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MtoM #220: Family Physician Millionaire Receives PSLF and Finance 101: Long Term Bonds
00:23:13
This family doc has all kinds of milestones to celebrate. He recently received PSLF, his net worth just exceeded $1 million and he is almost to $1 million invested. He is crushing the finance game. His secret to success is side gigs, side gigs, side...
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- [00:00]
Jim Dahle
This is the White Coat Investor podcast, Milestones to Millionaire. Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast number 220. Family Physician Millionaire receives PSLF. This podcast is sponsored by Bob Baiani, a protuity. He's an infinite provider of disability insurance planning solutions to the medical community in every state and a longtime White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or to get this critical insurance in place, contact bob@whitecoatinvestor.com Protuity today by email infrotuity.com or by calling 973-771-9100. All right, this is the Milestones to Millionaire podcast where we feature you and we celebrate your milestones, right? We use them to inspire others to do the same. And so if you'd like to come on the podcast, you can do so. You apply@whitecoatinvestor.com Milestones we need your feedback as well. We are doing our annual survey. It's open until May 6th. If you go to whitecoininvestor.com WCISurvey you can tell us how we can serve you better. It'll only take a few minutes and it really is valuable to us to know what you think, to know what you think about our content, to know what you think about our sponsors, to know what you think about the financial lives of physicians. So we're going to bribe you to fill out this survey. We're going to give away 20 T shirts. We're going to give away 5 of our online courses. So you enter the contest to win this just by filling out a survey. And even if you don't win, know that you're helping yourself and future White Coat investors by doing so. The reason our resources are as good as they are today is because we've been doing these surveys for a long time and we really do change what we're doing based on what we get in the survey. Again, the URL whitecodeinvestor.com WCIServey we have a great interview today, but stick around. Afterward we're going to talk about an asset class, long term bonds, and whether they belong in your portfolio or not. Our guest today on the Milestones to Millionaire podcast is Brody. Brody, welcome to the podcast.
- [02:26]
Brody
Yeah, thanks for having me.
- [02:28]
Jim Dahle
Tell us what you do for a living, what part of the country you're in, how far you are out of training. Sure.
- [02:33]
Brody
So I'm a Family medicine doc. I live in the south Southeast, and I will be eight years out of training this July.
- [02:42]
Jim Dahle
Very cool. And you, you know, we didn't even know what milestone to celebrate for this episode because you've been knocking out so many of them lately. But let's talk about what milestones you've accomplished recently. Sure.
- [02:55]
Brody
So in December, I got pslf, so got rid of those student loans. I've hit the 1 million net worth mark. Did that last fall, winter as well. But what I'm most excited about is how much I have invested. It's just shy of 1 million. It's at 920,000 currently.
- [03:14]
Jim Dahle
And if the markets cooperate. Right. I mean, the markets have dropped at the time we're recording this, they dropped, you know, in the first part of the year. The markets cooperate, you might be a million by the time people hear this at the end of April. So we'll see.
- [03:26]
Brody
Yeah, fingers crossed.
- [03:28]
Jim Dahle
Okay, very cool. Well, let's, let's take them in order. Let's talk about pslf. I mean, you're eight years out of training, so basically you started counting, you know, years toward PSLF during your residency. What do you think when you kind of, you know, started residency, enrolled in an income driven repayment plan? This would have been back in like 2015. Nobody had ever received PSLF before. At that time. Did you have a lot of faith in the program or were you kind of skeptical?
- [03:59]
Brody
I think initially I was. I was skeptical, as most people were, but I had faith that it would get carried out. I kind of read enough to know that the reason that the, the bad headlines were coming out in the beginning was because most of the people that applied just didn't meet the qualifications that were clearly stated. Now looking back to where we are now, and I achieved forgiveness in December, I feel very fortunate. I got in just at the right time. But during the process, I never doubted it too much. I felt like it was pretty solid the way it was written and the way it was carried out. So I really benefited obviously from the COVID pause and payments. Like three years I was in attending at that time.
- [04:44]
Jim Dahle
What was it, 36 months, 42 months worth of basically free payments you got.
- [04:49]
Brody
Yep. And I was in attending at that time. So it was big payments that were getting counted that were zero. So that was a big help. And then one thing that I combined, I kind of took advantage of was because of where I work, I qualify for the National Health Scholarship Loan repayment program. And so I was able to get some money through that and I used the money that they gave me to pay my monthly payment. So I think all in all, I think I took out 270,000. Originally, it grew to 330,000. And when the dust settled, I actually paid about $50,000 out of my own pocket.
