Today, we are talking about what your options are if you do not match this week. It can be one of the hardest things to face and knowing what your options are and what steps to take next can help ease the difficulty just a bit. We also spend some time telling you about the results of our annual survey. The survey is a huge part of how we decide what changes to make here at WCI. Finally, we tackle a few of your questions about annuities, if you should ever invest with a family friend, and where to put some extra moonlighting money as a resident.


 

What to Do If You Don't Match 

It's Match Week for medical students! Congratulations to all of you who are fourth-year medical students. If you have matched, congratulations on making it to the next step of your career. It's pretty exciting. However, I want to spend a few minutes today talking to the rest of you because the match is becoming more and more and more competitive every year. The reason for that is because medical school slots have expanded significantly and residency spots have not expanded as significantly. The match rate has actually been falling for several years. For MDs in US schools, it's still pretty high around 93%. Most of the DOs are now going through what used to be called the MD match, and their rate of matching is just about as high. Maybe it's a percentage point or two lower, but it's still quite high. So, most people are still matching. That's not the case if you're coming out of a Caribbean school. It's never been the case coming out of a Caribbean school. I think the match rate overall for those schools—and it's better at some schools than others—is about 56%. That means 44% aren't matching. That's a huge number.

To not match after borrowing a whole bunch of money for medical school is a financial catastrophe. If you owe $200,000, $300,000, $400,000+ dollars in student loans and now you don't have a job coming that's going to provide enough income to pay that back, that can be a pretty serious financial catastrophe. The numbers are probably actually worse for people who enroll in a Caribbean school, because those are just the numbers of those who graduate. A fair number of people don't graduate from a Caribbean medical school. It's a little bit of a gamble to go there.

The first thing you do if you don't match is you scramble or SOAP. You basically find out on Monday of Match Week that you didn't match. Those who do match find out they matched on Monday, as well, but they don't get to find out where until Friday, tomorrow, the day after this podcast is dropping. It's a big ceremony. Everybody shows up, and they open their envelopes and find out where they're going. It's very exciting. You bring your spouse or partner or significant other, and it's a big party. It's great for most people, but for those who didn't match, they often don't show up at this thing at all. In fact, they worked their butt off all week trying to SOAP into an open position because the residency programs in a lot of cases are scrambling just as much as the students are because they didn't fill all their spots. It's a big deal for a residency program to not fill its spots.

Imagine if you were planning on having 10 residents in a given year. What happens if you only have six? That's a lot of shifts that aren't covered. That's a lot of calls that aren't covered. It's just as big a deal for the residency program as it is for the students. Everybody's incentivized to grab the unmatched students and get them into positions and fill up those residency programs. That's what happens during the SOAP. Tuesday of Match Week, the programs can start reviewing the applications and start making the rank list. The applicants don't make a rank list in the SOAP; they just hope for the best. Then, come Thursday, the applicants are advised whether they matched in the SOAP. It's pretty wild, but you only get two hours to either accept or reject any offer that's given to you. I suggest you accept it. Most of the time, you're far better matching into something than matching into nothing. It's got to be a terrible program in a terrible place to be worse than not matching at all.

Then, of course, Thursday afternoon the process begins again with any programs that are still unfilled. You get two hours again to accept or reject the offers. Then, it's all over for that year. If you matched, you still get an envelope the next morning at Match Day. You open it with everybody else. You just happen to know what's inside it before you open it. If you didn't match, you probably don't even want to show up to that thing. It's probably going to be too painful to watch all your classmates' glee as they open their envelopes and not have one to open yourself. That would take a real saint to be able to do that.

Step 1, of course, is to try to still match this year. Scramble, SOAP, whatever you want to call it, get into that. But by the time Friday rolls around, if you haven't matched, you aren't going to. This is depressing. This is humbling. This is hard. The first thing I think you ought to do is take a little bit of time, take a break, try to get over the shock. If you're in this position and it's Friday, you probably haven't gotten much sleep, and you might be feeling pretty down. If you're really depressed, go see a professional. It's probably not a bad idea to see a therapist, even if you're not feeling that depressed. This is a major life event and it can be really hard—not only on you emotionally, but also physically. Call your family, call your friends; let them support you through this rough time and know that your journey to being a practicing physician isn't necessarily over.

For many of us, we didn't get right into medical school. For many of us, we don't get right into residency. I know plenty of docs who did not match who are still practicing physicians. By next week, it's time to go and meet with your advisor, meet with another faculty member in your desired specialty, and have a postmortem. Why didn't you match? Were you a borderline or worse applicant to start with? Did you do a poor job of applying? Was there a major red flag on your application? Was there a problem with your interviewing style? Were you trying to couples match or something that's harder, or were you just unlucky?

Not matching once is pretty common. If you ask around, you're going to find that many doctors had to apply to medical school two or even three times and that can be the same thing with a match. The key is to match in your next attempt. You have to know yourself, know what you're good at, know what you're bad at, know how well you stack up against your peers at your school and across the country. Few applicants have top-notch grades, board scores, letters of recommendation, extracurricular activities, and interviews. Most of us are going to be better at some things than others. Beg your faculty member, your advisor, to be brutally honest with you. You really need to know where your application is weak. Once you've figured that out, you have one year to address that weakness. Assuming you pass your boards, you can't retake those. Repeating medical school classes probably isn't an option either, although you probably have time to squeeze in another sub internship or something.

But you can certainly strengthen an application by getting more clinical experience and doing some research. You can get different and hopefully better letters of recommendations. You can get involved in other activities—whether they're paid or volunteer—that make you a more interesting person and a more compassionate and competent doctor. You can go get an MBA or an MPH with that year. You could do more practice or take a course on interviewing or public speaking. There are lots of ways to improve your application that don't necessarily involve taking your boards again or taking more medical school classes. As you apply again, you need to lower your expectations dramatically. Spend some money—a lot of money—both on applications and on interviews if you can get them. Apply to twice as many places as you think you need. Maybe apply to every program in your specialty. Go to every interview you get, leave it all out on the court, so if it doesn't work out, you can at least know you did everything you could.

Obviously, some specialties are more competitive to match into than others. If your desired specialty is particularly competitive or even moderately competitive, you should also pick up a backup specialty the second time around. Sure, maybe your first love is ophthalmology. Wouldn't you rather be an internist than not practice at all? Look at all the options you have available to you. If you need a backup specialty, you probably shouldn't be picking one from the top half of the list of most competitive specialties. You want something on the bottom half of the list. Maybe it's neurology or family medicine or internal medicine or peds or pathology. The things where you're much more likely to match into a position somewhere. Obviously, there are plenty of very competitive pediatrics programs. But on average it's not nearly as competitive as matching into neurosurgery or ENT or something like that.

Let's say you've applied two or maybe even three times and you still haven't matched. You can't strengthen your application anymore. You're never going to be a practicing physician. It's time to reconsider your options. What are you going to do for the rest of your life? How are you going to put food on the table? How are you going to pay off those student loans? You have two major options. The first is to leverage your medical degree into a job. While a doctor who has completed residency and practiced for a few years is very attractive for jobs in many industries, one who has never practiced can also be quite useful—especially with some additional training such as an MBA, some financial training, an MPH, an MPA or an MHA.

You may also find jobs in pharma, insurance, or other related fields. Alternatively, you can simply go into something else. You can open a business, start a real estate empire, go into sales, be a therapist or a coach or whatever. There's a whole world full of careers you don't even know about. You'll probably like some of them. However, the elephant in the room, of course, is the financial problem caused by borrowing a bunch of money to go to medical school and then not becoming a practicing physician. If you're fortunate enough to get through medical school with no debt—which is about 27% of MD students these days—or with minimal debt (if you only borrowed $10,000 or $20,000 or something like that), you basically have a fresh start from zero. If you have a contract with the government, like HPSP or NHSC, or you have an MD/PhD, you'll need to read the contract and talk to the appropriate authorities. With the military contract, for instance, you'll likely still have a service obligation. That's not so bad. You'll have a job. That job likely qualifies for Public Service Loan Forgiveness. If your contract was an MD/PhD, you likely have no further obligation as you completed the PhD long before the match. You can simply go into the research side.

But if you're like most students, like the 73% of students who have substantial student loans, you've got a bigger problem. If those loans are mostly federal, you can enroll in an income driven repayment program and you should give serious consideration to any job that qualifies for Public Service Loan Forgiveness. You might actually be earning more money in forgiving student loans than in salary in those situations. You can also consider IDR forgiveness, although, unlike PSLF, that comes with that big tax bomb after 20 or 25 years—not to mention the extra 10 to 15 years of payments. It doesn't require you to work for a nonprofit, though. You don't even have to work full-time or work at all. If you have private loans, you're going to have to find something that will earn enough money to pay them off. That can be tricky. But if you're smart enough to graduate from medical school, you're smart enough to figure something out there.

In the meantime, remember the big advantage of student loans. They can ruin your credit, but student loans don't go in bankruptcy and they're also unsecured loans. The worst case scenario is ruined credit, forfeited tax refunds and very occasionaly having 15% of your wages garnished. It's not the end of the world.

Obviously, failing to match is a major career and financial catastrophe. Do all you can to avoid it, but if it happens to you, attempt to SOAP your way out of it and apply again. If you still can't match, consider your other options both inside and outside the medical field, and pay special attention to your student loan burden as you do. Congratulations to those of you who matched this week, and my condolences to those who have not. I hope this section of the podcast has provided you with some options and some hope to deal with this situation you have in front of you.

med school scholarship sponsor

More information here: 

What Happens If You Don't Match into Residency and What to Do

 

White Coat Investor Annual Survey Results 

Our annual survey results are in, and Jim shared some key findings on the podcast. This survey offers invaluable insights into the diverse demographics and financial habits of the audience, and it is one of the primary guiding factors for how the next year will develop here at WCI. We pore over every single answer to every single question. One notable aspect from the survey is the audience composition, with the majority being in their 30s and 40s, primarily from the United States, and predominantly male. Our audience has been predominately male since its inception, but we hope to continue to see that number equalize as time passes.

