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White Coat Investor Podcast
WCI #439: Where to Bank and How to Save for Big Purchases
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Today we are answering a variety of listener questions. We start out talking about if it is important to have a bank with a branch where you live. If you live in a smaller town should you move from a national or online bank to a smaller local bank or...
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This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. This is White Coat Investor podcast number 439. Today's episode is brought to us by SoFi, the folks who help you get your money right. Paying off student debt quickly and getting your finances back on track isn't easy, but that's where SoFi can help. They have exclusive low rates designed to help medical residents refinance student loans that could end up saving you thousands of dollars, helping you get out of student debt sooner. SoFi also offers the ability to lower your payments to just $100 a month while you're still in residency. If you're already out of residency, SoFi's got you covered there too. For more information, go to sofi.com whitecoatinvestor Sofi student loans are originated by Sofi Bank NA member FDIC. Additional terms and conditions apply. NMLS 696891 thanks everybody out there for what you're doing. I don't know if you're exercising, walking the dog, commuting into work, coming home from work after a long day. Maybe nobody said thanks today. And you know, those of you who are docs, we tend to be people pleaser kind of people. And a lot of what we're working for is just to help other people. And so it's hard when nobody says thank you. So if I'm the first one to tell you that today, I'm sorry, but I am grateful for what you're doing out there. It's important work you do. Thank you so much. We're going to get into all kinds of your questions today. Now you can give us questions in lots of different ways. You can email questions to us, but sometimes it's better if you just leave it on the speakpipe@whitecoatinvestor.com speakpipe and we can hear directly from you and we'll get your question answered. And it's nice to hear some other voices on the podcast besides just mine. I mean, I don't even like listening to my voice. I can't even listen to these podcasts. I don't know how you guys listen to these podcasts, but I can't do it. So it's nice to hear your voices from time to time. All right, our first one's an email says Dr. Dali and teams My first time reaching out. I want to take a moment to thank Everyone, thank you very much. My wife is soon to be graduating general surgeon. I will be moving to a more rural northern Minnesota town the next year for her first attending position after residency. We're excited. Since this is our dream location, we've discovered that our current bank, a major national institution, does not have any branches nearby. Given that we plan to settle in this town for the long run, we're considering transferring the majority of our funds to a local bank or credit union. Do you think this is a wise move or does it not matter much Nowadays with online banking options, I've noticed some local institutions offer slightly better interest rates on checking and savings accounts, albeit not significantly. Additionally, we're looking into obtaining a physician home loan through a local bank for our first home purchase. Once we've settled in, would it be beneficial to open a checking and savings account with the same bank we choose for the loan, or is that not a necessary connection? I struggle to find clear information online regarding the best direction to take, and any insights you could provide be greatly appreciated. Leave. Your podcast audience would also benefit from this discussion, as this is probably an area of finance that many residents don't consider when moving to a new area for jobs. Thank you and God bless you. Okay, very nice email from Josh there, and thanks, Josh, for being willing to serve in Northern Minnesota. I don't know how many docs are up there, but I imagine it's not quite as popular of an area as the Bay Area around San Francisco, so thank you for being willing to go up there. There's really three things at play here. Okay? The first one is having some sort of a convenient checking account service, right? This is things like a local free notary public. That's something I use at my local bank account all the time. But sometimes you just need to go in and talk to somebody and do something locally that's hard to do online. So we have local bank accounts. Our business bank account is at a local and so that's nice to have both on the personal side and the business side. But our main checking account is not a local bank. It's a checking account we've had for literally decades. And as we've moved to different parts of the country, we've been able to keep the same checking account. And it's a pain to change checking accounts, right? You got to change all these bills and all these automatic deposits and stuff like that, all these connections with your investing accounts. So it's a pain to change. And there's something nice about having a large national institution. Ours happens to be with usaa. And I don't know that it's necessarily the best for every feature. I don't know that it's necessarily the worst. It doesn't have the reputation of some