- [05:30]
Jim Dahle
Very cool. Well, basically you got just about everything you borrowed paid back to you, which is pretty cool. Very nice. So that obviously helped the net worth. Right. To get rid of that $300,000 plus debt. Tell us about what your net worth is composed of today.
- [05:48]
Brody
Mostly stocks, so index funds, mutual funds. So 920,000 invested. And that's separated between my 401k from my W2 job. It's my solo 401k from my side hustles. I've got a Roth for myself, my wife, I've got a 457B. Through my main W2 gig, I have 529 plans for four children and then obviously health savings account. So between all those different accounts, that's what it's comprised of.
- [06:23]
Jim Dahle
Yeah, very cool. So you've taken advantage of a lot of tax protected accounts.
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Brody
Yeah.
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Jim Dahle
How have you chosen to balance your goals? You know, how much you put into an HSA, how much you're putting in 529s versus how much is going toward retirement.
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Brody
So the 529, I usually just try to take advantage of what my state offers for the state income tax discount, what you will. So that ends up being about $5,000 per child. So I contribute that and I try to start it when they're, you know, the first year that they're born and then the rest goes towards, I max out the health savings account, then the rest goes to retirement accounts.
- [07:01]
Jim Dahle
Yeah. Now is yours the only shovel in the household or do you have a spouse that's earning as well?
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Brody
My wife is a stay at home mom. She worked whenever I was in medical school and residency and then whenever I graduated residency, we started a family and she stays at home with them. She's got a much harder job than I do.
- [07:21]
Jim Dahle
Yeah, yeah, that's definitely true. You know, as I've transitioned a little bit in my own career, especially now with Katie, who's now an elected politician serving on the school board as well as doing stuff for wci. I'm definitely doing a lot more at home. And you're right, it is not insignificant. Perhaps the hardest part is the mental load of just keeping track of everything going on, which is not insignificant.
- [07:44]
Brody
Yeah. We have four kids under the age of eight.
- [07:47]
Jim Dahle
Yeah, yeah. She's Got her hands full for sure. She's full on. She's in it for sure. Okay, so tell us about your income since you came out of training. What's it ranged from? Sure.
- [07:58]
Brody
So I'll start while I was in training. So typical resident salary is roughly $50,000, 55,000 DOL a year. One thing that I do remember is that we would get paid monthly. So at the end of every month, after taxes and all that, I would get a check for about $3,000. And so we would make that $3,000 stretch. And usually by the end of the following month, it was down to, you know, we were running on fumes.
- [08:24]
Jim Dahle
Yeah, well, you divide 3,000 by six people, that's 500 bucks ahead. Right. It's not insignificant.
- [08:29]
Brody
Well, at that time, we didn't have children, so at that time, it was just. It was just me and her. But my program. I was fortunate that my program let us start moonl moonlighting as second years. They basically said, hey, once you pass step three and you can get a medical license, then you're free to start moonlighting. We won't hold you back. So I was gung ho about starting that as quick as possible. And I live in a rural area, so there's a lot of opportunities. And so I think it was November of my second year in residency, I worked my first moonlighting shift. And that particular year, so my second year of residency, my income went from 50 to about 75,000. And then my third year of residency, because of moonlighting, I took in just over 100,000. And then whenever I started as an attending, I kept the moonlighting going. So I worked one night a week in our local emergency room as an attending. And that added about $100,000 to my family medicine clinic income. So that total, my first year out was about 350. And then it's increased about $25,000 a year over the last eight years. And right now, I will gross a little over 500,000 this year.
- [09:46]
Jim Dahle
Wow. Very cool.
- [09:47]
Brody
And my secret. My secret is just side hustles. Side hustle, side hustle, side hustle. So I don't. I don't do the ER work anymore. After my second child was born, I just felt like being. Being away from home one night a week was. Was too much, and I was starting to get burned out anyways. And luckily I was presented an opportunity to start doing some hospice work, and that sort of has taken the place. And I do some other stuff too. Consulting with an urgent care group, reviewing charts for their nurse practitioners. I'm involved in some clinical research, so I got my hand in a lot of different stuff and it's worked out. And I also work. I'm fortunate that I work at a place that every year we do a yearly evaluation. And if you're doing a good job, you can get a raise of anywhere between 5 and 10%. So I've taken advantage of that too.
