Podcast #139 Show Notes: Physician Millionaires – How'd They Do It?
It is possible for you to retire a millionaire. In this episode, I interview 7 of your colleagues who have become millionaires before retirement. They share how they did it and what advice they have for you. They are dentists and physicians in varying specialties. People just like you. In 5-30 years they have built a net worth of 1 to 5.5 million dollars on incomes ranging from 80K-1 million annually. Some had six-figure student loan debt upon leaving training. None received a big inheritance. Some are business owners. Most invest in real estate. All of them had a plan. You need a plan in order to become a millionaire. Listen to this episode to learn how to create your plan, how these doctors became millionaires, and how you can too.
This podcast was sponsored by Pattern Financial Consultancy. Pattern is the company behind Matt Wiggins. Matt Wiggins is an experienced specialist in disability and life insurance for physicians. I've sat down with Matt face to face and talked about doctors and insurance. He knows what he's talking about and he can get you a high quality disability insurance policy that you can trust to deliver should the worst happen. Doctors get disabled all the time. Don't think it can't happen to you. If you don't have a disability insurance policy now or just need a second opinion on whether or not your current one is still right for you, contact Matt today.
Quote of the Day
Our quote of the day today comes from J. L. Collins who said
“Yes. It is possible for every middle class wage earner to retire a millionaire, though it's never going to happen. And that's not because the numbers don't work.”
I like that quote, not only because it's entirely possible on a middle-class income, but it's certainly possible on a physician or a dentist income. Yet 25% of doctors aren't millionaires by their 60s. I think that is a shame.
Physician Millionaires – How'd They Do It?
The people we interview in this episode are real-world doctor millionaires who tell you about their financial journeys to the point where they're at now. They had some sort of a financial plan, something they followed to become successful. That is something you need to have as well. There are basically three ways to do it.
- Read good financial books and educate yourself. Start with my list of the best financial books for doctors.
- Take a course to educate yourself. My Fire Your Financial Advisor course is a step by step guide to creating your own financial plan.
- Hire a financial advisor. Make sure that you are getting good advice at a fair price by selecting that advisor off my recommended list.
Advice From Physician Millionaires
Save/Invest Regularly and Automatically
The doctors we interview in this episode each had their own unique story. But even with their own path to millionaire status, there were themes that ran throughout each interview. No surprise but all of them believe that savings habits are the key to success. Saving regularly is the key. But they didn't have extreme savings rates, reporting 10-40%. Most of them give the same advice I do, Live Like A Resident! You don't have to do it forever but the longer you do it the faster your path to millionaire status. One physician is the spender in his marriage and his wife is the frugal one. To combat this spending tendency he treated the funding of his retirement accounts as a bill. The money was taken out and invested and essentially he never saw it, so he never spent it.
Negotiate Your Salary
Some of the people we interviewed still had debt on their mortgage or an investment property or one with a home equity loan. I often find myself on the more anti-debt side of the spectrum. I get some pushback from it in blog comments, emails, and on Twitter. One impressive doctor we interviewed is more like me though. He is in an impressive financial position. In a relatively low paying specialty, five years out of residency, he has no student loans or a mortgage anymore and he is a millionaire. His advice?
“The thing that is really important that you speak a lot about is the importance of increasing your own pay within your specialty. When I took my first job, I was all set to take a different job working for the hospital system that I did a residency with. I was encouraged by a mentor to just go and interview somewhere else and see what the other hospital systems in town or what other people had to offer. That simple decision to go a little bit out of my comfort zone was the difference of $140,000 in guaranteed salary and bonuses and loan repayment over the first few years of my career.”
Increasing your income will certainly speed your way to millionaire status. Make sure you are getting paid what you are worth.
Invest in Leveraging Your Human Capital
You are your most important asset. One of the millionaire doctors advised never to let your talents disappear and continue to learn.
“One of my keys to financial success was being able to start and eventually scale a dental specialty practice. It took a lot of hard work and the ability to learn from my mistakes. I would suggest that people try to find something they're really passionate about, that set a fire under them. I found by doing that that you can become wealthy in more than just a monetary sense.”
No surprise this optimistic doctor also said,
“The last thing I would really suggest is just enjoying the whole process. I realize that this is the podcast about personal finance and investing, but I believe what truly makes somebody happy is the relationships that they develop and their experiences that they develop between their friends and family.”
On that note, another physician millionaire worked his butt off for several years to build a dental practice and then sold it to increase his quality of life. He shares advice on selling a dental practice in this episode. Take care of your finances early and you have the option to cut back and enjoy life a little bit more.
All of our guests talked about living below your means. Our last guest talked about how you can't buy everything all at once.
“My dad told me when I took off after residency, he said, “You can either be rich or look rich, but you can't do both at the same time. You got to pick one. If you pick the right one, you might be able to do both down the road.”
He listened to his father's advice and he could do both now if he wanted.
Regular listeners and readers know how I feel about charitable giving. For the last several years we have given away more money than we have spent. One guest said,
“If you're generous, I think it makes you more disciplined in your spending. We try and give over 10% to our church and we are generous with our kids' schooling and local charities. My first wife, we set up an endowed scholarship (in her memory) that went to the college that generates a scholarship a year for a cancer survivor. So I think that's helped us over the years be more disciplined in how we spend our money.”
Now you have heard from seven different doctors who have been particularly financially successful. Each of them followed their own path. There are all kinds of different specialties, some very well paid, some really not that well paid. You'll notice that there's no real trend there in what their income was. But there was a trend in how they treated money. Every one of them said they lived below their means, sometimes far below their means, at least for a period of time. This is basically the story for all high income earners who become wealthy. They may not have had a perfect live like a resident kind of period, but they usually had something similar to it.
I hope you've seen in these examples a pathway that you can follow. Even if you're not starting at the same spot, even if you're starting with minus $600,000 net worth from a big student loan burden, living in a high cost of living area, or are in a relatively low paid specialty, I hope you have seen a pathway to becoming wealthy in your own way. A way that at least enables you to have money stop being a worry in your life and start being a tool that you can use to improve your life.
If you have a colleague who could benefit from this inspiring episode, will you share it with them?
Dr. Jim Dahle: This is White Coat Investor Podcast number 139, the physician millionaire episode. This is an episode we've been looking forward to for a long time and that we've been working hard on. So it's going to be great today. You're going to love it. This podcast is sponsored by Pattern Financial Consultancy, which you can reach at whitecoatinvestor.com/pattern. Pattern is the company behind Matt Wiggins. Matt Wiggins is an experienced specialist in disability and life insurance for physicians. I've sat down with Matt face to face and talked about doctors and insurance. He knows what he's talking about and he can get you a high quality disability insurance policy that you can trust to deliver should the worst happen. Doctors get disabled all the time. Don't think it can't happen to you. If you don't have a disability insurance policy now or just need a second opinion on whether or not your current one is still right for you, contact Matt today, whitecoatinvestor.com/pattern.
Dr. Jim Dahle: Our quote of the day today comes from J. L. Collins who said “Yes. It is possible for every middle class wage earner to retire a millionaire, though it's never going to happen. And that's not because the numbers don't work.” I like that quote not only because it's entirely possible on middle class income, but it's certainly possible on a physician income, or a dentist income. Yet 25% of doctors aren't millionaires by their 60s. I think that's a shame. So today we're going to be talking to a bunch of millionaires and we're going to talk about what they've done and what advice they have for you. But these are real world doctor millionaires who are going to tell you about their financial journeys to the point where they're at. It should be a really pretty awesome episode. But you'll notice that a lot of them have some sort of financial plan. They've got something that they followed to try to become successful. That's something you ought to have as well. There's basically three ways to do it.
Dr. Jim Dahle: The first is the cheapest, but it is also probably the most time consuming, requires the most amount of work. That is to write your own financial plan by reading a bunch of financial books, becoming financially literate, interacting on internet forums, reading blogs, etc. It can be free. It's very cheap depending on what you pay for the books, but does require a fair amount of work. I have a resource that will help you with it. If you go to the whitecoatinvestor.com at the top under the book section, you'll find not only links to my books, but links to great books by others. Those are great resources for you to learn how to write up your own financial plan.
Dr. Jim Dahle: Next on the scale is something that requires less time but cost more money, and that's our online courses. If you take our online courses, yes, it's going to cost you a few hundred dollars, which is obviously more than just borrowing books from the library. But I've actually taken all that and distilled it down to its most essential elements. If you watch these seven hours of videos, and you take the quizzes and the tests and do the exercises throughout the course, you'll come out of the course with a written financial plan that not only you wrote yourself, but that you now understand and you can modify and you can follow is needed to financial success. You can find that again and whitecoatinvestor.com under the courses tab. Now, other people might be willing to pay a little bit more money in order to get a little bit more help. If that is the case for you, you can get a good financial advisor.
