Passive Income with Peter Kim

Intro:
[00:00:00] This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host Dr. Jim Dahle.

Dr. Dahle:
[00:00:20] This is the Whitecoat investor podcast number 32, an interview with Passive Income M.D. If you are finding our podcasts informative and helpful we would encourage you to sign up for our monthly newsletter! It is totally free and includes useful, actionable information NOT AVAILABLE on the regular blog posts. It's almost like being in a secret club – the kind of club that can boost your knowledge and enhance your wealth at the same time – with no strings attached. Sign up today at whitecoatinvestor.com/newsletter. You can do this and The White Coat Investor can help.

[00:01:09] Now before we get into the podcast today I want to do a few housekeeping items. First if you're registered for the White Coat Investor Conference. Good for you. That means you signed up in the first six days that it was available because it filled that quickly. But if you haven't gotten an email in the last few weeks about the conference you may be having those e-mails go to your junk folder. So please contact us so we can get that information if you haven't gotten that e-mail.

[00:01:34] Also I'm working right now on an online course that's going to be coming up that probably will go live in January but it's going to be pretty awesome. It will give you the opportunity to basically develop a financial plan without having to hire a financial adviser. And so I'm pretty excited about it, putting a ton of work into it. And more information on that coming up.

[00:01:57] Also if you are not registered for the e-mails on the Web site please do so. Right now we're running the White Coat Investor financial bootcamp which is really a 12 step program to help you get your finances in gear for the new year. But that's totally free. All you got to do is sign up for the newsletters and you'll start getting those e-mails.

[00:02:17] Our quote of the day today comes from Bill Gross famous bond manager that used to be at PIMCO. He said “Jack Bogle's early business model of Vanguard promoting index funds was a mystery to me for at least a few of my beginning years at PIMCO. Why would most investors be content with just average performance I wondered? The answer is certainly now obvious right.

[00:02:37] Today we have a special guest on here, Passive Income M.D. He's our newest addition to the white coat Investor Network which is a network of physician and other high income professional focused blogs that are trying to get this information into your hands so you can find the financial success you deserve. So welcome Passive Income M.D.

PIMD:
[00:03:00] Great, thanks for having me. I'm excited to be part of the network and excited to be part of this episode.

Dr. Dahle:
[00:03:04] Sure it's great to have you here. Why don't we start with having you tell us a little bit about your upbringing your background and your practice.

PIMD:
[00:03:12] Sure. I grew up in a family physicians My my father's a doctor. He recently retired. My grandfather on my mom's side. She was a physician as well and had plenty of uncles. And actually some aunts that are physicians as well.

[00:03:25] So it was kind of predestined in a way that I would become one myself and they definitely was that pressure going up in like a physician heavy family. I'm sure some of your listeners can relate. But one thing that stands out when I think about my background is there was plenty of medical talk in the house but we never talked about finances and I really had no interest in it myself.

Dr. Dahle:
[00:03:49] I actually don't find that surprising given all the doctors that I've worked with.

PIMD:
[00:03:54] Oh that's right yeah. I mean I really had no interest. I never learned about it. I mean I don't even know how credit cards worked until I signed up for like five of them in college and started getting the bills. So I never really learned about debt, interest, the stock market. All these things and you know I had to learn about these things the hard way. I guess a lot of physicians do when they accumulate a lot of that debt especially credit card debt and college. And I know I can add to that and carry that over into med school.

[00:04:24] So in addition to my student loans, I got a good amount over 20000 actually closer to 30 thousand dollars in credit card debt at pretty high interest rates, eventually I paid it off and then I vowed I'd never let myself get into that type of debt again. But you know going out from a medical career, I'm an anesthesiologist in a large practice in a large city. I love what I do. Although I'll be honest I don't enjoy working nights and weekends so I've started cutting back on those.

Dr. Dahle:
[00:04:56] I can certainly relate to that. I've already dropped my night shifts and I don't think there's any way I'm ever going that weekend shifts. But I'm gradually moving toward working towards more days and nights so I can certainly relate to that. So given your background that you didn't have all this interest in finance or investing or business and really weren't even that good at managing debt originally what was it that led you to start passive income MD?

