Today we have a special guest on the podcast, Dr. Erik Hofmeister. Dr. Hofmeister is going to talk to us about veterinary medicine as well as the finances of veterinarians and really give us some insight into those who are physicians but not human physicians. He is a board-certified anesthesiologist, a diplomat of the American and European Colleges of Veterinary Anesthesia and Analgesia. He received his DVM from Washington State University in 2000 and then did an internship in small animal medicine and surgery. He did a residency in anesthesia at Georgia and then stayed on faculty there from 2004-2016, where he was a section chief for surgery and earned master's degrees in health promotion of behavior and sport pedagogy. He served as a department chair for surgery at Midwestern from 2016-2019, and then went to Auburn where he is the professor of anesthesia there. He is a deputy editor of The Veterinary Anesthesia and Analgesia journal. And his research interests include the scholarship of teaching and learning evidence-based decision making and measurement and testing.

 

How Upbringing Affects Financial Views 

Welcome to the White Coat Investor podcast, Erik. We've had some veterinarians on before but not a lot. A lot of our audience may not be that familiar with your career, both your educational path and your career path. But before we get to that, let's go back even further. Tell us about your upbringing and how that affected your views on money.

“It's really amazing how much upbringing affects you. I was raised in the upper-middle class in West LA. My father was an engineer. My mother was a teacher. So, we had a pretty good income and lived a pretty good lifestyle, but my parents invested in some kind of private equity deal and ended up losing basically their whole retirement investing when it fell under.

My sister was coming through as a teenager when money was rolling in, everything was flush. Then I came through in very much lean times. It's really interesting to see how that affected us. She really likes nice cars, nice things and all that, and I'm just accustomed to just doing without. It's really interesting to see. We're both raised by the same parents in the same situation but with very different financial upbringings. Then, my parents did have some rental property experience, but they never invested in the stock market. They equated it with gambling. So, for most of my life, I've just thought that it's gambling. That's kind of my basic background.”

I went over the highlights of your education and training and career so far. Do you feel like that's pretty typical for a veterinarian? You seem much more academically inclined than the typical practitioner?

“That is a good question. I think when we're talking about veterinary medicine, I tend to lump it into private practice general practitioners and specialists that tend to be the ones that go into academia. For academics, it's pretty typical: go to school, internship, residency, faculty position, or specialty private practice, but there are a lot of different pathways that people take. Especially for some reason, it seems like radiologists often go out in practice for a while and then come back and do their residency.

So, it differs a little bit by discipline, but it's a lot easier to go through straight than to take a spell in practice because you get accustomed to making that decent paycheck. Then going back and making $25,000-$28,000 as an intern is tough to sell.”

 

Paying for School 

Yeah, I can certainly relate to that. How did you pay for your schooling initially? Did you borrow? Did you work your way through? How did that happen?

“Yeah. I was very fortunate. I was able to get residency in Washington state during my undergrad time. I was able to get in-state tuition, which helps tremendously. Then, my parents were able to cashflow it for me. I was extremely fortunate in that I didn't graduate with any debt there. They definitely sacrificed to make that happen.

I think it's a little less doable now than it was 25 years ago, just with the inflation of education being so much higher. It's a lot like healthcare; it's gone way past CPI inflation. It’s definitely harder for upper middle-class people to just cashflow it from vet school education now that I got through that way.”

Let's talk about veterinary education these days. What does a typical education entail? What do you do as an undergrad? What do you do in school? Do people typically do postgraduate training? What does it cost? Give us the details on it.

“I think the undergrad looks a lot like pre-med. In fact, sometimes we'll have people go to vet school that were aiming to go to med school. All the prerequisites are pretty similar—biochem, organic chem, basic physics, those kinds of things. Undergrad is going to be pretty similar. The main difference obviously is the experience that you get. We like to see students have hours of experience working for a vet clinic and different animal interactive settings. Then, once they get into vet school, it's a little bit different from med school in that we tend to have three preclinical years and then one clinical year instead of two and two, although some vet schools do have a two and two system.

Your clinic year is a lot like what I understand from human medicine. You rotate through different services, different specialties, get an opportunity to see cases, and get your basic clinical skills. Then, you graduate and you have a DVM and you get a license. In contrast to human medicine, you can just go out and practice then and be a fully qualified practitioner, or you can go on for additional training if you want to do a specialty or something like that.”

 

Veterinarian Residency Programs 

What would you say is typical? Do most people do a residency? Do most people not do a residency?

“About 70% do not do an internship. They just go out and practice. The rotating internship is your first year out if you go to an internship. That's within a species, so there's small animals, equine, and larger food animals. After your one-year internship, then you go to the match again for a residency, or some people have to do a specialty internship if they don't get a residency, which is again, just a one-year timeframe in your discipline. So, you do a specialty internship in surgery, for example, and hopefully become more qualified to do a residency.

For internships, there are about 1,600 positions at 500 programs. The match rate is about 67%. The majority of those that apply for an internship get one, although again, that's only about 30% of new graduates. Then for residency, there's about 400 positions at 330 programs. Match rate for residency is only about 34%. Only about a third of those who apply for a residency end up matching with one. The rates vary substantially. The match rate for some disciplines, like zoological medicine or exotics or herd health, are in the single digits—7%, 8%. Some of the disciplines are over 66%, like emergency critical care, lab animal reach, and oncology. It really depends on what you want to go into, but most new graduates will go into just general practice, and that might be small animal care or large animal care, mixed animal practice, etc.”

Well, it sounds like matching into a residency is really competitive. Those are pretty low match rates.

“It is. Yes. If you are planning for your life to go a certain way, if you're like, ‘I need to be a surgeon and that's the only way I can be happy,' that's going to be tough because there's no guarantees. I know some people who have done two surgery specialty internships and still aren't a match for residency. And then it's like, well you spent three years as an intern basically, making $25,000-$30,000 and you don't get the payout at the end of becoming a specialist. There's some pretty substantial sunk cost risk there.”

Do the residencies pay any more than the internships?

“They do marginally. Yeah. It depends on obviously if you're in an academic program vs. a private practice, but they're still probably in the mid $30,000, maybe upward to $40,000 if you're in LA or something like that.”

What about getting into vet school? Is it competitive?

“I'd say so. It depends on who you ask. The statistics are about 1.6 applicants* or so per seat in the US and Canada [Dr. Hofmeister updated this after recording. More information found here. Further information was also provided after the podcast aired by a listener and can be found here.] It's a little bit competitive. I think that if you talk to the applicants, they would say, ‘Oh my gosh, it's impossible to get to vet school,' but the actual statistics aren't too catastrophic. I think it is relatively comparable to human medicine.”

It sounds easier if you're saying five out of six get in. That's a lot better than medical school where about one-third are getting in of applicants—at least the first time they apply.

“That might be. I'm not sure about first-time applicant stats on that. Yeah, I'd say it's reasonably competitive, but we've had more schools opening up lately, more seats because, of course, federal funding has been decreasing, state funding has been decreasing. A lot more schools are trying to open up more seats to get those tuition dollars in.”

 

Veterinarian Salaries 

How about after you come out? What are veterinarians making—generalists and specialists? And what can veterinarians do to make more to be higher on that range of incomes?

“It definitely differs depending on if you go into general practice vs. an internship. Like I said, interns are in the $33,000 range, and statistically, they have the highest debt-income ratio, which is not surprising because they're deferring making a reasonable salary. New grads are about $100,000, but it depends on your discipline. A small animal practice, you're going to be making more than in large animal practice, typically.

The compensation structure is that a lot of them have a guaranteed salary and then you have a production on top of that. If you exceed your production that generated that salary, you can bring in additional income. Typically, the total salary is between 22%-25% of your production. If a vet brings in about $400,000 into the practice and that's paid, not billed, they can expect a salary around $100,000. With academics, corporate, and government, it's just a straight salary. There's no production incentive in most academic settings. To make more, it's pretty similar to human medicine: work more hours, see more cases, see sicker cases because your average cost transaction is typically going to be higher for sicker cases than for like wellness appointments. And taking in relief shifts, especially working ER, a lot of hospitals will pay $1,000, $1,500 for relief shifts, which for a vet is a pretty reasonable amount.

And then ownership is really where it's at for veterinary medicine. This is why you see lots of vet clinics that have 1, 2, 3, 4 doctors because you get to be an associate when you graduate. You're looking at the bottom line. You're like, ‘Man, if I just bought a practice, I would be making way more.' So, it tends to create the situation where you have lots of little practices because that's really the path, at least historically, for earning more money as a vet.”

You say “at least historically.” Has that changed recently?

“Yes. The surveys for new graduates are that not as many of them are interested in ownership. I think that, like in human medicine, we're seeing the private equity firms buying up clinics and making more vets employees. On the one hand, like I said, new grads seem to be OK with that. But I don't think that they realize the potential consequences to their financial life long term. To not have as many ownership opportunities as we used to have because of all this consolidation might make it more problematic 20, 30 years down the line.”