national banks, which there's a handful of institutions I'd probably never give any business to. We're certainly not going to sell them an ad here at White Coat Investor. But I think that's the first thing to be thinking about is these kind of checking services things you need to be able to write checks and have a debit card and deposit things and set up automatic payments, those sorts of things. And if you want to have a local bank, I think that's totally reasonable to have a local bank to do that. You might want to keep your national bank account and you can figure out what you want to use each one of those for. It's okay to have more than one. Okay. The second thing at play is getting a good rate on your savings. You know, it worries me when you talk about moving the majority of your assets to this small local bank. I'm like, why would the majority of your assets be at your bank? That's not a place to have your assets. Okay? Even your short term savings, your emergency savings, whatever the likelihood of you wanting to keep that in a savings account or even a money market account at a local credit union or bank rounds to zero. That's not where you keep significant money. You need to earn some interest on that money. And that might be a high yield savings account, which is almost always online, right? Because their costs are a little lower online so they can offer better rates. But these days is probably in a money market fund. Whether that's at Vanguard, which usually has the highest yield, or Fidelity or Schwab, which may have a little better IT interface and service. You're going to be earning 4% or 4% plus on your money right now if you have it at a money market fund. You also have the option of using a tax free or a municipal money market fund. And so you can earn tax free interest. Whether that makes sense or not depends on, you know, the exact difference in yields as well as what your tax bracket is. But it's not an option at a high yield savings account. It is an option at a brokerage account that offers money market funds. So that's issue number two. The first one's all those convenient checking account services. The second one's getting a decent rate on your liquid savings. The third issue at play here is your physician mortgage, right? And we've got A list for this. If you go to whitecoatinvestor.com, you go to the recommended tab. You look for doctor mortgages or even not doctor mortgages. We've got recommendations and I think we've got 15 people on that list that lend in Minnesota. So go there to see who you should get a doctor mortgage loan for. Now, some of these lenders do require you to open a bank account at their bank. No big deal. If you're getting a great deal on a mortgage, it's fine to open a bank account. It's no big deal. But that's not necessarily the main banking account you want. Maybe it is, maybe it isn't. But that's not the order I would take it in is not to establish a relationship with the bank and then go get the physician mortgage. I'd go get the physician mortgage. And if they require you to have a banking relationship there, sure, open a bank account there. No big deal. So how should Josh and his family proceed? Well, number one, figure out where you're going to put your savings and emergency fund, right? If you already have an account at Vanguard or Fidelity or Schwab, that's probably where you're going to put your liquid savings. Then step two is go figure out the doctor mortgage. If the bank offering you one requires you to have a local account, open a local account. If not, don't worry about it. And three, determine if your current checking account is meeting your needs. Right. If whatever, it's a Bank America or whatever, that's fine and it does everything you need it to. Great. You don't need to go open a local credit union or bank account. There's probably not a huge rush to do this, but if you're like, boy, it sure would be nice to have something local. And there's no branches of my bank here in town, fine, go open a local one. You can link it to your, you know, online national one. But there's probably not a huge rush to do that. I think you're worrying about something that really isn't that big of a deal. It doesn't take that long to open a bank account if you needed need to have it. And what you'll probably end up with is your big national bank, Vanguard or something account and maybe a local bank account when all is said and done. And then you just use whichever one is best for whatever particular need you might have. So you know you want to have something in cash, right? Most people, unless you're pretty darn close to financially independent or already retired you need some sort of an emergency fund, right? This is money that you can get to very quickly. It's very liquid, very safe, and you know, you don't have to worry about selling it low. You know, like if you had the money in stocks or worse, you had it in something illiquid like real estate, you can't get your money back very quickly. This is liquid money that's very safe that you can get to. And how much should you have? I mean, typical recommendations are three to six months worth of expenses. Four months is probably the right number, right? Because most people, your disability insurance, your long term disability insurance doesn't start paying until after you've been disabled for three months and it pays at the end of the month. So