PIMD:
[00:05:21] Well at the end of my residency and fellowship, I don't remember exactly how it happened, but you know I stumbled on to a few finance related books and websites like yours. And I just couldn't get enough. I mean I just started absorbing like crazy and like a whole new world was opened to me at that time. And I have the type of personality where once I start down a path I just kind of go all in.

[00:05:47] So I started learning about you know the concepts of what is financial independence, started learning about passive income, and quickly realized this is something I need to focus on. And so when I started practicing I started calling all of my friends about it. All my physician friends in the hospital so just seeing who else is interested in this. Talking about passive income and practicing medicine on your own terms and a lot of us are joking, “hey you know you talk about this so much and passionate about it and you should probably start a blog.” And I never done that before but I sat on the idea for a couple months. I think actually six to eight months and finally decided to sit down and try writing a few posts. I mean I don't think I've written anything since college right.

[00:06:35] But I threw up a couple online and luckily some of these articles and some of these posts got a little bit of early attention and it just took off from there.

Dr. Dahle:
[00:06:44] Very cool. Now you said you felt like you needed to learn about this stuff. What was it that made you feel that need?

PIMD:
[00:06:53] Well I started looking out a lot of my colleagues even of my attendings when I was in residency or fellowship and I don't know, they didn't seem particularly happy.

[00:07:04] I also saw them picking up extra shifts, picking up extra nights and that and talking about you know how tough it is financially to do well in the city that I was living in.

[00:07:16] And I said you know there's got to be a better way. You know instead of working more it has to be something else. And you know that kind of go along with a lot of the things I was reading, I mean I was reading things on your site, reading things in books about you know setting yourself up well financially and ultimately creating some freedom for yourself.

Dr. Dahle:
[00:07:36] Great. Can you tell us more about your sources of passive income?

PIMD:
[00:07:41] I mean my goal has always been to build as many streams of income as possible right. Some are a little more active or some more passive. The goal is that if something dries up, like even medicine, I've got other things to rely on.

[00:07:56] So my main ones are, I mean I do invest in the stock market although almost exclusively tax advantage accounts. I mean I'm not getting any sort of current income from that but I expect to in the future and I go heavy into real estate.

[00:08:11] I mean I own my own rental properties. I have some single and multifamily or apartment buildings. That I own outright and then also co-own with some investors.

[00:08:23] I do some real estate crowdfunding online. I mean I've been doing some really nice returns over the last couple of years from that investment. I also invest in syndications for real estate which means I own shares of apartment buildings but somebody else is running in and operating.

[00:08:39] With my wife, we also started a business. We run one of these direct selling multi-level marketing businesses and we've done that for the last couple of years and see some really nice you know income from that.

[00:08:53] I also invest in some a peer to peer lending and on this blog which has actually been a nice surprise. It actually started bringing me some significant income this past year and I also did some angel investing which means I'm like an early investor in some companies. You mean you hope one of these companies blows up and becomes like an Uber, Instagram whatever. But they don't produce anything yet but I'm hoping they will somewhere down the line although I realize that these are pretty much all moonshots shots and I could lose it all. But you know those are my main ones.

Dr. Dahle:
[00:09:23] I'm not sure the angel investing ones count as passive income yet. Hopefully they will.

PIMD:
[00:09:29] Yeah. They could. Who knows?

Dr. Dahle:
[00:09:31] Now you recently became what you called free of your clinical income. Can you explain what that means and how you feel now that you don't have to practice?

PIMD:
[00:09:39] Sure, I think that's also called, in another way, financial independence or financial freedom.

[00:09:45] I mean I actually like, prefer to use the words financial freedom that just sounds really special to me. I recently reached this milestone and wrote about in my blog and what it simply means to me is that the money that comes in from these other sources of income there are enough to cover all of our family expenses. So in essence as is I can stop working at as a physician.

[00:10:06] My wife who's also a physician she could stop working and we do fine financially which is great and it's totally liberating. I mean it's a total mindset shift from where we first started and how I feel I was kind of almost raised as well.