Financial data from the survey was particularly interesting. While the audience's income spectrum spans from less than $200,000 to over $750,000 annually, a significant portion falls within the $200,000-$500,000 range. Despite variations in income, spending habits seem relatively consistent with approximately 90% of respondents indicating annual household spending between $100,000-$300,000. This consistency suggests a level of financial discipline and prudent management among the audience, regardless of income level.

Investment preferences were also interesting, though not shocking, with a substantial portion of the audience favoring traditional asset classes such as stocks, bonds, and real estate. There are certainly a portion of you out there interested in alternative investments like cryptocurrency, but the numbers are significantly lower. The survey highlights a strong inclination toward index funds over actively managed funds, which we love to see.

Jim also delves into audience engagement with the podcast, revealing insights into listenership frequency, preferred content formats, and guest preferences. While the majority of you appreciate the educational segments and guest interviews, there is also demand for more teaching-focused content similar to the blog format. We will be sure to add more of that in 2024. As is the case every year, some of you want only Jim's voice while others of you really appreciate diverse voices and input. We simply cannot please everyone, but we are doing our best!

Overall, we were grateful to see that The White Coat Investor is seen as a trusted resource for financial education and guidance within the medical community and beyond, and we will strive to continue to earn and deserve that trust. To read Jim's post outlining all of the survey findings, click here.

More information here:

2024 WCI Annual Survey Results: Here's Your Net Worth, How Much You Make, and Your WCI Criticisms  

 

To learn more about the following topics, see the WCI podcast transcript below:

  • Is it ever a good idea to use a family friend as your financial advisor?
  • Taking out a loan against your annuity
  • What to do with extra moonlighting money as a resident

 

Milestones to Millionaire

#161 — Nurse Becomes a Millionaire

Today, we talk with a nurse who is currently in school to become a CRNA and is officially a millionaire. Roughly 10 years ago, he and his wife took control of their finances. He said there were some tough conversations as they educated themselves about how to become financially literate and what their goals should be and how to reach them. But once they were on the same page, they were able to start crushing their goals. Their big goal was to be millionaires by 40 and they got there a few years early. He is now passionate about giving back financially and educating coworkers about how to get started with taking control of their financial lives.

 

Finance 101: How to Get Started 

Embarking on the journey toward financial stability begins with a thorough assessment of your current financial standing. This entails meticulously calculating net worth by compiling assets and liabilities—including debts such as student loans and mortgages—and assessing all income streams, including investments and side gigs. By gaining a clear understanding of your financial position, you can develop a roadmap for improvement.

With a comprehensive view of your finances, you can focus on enhancing your financial health through strategic budgeting. Delineating income and expenses helps determine whether you are living within your means. Analyzing spending habits reveals areas where adjustments can be made to increase savings rates, a crucial aspect of building wealth. By curbing unnecessary expenditures and maximizing income, you can work toward achieving positive cash flow and meeting savings targets, like saving enough for retirement.

Investing wisely is the final piece of the financial puzzle. A straightforward approach with low-cost, diversified index funds is the way to go. Through consistent contributions to retirement and taxable accounts, you can leverage the power of compounding returns to grow wealth over time. While navigating the world of investments may seem daunting initially, you can attain financial freedom and security with dedication and perseverance. Taking proactive steps toward financial literacy and empowerment lays the foundation for a future marked by stability, peace of mind, and the ability to support both yourself and your loved ones.

 

To learn more about how to get started, read the Milestones to Millionaire transcript below.


 

Today’s episode is brought to you by SoFi, helping medical professionals like us bank, borrow, and invest to achieve financial wellness. SoFi offers up to 4.6% APY on their savings accounts, as well as an investment platform, financial planning, and student loan refinancing featuring an exclusive rate discount for med professionals and $100 a month payments for residents. Check out all that SoFi offers at https://www.whitecoatinvestor.com/Sofi. Loans originated by SoFi Bank, N.A., NMLS 696891. Advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC, Member FINRA/SIPC. Investing comes with risk including risk of loss. Additional terms and conditions may apply.

 

WCI Podcast Transcript

Transcription – WCI – 358

INTRODUCTION

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

Dr. Jim Dahle:
This is White Coat Investor podcast number 358 – What to do if you didn't match this week?

Today's episode is brought to you by SoFi, helping medical professionals like us bank, borrow and invest to achieve financial wellness. SoFi offers up to 4.6% APY on their savings accounts, as well as an investment platform, financial planning and student loan refinancing, featuring an exclusive rate discount for med professionals and $100 a month payments for residents. Check out all that SoFi offers at whitecoatinvestor.com/sofi.

Loans are originated by SoFi Bank, N.A. NMLS 696891. Advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC, member FINRA/SIPC. Investing comes with risk, including risk of loss. Additional terms and conditions may apply.

All right, for those of you out there who are first year medical or dental students or know somebody who’s a first year medical or dental students, and in fact, we expanded that this year, if you are pharmacy school or PA or NP or podiatry, whatever. We've expanded this year, our Champions program, but tomorrow's the final day. Champions have to apply by tomorrow in order to get a free copy of the White Coat Investors Guide for Students for you and all of your classmates.

All you have to do is give us your mailing address and we'll send you all the books. All you have to do is pass them out to your classmates. That's it. We'll even give you a little bit of swag for doing it. It's not complicated. It really is a free book. And the knowledge in the book is maybe not priceless, but it's worth millions each of your classmates. And if you multiply that by the hundred people in your class, that's a whole lot of money that you can be making for your classmates.

So please, if you haven't been handed a White Coat Investor Guide for Students and you're a first year student, please apply for the Champions program. Tomorrow is the last day. We need some time to print the books, get them shipped out to you before class ends this spring.

Tomorrow is the last day. March 15th is the deadline. Please apply. If more than one person applies from your class, no big deal. We just pick one of you. But for too many classes out there, there isn't anybody that's applied to be the champion. We can't send these books out one by one. We can't afford the shipping. We have to send them out in boxes in bulk. We need a champion to pass them out once they get there. And that's where you come in. So please volunteer to be a WCI champion for your class.

 

WHAT TO DO IF YOU DON'T MATCH

All right, it's match week. Congratulations to all of you who are fourth year medical students. Although some dental folks go through a similar process as well as some other professions, but this week is medical school match week. If you have matched, congratulations on making it to the next step of your career. It's pretty exciting.

However, I want to spend a few minutes today talking to the rest of you because the match is becoming more and more and more competitive every year. The reason for that is because medical school slots have expanded significantly and residency spots have not expanded as significantly. And so, the match rate has actually been falling for several years.

For MDs in US schools, it's still pretty high. It's still 91, 92, 93%. Most of the DOs are now going through what used to be called the MD match and their rate of matching is just about as high, maybe a percentage point or too lower, but still quite high. So, most people are still matching. That's not the case if you're coming out of a Caribbean school. It's never been the case coming out of a Caribbean school. I think the match rate overall for those schools, and it's better at some schools than others, but overall I think it's about 56%. That means 44% aren't matching. That's a huge number.

And to not match after borrowing a whole bunch of money for medical school is a financial catastrophe. If you owe $200,000, $300,000, $400,000 plus dollars in student loans and now you don't have a job coming that's going to provide enough income to pay that back, that can be a pretty serious financial catastrophe.

The numbers are probably actually worse for people who enroll in a Caribbean school because those are just the numbers of those who graduate. A fair number of people don't graduate from a Caribbean medical school. So, it's a little bit of a gamble to go there. A lot people call it Second Chance University or Second Chance Medical School, but it's a much bigger gamble than going to a US MD or DO school.

At any rate, obviously, the first thing you do if you don't match is you scramble. It used to be called the scramble. Now it's often called the SOAP. You basically find out on Monday of match week that you didn't match. Those who do match find out they matched on Monday as well, but they don't get to find out where until Friday, tomorrow, the day after this podcast is dropping.

It's a big ceremony. Everybody shows up and they open their envelopes and find out where they're going. It's very exciting. You bring your spouse or partner or significant other and it's a big party. It's great for most people, but for those who didn't match, they often don't show up at this thing at all. In fact, they worked their butt off all week trying to SOAP into an open position because the residency programs in a lot of cases are scrambling just as bad as the students are because they didn't fill all their spots. And it's a big deal for a residency program to not fill its spots.

Imagine if you were planning on having 10 residents in a given year. Well, what happens if you only have six? Well, that's a lot of shifts that aren't covered. That's a lot of calls that aren't covered. It's just as big a deal for the residency program as it is for the students. Everybody's incentivized to grab the unmatched students and get them into positions and fill up those residency programs. And that's what happens during the SOAP.

Tuesday of match week, the programs can start reviewing the applications and start making the rank list. The applicants don't make a rank list in the SOAP, they just hope for the best. And then come Thursday, the applicants are advised whether they matched in the SOAP.

And it's pretty wild, but you only get two hours to either accept or reject any offer that's given to you. I suggest you accept it. Most of the time you're far better matching into something than matching into nothing. It's got to be a terrible program in a terrible place to be worse and not matching at all.

And then of course, Thursday afternoon, the process begins again with any programs that are still unfilled. And you get two hours again to accept or reject the offers. And it's all over for that year. If you matched, you still get an envelope the next morning at match day. You open it with everybody else. You just happen to know what's inside it before you open it. If you didn't match, you probably don't even want to show up to that thing. It's probably going to be too painful to watch all your classmates glee as they open their envelopes and not have one to open yourself. That would take a real saint to be able to do that.

