Risk vs. Reward — How to Find the Balance

INTRODUCTION

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor episode number 401, brought to you by Laurel Road for doctors.

Laurel Road is committed to serving the financial needs of doctors. We want to help make your money work both harder and smarter with a Laurel Road high yield savings account.

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QUOTE OF THE DAY

All right, our quote of the day today comes from Suze Orman, who said “When you understand that your self-worth is not determined by your net worth, then you'll have financial freedom.”

That's a great introduction to what we're going to be talking about today in this episode. We're going to be discussing a lot about life and how life isn't completely determined by your net worth, certainly not the quality of your life. And I think a lot of you know this, deep down inside you know this, but we tend to forget it from time to time.

Well, let me remind you, if nobody's thanked you for the important things you're doing in your life, which is not necessarily managing your money, let me be the one to thank you. You do a hard job, maybe you're coming home from a rough day or a rough shift and it's important work that you're doing. So, don't forget that and keep at it. The world needs you, it needs your skills, it needs your abilities and you're making an important contribution.

By the way, let's talk a little bit about Boldin. You probably haven't heard of Boldin, but you have heard of NewRetirement, at least previously on this podcast. The new name for NewRetirement is Boldin. I'm not sure exactly why they changed the name, but if you're sick of trying to make spreadsheets and calculations that do what you want them to, you should definitely check out Boldin.

It's perfect for DIY investors to take control of the variables that impact your wealth, retirement timing and long-term financial security. There's a free version, there's a paid version. You can check out the free version and see if it helps you with your financial plan. A lot of people have found that they actually got a better financial plan out of the free version of Boldin than they did from paying a financial advisor.

But I think it probably is best combined with something like our Fire Your Financial Advisor Financial Literacy course. You can learn more about that at whitecoatinvestor.com/courses. This could be a powerful tool to help you model the money as you work your way toward retirement. Check it out, whitecoatinvestor.com/boldin.

DR. DAHLE’S RELATIONSHIP WITH RISK AFTER HIS CLIMBING ACCIDENT

All right, we're going to start with a question off the Speak Pipe. It's less a money question than it is a climbing question, but let's take a listen to it.

Speaker:
Hey Jim, I wanted to thank you for your last couple episodes. I'm glad that you're feeling better after your fall, and I found the two-episode breakdown to be extremely insightful and very well done with really something for everyone to learn, and I really appreciated them.

I wanted to ask you, as a fellow doc and climber, now that this has happened, you didn't really get into how your relationship with risk has changed. It's probably a question that I'll have to ask again in another year, but just at this moment in time, are you going to be just a sport climber from now on? Are you planning to get back to the Grand at some point? What are you thinking?

And being financially independent, do you feel that gives you the extra go-ahead to get back after it sooner than if you were in a different financial position? Thanks again for everything and I'm glad you're back and feeling well.

Dr. Jim Dahle:
Well, thanks for your kind words and well wishes. As we record this, it's a few days before Christmas. I was cleared nine days ago to do physical therapy. Right now my life revolves around physical therapy. At least half of my workouts, as I'm trying to get back into shape, are really physical therapy kind of workouts. I'm using weights that are ridiculously low. If I were at a gym instead of in my garage, it would be embarrassing.

I can't do a pull-up right now. I actually tried about five days ago and couldn't even move myself off the ground. Well, yesterday I got about halfway up, so I was feeling pretty good about the improvement.

My physical therapist yesterday was very proud of me for getting 15 or 20 degrees of range of motion in my wrist over the last week. And that's really good, except for the fact that I started with a range of motion that was pretty darn close to zero total between flexion and extension of my wrist.

I've still got a long ways to go. My relationship with climbing right now is that climbing doesn't exist. I basically can't climb right now. I'm too out of shape, number one. Hopefully that will soon be fixed, but number two, I literally can't hold on to the holds. I can't do enough with my wrist to really do any sort of climbing that would be fun for me.

In that respect, I'm still in the middle of this. Now I think I'm a whole lot closer to the end than I am to the beginning, but my therapist tells me that I'm probably looking at six months of therapy just for my wrist and hopefully by that point I'm more in shape. It's hard to forecast how much risk I'm going to take in my life in that respect.

But I was very cognizant of risk before this particular fall. I've been climbing for a long time. I've taken risks like the risks that I took the day I fell frequently for decades. Risk doesn't show up every time. We know this in investing. We know this in climbing. A lot of times you get away with taking risk and every now and then it rears its ugly head and comes up and bites you.

Now the truth is I turn 50 next year. I'm not 25 years old anymore. It's probably time to start dialing back the objectives I'm going for when it comes to climbing. I don't think I'm going back to the North Face of the Grand Teton for instance.

Will I climb the Grand Teton again? Almost surely. Probably by one of the easier routes. Will I take up sport climbing? Probably not. I didn't do a lot of sport climbing before. Sport climbing reminds me of climbing in a gym and climbing in a gym reminds me of skiing at a ski resort. It's like skiing but it's not actually skiing. The real skiing is done in the backcountry. Once you've done some of that it just feels so artificial skiing on groomed trails or riding chairlifts. It's kind of the same way with climbing in the gym and in some respects sport climbing.

For those who don't know, sport climbing is basically climbing where all the anchors are six feet apart and are four inch bolts drilled into the rocks. It reduces your risk significantly compared to traditional climbing which is what I've spent most of my time doing over the last two or three decades.

That's kind of where I'm at with risk. I'm still recovering. I got a ways to go but I'm making progress. I do expect to be out adventuring again this spring and fall. Hopefully by late spring I'm actually able to row a boat and paddle a kayak and get out and get after it. But right now that's all pretty hard for me. I'll let you know in a few months. We'll have more physical therapy I suppose.

BALANCING YOLO AND PREPARATION

All right. Now we're going to talk a little bit about a related subject that comes in from an email. It says “Thank you for all you do for our community. My question is about the notion of YOLO versus preparation. I'm having a hard time finding the balance between working hard, saving in all the appropriate ways, preparing for the future and also enjoying life now.

I have enough life experience to know that tomorrow is not guaranteed but I also feel the responsibility of being prepared and ensuring that we are set in our retirement years. How do we find that balance? How do we know what that right balance is?”