[00:10:26] It's you know again I've seen a lot of my colleagues just grind away, they pick up those extra shifts again, if you give them some time with their family just bring in a little bit more money. Right. Some of them are are living honestly paycheck to paycheck. And guess I didn't want that to be me.

[00:10:43] So I'm fortunate that I've started down this path early on and my initial goal was to hit it in about 15 years out of practice or out of training. And luckily it's now six years out and I reach this point so I feel very fortunate to be here. And it's funny I actually enjoy being a physician more as a result. I found that when you relieve that financial pressure from being a physician even a little bit you know all of it. Yeah in some ways you can practice more purely for love. It's been great.

Dr. Dahle:
[00:11:15] You know I think it's great that you enjoy medicine more once you became independent of it. I feel the same way I find a much more interesting. I almost feel like I'm volunteering when I go into the hospital to work now. And really it's changed my mindset and how I practice. What's interesting is I talked to other docs like physician on fire, our partner in the White co-investor network. He found just the opposite. When he no longer had to work it felt like more of a drag when the pager started going off and he felt like he had to work more. So I think it's pretty interesting how that affects different people differently.

PIMD:
[00:11:51] Yeah I feel fortunate that you know it's you know originally I felt it was just a job and now it's like you said it's become optional. And honestly I do see it as a mission and the passion of mine.

Dr. Dahle:
[00:12:05] That's great. Now that article where you talked about how your free of your clinical income, that was picked up by Doximity and shared pretty widely. I noticed a comment on it. On Doximity that was left by a psychiatrist who was actually pretty critical about it. The essence of the comment was that doctors shouldn't focus on money. You know he didn't say it anywhere nearly that nicely. What do you reply to criticisms like that that they're saying by you focusing on passive income and this sort of stuff that maybe you're not as good of a doctor.

PIMD:
[00:12:37] Well I think it's obvious that he doesn't hasn't read any of the other articles that I've written. Because if you go to my side I do talk about money. You know I have to admit money is important in a way. It's a tool. Right. And it kind of you do need a certain amount to live the life that you want.

[00:12:53] So I believe it's important to talk about it and let's be honest you know financial pressures are a big contributor to physician burnout.

[00:13:02] Right. But at the end of the day the things I talk about it's not really about money itself it's really about things that are a lot more valuable than that.

[00:13:12] I mean I talk about time, choices, freedom, following passions, family and these are things I'm focused on more of my blog so when somebody you know criticizes either me or other financial bloggers that it's just all about the money.

[00:13:29] You know I'd encourage them to dig a little bit deeper and see what we're actually talking about here. I mean don't you feel that way?

Dr. Dahle:
[00:13:36] I certainly do. Now you talk about being free of your clinical income. Are you free of not working at all? Could you just sit back and not do any work at all at this point.

PIMD:
[00:13:47] Well on paper, yes. I mean there's other things that I want to save up for in the future. I mean I guess I want to save up, for educational cost for my kids and these kind of things. You know we've done a good amount of that as well. But when it comes down to it honestly if I went a month without working two to three months we'd still be able to cover our expenses.

Dr. Dahle:
[00:14:06] Yeah well that's great. I mean at this point we are certainly free of our clinical income but not quite what I would call fully financially independent at least not without selling the Web site just because we spend more than our savings could could generate even even with our sources of passive income. I can't quite consider my Web site and the White Coat investor empire and this podcast as completely passive. And so I don't really count that as as passive income at this point. Certainly keeping us from being completely free of having to work at all.

[00:14:42] If you're just tuning in we're talking a passive income M.D, the newest member of the white coat Investor Network. You can find his Web site at passive income M.D dot com and I encourage you to check that out and learn more about passive income and what it can do for you and your life and your practice. Another question for you. Why would a doctor who earns at a very high hourly rate need passive income at all prior to retirement? I mean he's got his clinical income or her clinical income coming in right?