Step one, of course, is try to still match this year. Scramble, SOAP, whatever you want to call it, get into that. But by the time Friday rolls around, if you haven't matched, this is bad. This is depressing. This is humiliating, this is humbling. This is hard.

The first thing I think you ought to do is take a little bit of time, take a break, try to get over this shock. If you're at this position, and it's Friday, you haven't gotten much sleep, you might be feeling pretty down. If you're really depressed, go see a professional. It's probably not even a bad idea to see a therapist, even if you're not feeling that depressed.

This is a major life event and it can be really hard, not only on you emotionally, but also physically. You haven't slept much all week. You're going to be doing a lot of work worrying this weekend if you like most people. Call your family, call your friends, let them support you through this rough time and know that your journey to being a practicing physician isn't necessarily over.

For many of us, we didn't get right into medical school. For many of us, we don't get right into residency, but I know plenty of docs who did not match who are still practicing physicians. By next week it's time to go and meet with your advisor, meet with another faculty member in your desired specialty, and let's have a postmortem. Let's have a discussion. Why didn't you match? Were you a borderline or worse applicant to start with? Did you do a poor job of applying? Was there a major red flag on your application? Was there a problem with your interviewing style? Were you trying to couples match or something that's harder or were you just unlucky?

Not matching once is pretty common. If you ask around, you're going to find that many doctors had to apply to medical school two or even three times and can be the same thing with a match. The key is to match in your next attempt. And that's a lot like the key to matching the first time, which is being realistic. You have to know yourself, know what you're good at, know what you're bad at, know how well you stack up against your peers at your school and across the country.

Few applicants have top-notch grades, board scores, letter of recommendations, extra curriculars and interviews. Most of us are going to be better at some things than others. So, beg your faculty member, your advisor, to be brutally honest with you. You really need to know where your application is weak. Once you've figured that out, you have one year to address that weakness. Assuming you pass your boards, you can't retake those. Repeating medical school classes probably isn't an option either, although you probably have time to squeeze in another sub internship or something.

But you can certainly strengthen an application by getting more clinical experience and doing some research. You can get different and hopefully better letters of recommendations. You can get involved in other activities, whether they're paid or volunteer, that make you a more interesting person and a more compassionate and competent doctor. You can go get an MBA or an MPH with that year. You could do more practice or take a course on interviewing or public speaking. There are lots of ways to improve your application that don't necessarily involve taking your boards again or taking more medical school classes.

Now, as you apply again, you need to lower your expectations dramatically. Spend some money, a lot of money, both on applications and on interviews if you can get them. Apply to twice as many places as you think you need. Maybe apply to every program in your specialty. Go to every interview you get, leave it all out on the court. So if it doesn't work out, you can at least know you did everything you could.

Remember, your odds of matching the second time are just less than 50-50. But if you have to ask yourself if you're a glass half full kind of person or glass half empty kind of person.

Now obviously some specialties are more competitive to match into than others. If your desired specialtie is particularly competitive or even moderately competitive, you should also pick up a backup specialty the second time around. Maybe the backup specialty is just completing an internship. Sure, maybe your first love is ophthalmology. Wouldn't you rather be an internist than not practice at all? Look at all the options you have available to you after completing an internal medicine residency. There's all kinds.

If you need a backup specialty, you probably shouldn't be picking one from the top half of the list of most competitive specialties. You want something on the bottom half of the list. Maybe it's neurology or family medicine or internal medicine or peds or pathology. The things where you're much more likely to match into a position somewhere.

Now obviously there's plenty of very competitive pediatrics programs. But on average it's not nearly as competitive as matching into neurosurgery or ENT or something like that.

Okay. Now let's say you've applied two, maybe even three times. You still haven't matched. You can't strengthen your application anymore. You're never going to be a practicing physician. It's time to reconsider your options. What are you going to do for the rest of your life? How are you going to put food on the table? How are you going to pay off those student loans?

Well, you have two major options. The first is to leverage your medical degree into a job. While a doctor who has completed residency and practiced for a few years is very attractive for jobs in many industries, one who has never practiced can also be quite useful, especially with some additional training such as an MBA, some financial training, an MPH, an MPA or an MHA.

You may also find jobs in pharma, insurance or other related fields. You can coach pre-meds on how to get into medical school. There's lots of options. Alternatively, you can simply go into something else. You can open a business, start a real estate empire, go into sales, be a therapist or a coach or whatever. There's a whole world full of careers you don't even know about. You'll probably like some of them.

However, the elephant in the room, of course, is the financial problem caused by borrowing a bunch of money to go to medical school and then not becoming a practicing physician. So, student loans. Now, if you're fortunate enough to get through medical school with no debt, which is about 27% of MD students these days, or with minimal debt, if you only borrowed $10,000 or $20,000 or something like that, you basically have a fresh start from zero.

If you have a contract with the government like HPSP or NHSC, or you have an MD PhD, you'll need to read the contract and talk to the appropriate authorities. With the military contract for instance, you'll likely still have a service obligation. That's not so bad. You'll have a job. That job likely qualifies for public service loan forgiveness. If your contract was an MD PhD, you likely have no further obligation as you completed the PhD long before the match. You can simply go into the research side.

But if you're like most students, like the 73% of students who have substantial student loans, you've got a bigger problem. If those loans are mostly federal, you can enroll in an income driven repayment program and you should give serious consideration to any job that qualifies for public service loan forgiveness. You might actually be earning more money in forgiving student loans than in salary in those situations.

You can also consider IDR forgiveness, although unlike PSLF, that comes with that big tax bomb after 20 or 25 years, not to mention the extra 10 to 15 years of payments. It doesn't require you to work for a nonprofit though, nor do you even have to work full-time or work at all.

If you have private loans, you're going to have to find something that will earn enough money to pay them off. That can be tricky. But if you're smart enough to graduate from medical school, you're smart enough to figure something out there.

In the meantime, remember that the big advantage of student loans. They can ruin your credit, but they can't foreclose on your brain. Student loans don't go in bankruptcy, but they're also unsecured loans. The worst case scenario is ruined credit, forfeited tax refunds and rarely having 15% of your wages garnished. It's not the end of the world.

All right. Obviously failing to match is a major career in financial catastrophe. Do all you can to avoid it, but if it happens to you, attempt to SOAP your way out of it and apply again. If you still can't match, consider your other options both with and without inside and outside the medical field and pay special attention to your student loan burden as you do.

Again, congratulations to those of you who matched this week and my condolences to those who have not. I hope this section of the podcast has provided you some options and some hope to deal with this situation you have in front of you.

Okay, we have a promotion this week as part of match week. It's actually a promotion at studentloanadvice.com. Once you match, you're probably starting to think about those student loans and what to do with them. Well, we're going to incentivize you to meet with our folks at studentloanadvice.com and get a plan for your student loans in place.

There ought to be enough incentive. I think our average client there comes out ahead by $180,000 or $190,000, mostly in increased public service loan forgiveness. But as an additional incentive for this week, and this promotion only runs through the 19th, we're going to give you a free copy of our Continuing Financial Education 2023 course if you book a consult this week. And of course, once you complete the consult, we'll send you access to that course. That's our promotion for this week for anybody who books a consult at Student Loan Advice. You don't have to complete the consult this week, you just have to book it. And once you finish the consult, we'll send you that free course.

 

WHITE COAT INVESTOR ANNUAL SURVEY RESULTS

All right, I wanted to spend a few minutes talking about our survey. Many of you answered our survey. Our podcast is probably our biggest reach of everything we do at the White Coat Investor. And so, many of you are the folks who answered our annual survey.

And the annual survey is super important. It really does guide what we do here at the White Coat Investor for the next year. It has a major impact on how we run the business and on the content that we produce and the way we do things. Thanks to all of you who filled it out. Obviously those who won the awards, the lottery, the whatever we call it, the drawing for filling out the survey, you've already been notified. If we didn't contact you then you didn't win. I'm sorry. But let's go over some of the survey results that I think you guys will find very interesting.

All right, we'll just go through it pretty quickly. A lot of these are pretty quick questions. We asked what country you live in. 99% of you are in the US, Canada, Australia, Saudi Arabia, Denmark, Japan. Lots of other things came up on the survey, but you're still 99% Americans. You're from pretty much all of the states. There's more of you in California than anywhere else, but there's also more people in California than anywhere else. Lots of people in Texas, Florida, New York, etc.

We asked you how old you are. And it turns out that 46% of you are in your 30s. About 25% of you are in your 40s. About 11% of you are in your 50s and about 12% of you are 60 plus. Only 6% under 30, which are mostly medical students and residents. Almost a quarter of you are 50 plus. I'll bet that wasn't the case 10 years ago in the early years of the White Coat investor, but it is now.

85% of you are married. That surprised me it was that high. About 12% single and the rest divorced or widowed. Majority is still male. I think it's about 72% of White Coat Investors are male. That hasn't changed much over the years. I'm not sure why that is. I think some of it might be guys tend to be more interested in finance. Maybe people in high income professions are still mostly male even though there's now more women in medical school than men. Maybe males just relate better to me than women do. I don't know. But that's been about the way it's been for a number of years.

We're certainly doing some things to try to reach out to women in particular. You've probably heard of the Financially Empowered Women. Megan, our podcast producer has a major role in that. And so, if you haven't found out about that, you can check that out at whitecoatinvestor.com/few.

All right. We asked what phase of life you're in. 69% of you are attendings or the equivalent, people working full-time in their careers. We actually asked this year how many people are working part-time and it was a decent chunk. It ended up being, it looks like about 15% or so working less than full-time hours. And I thought that was pretty interesting.