Well, this is one of those questions that there's no right answer to. There's only a right answer for you. But I'm reminded of it all the time when I see certain questions, financial questions that get posed to me. Sometimes it's things like people building massive 529s.

I've gotten a lot of these questions lately. People wanting to start 529s before they even have kids. People wanting to figure out ways to get even more money into a 529. I think some of these people just need to sit down and run out what $18,000 a year for 18 months at 5% or 8% actually adds up to. It's a massive sum of money. The likelihood that your kid is going to spend that in college, even if they go to an expensive college plus an expensive dental school, is pretty low. And most kids aren't going to go to an expensive college and an expensive dental school.

You don't have to save everything for college in advance but people are just trying to get more money, more money, more money. Well, I wonder at what cost? How many shifts are they working to do that? How many patients per hour are they seeing to do that? What are they missing out on now in order to do that?

I see similar questions with HSAs for instance. A post that ran today as we record this was how to give your kid a seven-figure HSA. And basically it's a post about how if your kid's not year dependent in those adult years when they're still in your family HDHP, your high deductible health plan, you can make a family size HSA contribution for them. And if you let that grow for the next 40 years it can grow to seven figures.

But the idea behind it is a sound one and most people might do it a little bit to some extent but aren't going to completely maximize it. But I had the first comment on this post was somebody going, “Oh, well, that's not even that much money. Inflation is going to take its chunk out of it and one really bad healthcare episode could wipe it out.”

Well, not if you have health insurance. Look at all the money I spent on health care consumption. I spent a six-figure amount. I don't know, it might be a quarter million dollars by the time all is said and done. What did I pay? $8,300. It's my max out-of-pocket. If you've got a six-figure HSA, you've got to have 15 years of those to wipe it out. Because that's your max out-of-pocket.

Now, there's some things that aren't necessarily covered by your health insurance and so on and so forth but the point is a six-figure HSA is a massive HSA, and a seven-figure is huge. Even if it's a seven-figure not in today's dollars. The likelihood of that not being enough just seems really, really low to me.

There's lots of people out there trying to optimize everything in their financial life and if that's you, I want to introduce you to the concept of enough. There's a book written by Jack Bogle called “Enough”. A lot of it's about how to run a business and that sort of thing but it also deals with the personal concept of enough.

When we think about this, we think about it a lot as being a money level. Enough money that we don't have to work the rest of our life or whatever. That's enough. But the concept applies to so much more than that. For example, it applies to how much time you spend at work. A lot of us need work in our life. I've found that work is an important aspect of my life. Without work, I just spiral into depression and sit around. And that's despite having lots and lots of hobbies but a little bit of work really energizes my life, provides a little bit of structure and a little bit of purpose and just makes everything a little bit better.

But there's a concept of enough that applies to the time spent at work. There is the concept of enough that applies to your level of optimization of your finances. You can always spend a little bit more time, find one little additional tax break, find one slightly better investment, find ways to shave your grocery budget down a little bit more and put a little more money toward your retirement accounts. But you don't have to do everything. You just have to do enough to be successful.

And so, you need to be prepared. You need to treat future you at least equally to present you. You're probably not going to die before 40 or 50. You're probably going to live in your 50s, 60s, 70s. Most people do. Not everybody. There are no guarantees so you don't want to put everything toward the future but you do need to find a balance.

For most people that want to work a full career, that balance means putting 20% or so of your gross income toward future you, investing it wisely and spending 80% of your current income on present you. If you really want to have an earlier retirement, bump that up a little bit, 25, 30, 35, 40%. But if you bumped it up to 60%, you've probably gone too far. Now everything's all about future you and you're not doing enough YOLO.

So, find balance in your life. Recognize that there are things you can do in your 40s that you cannot do in your 60s. Very few people go try to climb the Grand Teton in their 60s if they haven't previously done it in their life. Some things belong to decades that are earlier in life. Your teenagers don't want you to read bedtime stories to them. That era has come and gone and if you missed it, you can't get it back. Likewise, there's lots of other things that belong to specific chapters of our life.

This is a concept discussed in a book called “Die With Zero.” I highly recommend you read it. It's actually not about dying with zero. It's about balancing. Balancing now with later. It's a worthwhile read for anybody who's wondering about the best way to balance those two things.

The other thing you'll learn in life, and you've heard people tell you this, you just don't recognize it until you get to that point. More money is not going to make you any happier. A little more income does make people happier. You can look at the happiness studies. Up to a $100,000 or so a year, more income makes people dramatically happier. And even after that point, it does increase your happiness slightly but it levels out eventually and it's not going to bring you more happiness.

What does make people happier? Relationships. We've got plenty of money but you know what? When things aren't going well relationship-wise, people aren't happy. That's just the way life is.

Now, we've got a guest today that we're going to bring on the podcast. That's actually going to be a WCICON25 speaker. By the way, if you haven't signed up for that yet, you still can. wcievents.com is where you sign up. It's February 26th through March 1st. There is a virtual option available. If you can't still change your schedule so you can travel, you can sign up for it virtually as well.

INTERVIEW WITH DR. GRUMET

But one of the keynote speakers there is Dr. Grumet. So let's get him on the phone. We're going to talk a little bit more about these concepts, about the subjects he's going to be talking about at WCICON, which is what he's learned as a hospice doc from dying patients about how you ought to be living your life now.

All right, Jordan, it's great to have you back on the White Coat Investor podcast.

Dr. Jordan Grumet:
It is great to be here. I’m excited for our conversation.

Dr. Jim Dahle:
Now, for those who haven't heard from you before, can you introduce yourself a little bit? Not only what you've done in your life clinically, but also what you've done extra clinically.

Dr. Jordan Grumet:
I am the prototypical doctor. I thought I wanted to be a doctor since I was a little kid. Became one, realized very quickly that it didn't suit me as much as I wanted it to, got incredibly burned out with the paperwork, all the things that we all face.

I was lucky enough in 2014 to get, I believe it was a phone call from you. I was writing a medical blog at the time and you sent me your book, The White Coat Investor, and you wanted me to review it for my blog. I took a look at it, literally read it, I think in one sitting, and it gave me the financial vocabulary that I never had. I was like, “I'm feeling burned out in medicine. I'd love to get out, but everyone told me it was impossible. My financial advisor told me I didn't have enough money. My accountant told me I didn't have enough money.” Neither of them asked me how much I wanted to spend every year, by the way.

