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White Coat Investor Podcast
MtoM #242: Solo Family Practitioner Reaches Financial Independence and Finance 101: Financial Independence
00:28:30
Today we are talking with a family doc who has reached financial independence. This doc has followed a path that not too many follow anymore. He is a solo practice doctor and feels like his decision to own his own practice made all the difference in...
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- [00:00]
A
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 242. Solo family practitioner reaches financial independence. This podcast is sponsored by Bob Baiani at Protuity, an independent provider of disability insurance planning solutions to the medical community in every state and a longtime White Coat Investor sponsor. Bob 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 just need to get this critical insurance in place, contact bob@whitecoatinvestor.com Protuity P R O-T U I T Y. You can also email infoprotuity.com or just call 973-771-9100. Don't forget, our Champions program is open now. Now we're starting earlier this year. This is the program we use to give first year medical, dental, other professional students a copy of the White Coat Investor's Guide to Students. We can't send them individually. We can't afford it. We don't have the time nor the money to do it. We got to send them in bulk. So we want to give them to your entire class. All we need is somebody to volunteer to pass them out. That's the champion, right? And it's just a volunteer. It's not like a competition to become the champion. You just gotta say, hey, I'll pass the books out. And you gotta, you know, show us how many people are in your class, so on and so forth. We send you a box of books, you pass them out. That's the whole program, okay? The White Coat Investor Champions program. You can sign up@whitecoatinvestor.com champion but think about the value you're providing to your classmates. This information's worth a couple of million dollars to each of your classmates early in their career, right? And there's a hundred of your classmates in your class. That's $200 million worth of value that you can provide for them with what, 12 minutes of your time. However long it takes to pass these books out, it's super easy. It's totally free. We'll even bribe you to do it. We'll send you some WCI swag if you'll be willing to be a champion. But you sign up for that whitecoatinvestor.com champion. I think the best we've ever done is getting this book out to 70% of medical students in the Beat that this year. Let's see if we can get it to 90% of them. All we need is a champion in each class. Please volunteer. All right, we got a great interview today. We're talking to a solo family practitioner. Been solo for his entire career and done lots of cool stuff. He's got lots of tips now. He's a talkative guy, but there's a lot of pearls that he throws in as he talks about it. Pearls that I think a lot of you out there trying to get into solo practice or trying to stay in solo practice or will find useful. Stick around afterward. I'm going to talk for a few minutes about the concept of financial independence. My guest today on the Milestones Millionaire podcast is Eric. Eric, welcome to the podcast.
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B
Thank you so much, Jim. I really appreciate you having me here. I've been a huge fan of yours for quite a long time, and I'm honored to be with you today.
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A
All right, well, let's tell everybody a little bit about you, what you do for a living, what part of the country you're in, how far you are out of training.
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B
Yeah. So I'm a family medicine physician in solo practice in Southern California, specifically San Bernardino County, a high desert area of a little town called Esperia, kind of right off of Route 66. I've been in practice for 23 years now and independent practice the entire time and, you know, really have gotten to the point where I am finally figuring things out, you know, and I think I wish I had access to your podcasts at a much earlier stage in my career because I probably would have been in a lot better shape financially, even though I feel like I'm in good shape now. I'm sure I would have been double if I'd had access to your advice. But anyway, so that's a little bit about where I'm practicing and what my position is in my field.
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A
Yeah. Now I understand not only have you been in solo practice for a long time, which is no small accomplishment by itself, but you are also debt free and financially independent. Is that right?
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B
Yeah. So, you know, just recently, actually, I guess it's been two years now, I was able to finally pay off those student loans. It kind of gets into my, you know, my milestones of how I was able to achieve those things. But, yeah, so as far as, you know, being independent, as far as debt, that is a huge burden taken off of my shoulders for sure.
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A
Yeah. Now, you took your time. It sounds like getting your. Getting your student loans paid off. I mean, a couple of decades paying them off is longer than lots of docs want to have those. Any particular reason you decided to spend that much time doing it? I mean, you've clearly been saving money and building wealth if you're now financially independent. But you decided, you know, that the student loans weren't a super early priority for you. So tell me about that decision making and how you decided to do what you did.