We've got a heavy physician bias. Lots of docs, not so many other people. But we've got 7% dentists, 3% ABCs, 3% tech workers this year. One year in our survey we had 8% pharmacists. I don't know where they all went. This year was only 2%. Still more than lawyers, though. Not that many lawyers listening to the White Coat Investor podcast. Maybe we ought to do more to reach out to them.

Interestingly, 72% of you are employees. Only about 10% own your own practice. About 18% of you own a practice with partners. We also discovered that two thirds of you are less than 10 years out of training. But we have people throughout their entire career path.

We asked you guys how many years you've been following WCI and very few of you had been following less than one year. But many of you, 21%, only one to three years and another 26%, only three to five years. That puts the majority of people have been with WCI less than five years. And I find this fascinating because about five years ago I burned out and almost shut down WCI and half the people we’re now helping, hadn't even heard of it at that point. That's gratifying to me and makes me feel good about figuring out a way through that WCI burnout and keeping this thing going.

We asked how you find WCI and that's still a major part of how we've grown. 28% of people were just referred by a friend, a colleague, a partner, whatever. They were told about WCI. A lot of you were given or you bought the WCI book. About 14% of you.

But more and more you come in just off an internet search. You're searching for something, you're searching for whole life insurance and what to do with it or financial advisors or whatever. About 36% of you just kind of stumbled in here off the internet after searching for something else. We'll continue to make great efforts to help people continue to do that.

All right, let's get into some of the more financial interesting stuff about our audience. We asked do you have any student loans. And it turns out that 49% of you have already paid off your student loans. 28% of you still have a student loan and 23% of you never had student loans. And I'm pleased to see that a huge percentage of you paid off your student loans in less than five years. 42% paid off your student loans in less than three years. 27% paid off your student loans in three to five years. 24% took five to 10 years, and only about 8% of you took more than 10 years to pay off your student loans.

Current student loan balances for those who have it, a little over half of you have less than $200,000. The other half has more than $200,00. What does it look like? About 8%, 9% owe more than $400,000 in student loans. So, plenty of you out there, if you have a big student loan burden, you are not alone.

A lot of you have a plan to deal with your student loan debt. About 95% of you have a plan. If you don't, I mentioned studentloanadvice.com earlier. Meet with them, get a plan for your student loans.

We also asked if you have a written financial plan. And unfortunately that number was not 95%. That number was only 53%. And I don't like that. I don't like that 47% of White Coat Investors, people who are enthusiastic enough about what they're hearing here, what they're reading on the site to answer a survey 47% of you still don't have a written financial plan. And I think that's not a good idea. Maybe not everybody needs a written financial plan, but I think the vast majority of you would surely benefit from having one. So, whether you're writing it yourself, with or without assistance from something like our Fire Your Financial Advisor course, or meet with a personal financial planner to help you design that, I think getting a plan in place is very worthwhile.

All right, we asked you how many earners are in your household. About 40% of you are a one earner household. 55% are two earner household. And then, of course, a fair number of you are retired.

We asked how much you earn practicing medicine. And this was interesting. There were people all over the chart. Obviously some people are not earning anything practicing medicine, they're retired or whatever. But we discovered that about 15% of you make less than $200,000 practicing medicine. And then about another 17% make $200,000 to $300,000. Another 16% make $300,000 to 400,000. Another 14% make $400,000 to $500,000 and about 12% make $500,000 to $750,000. And then we've got a small slice of people that are making more than $750,000 a year.

I think the bottom line there is that yes, the vast majority are earning between $200,000 and $500,000. But there's plenty of people that are outside of those numbers. That's why what I think about when I think about a physician income is $200,000 to $500,000, but there's plenty of you making more and there's plenty of you making less.

We asked about your household income and numbers were significantly higher there than just looking at your physician income. But still we see that the vast majority of you, probably 55% are between $100,000 and $500,000 a year in household income. But again, lots of people that are outside of those numbers.

It's tricky. It's tricky to create content that's applicable to somebody making $150,000 a year and somebody that's making $1.5 million a year. Most of what we create I think is for people in the middle that are making that $200,000 to $600,000 in income. But we also try to make sure we're creating content for people on the high end as well as the low end there. But if you feel like you make $120,000 a year and the vast majority of what we're creating does not seem applicable to you, well, that's why, because most of the audience is making more money than you.

Likewise, if you're making $1.8 million a year and it feels like most of our content is geared to somebody making less than you, there's a reason for that. Because you are absolutely crushing it income wise and most people aren't anywhere near where you're at.

All right. Despite that huge variation in income and a lot of you making a whole bunch of money, my favorite question from the survey asked about your annual household spending, what you're actually spending. And here the numbers are almost all the same.

We found that the only 8% of you are spending under $50,000 a year. About 24% of you are spending $50,000 to $100,000. 44% are spending $100,000 to $200,000. And another 19% are spending $200,000 to $300,000. If you look at that, you sum that up, you can see that something like 90% of White Coat Investors are spending between $100,000 and $300,000 a year. 90% of you. We all earn different amounts, but we're spending pretty similarly, which I thought was pretty interesting.

We asked about your net worth and we discovered that some of you are doing very, very well. Only about 11% of White Coat Investors are not yet back to broke. They have a negative net worth. 84% of you have at least a six figure net worth and two thirds of you are millionaires. A third of you are multimillionaires and 5% of you are decamillionaires. So, lots of bias here, obviously. You're more likely to fill out a net worth survey if you have high net worth. But many of you are doing very, very well. So, congratulations to you on that.

We asked how many of you felt like you were financially independent. 21% of you said you were. We asked what you want your retirement nest egg to be. And we got responses that are all over the place. A very small slice actually that said 1 to 2 million. A bigger slice said 2 to 3 million. And about 19% of you, an even bigger slice said 3 to 4 million. 20% of you said 4 to 5 million. 23% said 5 to 7.5 million.

Basically, about two thirds of you are saying you need 3 to 7 million dollars as a nest egg in order to retire, which I find amazing since so many of you are only spending $100,000 or $200,000. Less than $200,000, and you think you need $7 million. And yet you really only need a portfolio of maybe 3 million to support what you're actually spending, which I find kind of interesting.

We asked you what age you want to retire at and it turns out most of you are not the hard core FIRE types. Very few of you wanted to retire under 40, not very many more wanted to retire before 45. Only 8.5% of you want to retire between 45 and 50. Once you get into your 50s though, you start seeing that a lot of you want to retire. 50 to 55 is 25% of you. 55 to 60 is 28% of you. 21% of you want to retire in the first half of your 60s. And about 13% of you want to keep working even beyond 65.

So, I don't know what FIRE is for physicians. Maybe 45. Let's say that. That's not very many of you that actually want FIRE. Most of you like your jobs enough that you want to keep doing them at least into your 50s.

We asked how many of you use a financial advisor. 65% of you said you do it all on your own. 13% of you said you used to use an advisor and about 15% of you said that you only occasionally use an advisor when you have a new question, which I find this all very interesting. That the ones who are actually using an advisor is just a relatively small percentage of you, about 20%. Whereas I think among all doctors, probably 80% want and need a financial advisor. And yet only about 20% of you guys are using one. I think it's just a selection bias issue there. I think those who come here, those who pay attention to the White Coat Investor are those who are more likely to be able to manage their own money. Despite not using advisors, many of you use a tax preparation firm. About 57% of you pay a professional to do your taxes.

All right, we asked what you invest in. No surprise. Stocks, bonds, high yield saving accounts, real estate. Only about 12% of you have invest in any sort of crypto. About 14% of you invest in small businesses. In the last year 91% of you have invested in index funds and only 14% in actively managed funds. 20% of you bought individual bonds, about the same number bought stocks. 5% of you bought crypto in the last year. 12% of you bought direct real estate. About 19% of you bought passive real estate.

Despite that interest in some of these alternatives, your portfolios are still heavily invested in stocks. 51% of you have 75 to 100% of your portfolio in stocks and another 36% have 50 to 75% of your portfolio in stocks.

We asked what percentage of your portfolio is invested in real estate. The biggest category at 70% is less than 10% of your portfolio. And another 17% invested less than 20%. So, probably 90% of people have 20% or less of their portfolio in real estate. Many of you plan to add it in the future. About 45% of you plan to add real estate in the future and another 26% aren't sure if you will or not.

Most of you have completed a backdoor Roth IRA every year, but still 19% of you haven't. And it makes me wonder why. Sometimes you say because you can contribute directly to a Roth IRA, you just don't make that much. 24% of you don't know how to do it. That bothers me a little bit given how long I've been teaching how to do a backdoor Roth IRA. If the only reason you're not doing a backdoor Roth IRA is because you don't know how to do it, check out our backdoor Roth IRA tutorial.

72% of you have a disability insurance policy. Boy, there's a lot of you that still don't, but not that many of you said you don't because you still need to purchase one. Most of you don't need one. Whether you're retired or financially independent or whatever.

Lots of you have purchased a guaranteed standard issued disability insurance policy. About 19% of you. That surprised me that it was that high. We learned that more of you have policies with Principle and then followed by Guardian than any of the other companies. But we also see 12% at MassMutual, 11% at Ameritas, 10% at The Standard.

About 72% of you have a life insurance policy. We asked about burnout and 47% of you said you've had burnout and it's occasionally impacted your work and life. About 18% of you say it's had a significant impact on your life, and only about 32% of you say you really haven't been affected by burnout.

All right, let's talk a little bit about the questions I asked this year that were specific to the podcast. I asked about how often you listen. And about 51% of you say you listen every week. 13% say once a month or so. About 16% listen a few times a year. 19% of those who took the survey don't listen to the podcast at all.

