← White Coat Investor Podcast
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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 Milestones to millionaire podcast number 270. This podcast is sponsored by Bob Baiani at Protuity. He's an independent 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. You can also email infootuity.com or just call 973-771-9100. All right, welcome back to the podcast. This is the Milestones to Millionaire podcast where we celebrate your successes and use them to inspire others to do so. The same. If you'd like to be on the podcast, you can apply@whitecoatinvestor.com Milestones all right, it's annual survey time. You can fill out our annual survey now through May 6th. This is really important for us. We go through all of the responses we get and we usually get a couple thousand responses. And we go through them because it is so important for us to be doing what you need. And so if you have a few minutes to tell you about yourself and share your feedback, we use that to improve the White Coat Investor community, to improve how we're offering you services, right? We want to know how we can serve you better, how we can improve WCI for you. What would make WCI better for you? We want your feedback and so we'll actually bribe you for it. 20 random entrants receive a t shirt. 5 people will win a WCI course totally free. Right? So you can get prizes for doing this, but mostly you can help yourself by improving wci and you can help those following after you. Okay, so the link is whitecoatinvestor.com WCISurvey now we also ask some like net worth questions and things like that. It's all anonymized, don't worry about that. But it enables me to put together kind of a post that people like to see that kind of shows where people are at financially in the White Coat investor community. So obviously you can skip any question you want in there and it's all anonymized data. But it's very helpful not only for producing content, but also for helping us make sure we're doing the right thing for you. Again. Whitecoatinvestor.com WCISurvey all right, stick around. At the end of this interview, we're going to talk a little bit about FSAs and dependent care. So a little bit of a nuanced topic we're going to talk about. Okay. I'm really excited about this episode. In fact, this might be my favorite Milestones episode we've ever done. There is so much cool stuff in this interview, but it gets even better because it turns out I found out right after we finished the interview that this is a little bit of the rest of the story. So let me take you back to the beginning of the story. Let's go all the way back to and this is in my email box. September 13, 2019 I get an email from today's interviewee. Email says I love your podcast. My name is Frank. I'm currently a Fellow living in D.C. and have a financial question. I did my residency in Brooklyn and now fellowship in dc. That's five plus years of living in very expensive cities. I actually make less as a fellow but pay more in rent than when I was a resident. I'm so close to getting that high paying first job, but I don't know if I can make it financially another 10 months. I didn't make the smartest decisions financially as a medical student and resident. I maxed out with credit cards. I was recently married. I had to move to DC. Licensing costs, board, prep board costs 1500 each for my written and orals, student loans, fellowship interviews, and the list goes on. My wife works, but it's not a lot. She has her own credit card and loan debt. Right now I'm stressed out. Sorry, I'm a little emotional reading this about being able to pay rent to go along with being in a new city and fellowship. My question to you is what are my options? I can't take out any more credit cards. I'm trying to set up locums, but my fellowship does not really allow for much extra time. Plus the process in setting it up and finding a gig is taking a long time. Should I try to get a personal loan from a bank? Are there any other types of loans that you could recommend? I'd rather take out another loan and be at ease than stress out my entire fellowship or when I can finally see the light at the end of the tunnel. Thanks for your time. This was in response to an email we'd sent out with Financial Boot Camp. Our Financial Boot Camp. We always invite people to email back if they have any questions and he did and he sent this email in and reading. My response is Very short, like most of my responses are, and talks about some of the things he can do. And practically, I gave him good advice to help solve the problem. What I didn't do was show nearly as much compassion, passion for the situation he was in, as I should have. You know, I told him, you're doing a good job. You already admitted that you screwed up a lot financially in the past. And I told him the second part was to set up a plan to live like a resident on his attending income in a year and told him that if he would do that, he could clean up this mess. And I told him it's definitely a mess you've got, but you can clean it up. You'll just live like a resident for a year. And then step three would be to get through this year, his last year of fellowship. And I told him, your options for this year are to have your wife work more to moonlight, sell anything you have of value, live as cheaply as possible, and take out a personal loan. And I referred him to One of the WCI advertisers, SoFi, that we've had for a long, long time. And I even gave him a link. Whitecodeinvestor.com Sofilo I don't even know if that link still works. Let's double check it before I put it on the podcast. Yeah, it still works. And so I sent that email back, no response, nothing. Just into the ether. And seven years later, he applies to come on the Milestones to Millionaire podcast. Let's hear the rest of the story. Our guest on the Milestones to Millionaire podcast today is Frank. Frank, welcome to the podcast.