PIMD:
[00:15:11] I think that's a great question. I mean one thing that's a recurring theme on my site is that there's a difference between being rich and wealthy and I think from an income an hourly rate standpoint I mean doctors are pretty rich they do pretty well. I mean they make good money but I think we all know that that doesn't really mean that they lived a life that they want, that they could practice how they want, that they have the time to spend with their loved ones as much and really not worry about money. And I think that's the biggest difference. And we all know that things are changing in medicine and they are constantly changing. And let's be honest it's almost never better for the physician in my opinion. So whether it's like political regulatory changes I mean doctors really end up feeling squeezed constantly squeezed for time money or whatever. And again I mention this before I think that's a big contributor to physician burnout. So one of the best ways to combat that burnout is really by relieving yourself of that financial pressure from medicine itself and that really comes from having other sources and multiple sources of income.

[00:16:17] And the more passive the better. Right. So if you can break that cycle of time in equals money out, time in equals money out, you can break that. My opinion that leads to freedom, both financially in terms of time. And so I think physicians they really need to understand that concept right. I mean they might feel like they have job security. But we definitely don't have income security.

[00:16:44] I mean I can tell you many examples of friends who you know been able to keep their jobs what their incomes have been cut 20-30 percent in the last year because their group got bought out by somebody else. Right. So I think having those side hustles I think having those other sources of income,passive income. I think it's extremely important for physicians.

Dr. Dahle:
[00:17:05] You know I like how you use the term squeezed. The first chapter of my book I actually titled The Big Squeeze. And I was referring with that to the increasing cost of medical education and the decreasing reimbursement along with the increase in government compliance issues. And there's no doubt the docs these days certainly feel more and more and more squeezed. I think the last survey I saw burned out actually was over half of docs that experienced some significant symptoms of burnout which is really a shame in what I consider the greatest profession.

PIMD:
[00:17:39] Yeah that sounds crazy to me. And I would think that's crazy but in talking to a lot of my colleagues and you know residents and attendings in the hospital that just seems to be the case.

Dr. Dahle:
[00:17:50] Yeah I know a lot of people do think it's crazy especially if they're outside of medicine. I had an interview with an NPR reporter the other day and she thought it was crazy that I talked about how doctors felt very very poor when they came out of residency with these huge student loan burdens. She thought well with an income of 150 or 200 thousand, how big of a deal is it if you owe 400 or 500000 student loans? And I really had to walk her through the numbers before she realized that that really was almost incapacitating for a doctor who started her career with.

[00:18:23] Now sometimes people get really interested in this sort of stuff early on. I get a lot of e-mails from medical students and residents and early docs that are pretty interested in finance. What would you recommend for a resident with interest in developing passive income?

PIMD:
[00:18:39] I actually get a good amount of feedback from residents who want to do this very thing. Here's the thing, I think to really develop passive income, You need a couple of things. I mean you either need time, you need to be able to you know put in a good amount of effort or you need money.

[00:18:57] So unfortunately residents are pretty short on time and money part. So they're really going to have to put in a good amount of effort. And the problem is without a lot of time they just got to be really efficient with it. So the best way for them to kind of develop some sort of passive income is by, I mean they have to start some sort of business. That's tough to do during residency. There are some that have been quite successful, some have use social media to build these pretty nice businesses, and some have written books and these kinds of things, but I believe honestly the best thing most residents can do is just focus on getting through training but while they do that you know start educating yourself right by reading, learning and then ultimately just create really good financial habits like not getting debt. Like what I did and save what they can. That way when they do become attendings and you know you preach on this, and there's additional money and it might be some additional time they really know how to use that money to really throw into these different income streams for sure.

Dr. Dahle:
[00:20:01] I think it's critical for a resident to hit the ground running and actually have some sort of a plan when they come out of residency for those first 12 paychecks they get coming out of residency. That really makes a big difference. But I agree with you. I mean residency is the time to focus on learning medicine and that for most doctors is going to be the major stream, the major stream of income they have in their entire career. And so learning how to do that one well I think is pretty critical and I would I would almost caution them against going out and starting businesses and trying to get a bunch of sources of passive income as a resident. Most of them have a great investment just paying down their student loans if they are not going for public service loan forgiveness or something. What would you say the best passive income sources are for a doctor who doesn't want a second job and doesn't really have any interest in being an entrepreneur?

PIMD:
[00:20:50] Man I see this question as well all the time on different forums I'm part of it you know from emails from readers and I really appreciate those. It might be worded a little differently. I mean I might see stuff like, I want passive income but I don't have the time or the money to invest or how can I make the most amount of passive income with the least amount of effort, I got that as well.