We asked what types of podcast segments you prefer. And 45% of you, the biggest category, prefer that we just teach on individual topics, which is basically what we do on the blog. We pick a topic and we blog about it. And a lot of you would like us to just do that on the podcast too, which wasn't really the idea behind the podcast when we started it. We were mostly going to do interviews, we're going to do questions, but maybe we need to do a little bit more of that teaching that we haven't done in the past. We've tried to add that on to the Milestones to Millionaire Podcast. You've probably noticed if you listen to that. So, we'll try to do a little bit more of that going forward.

We asked you about the Friends of WCI podcast episodes we do, and found that 43% of you love them having another voice on the podcast with me. And about 32% of you don't care and only 16% of you hate them. We're probably going to do a few more of those this year. Be ready for them. I'm sorry for those of you who hate listening to anybody besides me. There's not very many of you though.

We asked who you guys thought we should get on the podcast. The two most frequently requested people were Warren Buffett and Dave Ramsey. We've tried both. We're probably not getting either one of them, so you can give up on that. But please continue to send us your suggestions. A lot of the people we bring on the podcast are people that are listeners have suggested.

All right, this is the part I've been waiting for. I've never asked this question on the annual survey before, but this year I asked whether you like being told on the podcast “Thanks for what you do.” Because I get complaints about this. People write in and say, “Ugh, quit saying that. I hate it.” But we ask people and it turns out by a ratio of 20 to one, you guys actually do like it. I thank you for what you do. So, there you go.

All right. We asked some questions about conferences. It turns out more of you prefer the West coast than the East coast and none of you want the Midwest. But most of you just don't care. You're coming wherever it is. So, we'll hope to see you at future WCICONs. We're probably not going to do them during the weekdays anymore though. It was about three to one of people that prefer having it on the weekends.

All right. One of my favorite parts of the survey is I ask you for criticism. Now, I hope most of it is constructive criticism because that's literally gold in this industry. And so, the first question we asked was what do you disagree most with the views of WCI on. And I was pleased to see that 76% of you don't disagree with anything I say. And then I got thinking about it. I thought we were running kind of a multimedia education company, not a cult. Surely 76% of you that can't find anything you disagree with me on, that seems a little too high to me now that I think about it. But I'm happy to see it.

The biggest thing people said they disagree with me on is real estate investing, which I found interesting. So, let me reiterate my stance on real estate investing just so everybody understands what it is. And then you tell me if you really disagree with this.

My stance is that it's a worthy asset class with good returns and low correlation with stocks and bonds, but with some additional hassle. It's certainly optional. That's my stance. What part of that do you disagree with? That it's optional? You don't think it's optional? I don't know. I think it's odd that number was that high. There was one or 2% on a bunch of other stuff like whole life insurance or crypto or stock timing or market timing. But that was the biggest category, it was real estate investing.

Okay. I asked you if you think I tell you to spend less or to spend more, whether I'm telling you wrongly. And 93% of you said I get the balance just right and only about 5% of you say I tell you to save too much. So, it sounds like we're getting that right.

I asked you if you've ever been offended by our content and 96% of you said you never have. I'm pleased to see that. Almost all of you, 96% of you gave us a four or a five on whether you feel you can trust our recommendations. We'll keep working hard to deserve all the five star reviews we can get there.

And then of course we give lots of opportunity for you to type in whatever you want to tell us about improving the White Coat Investor. A lot of the stuff you guys ask for, we've already done. I'd encourage you to check out the search function on the website. You guys asked for stuff like “I'm trying to teach medical students basic financial management and simple images that can be referred to on a PowerPoint would be awesome.” I put that together five years ago, give it out every year as part of our medical educator award that we give out each year. It's right there under the WCI plus tab on the website. You want to download PowerPoints to teach somebody? It's all there.

Same thing people ask for stuff for lower income specialties, for stuff for single doctors. They ask for audio versions of books. We have audio versions for the books. A lot of this stuff people ask for, they just don't realize we've already done.

I like some of the humorous responses. People tell me we need more cowbell in the podcast and maybe they'll give me a cowbell one of these times. We'll ring the cowbell and then I'll have people complaining too much cowbell I'm sure.

And then of course, lots of the responses are stuff that one person says one thing, one person says another. For example, “I love Jim, but I wish you rotated in more hosts to add credibility.” And then the next comment will say, “I don't like the different voices on the blog so I stopped reading them.” We can't please everybody all the time.

We appreciate all of your comments. Many of them are very helpful, particularly when there's a trend of comments. It really does drive the decisions we make. Both business decisions like the advertisers we have and how many ads we run, as well as content decisions, what kind of content we cover. Thank you so much to all of you who responded to the survey this year.

 

CORRECTIONS

All right, I got to do some corrections. This is one of the reasons I like blogging. If I screw up a blog, I got an email by 6:00 AM the morning it's published, fixing it telling me, “Hey, you made this error.” I go in, I fix it in 10 seconds. Most of you never even noticed there was an error. On the podcast, that's harder because the corrections don't run for like three, four or five weeks afterward just because of our normal production schedule that we do for these podcasts. And so, it's a little bit harder to do corrections. I apologize for that. But I think it's important that we get stuff right. And so, even if the correction doesn't come for a few weeks, it's important that it gets corrected.

All right. We had a discussion in episode 349. This was a question from Dr. C from the southeast who had kind of a unique situation he was in, where he was attracted to a practice and had been given a loan from that practice or from the hospital to the practice. And then he got a 1099-C and I told him mistakenly on the podcast that this was completely taxable income.

Well, that's not entirely true. I got into a long email exchange with another physician in a similar situation. And basically the 1099-C includes not only a taxable portion, a part that went to pay off student loans, but also a part that was also offset by business expenses in the practice. And so, it's not entirely true that that entire 1099-C that this doc got was taxable income. It turned out to be a really complicated issue. And I just wanted to get that correction out there.

If you're in that sort of a weird situation, you need to talk to your accountant, your lawyer, whatever. Figure out how much of that is taxable. Probably the amount that went toward your student loans, but not the amount that went toward paying your share of the practice expenses.

Okay. Another correction we need to do. We had a fellow that came on and it was unbelievable. I can't remember what episode it was, it was a few episodes ago, but it was a fellow that had access to four 403(b)s and I told him that he couldn't contribute more than the total annual contribution you're allowed to make for employee contributions. And that is actually not correct. You can contribute more than that $23,000 a year. What you can't do is deduct more than that $23,000 a year.

So, if you got to contribute $25,000 or $26,000 or $28,000 in total to all of those 403(b)s to get your entire match, you should do so because the match is more valuable than what you're losing on that deduction. I hope that's helpful. But I learned something new from that. It's amazing. 13 years of doing this, I'm still learning new stuff every month.

Okay, here's another thing. I had mentioned at one point on the podcast that really public service loan forgiveness is the only way to get tax free loan forgiveness. That's not entirely true. There are a few state programs that also give you tax free loan forgiveness. There is a program called PERLP, which also will not send you a 1099 when they forgive their loans to you.

And of course, for the next couple of years if you're able to get IDR forgiveness, and most people aren't because they haven't made their 20 or 25 years of payments. But if you're one of a small fraction of people that does qualify for IDR forgiveness, and I can't remember when the deadline is, but I think there's still a year or two left, that is also currently tax-free forgiveness. If you're starting an IDR forgiveness program now, don't expect that to be the case. In 20 years, maybe it will, maybe it won't. But keep that in mind.

 

USING A FAMILY FRIEND AS A FINANCIAL ADVISOR

Okay. I think we need to get into some of your questions here. Let's listen to a Speak Pipe question, and talk about investing with a family friend.

Speaker:
Hey Jim, thanks for all that you do. I was just wondering if you think there's ever a scenario where it would be worth investing with a family friend financial advisor within the community that's pretty well connected. Currently I invest all of our own 529s, Roth IRAs and brokerage accounts, but they've been asking to manage them. And I'm wondering if the kind of social capital that would be gained by using them, even if it's just a small amount I'm sending them each month, may be worth the investment and the loss in management fees. Thanks Jim.

Dr. Jim Dahle:
All right. The vast majority of the time, it is not a great idea to invest with a family member or a close friend. And there's a number of reasons why. The first reason why is that this advisor is at a firm where the main method of finding new investors, finding new clients, is hitting up your family and friends. They're probably not at a firm you want to do business with.

There is a very short list of firms, I think it's maybe up to six or seven firms right now, that I would never do business with. I would never send my friends there. Maybe I'd send my worst enemies there, but I would not send  a family member or friend there. And most of these are firms where there's a big focus on prospecting your family and friends to bring in new clients. So, that's one big problem with it.

The second big problem comes when you want to fire them. Super awkward, super awkward to fire your brother-in-law. Super awkward to fire your cousin or your cousin's father or whatever. I guess that's your uncle, your cousin's father. But anyway, it's not a great situation. Plus there's all this extra social pressure to invest with them to pay higher fees than maybe you otherwise would.

All of a sudden you're now mixing family with finance and that can cause a lot of problems. And if you owe somebody money in your family, they say Thanksgiving dinner doesn't taste the same when you owe money to someone sitting across the table from you. I just think it's a bad idea to mix most of the time.

Now, is there ever a scenario when I'd consider it? I'm sure there's some scenario I'd consider it but it's not usually because they have access to some sort of special investment. If that's the case, it's probably more of a sales technique than anything else. So, I'd use extreme caution when investing with a family friend or similar person.

As a general rule, you don't want to invest in things that people are coming to you and trying to get you to invest in. You want investments that are bought, not sold. And a lot of times if a family member is coming to you and pressuring you to buy it, that's not an investment you want to have anyway.

 

QUOTE OF THE DAY

Our quote of the day today comes from Warren Buffet who said, “Do not save what is left after spending. Instead spend what is left after saving.” Good advice. Sometimes they call that anti-budgetting. You put all the money in your retirement accounts first and then you just spend whatever's left in your checking account and then next month you do it all again. You don't have to track your spending, but you still make sure you have a 20% or whatever savings rate. It works just fine if that's how you want to manage your monthly income.