And so, I read your book and I'm like, “Oh, there's a way to calculate this.” I was lucky enough to have great financial modeling from my parents. I had investments, I had real estate, I was doing some really good things. And so, I'm like, “Wow, I probably have enough money that I can really start thinking about doing some other things I want to do in life.” And then I had a panic attack because I had no idea what I wanted to do in life.

Fast forward years, I eventually pursued personal finance because I found that exciting. I loved public speaking and podcasting and blogging, and I built a life around that. And I would have people on my podcast who were experts in personal finance. And when I'd ask them about, “Well, what does enough money look like? Or why are we building all this wealth?” A lot of times I got blank stares.

And strangely enough, the place I was getting the answers for these kinds of questions was actually my hospice patients. Because when I realized I was burning out in medicine, I got rid of almost everything I did. But the one thing that I loved doing was taking care of hospice patients. I was still doing that maybe 10, 15 hours a week.

My hospice patients were talking about what they regretted, what they never had the energy, courage, or time to do. And almost none of them said, “I wish I made more money.” And almost none of them said, “I wish I worked more nights and weekends.” They talked about these deeper things that they never pursued. And I was like, “That's the message.” That's what all my personal finance people need to hear.

And so, I wrote my book, “Taking Stock”, to really bring those messages from the dying about money and life that I think we could all benefit from, not when we're on our deathbeds, but today when we're in the midst of worrying about burnout and struggling with our careers and wondering how much is enough.

Dr. Jim Dahle:
Perspective. That's what you get from the end of life. And due to some of the volunteer work I do, I have a number of friends that are in their last decade of life. And they have a totally different perspective on life than I have now in my 40s and certainly than I had in my 20s. There's a lot to learn from people. And sometimes we discount what people tell us because they're boomers. “What do they know? They're boomers. What can they know? They don't even know how to use an iPhone.”

And so, we discount all this wisdom that is found in people that have six, seven, eight decades of life behind them. And there's a lot of things you pick up along the way just from your experience that can be shared. Of course, you've got to be a little bit careful. Sometimes we do lose a little bit of faculties in our last decade of life. And maybe we don't want all of our political leaders to be 75 plus.

Dr. Jordan Grumet:
You think.

Dr. Jim Dahle:
But there's a great deal of wisdom available from the elderly that I think we don't take advantage of enough. Do you think a healthy 80-year-old versus somebody that's actually dying has a different perspective? And what differences have you noticed?

Dr. Jordan Grumet:
The difference is that when you are told you have a terminal diagnosis, it shifts the lens. Even the 80-year-old healthy person still wakes up with a major plan for the day. Look, 80-year-olds are no more connected to this idea that I'm dying than a lot of 40-year-olds. A lot of them don't want to think about it. They don't want to contemplate it.

To look at your life and say, “There were these big sentinel things that were important to me and I didn't do”, is to recognize that life is finite and people don't like to do that. It feels exceedingly uncomfortable. It's quite possible that someone who's 70 and 80 and not facing a terminal diagnosis still doesn't like that discomfort of realizing that an end is near or maybe even closer than it was when you were 40.

And that's why I think this terminal diagnosis really does change things a little bit. Because for once in your life, you can say there's an end and it really is not somewhere far off in the distance, but it's clear cut. And that changes the way we think. There's this term “memento mori”, this idea that we should carry with us, this idea that we're dying every day, that death is near. And that's something we should think about even in the midst of life.

I think there's something to that because there's always a reason to put things off. We always don't have enough time. We always don't have enough money. We don't always have enough energy. And I'll tell you, a lot of times we don't have enough courage. We're so deeply afraid that we're going to fail that we don't actually try, and you run out of time to try at some point.

Dr. Jim Dahle:
It's interesting. You talk about that change when it becomes finite. The truth is, if we sit back and think about it, we all have a terminal illness.

Dr. Jordan Grumet:
Yes.

Dr. Jim Dahle:
It's called life. None of us gets out of here alive. But you look at these accounts from people that died relatively young. Maybe one of the classic ones is Paul Kalanithi's book, “When Breath Becomes Air.”

Dr. Jordan Grumet:
Yes.

Dr. Jim Dahle:
For those who aren't familiar with this, this doc was 36, about to complete training as a neurosurgeon and diagnosed with stage four lung cancer, and then wrote this book. And so, it's possible to get that perspective even without the eight decades of life experience, isn't it?

Dr. Jordan Grumet:
It is. It's fascinating to see people do these things once they get a diagnosis like this, because what I always say is the problem with terminally ill is they don't have agency to actually live out some of these dreams that they've been putting off. But occasionally you get someone who does have a little bit of time.

And so, you see people do these amazing things. And he was always a writer, but had never really compiled everything together. I believe him, then with the help of his wife after he died, was able to still maybe pursue some of his dreams, even with a terminal diagnosis.

But a lot of us aren't that lucky. And a lot of us don't get enough time to really say, “Ah, there was this thing that was important to me. Now I know I'm dying. I'm going to go do it.” Occasionally we do, but it's not an everyday occurrence.

Dr. Jim Dahle:
I wonder, and maybe I'm wondering this because I had my own close call this year. I wonder how much of that you get just from having a close call, whether it's traumatic or whether it's a medical diagnosis, a cancer that you managed to beat. Is that enough, do you think, to shift perspective?

Dr. Jordan Grumet:
I definitely think it is. We only die once, but putting yourself mentally in that place and contemplating it is enough to really get you thinking. And so, we see this all the time. You're not the only one. We see people who have these near-death experiences or experience a death of a loved one and it changes everything.

There's a template to this. I don't think that you have to actually go through it. I think we can empathize with our own sense of mortality when we go through something difficult or empathize in someone else's version of mortality or someone else's path and still get all those positive benefits. It's a thought experiment. That's all it is.

Dr. Jim Dahle:
Yeah. Now I know you're giving two talks at this year's WCICON. We should talk about both of them actually, but we've been talking mostly about the subject of your keynote, which you titled “What the Dying Can Teach Us About Money and Life.” And I don't want you to give us your talk, I don't want you to spoil it because I want people to come to WCICON because I want to meet them in person. But give us a tidbit. What are some of the things that you learned from the dying besides just that perspective shift?

