georgia.

And I would say the balance aspect of that is continuing to live the lives that bring us joy and fulfillment, while not going into the luxurious lifestyles that is kind of, I guess, entertained after residency, because you've been paid so little, but we try to avoid that. And then the investment parts of it is maxing out our Roth IRAs every year.

And now with the income that we have, we have to do the backdoor Roth IRAs, which we do that. We make sure to max out our 401(k)s through our works, and any matching that they may do. So, we make sure to max those out every year. And then additional money that we may have to invest in, we will put in mutual funds, or through our financial advisor. And then I do dabble some mainly for fun, but in crypto and other things.

Dr. Jim Dahle:
So, how did you decide how to balance how much goes toward… Obviously, you're not paying extra on your student loans, but how much extra goes toward her student loans, versus is invested?

Tommy:
Yeah, I'd say we just max out the low hanging fruits, I guess you could call it. The Roth IRAs and our 401(k)s. And then after that, majority of the money, I would say goes towards the student loans. And then if we still have extra money, for whatever reason, I guess you could say that go towards the student loans. But we may put that more towards index funds or things of that nature. And our financial advisor helps us a lot with this.

I will say we've gotten to the point on her student loans, that the 6 and 7% interest loans are now gone. And what we have left are between, I think it's 4.2 and 5.1% interest. And so, if you balance that versus what you may get in the stock market, and things of that nature, you may in 20 years be on the higher side in the stock market, then paying off those additional ones.

And so, it's a little balance between that and just what we feel. And we know that the student loans are on a two more year timeframe. And you have a rough estimate about how much money that'll cost to do that. And then if we have extra money outside of that, then we invest it.

One other thing I'll just add, and this I think is I mentioned briefly earlier, why our student loans may be extended a little longer is we did decide to invest in some property in New Hampshire. And we bought some property about 1.6 acres in New Hampshire at a pretty high tourist area that we eventually over time plan to put cabins on and do Airbnb on those.

Dr. Jim Dahle:
Very cool. That's not a second home for you guys, your plans to actually use that as a rental property? Or is it going to be a mix between a rental property and something you use?

Tommy:
It'll be a mix between. We plan to put two cabins, it's 1.6 acres, we'll divide it up into 0.8 acres each. And then one would be primarily a vacation area for us. And then the other would be an Airbnb, but we'll probably Airbnb them both out when we're not using the other.

Dr. Jim Dahle:
All right, Tommy, somewhere out there, there's somebody like you that's going into a relatively lower paying specialty with a large student loan burden, living in a high cost of living area. What advice do you have for that person?

Tommy:
Yeah, I think the most important advice I could give them would be to live within your means, try to invest early in what you can, and live a lifestyle that is fulfilling to you, that's not overly luxurious, and that will still allow you to pay off your debt and invest what you're able to. At the end of the day, your debt will still be there. But I think your happiness and your well-being as a family unit is also extremely important.

And do not destroy that happiness, just for the sole goal to get completely rid of your debt. Whether you do it in one year or two years, I do not think it makes that big of a difference, especially to sacrifice your happiness as a family. And so, I think striking that good balance of what that means between you and your significant other, and your family unit is extremely important.

That answer is different for every single person. For one family, it may be “Be extremely aggressive, that's going to make us the happiest.” For another, it may be “Let's be moderately aggressive, and live a little bit more, and that may make them happy.” And that's completely okay. And I do not think there's a right or wrong answer. It’s different for every family.

Dr. Jim Dahle:
Yeah, awesome. Well, congratulations on your success. Thank you for being willing to come on the Milestones podcast to share it with others and to inspire them to do the same.

Tommy:
Yes, thank you so much for having me Truly an honor and privilege. I wish you guys all the best. Thank you again.

Dr. Jim Dahle:
Okay, I hope you enjoyed that interview as much as I did. I worry a lot about people who go out of the country for medical school, I worry about them being able to match back in the country and be financially successful. It can be very expensive to go to a “second chance” university for medical school in the Caribbean.

The match rates tend to be in the 60% range. 63% I think is what I saw the last time I looked. And that includes only the ones who apply in the match a fair number of other students drop out in the first year or two. As Tommy mentioned, it's a bit of a risky move.

But those who have success when I talked to them, generally say things like what Tommy said that they had no doubt whatsoever, that they were going to do just fine. They're willing to put in the work. And they weren't necessarily trying to match into interventional radiology or whatever the most competitive specialty of the year is.

But you certainly can have lots of success by going to a Caribbean medical school. I've met lots of docs that have and they've done just fine. Just have to be a little bit careful about it. But it's been fun to see him find balance in the other parts of his life, it's a high cost of living area. It's two people working, raising kids, trying to balance their financial goals.