Let's take a question from Joe about annuities.

 

TAKING OUT A LOAN AGAINST AN ANNUITY

Joe:
Hi Jim, this is Joe in Florida. I'm a longtime listener of your podcast and also reader of your blog. I have a question about annuities. I know from reading your blog that annuities are generally something to be stayed away from, but unfortunately I do have a family member that purchased an annuity many years ago. They took a loan out on that annuity and now owe more interest than the annuity itself is worth. In short, they're going to default on this loan. I've done some research and I know the distribution they took on a loan is going to count as income. My question is what happens with the unpaid interest? I'm thinking it probably also will count as income, but I was just going to see what your thoughts were. Thanks Jim.

Dr. Jim Dahle:
Wow, that's a bummer. Borrowed money against the annuity and now you owe more than the annuity is worth. You would think there would be some sort of method in place to keep that from happening. Sometimes people get in trouble with a similar issue with universal life policies. As you get older, as you get into your 80s and 90s, the life insurance component is often larger than the investment return and you can actually get in trouble if you borrow too much money out of a universal life policy. I suppose the same thing can happen with an annuity.

And yes, basically everything just becomes taxable income at ordinary income tax rates when that defaults. I think you're going to end up paying taxes on all of it. Not only the amount you borrowed out of the annuity, but also the interest that's accumulated on that. I'm not 100% sure on that. It's probably worth running that by a tax professional, which I am not. But that's my understanding is that you have to pay ordinary income taxes on all of that default, and that includes the interest.

Now you've probably got some basis in there. If it's a non-qualified annuity, you wouldn't have to pay taxes on that, but otherwise certainly all of the earnings and anything above and beyond the earnings is going to be taxable income. So, sorry to hear about that situation.

This is why you really shouldn't invest in annuities. What an annuity should be used for is an additional way to spend your money in retirement, not a way to invest your money trying to save for retirement. If you buy the good annuities and we're talking about things like a single premium immediate annuity, this sort of thing can't happen. All you're doing is giving a lump sum of money to the insurance company and in exchange they're promising to pay you a certain amount of income every month until you die.

You're never going to have this problem with that sort of an annuity, but if you're investing in an annuity for decades, then you're borrowing money against it or whatever, you can obviously get into some trouble with that.

 

WHAT TO DO WITH EXTRA MOONLIGHTING MONEY AS A RESIDENT

Okay, let's take another question about moonlighting. Lots of you moonlight out there and I appreciate that. Moonlighting fills a lot of gaps where people pick up some extra call or they cover some shifts. Without that a lot of times there're not doctors out there when people need doctors. So, thanks for what you do and thanks for those of you who do it over time.

All right, let's take a listen to this question.

Brian:
Hey, Dr. Dahle, this is Brian. I am a PGY-2 internal medicine resident who will be doing either a chief resident year or a hospitalist year prior to applying to fellowship. Even if I do a chief year, I plan to do a significant amount of moonlighting at an attending rate to increase my income during that year. What advice do you have for me with my influx and income for this one year with regard to continuing to position for public service loan forgiveness, paying off debt, saving for retirement, et cetera? Thank you.

Dr. Jim Dahle:
Okay. This is a common situation for lots of docs where they have a year with higher income and then they go back into training. Not uncommon at all. What do you do with that year? Well, you try to make the smartest financial decisions you can, you take advantage of that higher income knowing that you're going back to a lower income.

Probably the most important thing to do is not to inflate your lifestyle. If you blow up your lifestyle during that year when you have an attending income, it's going to be really hard to go back to living on a fellow's salary. So, whatever you do, continue to live like a resident during that year. But that should give you a pretty good chunk of change to use.

So, how do you want to use it? Well, it depends. It depends on what your financial priorities are. Now, some things should be a pretty high priority. Let's say you have some 15% credit card debt. Yeah, go pay that off. That's a pretty good idea. Maybe you don't have an emergency fund yet. Well, you probably ought to save that up. What's a typical emergency fund for a resident? We're probably talking $10,000, $15,000, something like that. If you don't have that, get that saved up and put away somewhere safe.

Other priorities tend to be maxing out retirement accounts, paying off cars, or maybe you've got a car that's on its last legs that you need to replace. That's a great year to do that. It's probably not the time to be buying a house if you're going right back into fellowship. You're probably only in fellowship for one or two or three years. That's too short of a timeframe to be buying a house unless you know for sure you're going to stay there afterward. So, that's not necessarily a priority.

As far as student loans go, it comes down to your student loan plan. If you are one of those people that's just done a residency and you are probably working at the same institution for a year and then you're starting a fellowship. That might be seven years toward PSLF. If you've got a bunch of federal student loans, PSLF is probably a good option for you to stay on as faculty after that fellowship for three more years and get PSLF. But if that's not your plan, if you're planning to pay off your loans then making big payments on your student loans during that year you have an attending income is not a bad idea at all.

If you are trying to maximize your public service loan forgiveness, one way you can do that in that year that you otherwise have relatively high income is to maximize payments into tax deferred accounts. 401(k)s, 403(b)s. You're probably not going to qualify to do a deductible traditional IRA contribution, but maybe you have access to an HSA you can contribute to. All these things that keep your income lower so your IDR payments the next year are going to be lower.

The other thing to keep in mind is you only have to recertify your income for the student loan folks when they make you do it. But you can, if your income goes down, recertify your income sooner. As soon as you go back into fellowship and your income drops, you ought to go back in and recertify that income so you can have lower IDR payments, and thus more forgiven via PSLF. Because you don't want to spend that first year of your fellowship making student loan payments as though you have an attending income. That's going to suck up your entire income making those payments if you're not careful.

So, yes, plan for that year. You need to plan carefully. Consider all those things I discussed. If you have extra income, start saving for retirement like an attending would. But for most people, just having a big fat bag of cash going into fellowship knowing that your income is going to be lower for the next one to three years wouldn't be a bad idea either. Maybe buff up that short-term savings account a little more than you otherwise would.

 

SPONSOR

All right. As I mentioned at the top of the podcast, SoFi is helping medical professionals like us bank, borrow and invest to achieve financial wellness. Whether you're a resident or close to retirement, SoFi offers medical professionals exclusive rates and services to help you get your money right. Visit their dedicated page to see all that SoFi has to offer at whitecoatinvestor.com/sofi.

Loans are originated by SoFi Bank, N.A. NMLS 696891. Advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC, member FINRA/SIPC. Investing comes with risk, including risk of loss. Additional terms and conditions may apply.

All right, don't forget about our match week promo. For those of you who book a consult with Student Loan Advice. You don't have to be a student. You can be anybody that books that consult before the 19th and you'll get a free CFE 2023 course that includes the CME that comes with it. Tomorrow is our final day of the WCI Champions program. You can apply at whitecoatinvestor.com/champions.

Thanks for those of you who've been leaving us five star reviews and telling your friends about the podcast. Recent review came in from Emile who said, “Life changing podcast. This podcast and the corresponding White Coat Investor book has been easily the most influential podcast to my life and career of any I’ve heard. Strongly recommend for anyone who does not feel 100% comfortable with their finances.”

All right, it's been a long podcast. I hope it's been worthwhile to you. We had to do some corrections and I wanted to talk to those of you going through the match this week. But I hope it's been worthwhile for all of you.

Keep your head up, shoulders back. You've got this. We're here to help. We'll see you next time on the White Coat Investor podcast.

 

DISCLAIMER

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

 

Milestones to Millionaire Transcript

Transcription – MtoM – 161

INTRODUCTION

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

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 161- Nurse becomes a millionaire.

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's no reason to feel guilty about it. Just make sure you're 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.

All right, before we get into our interview today, a couple of promotions I want you to know about. Student loan advice. This company we've started to help you get a fair shake with your student loans. They're running a promotion. It goes from March 11th through March 19th. And if you book a consult, we are giving you Continuing Financial Education 2023. This is a fantastic course. It's like 50 hours of wellness and financial content. It's good for CME and it's also just fantastic information. So, you get that for free once you complete a consult. If you book it with studentloanadvice.com between March 11th and March 19th.

So, check that out if you've been wanting to get some advice about your student loans. If you're not sure you're managing them right, a few hours with Student Loan Advice, or actually I shouldn't say a few hours. It's one hour. The Student Loan Advice is going to provide you the clarity you want in making sure you're managing your student loans properly.

All right. You've got a few more days for those of you who are students. The White Coat Investor Champion program. This is where we try to give away copy of The White Coat Investors Guide for Students to every member of a first year class. We expanded it a little bit this year as not only MDs and DOs and dentists. We'll also send them to PAs and NPs and pharmacy students.

But we can't afford to send them all individually. We got to send boxes to your entire class. So, we need a champion to pass them out. That's all you've got to do. You get WCI swag, you save your classmates millions, you pass them out a free book. There's nothing bad here. It's great.

whitecoatinvestor.com/champion is where you sign up. If nobody has handed you a book and you're a first year student, that's because we don't have a champion for your class. We need you to volunteer, and you can do that at whitecoatinvestor.com/champion. Stick around after this interview. We're going to talk a little bit about how to get started.

 

INTERVIEW

All right, we got a great guest today. He's a nurse and he's also a millionaire. Let's get him on the line. My guest today on the Milestones to Millionaire podcast is Tim. Tim, welcome to the podcast.

Tim:
Thank you, Dr. Dahle. Thank you for having me.

Dr. Jim Dahle:
Tell us what you do for a living now, what you're studying to become, how far you are out of college. Tell us a little bit about your career before we get into what you've accomplished.