Dr. Jordan Grumet:
The talk is based on three main premises. There are going to be lots of stories and lots of information that are going to deepen this. I don't think I'm giving anything away. And these are the three main premises. One is we should put purpose, identity and connections first. We should really define those in our life.

Next, we should build a path to financial independence around them. And last, we should ask ourselves one really big question, “What scares us most?” When you put this all together, the dying can teach us that there are these important things in our life and money is a great tool towards reaching these goals. But it's just a tool and not a goal unto itself. And if we put these things off forever, we will at some point be lying in a hospital bed and a doctor like me will come in and talk to them about hospice and it'll be too late. And so, we really need to start thinking about these things now.

Dr. Jim Dahle:
That's an interesting question. What scares us most? I'm curious what some of the answers you've gotten from people are about what scares us most. Because I think about this and I'm like, “I don't know what scares me most.”

Dr. Jordan Grumet:
Actually, I left this dangling a little bit because I thought it'd be interesting. More specifically, what scares you most? And here's the second part of the question. Are you more afraid that you're going to die today and never get to enjoy your wealth? Or are you more afraid that you're going to live a long life and die broke?

And the reason why that question is important is this is the first inkling we get to how to decide, do we spend today on something that'll fill us up? Or do we save for tomorrow? This idea YOLO versus deferred gratification. You only live once, let's spend it today and have a great time versus let's defer gratification so we have a great retirement.

The problem is none of us know when we're going to die. If you and I knew we were going to die at exactly the age 85 and we knew the date, we could plot it out and we could use all our money accordingly and have either nothing left or enough to leave our kids on that date. We don't know that.

The best proxy we have is our fear. What scares you more? If you can figure out, are you more scared of dying young and wealthy or old and broke? You can then start figuring out how to spend money today so that you get to have those wonderful experiences, buy those things that are deeply important to you, celebrate life with your money, use it as a great tool, but also save for the long term because you might live to 85 or 90 and you want to make sure you don't run out.

Dr. Jim Dahle:
Yeah, for sure. All right, give us a look at your other talk that you're going to be giving at WCICON besides the keynote.

Dr. Jordan Grumet:
“The Purpose Code” is the book that's coming out and I love to preface this talk by saying when I wrote my book “Taking Stock” and gave the talk that I'm going to give, the keynote, a lot of people got pissed off at me. Imagine I love this talk. I think it's really important. You might go to this talk and you might come out of this a little angry. After seeing this happen two or three times, it really hit me. People would come up to me and they'd all say the same thing. They say, “Look, you're saying put purpose first and then build a financial framework. But I've been searching for purpose my whole life. I can't find it. I'm really frustrated. I don't think there is a purpose.”

And after getting told this enough times and knowing how important everyone says purpose is, I dove into the data and I found two things that are kind of contradictory. One is that having what researchers call a sense of purpose in life is deeply associated with health, happiness, and longevity. Tons of studies. On the other hand, other studies show that up to 91% of people have what's called purpose anxiety at some point in their life, meaning this idea of purpose makes them frustrated and depressed.

I had a big question. I eventually wrote this book to resolve this question. How can it be both? And the answer is we get purpose wrong. We think it's one thing and it's actually two. There's what I call Big P purpose, which is associated with anxiety. And then there's little P purpose, which is probably what's associated with health, happiness, and longevity. The second talk is going to be how we can pursue that right version of purpose to get all the really good stuff and leave the anxiety behind.

Dr. Jim Dahle:
Yeah, that sounds really useful. I'm going to have to catch this one. In fact, I think I need to spend some time with the book. For those who don't know, this is on Amazon. It's called “The Purpose Code”, subtitled “How to Unlock Meaning, Maximize Happiness, and Leave a Lasting Legacy.”

Purpose can be elusive. I get it. I've had to spend a lot of time thinking about this as I sat around healing this fall and wondered, “Why am I still here? Why did I survive this? What's left for me? Is there some great purpose for me that I'm supposed to accomplish now in my life?” And I don't know, maybe there is, maybe there isn't, but it's certainly a humbling experience to spend a significant amount of time thinking about that.

Dr. Jordan Grumet:
It's funny, Jim, before I read your book, I thought finances were elusive. And then I read your book and it was so clean cut that I'm like, “Oh, there's a pathway. This is what I want the purpose code to do for purpose.” I think there are tons of people out there saying “Purpose is so elusive.” And I want them to be able to read my book and like after reading your book with finances, I want them to go, “Oh, there's a path to this and I can do these steps and end up getting the pot of gold at the end, which is happiness.”

Dr. Jim Dahle:
Yeah. Well, that's very cool because if it's as easy as finance can be made, then any of us can do it, because that's the truth. Finances are not that hard. So if purpose is no harder than that, I can do purpose.

Dr. Jordan Grumet:
Most people don't know that finances aren't hard because they haven't read your book. Someone had to teach them. They had to hear a podcast, read a blog, get interested in financial independence or whatever it was. But up until that point, it felt like the most difficult thing ever. I would submit to you that purpose is exactly the same.

Dr. Jim Dahle:
Very cool. Well, our time is now gone. We'll have a link to “The Purpose Code” book in our show notes. I think you ought to come to WCICON and meet Jordan in person and meet me in person as well though. I'll give you more details about that shortly. But Jordan, thanks so much for being willing to come on the WCI podcast again and sharing your wisdom with us.

Dr. Jordan Grumet:
Thank you so much for having me.

Dr. Jim Dahle:
All right. I hope you enjoyed that interview with Jordan. He's a great guy. Again, WCICON. You can sign up wcievents.com. That's February 26th through March 1st this year. We would love to have you there. It's not just about the content there. The content is top notch, of course. But coming to this conference is an experience. It's not only at a top notch resort this year, it's in the Hill Country outside of San Antonio, but every year it's at a really nice resort because we want you to go home more well than you came.

We also knock off all the academics at about 4:00 each day and go to pre-planned activities, wellness activities, and it ranges everything from pickle ball to wine tasting to yoga, all this sort of stuff. We usually have a 5K at the event as well.