- [10:42]
Jim Dahle
Now having that support at home, taking care of home, taking care of the kids certainly enables you to have a little bit more freedom to take on these sorts of additional hard working side hustles, whatever you want to call them. But I mean, the average income for a family practitioner is like 275, you know, and so obviously 50% of people are below there and 50% of people are above there. You're substantially higher than that. What would you tell somebody who's coming out of family medicine residency or is sitting there making average or even below average for family medicine? What would you say to inspire them to maybe do a few things to increase their income?
- [11:24]
Brody
So my number one piece of advice is you have to negotiate and advocate for yourself. You have to know your own worth and present that and fight for it. So if you're a new attending and you're negotiating for your first job, man, that is the best time to negotiate right then. And what I did is I had multiple different places trying to recruit me, as most family docs will, because we're just such in demand, there's not enough of us to go around. I kind of had this strategy, this philosophy that I'm willing to listen to any opportunity. So when somebody would call and say, hey, we've got a potential job opportunity, can we take you to dinner? My answer was always yes. And I would always hear them out and see. And so once I kind of had it narrowed down to two or three different jobs, then the job that I ended up going with, and it's the job that I've stayed with the past eight years, that they want it with all the benefits, but their salary offer wasn't quite as good. And so I just negotiated. I basically said, look, the only thing keeping me from signing here is your salary's below what I have offered from other places. Luckily they matched it. And so then I started. And then periodically, every two to three years, I would come back to the table to them and say, look, I think that my worth to the company is worth more than what you're paying me. And this is what I'm asking for. And I just sort of have the attitude that all they can say is no. And I think that a lot of us in the medical field and healthcare, we're not used to the financial side. And so we think that by coming to the table and asking for things or trying to negotiate, we're not used to that. But I assure you that those in the admin that you're dealing with, they're used to that environment and they're not going to get offended by you asking for more. They probably are shocked when docs take the first offer that they're given and they probably are high fiving each other in the, in the C suite saying can you believe that doc took that? You know, so don't be afraid to negotiate for yourself and listen to opportunities when they come. And like I said, the worst they can say is no. And the more leverage you have, the better though. So I would always, whenever I would negotiate, I would always make sure that I did my homework, that I had key pieces of information that would help me make my case. For instance, I think most people don't realize, maybe they do, but a lot of people don't realize that there's the, that every nonprofit has to file their taxes publicly and that the 990form is what it's called and that's easily accessible online. And so if you work at a nonprofit health system or a nonprofit hospital, you can access that information and you can see what a lot of different people, what a lot of your colleagues are making. And that's a good piece of information to have if you're going to go to the negotiating table with your bosses.
- [14:25]
Jim Dahle
Yeah, a lot of universities have the same system like our local university system. I can look up what all my friends are being paid by the university. It's a publicly accessible database that works in a similar way. Well, very cool. Well, it's pretty obvious I've only been talking to you for 10 minutes here, but you're quite financially literate. You've done just about everything right. Tell us how you became so financially literate.
- [14:49]
Brody
So I was fortunate that my third year of residency, one of my attendings mentioned your book and your website. And that's really what started my education. My family has always been pretty entrepreneurial and financially savvy, but nobody in my family was in the healthcare field. So once I really started diving into your book and the website, it really just sort of over time my education built. I really find this stuff pretty interesting. Although what I would tell someone who's just getting into it, it can seem daunting at first, like just all the information that you're trying to absorb at once. And my advice to them would just be, hey, just take it slow. Read one blog post a day and over the course of time it'll add up. I remember some of the first couple articles of yours that I like. Half the stuff, half the terms I felt like went over my head, but over time you start to slowly, gradually understand those terms and Alphabet soup of different accounts and it just kind of comes together and so I wouldn't get discouraged. For people that are feeling overwhelmed, just give it time.
- [16:06]
Jim Dahle
Yeah. Very cool. Once more, the White Coat Investor Doctor's Guide to Personal Finance and Investing is the entry drug to this wild universe of becoming financially literate and successful. Well, Brody, congratulations. You've had a lot of success, multiple milestones on this call, and maybe even a millionaire in investments by the time people hear this. So congratulations to you and thank you so much for being willing to come on the podcast and share your story to inspire others.
- [16:33]
Brody
Yeah, thanks for having me.