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B
Yeah, that was just really more about the math. It was looking at the interest rates on those loans compared to interest rates on, say, the mortgage for the building I built or the mortgage on the house, and then really trying to figure out what made the most sense financially on what to pay off first. And so I guess that was really the main thing. The other is there's only so much income to go around. I had to pay my way through college. I was able to get through at least university debt free. So it was medical school, but by the time residency, four years of deferment, it was a good $350,000 in debt. And that's no small chunk of change. And so it was always just another mortgage payment I made. And I think like I said, once the interest rates started climbing, then it was to the point was like, okay, well no, this doesn't make any sense anymore. And then just, actually just went ahead and paid those off.
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A
Now, you came out of your school not that long before me, and when my classmates were coming out, they were refinancing like 1% or something crazy low. What was the interest rate on your loans?
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B
Yeah, I think the best I ever got was 3.2. And so I was nowhere getting any rates like those. I did consolidate about halfway through at least to try to lower, you know, that variability and get any fixed rates I could. And. But yeah, once it started getting to about 7.5, then like I said, it made no financial sense anymore.
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A
So you'd been a little bit arbitrage in that debt and just going, hey, I can borrow money at 3% now. I'd invest that.
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B
Right, right.
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A
When. When did you find out what financial independence was and decide that was something you wanted to pursue?
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B
Yeah, so, you know, I think it really kind of builds off of the milestones that I, I really, you know, have kind of measured along the way. That really kind of inspired my entrepreneurial spirit all along. And that goal to be independent, it's not just in how I practice, but also financially independent. I, I grew up on a, on a small ranch down not far from where I live now and learned really early on from my family construction business that you get up at 2:33am you come home seven, eight o' clock at night. You work hard days, all day, every day. I could get, you know, $5 to rake all the leaves on a hillside, but on a 27 acre ranch, there's a lot of hillsides and we had animals and shoveled, you know, everything you can imagine. So I learned the value of a dollar real early and I think that that stuck with me, that work ethic and the value of money and making sure that, well, everything I ever achieved, it was always hard earned and no one ever gave me anything. I didn't have help with school, I had to figure everything out on my own. And so I think that just stuck with me and I think that that independence in thought and also in money management has served me well. And so I really commend my parents for teaching me how to work hard early on. Probably not unlike your experience, I know from your previous interviews of how you grew up. Yeah.
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A
Now, one of the things that's actually more and more impressive every year is simply owning your own practice. What would you recommend to somebody coming out of training now that wants to own their own primary care practice of some kind of.
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B
Right. You know, So I was lucky enough to be affiliated with a ipa, independent Physician association that I had kind of gotten in touch with the, the president of that IPA early on during my medical school career, actually doing rotations in neurology, which was his specialty. And so I maintained those relationships that when I finished residency were there still, that they said, hey, when you get done and you want to come and practice in this region that, you know, we will help you get started. And it was that kind of an opportunity that I took advantage of where they kind of helped me find the office space, helped me get set up. And then shortly after that I was off and running and basically just took everything over myself. So it was always my intention to be on my own. But there were advantages to, you know, relationships and building those relationships early. So as far as advice to the medical students, the residents, look at that and don't just limit yourself to training just at large facilities. Get a broad education, get experience in independent practice, because the rewards are many, as I can discuss here in a few.
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A
Yeah, well, let's talk a little bit about the rewards. What kind of income have you seen over the last 20 plus years working as an independent family practitioner?