Dr. Jim Dahle: We have a recommended list of financial advisors. They will teach you and help you draft up a financial plan that you can follow to invest in success. Just because you hire them to help you draft up the plan doesn't mean you have to hire them to implement it or to maintain it. They can teach you how to do that as well and then you can go on and be a do-it-yourself investor if you like, or you can continue to use their services as probably the vast majority of physicians do. That's fine as well. But whichever of those ways that you do this, make sure you get yourself a written financial plan.
Dr. Jim Dahle: All right. Let's get into the episode. We have six or seven guests on today. This is going to be awesome because we're just going to ask them about their net worth, and their income, and what they did to become so financially successful as doctors. So let's get into our first guest here. Our first guest today is James. James, welcome to the White Coat Investor Podcast.
James: Thank you for having me. It's a privilege to talk with you.
Dr. Jim Dahle: What is your specialty and how far are you out of training.
James: My specialty is emergency medicine, and I am 30 years out of training.
Dr. Jim Dahle: What's your approximate net worth?
James: Around 4 million.
Dr. Jim Dahle: How do you divide that up? How much is house? How much is real estate? How much is mutual funds, etc.?
James: I'd say it's 3.5 basically retirement accounts and half a million in real estate, which is just house.
Dr. Jim Dahle: What's been your range of income throughout your career? Obviously, over a 30 year career, I'm expecting a pretty good range. But what has your range of income been from your first year out of training until now?
James: First year out of training, maybe 80,000 in the military and now around a half a million.
Dr. Jim Dahle: How long did it take you to become a millionaire?
James: Probably 20 years.
Dr. Jim Dahle: What are your secrets to success? How did you become so wealthy? I mean, 4 million is no small chunk of change. That's very impressive. Even for a physician with a pretty good income, that's an impressive sum of wealth that you've accumulated over the course of your career. How did you do it?
James: Well, I know that I like to spend money. I just learned early on that physicians like to overspend. So just knowing my weakness of liking to spend money, I knew that I had to protect myself from myself. So I just maxed out my retirement accounts as soon as I could and that was probably when I started practicing. I could have done it a few years earlier but when I started practicing, I just started maxing out my retirement accounts because I knew I would spend the money if I didn't do that.
Dr. Jim Dahle: So you basically just paid yourself first and treated your retirement account contributions like any other bill?
Dr. Jim Dahle: What was your net worth when you came out of training? Do you remember how much you owed or how negative you were if you were negative at all? Maybe you weren't going into the military.
James: I wasn't negative because I went to a cheap college and then did military medical school and military training.
Dr. Jim Dahle: Did you get any help? Did your parents pay for your medical school? Or is any part of this 4 million due to some significant inheritance or anything?
James: No. None of it's inheritance. I decided to do the military route so that I wouldn't accrue any debt. So none of it was really paid. It just was zero sum if that makes sense.
Dr. Jim Dahle: Yeah. So time debt instead of money debt?
Dr. Jim Dahle: How much debt do you have currently?
James: Oh, probably $30,000 or $40,000 in a home equity loan that I just used to draw cash off if I needed here in there.
Dr. Jim Dahle: What advice do you have for those that are a decade or two or three decades behind you? What can you tell them about how to become like you in 30 years?
James: Well, be better than I am. I should probably be twice as good as I am right now. Listen to this podcast and just know that you can live more frugally and not have to spend the money just because it's in the account. But definitely, pay yourself first and your retirement accounts and in your long-term saving plans. That way, you don't have to think about it. I never really thought about my money. I just maxed it out and never really thought about it.
Dr. Jim Dahle: What was your savings rate over the course of this 30 years? Do you think you were saving 5%, 10%, 20% of your income? What do you think you were actually putting away on average?
James: I would say 10 to 20. Definitely no more than that.
Dr. Jim Dahle: Yeah. What did you invest in? I mean, I'm assuming 30 years ago, you didn't start out investing in index funds because almost nobody was back then.
James: No. I did just mutual funds through retirement accounts. I did some insurance products and turned that into an annuity. Now, it's just mainly mutual funds. So mutual funds from the get go, transitioning towards index funds as I learned more about them.
Dr. Jim Dahle: What do you think was your biggest mistake over that time period?
James: That's hard to say because for example, 10 years into training when I went into private practice, I started something called a 412(i) which was an insurance product that allowed me to save $60,000 in retirement a year plus a 401(k) which at the time was about 11,000 or 12,000. So I was able to put $70,000 away a year instead of just around $40,000 is with a SEP IRA or 401k, I believe, at that time, as an independent contractor would have. However, the cost of that was up front the first year, I believe, that I probably paid about $30,000 for that product. So it's very complicated. I think that was a mistake but where it's put me now is in a good place and so I have the money.
Dr. Jim Dahle: Yeah. What do you think was the smartest thing that you did over the course of that 30 years?
James: Again, that's just putting it away where I can't touch it, can't see it. Don't worry about it. When the market dropped in, I believe, 2001 and then 2008, I never really worried about it. I just kept putting it in and never looked at it and never thought anything of it.
Dr. Jim Dahle: Did you ever feel deprived? You were in some sort of a hardship to save that much money?
James: No. Absolutely not. Especially if you don't see it or feel it.
Dr. Jim Dahle: Did you use a financial advisor for most of your career or was most of this do-it-yourself investing?
James: Most of it was do-it-myself. I have a wealth manager that I picked up 10 years in that put me into a mutual fund that I still have. He put me into a small annuity as a asset protection device that I still have and still has about a third of my money that they manage actively.
Dr. Jim Dahle: So a little bit of each, huh?
James: Correct. Then I did my own as an independent contractor for 10 years, and now as an employee for 10 years, I did SEP IRA and then the 412(i) and now 401k and 457(b).
Dr. Jim Dahle: Are you married? Do you have any children?
James: Married with two children. They're 25, 26 years old.
Dr. Jim Dahle: How do you think they contributed to or detracted from your building of wealth along the way?
James: Oh, they absolutely contributed to it. My wife is a frugal person where I'm not. So we're a decent match there. My sons were both very intelligent and athletes. They had scholarships. I did have a friend who mentioned a college savings account. Texas used to have a very nice thing called The Texas Guaranteed Tuition Plan that I started paying into about seven years before they went to college. So that helped offset college cost a lot. Also, we would sit down about once a year and talk about money. So that just kind of helped me stay on path too by talking to them about it.
Dr. Jim Dahle: What do you drive?
James: I drive a Yukon Denali, a very large vehicle. We ride bikes, race bikes, travel extensively. We have a nice big car that we travel around the US.
Dr. Jim Dahle: Do you remember what you drove the first few years out of residency?
James: Yeah. I drove an old VW Rabbit and a new VW Jetta.
Dr. Jim Dahle: Very nice. Well, we're running out of time. We need to get on to our next person on this podcast. But I appreciate you coming on and sharing your story, James. Congratulations on all your success and for dedicating your life to the practice of medicine.
James: Well, thanks for doing what you do. It's amazingly important to people to come after us for sure.
Dr. Jim Dahle: Thank you very much. Our next guest on the White Coat Investor Podcast is Suresh who is coming to us and going to share a bit of his journey and some of the success that he's had. Welcome to the White Coat Investor Podcast.
Suresh: Thank you very much, Jim. I'm very happy and honored to be here.
Dr. Jim Dahle: Now, what is your specialty and how far are you out of training?
Suresh: I'm a hospitalist and medical director for health plan services in a hospital in Midwest. I'm almost around 10 years out of residency.
Dr. Jim Dahle: Okay. What is your approximate net worth?
Suresh: It is around over two and a half million dollars.
Dr. Jim Dahle: Okay. 10 years out of training, over two and a half million dollars. Congratulations it is very impressive.
Suresh: Thank you, Jim. Thank you.
Dr. Jim Dahle: How do you divide that up? How much of it is house? How much of it is real estate? How much is stocks? How much is in retirement accounts, etc.?
Suresh: I have retirement funds and I invest in Vanguard after taxes. I have real estate. I have my house. I have emergency fund and have some real estate back home in India. My retirement funds are mostly 401(a), 403(b), 457, 529 and Roth IRA and whatever… I have an equal amount of money I have in after-tax as well. I used to invest in real estate here, local Fort Wayne. I do something called tax sale. I don't know if many people know it. You go to the city and if you don't pay your taxes in two years, the city has a deed and they can sell your house even you don't know it. So we go there and bid and buy houses cheap and rent it. That's what I did for five to seven years.
