A (3:46)

Thank you, Jim. Happy to be here.

B (3:48)

Tell us what you do for a living, how far you are out of training, what part of the country you're in.

A (3:53)

Yeah. So I'm a pediatric emergency physician. I'm three and a half years out of fellowship, and I work in a rural community in the Northeast.

B (4:02)

And what milestone are we celebrating with you today?

A (4:04)

Well, I am back to broke because I just got public service loan forgiveness.

B (4:10)

Awesome. It's kind of two milestones, but it's a wonderful combination. Congratulations. As I said before we started recording, this might be my favorite milestone. It's a big deal for doctors to get back to broke. Something like 73% of docs are paying for school with student loans, and that's often 2, 3, 4, $500,000. And just gaining that much money in net worth is not insignificant at all. So tell us a little bit about your journey. I assume you borrowed to pay for medical school, right?

A (4:42)

I did. I did. So I went into medical school with no debt. I had no undergrad debt. And I was very concerned about Student loans. I think I made a mistake at that time. I closed out a trust fund I got from my grandparents to pay for some of med school. It was only about 30 grand.

B (5:03)

But in retrospect, it's going to feel a little bit painful, isn't it?

A (5:06)

It is, because I don't think it really mattered. And it probably would be quite large now, which is a little sad, which

B (5:13)

is totally different for anybody listening to this and going to medical school now. And this was all, you know, just happened to be circumstances that you benefited from.

A (5:21)

Yes. So I ended up borrowing approximately 270,000 and that was, you know, living expenses and everything. And by the time it was forgiven, it was about 370.

B (5:34)

So it grew. It grew in residency. You did a pedes residency. It grew in fellowship. You did what, two years of pedgm fellowship? I had three, three years of PGM

A (5:44)

fellowship and I also did a teeth year. So I did seven years of training by the time I was done.

B (5:49)

Wow. And so it grew from 270 to 370. And that's with the. Whatever it was three and a half year student loan holiday in the middle of it, it still grew $100,000.

A (6:01)

Correct.

B (6:02)

Okay, so when did you decide? Okay, PSLF is the route for me.

A (6:08)

You know, I think I was not sure through a lot of my residency and listened to a lot of your stuff. And I also listened to a lot of Dave Ramsey during that time. And we were doing a separate debt snowball for all of our other debt, me and my husband. And I think it was more as I got closer to fellowship and saw those numbers start starting to add up towards 120 payments, that we just decided to continue that path. And when I signed onto my job and got my sign on bonus and everything, we decided not to use that for the loans and just to continue for pslf. Especially when people I worked with started to get the forgiveness and it became more real.

B (6:51)

It's funny how knowing somebody or hearing somebody like on this podcast, and you go, oh, this actually does work, even though I've been telling people it was going to work for 15 years, it doesn't feel that real. And it didn't help. I think back in 2017, 2018, when they were coming out with all these statements that only 1% of people applying were getting it, that sort of stuff, I think it scared a lot of people. And a few of them maybe didn't make the right decision managing their loans. Maybe they were in a PSLF qualifying job and still refinanced and paid them off and, you know, came out a few hundred thousand dollars behind because of that. Okay, well, tell us about the other debt. You alluded to some other debt. What other debt did you have?

A (7:31)

We in our marriage, my husband, we had some undergrad debt, we had some car debt, we had some credit card debt. We had a little bit of everything and paid most of that off during residency, which required a lot of energy and focus. And again, now that we're on this side of it, sometimes I wonder if the juice was really worth the squeeze.

B (7:55)

Maybe lived a little too frugally during residency.

A (7:58)

Yes, yes. And I printed out because we've always had a written budget, so I printed out our written budget from that time. And just thinking about what our written budget is now, it's funny to compare.

B (8:10)

Yeah, this is a funny exercise. We've gone back and looked at budgets from as early as like 2000. Right. I was in medical school in 2000. It's shocking what we lived on. Not just the effects of inflation, but just how frugal we were. It was, it was kind of crazy looking back, knowing now what income we have. So I can definitely relate to that. Okay, is your, was your husband working during residency during med school? What. Was, what was going on there? When did you get married and what does he do?