 

Debt-to-Income Ratio for Veterinarians 

Now I understand that the typical veterinarians are coming out with a couple hundred thousand dollars in debt these days. And if they're making $100,000, that's not an awesome ratio. The average debt to average income is significantly worse than it is for human medicine. What's your take on that debt-to-income ratio and on the viability of veterinary medicine as a smart financial move?

“Again, like human medicine, it really depends on where you go to school and what you do jobs-wise after. If you go to a state school and you get a reasonably well-paying job when you graduate, I think it could be a reasonable investment. You should be able to graduate with a less than 2:1 debt-to-income ratio—if you go to a state school and you get a reasonably paying job in the $100,000 range. The problem is, if you decide you want to go to an expensive school. Those are usually the Island schools; there are some private schools in the US. What I see a lot is students are like, ‘I have to be a veterinarian. That's the only thing I could imagine being. It's what I've always wanted to do.' They don't get into their state school the first couple of times; then they apply to the private schools.

And they're just not thinking it through. That the private schools can be in the $350,000-$400,000 range at the end of it. Then, even if you're making a reasonable salary, like $100,000, that's a 4:1 debt-to-income ratio. Obviously, the only way you're getting rid of that is with the income-driven repayment options. I think that's a serious problem. The other thing that you see is I interview a lot of students who come from a little town in rural Kentucky, and they're like, ‘I want to go back to my little town in rural Kentucky and be the vet,' because that's what their model is, that's what they've seen. That's kind of how they got interested in going to vet school.

And I say, ‘That's great, but you're going to make like $50,000, $60,000. What's really going to happen is you're going to end up practicing small animal medicine in Atlanta to pay your debt in.' They have these visions of what they want their life to be that are limited because of the debt that they incur going to school. It's just a disconnect of reality. If they came and they were like, ‘I understand that I'm going to have to sacrifice. And my whole life is going to be dramatically affected by this decision because of the finances,' I would say, ‘OK, you're going into it with your eyes open.' But most of them are like, ‘I just want to be a little small-town vet and it's okay if I incur $400,000 in debt to get there.'

More information here:

How to Fix the Veterinarian Student Loan Debt Problem 

 

Becoming Financially Independent as a Vet

Now you've been pretty successful financially. You've become financially independent, I understand.

“Yes, we hit that last year.”

How'd you manage to do that as a veterinarian? Obviously, you trained a while ago and so maybe avoided the more expensive schooling that's available now, but how did you do that throughout your career?

“Obviously, graduating without debt was tremendously helpful. I don't think that there's that much magic to it. My first salary as a new assistant professor was $80,000 in 2004, and it slowly went up to $130,000 by 2016. It's about $160,000 now. So, it's a reasonable salary, I feel. I bought a house way below what I could afford. I got a reasonably sized house when I got my first attending job. My wife is a pharmacist. She had a very variable salary. Her first year was in retail. She made $100,000, but then she's been a grad student making the $30,000 range. Currently she's at $80,000. So, having another salary helps a lot.

But what I discovered is that year after year, I'm like, ‘Why do I have more money in my bank account at the end of the year than I had at the beginning?' I was very confused by that because I didn't know anyone in that situation. And I was like, ‘What am I going to do with this?' I mean, I guess I'll just build a million-dollar home one day. I didn't have a clear vision for my finances. I just happened to have more. Then I discovered in 2017 Mr. Money Mustache, and I was like, ‘Oh, hey, I can use this money to retire early if I wanted to.' I started to be more deliberate and realized how I got there. I never considered it frugality. I was just living my life. I think frugality is kind of baked into veterinary medicine.

If you read the James Herriot books and stuff, we're always trying to do more with less to the point where early in my training, in the '90s, vets would re-sterilize gloves and re-sterilize needles and all this stuff that you're like, ‘That's bad and it's nonsense.' And it actually probably costs you more because you're having to pay the staff to do it. But those kinds of things, it's just baked into veterinary medicine. I think that I've always been, I don't even consider it frugal. I just consider it maybe not extravagant.”

It's interesting because most doctors feel this pressure, the societal pressure. ‘You're a doctor, you're supposed to be rich. You can pay the bills. You're supposed to be wealthy.' Even though they're coming out of school owing $400,000, they feel this pressure. Is that not present at all in veterinary medicine?

“No. And I would say almost the opposite. If there's someone who drives a BMW into our parking lot, I think that there's this general frowning attitude. People are driving farm trucks to work routinely. And so, yeah, I don't think that expectation is there for us. Or at least it hasn't been.

Salaries the past few years have been going up relatively steeper than they had the previous 15 years or so. As vets get to the point where they're maybe having a higher income that might become an issue, but I'd say in general, we definitely don't feel those societal expectations. I would say, like I said, maybe even flipped.”

 

Portfolio Allocation 

It sounds like in 2017 you got on the FI train. What did you start investing in? All this cash you had sitting around, what did you put it in? What does your portfolio look like?

“Right now, about half is in taxable. Half is in 403(b)/governmental 457s. We have a small Roth IRA, but I only started that a couple of years ago. I did it because my family had experience with rental houses in 2008 and 2009, when everything tanked. I looked around and I was like, ‘Oh, hey, I can pick these up for a song and a dance.' I got a couple of single-family homes in Athens where I was working before. Those have appreciated marginally, but more importantly, they're paid off. So, we get a gross rental income of about $3,200 a month for those, which is really nice.

And then once I discovered that the stock market wasn't gambling and that it's actually buying real goods that exist in the world, we got on board. Our allocation is about 60% US stocks that's in a 500 US stock, 30% international. A little bit in REIT, just to diversify away from the single-family homes. And then about 5% in muni bonds in our taxable that we're imagining for our kind of early retirement spending. Then I also have a pension from the state of Georgia that kicks in when I turn 60. That's estimated to be $2,500 a month, but it's not inflation adjusting. Between now and 15 years in the future, I don't expect that to help me very much. But it's nice to have at least a little bit of guaranteed income there.”

So a fairly traditional portfolio. Stocks, bonds, and real estate.

“Yeah, exactly. Keep it pretty simple. I think the single-family homes are the only thing that caused me a little bit of stress being a landlord and just having to get tenants in. It's in a college town, so the turnover is relatively substantial. Everybody wants to have their three large size dogs in there, as well. That's always a little bit of a struggle, just making sure that we get good tenants, but so far they've turned out pretty well.”

As a veterinarian, do you allow pets in your rentals?

“Yeah, for sure. Because early on, most of my tenants were through the vet school and I had some connection to them at least. If they were vet students, they were going to trash their rental house. Almost every vet student comes with a pet. So, I considered that par for the course there.”

So, was it worth it to deal with the hassles of being a landlord?

“That's a good question. I think that they've turned out to be very sound financially. I bought them for like $110,000 and $120,000. The return on investment has been pretty good for them. The hassle has not been that substantial, but probably if I knew then what I know now, I would've just ploughed into all US stocks and forgotten the headache. We had our main house in Athens that we had been renting out that we just sold maybe a year and a half ago. I just put all of that into our stock fund when I sold it. I was like I don't want to buy another rental and increase that headache.”

 

Should You Buy Health Insurance for a Pet?

Let's turn the page a little bit. I've got a question for you. Should people buy pet health insurance?

“I will say, it's easier for the vet. From our standpoint, most of the insurances reimburse the client. The client pays us, so we get paid. We don't have to deal with insurance company issues. Also from our standpoint, it lowers the barriers to the clients being able to pay for stuff. We'll tend to get people saying yes more than if they don't have insurance. From our standpoint, I always liked having clients who had insurance. From the pet owner standpoint, it's insurance. The insurance companies have to make their money. I would strongly encourage any of your readers that are high-income professionals to just self-insure. The peak expenses aren't that much. Your worst-case scenario is like a 12-year-old golden retriever who needs multiple transfusions and is swirling the drain. That's going to be maybe $15,000 and you should be able to cash flow that.

I guess I'd say, if it's hard for you to spend on your pet, maybe it would be like a psychological way to encourage you to do that. Similarly with wellness care, if you have a hard time justifying the $250 for a yearly exam, maybe the insurance would be helpful there. Mostly in terms of convincing you to go in for regular exams to keep your pet healthy rather than financially. So, yeah, I think it's probably not a great deal for most of the listeners here. We do have people that have financial struggles pretty routinely, and there's a lot of care credit and these kinds of institutions that can loan money for short-term veterinary expenses. Even with people that can't cash flow it, there are other alternatives. That's my take on it. I don't have health insurance for my pets, and I never have.”

What does it cost? If I have a 2-year-old cat, what's it cost me to insure that cat?

“Obviously, it varies, but it's around $500 a year. The deductible is not terribly substantial. You can get 100% coverage. Most of them are like 80%-90% coverage and includes wellness and catastrophic accidents and cancer and all those kinds of things. But again, even if you have a dog who has a cruciate ligament rupture, that's probably going to be a $4,000-$5,000 surgery. If you just saved that $500 and invested at times, whatever, eight or nine years, you would be breaking even. Then you'd be well off if you didn't have a dog that got a cruciate ligament tear. Like I said, like all insurance products, it's a deal for the insurance company rather than the user for the most part. The expenses for veterinary care are just not that great. You're not going to get bankrupt by your vet bill.”