Dr. Jim Dahle: So what's the split between your retirement accounts and mutual funds and your real estate at this point?
Suresh: So I have 30% in retirement funds, and 30% in after-tax investment. I have 5% in 529 for my kids, and 15% is my house. I have 15% invested in other real estates.
Dr. Jim Dahle: Okay. What's been your range of income throughout your career?
Suresh: This is my first job and I've been here almost 10 years. When I started in 2010, it was $185,000. Right now, I earn more than $400,000.
Dr. Jim Dahle: So between 185 and 400 plus over the course of that 10 years. Is that your whole household income? Are you married with children, single?
Suresh: No, I'm married and to a beautiful lady. I have two wonderful kids. My wife right now, she is going to school and completing her MBA in next summer. So right now, I'm the own but she manages my all real estate. She's the manager and I don't have to do anything. File the legal stuff and do the taxes and all those stuff.
Dr. Jim Dahle: Okay. So how long did it take for you guys to become millionaires? How long did it take to become a millionaire?
Suresh: Jim, I really didn't know. I started MBA at Kelley School of Business doing business of medicine where 50 doctors come around from United States, learn about healthcare. We're learning in accounting and finance. One project was to do time value of money and to see your net worth. When I did that at that time, I was surprised I was a millionaire. I even didn't know that. Now, when I heard your podcast, you wanted to know who are the millionaires. I said, “Oh my goodness, I can talk with Jim and share that even I did not know that I was a millionaire. Now I can talk about it.” I hear your podcast, almost all podcast I have heard. If you do the right thing, it is a very easy thing to do. Doctors are very financially illiterate. At my local hospital, I give run-downs on financial freedom for physicians. People come and talk to me and ask me. If I don't know, I google up or talk to someone else and help them out.
Dr. Jim Dahle: I like that story because it reminds me of the physician on fire who didn't quite realize what financial independence was until he once ran the numbers and realized that he already was financially independent without even trying. I'll bet that happens to a lot of people that are kind of natural savers. So tell me about your secrets to success. What did you do? How did you become so wealthy so quickly? Because this isn't the norm for physicians, right? I mean, a quarter of physicians in their 60s still aren't millionaires. So you're pretty unusual to be able to pull that off just 10 years out of residency.
Suresh: That's a very good question, Jim. As you said, great saving habits are key to financial success. Warren Buffett says that do not save what is left after spending. Instead, spend what is left after saving. Saving regularly is the key to success. You do say that 20% of your gross income. But for me, I was calculating, and I was saving 20% to 40% every year. That's a simple thing. We are high earners. How much can you spend? I know you don't want Tesla, but you can drive Tesla and you'll still be millennial.
Dr. Jim Dahle: I actually really liked the Tesla I drove a couple of weeks ago. It was a lot of fun. It's got a pretty good acceleration.
Suresh: Did you like it?
Dr. Jim Dahle: Yeah. It's my buddy's Tesla. I got him to let me drive it one afternoon after we went climbing. I certainly understand the draw. It's a very fun vehicle to drive.
Suresh: Yeah. I think when you have your ducks in a row, I think you can knock it off a little bit. I think having fun is a good thing to be in life. You're not going to be there forever. So have your ducks in row, whatever is left, spend whatever you want to.
Dr. Jim Dahle: So it sounds like you save 20% to 40% of your income, which is pretty much your secret of success, it sounds like. You worked hard. You made a lot of money. You saved a whole bunch of it. It sounds like you invested in some sort of reasonable manner. Here you are just 10 years out of training worth more than $2 million. That's pretty awesome.
Suresh: Yes, thank you.
Dr. Jim Dahle: What was your net worth when you came out of training? Do you recall?
Suresh: I do. I hear all your stories about student loans. I'm from Nepal, I'll tell you that. In our culture, our parents pay the money for our schooling, medical school and everything. I do remember right now, we go to medical school after high school. So when you are 18 years old, we join medical school and we go for five and a half years. Then I did USMLE, came to United States when I was age of 26. Then I started work at 30. I'm now 40 years old. But what I did was I gave my parents money back. Not just for they wanted it, but it was my responsibility to take care of them. Every year, I used to give them $10,000. When I came to the Midwest after finishing my residency, I had $10,000 in cash. I am never been in debt after I bought my house and I had some levers, but I don't have any car loans, no credit cards, nothing. Everything is in cash.
Dr. Jim Dahle: So you basically came out at training with a net worth near zero? You didn't have any big student loans, but how much were you worth when you came out of training, do you think?
Dr. Jim Dahle: Okay. So compared to where you are now, that's a whole lot closer to zero but certainly better than the average physician coming owing $200,000 or $300,000 these days. Certainly. Now, your parents paid for medical school but it doesn't sound like any of this two and a half million dollars came from any sort of inheritance or anything like that.
Suresh: No. In fact, I have given them around $200,000 over 15 years.
Dr. Jim Dahle: Yeah. Now, how much debt do you have currently?
Suresh: I have 5% of my net worth in my house, my mortgage. But if I wish, I could pay but my mortgage is like 2.5%. So I'm not in any rush to pay that back.
Dr. Jim Dahle: Okay. So just the mortgage. That's it at this point.
Suresh: That's it.
Dr. Jim Dahle: Okay. Now, what advice do you have for those who are a decade or two behind you? What would you tell the doctors coming out of residency today that thinks there's no way I could have two and a half million dollars 10 years from now?
Suresh: As you said, I was very lucky and I didn't know that I was a millionaire already. So one thing is, number one, is save regularly. I started with 20% of your gross income and you are a high earner. You can go up to 20%, 30% if you can. Number two is invest regularly. Put in autopilot. Simplicity, automation, and hibernation. The most important thing I would tell to everyone, all physicians, is take care of yourself and your family. That's the most important thing. This money is not going to be there. Eat right. Exercise. Have a lot of fun and don't work very hard because you need to take care of yourself. Once you do this, you are all set and everything is going to be fine.
Dr. Jim Dahle: Do you have any specific advice for those coming here from another country that are now coming to the US maybe with just a few dollars in their pocket and looking to make their fortune here?
Suresh: So advice is the same formula for everyone: save regularly, invest regularly, and take care of yourself. For us, when I came out in my residency, people used to talk about investment in stocks and market. I said, “What is these stocks and bonds and this?” I joined residency in 2007. That was the Great Depression. One of my attendings said that, “Oh, I have to work more a couple of years because the stock market crashed.” I said, “Oh my goodness. I don't know what is this.” I never took anything. But after I came here, I had a lot of cash in hand. I said, “What am I going to do?” So one of my friends told, “Go to this financial advisor.” So I went and I gave all my money and he put it whatever he wanted. Then once I started my MBA and I saw this, I said, “Oh my goodness. He's taking 1% of my asset every year just for doing nothing?”
Suresh: So when I finished my finance course, I said, “Okay, give me my money back. I can take care of it.” So I have been tax efficient globally diversified index mutual funds. I've been doing that since then. The money grows itself. Once you do this, you end up with massive wealth. Just even you don't know that you have massive wealth.
Dr. Jim Dahle: Well, congratulations on your success, Suresh. You have really done very well for yourself. I think you mentioned before we started recording that you're looking at going to 0.6 FTEs at this point and trying to determine what you're going to do with the other 0.4% of your time. So I'm excited that you got your financial ducks in a row and you're able to really create the life that you're looking to make. So congratulations on your success. Thank you for coming on to the White Coat Investor Podcast.
Suresh: Thank you, Jim. I want to say one more thing is you are doing an awesome job. The small things can make a big difference in people's life. Just listening to your podcast, I think I have a physician here. He's in 70s. He has just a million dollar in his portfolio. I said, “What are you doing and what did you do with your money?” He said, “I did a lot of bad stuff.” If you do these small things correct for a couple of maybe 10 years, no one's going to stop you for being a millionaire.
Dr. Jim Dahle: Yeah. Awesome. Thank you very much. All right. Our next guest here is Michael who is going to talk a little bit about the success that he has had in his career and with building wealth. So welcome to the White Coat Investor Podcast, Michael.
Michael: Thanks so much for having me, Jim. It's an honor.
Dr. Jim Dahle: Now, what is your specialty and how far are you out of training?
Michael: I'm a family medicine physician. I'm about five and a half years out from completion of residency.
Dr. Jim Dahle: Okay. What's your approximate net worth?