A (8:38)

Yeah, we got married right before we moved for residency and in residency he followed me. He's very supportive and did a job switch during residency. So we got there and he ended up switching into a different field and we worked through that job switch and then he worked through all of residency with me and then we moved back near our home and thought there were good job opportunities for him here, but it didn't really work out like we thought thought it would. And so now he is doing a job switch and we're able to, you know, finance him going back to school without any issues and live off of my income, which has been kind of a fun little adventure for our family.

B (9:20)

So it doesn't sound like he was any sort of a high income professional while you were in residency. He was working kind of a typical job. Typical income. Okay, so you guys got rid of all that other debt and then come out of training, start earning like a typical pediatric emergency medicine doc. What are we looking at for household income the last three or four years?

A (9:41)

Yeah, so I started my job because I'm in a rural area, so I'm definitely on the higher end. So I started at 2:70. And then, you know, peds typically makes less than generally, but the hospital system I'm in just started pay parity. So I got a big bump this year and now we're about 370.

B (9:59)

Yeah. Which is about the average emergency medicine income across the country for at least a full time emergency doc. Okay, so, so I mean, you just got a $370,000 bump in your net worth.

A (10:12)

Yes.

B (10:13)

This probably did a little more than just get you back to broke, am I wrong?

A (10:17)

Well, it gets us pretty close back to broke. We do have a big doctor house. So for, you know, better or worse, when we moved near home, we ended up with a very nice 10 acre property that carries a lot of, of debt. So with that, now we're right about at broke.

B (10:37)

Are you counting the value of the property though? I mean, what's the property worth?

A (10:41)

So the property is worth about 900 and we have about 300 of equity in it.

B (10:45)

Okay, so that's $300,000. Do you have some other $300,000 debt somewhere offsetting that?

A (10:51)

I don't think so. The house, we have about 600,000 in debt on the house.

B (10:55)

Right.

A (10:56)

And then we have about 300 of equity. And then our other net worth is we have about 80 some in cash money market. And then retirement accounts add up to approximately $250,000. And then plus the house, it gets us right about back to even.

B (11:15)

Well, I mean, I think you're not quite calculating it right. I calculate your net worth is six or seven hundred thousand dollars. Right. Because you get to count the home equity in there too. You don't just subtract your debt from your other assets. So I, I think you're doing great. I mean it's $300,000 in home equity, $250,000 in retirement, $80,000 in cash. That's 6 or $700,000. So we're gonna celebrate not only back to broke, we're gonna celebrate half a million dollars. We're gonna celebrate PSLF with you. So you guys are doing great. Congratulations on all that.

A (11:47)

Thank you, thank you. It's been an interesting journey.

B (11:51)

Yeah. So tell us how you saved for retirement, what you've been doing to do that.

A (11:56)

So I do the boring stuff. So I maximize what I can do through my employer for pre tax and then they have a very generous match. So that ends up being close to 40 a year that we put away. And then that's most of what we do. And then we do some 529s and then, yeah, just that automatic savings every month.

B (12:19)

So all in tax protected accounts for now, it Sounds like yes.

A (12:23)

And then we have a Roth from during residency that we have still, too.

B (12:26)

Very cool. Well, tell us a little bit how the two of you got on the same page financially so you could achieve this level of success. Because it's not insignificant. I mean, even if you just look at what you've got in retirement and what you've got in cash, this is more than a year's income after just three or four years out of residency. It's not insignificant what you've been seeing. Savings. So tell us how you guys have worked together to achieve that.

A (12:54)

Well, I think one of the biggest things for financial success for anyone is being on the same page as your spouse. And I think if you can work as a team, you are far more likely to be successful than if one person really wants to save and one person wants to be more, you know, liberal with their spending. So my husband and I come from very similar backgrounds. Our families are very similar. We did not have, like, extravagant upbringings, and my parents have retired early with a very comfortable nest egg after having, you know, basic American jobs, like, they were the quiet millionaires, you know. So I think having that same understanding worked well. And then we did buy a fixer upper at the beginning of residency for the whopping cost of $72,000. So we bought a home that needed a lot of work, and my husband is very handy, and he redid many parts of the home. And one day, I remember I was at residency working, and he sent me a picture of the floor of the kitchen ripped up, and I was like, what? And so we redid the kitchen together, we did tiling, and then we sold the home for about 220,000 at the end of my residency.

B (14:06)

Very cool. So that contributed significantly to your net worth.