And so, there's all these other things that happen there that not only help you to make friends with people that are like you and do a little bit of networking, but also to make sure you go home more well than you came. And in order to do that, we don't actually require you to come to any classes while you're there. And in fact, eventually you'll be sent home with all the content from the conference. And so, you can consume that at your own pace on your own time and really spend that three or four days you're with us boosting your own wellness. That's the whole point.

Again, sign up wcievents.com. It is not yet sold out. There are still seats available if you want to come live and can arrange your schedule to do so. We'd love to have you there. My favorite part is just meeting people personally, hearing their stories, hearing their challenges, hearing their successes. I'd love to meet you personally there. We'll see you down in San Antonio.

SPONSOR

This podcast has been brought to you by Laurel Road for Doctors. Laurel Road is committed to serving the financial needs of doctors. We want to help make your money work both harder and smarter with a Laurel Road high yield savings account.

Build your savings with highly competitive rates, no minimum balance to open and no monthly maintenance fees. Whether you're saving for an emergency fund or planning your next big purchase, you can keep building your savings and access your funds whenever you need them.

For terms and conditions, please visit www.laurelroad.com/wci. Laurel Road is a brand of KeyBank N.A. Member FDIC.

Don't forget, I mentioned earlier about Boldin, whitecoatinvestor.com/boldin. It’s used to be called NewRetirement, but that provides a great financial program that can help you do calculations and make spreadsheets and so on. It can help you take control of your finances. There's a free version, there's a paid version, so check it out. You may find the free version is all you need.

Thanks for those of you leaving us five-star reviews and telling your friends about the podcast. A recent one comes in, it says, “Excellent podcast. Pro tip, you don't have to be a doc to benefit. Dr. Dahle gives sound, well-researched, important advice for anyone looking to maximize an investing strategy while not falling for the latest gimmick. He's incredibly consistent with suggestions and directions. His website is also a great source for details, like examples of screenshots or walk-ins or spreadsheet formulas. Very little is specific to doctors, so don't let the title keep you away.” Five stars. Thanks so much for that great review.

For the rest of you, keep your head up and shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor podcast.

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.

INTRODUCTION

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 204 – Two doc couple beats the seven-year itch and becomes multi-millionaires.

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With over 13 years of experience, a $375 million portfolio, and 1,600-plus units under management, Black Swan offers unique opportunities that put investors first. They operate with no GP-level fees, ever, a structure virtually unheard of in the industry.

Led by physician Dr. Elaine Stageberg and supported by a vertically integrated team, Black Swan ensures hands-on management and a proven track record of strong, stable returns. Learn more about their investor-aligned approach at whitecoatinvestor.com/blackswan.

Be aware that today is the last day of our buy one, get one sale. Buy any of our courses and get our Continuing Financial Education 2023 for free. Now, that course is good for CME. It was compiled using material from WCICON in 2023, and it's like 50 hours of material. It's a great course. It comes to you absolutely free for buying any of our other great courses.

You can buy Fire Your Financial Advisor, the course that helps you to write your own financial plan that you can follow to investment success. You can take No Hype Real Estate Investing, which will help you learn what you need to know to get into this exciting real estate class. You can even buy Continuing Financial Education 2024, and we'll throw 2023 in for free.

All of those courses are available. You can go to whitecoatinvestor.com/courses. Some of them you can buy with CME funds. There's a version of Fire Your Financial Advisor that qualifies for CME as well as Continuing Financial Education. Because it's packed with wellness content, that one also qualifies for CME. But today is the last day for this buy one, get one sale. If you've been waiting for a sale to buy a WCI course, now is the time, whitecoatinvestor.com/courses.

We have a great interview today. I think you're really going to like this one. This is from some White Coat Investors that have been killing it, absolutely killing it. And also had some personal success in their marriage.

Stick around afterward. This is our first Milestones Podcast of the year. We're going to talk a little bit about beginning of the year stuff. In particular, front-loading your tax-protected or retirement accounts.

INTERVIEW

Our guest today on the Milestones to Millionaire Podcast is Steve. Steve, welcome to the podcast.

Steve:
Thanks for having me, Jim.

Dr. Jim Dahle:
Tell us what you do for a living and a little bit about your family situation, what part of the country you're in.

Steve:
Sure. I'm from the Midwest in a medium-cost living area. I'm a trauma-adolescent psychiatrist, and my wife is a specialty surgeon.

Dr. Jim Dahle:
Very cool. You guys had a recent anniversary recently, I understand.

Steve:
We did. Actually, to give you the full story, I had signed up to do this a year ago for our seventh-year wedding anniversary. I never found any calendar times that worked for me. Honestly, this all happened with you. I felt like, if I can't do this now, when can I do this? We actually just hit our eighth-year wedding anniversary instead of the seventh.

I did just want to thank you first before we get too far into things. I grew up without a dad, and so you have been my surrogate financial help throughout. I was very lucky to be introduced to White Coat Investor at the middle-to-end of my residency before I started a fellowship and then took on stuff from there. It has greatly changed my life, and so I wanted to come on after hearing what happened to you, say thanks, and be part of the community.

Dr. Jim Dahle:
You're very welcome. But I don't know that I can take the pressure of being a surrogate dad. I guess maybe just financial dad, all right? Is that good?

Steve:
Financial dad. Yeah, that sounds good.

Dr. Jim Dahle:
You have hit a milestone recently. Tell us what milestone we're celebrating today.

Steve:
Yeah. As part of a two-physician, both full-time attending household, I think getting through seven, eight years of marriage, raising a family with a young kid, there's a lot of pressure and stress that goes through that, finding a way to make it through the end of the day, take care of everybody's call obligations, family obligations, and still be able to celebrate.

There's historically been this thing about divorces spiking at seven years, and then again, an empty nest time that people talk about, and relationships going wonderfully with my wife, so blessed to be married to her. And I just really wanted to celebrate that. We actually took a trip to the Maldives to do so and got a chance to see some great dolphins and sharks and things of that nature. So, that was a big milestone for us.