Michael: So I am right around the seven figure mark. To be honest, I'm not sure if I've crossed it or gone back and forth. I only check it about every six months. But I was due to be hitting it right around now. So probably by the end of the year, I'll tally it up and hopefully will be around there.
Dr. Jim Dahle: Well, given recent market performance, I suspect it's probably pushed you over already. What's your net worth divided up into? How much is house? How much is real estate? How much is stock index funds and retirement accounts, etc.?
Michael: Yeah. It's changed a lot, but we moved to simplify everything dramatically over the past year. So now, I can thankfully say that, about 30% of it is in our personal home equity and the rest is all in index mutual funds. Most of it is in retirement accounts with some taxable as well.
Dr. Jim Dahle: What's been your range of income throughout your career these last five years or so?
Michael: My starting salary was 160,000 annually. I've gotten up to 240 over the first five years,
Dr. Jim Dahle: So 160,000 to 240,000, you became a millionaire five years out of residency. That's pretty awesome. Congratulations.
Michael: Thank you. I mean, we, of course, did have a pretty good market. So I can't take all the credit. We did get a little bit lucky with some real estate gains too that accounted for about 50,000 or so. But the rest of it was just boring old saving and low cost investing.
Dr. Jim Dahle: Wow. I mean, that's your secret to success, saving money and investing in low cost index funds. Because if you look at it, you've made about a million dollars in the last five years and you have a million dollars. That's pretty awesome.
Michael: Yes. We are extremely blessed to be in the position that we're in. I've had a working spouse as well. We're just starting a family now. So those have all been good tailwinds along with living in a relatively lower cost of living area. But living like a resident for five years, it really works.
Dr. Jim Dahle: So how much did your spouse make during that time period? We probably ought to add that in.
Michael: Yes. She made about 50,000 to start. She got some raises, pretty significant ones over the past year. She's probably up to about 70,000 now.
Dr. Jim Dahle: But even so, she's not a high powered lawyer or another physician or anything by any means.
Dr. Jim Dahle: That's pretty cool. So what was your net worth? When you came out of training? Did you have a bunch of student loans or a big negative net worth you had to overcome to get started? Or were you fortunate enough to come out having med school paid for?
Michael: I did have a negative net worth. It was not extremely negative. I have my wife to thank for that because she had been working for a few years and working towards some savings. But I still had six figure student debt. It wasn't terrible. It wasn't a low 100s which I consider myself very fortunate these days to have walked out of medical school with that type of debt. But we got that paid off pretty quickly and started working on building wealth.
Dr. Jim Dahle: How fast did you pay it off?
Michael: It was about two and a half years.
Dr. Jim Dahle: Okay. But even so, you overcame a six figure student loan debt and built a million dollar net worth in just five years. That is pretty incredible, pretty awesome. Certainly faster than Katie and I build wealth, at least those first few years out of residency. So did you receive any sort of inheritance, any sort of bolus of money into this?
Michael: No, not at all. I came from a pretty modest background, which I think probably has as much to do with my early success as anything because that forced me to learn to be frugal and to choose colleges and med schools wisely in terms of keeping costs down. So now, this was all my wife and I and just steady and slow building.
Dr. Jim Dahle: So how much debt Do you guys have currently?
Michael: We are currently as of a few months ago completely debt free.
Dr. Jim Dahle: No mortgage or anything?
Michael: No mortgage. Yep. We paid off the mortgage. I know that'll make some of the diehard people cringe a little bit, but it was the right decision for us and we're very happy with it.
Dr. Jim Dahle: It's interesting as I've done these interviews. The listeners will have heard before yours. Obviously, we're recording them all at different times in advance. But a lot of them chose to carry a low interest rate debt, a 2% debt or a 1% debt or whatever because they felt like they could out-invest it. Tell us about your decision making when you decided, you know what? We're just going to pay it all off. How you think that helped you build wealth or whether you think it slowed you down.
Michael: Well, I think it's easy to look back and see how the market's done over the past five years and say, “Gosh, if I could have stayed as leveraged as possible, we would have come out a little bit ahead.” But that's probably not a fair comparison looking backward. Of course, we couldn't have known that. I looked at the debt as if we were paying 3.5% with after tax dollars, that might be the same as guaranteed 5% return before tax. That's not too bad. We had all of our other financial ducks in a row. We were saving plenty enough for our retirement. That we were going to be meeting our financial goals. We ended up getting a windfall from selling the one rental house and thinking, “What should we do with this?” After discussing it with my wife, we just said, “This would probably be best if we just work towards paying off the house.” We did it.
Michael: It's hard to say that it was the best move by the numbers. But I also think that if I'm trying to play interest rate arbitrage on a couple hundred thousand dollars, that that's really not going to be the difference between whether or not we reach our goals and achieve the kind of financial goals that we've been looking for. So the extra few thousand dollars we could have made, I don't lose any sleep over it. I'm very happy with our decision.
Dr. Jim Dahle: So I often find myself on the more anti-debt side of the spectrum. It sounds a bit like you. I sometimes get some pushback from it in blog comments or emails or on Twitter or whatever. I often ask people, “Well, did it work for you? Where are you at in life?” Inevitably, they don't want to say or they're really not in an impressive financial position. But here you are in an impressive financial position. Not only are you in a relatively low paying specialty, but five years out of residency, you have no student loans or any other debt and you're millionaires. That's an incredible financial position to be in. So it clearly worked for you. Whatever mindset led you to pay off your debt also led you to build wealth pretty darn rapidly.
Michael: Yeah, I completely agree. I'm very analytical on things. So I had to run the numbers. I had to say, “What if I invested this money?” It only a 15-year mortgage anyhow. What if I invested this money instead and I figured maybe the sequence of market returns goes well and I come out $50,000 ahead? Or maybe I come out a little bit behind. But it was such an overall small percentage of where I think that we would be in 15 years that it didn't make sense to me to keep carrying extra debt.
Dr. Jim Dahle: So what advice do you have for those who are behind you? Somebody coming out of residency in five years or maybe somebody going into residency, what can you tell them that you wish somebody told you?
Michael: Well, I don't want to make it seem as though I've done everything perfectly. I certainly made a lot of mistakes fresh out of residency. I fancied myself pretty smart and got involved with investing in oil exploration, micro cap stocks. The worst thing possible happened, which was I doubled and tripled my money pretty quickly, but you can imagine how that ended up in 2014, 2015. I chalk it up to the school of hard knocks, but that was what it took for me to learn how to invest properly and to take a more sensible approach, a less gambling approach. So what I would say is don't think that I never made any mistakes along the way.
Michael: But I think the other thing that's really important that you speak a lot about is the importance of increasing your own pay within your specialty. When I took my first job, I was all set to take a different job working for the hospital system that I did a residency with. I was encouraged by a mentor to just go and interview somewhere else and see what the other hospital systems in town or what other people had to offer. That simple decision to go a little bit out of my comfort zone was the difference of $140,000 in guaranteed salary and bonuses and loan repayment over the first few years of my career. So I think it's easy to focus on the little stuff in terms of saving the day-to-day but when you can get big stuff like salary negotiations and cost of housing and transportation, when you can get that big stuff down, the rest of it just kind of takes care of itself.
Michael: We don't run any sort of tight budget. We go on vacation. We're not living like we're trying to scrimp and save every penny. But we got the big stuff right and the rest of it takes care of itself.
Dr. Jim Dahle: Well, congratulations on your success, Michael. Thank you for coming on the White Coat Investor Podcast.
Michael: Thanks so much, Jim. Thanks for everything that you do. I recommend you and your books and your podcast, your website to all the residents I work with. Keep doing what you do.
Dr. Jim Dahle: Appreciate you doing that. All right. Our next guest on the White Coat Investor Podcast is Bob. Bob, welcome to the podcast.
Bob: Thank you very much for having me, Jim. I appreciate it.
Dr. Jim Dahle: What's your specialty and how far are you out of training?
Bob: So I practiced general dentistry for approximately six years before returning to school to become a dental specialist. My specialty is endodontics, which is one of the nine recognized dental specialties. As endodontists, we receive training that focuses on diagnosing tooth pain and performing root canal treatment. I'm 15 years out of my specialty training.
Dr. Jim Dahle: Okay. So how far out of school total are you now?
Bob: Just had my 25th dental school reunion.
Dr. Jim Dahle: Awesome. What's your approximate net worth now?
Bob: It's 5.4 million.
Dr. Jim Dahle: And what is that divided up into?
Bob: So it split approximately 50% real estate, 25% investments in cash, and 25% in business practice value.
Dr. Jim Dahle: Okay. So a pretty good mix there. Obviously, you like real estate.
Bob: I do. I do.