 

End-of-Life Care for Pets

Let's talk a little bit about end-of-life care and end-of-life discussions. What do you think about people that treat their pets like a family member, such as spending tens of thousands to prolong their life by a few months instead of putting the pet down?

“I don't think I'd have a job if we didn't have those people. It's like with breeds, if people didn't buy dachshunds and bulldogs and all that kind of stuff, we would be rapidly out of a job. I think that obviously, it comes down to individual values. I do personally get somewhat frustrated by that. If you've got a 10-year-old great dane with heart failure and kidney failure, and now we're doing surgery on him, I'm like, ‘This dog has reached its expiration date. What are we really going to accomplish here?' I think that probably one thing that factors into this is the suddenness with which it happens to the owner. My impression is that people have some idea that something's wrong. They're like, ‘Oh, there's this tumor growing in me, maybe I should go check that out.' And we only really see animals once it reaches some catastrophic stage a lot of the time.

I think that that's part of it is that the suddenness plays a role. So, they just haven't thought about, ‘Oh my gosh, what am I going to do if my dog has a hemo abdomen, because he had a splenic tumor rupture.' I think there's also a lot of guilt that runs into things like owners run over their pet, and then they come in with this multiple pelvic fracture case. And they're like ‘Do anything' because they feel bad about it, which I understand again. But it's tough. We know if you have a hemo abdomen case, the median survival time is 49 days, and that's going to be a probably $5,000-$8,000 bill at the minimum. So, is it worth that? I think that people make pretty emotional decisions rather than practical ones.

I had this little bit of personal experience. I had a cat with hypertrophic cardiomyopathy throw a clot and ran her in. We had a healthcare discussion about what we would do for our pets, but that was when they were like 5 years old. Now I had this 17-year-old cat that threw a clot. And so, I was just acting on what we decided 12 years before for what to do with them. I'm like, ‘Yeah, let's do TPA and everything.' But if I'd thought about it for a second, I'm like, my cat's 17, she's got HCM, median survival time of six months, even if she makes it through this. That's really not worth the thousands to me.

I also struggle with a complex philosophical problem. But if you've got some young puppy who the owners just got a couple of months ago, gets hit by a car. We're looking at a $5,000-$8,000 surgery. You can buy a lot of puppies for $5,000. I understand that for the individual, it'll be like, ‘Yeah, but no, this is my puppy.' I also understand that there's some obligation that we have to take care of our pets, but I think about that a lot. I'm like there are a lot of animals out there that need homes and spending all these resources on this one animal sometimes makes that a little bit hard for me.”

 

Comparative Medicine: Animal vs. Human 

One of the most interesting things about veterinary medicine is the comparison between species. Now, as human physicians, we get very little training in comparative medicine. What can we learn from our veterinary colleagues in that respect?

“It's really interesting to me to think about what human medical practitioners learn because my wife is a pharmacist. So, I'll treat her as if she's a veterinarian and I'll be like, ‘Oh yeah, of course, you could use this drug and this drug and this drug.' And she's like, ‘What are you talking about?' I'm like, ‘Oh, don't you know that?' It's just walk around knowledge, I think, realizing how similar animals actually are among each other. I really like having medical professionals as clients because then I can talk to them more easily. We use the same drugs: propofol and methadone and dexamethasone and anesthesia are basically identical across species. And that's true for internal medicine and dermatology, etc.

I really like cooperating with clients that are medical professionals. Sometimes they are brought into a procedure. They're like, ‘Hey, we do this procedure on people. Can we do that in animals?' I'm like, ‘Sure. It's an animal, let's try it.' Sometimes I'm like, ‘Well, but why don't you do this in medicine?' There are some drugs that we use like Tiletamine, steroid anesthetics like Alfaxalone. It sounds like human medicine. They still use a lot of saline even though it causes acidosis and is associated with poor outcomes. So, there are things like this where I'm like, ‘Why do you guys do it this way?' I'm not an oncologist, but I've heard oncologists be like, ‘Yeah, dogs with naturally occurring lymphoma are just like people.' And I'm like, ‘OK, well, why aren't we using dogs as a model for that?'

I think the other thing to realize is that you can get quite a high-level specialty care for your pet. If you don't like an answer that you get from your general practitioner, realize you can get a referral and we have a 3T MRI, we have a variant system edge for radiosurgery. We do ultrasound and guided blocks, thoracoscopy, all these sorts of things. But at the same time, there's some stuff that we don't do. We don't do transplants except for kidneys in cats. We don't really do long-term dialysis; cardiac bypasses are pretty rare. There are some things that we just don't do in veterinary medicine, where I've had medical practitioners come in and they're like, ‘Oh, can you just do this?' I'm like, ‘We don't really have a dialysis unit, so sorry.'

What's the largest endotracheal tube you've ever placed?

“We have tubes up to 35. So, I'll usually use those for the big draft horses or sometimes the really big ruminants or one of my colleagues who did a giraffe last year. We used it for that. It's quite a large endotracheal tube. Especially people who have relatively small tracheas compared to their size. So, in a 20 or 30-kilogram dog, I would expect to place a 9 or 10 endotracheal tube, which I gather is what you often use for people. So, it's interesting. Trachea varies by species.”

What's the hardest animal to intubate?

“Oh, man. Any herbivore is not designed to open its mouth. Because they just nibble on grass. So, hamsters and guinea pigs are very, very difficult. Rabbits are probably the one that we routinely anesthetize that are the most challenging. I always say, if you can intubate a rabbit, you can intubate pretty much anything. I spent some time at a human hospital in Australia and I'd always heard that intubating people is very challenging. I saw them doing it. I'm like, ‘I mean, yeah, this looks relatively hard, but no harder than a pig, I think.'”

 

Malpractice for Veterinarians 

What is the malpractice situation like for veterinarians?

“This is probably going to upset a lot of your readers, but it's almost a non-issue. In most states, animals are considered property, so they can really only sue for the value of the animal. And of course, if it's just a random dog, how much is that dog or cat really worth? That's more of a problem in equine medicine where you have horses worth hundreds of thousands, even millions of dollars. So, coverage for equine practitioners tends to be a bit higher for that. But for example, for the highest coverage, $1 million/$3 million annual policies per year is about $2,600 for equine practitioners. It's about $250 for a small animal exclusive.

Just looking at how much the insurance costs tells you how much the insurance companies expect this to be a problem, which is very, very little. The insurance coverage that we have typically is very good. They really go to bat for the veterinarian, and they always defer to what the vet wants. If the vet says, ‘No, I want to fight this,' the insurance company won't necessarily settle it without the vet being on board. It can be problematic for their reputation if there's an implication that the vet did something wrong and it gets settled, even if they feel that it doesn't.

The coverage also includes wherever you practice, if you have an individual policy. So, if you do locums or relief shifts, that sort of thing, your coverage goes with you. Of course, with liability, it's always a question of what's the standard of care. There is a wide range of standard of care in veterinary medicine. We don't have as much evidence-based data about what the best thing to do in this case is. It is really easy to argue, ‘Oh no, this is standard of care for rural Louisiana,' for example. Even though if you're practicing in LA, you would say that wouldn't be a sufficient standard of care. The one thing that's a little bit different is that the vet may be liable for the client's safety, as well. So, if you're in the exam room and you get bit by your dog, the vet could potentially be liable for that. Most of the time we won't have clients around their animals when we're doing stuff, because we could be liable for their injuries.”

Now, a lot of docs I know have this dream of practicing without insurance or Medicare or RVUs. Is it as nice to practice like that as human docs think it would be? Or does it just mean you make less money?

“Not having to mess with insurance is truly amazing from what I've talked to. My uncle is a general practice physician. It sounds like insurance is terrible, on the human side. Most of our insurance reimburses the clients. The client pays us and then the client deals with the insurance company. We never have to see it. I don't understand RVUs very well. I think that, on a certain level, it could make it easier to set fees, because right now, every practice just determines what they're going to charge for something. It's almost a random number generator. Not having insurance and Medicare means that we have a lot of patients which could be treated but aren't treated because of finances.

We have quite a number of situations where the client comes in. We're like, ‘OK, well, I think this is the best thing to do for your pet. And this is what it'll cost.' And they're like, ‘OK, well, I can't afford that.' I'm like, ‘OK, well, we'll try to treat it symptomatically and hope for the best.' At least if all of our patients had insurance coverage, then we could consistently do what's the best thing for the patient. I think it would just be a different type of stress and a different type of conflict. Every single client we talk to, money is a consideration, and it's something we talk about. And I don't think most physicians have any clue what things cost. I am acutely aware of how much it costs when I prescribe methadone for a patient. Because I know it's going to go right onto their bill and it's going to dramatically increase their bill depending on what we're doing to them. So, vets are all very aware of what things cost, and that creates a barrier for us to do the care that we want to provide.”