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B
Yeah, so it's evolved and I think it might make more sense even to just kind of tell you, like why I even got involved in medicine in the first place. And I think that was really kind of, you know, the. The first milestone for me, which was just to break that family tree as you quoted before, you know, and get into a position where I could actually work towards a different path. And it all started actually when I was in high school, a sophomore in high school, and I had a best friend that I'd known for since we were five. And we never really tried. I mean, there was never expectation other than just work hard and you're going to co and you're going to be a tile setter. And that was the expectation. Education was never something encouraged. I had a dream that he and I had both gone to medical school together, and I told him that, and he said, you know, neither one of us are smart enough to do that. And it really struck me because no one had ever told me that I couldn't do something or that I wasn't smart enough to do something. I mean, growing up on the ranch, if the tractor was broken, I fixed it. If I needed to fix my bike or the car engine or anything, I fixed it. No one ever told me I couldn't do something. So that stuck with me. And a month later, he was killed in a car accident. So that was my best friend that I had been throughout school. And so I spent my junior and senior year in high school, basically kind of a loner. And I guess it could have gone multiple ways, could have just gone into depression or not figured out your past or what. But I remember what he said about not being smart enough to be a physician, to be a doctor. And it drove me. And from that moment on, I just started working harder and harder. And all of a sudden I started getting good grades. And I'd never even worried about them before because it was always expected I would just be in construction, which is a great life. And it served my father well and my uncles and everyone else in my family. But I knew there could be something else for me. And I kept working hard towards that goal and continued and made that decision that I wanted to be a physician. And it was something really interesting to me. And I didn't have anything that I felt was going to get in my way. But the part about being independent, I think that stuck with me. And that's why I diverted back to that, to that story, because it's so important, I think, of what really formed me, how I look at money, how I look at my practice. And, you know, that becoming independent was that other milestone. I think probably the big milestone too, was that I never considered that I Would remain a resident, basically working for someone, making someone else money. And so that was always something that really drove me initially too. And I think the financial independence probably was that third milestone. And to get back to your original question, which was how did I figure out, you know, when I was independent financially, and I would say just early on in my practice, I realized that it probably only took me two years to start making enough profit that I was paying my own salary, paying my staff well, taking good care of them so that they take good care of me, but then also starting to build towards something else. My wife and I bought our home right out of residency as a new home buyer. And we almost have that paid off actually now as well. And so we were heading in that direction I think very early on, just planning ahead, building that family, building the wealth. But you know, with limited income, you do what you have to do. You don't just go spending money like crazy, but. And I worked zoo hospitalist work for like 11 other doctors, doing 13 hour days, five days a week. And you do what you have to do. And then when my daughter was born, there was a shift and I didn't want to be the dad that was never there. We hear a lot of physician stories about failed marriages or dads that are gone all the time working. And I made a shift because I was independent. I changed my schedule and I started working. Only right now I'm only doing three and a half days of actual patient care. The other time is actually off or if I have to put patients into half days here and there. So I've been able to evolve my schedule and my lifestyle to fill, you know, the work life balance, I think. And so that independence is that other thing that kind of gives me that freedom that I know I don't see in a lot of my colleagues that are working for a large system or that kind of situation.
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A
Did you find that that level of control came at a cost, that you ended up having to make less money in order to have that much control over your workplace? Or were you able to make more than your colleagues that were employed by large systems?
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B
Yeah, I believe even at the beginning, my earning potential was at par with what the going rate was for family medicine primary care in my socioeconomic district. I think after probably about year 10, and I'm 23 years into this journey here, I surpassed anyone else's abilities to the point where now I'm probably at about. I know you didn't ask me, but you May at about 450,000 a year, earning potential for family medicine, working three and a half days a week, taking approximately four months off of vacation time per year just for lifestyle. And so that's nothing compared to any of my colleagues in family medicine, I'm sure. At least not a lot.
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A
Yeah, it sounds to me like all your hard work's paid off at this point.
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B
Yeah, I still feel like I'm going to work till I'm 90. I don't know. I just, you know, but. But I. I do feel like I'm prepared. I mean, I think that as far as, you know, investments, I. I wish I had learned about defined benefit plans much earlier, I'll tell you, because that's been only about eight years. Had I. Had I earned or learned about them earlier, I probably could have been, you know, double as far as savings is concerned right now. And so I would. One big piece of advice, especially to those new physicians, is looked into it, look into a defined benefit plan, if you are an independent physician, for sure. So that was a huge, huge step for me.
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A
I would say, well, there's somebody out there, right, that thought, I want. I want this, you know, classic traditional doctor's life. I want to own my own practice. I want to be able to make my own decision, not only with patient care, but with the business. What advice do you have to somebody coming out now who wants to own their own practice throughout their career?