Dr. Jim Dahle: Yeah. How'd you get started in that?
Bob: So we have a practice that has multiple locations. So in the locations that we have, I purchased space. So we basically purchased the space and leased back to the corporation. But some of that real estate too. When I'm calculating out net worth, I kind of lump everything together. So I have my residence in the second home and all those different things.
Dr. Jim Dahle: I see. So a lot of that real estate is related to the business itself, it sounds like.
Bob: It is. It is.
Dr. Jim Dahle: Yeah. So what's been your range of income throughout your career?
Bob: I thought that was a great question because that's actually something I don't think about a lot but it's varied so much over my career. On average as a general dentist, I hovered around 200,000. As a specialist, it's varied from 200k in the infancy of the practice when I started, as high as 1.2 million. My current taxable income is approximately 950k on three days work week.
Dr. Jim Dahle: So it's pretty good income. You find that pretty easy to build wealth with once you got it up that high?
Bob: Yeah. I mean, that makes a big difference. So in the beginning, things scaled pretty rapidly. I know we're going to probably get into some of these points. But I think one of the things that's helped me be successful is the fact that I started my own business and had the energy to put into it and scale it. That's made a big difference for me. Yes.
Dr. Jim Dahle: For sure. So how long did it take you to become a millionaire? Do you remember when you first became a millionaire?
Bob: Well, I'm going to say it probably took me a little longer for a couple of reasons. First, I returned to school to specialize after six years of general practice. So I actually practiced as a general dentist for six years before returning to specialize. So when I went back to training, I had about 200k net worth. In two years of specialty training, I came out with a negative 200k net worth. So I went from a positive to a negative in two years. Secondly, I went through a divorce which also set me back a little bit, but I would say about five years after specialty training is when I hit my net worth of over a million dollars.
Dr. Jim Dahle: Awesome. What Would you say were your secrets to success? I mean, how have you become so wealthy?
Bob: I think there's probably three things. Honestly, I've been kind of obsessive about your podcast. I've probably listened to every one of them. A lot of it is a reiteration of the many of the concepts that you talk about at the White Coat Investor. So for example, one of the mantras I've always had is living below your means so you can pay down debt. If you do that early on, not only can you grow your net worth pretty rapidly, but you can adopt the lifestyle that you and your family over time can reap the benefits of for many years. Eliminating debt also has a nice side effect of reducing stress. I know you talk a lot about burnout and I think reducing debt is a nice answer to reducing burnout. By the way, when I say living below your means, it doesn't mean you have to live in a cardboard box. I mean, you can live in a comfortable lifestyle and enjoy living your life.
Bob: I think the important metrics to look at and we've talked about income, but the most important metric I think is net worth. Secondly, if you can invest in leveraging your human capital which I think is your most important asset. An asset that doesn't always show up on the balance sheet. What I mean by that is you never let your talents dissipate and always try to continue to learn. One of my keys to financial success was being able to start and eventually scale a dental specialty practice. It took a lot of hard work and the ability to learn from my mistakes. I think, Jim, you might agree with me that for your situation, you used your talents and capital to grow your business. I would suspect that hopefully, you would agree that the White Coat Investor continues to be a lot of hard work, but it's probably very rewarding for you as a business venture.
Bob: I would suggest that people try to find something they're really passionate about, that set a fire under them. I found by doing that that you can become wealthy in more than just a monetary sense. There was one good example, and I was really looking through the podcast that I listened to is there's number 75, you had his interview with Dr. G which is increasing your primary care income. I found that that was surprising how well that story related to my personal venture as far as building wealth.
Dr. Jim Dahle: Yeah, for sure. I run into sub-specialists all the time, dental sub-specialists that are making $200,000, $250,000 a year. Then I run into people like you that are making 700,000, 800,000, a million, a million and five. I mean, there's a dramatic difference in how easy it is to build wealth if you can get your income up to that level. But for some reason, some people have trouble with the entrepreneurial aspect or taking the business risks or putting in the work or the time or whatever to do that. So what do you think the difference is between those folks that do it like you and those folks who don't?
Bob: I mean, I think it's an innate thing a lot of times, I mean, I've always enjoyed business. I mean, right now, I'm going back to school to get an MBA. I mean, I'm pretty busy, but I look forward to these classes. I really enjoyed finance. I really enjoyed businesses. For me, I had opportunities to start out as an associate when I got out of training. I just really wanted to start something from scratch. When I got out of training, I was almost completely broke. I listened to-
Dr. Jim Dahle: You were worse than broke.
Bob: I was below broke. Right? I was 200k below broke. Fortunately, I found a bank that can lend me a little bit of money so I could start a practice. I did some market research and picked an area that I thought was going to support what my specialty did. It worked out really well. I've had the ability to bring in people into the practice. I mean, when we started our business, I think I had two people working with me. It was myself and two other people. Now we have 24 employees and four doctors and three locations. So I like growing things. The process of scaling things has been really exciting for me. I feel really lucky to be where we are.
Dr. Jim Dahle: Any other secrets you think that you learned or that you could share?
Bob: Yeah. Again, I'm going to give you another plug with the White Coat Investor, but honestly, the thing that I find so crazy is 20 years ago, I had advisors coming to me trying to sell me products and circling back to that whole negative net worth thing. I had an advisor who happened to be a close friend of my brother come in and try to sell me a whole life policy. It was going to be for my spouse. It was going to be $300 a month and I didn't have $300 a month. Something didn't smell right to me. So I would be very leery of advisors trying to sell you things you don't need when you're starting out. I got very lucky in that respect. If you choose to work with somebody, makes sure that there's transparency in what investments you're getting involved with and the products they're going to choose for you. Just really understand the fees associated with those investments and products. I think that's really important when you're starting out.
Dr. Jim Dahle: So is this pretty much all you or did your parents at some point pay for school? Or did you get some big inheritance or anything? Or did this entire five plus million dollars come from your hard work and saving and investing?
Bob: The first thing I'll say is I didn't receive an inheritance of any significance. I got a little bit of help from an aunt here or there, was spending money when I was in school. I grew up with a family of six kids. My dad was a dentist, but he had a lot of health issues and wasn't able to work to his full capacity. So my parents agreed to pay for most of our undergraduate education. But everything beyond that, we were responsible for. So my parents extended that to each and every one of the kids who chose to go to four years of undergrad. But I paid for my own dental school and residency training myself. Basically, I paid for it through working and student loans.
Dr. Jim Dahle: How much debt do you have currently?
Bob: My wife and I have 260k debt. That's split between two rental incomes or two rental properties that are income generating. I'm happy to say we don't have any other debt other than that.
Dr. Jim Dahle: So just your leveraged investments basically.
Bob: That's it. Yeah.
Dr. Jim Dahle: Do you have any last advice for those who are a decade or two behind you? Maybe somebody coming out of their sub-specialty training wondering how they can possibly get to the same place as you by mid to late career?
Bob: Yeah. Kind of a bit of a reiteration to some of the things I talked about, but I think living below your means is really important. I think you say living like a resident. Understanding that living below your means will look very differently when you're 50 in wealth than when you're 30 and just out of your training. So it's kind of a lifestyle you can adopt and bring through your entire career. It's something you can model for your kids, too, if you have any children. But the second thing I'd say is make sure you leverage and make full use of the human capital. Never let your talents dissipate and your skills. If you have the ability to find something you're passionate about, just create it and grow it as much as you can.
Bob: The last thing I would really suggest is just enjoying the whole process. I realize that this is the podcast about personal finance and investing, but I believe what truly makes somebody happy is the relationships that they develop and their experiences that they develop between their friends and family. I just remember this friend of mine from Louisiana that I trained with. He always said years ago that he's been both happy and unhappy in the presence and absence of money and came to realize that it's not just money that makes him happy. I'd have to say that I agree with that. So just enjoying the process and the whole thing is really important, I think.
Dr. Jim Dahle: Awesome. Great advice. Well, congratulations to you, Bob, on your success. You've certainly worked hard. I'm proud of you. You've done really great for yourself. I appreciate you coming on the podcast today and sharing your secrets of success with the listeners.
Bob: Well, I appreciate, Jim. I think everything you're doing is great. I just completely agree with 99% of it. Just keep doing the good work you're doing. I appreciate you spending the time with me.
Dr. Jim Dahle: Thank you. Our next guest on the White Coat Investor Podcast is Brendan. Welcome to the podcast, Brendan.
Brendan: Thank you. It's great to be here. Really an honor to be talking with you.
Dr. Jim Dahle: So what is your specialty and how far are you out of training?
Brendan: So I'm a general dentist and I am in my 14th year out of training.