And I like his perspective. That is true. It doesn't matter if you pay off your student loans in one year or two years. You don't want to take 22 years to pay them off. But if you get them knocked out in one year or two years, while you're balancing it with investing, while you're balancing it with some other things you want to spend money on, that's okay. Find that balance in your life. You got to do what's right for you. I love that piece of advice that he provided.

FINANCIAL BOOT CAMP: HOW MUCH HOUSE CAN YOU AFFORD?

Dr. Jim Dahle:
How much house can you really afford? What are we balancing here? Well, you don't want to be house poor and have all your wealth and income tied up in the place you live in. But you also want to be able to enjoy as nice of a house as you can and as nice of an area as nice of a school district as you can, while still being able to meet your other financial goals.

And so people often have this dilemma, how much should I buy? Because the sky really is the limit when it comes to buying a house. You can spend millions and millions and millions of dollars on a house. On the other hand, you can often rent a place, a one bedroom apartment or a studio apartment for really not that much money in a lot of areas of the country.

So there's a huge range and people want to know “How much can I spend? How much should I spend?” And that's hard to say because it's such a personal decision. It requires you to apply your values to your financial life and decide what you really care about. Because when you spend more on a house, you have to spend less on something else, whether that's saving for your future or giving money away or just spending on other things, cars, vacations, other activities you enjoy, clothing, whatever.

So let's provide a few rules of thumb for you. In general, I recommend you keep your mortgage to less than two times your gross income. So if you're making $300,000 a year, that would suggest you keep your mortgage to less than $600,000 per year. So if you want to buy a million dollar house and you have a $300,000 income, that would suggest you put down $400,000 in order to buy that house.

And that's a pretty good rule of thumb. Obviously when interest rates are really low, your payments are lower than they are when interest rates are really high. And that's just a rule of thumb. It doesn't come with an interest rate adjustment of any kind, but obviously some people do feel a need to stretch that rule, particularly when they live in a high cost of living area.

Bear in mind, when we're talking about stretching that rule, we're talking about 3X to 4X your gross income, not 10X. If you buy a house that's 10X your gross income, you're going to regret it. You're going to end up in foreclosure and having to fire sale that house or short sale that house. Please don't do that. At 3X to 4X, you're going to be making some sacrifices. You might be working longer, for instance, before you can retire. You're going to spend less on vacations. You're going to spend less on nice cars or private schooling or whatever. There's going to be some sacrifices, but it may be doable.

When you talk about this number, this 20% of your gross income, what that is really is a debt to income ratio or DTI. And if you look at the mortgage industry, you will find that people are willing to give you a mortgage for up to 43% of your income. In your debt to income, all of your debts together, what it costs you to service them and pay them compared to your income is up to 43%.

But just because a bank will let you borrow that much doesn't mean you should borrow that much. Oftentimes, the percentage is lower when it comes to just a mortgage, like 28% to 35% debt to income ratio. But I'm telling you, if you're spending 35% of your gross income as a doc on housing, there's not going to be a lot left over for you to spend or for you to save to meet your other financial goals. Because you got to assume 25%, 30%, 35% of your money is going to taxes.

So you got to live and save on the rest of that. And if you're trying to save 20% of your income for retirement, like I recommend you do, that's not going to leave a whole lot for you to live on. So what happens? People don't save for retirement, end up being house poor, and you don't want that.

Another useful rule of thumb that might be a little more useful in times of different interest rates is the 20% rule, where you are only using 20% of your gross income for your housing costs. Mortgages, insurance, taxes, HOA, and utilities, less than 20% of your gross income. And I think that's a pretty good rule of thumb as well. And that adjusts with interest rates, unlike the 2X ratio that I mentioned earlier.

Okay, what determines how much house you can afford? Well, your debt to income matters. And your credit score does have an influence on this, because it affects what interest rates you can get and whether you can borrow money at all.

Now, I hate to see people worshiping at the altar of the FICO score. This is not your financial GPA. Your credit score is far from the most important number when it comes to your finances. Your savings rate matters a whole lot more. Your net worth matters a whole lot more. But when it comes to getting a mortgage or borrowing money, they care about your I love debt score, AKA your credit score. So you do want to pay a little bit of attention to it.

But honestly, it doesn't take much to have a great credit score. Having one credit card that you put your gas on every month and have it paid off automatically out of your bank account is probably enough. And most doctors have far more debt than that, especially if they borrowed for medical school.

So you don't have to do anything special most of the time to have a really high credit score other than pay your debts as you agreed to do. And that's really the main component when it comes to credit scores. But if you're on the borderline, you can do some research on other ways to improve your credit score to get it up a few points and get that best possible interest rate available to you when you're going for a mortgage.