Tim:
Of course, of course. I'm a registered nurse. I started becoming a nurse around 2011. I was about 26 years old, and did a little bit of that as well as some army reserve time. And then eventually decided to go back to school at the young age of 37 and become a CRNA. I am in the midst halfway through CRNA school at this point. But in spite of that, for our family, we've been able to meet a pretty significant milestone.

Dr. Jim Dahle:
Yeah, we're pretty excited about your milestone. You are a millionaire. Congratulations.

Tim:
Thank you.

Dr. Jim Dahle:
I don't think I've ever had a student on here that has accomplished this milestone. You mentioned a family. I assume there's a spouse. Does your spouse work?

Tim:
Yes, she does. She's a director of marketing.

Dr. Jim Dahle:
Director of marketing. Okay. When did you first start really earning money? It sounds like you became a nurse at 26. You were doing something before that. What was that? Were you being a ski bum or did you have another career?

Tim:
I would say bum. I would just remove ski. But yes, just kind of like intermittent jobs. As I got done with college, I was one of probably many students who graduated with their first degree and didn't know what to do with it. And then nursing kind of walked into the picture. And so, working part to full-time to facilitate a second education. And so, that's why you see a little bit later of a start. But eventually, I graduated with that at as a nurse at 26.

Dr. Jim Dahle:
Okay. And you've been married how long?

Tim:
I've been married for almost 10 years.

Dr. Jim Dahle:
10 years. Okay. And what was your net worth right after you got married?

Tim:
Oh, I would say probably less than $10,000. Something in around there.

Dr. Jim Dahle:
Okay. So, you're basically started with nothing. Nothing and in the last 10 years you became a millionaire. What was your range of income over that time as a household?

Tim:
We range I would say probably about $100,000, $120,000 at the earliest, upwards to about $275,000, $290,000.

Dr. Jim Dahle:
Okay. So, quite a range there. What kind of nursing did you do?

Tim:
I was fortunate to work in several different hospitals here in Arizona. And I've worked at every ICU you could possibly imagine. Cardiothoracic, neurosurgery, medical, surgical. And then I did flight nursing for a couple years. And then I also did some nursing in the Army Reserve. I tried to get a smorgasbord of experiences and challenges throughout my career.

Dr. Jim Dahle:
What's the most you ever made personally as a nurse in a year?

Tim:
I'll give you two answers for this. Throughout the whole year, I would say probably $120,000. However, there were some time periods where, for example, I made like $50,000 in about two months. I ended up doing some army stuff later that year, which kind of capped that ability, but that was probably the most I ever made as an RN.

Dr. Jim Dahle:
Okay. Let's call it an average of maybe $200,000, maybe a little bit less on average over the last 10 years. But basically half of what you guys have made for the last 10 years, you've been able to hold onto and turn into wealth. How did you do that?

Tim:
I'll kind of back up a little bit. I'm like many probably people where their parents never talked to them about money. That just wasn't a conversation. You knew as a part of life, but you didn't know any. Anything more than that and you get the arbitrary you should save. But any follow up questions didn't really yield anything.

My dad, the one thing he did do, and I appreciate it very much, is when I was around 25, 26 when I was graduating, is he gave me a Dave Ramsey book, Financial Peace University. And that opened my eyes to how money impacts every part of your life. And so, what I decided to do is start educating myself and I started challenging his thought process. That's where I found yourself. That's where I found other FIRE websites and sources and other blogs and other books. And I tried to challenge those concepts and try to understand the financial environment.

And once I did that, then I tried to then bring my wife as we got married into the picture, which financial disagreements is one of the top five reasons people get divorced. And so, there was some turbulence, I guess would be the best description to get on the same page for me to understand where she's coming from and her to understand where I'm coming from.

But eventually we got on the same page. We got into a common goal, and once we had that common goal with shared understanding. She understood what we were doing, I understood what we were doing. We had some help with a financial advisor to educate us. He taught us, which I'm extraordinarily appreciative of, but eventually we got to the point where we were managing our finances on our own to try to achieve our own goal, which our goal was to be a millionaire before we were 40. And since we are on the same page, we were fortunate enough to be able to accomplish that goal even two years early at the age of 38.

So, it really was being on the same team. It was understanding what we did and creating a common goal and back planning that and saying, “This is what we have to do to accomplish that.”

Dr. Jim Dahle:
Yeah. You became a millionaire at the same age we did. Very different pathways.

Tim:
Yes.

Dr. Jim Dahle:
In my twenties, I basically didn't make anything and then made more coming and becoming a doc coming out of residency at 31. And your pathway, of course, bumming around for a little while, getting married and then getting serious and working hard and saving a whole bunch of it, got you to the same place.

There's lots of different pathways it turns out to wealth, but they all share a few things in common. Generally, if you're going to be a millionaire before 40, you're going to make some good money. And you guys made good money. You're going to carve out a big chunk of that money and you guys seem to have done that. And you're going to invest it in some sort of reasonable way. And I'll bet you've done that as well. How have you invested your money?

Tim:
A majority of our money has been in index funds, has been an S&P total stock. We've tried to keep the investments in a place where it just mirrored the general market because from our understanding is most mutual funds, most advisors aren't going to beat the market. I wanted to utilize that. We did a lot of that. And then we also were fortunate with our house, obviously, the growth over the last few years for a lot of Americans has been huge. So, having our house increase and appreciate has been an immense part of that value as well.

Dr. Jim Dahle:
Tell us about your net worth calculation. What assets do you have? About how much are they? How much debt do you have, et cetera?

Tim:
At this point, net worth is about $1.25 million. And what that's made up is about $450,000 for our house, a little over $700,000 for pre and post-tax retirement. It's about 60/40 in Roth versus traditional. About $60,000 in stock options, about $60,000 in 529. And then I have about $36,000 in student loans, which unfortunately will be going up over the next year and a half. And then about $10,000 in a car, which should be paid off over the next year.

Dr. Jim Dahle:
No mortgage?

Tim:
I'm sorry. We owe a little less than $400,000 on our mortgage.

Dr. Jim Dahle:
Okay. All right. And that all works out to $1.25 million. I won't verify the math. It sounds like you're more or less in the right place. I'm curious, your reasoning behind borrowing for school. You're a millionaire. You've got all these other assets you could draw upon. How come you decided to take out student loans?

Tim:
I don't know if this was the right answer, and I've struggled with it. My wife and I have talked about it. We've talked to other people about it because there was a decision that had to be made, a decision point that said, “Do we limit our expenses over the next year and a half, two years, and then just concentrate on negating all of the loans? Or do we live a certain life and limit some of the loans?” There's a lot of students who walk out from CRNA school that have hundreds of thousands of dollars worth of loans. I will not be one of those.

So, what we did is we compromised and what we thought was an okay option to mitigate risk. And we have been intelligent and prudent in our spending, but still living our life, but eliminating a large portion of the loans that we would have. Instead of owing $250,000 or $300,000, we're probably going to owe about $100,000. But with an income coming out as a brand new CRNA, it's very feasible. That's something we can pay off in six months to a year, but still live our lifestyle. And for us, especially my wife, that was important. I got deployed previously and spent a lot of time away. And so, having that consistency and having that for our family, it was a little bit more important this time than I think maybe it was in the past when we were trying to grow our wealth.

Dr. Jim Dahle:
Yeah. How old are the kids now?

Tim:
We got a two, four, and a 6-year-old.

Dr. Jim Dahle:
Okay. So, still young years for sure.

Tim:
Yes.

Dr. Jim Dahle:
You didn't get a lot of education about money. What do you plan to teach them about money?

Tim:
I've tried early. Just simple things that kids understand. I want to use their child development level. For example, my 6-year-old and 4-year-old, they want to buy toys. Okay, let's talk about how much that toy costs. How much money do you have in your bank? What change do you get left? Can you buy this thing over here if you bought this one over here?

So, what I'm starting out with, and I don't know if this is 100% the right way, but what me and my wife are starting out with is using what they develop mentally find interesting and what they can handle. And trying to show how money may impact that and how it will change your decisions.

Later on, it's a big part of what we would like to do really in order for them to progress throughout high school and later in middle school, is they have to read certain books in order to gain certain privileges or opportunities. And if they can restate back what that book or that item says to me, I think that puts them in a good position to make intelligent decisions when I have zero control over anything that they do.

Dr. Jim Dahle:
Yes. You can certainly lead a horse to water.

Tim:
You can't make a drink, can't make a drink.

Dr. Jim Dahle:
We'll find out later whether they drank or not, huh?

Tim:
Yes.

Dr. Jim Dahle:
Okay. Well, how'd it feel when you realized you were a millionaire?

Tim:
It was a little surreal. You worked very hard. As a physician, you delay gratification for a very long period of time, and eventually you get it. And it was a good feeling. But I think what a lot of people realize is the feeling fades fairly quickly. And so, it goes into, “Okay, well, now what? What do I do now?” And that's one of the things that we don't actually really have an answer for. I'd love to hear your side of it because you interview people all the time. But what do you do next? What is that next goal? Because as I do the math, we expect to be around between the age of 60 and 65, we become decamillionaires. That's reasonable. Well, we did it. What else can we do?

And so, some of the things we've brought in and some of the values that are important is constantly challenging ourselves with work, finding new ways to help more people. We have other goals that are coming up once I graduate school. Something I'd really like to do is every month I'm spending around $4,500 to $5,000 in donations. That is my goal, where we can do it as a family and bless other people. I think it's really important. But in general, I don't have a great answer of what you do next. So, I'd say if you have any ideas, I'd love to hear them.

Dr. Jim Dahle:
Yeah. Just shortly before we recorded this, it'll be several months back for those of you hearing this, but shortly before we recorded this, we ran a post on the blog called How to Be Rich, not How to Get Rich, which is what most of the posts on the blog talk about, but how to be rich. And it talks about some of the things I've learned as I'm going through that process. It’s a learning pathway for all of us for sure.