Dr. Jim Dahle: Okay. What's your approximate net worth?
Brendan: Right now, just a little bit over 1.6 million.
Dr. Jim Dahle: What's that divided into? How much of that's retirement accounts versus mutual funds versus your home versus real estate investments or whatever? How much is in Bitcoin? That's what we really want to know.
Brendan: Yeah. So about half of it is in the market, mostly index funds. That's spread between taxable and my 401k and IRAs. About a quarter of that is in physical real estate. I also have a couple of privately held notes. Then a quarter of it is in our paid off home.
Dr. Jim Dahle: Okay. Do you own your practice?
Brendan: No. Actually, we owned two practices. We sold them about three years ago to a dental service organization. That was one of the nice boosts to our wealth.
Dr. Jim Dahle: Very nice. What's been your range of income throughout your career?
Brendan: Yeah. So when I started off, my first contract was $100,000 and my best year was about 440,000.
Dr. Jim Dahle: Okay. It's pretty good range there. What did you do to increase your income?
Brendan: My best years came when I owned my practice. I was just working like a guy with my hair on fire. So it was great for the income but not really great for my family life.
Dr. Jim Dahle: Not the ideal lifestyle. I think a lot of docs out there can relate to that. The problem is every time your income goes up, your lifestyle goes down. Everyone has got to find their set point. I think most of us probably go over the line and then try to come back to it. So how long did it take you to become a millionaire?
Brendan: It took us about 11 years.
Dr. Jim Dahle: What were your secrets to success? I mean, how did you become so wealthy?
Brendan: Yeah. So really, I guess starting out as a child, I saw my family struggle with debt. I just knew that that was not the path to a happy life. So I was always afraid of taking on debt. So I chose to attend a state dental school. That was about a third the cost of the private ones. Then when I got out, I started working in public health and I received National Health Service Corps loan repayment. So for the first five years of my career, I was killing my debt with the loan repayment and saving a lot of my paycheck because I've always been frugal. So I'll spend money on the things that I find value in. But I still like to shop for deals and make sure I'm getting the best bang for my buck.
Brendan: For instance, my first home that I bought was in foreclosure and I had a $500 mortgage. I did buy a new truck but it wasn't one of those $70,000 fancy ones. I made sure that the fishing boat that I bought was something I could pay cash for. When I started out working, I was also taking on extra shifts. There was some other clinics in my area that needed help, so I picked up extra time there. The things that I did for fun were fishing, so I bought a piece of land that I could enjoy, but it was also an investment. I was able to sell wood off of that land and later, I sold the property all together. That's one of the privately held notes that I have.
Brendan: Then as I mentioned, my wife and I bought those two practices. Part of the evaluation that I made in looking at those practices was the locations. So I bought the buildings that those practices were in. One of them ended up being about as good an investment as the practice itself. I guess it's nice to have some frugal friends. I like that saying that you're the average of the five people you associate with most. I'm fortunate to have some friends that I can talk to about frugality and investing. Along with that line, I think listening to podcasts like yours and reading blogs lets me know that there's a community out there that we're not the only ones that are doing something crazy by living frugally, not taking on huge amounts of debt, and I guess bucking the typical American trend.
Dr. Jim Dahle: Now, you've been pretty entrepreneurial compared to most docs. I always tell people I like owning stuff because when things do well, you own all the profit. You've owned quite a bit of stuff throughout your life between the practices and between the properties and the properties the practices are in and all this stuff. That's worked out pretty well for you.
Brendan: Yeah. I mean, I guess it's important to evaluate if it's going to turn out to be a good investment. I like your advice to stick to your plan. I like that old Ronco slogan of set it and forget it. So I try to follow that as much as possible. I think that that starts with evaluating everything that you're going to buy and make sure it's a good buy and there's a good chance you're going to get a return on it later on.
Dr. Jim Dahle: So what was your net worth when you came out of school, do you remember?
Brendan: Yeah. I actually was thinking about this recently talking with some new docs. I was about $240,000 in debt just from education debt when I got out of school.
Dr. Jim Dahle: So I'm presuming your parents didn't pay for dental school and there's no inheritance involved in this whole thing?
Brendan: No. I got a little bit of help because I went to a private undergrad school and I wasn't able to borrow the entire amount. But the bulk of it was either I borrowed or paid through with summer or in school work.
Dr. Jim Dahle: So how much debt do you have currently?
Brendan: Very proud to say that we have no debt.
Dr. Jim Dahle: None at all?
Dr. Jim Dahle: In fact, you got negative debt because people are paying you interest on these things you've sold them.
Brendan: Yeah, that's the great side of the ledger to be on.
Dr. Jim Dahle: Yeah. That's what I always teach my kids, is better to receive interest than pay it.
Brendan: For sure.
Dr. Jim Dahle: So what advice do you have for those who are 14 years behind you? They're coming out of dental school now. They owe $400,000 or more maybe. They just don't see a pathway to even becoming a millionaire much less doing as well as you have.
Brendan: So I hope that you have the power to reach some people that are still evaluating because some of that is taking a look before they even start. It may be better to wait an extra year or two in order to get into a state school than it is to go to that expensive private school. For some people, that might be best to choose a different path all together. But for new graduates, I all the time refer them to your blog as the first resource because I can't say it any better than live like a resident. But if they haven't created financial independence as a goal, I think that they need to because it just gives you so much more freedom. If you're willing to put your nose down to the grindstone when you're fresh out of school and you have lots of energy, that that freedom that you gain from having financial independence will allow you to achieve more goals and have more time to spend with your family or however you choose.
Brendan: As I mentioned, we sold our practice. I think this applies more to dentistry, but I would say that for people that are coming out, or own a practice currently, the old paradigm of own your practice, work until you're 65 and then sell it and use that money to fund your retirement is just not going to work. At the current pace, it's about 50% DSO penetration projected to be in 10 years.
Dr. Jim Dahle: Can you explain what DSO penetration is? I think a lot of listeners don't know.
Brendan: Sure. Yeah. So a DSO is a dental service organization. So they take care of the administrative work. That was one of the factors that went into us selling. So I said I was earning a lot of money, but I had no quality of life. I was doing my own bookkeeping, doing my own taxes. But the sale allowed us to give that part up. We still work in our business. I can focus on being a doctor. Actually, I think I'm a better doctor now without worrying about that stuff. The biggest blessing was we were delaying having a family because we had so much other work to do. So we welcomed a healthy little boy into our family about eight months after we sold the practice. So yeah, that was great.
Brendan: But I guess to get back now that we've explained that, there's going to be a tipping point. So as the amount of practices that are in that DSO model gets over 50%, I think current practices, they're going to lose value, and also, they're going to be out-competed. I would say that the corollary is the transition that occurred in pharmacy and medicine where there's no private pharmacists out there. It's all Walgreens or CVS. There's mostly groups in medicine. We're just a little bit behind that in the timeline. So I really think that the best time to sell a practice in dentistry is now to the next five years. So if there's a new doc out there that really wants to own a practice, I would go into it with that mindset of buy one that's low performing, build it up, and make an attractive target to sell. The same for somebody who's in their practice now, I would be looking to get an exit plan in the next five years so that you get that maximum value out of it.
Dr. Jim Dahle: Well, thank you for that. And congratulations to you. You've been very successful. I'm very proud of you.
Brendan: Thank you.
Dr. Jim Dahle: It's wonderful to see that this stuff actually works for real people that aren't financial podcasters or financial bloggers. So thank you, Brendan, for coming on the White Coat Investor Podcast.
Brendan: Thank you so much. It was an honor.
Dr. Jim Dahle: Our next guest on the podcast is Gail who's going to be talking a little bit about some of the success she has had in finances. Gail, welcome to the White Coat Investor Podcast.
Gail: Thank you for having me, Jim.
Dr. Jim Dahle: What's your specialty and how far are you out of training?
Gail: I trained in emergency medicine and I finished my residency in 2000. So I'm 19 years out.
Dr. Jim Dahle: Okay. So you're about six years ahead of me. I came out of training in 2006. What's your approximate net worth now?
Gail: This is a fun exercise. I did this today and calculated my net worth to be just shy of 3 million, at 2.96 million.
Dr. Jim Dahle: Awesome. Congratulations. Coming right up on a big milestone. You have a big day in the market or a big week in the market and you're probably over it, I would imagine. So what is your net worth divided into? How much is real estate? How much is in mutual funds? How much is in real estate, etc.?