that's four months. And so that's probably a reasonable amount for most people to have in their emergency fund is four months worth of savings or four months worth of spending. So if you spend $6,000 a month, that's $24,000 you have in your emergency fund and you just stick it in your money market fund, Vanguard or whatever, it earns 4% and fine, because the important thing is the return of your principal, not the return on your principal. So you want it very safe, very liquid, et cetera. And the truth is, for most people, some of it's probably in cash in the house, maybe in a little safe or something, some of it's checking account and the rest is earning interest at Vanguard or Fidelity or Schwab or whatever. Likewise, if you're saving up for something in the short term, right, this is money you're going to spend on your tax bill in three months, or this is money you're going to put down on a house in six months, right? This isn't money that should be invested in stocks or real estate or something like that. It can just be in cash. Earn something on the cash while it's sitting there, but you can put that in the same place as your emergency fund. If you've been wondering how to get into real estate investing, we have an ongoing masterclass. It's totally free and you can sign up@whitecoatinvestor.com remasterclass. It's available all the time and you can take that and be introduced to all the different ways that you can invest in real estate. This is not as extensive as our online course, the no Hype Real Estate Investing course, but it's also totally free. So it doesn't take any of your money, it doesn't take very much of your time, and it'll give you an introduction, help you decide if real estate's something you ought to be adding to your portfolio. Again, sign up for that@whitecoatinvestor.com remasterclass all right, our next question comes from Nate. Let's listen to it on the speak pipe. Hey, Dr. Dali, it's Nate from the Midwest. I'm a final year MD, PhD student applying into anesthesiology. I just had a question about your recommended method of saving up to make large cash purchases for things like a house or a boat. I've received some advice from authority figures in my life that basically all expendable income should go into a retirement account of some form and then shouldn't be touched at all until retirement. This doesn't fully make sense to me as it would require taking out loans or making multiple payments with interest for big purchases like a car or something like that. My question is, what is your recommended approach for allocating a sum of money for a big cash purchase without losing the benefits of investing that money in the time that you're saving it up? I understand that you can't have the best of both, but is there a way to optimize here? Thanks again for all that you do. Okay. Large cash purchases. You're usually not saving for these things for too long, two or three years maybe at the most. So it's not about the return on your investment, it's the return of your investment. Right? So you should be investing in a pretty safe way for this stock. This isn't money you're investing into stocks and real estate, et cetera. But the question was more about investment accounts, Right? And if you're going to be buying a house in two years, you want to save up a big down payment. A Roth IRA is not the place for that. All right? The investing process is number one. Set your goals. Right? I want to retire with this much on this date. I want to have this much for college. I want to buy a house in two years. I want to buy a boat in four years, whatever, right? Set your goals and then for each goal you choose the account or accounts you're going to be investing for that goal using. So if I'm saving for retirement. Yeah. Roth IRA is a great place. Your 401k is a great place. If you want to save more than fit in those accounts, you put it into a taxable account. Great. That works great for retirement. Same for college. We're Talking about a 529 account. Saving for health care. We're talking about an HSA we're talking about saving up for a house down payment or a boat you're going to be buying in your 30s. That's called a taxable account. If somebody's telling you, no, no, put that Money into your 401k and then borrow the money for the boat, I don't think that's so wise. I'd like to see you max out the 401k and still save something for the boat. In fact, if you're not able to save 20% of your gross income for retirement and still afford the boat, you probably shouldn't be buying the boat. A boat is not a wise financial decision. I own a lot of boats. None of them are smart as far as finances go. You know, whether this is my $1500 pack raft or a $800 inflatable kayak or, I don't know, whatever my raft is $5,000 for the rubber on my raft or a more expensive wake boat or this houseboat share we own, right? None of this is like making money. These are not wise investments. These are a way to spend money to try to get a little bit more happiness. So, you know, it is not an investment in any way, shape or form. In fact, it's a stupid thing to do with your money. But it's a lot of fun to spend time on the water, you know? But saving up for it, you do that in your money market fund, right? Vanguard or Schwab or Fidelity, Right? If you want to buy a house and you want to have $150,000 to put down on it and you want to buy it in 15 months, well, that's $10,000 a month. So you take $10,000 a month and you put it into that money market fund. After 15 months, you got $150,000 that you can put toward that house. That's how you save up for it. It's not complicated. Don't make this more complex than it needs to be. If it's money you're going to blow in 15 months, no, don't put it in your 401 or your Roth IRA. So yes, I know there's some rules where you can take some money out of your 401k and not pay a penalty on it if it's going for a first time home and it's less than $10,000. And I know you can always take your principal out of your Roth ira, right? Tax and penalty free. Yeah, I understand the rules. Right. I've written books about IRAs and 401 s and chapters about IRAs and 401 s and blog posts about 401 s and IRAs. I understand the rules. I just don't think that's the place for your short term money. Put your long term money in those accounts. Put your short term money in your taxable account. If you don't want to pay taxes on it, put it in muni bonds and you don't have to pay taxes on it. But don't make this more complicated than it is. Don't take financial advice from people who are not financially literate. So just because your Uncle Bob tells you to do some crazy scheme where you're putting your boat money into your Roth IRA or you're putting into your 401 and taking out a 401 loan to pay for it. Now this stuff does not have to be that complicated. If you're listening to this podcast, you're a high earner. You can probably save adequately for retirement and still save up for whatever extra thing you want. In the short term, you don't have to make it complicated and use tons of leverage in your life to reach your financial goals. Our quote of the day today comes from David Bailey who said to get rich, you have to be making money while you're asleep. And what does that mean? That just means you're an investor. Yes, it helps to be an entrepreneur and to own a business and have a cash machine. Right? To have rental properties. They're paying you every month even if you're on vacation. It's a beautiful thing. I tell you to go on vacation and come back wealthier than you left. That is a beautiful thing. I absolutely agree with David there. But you know what? What we're talking about when we're talking about making money while you're asleep, we're mostly talking about investing. Carve a chunk of your money out of your earnings to invest and guess what? Those dollars are working 24, 7, 365 for you. They're the most reliable employees you'll ever have. And yes, in the short term, the value of your investments might go up and down. But in the long run, as long as you're making reasonably wise investments, you're going to be making money while you're asleep, becoming wealthier as you go along. Okay, let's take a question about mid career physicians. Hello Dr. Dali. I'm a 43 year old mid career GI physician amidst a job switch. I have been an avid listener to your informative podcasts. I find particularly useful the special podcasts you build around July for new residents and similar ones for new attendings, giving them a checklist of financial decisions they should consider at the time of those life and career transitions. Can you kindly consider creating a similar podcast focused on mid career physicians amidst W2 job switch across state borders to educate them about the best financial practices built around 401k, whether to keep with the original employer or roll it over into some sort of traditional ira, giving them more flexibility of investment options and their impact on ability to perform backdoor IRA. What to do about existing mega backdoor Roth IRA options with the existing employer 457, 529 if moving from a state without any state income tax to one which has state income tax and other pertinent points. Thank you so much in advance. Okay, congratulations on your new job. This is exciting, right? Presumably this is a better job or a better place you want to live than where you were. So congratulations. I don't know we're going to devote an entire episode to this topic because I don't think there's that much to say about it. But there is something to say. So let's go through each of these things and talk about what you're going to do when you change jobs. Okay. Issue number one, you're moving. That probably means selling a house in one spot, buying a house in the other spot. So what do you do? Well, the worst situation is to own two houses at once and be paying two sets of utilities, be paying two sets of property taxes, be paying two mortgages. Right? That's a drag. I've done that before. When we moved in 2010, we got a great deal on our house in Utah. We could not sell the one in Virginia for the life of us. And so for years afterward we had the expenses of two places. It took us about a year before we gave up selling the place in Virginia because at any price we could have sold it for, it was a fantastic investment. We put a renter in there for a few years and we eventually sold it like five years later. Accidental landlord situation. Not super fun, didn't love it. But at least that rent coming in offset those expenses that we had from that second home that we own. So ideally you figure out a way to sell the first one at the same time as you're buying the second one. And you can do that by putting contingencies in the contract that we're not buying your home until ours sells. That's