Dr. Jim Dahle:
Very cool. Congratulations on hitting that. You're right. It is not insignificant. A lot of people think doctors have this terrible divorce history. And it's not what most people think. The typical divorce rate in our society is 50%. If one of you is a doctor, it drops to 25%. And if you're both doctors, it actually drops to 10%. So it's not this bad thing that people assume it is for doctors. Yes, residency and fellowship, they're hard, but there are a lot of benefits to being married to a doctor, it turns out.

You've been married seven, eight years now. You're also seven, eight years out of training. Both of you came out close to the same time and hit a recent net worth milestone. Now, I don't know if the one I have in front of me was a year ago. Where are you at now with your net worth?

Steve:
It's right around three million.

Dr. Jim Dahle:
$3 million dollars, seven, eight years out. That's awesome. Congratulations. You guys are killing it.

Steve:
Thank you.

Dr. Jim Dahle:
Obviously, part of your success is it's two doctors. It's two big shovels contributing to this mound, this pile of money that you're putting together. But still, seven, eight years out, this is impressive. What are your secrets to success? How have you acquired this much wealth that quickly?

Steve:
Yeah, I think for us, we are very lucky to be on the same page financially the whole way through our spending habits. We don't budget anything. We don't ever really talk about much as far as spending unless it's for big ticket items. And because we both, I think, intrinsically the way we were raised, learned to have a value for money, it's just come fairly naturally. We've basically saved her salaries as a surgeon her entire career and never had to spend any of it outside of buying a house, things of that nature.

And then obviously, a big part of it, as I said before, is just kind of knowing what to do, being smart with low cost index funds, letting the market do the work, not being trapped by any whole life policies or bad decisions that I know other people have had to make the mistakes of. And so, I haven't had to make those mistakes, which has been very fortunate.

Dr. Jim Dahle:
Well, we all make mistakes. Hopefully, we make them early on with small amounts of money, right?

Steve:
That's true. I did do that, actually. I did make early mistakes, as I was alluding to before. When I came out of training, I didn't have any financial help for med school. I was able to get enough scholarships to cover my undergrad. And I came out of that without any debt. But med school was all 100% financed by loans, all at 6.8%. I came out of med school with about $200,000 in loans. This was back in the day. It's a little bit cheaper. But that, of course, was accumulating.

And I had no idea what to do when they asked me what to do with the loans. I kind of pretended I was an ostrich. I put my head in the sand. I was in forbearance on those, which is obviously not ideal. I wasn't able to accumulate any income-based subsidies or payments or anything of that nature. It really wasn't until the third year I was a resident where I was just figuring out, “I actually have to address this. This isn't monopoly money. I do have to find a way to go forward.”

Dr. Jim Dahle:
It's funny how it feels like monopoly money when you're taking it out, isn't it?

Steve:
It does.

Dr. Jim Dahle:
Did your spouse also end up with a bunch of debt coming out of school? Or was she coming out debt-free?

Steve:
She came out debt-free. And so, it was nice to just have mine. And she was very aware. We had conversations about exactly what that looked like. And at that point, it was a quarter million that it was going to take to repay. It took us about two years to do that coming out.

Dr. Jim Dahle:
What do you think your net worth was when you guys came out of training?

Steve:
It was negative $200,000.

Dr. Jim Dahle:
Okay. Definitely in the negative. So you've had quite a swing. Now, have you both been working full-time the last seven, eight years?

Steve:
We have been. She took off a little bit of time when she had our child. But other than that, yeah, full-time.

Dr. Jim Dahle:
Okay. And what do you think the range of income has been? Total household income over that time period?

Steve:
It's been very close to $800,000 throughout. $500,000 from her and $300,000 from me, roughly.

Dr. Jim Dahle:
Okay, very cool. And what do you think your savings rate has been over the last seven or eight years, if you had to guess?

Steve:
I take a look at it usually from a post-tax perspective, even though I know a lot of people look at it pre-tax. We try to save about $3 for a dollar we spend from a post-tax basis, about 75%.

Dr. Jim Dahle:
Wow. Well, that's quite a savings rate. That explains why you're building wealth so quickly. The investments help, obviously, especially the last five years or so. But when you're putting that much money away, you just build wealth very, very quickly.

Tell us why this was so important to you to do that. A lot of people would have said, “You know what? Let's get a big fancy doctor house. Let's get a second home. Let's get a wake boat. Let's enjoy some of this money. We deferred gratification for so long.” Why was it important to you to have a 75% net savings rate?

Steve:
I think it goes back to that sense of security. I did not grow up with any money. And so just knowing that something was there, and interestingly enough, my wife grew up with some money, not fabulously wealthy, but definitely came from an upper middle class background. And she maybe feels even more than I did just by growing up with much less. We just kind of felt like being able to say no. If something happens at a job, if things aren't going the way we want it to, was kind of the number one priority.

And then I have no plans on stopping working, and maybe things will expand to getting that second house or getting that wake boat. Those are certainly on the table for spending in the future. But for us, we wanted the foundation and stability first. And then once we felt like it was easy to walk away from work, then we were going to expand out from there.

Dr. Jim Dahle:
The classic get rich first, huh?

Steve:
Yes.

Dr. Jim Dahle:
Yeah. Can you recall any disagreement the two of you ever had about money? What's the biggest disagreement you think you've had in how you invest or how you budget or spend or save or give over the last seven or eight years?

Steve:
Yeah. We actually have a fairly large disagreement. She, I think, doesn't have the same background in the markets and personal finance that I do, in addition to consuming every piece of material that the White Coat Investor has ever produced. I also listen to other finance podcasts and read other forums and other books.

And so, to me, it's kind of straightforward stuff. To her, there's definitely some skepticism around broad-based market index funds. There's some idea that maybe she'd be having a financial advisor do some of this work. Thus far, it has defaulted to me, but I think there's probably still some conversation to be had about that in the future. It has certainly helped that things have gone very well financially. And not that bear market means that you should be picking stocks. I obviously know that, but we haven't had to get to that point with how well things have gone in the market.

Dr. Jim Dahle:
Yeah, it's interesting. One of the benefits of sitting down, even for a one-time consultation, is your spouse gets to hear that you actually know what you're doing, and that is beneficial to a lot of couples. And to realize, “Oh, okay, well, maybe my spouse isn't out to lunch.”