- [06:25]
B
Thanks for having me. I really appreciate it.
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A
All right, tell us what part of the country you're in, what you do for a living, how far you are out of train.
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B
So I'm from the northeast, New York, New Jersey area, metropolitan area. About five and a half years out of fellowship training. I did general surgery and I did surgical critical care fellowship, and then I've had trauma surgery, emergency general surgery jobs for the last five years.
- [06:50]
A
Very cool. Well, thank you for doing that. Number one, thank you for doing it in New Jersey. Right. New Jersey is not the easiest place for doctors to live financially, but they definitely do need doctors there. So thank you for doing that.
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B
You know, I grew up in New Jersey, so that's kind of how I got here.
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A
But easy to stay home.
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B
Yeah.
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A
Okay, well, tell us what milestone we're celebrating with you today.
- [07:13]
B
It's a couple. I paid off all my student loans or I got them Forgiven, I should say, and got back to broke. I haven't quite reached a half a million, but I figured those two milestones were, you know, at least a good start.
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A
Yeah, you're doing great. Okay, well, take us through the student loans, take us back to medical school and give us the numbers.
- [07:32]
B
So I came out with 315,000 in student loans. And back when we started the PSLF, there was no fancy website like they have now where you have these nice bar graphs and it shows exactly the payment you made. Like one second ago. There was yearly emails where they send you, you know, yeah, we received your payment, sure. Even if I asked for proof, they never really actually gave any in the beginning there. And actually it was very difficult to get started. And a lot of those $0 payments that we know and love in the beginning didn't really count. All of it didn't transfer. It was multiple phone calls. And so I got all my loans over to the PSLF platform and it actually made it very difficult and had a lot of problems throughout because it broke it down to about 15 different loans just based on the way they crossed over. It made it a real big problem when, you know, they, you know, fix the system and like, oh, you missed a payment here, missed payment there and they like forgave like a certain amount of payments where they just like, you know, took it off the top. But because I had 15 different loans, you know, oh, we give you 15 free payments or 15 free, you know, clubs will fix for free. And that turned into like, you know, one month's for each of them. So it actually really messed it up and lots of phone calls.
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A
So you came out, I mean, you came out a decade ago. What IDR did you enroll in initially? Do you remember?
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B
I forget, I forget exactly which one. But it was the income based payments,
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A
IBR or pay or. I don't even think REE pay existed.
- [09:04]
B
I mean, no, it was ivr.
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A
When you started, nobody had ever received public Service Loan forgiveness.
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B
Right.
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A
I mean, the first people eligible would have been 2017, 2018. You would have started making payments in 2015-2016ish. And what do you think? Were you worried when you started hearing all these people saying, you know, only 1% of people applying are getting PSLF, et cetera. Did that worry you at all?
- [09:30]
B
Well, you guys helped, of course, all your information was great, but it made sense that no one got it because it wasn't enough time yet because it was 10 years. And then as I got closer to the time where people were getting it. They did say a lot of it was, you know, because they didn't qualify or they didn't do enough payments or they didn't have enough or they didn't sign up the right loans. I was pretty confident that I had the right type of loan and in the right spot. So I thought all my. I knew all my paperwork was in the right. I just was worried about, you know, policy change or someone taking it away. But once I got to the 7, 8, 9 year mark, I was like, I'm. I gotta think that I'm in deep enough that even if they change the policy that I'll be grandfathered in. But it definitely was a problem. It definitely was scary in the beginning, but I really didn't have any other choice. I'm like, well, I just have to deal with it later if it doesn't go through because you don't have no money. Resident. Being a resident in New York City in Brooklyn.
- [10:21]
A
Well, it wasn't like you were going to pay him off as a resident anyway.
- [10:25]
B
Right. I was hope for the best kind of at that time. So it worked out okay.