Don't forget that there are other costs when it comes to owning a home. One of the dumbest things you can do is say, “Hey, my mortgage is less than rent. It must be a good idea to buy.” That's the dumbest way to think about buying a home out there. Don't do that. There are lots of other costs associated with owning a home besides the mortgage.

Think about it like a real estate investor. If you're a real estate investor, you got to pay all the expenses using rent. And then you're hoping there's something left over for profit. What are all those expenses? Well, if you've never owned a home, it's a lot more than you might think.

There's closing costs and property taxes and homeowner's insurance, flood or earthquake insurance in some areas. You might have to pay private mortgage insurance or PMI. You might have to pay for maintenance and utilities. You got to get a new snowblower and a lawnmower and a snow shovel and brooms and all this stuff.

It can be really expensive to own a home, not even to mention furnishing it with drapes and furniture and all those kinds of things. So, don't forget all that when it comes to owning a home. The rent is supposed to be much higher than the mortgage. You cannot just compare the mortgage to the rent.

The key of deciding whether you should be buying a home at all instead of renting is how long are you going to be there? Because you need that home to appreciate enough to offset the transaction costs of buying and selling a home. Those are typically about 15% of the value of a home. Maybe 5% to get in, 10% to get out. More or less, that's a pretty good rule of thumb for what it's going to cost.

So, it's a half a million dollar home. We're talking about a $75,000 round trip. You need it to appreciate $75,000 while you're in it or else you're going to come out behind on buying that home. And how long does that take to appreciate $75,000? Well, on average, it's going to take about five years. If you're going to be in a home for five plus years, almost always makes sense to buy it. If you're going to be in there for less than five years, you're rolling the dice.

At five years, it's a 50-50 proposition. At three years, it's probably works out a third of the time and doesn't work out two thirds of the time. If you're going to be in there for a year or two, you're really gambling. Yeah, houses might go crazy in that year while you're in it, but you're going to need them to just to make up for those transaction costs.

In general, buy a house when you're in a stable, personal and professional situation where it looks like you're going to be able to stay in that house for at least five years. And that can make a lot of sense.

So, what does that mean for people in medical training? Well, lots of residencies are only three years long or a fellowship might only be one to three years long. Those are not periods of time where you're likely to come out ahead. Despite the urge to feel like you've made the American dream by buying a house. So don't get suckered into buying a house for a one, two, three year period, then ended up regretting it.

Now, lots of docs do this. I can't talk them out of it most of the time. And the truth is they usually end up being okay. But the reason why they're okay is because their new attending salary rescues them. They can afford to pay that mortgage on the old rental house or on the old residency house and whatever new house they're moving to just because they have this new higher income. But that doesn't make it a good financial decision.

Don't be so afraid to rent that you make a bad decision. You can rent a house just like you can rent an apartment. It can have a fence, you can have pets. Don't use all these silly excuses to buy a house you shouldn't be buying in the first place. Make an informed decision.

The New York Times has a pretty handy buy versus rent calculator. You might want to plug your numbers into. But if you put in typical numbers, you're going to find what I've told you is true. That three to five plus years is what it's going to take for you to be coming out ahead on this home with any sort of reasonable assumptions.

Now, as a brand new attending, you should keep in mind that about 50% of docs change jobs within two or three years of finishing their training. That means there's a good chance you're going to be moving as there's a good chance that new job isn't going to be in the same geographic area. So, it's okay to rent for a little while when you get to that new place, six months, even a year. It's often easier to get a contract for a year. Make sure you actually like the job. Make sure the job actually likes you. If you're in a partnership track, make sure it looks like they're actually going to make you a partner before buying a house. And that makes a lot of financial sense.

Okay, now what if you don't have 20% to put down? Are you stuck paying private mortgage insurance or PMI? Remember, this is the insurance you pay to protect your lender from you defaulting. It doesn't do any good at all for you. But classically, if you put down less than 20%, you have to pay it.

However, there are doctor mortgages or physician mortgages out there, and they're available to some other types of high-income professionals as well. We have a whole list of them at whitecoatinvestor.com you can check out, where you can put down less than 20% and not pay PMI. Maybe that's not a good idea to put down less than 20% because that 20% not only helps you avoid PMI, but it helps you in case you have to sell that house in a year or two, not be underwater on it.

But if it makes sense for you to buy and you have a better use for your money, like paying off student loans or maxing out retirement accounts, it might make a lot of sense for you to get a doctor mortgage loan and use that money you have for a down payment for something else. So, tread carefully, but it's not an unreasonable thing to do. I hope that helps you understand how much house you can afford as well as some of the best practices when it comes to buying your first or even a later house in your life.

This is the Milestones to Millionaire podcast. If you'd like to come on it, you can. You just apply at whitecoatinvestor.com/milestones.