traditionally the way. People have done this for years and years and years. Now in a hot real estate market, they might not take your offer. They're like, we'll take this other one without a contingency. So you got to be careful. In a hot market, that might not be the best way to do it. Sometimes people use some sort of a bridge loan. They borrow home equity out of the first one to make the down payment on the second one and that's an option. You gotta be careful though, because you're gonna have two mortgages if you don't get that second one sold. And if you're only carrying it for two or three months, that's probably no big deal. You can probably afford to do that. But if you're carrying it for two or three years, that can really make you somewhat house poor. So manage the house as you move states. Okay? Next issue is your taxation, right? You're probably going to end up having to file as one of the two states being your main residence for that year. And if you move right on July 1st, well, I guess you got a choice there. Maybe you're filing as a part year resident in both states, but you got to sort out how you're going to file taxes that year you move. And it's usually you file as a resident of one state and you file as a part year resident of the other state and it works out. Your accountant can help you with that. That's not that big of a deal. Okay, you're leaving one employer and going to another employer. And typically the new employer will offer you different retirement accounts than the old employer did. So you got to figure out what to do with the old employer retirement accounts. And there's no huge rush to do this. Most employers do not and maybe cannot even kick you out of the old retirement plan. So there's no rush to do it. And in fact, you often don't qualify for the new retirement plan for six months or a year after you take the new job. So there's no huge rush. You don't have to do this before you ever leave the old place. When you get to the new place, sort out what you've got and then you can figure out what to do with the old retirement plan. Probably what most people do is they roll the old 401 or 403 into the new 401 or 403. That has a couple of advantages. One, the new plan might be a lot better, might have lower expenses, better investments. That's great. It also keeps things simple. So you're not managing two separate accounts, you just have one. That's great. But the other benefit of moving it directly into the new employer's plan rather than a traditional ira, which is the classic teaching for people when they leave an employer is to just roll it into a traditional IRA where you have control over it. Maybe you have lower expenses over it. The problem with doing that is white coat investors and other high earners don't want to have any money in a traditional ira, SEP ira, simple IRA, or a rollover ira, because that balance at the end of the year goes on line 6 of Form 8606 for your backdoor Roth IRA. Makes your Roth conversion each year for the backdoor Roth IRA process become prorated. And you don't want that. So basically, if you're going to do the backdoor Roth IRA every year, you've committed not to have a traditional IRA throughout your working years. So that money needs to stay in 401 s. Now, I guess if it was relatively small, you could just do a Roth conversion of the whole thing when you leave an employer. That's one way to get rid of that traditional ira. But most people have substantial assets in those accounts. It'd be really expensive to just convert the whole thing. So they just roll it over into the new plan. Okay, for your 457, if you're going from an employer that had a 457 to a new employer that has a 457 and they're the same kind of 457, you can do a rollover there as well. Now, if the old employer had a governmental 457, well, those can be rolled into all kinds of retirement accounts. They could be rolled into an ira. You don't want to do that though. They can just be rolled into the new 401 or 403. If it's a non governmental 457, you're not allowed to do that. Those can only be rolled over into other non governmental 457. And maybe you're lucky and both employers have a non governmental 457 that you're happy with. But otherwise you're stuck with whatever the distribution options are. That old 457 plan, and it might be that it's a lump sum when you retire or when you separate from the employer. But hopefully there are some better options than that that you evaluated when you first started funding that 457 account. Typically those are spent relatively early in retirement. Right. If you retire early, 457, money is usually one of the first things you tap into. There's no age 59 and a half rule on 457 money. And it's also your employer's money. So you don't want to leave it there any longer than you have to in case something happens to the employer. That deferred compensation is not technically your money yet. So spend that money first in retirement. Okay. 529s. You can just leave it in the old state. 529 you do not have to move it to a new state. 