[00:21:13] I really truly believe that passive income is more like an end point. I mean it doesn't always start that way, you know, most great sources right of passive income requires some sort of upfront investment. I've mentioned it before that either it's like time or energy or effort or money and you gotta have at least one of those three things so you know if you don't really have the time or effort this time you have the money that hopefully a lot of physicians have they've been saving well you know they can get a decent return without too much time and things that don't require active management right.

[00:21:44] So in that scenario I mean I guess I'm biased towards real estate so I might suggest they put their money in places like real estate crowdfunding or in syndications where you know I've been fortunate enough to receive consistently consistently receive some double digit returns over the last couple of years. Now those have been pretty passive in the sense that someone else manages it and it's nice to see these monthly or quarterly dividends that just show up or interest payments show up in my bank account. But honestly it takes a little time to figure out what you're doing. You can't just throw money at something you know at least do your homework. Why do you like real estate in particular. You know there is leverage there. Maybe someone else is using the leverage. But there's also a vast amount of inefficiency that exists of real estate.

[00:22:36] So really savvy investors are able to capitalize on that and find significant returns. But usually that is somebody else and you can invest with that. So yeah you know I always caution people it's not going to be completely passive you know, at the very least you still have to do your reading, educate yourself. So you know where your money is going.

Dr. Dahle:
[00:22:58] One of the cool things about real estate especially with regards to single family homes is that there's a certain part of the market that is not composed of investors like with the stock market basically everybody that owns a stock is an investor. But in the real estate market at least the single family home market that's not the case, there's a lot of people that have just bought homes they want to live in. You know more as a consumption item than as an investment. And I think that's where a lot of the inefficiency in real estate comes from at least among single family homes.

[00:23:28] Now you mentioned your wife was involved in a multilevel marketing business. Can you talk a little bit about the strengths and weaknesses of that and some of the opportunities that are available there.

PIMD:
[00:23:40] Sure. I think for us we wanted to find something like a business for her in particular that we could work on it together. But that she could do from home right and hopefully without a low of overhead and unfortunately too many businesses like that.

[00:24:00] And so we looked into a bunch of different things and we settled on one particular company that didn't require any inventory and very little overhead. It's something that she could talk about and something that she could use. And so that's what we did when we started this company a few years ago.

[00:24:19] She enjoys it. I mean she really enjoys the process of you know talking to people about things so she's passionate about and you know over time I mean it's slowly grown at this point, it provides a really significant amount of income for us. Yeah and what is has allowed her to do in particular is cut back on her medicine a little bit to pursue this. And so she's found a really nice balance between you know her main medical career and her side business.

Dr. Dahle:
[00:24:50] Now tell us a little bit about that balance both for you and your practice and you have children as well if I recall.

PIMD:
[00:24:58] Yeah I do have two children, they are pretty young.

Dr. Dahle:
[00:24:59] So tell us about how you find that balance and how your wife finds that balance and how together you're able to balance all these multiple businesses and two practices and raising a bunch of kids.

PIMD:
[00:25:10] Yeah I think that's it's always a work in progress. Yeah I think we're learning as we go. But one thing we knew we didn't want is to totally grind it out every day in terms of medicine and being stuck in the hospital not being able to spend time together as a couple and work on our relationship but also spend time with our children. We wanted to be there for really important times in their lives. I mean they're young so yes I mean there's some school recitals and these kind of things.

[00:25:38] But we also want to set ourselves up in the future for other bigger events that we just don't want to miss these things. You know I've come to a realization that life is short. And so I don't want to miss. You know I don't want to spend a lot of it just working and being unhappy. So what we started to do is instead of thinking that we are just going to retire outright we decided to kind of slowly cut back especially on medicine, to find like a happy place. And I think my wife has found that. She were a couple of days a week. And I think she's very happy where she's at, where she feels that you know it's enough to keep her skills sharp and she gets some really great interaction outside the house and she just enjoys what she does and she's able to see her patients over time and keep a consistent relationship with them. And for me I'm still trying to get there. I don't think I'm fully there yet but I've been slowly cutting back giving up some shifts, again getting rid of some of those nights and weekends to a place where I feel like OK this is the perfect balance between again keeping my skills sharp enjoying it but also being free to do the things I don't want to do.