- [10:32]
A
Very cool. Well, the timing for you worked out pretty good given when you started. Right. Because you made these little tiny payments in training. And then about the time you became an attending, you came into the student loan holiday. Right. With $0 payments. And you got three and a half years of those as an attendant. Right. As an attending.
- [10:49]
B
Don't say that too loud. I don't think they could take it back because I have the proof that says they're all forgiven. Zeroed out. But yes, I got very lucky in that regard where I actually never made a payment with an attending salary because of the way they re verified your income. The date kept getting pushed back, I guess because the website was being fixed. It was right around that time. So they pushed back the income verification once the payments restarted. So I was still on a fellowship residency salary when the payments restarted. So they never actually. And it was right after I made the 10 years of payments when they wanted to know how much I made now. So there was multiple years where I was an attending where it was $0 because of COVID which was really nice. And then once I got back, it was only like $500 a month or something like that because my salary was so low.
- [11:39]
A
I mean, your timing couldn't have been more perfect.
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B
Couldn't have been. It was perfect again. It ended right at the end. Yeah.
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A
How much did you get forgiven? What was the balance when it was forgiven?
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B
It was $405,000.
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A
$405,000. And how much do you think you made total in payments approximately over the course of the prior 10 years?
- [12:01]
B
I was trying to look that up. There's not a good way. But it was all like less than 1% of each loan was paid. Like, my highest payment each month was 500. Was $500.
- [12:10]
A
I mean, do you think you even paid 30,000?
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B
I think that's a good number about that, but it's pretty close. It's definitely not more than that. I just didn't have it at the time.
- [12:20]
A
There was a parent plus loan involved as well. Tell us about that.
- [12:23]
B
Yes. So that was at. That was also interesting. So once I was paying the loans, I had them all set up. My dad was like, you know, we have this parent plus loan that's on me because he had to do it for undergrad. And for whatever reason, I didn't know the, you know, how to do it or how what was going on then because I was an undergrad.
- [12:42]
A
You thought, you thought he was paying your tuition and he was borrowing it?
- [12:44]
B
Yeah, I thought, yeah. He's like, well, you know, you know, I've been paying some, but it's like, I guess the terms weren't great or whatever happened. I don't know the circumstances, but he kind of dropped it in the middle and I was like, oh, we got to figure this out. And luckily when they revamped the pslf, they included a lot of people and you can do back payments. And he happened to always work for a town because he's a building engineer inspector, so he always worked for a town. And you know, he had the lucky, had the payment proof and he went from zero to like finishing off before me because he always was making like minimum payments and this or that and deferments, I guess because it got, you know, when it got to be too much at times, and that's when they. That where they fix like up to 15, you know, deferments or payments that you missed or something. They just kind of like blanket fix a certain amount where it didn't help me. It really helped him. And he actually, we actually finished his. Prior to finishing mine. So he had a couple. He had a year, about a year or two of like thousand dollars payments or so because his income was more towards the end. So he actually probably paying like, you know, a good amount of it, but he got 115,000 on top of the 400 that I got forgiven.
- [13:55]
A
And it was paying for your education though, right?
- [13:58]
B
Yeah, it Was my. It was not for him in any way, shape or form. It was all for me.
- [14:01]
A
So you got PSLF and you helped your dad get pslf?
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B
Yes.
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A
That's pretty awesome. That's the first time we've had that milestone on this podcast. That's pretty cool.
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B
It was like, again, it's some luck involved, but it was a lot of work back and forth to make sure they got it counted because now we're going back eight years of his payments and eight years of his employment. Where? Somewhere, you know, towns he worked for before. But luckily it was all like a government, you know, municipality job. So it all like, it all qualified.
- [14:31]
A
$500,000 plus when you total the two of them together.
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B
Yeah, if we played, if we paid the, you know, a couple, percentage of that probably is being kind. So we really gotta really got lucky.
- [14:43]
A
Yeah. So what's your net worth now? I mean, you say back to broke, but you've had a 4 or depending on how you look at it, $500,000 swing in your net worth.