529 you can have 50 different 529s if you want for each kid. There's no rush to do this. Check out both 529s. See which one's better. It may be that you're going to a state with no state income tax or they have a lousy 529 or whatever and you just want to use the old one. Fine. Or that state doesn't give you a tax break for contributions to their 529. Great. Just use the old one. There are a lot of states that if I moved to I would still be using the Utah 529 because it's better than theirs. So evaluate the benefits and you got to choose which 529 you're going to use. If the new one is going to be good and you want to use it you can just transfer money from the old one to the new one. Unless you're up against the total amount you're allowed to have in 529s, which is usually more than half a million dollars. You don't have to worry about that. You can just combine them and put them into the new states. 529 no big deal. All right. I think I talked about everything you wanted to hear about as far as changing states at mid career. It's not that big of a deal. Make sure that if you had insurance at the old employer you were counting on your employer provided disability insurance that you're either getting it from the new employer or you need to go out and shop an individual policy. And we've got recommended people that can help you with that. Go to the recommended insurance agent tab@whitecoatinvestor.com and they can help with that. But otherwise it's mostly just transitioning one thing at a time as you go to the new job. Again, congratulations on the new job. It's probably going to be awesome. Okay, here's an email we got. This one is from someone who's got some Apple stock. Well, that's been good the last few years, right? Everybody likes Apple. My wife and I are a non doc household. And my grandparents have gifted our toddler 30 grand worth of Apple stock to our UTMA account this past year. I don't know what you mean by our UTMA account. I assume the toddler's UTMA account. We would ideally like to diversify out of this one stock. We are struggling with the best strategy to sell the stock. If it were our money, we would sell most, if not all of it and put it into index funds. Okay, I like that plan. Our toddler currently does not have enough income to need to file taxes and we would like to avoid selling it and paying taxes at our current tax rate. Cost basis of the stock is $25 a share and there are about 150 shares. Any advice on what you think might be appropriate options to diversify away from single stock risks while minimizing tax rates for the child? We're extremely blessed to be in this situation and quite thankful to have to think about these options. Okay, well, when I got this email, Apple was trading at $203 and apparently the grandparents bought it at $25. Okay, so this is a good move for the grandparents, right? Take something that's highly appreciated and give it to somebody whose tax rate's really low, like this toddler. So this is a good move for them. Instead of giving cash to the toddler, you give these appreciated shares. The only better move is giving them to charity where nobody pays the taxes on it. But this is a good way to give money to grandkids and minimize the overall family tax bill. But there's a big capital gain there, right? 203 minus dollar 25 times 150 shares. That's a gain of like $27,000. So it's a little bit of a hard decision. You got to understand the kiddie tax rules, right? So the first $1,350 this year is tax free for that kid. The next $1,350 is taxed at the kid's rate, which since these are long term capital gains, is going to be $0. But if you want to sell the rest of it this year, the next, you know, whatever it is, $24,000 or so is going to be taxed at your long term capital gains rate. So, you know, depending on what everybody's capital gains rate is, maybe better for the parents to sell it and give you after tax cash than for you to sell it. So essentially this kid's now got a legacy investment in their utma. Now you can just leave it in there and If Apple continues to do fine over the years, you know, and your kid gets financially independent from you in their 20s and they still don't have a very high Inc. Well, maybe they can sell the whole thing. Even with it continuing to appreciate. Maybe they can sell the whole thing at a 0% long term capital gains bracket, right? So that's an option. Don't reinvest the dividends or anything, but just let it ride. Then the kid sells it in their 20s and maybe there's no tax cost at all. That of course leaves the kid not diversified for a couple of decades. That might be bad if Apple doesn't do very well, right? So maybe it's worth it just to bite the bullet and pay the taxes and get the kid out of the investment. The alternative is you could just sell a little bit each year, right? Maybe you're selling $2,700 a year worth of gains. So maybe that allows you to sell a little more than that. Maybe you're selling 3,000 or $4,000 worth of shares and over the course of five to 10 years you can get completely out of that investment or at least have less of the kids money in that and still not be paying any capital gains. But you're kind of weighing these capital gains taxes with diversification. And this is an issue people have all the time with legacy investments. So the first thing you do is when you find yourself in a hole is you stop digging. So stop reinvesting the dividends. And then you decide, well, how much lack of diversification do I have? How much am I willing to pay in taxes to get rid of that? And you can get out of it very slowly and minimize the taxes paid, or you can get out of it quickly, pay more in taxes and get diversified. But it's a hard decision to make, right? And certainly you're gonna