We get a lot of people that complain about this podcast that all we bring on are these docs making half a million dollars a year, and we don't bring anybody on with low incomes. Well, you're a good example of somebody with I wouldn't call it a low income. You made $120,000 one year as a nurse. But it certainly isn't doctor incomes and you've still managed to be successful. You've still managed to become a millionaire. As you say, you're probably going to become a decamillionaire at some point down the road, which is more money than most doctors have. Net worth surveys of doctors show that only 10% of them have more than $5 million as a net worth.

So, what advice do you have for those out there that I'm not going to call them low income because I'm not sure a lot of low income people actually listen to this podcast, but let's say moderate income professionals out there. What advice do you have for them if they want to accomplish what you've accomplished?

Tim:
I'll compare to what we already do in the ICU when I was working. Me and another associate, another colleague, we would have a competition, a friendly competition to try to see who could get more people to start their 401(k) or 403(b). And it sounds crazy maybe to some people, but there's a lot of people who don't, regardless of their income. Nurse practitioners, PAs, residents. We talk to everyone all the way down to nursing techs. A large percentage of people haven't even started it, or they have no idea what they're doing at all.

And so, what we do, what we talk to them, is we just start approaching them with the conversation. And the number one point we talk about is you need to start now. First just start and put more in than you think you should. If you just do that now, your future self-will, thank you.

Dr. Jim Dahle:
Contribute till it hurts. Just like give till it hurts.

Tim:
Yes, it does. And I remember when I first came out of school, I made, I think $50,000. I wasn't married, and I ended up doing a Roth, which obviously, you have taxes and then that, and it hurts your paycheck when you're taking 15 or 20% out. That takes your breath away, the first paycheck you see.

I always make decisions based upon how I'm going to look at it five or 10 years later. And so, I knew that later on it would be helpful. I will tell people, start the conversation, start now, and then what I'll do is I'll give resources that say, “I need you to understand it because just some random nurse who's talking to a resident who's overwhelmed or talking to a colleague who doesn't know anything about money, don't believe what I say. But start educating yourself so you can understand 100% what you are doing because you worked too hard in nursing school or as a physician not to take advantage of the income you're being provided.”

And you are absolutely, especially physicians, way smarter than what it takes to own your own finances. What you know about medicine I think is much harder than what finances provides or what you need to know about finances. We talk to them, we say, “Let's start having this open conversation. Talk to your spouse if you're married. Start educating yourself, start now.”

And then the final piece is because people are like, “Well, I don't know where to start.” Well, we can real quickly put on a piece of paper and go, “Okay, how much money would you want? How much annual salary would you want in retirement? Okay, how much is it going to take if you do a 4% or 3.5% withdrawal? How much are you going to need to accumulate? Let's back plan that.”

And I'll do that real quick in less than five minutes just to give them an idea that goes, “Oh, that's how much I need to put in.” And so, now they have a framework and a conversation that hopefully they build upon. Once you have that, it's 100% possible. Is it easier if you're making $400,000 to $500,000? Yeah. Gotcha. But you can 100% do it if you're making $60,000, $90,000 or $100,000. It's very feasible. You just need to start talking about it, educate and plan.

Dr. Jim Dahle:
Awesome. Great advice. And congratulations to you, Tim. You've accomplished something incredible. It's inspiring to others, and I hope others take from your message that this is not only possible for you, but it is possible for them. Thank you so much for being willing to come on the podcast.

Tim:
Yeah, thanks for having me, Dr. Dahle. It's a privilege. And thank you again for all your help. You've been an immense resource for me and a lot of my colleagues.

Dr. Jim Dahle:
It's our pleasure.

Okay. I hope you enjoyed that interview. Tim is great. What a nice guy. No wonder he is being so successful. They're killing it. They're doing awesome. Their income is about to go up dramatically, and they're going to be able to save even more. Imagine already being a millionaire before finishing really your training for your eventual career. It's pretty awesome. They're just doing awesome. Super proud of them.

 

FINANCE 101: GETTING STARTED

I promised you at the beginning that we'd talk a little bit about getting started. Obviously, you don't get started as a millionaire. You get started at the very beginning, and for many of you, within the sound of my voice getting started isn't even starting at zero. You're starting out in a huge hole.

And so, I think the best way to get started is to figure out where you stand. And you might have to pour yourself a stiff drink to really figure out where you stand. But I want you to do this. If you're single, do it just with the drink. If you are married, you need to include your spouse in this process. Two stiff drinks and your spouse and some time together without anybody interrupting you. And actually sit down and figure out where you stand.

Like any business, and if you start thinking of your family, at least financially speaking as a business, has two important documents. It's got an income sheet, and it's got a balance sheet. The balance sheet tells you what the business has, essentially a net worth. The income sheet tells you what the business brings in and what it pays out. That's essentially a budget. So, if you can calculate your net worth and calculate your income and your expenses, you are dramatically ahead of the vast majority of Americans.

Yesterday I was writing a blog post, I don't know if it'll run before this podcast does or not, but it was a blog post based on an article out of the Wall Street Journal, where they had four people on who were essentially living on social security. To a T they basically all said they didn't start budgeting until they were already retired and already living on social security. There's no reason to put it off that long. You should do it now. The sooner you get started, the better off you're going to be.

So, sit down, figure out where you're at. You've now got the stiff drink in hand. Pull up all your student loans, write them down, how much you owe, what the interest rates are, maybe what the monthly payments are. Make a spreadsheet or do it on a sheet of paper, whatever. Go to the next one, write them all down, total them up. Add your other debts. Credit card debts, car loans some sort of consumer debt on a couch or a boat or ATV, whatever, your mortgage, your HELOC, a mortgage on the other house, whatever. Put it all down there. Add up all your debts. I know what the total of your debts is. You might be surprised. It might be less than you think. If you're like most people, it's probably more than you think. Don't actually know how much it is? It's probably more than you think it is. That's why you need a stiff drink.

Now sit down, write down your income. What'd you bring in last year? What do you make in a month now? Include your spouse's income, including the investment income you have, any side gig income.

Now you've got your debts, you've got your income. Add up all your assets. Everything you own that's worth something. If you have a house, the value of the house. You got the mortgage to offset it on the other side of the ledger, but you've got the value of the house and you've got the value of your investment accounts. If you have anything you've started investing in, or your bank account or whatever, anything that you could sell ready. If you could sell it for more than $1,000 in the next month, then you probably ought to include that sort of a thing as an asset.

So, you put your assets on one side, you put your liabilities, your debts on the other side. You add up all your assets, you subtract all your liabilities, that's your net worth. Write that down. That's where you're starting.

And I want you to repeat this exercise once a year. Just by measuring this it's going to improve. You'll pay more attention to it, and you'll try to win at life in finances. And winning means that number is going up each year. Even if you're starting at minus $400,000, if next year you're minus $250,000, you're winning. You're going in the right direction, you're not quite back to broke. That guy living under the aqueduct actually has a higher net worth than you do, but you're going in the right direction.

Likewise, on the income sheet. We've added up your income, now add up your expenses. Figure out where your money is actually going. You can go back to the last three months and do it and say, “Okay, well, this much went toward food and this much went toward restaurants, and this much went toward the rent, and this much went toward a car payment.” Add all that up and offset it. Put that next to your income.

If you subtract all of your expenses from all of your income, what's the difference? If it's negative, you're really in trouble. You're hemorrhaging money. You've got a dead emergency, you're in a bad place. So, you've got to adjust that. You've got to get the expenses down, you've got to get the income up. You got to make that number positive. And probably more importantly, it's got to be significantly positive.

For doctors I tell them 20% of their gross income needs to be going toward retirement. That means when you take what you're earning and subtract what you're spending, there better be at least 20% of it left. If there's not, you need to start making adjustments.

And chances are, by tracking this, you'll see some places where money is going that you don't really care about. Maybe you don't really care about eating out that much. You don't care about fancy restaurants, and yet you're spending a significant amount of money there. Well, cut that out. You're not going to be any less happy and you'll have a whole lot more money. It might be cars, it might be vacations, it might be kids activities, who knows what it is. But look for those things where you can cut expenses and get that savings rate up.

And once you've got that savings rate up, then you just got to figure out how to invest it, and that part is actually the least complicated part. For the most part, you're putting this money into retirement accounts. Once those are full, you can invest it in a taxable account. And typically you're going to put that into low cost broadly diversified index funds as the mainstay of your portfolio.

You can put everything like Tim did. Everything in his portfolio is basically going into total stock market index funds. That's okay. It's not crazy, and it's super simple and easy to do. And you know what? If you keep doing it year after year, eventually you become a millionaire just like Tim was. And so, that's basically the process.

But does that take a little bit of time and effort? Sure. You got to log into the 401(k) website. You got to create a password. You got to look at the document and figure out what's going on in there. You got to figure out which ones of the low cost broadly diversified index funds and actually allocate money in there. You have to transfer money from your bank account to your investing accounts. You have to do a few chores, yes, but none of them are hard. They're way easier than whatever you're doing day to day.

And you can do this. Step by step I promise it becomes easier as you go along. It gets exciting as you see your net worth starting to go up. And it's exciting to actually be in control of your finances, and it brings a great deal of peace into your life as well. Fewer fights with your spouse, less worry, less laying awake at night worrying about money. And all of a sudden, after a while, you're able to not only not have to worry about money yourself, but able to be a blessing in the lives of those that you care about. It all comes from getting started. So, get started today.

 

SPONSOR

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 of 80% is way too low. He estimates it at 99%.

But at any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you're 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. It's under the recommended tab on the main website as well.

You can do this. The White Coat Investor is here to help you. We'll see you next time on the Milestones to Millionaire podcast.

 

DISCLAIMER

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