- [14:53]
B
So it's about 400 to 450,000. About 300 of that is 401k and 457b retirement. And then the rest is, I have about 20,000 emergency and then 50,000 or so in just cash on hand and then the rest is in the house, which helps with the net worth, but also took a big chunk of it as we're building it.
- [15:18]
A
So you've had, I mean, you've had more or less a million dollar swing in net worth since you came out of training five years ago. Pretty awesome. What's the range of income you've seen in that time period?
- [15:31]
B
When I started my first job, it was about 315. And then for two years I got a different job. I went from New York City to New Jersey and it went up to about 440 and now it's about almost 5.
- [15:45]
A
So a pretty typical general surgeon kind of salary.
- [15:47]
B
Yeah.
- [15:48]
A
Okay, very cool. So tell us. I mean, obviously you got into the details of pslf. You figured out work, you didn't bail on it, you stuck with it, it paid off. But you've also accumulated close to half a million dollars in the meantime. So tell us your secrets to success. I mean, you say you became financially educated listening to this podcast and reading WCI and that sort of stuff, but you still had to do it. So tell us how you became so financially successful.
- [16:17]
B
You've said it to me a hundred times. Live like a resident after you graduate. I truly did. We bought a Tempur Pedic bed and a big screen tv. But other than that, I live next to the hospital in a townhouse or. Not a townhouse, an apartment. It was about 2,500 bucks. And then even after that, because my wife's parents lived around that hospital, we lived with my wife's parents for about a year and they're like mother, daughter part, just to save for a house, even when we had a kid. So there was a good three, three and a half years there where we lived, you know, 2,500 to almost nothing per month, at least on rent.
- [16:55]
A
Yeah. So I mean, both sides of the family got involved in this thing, right? I mean, your dad had the parent plus loan, her parents had. You live with them for a. But you know what, you add it all together and you can build a lot of wealth together when multiple generations work together. Okay, so how did it feel to look on the PSLF website and see it go from 405 to nothing?
- [17:17]
B
Oh, man. It's funny that you say it that, because I don't know if you recall, but they just revamped the website so the website was down right as I was done. So after 10 years of waiting, 10 plus years of waiting, I couldn't exactly like get it because they were in the middle of that three month period where they were redoing the website and they were like backlogged, so I had to wait a couple months. But I had my dad's payoff first, so that was a nice victory. And then it was just surreal when the 404, where I think it was up to, just went away the next day. They didn't go down easy. Like a couple emails like, hey, is it done? Is it done? Are we done? You know, sure, I have all my payments. No, it's not popping up. They're like, yeah, we'll get to it. And then all of a sudden one day it came and you know, like you said, it's $500,000 swing. You know, I always knew, I always believed it was going to get forgiven and I just tried to stay positive on that, even though people read things about policy change. But I just, you know, I kept positive and knew that I was this far along and I had all, you know, I was very meticulous on making sure everything was in the right order every step of the way. But I know that's the government, anything can happen. But I was pretty prepared, so I knew it was going to happen and it all worked out. At the end.
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A
You had kind of an interesting Experience with a house. You guys have kind of done a semi custom house. Tell us about that experience and lessons you learned from it. Right?
- [18:45]
B
So as much as you can be financially responsible and save towards something, if you don't have a plan, an exact plan to how you use that, you know, you can get. You can get knocked down a peg or two. So we, we found this house in the town that actually I grew up in. There were eight custom houses that were being built. So the builder owned the property and the houses and then, you know, he sold it as. You can change the options. You can do this, you can do that, you can make it your own. Like, you just can't change walls. This is what he said. So you could put whatever you need, you can change whatever you want outside, inside. And what we didn't know and what we tried to get out of them, it wasn't very clear is what actually comes with the house because, you know, you can change and upgrade stuff, but like, all right, so we changed the floor to floor B. Obviously the house comes with a floor. What are we going to, you know, how much credit do we get? And how much more is the floor B? Because we like floor B. What does it come with? And every step of the way was met with, oh, don't worry, you know, we'll figure, you know, kind of. And we're so far into it at that point. And we really liked the house. We already met, like the people on the block and it just kept getting, yeah, yeah, yeah. And it turned into a huge bill at the end because, you know, he was very not forthcoming with what came with the house and how much extras would be, and then got very aggressive about it when we complained. He's like, do you want this house? I can get out of it right now. And so we kind of just went along with it as it went, and it ended up costing a lot more out of pocket than the house, what we thought. So all that money we saved, you know, the down payment and obviously for upgrades kind of came and went pretty fast. And we're already, you know, we almost went to legal battles because of, you know, he put in extras and then charged us later and, you know, was very shady about it. It ended up being a beautiful home, but we just, you know, paid way more than we thought. So it kind of set us back. And now we have this. Now you have the mortgage. You know, it's hard to recover like it was when you were living with our in laws. And on top of that, it took two years to Build. So you can't. If it's not your property, you can't get a mortgage rate. You can't lock a mortgage rate until you move in. So when we budgeted for it, it was at like five and a quarter. You know, the payment was way less than it was two years later. Six and a half, seven. And, you know, added an extra 1500, $2000 a month for the payment. So it was a lot of, you know, it was hard to plan for that. But it also set us back all the kind of good work we did. Lucky I was back to broke at that point.