- [16:36]
Jim Dahle
I hope you enjoyed that. I thought that was a particularly good interview. Not only did we get multiple milestones out of it, but we got to learn about the importance of negotiating and how become financially literate and all that good stuff. So I thought that was a particularly useful interview. Now, I promised you at the beginning that we were going to talk about long term bonds, and I occasionally run into somebody who advocates for including long term bonds, particularly long term Treasuries. These are treasury bonds, loans to the Federal Government of 20, 25, 30 years in your portfolio. And you can do this either using a mutual fund or an etf, or buying the bonds directly at Treasury Direct or through your brokerage. It's really kind of the same thing no matter how you do it. But there are some downsides to investing in long term bonds. The two main risks when it comes to bonds are default risk, credit risk that the person you loan the money to or the institution you loan the money to doesn't pay you back. Well, that's pretty darn low if you stick to just Treasuries. The other main risk is interest rate risk, the possibility of interest rates going up and causing the bonds you own to be worth less because people can buy bonds that have significantly higher yields now. And that risk really showed up in 2022. 22 historically is the worst year we've ever had for bonds. Interest rates went up about 4% that year, and so it just devastated bond returns because this significant risk with bonds really showed up and showed up in Force. And of course, when you have short term bonds or even intermediate term bonds, that risk wasn't so bad. Short term bonds lost single digit amounts that year. Cash didn't lose anything. In fact, they were thrilled to see their yields go up. Intermediate term bonds might have lost as much as low double digits, 10, 12%, which is a terrible year for bonds. Historically almost never lose money like that. But the long term bonds got devastated. TLT is an ETF that just invests in long term Treasuries. I think, I think its return in 2022 was worse than -31%. I mean that sounds like a stock bear market to lose 31%. And to do that in what's supposed to be the safe portion of your portfolio is pretty unappealing to me and to lots of people like me that don't like seeing that sort of volatility out of the safe portion of your portfolio. Now the argument people make that are all for including these long term Treasuries in their portfolio is that when things get really bad for equities, the bonds that tend to do the best are the long term Treasuries. Interest rates often get cut and when interest rates go down, the longer term bonds have the best returns. And of course, when there's a flight to quality, when there's a flight to things that people think are going to be liquid and are going to be safe, they tend to prefer Treasuries and in fact actually prefer nominal Treasuries, even over tips. And so that's the, the, the theory is, well, you got to look at the whole portfolio, right? And when you have long term bonds in there with stocks, maybe they provide the best opposition to stocks in that respect. And there have been portfolios that have used long term bonds over the years. Maybe you've heard of the permanent portfolio. It's like 25% stocks and 25% gold and 25% cash and 25% long bonds. And the theory is that each one of those assets will do well in a certain type of economic situation. The problem is the economic situation where stocks do best is actually the most common one. And so only having 25% of your money in stocks has significant downsides in the long run. But this isn't necessarily a new idea, but I feel like the people pushing it and the discussion I'm seeing on it in online communities is a bit more prominent than I have heard for a long time. So if you decide to do this with your portfolio, a couple of things. One, you've got to look at the performance of the whole portfolio because this is going to be a volatile asset class, hopefully volatile in a good way for you a lot of the time. But also at times a year like 2022 is going to show up and you're going to lose a whole bunch of money in bonds. Now if you're own individual bonds and maybe you look at it as okay, well I don't lose anything because I'm still getting the same deal by the time I get it back. But you got to be okay with that, number one. Number two, you gotta be okay with significant inflation risk. This is another significant risk with long term nominal bonds. Like when I see people getting out into these long term treasury ladders, I prefer them doing it with a TIPS ladder. If they're trying to provide spending money for the year they turn 82 and they're buying it when they're 58 or something, I like to see that be a tips. So at least it's indexed to inflation because if we get 9% inflation like we had a few years ago and that persists for three, four, five, six years, that's going to take an awful lot out of the real value of those long term Treasuries. So be careful with that sort of a portfolio. I think it's a little bit faddish. I prefer taking my risk on the equity side. So not only do I keep the quality of my bonds high, but I tend to keep the durations, the maturity, the length of these bonds, the term risk of these bonds relatively low, the short term and maybe some intermediate term bonds. So be careful if you decide to add the long term bonds to your portfolio. But it's possible that that'll work out well for you in the long run. This podcast was sponsored by Bob Baiani at Protuity. One listener sent us this review. Bob has been absolutely terrific to work with. Bob has always quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have somewhat of a unique situation. Bob has been able to help explain the implications underwriting process in a clear and professional manner. Contact bob@whitecoatinvestor.com Protuity that's P R O T U I T Y today. Or you can email infoorotuity.com or by calling 973-771-9100 to get disability insurance in place today. Okay, we'll have another podcast for you next week. Until then, keep your head up, shoulders back. You've got this. We're here to help. We'll see you next time on the Milestones to Millionaire podcast. 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.