- [16:23]
B
Yeah, and I'm trying my best to spread this word. I'm on faculty at three different medical schools, and I've been giving lectures for years and years to medical students and residents just on this subject, on independent practice, because we're all told that you can't make it, you can't do it, and that that's the way, you know, of the old days, and there's just no, no possibility. Well, I'm here to say that is absolutely not true, because in my mind, that's someone else telling me what I can't do. And we all know how that went. So I would say stay true to yourself. And as far as advice is concerned, I mean, really, you just need to never lose the common touch, is what I always tell those students. If you treat your patients like they are family, they will come and you will be busier than you can handle. And then it's just about managing the small business. Right? And in this situation, for me, I had to learn the hard way all along, but there were steps that I took as a small business that allowed me to prosper and not just survive. And I had to be very picky in fact, at about 10 years ago, I actually closed all my commercial HMO panels. And you know, that was something that's a big decision because, I mean, I was getting probably nine new patients a day, not sustainable. So I had to basically ration care in a way, but strategically to the payers that made it be worthwhile to work that hard. And so a big piece of advice is once they're on their own, pay attention to the payers. Contracting is important and you are all ahead of it because you have links actually for a contract review on your site. So I really commend you for that. But I would say pay attention to those payers because you need to as a small business, make business decisions and be a physician. But you are smart enough, you went through medical school, you did the hard part. The easy part is actually just paying attention so that you are working smarter, not harder. And so in my situations, all along I've changed my patient profile for my practice so that I'm doing just that. The cancellation of the commercial contracts because the per member per month was so low on commercial, but much better for seniors HMO. So I focused on senior HMO with the IPA that I've been exclusive with for 23 years. So that made business sense at that moment. The latest has been probably in the last four years and I guess four and a half years participating with shared savings programs and basic basically through Alidate, an ACO that's nationwide. But this is Value Based Care, it's called. And so for those Medicare patients and some PPO patients, they were always a money loser. So I would stop taking Medicare for like eight years because of the diminishing returns on Medicare reimbursement. Since I started, it was down like 23%. But with value Based Care, that model actually now, currently this year with my participation with Aledate, those Medicare patients per member per month now surpass the ipa. And so being aware of those changes and what is out there and available to you is absolutely critically important as a small business. And I'd love to be able to put links into your website so that people can access to this information because it's again, information. I wish I had it in much earlier phase, but I was adept at making those changes. And we still even, maybe even every couple months we'll change which PPO patients we're taking as new patients. I never get rid of any patients, it's just that I won't take new ones if it makes no business sense. And so I would say that is a huge piece of advice, because that way you're not looking at burnout. That way, as you are working along in your career, your career hopefully gets to the point where I'm at now where I actually enjoy going to work. And I never thought that early on when I was working those 13 hour days, that someday it would come that I would enjoy getting up and going to work. And I'm there now. So I think that to answer your question from long ago about the independence and financial independence and knowing that I was there, I would say that's probably been in just even the last year or two that I really felt that joy in doing what I do. And I think it comes off with the patients as well. They know it when I can spend a half an hour with them and I'm not looking at my clock and they know that I'm there for them at that moment. And I'm not just worried that I've got to see 60 people today or I won't be able to pay everybody's check for payroll. So I think that that was a huge step for me.
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A
Well, congratulations, Eric. You've been very successful. You've outlined a path that I think a lot of people want and demonstrated pretty well, I think, how that can still happen in today's modern medical world. So thank you so much for being willing to come on the Milestones to Millionaire podcast, sharing your story and inspiring others to do the same.
- [21:31]
B
I really appreciate the time you've let me spend with you. And, you know, there was one quick one, and I'll just say it really quickly. If you have the option, build your own building, that was a huge step for me, paying myself rent. That was a huge thing. Plus taking the deductions that you get when building new real estate. And I know you've done other segments on real estate investment, so that kind of fits two categories there. But thank you again for having me on your show.