- [21:12]
A
Yeah, you had an experience with a pump and dump scam, too. Tell us about that. And maybe what doctors can do to avoid the same mistake.
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B
Yeah, so it's a little embarrassing because I should have seen it coming, but it's too good to be true. If it sounds too good to be true, it probably is. And it came from a simple Google search. Like, I think I Googled a stock and, you know, to learn more about it. And then it kind of went to, like a Facebook group that turned into a WhatsApp group that had stock advice and they gave charts and they justified it and they, like, you know, see how, you know, kind of reading the charts. That's what I wanted to get into, like how to read the charts and, you know, kind of make some predictions. You know, just trying to dip my toe in the water and try to learn. And they would give you advice and like a trial period. Right. So I was like, you know, they're not asking for my money. Yet you do it your own through Robinhood based on their advice. I was like, well, you know, what could harm could it be. And they. The first couple, they gave you winners. And they're like, all right, this is the last of the trial period, which I probably should have saw coming. So I put way more into it because they had Megan sound advice. They were justifying it. You know, they gave information that was all, I guess, you know, probably copied and pasted from somewhere else. And they lured you in. I put a bigger chunk because it was the last one, which. And then it rose, and then within an hour, it went from like $10 to like $0.10.
- [22:31]
A
Oh, Bas. Basically your FOMO got the best of you.
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B
Yeah. It was stupid, wasn't? It was, you know, more embarrassing and obviously took a financial hit. But it wasn't, you know, it wasn't bankrupt or anything like that. I wasn't injured. Nothing bad happened. I wasn't, you know, at least that's how I'm choosing to treat it. But it was pretty humbling moment. And just be careful and sounds too good to be true. It is only get certified advice or backed by either someone else that you know that experience it or through you guys. Because it's easy to lose focus for one second and think they can't get you and then they get you.
- [23:10]
A
Yeah. So this sort of thing is not that uncommon. We've seen people show up in the Facebook group. You know, somehow they snuck into the Facebook group and then they post, you know, a link to another Facebook group or a link to a WhatsApp group.
- [23:24]
B
Yeah, right.
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A
So they get you out of the WCI Facebook group where really there's a lot of people kind of looking out for you into something else.
- [23:31]
B
Yeah, that's exactly what happened happens.
- [23:33]
A
We've deleted those sorts of things numerous times over the years out of our Facebook group.
- [23:38]
B
And they're really sneaky. Like, they, you know, they keep. Even after they do it to you, they try to get you more. They're like, oh, this is a recovery group. You know, someone we messed up, like, go into this, like, crypto thing. And they, they, they are relentless. And, you know, even if you call them out there, they deny it. It was, it was tough, but it was a lesson learned. But, yeah, they can be very tricky. Like you said, they. It was a Facebook group that turned into a WhatsApp group that turned into, you know, and then they lured you in with like, some actual positive success.