And you're providing the drugs, as well, out of the clinic?

“Yes, exactly. Most vet clinics will also prescribe with the advent of online prescription systems. I think that that's probably less of a profit center than it used to be for veterinary clinics. But most of them, if you're there, your dog has an infection, it's easier to just get the Amoxicillin from your vet rather than have to go to the pharmacy or order it online. So, most of them still maintain their own pharmacy.”

 

PSLF for Veterinarians 

Now, given the debt-to-income ratio that a lot of veterinary docs come out with, public service loan forgiveness has to be something to think about. That requires you to work full time for a 501(c)(3) or a government agency. What job options are available for vets who want to go for PSLF?

“Academia obviously is easy. There are jobs in academia for general practitioners. If someone doesn't want to do the internship residency and make a terrible salary for four or five years, they could potentially get one of those positions. Most jobs in academia, though, are specialists, and that's going to be your four or five years of postgraduate education. But of course, as you're going through training, you could potentially get credit for that time, although some internships in residency are in private practice. So, it depends on how you go through, but academia is the one that comes to mind.

A lot of shelters, a lot of animal shelters are 501(c)(3) organizations, and shelter vets can make a decent salary depending on where they are geographically. That might be a good option. There's government work like working for the USDA and zoos, and there are some other charities and kind of smaller things. But I think probably the big ones are academia, shelters, and government work. We have a problem in academia attracting good specialists. It's been a mystery to me. Obviously, there is a salary differential. It's not that substantial from my point of view. And yeah, if you could get public service loan forgiveness, that seems like an easy bet.

I think that it's probably more so the ignorance, like the lack of acknowledging the debt. They accumulate debt in school and then they graduate and they don't think, ‘Oh gosh, on the one hand, I could get rid of this in 10 years if I did internship, residency, and worked for a university for a little bit longer, or I'll just go and practice.' Again, that's how the debt influences your job selection. They go out into private practice to try to make more money to service that debt.”

More information here:

How to Ensure Student Loan Forgiveness Through the PSLF Program 

 

Advice for Vet Students and New Attendings — Keep Your Debt Low

Now, there's probably a few vets listening to this. If there were some vet students or new attendings or somebody in a similar field with similar earnings, similar debt-to-income ratios, and they want to become financially successful like you have, what tips do you have for them? If a student comes to you and says, “You know what? I don't want to be broke. How can I practice, be a good veterinarian and still be financially successful?” What would you tell them?

“I would say don't go to an expensive school and don't think, ‘I want to be a vet at any cost.' If they have a debt-to-income ratio over 2:1, strongly consider public service loan forgiveness. There are plenty of academic jobs that are open and eager to have people. If you have significant debt, you need to consider extra shifts. You might need to think about doing a different type of practice. You may need to move to Phoenix and work in emergency practice to service that and get it paid off. Like I said, frugality really is built into the bones of veterinary medicine. If they just avoided debt, I really do think that they would be fine on a starting vet salary.”

Well, we're coming to the end of our time here, but you've got the ear of 30,000-40,000 high-income professionals, mostly doctors, that will eventually listen to this podcast. What do you think they should know that we've not yet talked about?

“I think I would say when you are talking to kids about being medical professionals, make sure to talk about the finances and debt, especially for lower earning disciplines like VetMed. It kills me to see young students who are saying, ‘I want to do this no matter what,' and then get settled with this huge debt-to-income ratio that's going to affect their whole life. As you're talking to these undergrads and these people that are thinking about pursuing medicine, just make sure that debt discussion is part of the advice that you give them.”

We estimate that 80% of doctors need, want, and should use a financial advisor and/or an investment manager. Some investment gurus such as Dr. William Bernstein think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there is no reason to feel guilty about it—just make sure you are getting good advice at a fair price. 

If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors at whitecoatinvestor.com/financial-advisors

You can do this and The White Coat Investor can help.

 

Milestones to Millionaire Podcast

#51 – Neonatologist Finds Financial Freedom

This neonatologist and internist couple reach financial freedom just 4.5 years out of training.  It is always great to marry another high income professional. There are challenges for sure but two incomes is a powerful tool to build wealth and take care of business. He was able to walk away from a demanding job that could not provide work-life balance. Now he has the freedom to work part time or not at all in medicine and enjoy time with his family.

Sponsor: WCI Insurance Recommended List 

Listen to Episode #51 here.

 

Quote of the Day

Our quote of the day comes from Rick Ferri who said,

“Be prepared to marry forever the mutual funds you buy in a taxable account because divorce is often a taxing experience.”

And that's the truth. In fact, you want it to be a taxing experience, because if it wasn't, it means you lost money.

 

Full Transcript

Transcription – WCI – 248
Intro:
This is the White Coat Investor Podcast, where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011. Here's your host, Dr. Jim Dahle.

Dr. Jim Dahle:
This is White Coat Investor podcast number 248 – Veterinarians and Their Finances.

Dr. Jim Dahle:
This episode is brought to you by the Laurel Road for Doctors. Laurel Road is committed to serving the financial needs of doctors like you. You take care of us, it's time someone took care of you.

Dr. Jim Dahle:
With Laurel Roads physician mortgage, you may be eligible for a rate discount when you take out a new mortgage or refinance your existing mortgage. Specially designed for doctors, this physician mortgage has flexible financing options and may have fewer restrictions than a conventional mortgage, which could mean lower monthly payments.

Dr. Jim Dahle:
For terms and conditions, please visit www.laurelroad.com/wci. Laurel Road is a brand of KeyBank and an equal housing lender, NMLS number 399797.

Dr. Jim Dahle:
Our quote of the day today comes from Rick Ferry who said, “Be prepared to marry forever the mutual funds you buy in a taxable account because divorce is often a taxing experience.” And that's the truth. In fact, you want it to be a taxing experience because if it wasn't, it means you lost money.

Dr. Jim Dahle:
Thanks so much for what you do. Whether you are a veterinarian, whether you are a nurse practitioner, a physician assistant, whether you are an optometrist, whether you're a physician or a dentist, like most of our listeners, thanks for what you do. Your jobs are difficult. They're even more difficult during pandemics. And if no one said thanks today, let me be the first.

Dr. Jim Dahle:
If you are interested in doing something a little different on the side, like being an expert witness, we have a course for you. You can get more information at whitecoatinvestor.com/expertwitness. But we are having a sale on this course that will teach you everything you need to know about being an expert witness and help you develop this side gig, if you will take this course. It's great.

Dr. Jim Dahle:
It's on sale from February 1st through 14th, and then it goes live on the 14th. So, you can sign up any time between now and then, and enjoy that course. I know we've gotten a lot of great feedback on this one. This is not a course I do. This is one of our affiliate partners and it's really excellent for anybody who's thought about becoming an expert witness, but really doesn't know where to take the next step.

Dr. Jim Dahle:
This course will take you by the hand, soup to nuts, and teach you everything you need to know about becoming an expert witness, whether you want to work for the defense, whether you want to work with the prosecution, whether you want to do both, and whether you want to review charts. This is an option for you to use your medical knowledge to earn a little bit more money on the side in a way that's different from your usual clinical practice.

Dr. Jim Dahle:
I know a lot of people that have done this that feel like it makes them a better doctor. It helps them pay more attention to which they're doing on a day-to-day basis and that really benefits their practice and their bottom line. If you're interested, whitecoatinvestor.com/expert witness, you can get more details.

Dr. Jim Dahle:
All right, we got a great episode today. For the first time, we're bringing a veterinarian on the podcast. Actually, I don't know if this is the first time, I think a couple of years ago, we had a veterinarian on here. We're going to talk more about veterinary medicine. We're going to talk about the finances of veterinarians and really get some insight into those who are physicians, but not human physicians. Let's get our guest on the line.

Dr. Jim Dahle:
My guest today on the White Coat Investor podcast is Dr. Erik Hofmeister. He's a board-certified anesthesiologist, a diplomat of the American and European Colleges of Veterinary Anesthesia and Analgesia.

Dr. Jim Dahle:
He got his DVM from Washington State University in 2000, did an internship in small animal medicine and surgery. And did a residency in anesthesia at Georgia. He stayed on faculty there from 2004 to 2016, where he was a section chief for surgery and earned master's degrees in health promotion of behavior and sport pedagogy. I don't even know if I'm pronouncing that right.

Dr. Jim Dahle:
He served as a department chair for surgery in Midwestern from 2016 to 2019, and then went to Auburn where he is the professor of anesthesia there. He's a deputy editor of The Veterinary Anesthesia and Analgesia journal. And his research interests include the scholarship of teaching and learning evidence-based decision making and measurement and testing. Welcome to the White Coat Investor podcast, Erik.

Dr. Erik Hofmeister:
Thank you very much, Dr. Dahle. It’s great to be here.