Gail: Okay. I have about 1.6 million in retirement that includes both my husband and myself. Majority of it is mine as my husband is mostly a stay-at-home dad. So he has about 170,000 of it. The rest is mine, ours I should say. 1.2 million is in real estate. We have about $100,000 in cash and that is mostly in Norway. My husband is Norwegian. We spend a lot of time there. Currently, the US dollar is very strong against the Norwegian Krone. So we've been sending money over there so we can enjoy vacations in the future when it's not so strong. We have about $150,000 in my husband's antique boat business and our cars are valued probably about $30,000. I'm not including anything like furniture, jewelry, sporting equipment like bikes or our children's 529s in our assets.
Dr. Jim Dahle: I wish we had more time to talk about an antique boat business. I was just over in Norway not that long ago and saw a lot of the kind of Viking boats that they've been reconstructing there at a museum. It is pretty interesting to see people using older techniques to build these boats essentially. It's pretty cool. I don't know if that's quite antique enough for what he's doing though.
Gail: He's not that antique. He's a master woodworker. He's working on some classic runabouts, wooden runabouts from the 1940s and 1950s.
Dr. Jim Dahle: Awesome. So what has been your range of household income throughout your career?
Gail: I just went through my W2s. When I started in 2001, my W2s showed that I earned 150,000. That's the median salary in the northeast. In 2018, I had $316,000 in wages from my job. I also do want to mention, Jim, that I did take a hiatus. I spent two years in Norway. So in 2012, I had a midlife crisis. So my husband and I packed up our three children who were elementary school age at the time, and we moved to Norway for a year to live off our savings. But it wasn't long before they heard that there was an emergency medicine doctor living on a potato farm in rural Norway. I was recruited to help start up the first emergency department there. So our one year leave of absence became two years. I wound up working full-time in Norway. My salary there was about $100,00 in US dollars. So much lower reimbursement for physicians in Scandinavia.
Dr. Jim Dahle: Awesome. What a great experience, though, to be able to experience that and start something up new there. So how long did it take you to become a millionaire?
Gail: I don't remember exactly, but I knew that I had a goal of having a million dollars in net worth by the time I was 40. I did reach that goal, so probably around 39
Dr. Jim Dahle: What are your secrets to success? How did you become so wealthy?
Gail: Well, first of all, I don't consider myself wealthy. That may help. I come from very humble backgrounds. So my father was a sanitation worker and my mom was a stay-at-home parent. So no matter how much money I earn, or accumulate, I'll always be this daughter of a garbage man. So one of my secrets, I think, is being frugal and a minimalist. I would say that that's probably in comparison to other high income professionals. Because I know there are a lot of Americans living off a lot less money than we are. I always live below my means. I just read a post on Facebook today about coupon clipping. I still do that. I shop in bulk at BJs and I clip coupons. Yes, I could probably earn more money working an extra shift but I have to shop anyway, so might as well save some money doing that.
Gail: We also like to spend money more on experience rather than things. So by the time this podcast airs, we will have just come back from a family scuba diving trip to Mexico for Christmas vacation. We're not buying each other gifts. Our family gift to each other is the experience of scuba diving in Cozumel together. Then another trick is that I always pay myself first. What I mean by that is I'm a W2 employee. So I have all of my retirement savings taken out of my paycheck before I ever see it. So I max out my retirement savings every year. As a result of that, I've never had to keep a budget, but I've never under-saved for my retirement either. I'm also very debt averse. So I've never had a car loan or a credit card debt. I consider myself a relatively concrete in my thought process. That meaning I tend to understand things that I can actually see and touch as opposed to things that are a little bit more theoretical, which is why I'm so heavily invested in real estate.
Gail: So I know that you don't recommend this but I bought my first house my internship year. I did my residency in Detroit and housing market was pretty cheap there. I bought my starter home at $63,000 back in 1997. I met my future husband few months into internship. He was about ready to move back to Norway. His visa was about to run out. So we had to make some pretty quick decisions and do the financial calculations. He moved in with me and our expenses turned out to be $250 per month per person. That covered the mortgage, the homeowners insurance and taxes. So when you say to live like a resident, I think back to those years, we actually lived like a king and queen. We went scuba diving. We traveled to Mexico and Malaysia while paying down the mortgage and paying down student loans. We were then able to flip that house three years later.
Gail: As I mentioned, my husband's quite handy. He's a woodworker. So we sold the house three years later for $85,000. So quite a nice profit and gave us a nice down payment for our next fixer-upper house that we bought as soon as I took my first attending job in New England. We put a lot of sweat equity into that house. We also turned my student loans into the mortgage. So they disappeared because I didn't have student loan refinancing back in the early 2000s. Then I waited to buy our doctor house until my third year as an attending once I knew that I was going to be in that area. In addition to those real estate investments, we also have two duplexes for a total of four rental units. We've had those for 15 to 18 years. They have a positive cash flow. The money we bring in from that actually pays for our primary home mortgage.
Gail: Then just a couple of other things. We did some geographic arbitrage. So when I finished residency, we looked at expensive cost of living areas like San Diego. We realized that we couldn't afford to buy a house there. So we eventually settled on New England because the cost of living was more reasonable and the school systems were good. So our children have gone to public school all along. They're in high school now. Then one other thing that I recommend that will probably get a bit of backlash is that we've always had a 15-year mortgage. Others will say that you can take that money and invest in the stock market. But like I said, I like to kind of see where my money is going. And we've always considered it to be like forced savings. I think it takes a lot of discipline to invest the money once you have it in your pocket. It can be easily spent.
Gail: I'm pretty disciplined person. I'm an endurance triathlete. I do Ironman races. So I know about discipline and training and diet. I don't trust myself to not spend that money once it's in my pocket. So we hope to have our primary home paid off for within the next year before our oldest child starts college.
Dr. Jim Dahle: Awesome. That'll be your last debt?
Gail: That'll be my last debt. We have about a little over 100,000 on our primary mortgage. We have $6,000 0% on a loan for installing a solar system at our house.
Dr. Jim Dahle: Now, I'm presuming your parents didn't pay for medical school or leave you any significant inheritance. Do you remember how much you owed when you came out of training?
Gail: I do. I owed just under a hundred thousand dollars. I think about 97,000.
Dr. Jim Dahle: Any last advice for those a decade or two behind you who are wondering, how can I be worth $3 million by the time I'm 20 years out of residency?
Gail: I would say the biggest thing is to just live below your means. So don't spend more money than you earn. I would recommend not over leveraging. Like I said, our rental properties are all paid for and it's a safe thing. But at least we know that our real estate is as ours. I would insure against catastrophe. So I've had Disability Insurance ever since my senior of residency. Once I had children, we got life insurance. I wouldn't buy anything without being able to sleep on the decision first. So I speak from personal experience after getting rocked into buying a timeshare where you had to decide on the spot. That was probably about a $14,000 waste of money right down the drain.
Gail: So I recommend not make any decisions that you can't sleep on and think about. I would also recommend starting saving for retirement on day one as soon as you start earning an income because it's more about habits and discipline rather than asset allocation. Again, I didn't really understand the stock market. That was in my 30s and 40s. Retirement also wasn't something that I completely grasped. It wasn't until I turned 50 just recently that retirement has started to become more of a reality. I think about the next 10 or 12 years. One of the things my husband and I have always had is what we call a go-to-hell fund which other people might consider an emergency fund. That just keeps your options open. So if for some reason you don't like your job, or you have a midlife crisis and want to move overseas, or you want to take time off and write a book, it gives you those options.
Gail: Then I think lastly, I would say that it's not always about the money. I think it's about finding the proper balance and enjoying life in your job and just trying to help make the world a little bit of a better place.
Dr. Jim Dahle: Awesome, Gail. Well, congratulations on your success. I'm very proud of you. You've done some wonderful things both in this country and in Norway. I appreciate you coming on the White Coat Investor Podcast.
Gail: Thank you for all you do, Jim.
Dr. Jim Dahle: So our next guest on the White Coat Investor Podcast is Rich. Welcome to the podcast, Rich.
Rich: Thanks for having me on.
Dr. Jim Dahle: What is your specialty and how far are you out of training?
Rich: My specialty is Maternal Fetal Medicine and I've been out of training for 17 and a half years.
Dr. Jim Dahle: What's your approximate net worth now?
Rich: 5.7 million.
Dr. Jim Dahle: Okay. What's that made up of? How much of that is your house? How much of that is real estate investments? How much mutual funds, etc.?
Rich: 1.5 is in just various retirement accounts. About 1.5 million is in various taxable accounts. I do have one million in cash value in a variable universal life insurance policy. 300,000 in various 529s for my children. Then 1.4 million in our home which is paid off.
