The Story of The White Coat Investor Part 1

I've been blogging as The White Coat Investor for over 7 years, but I've never really told my story all the way through on this blog. In fact, I've learned over the years that most blog readers haven't read more than a tiny percentage of what I've written. In a series of three posts this week (it was going to be just one big post, but it turned into a 6500 word diatribe), you will get to know me a whole lot better. Since this is a financial blog, this is going to focus heavily on financial aspects, despite the fact that finances are actually a relatively small part of my life. Part one will cover childhood through medical school, part two will cover residency up until the start of The White Coat Investor, and part three will cover 2011 to present.

What Kind of a Childhood Leads to a Life as a Financial Blogger?

I grew up in Alaska as the third of six kids of an electrical engineer and a homemaker. I left the state only three times in 18 years before leaving for college. My parents got the big things right financially, mostly living within their income aside from my father's vice of flying small bush planes. And when I say small, I'm talking about 2 seat planes that will convince you that runways need not be paved, level, flat, long, or straight. But there wasn't a lot of extra money. We drove used cars, we never stayed in hotels on vacation, and we drank powdered milk because the price of real milk in Alaska was so outrageous. One of our favorite snacks was uncooked spaghetti. You get the idea. But we never starved, we were never homeless, and we attended the “rich” public high school on the hillside, even if we lived at the base of the hill.

My parents weren't really much into saving or investing, but my father eventually retired with a pension and some health care from his job with the state. They had no financial advisor while I lived at home. The only time I can ever remember anything about investing was one time when someone talked my dad into buying some options, and he talked me into going along with him using $500 of my Alaska Permanent Fund dividend money.

Needless to say, we both lost our entire “investment.” While there was always the expectation (both in my parents and myself) that I would go to college, it was very clear to me from watching my older sisters head off to school that there would not be any money provided by my parents for my schooling, so I didn't even ask. For some reason, that didn't bother me a bit. I figured that was the way it was supposed to be since most of my friends were in the same boat. We all knew college was going to involve some jobs and some loans.

The College Years

I applied to and was accepted to seven colleges. I had not visited any of their campuses. Most were “semi-competitive” (Rice, University of Chicago, Colorado College, Brigham Young) but in the end only one offered me a scholarship, and so I boxed up my mountain bike and off I went to the land of my birth- Utah. (I know I said I was raised in Alaska, but I was born in Utah, on my first vacation, before my mom decided Alaskan physicians could be trusted after all.) Tuition was covered, as long as I maintained a 3.5, and I barely managed to do that as a freshman. Living expenses that year were covered with my first and only student loan. The terms were exceptionally good. It was an 8% loan from the State of Alaska, but it was subsidized and payments were deferred while I was in college, medical school, residency, and military service. I paid it back 17 years later in one lump sum and with inflation, I figure I paid off a $5K loan for about $3,100 in 1993 dollars. My parents were kind enough to fly me home for the summer and I took up a job at a climbing gym.

I subsequently spent two years “without purse or scrip” in Arizona. While rent and utilities were covered, I lived on about $160 a month, traveled mostly by bicycle, purchased almost no material goods, and learned that I wanted to spend my life in the service of others. The “missionary zeal” behind The White Coat Investor is hardly new to me. Upon returning home, I fell in with a landscaping crew. The work was hard, I made a little money, and a month later I was off to college again. My parents actually did help me out quite a bit my sophomore year. Not only did they fly me to school (and home for Christmas and the next summer), but they covered my rent. I had five roommates and paid $188/month. Aside from that, I lived on the $1000+ I earned from a month of mowing lawns for the next 8 months. Missionary work had taught me to study, and mowing lawns had given me the motivation to do so. Keeping that 3.5 was no longer a challenge, and I had a 4.0 the next couple of years while traveling most weekends playing college hockey. The next summer, I spent a month at the University of Oklahoma, mostly checking the research box required to get into medical school. I spent the rest of the summer mowing lawns again. I remember I wore the bottom off of a pair of boots and came to the firm realization that it was a whole lot easier earning money sitting on my butt than walking 10 miles a day.

I was now into my junior year, and well into the undergraduate “must get into medical school” stress well-known to most readers of this blog. As I finished up medical school pre-reqs and moved into the upper level classes for my molecular biology major and chemistry minor, I also began serious preparation for the MCAT and even more serious pursuit of a fair damsel who was playing her cards close to her chest. She didn't seem to care all that much as I took the MCAT, took my finals, and headed home to the Tierra de la Nieve Eterna.

I was clearly getting smarter, as this year I had lined up a job in tourism instead of going back to mowing lawns. I spent the summer giving a tour and being the host in a dining car on a train that ran from Anchorage to Fairbanks. The days were 15 hours long, and 7 hours of each day was overtime. One day we went to Fairbanks, and the next back to Anchorage. Then we had a day off before doing it again. After that, we had three days off. If you were really hungry, you could use two of those days to do another round-trip, all of which would be overtime. Add in the tips (and I really hustled for tips), and I finished the summer with $13K in the bank, over three times as much as I could have made mowing lawns. I never felt so rich in my life. Halfway through the summer, Katie showed up at our dinner table unannounced. My roommates had arranged with my parents for her to come stay with us for a few weeks as a birthday present for me. She got a temp job in the post office and got to know my family. Needless to say, she was a bit scarred by that experience and certainly not ready to jump into any long-term commitment. Who could blame her? Even though she was already a junior in college, she was still technically a teenager.