Dr. Dahle:
[00:26:50] You know it's funny when doctors talk about cutting back, the first thing they cut back to is a full time job usually you know because most docs are working far more than you know the classic 40 hour workweek. And when I talk to a lot of doctors and ask them well what do you want to come back to? And the life they describe is literally a full time job. They think that would be awesome. And I agree you know if we can get doctors down to working just full time that would go a long way.

PIMD:
[00:27:13] No it's true. I've said that I was going to cut back 20 percent. When I cut back to 20 percent I was talking to my friend he said how many hours is that? I calculated it was like that's about 36 hours.

Dr. Dahle:
[00:27:25] So this is basically a full time job anywhere else. Well if someone wants to get a flavor for your blog what three articles should she read first?

PIMD:
[00:27:36] Sure I picked these three articles. The first one is why I'm beginning my retirement today in my 30s. That's a blog post I wrote several months back not even thinking that I'd be where I am today which was great. Explains that concept of kind of gradually cutting back.

[00:27:58] Number one is five reasons why doctors should have a side hustle. Again I believe that's extremely important, not to leave your current job. But who knows what this thing will become in the future.

[00:28:08] The last one is a post on financial independence. I am financially free from medicine.

Dr. Dahle:
[00:28:13] Yeah that's quite it. That's quite a milestone. So in blogging you know I mean you've got this focus on passive income. Did blogging turn out to be as passive as you thought it would be?

PIMD:
[00:28:23] Definitely not. It's definitely more been more of an active venture. However I've been lucky that I've been able to monetize a site pretty quickly and there are times when I wake up and I get some notifications and I've made some money in my sleep. That's nice. But to get to this point it's taking a lot of work. I mean there were months and months and I still do this every so often I wake up an hour or two hours before anyone else wakes up in my house just so it's quiet. So I can get some things written for the blog. And it's always on my mind, I'm thinking about it quite a bit. I've even you know we spent some time at the same conferences but we got to go to conferences to learn how to create a better site for the readers, create better content, and run it better as a business. So really it's not been passive per se up to this point but I feel it has that potential to become more and more so.

Dr. Dahle:
[00:29:20] Yeah it's interesting you mentioned that because I feel the same way. I can't believe the percentage of my time that I spend thinking about this business literally because you know I'm basically thinking about it all the time and I think that's common to a lot of entrepreneurs is you really putting in quite a bit of time and it's not nearly as passive as anyone thought it would be in the beginning. Rewarding yes passive maybe not so much.

[00:29:45] What else would you like readers to know about you and your Web site?

PIMD:
[00:29:50] Well I think we've already mentioned it before but I can't emphasize enough. The site is not all about money about making money for the pure sake of being rich. Again money is a tool and you've got to think about it like that. You know hopefully it buys you time and gives you the opportunity to live a life you want.

[00:30:17] And so that's why I talk about it talk about it quite a bit. But again please know that at the end of the day you know the site is really about those other things that are more way more important and that's about calling your passions, about having time, and freedom of time, and most importantly it's about being with family.

Dr. Dahle:
[00:30:40] That's great. We sure appreciate you being on here today.

[00:30:43] If you are finding our podcasts informative and helpful we would encourage you to sign up for our monthly newsletter! It is totally free and includes useful, actionable information NOT AVAILABLE on the regular blog posts. It's almost like being in a secret club – the kind of club that can boost your knowledge and enhance your wealth at the same time – with no strings attached. Sign up today at whitecoatinvestor.com/newsletter. You can do this and The White Coat Investor can help.

[00:31:27] Be sure to give us a five star rating for the podcast so that we can get this message to even more people. You can check out the show notes on the Web site as well and follow us on Twitter and Facebook and especially be sure to go to passive income M.D dot com and check out the great resource there.

[00:31:41] Head up shoulders back. You can do this. Tens of thousands of doctors and other high income professionals just like you are doing it everyday. See you next time.