Dr. Jim Dahle: Awesome. What's been your range of income throughout your career?
Rich: It ranges since I finished training anywhere from 220,000 to 575,000 a year.
Dr. Jim Dahle: So how long did it take you to become a millionaire if you recall back then?
Rich: Yeah. I was 40 years old when I hit the first million, which was about four years after I finished training.
Dr. Jim Dahle: That's pretty quick. What was your net worth when you came out of training?
Rich: About 100,000.
Dr. Jim Dahle: You had a positive net worth when you came out of training?
Rich: Yeah, positive net worth. Interesting thing was it was the time of the .com. So actually, at one point during my training, it was up to 450,000 with all those internet stocks. It dropped into 100,000.
Dr. Jim Dahle: Oh, that's a painful story. So you rode out that crash, huh?
Rich: Yeah. Luckily, I wasn't margined. So it ended up about a hundred thousand when I finished. What I did learn is that enough money that you don't have to hit home runs and just singles and doubles to reach financial independence. So at that time, I stopped buying individual stocks and just focused in on mutual funds, asset allocation, dollar cost averaging, boring investing.
Dr. Jim Dahle: A lot of people say the worst thing that can happen happened to you as an investor is hitting a home run early. It's actually better for you to lose money earlier because you learn about investing faster and you put in appropriate risk control management techniques. So maybe it was good for you to lose all that money early on. It certainly didn't impede you from becoming a multimillionaire relatively quickly.
Rich: No, I think it was a good lesson. I mean, it was definitely a good lesson and good to learn it early on and instead of late in the career.
Dr. Jim Dahle: So what are your secrets to success? How did this work for you? How did you become so wealthy?
Rich: Man, I don't really consider myself wealthy but I think my father was helpful. Financially educated early on, no one really cares about your money more than you and you have to realize that. My father was an immigrant over 50 years ago, came here with nothing. He's made some good choices. He probably has an eight figure net worth now and taught me many principles early on. I think the main thing is to pay yourself first. Pick a percentage that you want to save and stick to it. That's ranged anywhere from 10% to 35% in my career. Live definitely below your means. There are times when you can have unpredictable situations come up. My first wife died of cancer about nine years ago. During residency, she was pretty ill. So I took a year off during my residency and probably made half as much money as I was making as a resident which wasn't very much. Interestingly, because of good financial habits, we weren't impacted financially from that.
Rich: Also living below your means because it allows wealth building. I mean, the homes we owned before we got the doctor home a few years ago was less than one times my annual salary, which fortunately we make pretty good money, so it's not like we're living in a shack or anything.
Dr. Jim Dahle: That's a common trend, I think, among physicians who do well is they don't max out what they can buy house-wise. They're not out there with a 3X, 4X house. They're certainly under 2X and often under 1X like you were. Then all of a sudden, because they're not putting all that money into housing, it just piles up. Before they know it, they're millionaires, and then they're multimillionaires. Then they're financially independent. They don't feel like they did anything hard because the people that are living around live in the same size house as they do.
Rich: Couple other things that was helpful was prioritizing spending. You can't buy everything all at once. My dad told me when I took off of residency, he said, “You can either be rich or look rich, but you can't do both at the same time. You got to pick one. If you pick the right one, you might be able to do both down the road.” Just being generous also I think helps. If you're generous, I think it makes you more disciplined in your spending. We try and give over 10% to our church and we'd be generous with our kids' schooling and local charities. My first wife, we did set up endowed scholarship that went to college that generates a scholarship a year for a cancer survivor. So I think that's helped over the years, be more disciplined in how we spend our money.
Dr. Jim Dahle: That's awesome. That's awesome. I think that is also a common theme among millionaires and people who have done well is yes, they spend less than they make. Yes, they generally work hard and make a lot of money, but they also tend to give a fair amount away. I think that's also true in the physician financial blogosphere. So awesome for you. So you mentioned that your house is now paid off. Do you have any debt at all now?
Rich: No. No. We're debt free fortunately.
Dr. Jim Dahle: I assume you mentioned your dad now at least has an eight figure net worth. Did they cover your medical school? Is that how you were able to come out with not a big student loan burden?
Rich: That was interesting. They didn't cover it. It's been a lot of compounding. I mean, he's pushing 80 now. So that's why it's very large, but I was really blessed. My dad's a college professor. One of the fringe benefits which I feel very fortunate was to free tuition at medical school.
Dr. Jim Dahle: I mean, obviously, that helps, but this net worth you've built, it doesn't sound like there's been any big inheritance. Your parents are still living, at least your dad is. Doesn't sound like they've given you some big chunk of money at some point. Is that right?
Rich: No, no, no. They haven't really given us a big chunk. I mean, there'll probably be some down the road. I mean, they did teach us good principles. I mean, that was a huge… It's like getting a medical school scholarship, basically, which is unheard of. So to be able to get tuition for medical school was huge to not come out like negative 300k out of training.
Dr. Jim Dahle: Yeah, it's a big trend at the local medical school here. If your spouse works for the university, I think they have to work there for a year or so, then your tuition is half price. So I remember a lot of my medical school classmates had a spouse that was a nurse or did something else at the university because it was like a huge raise for them to be able to get tuition half off. Medical school tuition is hardly an insignificant side benefit. It's a big deal. And so kudos to you guys for taking advantage of it. So what advice do you have For those who are a decade or two behind you? Someone that's coming out of training now. They they're thinking, “Man, there's no way I'll ever even be a millionaire much less a multi-millionaire.” What advice do you give to them?
Rich: Just a few things. I mean, I would say start investing early. Definitely get in that habit of paying yourself first even though the dollar amounts may be small. I mean, if you could set aside some money during residency and just get in that habit of saving, that's helpful. Then when you actually make the dollar amounts, you know you'll already be in that habit of saving. Definitely avoid debt as much as possible because you do have to pay it back. Living definitely below your means, getting financially educated and then learning to be generous with the different benefits and blessings that you'll be blessed with as a physician. I mean, we don't make crazy amounts of money, but we do make a good amount of money and live a good life.
Dr. Jim Dahle: Awesome. Well, you are in the top quartile of physician net worth. So over 5 million puts you in the top quartile as physicians go. So congratulations to you. And thank you for what you're doing for your patients and for the causes that you support. And congratulations on your success.
Rich: Thank you.
Dr. Jim Dahle: Okay. You've now heard from seven different doctors who have been particularly financially successful. Each of them followed their own path. There are all kinds of different specialties, some very well paid, some really not that well paid. You'll notice that there's no real trend there in what their income was. But there was a trend in how they treated money. Every one of them said they lived below their means, sometimes far below their means, at least for a period of time. This is basically the story for all physicians who become wealthy. They may not have had a perfect live like a resident kind of period, but they usually had something similar to it.
Dr. Jim Dahle: So I hope you've seen in these examples a pathway that you can follow. Even if you're not starting at the same spot, even if you're starting with minus $600,000 net worth from a big student loan burden. Or even if you're living in a high cost of living area. Or even if you're a relatively low paid physician. Or even if you also have childcare responsibilities or whatever, I hope you've seen a pathway to become wealthy in your own way. A way that at least you can have money stop being a worry in your life and start being a tool that you can use to improve your life.
Dr. Jim Dahle: This one was sponsored by Pattern. You can get access to them at whitecoatinvestor.com/pattern. That is Matt Wiggins, an experienced specialist in disability and life insurance for physicians. I know Matt personally. We've sat down face to face. He's come out to Salt Lake. We've talked about doctors and insurance. He knows what he's talking about. He can get you a high quality disability insurance policy that you can trust to deliver should the worst happen. Doctors get disabled all the time. Don't think it can't happen to you. If you don't have a disability insurance policy now, or just need a second opinion on whether your current one is still right for you, contact Matt today at whitecoatinvestor.com/pattern.
Dr. Jim Dahle: Remember, if you need a financial plan, there are three ways to get it. You can read some books. We have some recommended books on the website, be sure to check those out. You can take an online course. We have one specifically designed to help you get a written financial plan. Also, if you need help from a professional, from a financial advisor, you can hire those as well. We have a list of recommended ones on the website. You can see their applications. You can see how they've been vetted. You can hire them for whatever your needs may be, whether they're short-term or long-term. So be sure to check those out.
Dr. Jim Dahle: Thank you for leaving us a five-star review. Thank you for telling your friends about the podcast and the blog and the conference and all that. Head up, shoulders back, you've got this and we can help. Let's all have a great 2020.
Disclaimer: My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He is not a licensed accountant, attorney, or financial visor. So this podcast is for your entertainment and information only. It should not be considered official personalized financial advice.