- [24:08]
A
Yeah. Well, this is the Milestones podcast, so we're going to celebrate your successes. You know, and learning's good. Making mistakes, especially early on with small amounts of money, relatively small amounts of money is good. But that' celebrating today we're celebrating the fact that despite making a few mistakes here and there, despite being in a pretty rough financial situation, when you come out of training, you have had a swing in your net worth of close to a million dollars since you got out of training. And that's pretty awesome. So we congratulate you on that. We thank you for being willing to come on the podcast, share your experiences, positive and negative, with the rest of the white coat investor community. Congratulations on your success. Very well done. You should be proud of yourself. And again, thanks for coming on the podcast.
- [24:55]
B
Thank you so much. I appreciate it. I hope people can learn both good and bad. Just don't lose focus even for a second, because you do a lot of hard work to gain all that money. You want to keep it and spend it on things that make you happy?
- [25:08]
A
Okay. I hope you enjoyed that interview as much as I did. Frank has come a long way since he sent me that email in 2019. He's had a net worth swing of a million dollars. Yeah. You know, he's like, I'm a little embarrassed about the stock thing, you know, and you know, maybe reading back through the email and he gave me permission to read that on this podcast. He's like, it's a little embarrassing some of the stuff I've done, but it's real because so often we have people on this podcast who, you know, again, good for them. It's wonderful, right? But they basically did everything perfectly. They screwed up nothing. Right. Frank's journey is far more like mine. I screwed up mortgage. I screwed up a mortgage refinance just about got taken advantage of there. I bought a house when I shouldn't have bought a house. I ended up with a fee base instead of a fee only financial advisor. I bought whole life insurance as a medical student. I made lots of screw ups. I know many of you have as well. But Frank is coming from a place, he's in his last year of fellowship, right? He's got his credit cards all maxed out. He's taken out a personal loan to pay the rent, right? And actually him and his wife say that's the best thing they ever did. Said he wiped it out in his first year as an attending along with all that credit card debt. Because he did take my advice, he lived like a resident that first year once he came out. But he was not in a great place. Right? What was his net worth? If you take the $400,000 in student loans, another 100,000 that his dad had on him, right? He's got credit card debt. He's now got a $40,000 personal loan he's using to pay rent in D.C. right? He's not in a great place. And where is he now? He's close to half a million dollars in net worth. He's gotten pslf. He stayed the course with it. He learned every detail he could about it. He made sure he kept all his paperwork, checked all the boxes. And he ended up only having to pay about $30,000 of those student loans because he paid attention to the details. He became financially literate, he became financially disciplined. Right? And it's a very powerful combination when you can get those two things. It's like having a superpower in our world because so few people have them, right? And then you combine that with a physician salary and miracles happen. Right? Financial miracles. When his children grow up, they're not going to have any sense that there was ever this period of life when they were maxed out on their credit cards and having to take out a personal loan to pay the rent to finish his training in D.C. i mean, he's basically changed his family, right, because he paid attention, became financially literate, did the hard things, and has overcome any mistakes he made by doing the important things, getting the big things right. And I want to encourage you to do that as well. Get the big things right. You can screw up some stuff in your life and it's going to be okay. You're going to have a physician's salary, right? That's going to hide an awful lot of errors if you can just learn to manage it well. Now, he admits he even now sometimes feels like he's living paycheck to paycheck. And obviously it's easier not to do that in a medium sized town in Indiana or Texas than it is in New Jersey. But he's not out of the woods yet. But he's building wealth. He's got a great income, he's on a great path to financial success. And that's where I want you guys to be. And that's why we keep making these podcasts every week. And that's why we're working hard here at Whitecon Investors. There's 19 of us working here now. As I record this, we're a few days from going to WC Icon. We're building pallets in the garage. So Katie and I are squabbling about where in the garage the pallets get built because I want to be able to shoot hockey pucks down there. And she's like, you got to chill. Quit touching my pallets. So it's a stressful time for all of us here at wci. But the reason we go through that stress is because we hear these stories about families like Frank's where what we're doing is changing their lives. And that's the whole point. And sometimes I forget that. And I should be better when I. When I email you guys back about, you know, showing compassion or recognizing what you're going through. I'm going to try to do a little bit better with that. Okay, I promised you at the top of this podcast, we're going to talk a little bit about FSAs, and we were going to talk a little bit about dependent care kind of situations. Let's get into that