Because there's a lot of people that are very confident about their finances and they're doing crazy stuff. Maybe your spouse worries that you're one of those people. And so for everybody out there, that's something to think about. That is a benefit of paying a few hundred dollars to have a one-hour consultation with a financial planner of some kind. Even if you really don't have any questions, you just want to check up, that is something you can do. There are firms out there that do that sort of a thing.

It's hard for them to build a business that way. Most financial advisory firms are set up to serve delegators. People that want to come and manage all their money indefinitely going forward. But there are some firms out there that will do hourly rate financial planning and they can do that sort of a service.

Steve:
And I think that's a great idea. I really want to be doing that. I got to find the people and make the time to do that in between working and taking care of my child. But I think that's a great idea. I have shown her the Vanguard page and she's looked at it. But I think it looks like it’s in Hebrew or Arabic characters to her or something when she takes a look. She sees the numbers of the actual ETFs and stuff. It's kind of looking like they're in a different language.

Dr. Jim Dahle:
Even sometimes just doing the chores, buying, selling, donating, moving money into the DAF, whatever, those sorts of things are worth having the less interested spouse do from time to time. Just so in case you fall off a mountain or something like I did, you want your spouse to be able to pick up where you leave off. So there's some benefit to that.

Now, you mentioned that your student loans are all gone. What's the breakdown of your net worth look like? What are your assets? What are your liabilities at this point?

Steve:
Yes, we don't have any debt. It was very important to my wife to not have any debt. Again, I think going back to that sort of safety net, our net worth would be much better if we didn't own our house in full. But we have a million dollars in our primary residence. And then the rest is about $1.5 million in taxable and then about half a million between our 401(k)s and backdoor Roth IRAs.

Dr. Jim Dahle:
This is a problem a lot of people have out there, that they're like, “Well, where else can I save for retirement? I don't know where to save for retirement. I already maxed out my 401(k) and my IRA.” You clearly did not have this problem. You've learned that you can always save more in taxable.

Steve:
Well, actually, I will say I did have this problem going back to everybody making mistakes. We have only been in the markets for I think maybe the past three and a half, four years. We did actually have extended periods of time with multiple six figures sitting in a money market. That was under the auspices of buying a seven figure house in cash. But things would have obviously, like I said, been much, much different if that was in the market and we went with a traditional mortgage and did things that way.

Again, for family reasons, we decided not to do that. It gave everybody peace of mind. I know it wasn't the optimal thing financially, but I was happy to make that sacrifice for my wife feeling better about it. And so, we did.

Dr. Jim Dahle:
Did you pay cash for the house?

Steve:
We did.

Dr. Jim Dahle:
You saved up the whole thing and walked in there and dropped a million dollars on the desk and said, “We're not going to do a mortgage.”

Steve:
Yeah. At the age of 34 or 35, yeah.

Dr. Jim Dahle:
That's pretty cool. What'd that feel like?

Steve:
It was harrowing. Sending the actual money transfer and they send you all these, “Don't get scammed” and all those sorts of things. And I quintuple checked it and called all the people. Wiring a million dollars is a really weird feeling, but it felt great being in the home sense. We picked something that wasn't too big, but also not too small. It's not some super fancy house, but it's obviously enough that a lot of people would be very grateful to live in.

Dr. Jim Dahle:
Yeah, a million dollars still goes a long way in the Midwest.

Steve:
It does.

Dr. Jim Dahle:
Very cool. Well, congratulations to both of you on your success. You guys are doing great. You should be very proud of yourselves. We're happy with any contribution we might have made towards your success over the years. Thank you so much for being willing to come on the podcast and share your story and inspire others to do the same.

Steve:
I really, again, appreciate everything you've done. It's made a huge difference in my life. So glad that you're still here with us to host this podcast today.

Dr. Jim Dahle:
I hope you enjoyed that podcast. It was a fun interview. We talked to so many people in this podcast that are just absolutely killing it. We're so proud of so many of you out there that are doing this well.

I was talking to him afterward. When I came out of training, Katie was staying at home with her oldest child and I was working for the military. We did not come out to an $800,000 pair of shovels to work on our pile. We came out with a $120,000 pile or shovel. That's all we had. That's what we were making literally when I was first in attending. That's what the Air Force was paying. It was $120,000 a year.

Yeah, there were a few tax breaks on it, but the truth is you don't pay that much in taxes when you're only making $120,000 anyway. And so, we had to be pretty careful budgeters. We still had a high savings rate. We hit the ground running financially in that we were financially literate. We had a written plan and we started building wealth. It took us about seven years to become millionaires.

Well, in that period of time, this couple were multimillionaires. They had $3 million in the time it took us to get $1 million. They bought a house for cash for crying out loud. So many of you have done way better than we ever did. And you should be proud of that.

But those of you out there who are not multimillionaires, seven years out of residency, don't think you're unusual or behind everybody else. A lot of times on this podcast, we're seeing the very high percentile people as far as financial literacy goes, as far as savings rates go.

They're saving 75% of their net income. You do not have to do that to be financially successful. You can catch up to that sort of success just by being persistent. Yes, you have to save something. I generally recommend 20% of gross. You have to save something. You do have to have plans for your debts, your mortgages, your student loans, et cetera. You can't just throw caution to the wind and blow everything and expect to be financially successful.

But you don't have to be as successful as some of the people we feature on this podcast. They're going to probably have estate tax problems. They're going to have problems where they got to figure out what can they spend money on that will make them happier? They've got problems and then they got to worry about, “How can we keep from ruining our kids with all the money we have?”

They're great problems to have, these first world problems, and we'll continue to talk about them here at the White Coat Investor but it's not necessarily some sort of requirement that you save 75% of your income or make $800,000 a year in order to be financially successful.

The whole point of this website is that you don't have to do those things and you can still be financially successful. You do want to make as much money as you can without burning out. You do want to save a good chunk of your income. You do need to invest it wisely, but you don't necessarily need to be FI in the first decade out of practice. It is an option though, obviously, if you're interested in that.

FINANCE 101: YOUR FINANCES AT THE BEGINNING OF THE YEAR

I mentioned at the beginning, we're going to talk about the beginning of the year. It's the 6th of January when this podcast drops. I mentioned earlier, it's the last day of our buy one, get one sale. This is a good time to pick up Fire Your Financial Advisor or No Hype Real Estate Investing or Continuing Financial Education course from last year and get our CFE23 course along with it. You can sign up for that at whitecoatinvestor.com/courses.