Dr. Jim Dahle:
We've had some veterinarians before, but not a lot. And a lot of our audience may not be that familiar with your career, both your educational path and your career path. But before we get to that, let's go back even further. Tell us about your upbringing and how that affected your views on money.

Dr. Erik Hofmeister:
Yeah, it's really amazing how much upbringing affects you. I was raised in the upper-middle class in West LA. My father was an engineer. My mother was a teacher. And so, we had a pretty good income and lived a pretty good lifestyle, but my parents invested in some kind of private equity deal and ended up losing basically their whole retirement investing when it fell under.

Dr. Erik Hofmeister:
My sister was coming through as a teenager when money was rolling in, everything was flush. And then I came through in very much lean times. And it's really interesting to see how that affected us. She really likes nice cars, nice things and all that, and I'm just accustomed to just doing without. And so, it's really interesting to see, we're both raised by the same parents in the same situation, but with very different financial upbringings.

Dr. Erik Hofmeister:
And then my parents did have some rental property experience, but they never invested in the stock market. They equated it with gambling. And so, for most of my life, I've just thought that it's gambling. That's kind of my basic background.

Dr. Jim Dahle:
I went over the highlights of your education and training and career so far. Do you feel like that's pretty typical for a veterinarian? You seem much more academically inclined than the typical practitioner?

Dr. Erik Hofmeister:
Yeah, it's a good question. I think when we're talking about veterinary medicine, I tend to lump it into private practice general practitioners and specialists that tend to be the ones that go into academia.

Dr. Erik Hofmeister:
For academics it's pretty typical, go to school, internship, residency, faculty position, or specialty private practice, but there are a lot of different pathways that people take. Especially for some reason, it seems like radiologists often go out in practice for a while and then come back and do their residency.

Dr. Erik Hofmeister:
So, it differs a little bit by discipline, but it's a lot easier to go through straight than to take a spell in practice because you get accustomed to making that decent paycheck and then going back and making $25,000 – $28,000 as an intern is tough to sell.

Dr. Jim Dahle:
Yeah, I can certainly relate to that. How did you pay for your schooling initially? Did you borrow? Did you work your way through? How did that happen?

Dr. Erik Hofmeister:
Yeah. I was very fortunate. I was able to get residency in Washington State during my undergrad time. And so, I was able to get in-state tuition, which helps tremendously. And then my parents were able to cashflow it for me. I was extremely fortunate in that I didn't graduate with any debt there. They definitely sacrificed to make that happen.

Dr. Erik Hofmeister:
And I think it's a little less doable now than it was 25 years ago, just with the inflation of education being so much higher. It's a lot like healthcare, it's gone way past CPI inflation. So, it’s definitely harder for upper middle-class people to just cashflow it from vet school education now that I got through that way.

Dr. Jim Dahle:
Let's talk about veterinary education these days. What does a typical education entail? What do you do as an undergrad? What do you do in school? Do people typically do postgraduate training? What does it cost? Give us the details on it.

Dr. Erik Hofmeister:
Yeah, I think the undergrad looks a lot like pre-med. And in fact, sometimes we'll have people go to vet school that were aiming to go to med school. All the prerecs are pretty similar biochem, organic chem, basic physics, those kinds of things.

Dr. Erik Hofmeister:
Undergrad is going to be pretty similar. The main difference obviously is the experience that you get. We like to see students have hours of experience working for a vet clinic and different animal interactive settings.

Dr. Erik Hofmeister:
And then once they get into vet school, it's a little bit different from med school in that we tend to have three preclinical years and then one clinical year instead of two and two, although some vet schools do have a two and two system.

Dr. Erik Hofmeister:
And then your clinic year is a lot like what I understand from human medicine. You rotate through different services, different specialties, get an opportunity to see cases and get your kind of basic clinical skills. And then you graduate and you have a DVM and you get a license. And in contrast to human medicine, you can just go out and practice then and be a fully qualified practitioner or you can go on for additional training if you want to do a specialty or something like that.

Dr. Jim Dahle:
And what would you say is typical? Do most people do a residency? Do most people not do a residency?

Dr. Erik Hofmeister:
Yeah. About 70% do not do an internship. They just go out and practice. And the rotating internship is your first year out. If you go to an internship. And that's within a species, so there's small animals, equine, and larger food animals. After your one-year internship, then you go to the match again for a residency or some people have to do a specialty internship if they don't get a residency, which is again, just a one-year timeframe in your discipline. So, you do a specialty internship in surgery, for example, and hopefully become more qualified to do a residency.

Dr. Erik Hofmeister:
For internships, they're about 1,600 positions at 500 programs. The match rate is about 67%. The majority of those that apply for an internship get one, although again, that's only about 30% of new graduates. And then for residency, there's about 400 positions at 330 programs. Match rate for residency is only about 34%. Only about a third of those who apply for a residency end up matching with one.

Dr. Erik Hofmeister:
And the rates vary substantially. The match rate for some disciplines like zoological medicine or exotics or herd health are in the single digits, 7%, 8%. Some of the disciplines are over 66% like emergency critical care, lab animal reach, and oncology. It really depends on what you want to go into, but most new graduates will go into just general practice and that might be small animal care or large animal care, mixed animal practice, et cetera.

Dr. Jim Dahle:
Well, it sounds like matching into a residency is really competitive.

Dr. Erik Hofmeister:
Yeah.

Dr. Jim Dahle:
I mean, those are pretty low match rates.

Dr. Erik Hofmeister:
It is. Yes. If you are planning for your life to go a certain way, if you're like, “I need to be a surgeon and that's the only way I can be happy,” that's going to be tough because there's no guarantees. I know some people who have done two surgery specialty internships, and still aren't a match for residency. And then it's like, well you spent three years as an intern basically, making $25,000 to $30,000 and you don't get the payout at the end of becoming a specialist. There's some pretty substantial sunk cost risk there.

Dr. Jim Dahle:
Do the residencies pay any more than the internships?

Dr. Erik Hofmeister:
They do marginally. Yeah. It depends on obviously if you're in an academic program versus a private practice, but they're still probably in the mid $30,000, maybe upwards to $40,000 if you're in LA or something like that.

Dr. Jim Dahle:
I guess you can count your blessings that you're not like the dentist where they're still paying during their residencies.

Dr. Erik Hofmeister:
Yeah. That is incredible to me.

Dr. Jim Dahle:
What about getting into vet school? Is it competitive?

Dr. Erik Hofmeister:
Yeah. I'd say so. It depends on who you ask. The statistics are about 1.2 applicants or so per seat in the US and Canada. It's a little bit competitive. I think that if you talk to the applicants, they would say, “Oh my gosh, it's impossible to get to vet school,” but the actual statistics aren't too catastrophic. I think it is relatively comparable to human medicine.

Dr. Jim Dahle:
Yeah. It sounds easier if you're saying five out of six get in. That's a lot better than medical school where about one-third are getting in of applicants. At least the first time they apply.

Dr. Erik Hofmeister:
Yeah. That might be. I'm not sure about first-time applicant stats on that. Yeah, I'd say it's reasonably competitive, but we've had more schools opening up lately, more seats because of course, federal funding has been decreasing, state funding has been decreasing. A lot more schools are trying to open up more seats to get those tuition dollars in.

Dr. Jim Dahle:
How about after you come out? What are veterinarians making? Generalists and specialists. And what can veterinarians do to make more to be higher on that range of incomes?

Dr. Erik Hofmeister:
It definitely differs depending on if you go into general practice versus an internship. Like I said, interns are in the $33,000 range and statistically, they have the highest debt-income ratio, which is not surprising because they're deferring making a reasonable salary. New grads are about $100,000, but it depends on your discipline. A small animal practice you're going to be making more than in large animal practice typically.

Dr. Erik Hofmeister:
The compensation structure is that a lot of them have a guaranteed salary and then you have a production on top of that. If you exceed your production that generated that salary, you can bring in additional income. Typically, the total salary is between 22% and 25% of your production. If a vet brings in about $400,000 into the practice and that's paid, not billed, they can expect a salary around $100,000. Academics, corporate and government, it's just a straight salary. There's no production incentive in most academic settings. It's just you get the salary.

Dr. Erik Hofmeister:
And to make more, it's pretty similar to human medicine, work more hours, see more cases, see sicker cases because your average cost transaction is typically going to be higher for sicker cases than for like wellness appointments. And taking in a relief shifts, especially working ER, a lot of hospitals will pay $1,000, $1,500 for relief shifts, which for a vet is a pretty reasonable amount.

Dr. Erik Hofmeister:
And then ownership is really where it's at for veterinary medicine. And this is why you see lots of vet clinics that have 1, 2, 3, 4 doctors because you get to be an associate when you graduate. You're looking at the bottom line. You're like, “Man, if I just bought a practice, I would be making way more.” And so, it tends to create the situation where you have lots of little practices because that's really the path at least historically for earning more money as a vet.

Dr. Jim Dahle:
You say at least historically. Has that changed recently?