SPONSOR

Dr. Jim Dahle:
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The fun thing about a turnkey property is it's a cool blend of direct ownership. Because you control the big decisions with this property. You get all the tax benefits of the property. You can do a cost segregation study and get bonus and accelerated depreciation, all the things that you can do with direct ownership.

And yet, because it's turnkey, you get rid of like 95% plus of the hassles of direct ownership. You don't have to build it, they do that. You don't have to put the tenant in it, they do that. You don't have to manage the property, they do that. And if you want to sell it, they do that.

You basically hired them to take care of all the hassles. You're not going to get the 03:00 A.M. toilet calls and those sorts of things. Yeah, they say you'll probably spend about an hour a month taking care of that particular investment. That's a pretty low barrier for direct real estate ownership.

So, don't be afraid to check that out, whitecoatinvestor.com/southernimpressionhomes. Very reasonable way to invest.

All right, keep your head up, shoulders back. We'll see you next time on the Milestones to Millionaire podcast.

DISCLAIMER

The White Coat Investor podcast is for your entertainment and information only. It should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.

The match is a contribution made to your 401(k) or similar retirement account, like a 403(b), from your employer, and it is often contingent on you putting some money into the retirement account. The idea is that the employer is trying to encourage you to save for your own retirement by giving you a little bit of extra money if you will do so. However, it becomes very complicated sometimes, and it's hard to understand the language that employers are using for this benefit.

For example, something that might be typical is that the employer will match 50% of the first 6% that you put into your 401(k). Well, what does that mean exactly? Well, 6% of what? 50% of what? Often what they're saying is that they're talking about 6% of your salary. So let's say that if you make $300,000 per year and you put in 6% of that, or a total of $18,000, the employer will give you 50% of what you put in, or $9,000. So if you put in $18,000, the employer puts in $9,000. Now there's a total of $27,000 in the account. $9,000 is the match.

The most common vesting plan, meaning when the money becomes yours for this match, is immediate vesting. But there are other vesting plans. Sometimes you have to stay with the employer for perhaps as long as five years to actually be vested in the employer's contribution to the plan. So you should pay attention to that as well. When you're reading your 401(k) plan document, what is the match? How is it calculated? When does it become your money?

If it's not clear from the 401(k) plan document, which HR is required to give you if you ask for it, just go into HR and start asking these questions. What does that mean? 50% of what? 6% of what? When am I vested in the match? Make sure you understand how the plan works.

This is a really important part of saving for retirement. For lots of docs and other high-income professionals, a big chunk of your retirement savings is often in these employer plans, so you need to understand how they work. It should be a pretty high priority when it comes to saving for retirement. Not only is the money in that 401(k) or other retirement plan protected from taxation as it grows, but it's protected from your creditors too.

If you, for some crazy reason, are one of the very rare docs that gets sued for above policy limits, and that's not reduced on appeal, and you have to declare bankruptcy, you get to keep the money in your 401(k). So that's a great reason why that's one of the first places to put your retirement savings into an employer-provided plan like that.

Keep in mind that you can put in more money than the amount they will match most of the time. For example, in 2026 you're allowed, if you're under 50, to contribute $24,500 into your 401(k) or 403(b) as an employee contribution. Now, the match doesn't count toward that. It's above and beyond that. The total of your contributions plus the employer contributions has a higher limit, something upwards of $70,000.

Keep in mind that those numbers change every year. They tend to be indexed to inflation. So you should go to our numbers page, whitecoatinvestor.com/numbers, where you can see a current listing of all the annual contribution limits and those sorts of numbers, because they do change every year. That makes every piece of content we make where we mention these numbers out of date within one year. So check that for the current year to know the exact amount that you can contribute.

I do this all the time. If I have to look something up, I quickly Google it or pull up that numbers page and just make sure I'm using the right number because it does change so frequently.

Many employer 401(k)s do not allow you to put in as much as the IRS would allow to be put into the 401(k), and that's a result of some nondiscrimination testing that 401(k) and similar plans have to pass. Basically, all the benefits of these retirement accounts cannot go to just the highly compensated employees, like the docs. If it turns out too many of them are going there, the employer has to pay penalties.

Now, all the penalties are are additional contributions into the retirement accounts of the non-highly compensated employees. It's not some terrible thing, but lots of employers don't want to pay those. So they limit how much the highly compensated employees can put into the plans to an amount less than what the IRS would actually allow.

Keep that in mind if you're starting your own 401(k), your own practice, or if you're a sole proprietor and you're the only person working for your company. You can set up solo 401(k)s that allow you to put more money in than lots of employers would allow you to put in. Now you're the source of the match, of course, when you're also the employer, but it is nice to be able to get more money into that tax-protected and asset-protected account.

I hope that helps you understand how employer matches work in your retirement accounts.

The White Coat Investor podcast is for your entertainment and information only and should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.