But even if you don't need a course, it's time to pay attention to your finances. This is January. And the amazing thing, when we look at our traffic for the website, it's always really high January to April. And then you guys go on summer vacation, just like we do. And the falls, kind of chill. And then coming in December, it kind of picks back up again.

That's just the way personal finance is. We think about it at the beginning of the year. Well, it's the beginning of the year. It's time to think about it. If you're not experiencing the success you would like, you need to make some changes in your life. And you can do that. You can save a little bit more money. You can earn a little bit more money. You can invest a little bit smarter. You can take care of those important financial tasks that maybe you've been putting off, like buying disability insurance from one of our recommended agents. You can go to whitecoatinvestor.com/insurance for that.

Or maybe you need to get a will in place. Or maybe you need to do some more extensive estate planning or give a thought or two to your asset protection plan. Wherever you're at, please take this as motivation to help you do that.

I wanted to talk a little bit about front-loading retirement accounts. Investing in tax-protected accounts is a good thing. Not only do those accounts get more asset protection in every state, some states even protect your IRAs completely, but in some states protect HSAs and 529s as well.

But they grow faster. You put the money in these accounts and they don't get taxed as they grow, even if you're buying and selling within them. And so, you want to invest as much as you can inside these tax-protected and retirement accounts rather than outside of them.

As much as you can, try to front-load your contributions to those things. For the most part, you're trying to use your earnings in the early part of the year to go into retirement accounts and HSAs, 529s, whatever. And later in the year is when the money goes into your taxable accounts. That gives you a few more months of that extra tax protection.

And so, the first thing that we fund every year is our HSA. HSA is triple tax-free. And every year for like the last 14, 15 years, we have put the maximum contribution into an HSA basically the first week of January. And we have invested in equities the entire time. In fact, U.S. equities, we basically just put it all into total stock market fund just for simplicity. And obviously over the last 15 years, that has done very well. I think our HSA is pushing a quarter million dollars. And a good chunk of that is because we front-loaded it every year. And that's what happens when you start front-loading these sorts of accounts.

We also fund very early our backdoor Roth IRAs. You can do one of these for yourself, one of these for your spouse. It usually takes a few more days than the HSA. The HSA, you can usually dump in January 2nd or whatever. What often happens with the backdoor Roth is the money's got to sit there for a few days or a week or as much as three weeks I've heard before, before they let you do a Roth conversion on it.

Two-step process, contribution to a traditional IRA, then a conversion to a Roth IRA. Yes, if you got some extra money in there from the growth in between those two steps, you ought to convert that as well. And you'll owe taxes on $16 or whatever earned in between contribution and conversion. But otherwise it's generally a tax-free conversion because you didn't get a tax deduction for making the contribution to the traditional IRA because you make too much and you have a plan at work.

You can do more though. That's not the only things you can put in in January. Many of us have control over our individual 401(k)s. And the IRS does not care when you make the money as long as you make it during that year. You don't have to earn it before you can put it into the 401(k). Now you have to have some money put into the 401(k) but you don't have to earn it. You have to earn it by the end of the year to justify the contribution. But if you know you're going to make enough money to max the thing out, you can max the thing out right away.

What I end up doing in my physician partnership where I make my employee contribution is I send them a check in January. For last year it was $23,000. I think this year is $23,500. I send them a check and I say, “Put this in my 401(k).” Now I wait until April of the next year to make the profit sharing or employer contribution to that 401(k) because I just don't know how much I'm going to make and how much they let me contribute to it. I don't practice medicine enough to be able to max that account out. So I got to wait a while to put in the employer contribution.

But you know what Katie and I do with our first paychecks from WCI of the year? We max out our WCI 401(k)s. We happen to do mega backdoor Roth contributions in that but we do it early in the year. And we've always done this as early in the year as we could.

Now in the beginning, we didn't have enough money to max everything out in January. We couldn't do it. But every year we tried to move it up. Maybe the first year you come out of training, you don't even have any money to do your backdoor Roth IRAs and you end up doing it April of the next year. Well, then you move it up to January or up to December the year after that and maybe October the year after that. And eventually you get to the point where you're doing it early in the year, January, February, March, et cetera.

And you can gradually move everything up. Maybe it takes you four or five months to max out that 401(k). That's okay. Better to get it in there in the first four months of the year than spread it out over all 12 months of the year. You get a little bit of extra tax protected growth from front-loading your accounts as much as you can.

Now, this is obviously the maximizer approach. And satisficer works for most of us in all the things we do. But if you're trying to get the maximum benefits out of those accounts, front-load them. You can do it with your HSA, you can do it with 529s, you can do it with your 401(k)s. A lot of times your cash balance plans won't let you do it. Mine won't let me front-load it at all. We have to spread our contributions out throughout the year and that's okay. Whatever they want to make me do is okay.

But as a general rule, your savings early in the year ought to go toward the tax protective accounts and the savings toward the end of the year, if any, can go toward your taxable accounts. Or maybe that's when you spend more money or give more money or whatever. But that front-loading effect does have an effect on how quickly your accounts can grow.

SPONSOR

Today's sponsor, Black Swan Real Estate, offers accredited investors access to private multifamily real estate investments with an investor-first model. Unlike most firms, Black Swan collects no GP-level fees and takes no profit until investors receive a full return of capital.

Their physician-led team brings a hands-on approach to managing their $375 million portfolio, ensuring every asset is optimized for cash flow, appreciation, and tax advantages. With a track record of meeting and exceeding return targets, Black Swan Real Estate provides stability and growth for long-term wealth building. Discover more at whitecoatinvestor.com/blackswan.

All right, we've come to the end of another great podcast. This is the Milestones podcast. The regular podcast drops Thursdays. The Milestone podcast drops Mondays. You can apply to be on this podcast. We'd love to feature your milestone, congratulate you on your accomplishment, and use it to inspire others to do the same. You can apply at whitecoatinvestor.com/milestones.

All right, keep your head up, shoulders back. We'll see you this Thursday for the next podcast and next week for the next Milestone.

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.