Dr. Erik Hofmeister:
Yeah. The surveys for new graduates are that not as many of them are interested in ownership. I think that like in human medicine we're seeing the private equity firms buying up clinics and making more vets employees. And on the one hand, like I said, new grads seem to be okay with that. But I don't think that they realize the potential consequences to their financial life long term. To not have as many ownership opportunities as we used to have because of all this consolidation might make it more problematic 20, 30 years down the line.

Dr. Jim Dahle:
Now I understand that the typical veterinarians are coming out with a couple hundred thousand dollars in debt these days. And if they're making $100,000, that's not an awesome ratio. The average debt to average income is significantly worse than it is for human medicine. What's your take on that debt-to-income ratio and on the viability of veterinary medicine as a smart financial move?

Dr. Erik Hofmeister:
Yeah. Again, like human medicine, it really depends on where you go to school and what you do jobs-wise after. If you go to a state school and you get a reasonably well-paying job when you graduate, I think it could be a reasonable investment. You should be able to graduate with a less than two to one debt to income ratio. If you go to a state school and you get a reasonably paying job in the $100,000 range.

Dr. Erik Hofmeister:
The problem is, if you decide you want to go to an expensive school. And those are usually the Island schools, there are some private schools in the US. And what I see a lot is students are like, “I have to be a veterinarian. That's the only thing I could imagine being. It's what I've always wanted to do.” They don't get into their state school the first couple of times, then they apply to the private schools.

Dr. Erik Hofmeister:
And they're just not thinking it through. That the private schools can be in the $350,000 to $400,000 range at the end of it. And then even if you're making a reasonable salary, like $100,000, that's a four to one debt to income ratio. And obviously, the only way you're getting rid of that is with the income-driven repayment options. I think that's a serious problem.

Dr. Erik Hofmeister:
And then the other thing that you see is I interview a lot of students who come from a little town and rural Kentucky, and they're like, “I want to go back to my little town in rural Kentucky and be the vet,” because that's what their model is, that's what they've seen. That's kind of how they got interested in going to vet school.

Dr. Erik Hofmeister:
And I'm like, “That's great, but you're going to make like $50,000, $60,000. What's really going to happen is you're going to end up practicing small animal medicine in Atlanta to pay your debt in.” They have these visions of what they want their life to be that are limited because of the debt that they incur going to school.

Dr. Erik Hofmeister:
It's just a disconnect of reality. If they came and they were like, “I understand that I'm going to have to sacrifice. And my whole life is going to be dramatically affected by this decision because of the finances,” I would say, okay you're going into it with your eyes open. But most of them are like, “I just want to be a little small-town vet and it's okay if I incur $400,000 in debt to get there.

Dr. Jim Dahle:
They just don't realize that that's going to be hanging over their head for the next seven decades.

Dr. Erik Hofmeister:
Yes, exactly. Exactly. Yeah. They just don't really think it through.

Dr. Jim Dahle:
Yeah. Now you've been pretty successful financially. You've become financially independent, I understand.

Dr. Erik Hofmeister:
Yeah, yeah, exactly. We hit that last year.

Dr. Jim Dahle:
How'd you manage to do that as a veterinarian? Obviously, you trained a while ago and so maybe avoided the more expensive schooling that's available now, but how did you do that throughout your career?

Dr. Erik Hofmeister:
Yeah. Obviously, graduating without debt was tremendously helpful. I don't think that there's that much magic to it. My first salary as a new assistant professor was $80,000 in 2004 and it slowly went up to $130,000 by 2016. And it's about $160,000 now. So, it's a reasonable salary I feel.

Dr. Erik Hofmeister:
I bought a house way below what I could afford. I got a reasonably sized house when I got my first attending job. My wife is a pharmacist. She had a very variable salary. Her first year was in retail. She made $100,000, but then she's been a grad student making the $30,000 range. Currently she's at $80,000. So, having another salary helps a lot.

Dr. Erik Hofmeister:
But what I discovered is that year after year, I'm like, “Why do I have more money in my bank account at the end of the year than I had at the beginning?” I was very confused by that because I didn't know anyone in that situation. And I was like, “What am I going to do with this?” I mean, I guess I'll just build a million-dollar home one day. I didn't have a clear vision for my finances. I just happened to have more.

Dr. Erik Hofmeister:
And then I discovered in 2017 Mr. Money Mustache, and I was like, “Oh, hey, I can use this money to retire early if I wanted to.” And I started to be more deliberate and realized how I got there. I never considered it frugality. I was just living my life. I think frugality is kind of baked into veterinary medicine.

Dr. Erik Hofmeister:
If you read like the James Harriet books and stuff, we're always trying to do more with less to the point where early in my training, in the '90s, vets would re-sterilize gloves and re-sterilize needles and all this stuff that you're like, “That's bad and it's nonsense.” And it actually probably costs you more because you're having to pay the staff to do it. But those kinds of things, it's just baked into veterinary medicine. I think that I've always been, I don't even consider it frugal. I just consider it maybe not extravagant.

Dr. Jim Dahle:
It's interesting because most doctors feel this pressure, the societal pressure. “You're a doctor, you're supposed to be rich. You can pay the bills. You're supposed to be wealthy.” Even though they're coming out of school owing $400,000, they feel this pressure. Is that not present at all in veterinary medicine?

Dr. Erik Hofmeister:
No. No. And I would say almost the opposite. If there's someone who drives a BMW into our parking lot, I think that there's this general frowning attitude. People are driving farm trucks to work routinely. And so, yeah, I don't think that that expectation is there for us. Or at least it hasn't been.

Dr. Erik Hofmeister:
Salaries the past few years have been going up relatively steeper than they had the previous 15 years or so. As vets get to the point where they're maybe having a higher income that might become an issue, but I'd say in general, we definitely don't feel those societal expectations. I would say, like I said, maybe even flipped.

Dr. Jim Dahle:
It sounds like in 2017 you got on the FI train. What did you start investing in? All this cash you had sitting around, what did you put it in? What does your portfolio look like?

Dr. Erik Hofmeister:
Yeah. Right now, about half is in taxable. Half is in 403(b)/governmental 457s. We have a small Roth IRA, but I only started that a couple of years ago. I did it because my family had experience with rental houses in 2008 and 2009, when everything tanked. I looked around and I was like, “Oh, hey, I can pick these up for a song and a dance.”

Dr. Erik Hofmeister:
I got a couple of single-family homes in Athens where I was working before. Those have appreciated marginally, but more importantly, they're paid off. And so, we get a gross rental income of about $3,200 a month for those, which is really nice.

Dr. Erik Hofmeister:
And then once I discovered that the stock market wasn't gambling and that it's actually buying real goods that exist in the world, we got on board. Our allocation is about 60% US stocks that's in a 500 US stock, 30% international. That's mostly developed in all world. A little bit in REIT, just to diverse away from the single-family homes. And then about 5% in muni bonds in our taxable that we're imagining for our kind of early retirement spending.

Dr. Erik Hofmeister:
We rebalance just with view contributions. And then I also have a pension from the State of Georgia that kicks in when I turn 60. That's estimated to be $2,500 a month, but it's not inflation adjusting. Between now and 15 years in the future, I don't expect that to help me very much. But it's nice to have at least a little bit of guaranteed income there.

Dr. Jim Dahle:
Yeah. So a fairly traditional portfolio. Stocks, bonds, and real estate.

Dr. Erik Hofmeister:
Yeah, exactly. Keep it pretty simple. I think the single-family homes are the only thing that caused me a little bit of stress being a landlord and just having to get tenants in and it's in a college town, so the turnover is relatively substantial. Everybody wants to have their three large size dogs in there as well. And so, that's always a little bit of a struggle, just making sure that we get good tenants, but so far they've turned out pretty well.

Dr. Jim Dahle:
As a veterinarian, do you allow pets in your rentals?

Dr. Erik Hofmeister:
Yeah, for sure. Because early on, most of my tenants were through the vet school and I had some connection to them at least. If they were vet students, they were going to trash their rental house. And almost every vet student comes with a pet. So, I considered that part for the course there.

Dr. Jim Dahle:
So, was it worth it to deal with the hassles of being a landlord?

Dr. Erik Hofmeister:
That's a good question. I think that they've turned out to be very sound financially. I bought them for like $110,000 and $120,000. The return on investment has been pretty good for them. And the hassle has not been that substantial, but probably if I knew then what I knew now, I would've just ploughed into all US stocks and forgotten the headache. We had our main house in Athens that we had been renting out that we just sold maybe a year and a half ago. And I just put all of that into our stock fund when I sold it. I was like I don't want to buy another rental and increase that headache.

Dr. Jim Dahle:
Let's turn the page a little bit. I've got a question for you. Should people buy pet health insurance?

Dr. Erik Hofmeister:
Yeah. I will say, it's easier for the vet. From our standpoint, most of the insurances reimburse the client. The client pays us, so we get paid. We don't have to deal with insurance company issues. And also from our standpoint, it lowers the barriers to the clients being able to pay for stuff. We'll tend to get people saying yes more, than if they don't have insurance.