A (14:09)

That helped a lot. And that was part of our down payment on our new home. And then I think just having a written budget every month and knowing where your money goes and in residency, decreasing our debt, that was not something we were planning on having to be forgiven and ensuring that we were not accruing more debt every month was important for us. And it's still important because I still do a written budget every month. I know where our money is going. We're on the same page for where we want to spend money and just slowly doing those goals, like, each month picking something. Well, we have money for this this month, so let's buy that piece of furniture. We have money for this next month. So just, like, slow, patient, incremental savings, I think gets you there. You just have to be willing to take the time to do all those things.

B (14:58)

What did you guys learn about the credit card debt and the auto loans while you had them?

A (15:02)

I really hated auto loans, so we paid those off as fast as we could. And then when we moved here, our car, like, we had some issues with cars and bought a new car. And it was the first brand new car we ever bought because we had bought used cars all our life. And then we bought that new car since starting attending ship and paid it off in six months. Because I just. I feel like that car loan every month is not something that contributes to your financial success. So getting rid of that is something that we've always prioritized and. And have been able to do those very quickly, which I think has been important.

B (15:37)

Yeah. Where did all the credit card debt

A (15:40)

come from when we got married? It was my husband's from before we were together. And it was small. It was like $2,000. And we got rid of that relatively quickly and then have never carried credit card debt since then.

B (15:51)

Wipe that out quickly. Took it in the corner and dropped an anvil on it.

A (15:54)

Yes, yes.

B (15:55)

Very nice. All right. Somewhere out there, there's somebody like you sitting there, maybe in residency going, I got to figure this money stuff out. And does this piece, this PSLF thing really work? And how can I be like this person that three or four years out now has a net worth of more than half a million dollars, student loans are gone. Is doing what she wants with her life. What advice do you have for that person?

A (16:20)

Well, I was thinking about this for coming on today, and I have two things. Number one, developing simple money habits early is really important. So a written budget, figuring out what your priorities are in doing that, but also doing it in a way that is sustainable and doesn't delay gratification for too long. One thing that I remember was in residency when we were very, very focused on paying off debt, and I was extremely stressed about money. Aretha Franklin came to town and I was like, we cannot pay for these $40 tickets. And we didn't go. And then she died, and I never got to see her. And I feel like those sorts of decisions were too legalistic and it would be better to be more free for small things like that. And then number two, in medical school and in residency, choosing a job that you really, really love, even if there is a lot of training. So pediatrics is not classically a high income specialty. And I did seven years before I got to my job, which is quite a long time for training. But I love my job and I expect to have quite a long career of income. So even though the training's longer, doing something you really, really love, that you can sustain for a long career will really contribute to your financial success because you're not going to burn out if you're really, really fulfilled in your. In your career and in your specialty. So those two things are really important, for sure.

B (17:50)

Much better off being a pediatrician for 30 years than burning out of orthopedics in six. Absolutely no doubt about it. It just works out better. Very cool. Well, thank you so much for being willing to come on the podcast. Thank you for what you're doing in your life. Congratulations on your success. I think we've just celebrated at least three milestones, so you're well on your way. It won't be that long before you are a millionaire. You'll be amazed how quickly that happens. And we encourage you to continue working your way down the list of milestones and building an awesome financial life like you are.

A (18:24)

Thank you. Thank you very much.

B (18:27)