Now. Dependent care FSAs, or flexible spending accounts are slightly different from Health Care FSAs. One of the big differences is that you can still use a dependent care FSA even if you use a health savings account, a high deductible health plan with a health savings account or hsa. That's not the case if you're using a healthcare flexible spending account. But like all flexible spending accounts, this is use it or lose it money. So never put more into one of these FSAs than you're going to spend that year. There is a slight amount that you can carry over year to year, but for the most part don't put anything in there that you don't know you're going to spend in this given calendar year. Okay? Flexible spending accounts for dependent care can be used to care for your dependents whether they are children or whether they are older. For example, some of the things they can be used for include adult daycare centers, after school programs, au pairs babysitting, babysitting even by your relative if the relative is not a tax dependent. A before or after school program, child care custodial elder care, day camp dependent or elder care while you work to enable you to work or to look for work elder care in your home or someone else's extended care which is a supervised program before or after regular school hours. Housekeeper who cares for your child Obviously only the portion of the payment attributable to the child care. You can use the FSA for a nanny, you can use nursery school, you can use it for overnight care, you can use it for with documentation that the care is employment related. You can use it for payroll taxes that are related to eligible care. You can use it for preschool, you can use it for registration fees once the care has been given senior daycare, sick child care and transportation to and from the eligible care if it's provided by the care providers. But there are lots of things you can't use it for that you might think you can use it for. Right? Activity fees no go A babysitting that's not work related, right? For so you can go on a date. No, you can't use it for that. It's got to be care of the dependents while you work babysitting by your tax dependent, right? If it's your child or if it's your spouse or you know your your parents that are dependent on you tax wise or for tax purposes, that's a no no go. Dance lessons can't do that day nursing care, you can't use it for that. You can't use it for educational, learning or study skills services, field trips, housekeeping or maid services. You can't use it for kindergarten tuition or language classes. You can't use it for meals, foods or snacks. You can't use it for medical care. Right. This is the dependent care FSA we're talking about. Can't be used for medical care. You also can't use it for nursing home care, for piano lessons or private school tuition or kindergarten tuition or any kind of tuition like that. Respite care. Can't use it for that. Sleepaway camp, you can't use it for that. And if the transportation to or from the care is provided by somebody other than the care provider, you can't use it to pay for that. Tutoring? No, this is not for tutoring. Right. This is for dependent care. A few other things to keep in mind with these dependent care FSAs is the limits change every year. They may be adjusted upward with inflation. They were particularly high during the pandemic and are now significantly lower than they used to be. But there's lots of things that you can use it for. Just make sure you don't put more in there than you think you're going to spend this year. They do have to be your dependent. They can be your parent or they can be your child. Anybody who's actually dependent on you that needs these care services. So check the limits each year. But if your employer offers this and you are actually spending that much money on dependent care, then go ahead and use it. This is probably a better tax break than a lot of the other dependent care stuff out there, like the dependent care tax credit, for instance. This is probably a better deal for you, by the way, if both you and your spouse are working, one of you makes more than the Social Security wage limit and you both have a dependent care FSA available to you. Have the person with the lower income use theirs because that is likely to save you a significant amount of payroll taxes. Right, because it lowers their taxable income and they pay less in Social Security tax than if the higher earner that's above the wage limit. We're paying for it out of their taxes because they'd only be paying Medicare tax. Hope that's helpful. FSAs are a great tax break. Might as well take advantage if your employer is offering one. Just know what the limits are and what the valid uses for it are. Okay. This podcast was sponsored by Bob Baiani at Protuity. One listener sent us this review. Bob has been absolutely terrific to work with. He's 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 and Bob has been able to help explain the implications and underwriting process in a clear and professional manner. Contact bob@whitecoatinvestor.com Protuity. You can email infoprotuity.com you can call 973-771-9100 to get disability insurance in place today. Thanks for what you're doing out there. It's important work. Keep your head up and your shoulders back. You've got it. You're going to overcome whatever financial thing you are facing right now and you will soon be celebrating your own milestones. Whether you with us on the podcast or not. You'll soon be celebrating your own financial accomplishments. Get er done. See you next time on the podcast. 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.