Dr. Erik Hofmeister:
From our standpoint, I always liked having clients who had insurance. From the pet owner standpoint, it's insurance. The insurance companies got to make their money. I would strongly encourage any of your readers that are high-income professionals to just self-insure. The peak expenses aren't that much. Your worst-case scenario is like a 12-year-old golden retriever and needs multiple transfusions swirling the drain, that's going to be maybe $15,000 and you should be able to cash flow that.

Dr. Erik Hofmeister:
I guess I'd say, if it's hard for you to spend on your pet, maybe it would be like a psychological way to encourage you to do that. Similarly with wellness care, if you have a hard time justifying the $250 for a yearly exam, maybe the insurance would be helpful there. Mostly in terms of convincing you to go in for regular exams to keep your pet healthy rather than financially. So, yeah, I think it's probably not a great deal for most of the listeners here.

Dr. Erik Hofmeister:
We do have people that have financial struggles pretty routinely, and there's a lot of care credit and these kinds of institutions that can loan money for short term veterinary expenses. Even with people that can't cash flow it, there are other alternatives. That's my take on it. I don't have health insurance for my pets, and I never have.

Dr. Jim Dahle:
What does it cost? If I have a two-year-old cat, what's it cost me to ensure that cat?

Dr. Erik Hofmeister:
Obviously, it varies, but it's around $500 a year. The deductible is not terribly substantial. You can get 100% coverage. Most of them are like 80%, 90% coverage and includes wellness and catastrophic accidents and cancer and all those kinds of things.

Dr. Erik Hofmeister:
But again, even if you have a dog who has a crucial ligament rupture, that's probably going to be a 4,000 or $5,000 surgery. If you just saved that $500 and invested at times, whatever, eight or nine years you would be breaking even. And then you'd be well off if you didn't have a dog that got a crucial ligament tear.

Dr. Erik Hofmeister:
Like I said, like all insurance products, it's a deal for the insurance company rather than the user for the most part. And the expenses for veterinary care are just not that great. You're not going to get bankrupt by your vet bill.

Dr. Jim Dahle:
Let's talk a little bit about end-of-life care and end-of-life discussions. What do you think about people that treat their pets like a family member, such as spending tens of thousands to prolong long life by a few months, instead of putting the pet down?

Dr. Erik Hofmeister:
I don't think I'd have a job if we didn't have those people. It's like with breeds, if people didn't buy doxins and bulldogs and all that kind of stuff, we would be rapidly out of a job. I think that obviously, it comes down to individual values. I do personally get somewhat frustrated by that. If you've got a 10-year-old great dane with heart failure and kidney failure, and now we're doing surgery on him, I'm like, this dog has reached its expiration date. What are we really going to accomplish here?

Dr. Erik Hofmeister:
I think that probably one thing that factors into this is the suddenness with which it happens to the owner. My impression is that people have some idea that something's wrong. They're like, “Oh, there's this tumor growing in me, maybe I should go check that out.” And we only really see animals like once it reaches some catastrophic stage a lot of the time.

Dr. Erik Hofmeister:
I think that that's part of it is that the suddenness plays a role. And so, they just haven't thought about, “Oh my gosh, what am I going to do if my dog has a hemo abdomen, because he had a splennic tumor rupture.” And I think there's also a lot of guilt that runs into things like owners run over their pet, and then they come in with this multiple pelvic fracture case. And they're like “Do anything” because they feel bad about it, which I understand again.

Dr. Erik Hofmeister:
But it's tough. We know if you have a hemo abdomen case, the median survival time is 49 days, and that's going to be a probably $5,000 to $8,000 bill at the minimum. So, is it worth that? And I think that people make pretty emotional decisions rather than practical ones.

Dr. Erik Hofmeister:
I had this little bit of personal experience. I had a cat with hypertrophic cardiomyopathy through a clot and ran her in. We had a healthcare discussion about what we would do for our pets, but that was when they were like five years old. And now I had this 17-year-old cat that threw a clot. And so, I was just acting on like what we decided 12 years before for what to do with them. I'm like, yeah, let's do TPA and everything. But if I'd thought about it for a second, I'm like, my cat's 17, she's got HCM, median survival time of six months, even if she makes it through this. That's really not worth the thousands to me.

Dr. Erik Hofmeister:
I also struggle with a complex philosophical problem. But if you've got some young puppy who the owner’s just got a couple of months ago, gets hit by a car. We're looking at a $5,000 to $8,000 surgery. You can buy a lot of puppies for $5,000. I understand that for the individual, it'll be like, “Yeah, but no, this is like my puppy.” And I also understand that there's some obligation that we have to take care of our pets, but I think about that a lot. I'm like there are a lot of animals out there that need homes and spending all these resources on this one animal sometimes makes that a little bit hard for me.

Dr. Jim Dahle:
One of the most interesting things about veterinary medicine is the comparison between species. Now, as human physicians, we get very little training in comparative medicine. What can we learn from our veterinary colleagues in that respect?

Dr. Erik Hofmeister:
Yeah. It's really interesting to me to think about what human medical practitioners learn because my wife's a pharmacist. And so, I'll treat her as if she's a veterinarian and I'll be like, “Oh yeah, of course, you could use this drug and this drug and this drug.” And she's like, “What are you talking about?” I'm like, “Oh, don't you know that?” It's just a walk around knowledge.

Dr. Erik Hofmeister:
I think realizing how similar animals actually are among each other. I really like having medical professionals as clients because then I can talk to them more easily. We use the same drugs, propofol, and methadone, and dexamethasone, and anesthesia is basically identical across species. And that's true for internal medicine and dermatology, etc.

Dr. Erik Hofmeister:
I really like cooperating with clients that are medical professionals. Sometimes they are brought into a procedure. They're like, “Hey, we do this procedure on people. Can we do that in animals?” I'm like, “Sure. It's an animal, let's try it.”

Dr. Erik Hofmeister:
And sometimes I'm like, “Well, but why don't you do this in medicine?” There are some drugs that we use like tiletamine, steroid anesthetics like Alfaxalone. It sounds like human medicine. They still use a lot of saline even though it causes acidosis and is associated with poor outcomes. So, there are things like this where I'm like, “Why do you guys do it this way?”

Dr. Erik Hofmeister:
And I'm not an oncologist, but I've heard oncologists be like, “Yeah, dogs with naturally occurring lymphoma are just like people.” And I'm like, “Okay, well, why aren't we using dogs as a model for that?”

Dr. Erik Hofmeister:
I think the other thing to realize is that you can get quite a high-level specialty care for your pet. If you don't like an answer that you get from your general practitioner, realize you can get a referral and we have a 3T MRI, we have a variant system edge for radiosurgery. We do ultrasound and guided blocks, thoracoscopy, all these sorts of things.

Dr. Erik Hofmeister:
But at the same time, there's some stuff that we don't do. We don't do transplants except for kidneys in cats. We don't really do long-term dialysis, cardiac bypasses are pretty rare. There are some things that we just don't do in human medicine, where I've had medical practitioners come in and they're like, “Oh, can you just do this?” I'm like, “We don't really have a dialysis unit, so sorry.”

Dr. Jim Dahle:
What's the largest endotracheal tube you've ever placed?

Dr. Erik Hofmeister:
We have tubes up to 35. So, I'll usually use those for the big draft horses or sometimes the really big ruminants or one of my colleagues who did a giraffe last year. We used it for that. It's quite a large endotracheal tube. Especially people who have relatively small tracheas compared to their size. So, in a 20, 30-kilogram dog, I would expect to place a nine or 10 endotracheal tube, which I gather is what you often use for people. So, it's interesting. Trachea varies by species.

Dr. Jim Dahle:
What's the hardest animal to intubate?

Dr. Erik Hofmeister:
Oh, man. Any herbivore is not designed to open its mouth. Because they just nibble on grass. So, hamsters and guinea pigs are very, very difficult. Rabbits are probably the one that we routinely anesthetize that are the most challenging. I always say, if you can intubate a rabbit, you can intubate pretty much anything. I spent some time at a human hospital in Australia and I'd always heard that intubating people is very challenging. And so, I saw them doing it. I'm like, “I mean, yeah, this looks relatively hard, but no harder than a pig, I think.”

Dr. Jim Dahle:
Nothing like a rabbit. Huh?

Dr. Erik Hofmeister: Yeah. But rabbits are tough.

Dr. Jim Dahle:
What's the malpractice situation like for veterinarians?

Dr. Erik Hofmeister:
This is probably going to upset a lot of your readers, but it's almost a non-issue. In most states, animals are considered property, so they can really only sue for the value of the animal. And of course, if it's just a random dog, how much is that dog or cat really worth?

Dr. Erik Hofmeister:
That's more of a problem in equine medicine where you have horses worth hundreds of thousands, even millions of dollars. So, coverage for equine practitioners tends to be a bit higher for that. But for example, for the highest coverage, one in three million policies per year is about $2,600 for equine practitioners. It's about $250 for a small animal exclusive.