I “bought” my parents' Geo Prizm off them for a $3K note. “Pay us back when you start making money,” the note said, and with a friend, I spent 48 hours over 3 1/2 days driving to school that Fall. Senior level classes, ice hockey, and lots of long walks and talks until the medical school interviews started rolling in. U of Maryland, U of Vermont, AZCOM, PCOM, and finally the University of Utah, no small feat considering I was applying for one of the 15 out-of-state slots. When that acceptance showed up, I cancelled the rest of my interviews except The University of Washington, through the WAMI program, where I would be treated as an in-stater. By halfway through that interview, I was secretly mocking the rest of the applicants for their nervousness, since I had already made my decision, and it didn't involve living in Anchorage, Seattle, Anchorage, and then Seattle again while Katie was finishing school in Utah.

We were engaged at center ice between the 2nd and 3rd period during a game in January. I figured that was my best chance to get her to say yes. The date was set for mid-summer. Then I realized there was no way I was going to be able to pay for medical school like I had paid for my undergraduate education. And I was very sick of being poor. Carrying a full academic load, playing college hockey, donating plasma and holding down a part-time job was getting old.

Katie's father was an accountant in the Air Force, and she had one brother at the Air Force Academy and another in ROTC. For the first time in my life, I considered military service. It sounded like an adventure, her family was obviously very supportive, I love my country as much as the next guy, and we could sure use the money. At the time, the military covered tuition, fees, and paid $922 per month as a living stipend. I had no idea how we were going to be able to spend 2-3 times as much as I had been living on up until that point. We felt so rich we (stupidly) bought a house, thanks to her parents co-signing. Two weeks later, Salt Lake City's first tornado tore through the neighborhood. Our little condo was spared, but we hadn't even moved in yet!

Medical School

Katie was commuting to school on a bus to finish her last semester in the undergraduate Athletic Training program, and I was playing foosball. I mean studying medicine. Well, there was a lot less foosball and a lot more studying after that first gross anatomy test. I was clearly no longer one of the top students in the class like I had been my entire life. There was still plenty of foosball and rock climbing, but a lot of studying too. I passed anatomy, Katie graduated, and she scored an incredibly low paying job as a ski instructor. It did come with benefits though- a free ski pass for her and a $10 season pass for me. Newlywed without kids, rock climbing a couple of afternoons a week in the Fall and Spring and skiing a couple of afternoons in the Winter, plenty of foosball, some great road trips done on the cheap, and finally learning something I was going to use the rest of my life — we willl forever look back on the four years of medical school as some of the best years of our lives.

It's true that I brought all the debt into the marriage and Katie brought all the assets. Not only did she have a $20K “college fund” provided to her by her grandparents (most of which she didn't need for school thanks to scholarships, choosing an inexpensive school, and her constant part-time jobs) but her parents chipped in $300 a month into our budget for most of that first year as she finished up school. That money was the origin of my idea of a “20s fund” for our kids. There is no time in your adult life when a little extra money is so useful like in your 20s, and we're incredibly grateful for the money received and are doing our best to pay it forward.

Katie was a bit restless. That summer she took a job as a physical therapy aide, incredibly low-paying for a four year degree, and realized she didn't want to do that the rest of her life. She applied to PA school a couple of times, but without the luxury I had to apply all over the country (since we weren't willing to split up) and little clinical experience, the odds were stacked against her. Through some friends, she decided to pursue a degree in Adaptive Physical Education instead. She had a grant that covered tuition and even a side job eventually. (It turned out that $922 really didn't cover our expenses especially given our $640 mortgage payment.) We ended up graduating at the same time, her with a master's and me with a doctorate. But not before we started getting screwed by financial professionals.

In retrospect, our first big financial mistake together was buying a house. I mean, who buys a house with a mortgage equal to 2/3 their income in a place they know they're leaving in 4 years? Financial idiots, that's who. While we technically sold it for more than we paid for it, we lost thousands on that deal. What the realtor should have told us was that we had no business buying a house. We refinanced it twice in those four years, both times at a minimally lower rate. But the closing costs were rolled into the loan and one of the times I caught the lender slipping in a pre-payment penalty. What the lender should have told us was that we shouldn't refinance a loan when we're selling in a year or two. A friend came by and sold us an inappropriate whole life policy. I won't tell you which company he was interning for that summer, but it rhymes with Birthtestern Too Cruel. We didn't have much money (especially with a mortgage eating up 2/3 of my income) so he only managed to sell us a $20,000 whole life policy and an overpriced $280,000 term life policy. 7 years later, when I finally dumped that whole life policy, our cumulative return on the premiums paid was -33%.

Financially, we had a positive net worth, which put us way ahead of most of our residency peers. Return tomorrow for part two!

What financial mistakes have you made that others can learn from?  What did you do right in your early years? Share your experiences and comment below!