All right, that was a fun interview. Afterward, we got into the details about net worth calculations, and I suspect there's a lot of people out here making the same mistake when calculating their net worth. Remember, when calculating your net worth, it's everything you own minus everything you owe. So you put your assets on one side of the ledger, you put your liabilities on the other side of the ledger, and then you add it all up, and the sum total is your net worth. It's the measurement of wealth. Now, that's maybe not the most important number out there when it comes to your finances. Your investable assets might be a more important number than your net worth, but when it comes to your net worth, it's everything, right? Includes your home, it includes your business, includes your practice, includes your cars and your stuff, if you want to add all that. And I'm not sure everybody does that usually, but when you're calculating home equity into that, you don't just put the equity on one side of the ledger and put the mortgage on the other side, right? That was the mistake that our fine interviewee today, Nancy, was making. What you put over there is the value of the house on the assets and the mortgage on the liability side. So the sum total of that is the home equity. But if you're only using the equity as the asset and you're using the entire mortgage, you're basically counting the mortgage twice. So she thought she was back to broke. In reality, her net worth is 6 or $700,000. So had a good time delivering that good news to her today. All right, let's get into utmas and ugmas for a few minutes. UGMA or utma accounts are basically custodial, taxable accounts for your children. They first came up with the Uniform Gift to minors act like 1950s, and were subsequently revised about a decade later. And that's when utmas came about. The UTMA was slightly better than the UGMA in that you can hold things that aren't just stocks and bonds in it. You are allowed to hold some life insurance policies and real estate and those sorts of things in a utma, but for the most part, they're the same thing. And a UTMA is available in all states except Vermont to South Carolina. In those two states, you still have a UGMA account with its slightly more restrictive investments. For the most part, though, most people that open one of these accounts for their children, it will be a UTMA account. Now, this is money you want to give to your children when they reach a certain age, typically age 21 in most states, and it becomes their money at that point. So this is not like a 529 account for a college education where it's your money. This becomes their money. At a certain point, they can go spend it on anything they want, right? If they want to go use it to buy a car or give it away to somebody you don't approve of, or use it for drugs or alcohol, that's up to them. Once they hit that age, it's their money. So why would anybody even think about doing this instead of just giving them money later? Well, a couple of reasons. The first one is it gets money out of your estate, right? It becomes their money. And so it's a way you can give them a gift amount every year that's not subject to gift taxes, is not subject to having to file a gift tax return and reduce the size of your estate. But mainly the reason people do it is to save a little bit of money on taxes. You see, the first certain amount of income that it makes every year is totally tax free. And the next little chunk of income that it makes, and these both go up a little bit year to year, and the total between the 2 is about $3,000 ish. But the next amount is taxable at their income tax rates. The problem is any amount of income above that gets taxed at your tax rate as the custodian. This is known as the kiddie tax. And it's a bit of a pain, which suggests that you probably ought to invest these UTMA accounts very tax efficiently and not let them get too big. If you'll invest them in something like a total stock market account and you'll keep it to a five figure amount, you probably won't have to pay any kiddie tax on it. The yields are just low enough that they will keep you below that amount where kiddie tax has to start being paid. So what do people use these for? Well, if you want to give your kids money like we have that we call a 20s fund, money that they can use for anything they want, an early inheritance, if you will, UTMA is a good account for it, right? If you want to let them use it to go on a mission or to do a summer in Europe or to buy a car, pay for a wedding or a honeymoon or a down payment on a house or those sorts of uses, right. That aren't education. It's education. Use a 529. If it's something else, you can use a UTMA account for it. You get a little bit of tax favorability out of it, right? That money either doesn't get taxed or gets taxed at their income rather than your higher tax rates. But you give up control over the account once they turn 21. It's their account to do with as they please even before they reach that age. You can only spend this money for their benefit, right? You can't take the money back out and use it to go buy yourself a boat. It's got to be spent for their benefit. Now that might be a car for them when they're 16 or something, but it's not a boat for you. So keep that in mind as you fund a UTMA account. Is this really is a gift that you're giving to your children. You're giving it to them a little bit early, retaining a little bit of control until they get to a certain age in exchange for a little bit of tax benefit. That's really what a UTMA is. It's a custodial taxable account for your kids. Earlier we mentioned working locums with Comp Health, the number one staffing agency. But Comp Health isn't just a locums agency. Comp Health staffs regular permanent positions across the nation as well. They also offer telehealth, medical missions and more. That's what makes them unique. They can look at your situation and offer multiple solutions to build your career the way you want it and meet your financial goals. And they know their stuff, especially when it comes time to negotiate contracts, which they're willing to do for you. So whatever career move you're looking for, visit whiteconeinvestor.com comp health and use the power of Comp Health to build your career your way. All right, that's the end of this week's Milestones to Millionaire Podcast. Thank you so much for being here. Without you, it's not much of a podcast. We're grateful to have you in the White Coat Investor community. If you want to come on this podcast, you can submit for it@whitecoatinvestor.com Milestones. Till next time, keep your head up, shoulders back. You've got this.

A (25:12)

The White Coat Investor Podcast is for your entertainment and information only and should not be considered financial, legal, tax or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.