Dr. Erik Hofmeister:
So, just looking at how much the insurance cost tells you how much the insurance companies expect this to be a problem, which is very, very little. And the insurance coverage that we have typically is very good. They really go to bat for the veterinarian and they always defer to what the vet wants.

Dr. Erik Hofmeister:
So, if the vet says, “No, I want to fight this.” The insurance company won't necessarily settle it without the vet being on board because it can be problematic for their reputation if there's an implication that the vet did something wrong and it gets settled, even if they feel that it doesn't.

Dr. Erik Hofmeister:
And the coverage also includes wherever you practice, if you have an individual policy. So, if you do locums or relief shifts, that sort of thing, your coverage goes with you. Of course, with liability, it's always a question of what's the standard of care. And there is a wide range of standard of care in veterinary medicine. And we don't have as much evidence-based data about what the best thing to do in this case is.

Dr. Erik Hofmeister:
And so, it's really easy to argue, “Oh no, this is standard of care for rural Louisiana,” for example. Even though if you're practicing in LA, you would say that wouldn't be a sufficient standard of care.

Dr. Erik Hofmeister:
The one thing that's a little bit different is that the vet may be liable for the client's safety as well. So, if you're in the exam room and you get bit by your dog, the vet could potentially be liable for that. Most of the time we won't have clients around their animals when we're doing stuff, because we could be liable for their injuries.

Dr. Jim Dahle:
Now, a lot of docs I know have this dream of practicing without insurance or Medicare or RVUs. Is it as nice to practice like those as human docs think it would be? Or does it just mean you make less money?

Dr. Erik Hofmeister:
Not having to mess with insurance is truly amazing from what I've talked to. My uncle is a general practice physician. So, it sounds like insurance sounds terrible, on the human side. And most of our insurance reimburses the clients. The client pays us and then the client deals with the insurance company. We never have to see it.

Dr. Erik Hofmeister:
I don't understand RVUs very well. I think that on a certain level it could make it easier to set fees because right now, every practice just determines what they're going to charge for something. It's almost a random number generator. Not having insurance and Medicare means that we have a lot of patients which could be treated, but aren't treated because of finances.

Dr. Erik Hofmeister:
We have quite a number of situations where the client comes in. We're like, “Okay, well, I think this is the best thing to do for your pet. And this is what it'll cost.” And they're like, “Okay, well, I can't afford that.” I'm like, “Okay, well, we'll try to treat it symptomatically and hope for the best.” And at least if all of our patients had insurance coverage, then we could consistently do what's the best thing for the patient.

Dr. Erik Hofmeister:
I think it would just be a different type of stress and a different type of conflict. Every single client we talk to, money is a consideration, and it's something we talk about. And I don't think most physicians have any clue what things cost. I am acutely aware of how much it costs when I prescribe methadone for a patient. Because I know it's going to go right onto their bill and it's going to dramatically increase their bill depending on what we're doing to them. So, vets are all very aware of what things cost and that creates a barrier for us to do the care that we want to provide.

Dr. Jim Dahle:
And you're providing the drugs as well out of the clinic?

Dr. Erik Hofmeister:
Yeah. Right. Exactly. Most vet clinics will also prescribe with the event of online prescription systems. I think that that's probably less of a profit center than it used to be for veterinary clinics. But most of them, if you're there, your dog has an infection, it's easier to just get the amoxicillin from your vet rather than have to go to the pharmacy or order it online. So, most of them still maintain their own pharmacy.

Dr. Jim Dahle:
Now, given the debt-to-income ratio that a lot of veterinary docs come out with, public service loan forgiveness is got to be something to think about. That requires you to work full time for a 501(c)(3) or a government agency. What job options are available for vets who want to go for PSLF?

Dr. Erik Hofmeister:
Yeah. Academia obviously is easy. There are jobs in academia for general practitioners. If someone doesn't want to do the internship residency and make a terrible salary for four or five years, they could potentially get one of those positions.

Dr. Erik Hofmeister:
Most jobs in academia though, are specialists, and that's going to be your four or five years of postgraduate education. But of course, as you're going through training, you could potentially get credit for that time. Although some internships in residency are in private practice. So, it depends on how you go through, but academia is the one that comes to mind.

Dr. Erik Hofmeister:
A lot of shelters, a lot of animal shelters are 501(c)(3) organizations, and shelter vets can make a decent salary depending on where they are geographically. So that might be a good option. There's government work like working for the USDA and zoos, and there are some other charities and kind of smaller things. But I think probably the big ones are academia, shelters and government work.

Dr. Erik Hofmeister:
We have a problem in academia attracting good specialists. And it's been a mystery to me. Obviously, there is a salary differential. It's not that substantial from my point of view. And yeah, if you could get public service loan forgiveness, that seems like an easy bet.

Dr. Erik Hofmeister:
I think that it's probably more so the ignorance, like the lack of acknowledging the debt. They accumulate debt in school and then they graduate and they don't think, “Oh gosh, on the one hand, I could get rid of this in 10 years if I did internship, residency, and worked for a university for a little bit longer, or I'll just go and practice.” And again, that's how the debt influences your job selection. They go out into private practice to try to make more money to service that debt.

Dr. Jim Dahle:
Now, there's probably a few vets listening to this. If there were some vet students or new attendings or somebody in a similar field with similar earnings, similar debt to income ratios, and they want to become financially successful like you have, what tips do you have for them? If a student comes to you and says, “You know what? I don't want to be broke. How can I practice, be a good veterinarian and still be financially successful?” What would you tell them?

Dr. Erik Hofmeister:
I would say don't go to an expensive school and don't think “I want to be a vet at any cost.” If they have a debt-to-income ratio over two to one strongly consider public service loan forgiveness, there are plenty of academic jobs that are open and eager to have people.

Dr. Erik Hofmeister:
And if you have significant debt, you need to consider extra shifts. You might need to think about doing a different type of practice. You may need to move to Phoenix and work in emergency practice to service that and get it paid off. And like I said, frugality really is built into the bones of veterinary medicine. If they just avoided debt, I really do think that they would be fine on starting vet salary.

Dr. Jim Dahle:
All right. Well, we're coming to the end of our time here, but you've got the ear of 30,000 plus 40,000 high-income professionals, mostly doctors that will eventually listen to this podcast. What do you think they should know that we've not yet talked about?

Dr. Erik Hofmeister:
I think I would say when you are talking to kids about being medical professionals, make sure to talk about the finances and debt, especially for lower earning disciplines like VetMed. It kills me to see young students who are saying, “I want to do this no matter what,” and then get settled with this huge debt to income ratio that's going to affect their whole life. As you're talking to these undergrads and these people that are thinking about pursuing medicine, just make sure that debt discussion is part of the advice that you give them.

Dr. Jim Dahle:
Awesome. Well, Dr. Hoffmeister, thank you so much for coming on the White Coat Investor podcast. I know your comments will be useful to many. I, for one, enjoyed learning a lot more about veterinary medicine than I knew before. So, thank you so much.

Dr. Erik Hofmeister:
Wonderful. Thank you, Dr. Dahle.

Dr. Jim Dahle:
Well, that was fascinating. I had no idea that people intubate rabbits. I guess for research purposes, I can understand it, but a rabbit is $30 at the pet store. It's $10 from the shelter. I can't imagine people are going to spend a lot of money on a rabbit, but I guess if you're really attached to your rabbit, maybe that's the case. As bad as rabbits are to intubate, I can't imagine a hamster is much easier. At any rate, I thought that was a pretty interesting interview. I hope you enjoyed it.

Dr. Jim Dahle:
If you'd like to come to WCI con 22, you actually still can. By the time this drops, it's February 3rd. Now the conference is the 9th through the 12th. You can't come in person. It's too late. We've already finalized the food by the time you hear this.

Dr. Jim Dahle:
But you can still come virtually. You can actually sign up right to the end of the conference if you like. You can do that at whitecoatinvestor.com/wcicon22. We had a great virtual conference a year ago. It was really enjoyable. This time we've kind of married the in-person conference to the virtual conference, and what I'm hoping is we're going to have the best of both worlds. There will be over a thousand people. It's going to be awesome. So, if you'd like to come, you can still sign up at whitecoatinvestor.com/wcicon22.

Dr. Jim Dahle:
This episode was brought to you by the Laurel Road for Doctors. Laurel Road is committed to serving the financial needs of doctors like you. You take care of us, it's time someone took care of you.

Dr. Jim Dahle:
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Dr. Jim Dahle:
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Dr. Jim Dahle:
Thank you for leaving us five-star reviews, telling your friends about the podcast. Our most recent review comes from Christopher Iverson who said, “Incredible resource for both the physician in training and the physician in practice. Wonderful resource on the topics they don't teach you in medical school. Five stars.” Thanks so much, Christopher, for that review.

Dr. Jim Dahle:
Keep your head up, shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor podcast.

Disclaimer:
My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He’s not a licensed accountant, attorney, or financial advisor. So, this podcast is for your entertainment and information only, and should not be considered official personalized financial advice.