- [21:55]
A
All right. I hope that was helpful to you. As I mentioned at the beginning, Eric's a talkative guy, but I wanted to let him talk because of what he was putting out there. Right. A lot of these little tips are worth tens or hundreds of thousands of dollars over the course of your career that he was dropping on you. You know, paying attention to the payers. You don't have to ditch your patients. You already have. You can just, you know, use that information. You have to decide who the new patients you're going to take are. Because, you know, what if the payers, the insurance companies usually don't want to Pay you for your work? Well, you got to stay in business, you got to make payroll, and you want to be paid fairly. So you got to pay attention to that stuff. And if you could handle becoming a great doctor in medical school, you can handle running your practice. So don't be afraid to do that. I told you at the top, we're going to talk for a few minutes about financial independence. Sometimes this is called fire, right? Which stands for financially independent. Retire early. But you don't have to retire just because you find you became financially independent. I didn't retire when I became financially independent. In fact, I've got two jobs now, right? What I'm doing here at the White Coat Investor as well as my clinical practice. But I'll tell you what, it provides a lot of benefits even if you don't retire, right? You don't have to do things just for the money anymore. You want to take a lousy payer because you like the patient, you can do that, right? If you want to spend your time doing something that's more aligned with your life's mission and really doesn't make much money, you can do that, right? When we became financially independent, one of the things Katie did, she ran for office last year. She wasn't able to campaign very well because she was nursing me back to health after falling off a mountain. But she still got elected, and so she's working on the school board now, something that maybe we wouldn't have had the opportunity to do if we hadn't taken care of our finances early on. So there's all these benefits of financial independence besides just being able to stop working. So how do you determine if you're financially independent? Well, it basically means you have enough money. You don't have to work for money at any point in the future. So that's typically a number that's something like 25 times what you spend. Okay. Notice that it's not the same amount for every person, nor is it a function of how much you make. It's only a function of how much you spend. And yes, that includes all your spending, right? Including any charitable giving you're doing every year, including your tax bill, including any financial advisory fees you're paying. That all counts toward that amount. Add that amount up, multiply it by 25. That's the amount you need to be financially independent. So if you're spending $100,000 a year, it's $2,500,000. You're spending $200,000 a year, it's five million dollars. You're spending $300,000 a year. It's $7.5 million. See how this works? It's not that complicated. Now that's a lot of money. Don't get me wrong, $5 million is still a lot of money. So how do you get there? Well, for most of us, it takes time. It means putting money away, something like maybe 20% of what your gross earnings are each year. Putting away investing in some sort of reasonable manner. And over time, as you continue to add money to that stash, that pile of money, it grows. And after a while, your money's growing more each year than the amount you're putting in there. And eventually it becomes a seven figure amount, you become a millionaire. And then it starts going really fast, right? Because your money tends to double every seven to 10 years. No matter what you do. If you're still adding more money to the pile, well, it gets there faster. So the first million is definitely the hardest million. And then it just starts piling up. And before long you look around and go, I don't actually have to work anymore if I don't want to. And then you have an existential crisis every day for the rest of your life of what you want to do with the time you have left on this planet. And that's a beautiful thing to struggle with. And maybe it involves some work, maybe it doesn't. Everybody's a little bit unique in how they do that, but that's how the process works. And so I think financially independent doctors can be better doctors because they can make decisions without regard so much to the financial consequences of those decisions. And I think that's a good thing. So I hope that's one of your goals out there, to become financially independent at some point. Now, for some people, that doesn't happen until they're in their 60s, especially as they start seeing some of their expenses like health insurance drop off and be replaced by significantly cheaper Medicare. Sometimes it's when they start getting payments from Social Security that gives them a boost to that income. So they don't need quite as big of a nest egg to be financially independent or they qualify for a pension or something like that. But there's no reason you have to wait until your 60s to be financially independent, especially if you invest wisely and especially if you have a really high savings rate. In fact, a lot of ways, it mostly comes down to your savings rate. The more you save, the sooner you're financially independent, right? Because the more you're saving, the less you're spending and you're working now on both ends of that stick and it doesn't take long before that stick is very short. And so we run into people all the time in their 30s, 40s, early 50s that are already financially independent. They don't have to wait for Social Security or Medicare to get there. All right, this podcast was sponsored by Bob Baiani at Protuity. A listener sent in a review about Bob said he's been absolutely terrific to work with. It's always quickly and clearly communicated with me by both email and or telephone, with responses to my inquiries usually come in the same day. I have somewhat of a unique situation. Bob has been able to explain the implications of underwriting process in a clear and professional manner. Contact bob@whitecodeinvestor.com or you can email them inforatuity.com or you can call 973-771-9100 and get your disability insurance in place today. All right, that's the end of our podcast. If you want to come on this podcast, apply whitecoatinvestor.com Milestones we want to celebrate your milestones and use them to inspire others to reach their own milestones, whether they're the same as you or not, and to realize that they can do it because you can do it. Keep your head up and your shoulders back. You're a very capable person and you can accomplish anything you set your mind to. See you next time on the Milestones Podcast.
- [28:10]
B
The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors.
- [28:15]
A
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.