wanna pay attention to how Apple's doing. It looks like Apple's not gonna do very well and they're going bankrupt. Well, maybe you wanna sell as soon as possible. Besides, when it falls back to its basis, well, there's not gonna be any tax bill due anyway. So look into it, figure out how much you wanna be diversified, how much you're willing to pay in taxes to get there and take the free lunches you can find and go from there. Hope that's helpful. Okay, we have somebody writing in with what they call an FYI, not a question, but thought it would be useful to have on the podcast. And I can talk about this topic for a little bit as well. The email Says everyone knows someone who shouldn't drive any longer. That person might be you or me someday. Physicians are in a unique position to advise aging patients to do what my mother did. Widowed in the 70s, my mother was a financial rock star, having done many of the things that you teach decades before blog was even a word. Another legacy was her wisdom regarding driving in her later years. She was 60 when she promised, in the presence of her children, to surrender her keys. When we thought she should no longer drive, the time came. And while she was not happy, she complied. Because either one, she was not of sound mind at age 60, which wasn't true, or two, the people who loved her most wanted to make her life miserable, which also was not true. In essence, she painted herself into a logical corner. It was impossible to escape. I doubt any written financial plan includes willful injury or worse of someone due to negligence. My mother's plan is a great way to mitigate that risk, and I intend to borrow her wisdom. Thanks to you and your team for what you do. Okay, I thought that was a great tip. And obviously that's up to the individual if they want to commit to their family to allow them to decide when they stop driving. Because stopping driving is a big deal. You're losing a lot of independence when you stop driving. And so most people want to preserve it just as long as they safely and legally can, even if they're driving into their 90s. But, you know, sometimes we have parents that are like my parents. You know, my dad was not really that safe of a driver at 40. You know, now he's 80, and not only is he still driving, he's still flying his plane. So if he gave us that option of stopping his driving when we thought he wasn't safe to do so, we would have all stopped him when we were in high school. So, you know, you got to balance it out. Every family's a little bit unique, but I think there's a lot of truth there, right, to think about it in advance, recognize you're probably not driving until the day you die. So what do you want the criteria to be of when you stop driving and how are you going to take care of your transportation needs at that point? Maybe you're wealthy enough that you can hire an Uber everywhere you want to go or have your own dedicated chauffeur for your limousine. I don't know. But give us some thought. Maybe make a commitment to those who care about you most about when you'll stop driving and save them from that really awkward conversation of trying to drag you into the dock or the DMV and get your driving privileges taken away. And whichever one of you out there in white coat investor land that keeps passing my dad on his flight physical, I'm amazed who can still fly a plane these days? And I'm glad in some ways that commercial pilots are all forced to retire at 65, even if private pilots can continue to put their own lives and those of their passengers at risk. All right, our next question comes from a medical student talking about PSLF. Hey Dr. Dahl, thanks for all you do for the professional community, period. I am a 4th year medical student in the United States, period. I will be graduating with around $350,000 in federal student loan, period. My wife and I are currently debating whether to start the PSLF route considering all that's going on in that landscape, or just taking on a loan servicer, making low payments during residency and then attacking the debt in one to two years after I'm out of residency, period. Can you discuss the pros and cons of each of these scenarios, Especially in the setting of what we are going to miss out on, compounding interest and investments if we send all of our money towards the debt in the first two years after residency. Thank you. Okay, great question. Just a comment about how the Speak pipe works, right? We just play what you record. It's not being transcribed, right? You're not sending me a text or anything like that, so you don't have to include your punctuation. Just talk into the mic. No big deal. Okay, second point. You don't make this decision as a medical student, right? I love that you're trying to think ahead and think your way through these questions. But whether you go for PSLF or not is a question you make after you leave training. And the main factor is does the job you want qualify for PSLF or not? If it does, going for pslf, at least for the portion of your loans that are federal loans, is almost surely wise. Unless for some reason under the new RAP payment, you know, there's not going to be much left to forgive. Then maybe, fine, refinance it and pay it off. But for the most part, if you're taking a PSLF qualifying job, it makes sense to go for pslf. It's really that simple. So don't try to do a bunch of calculations and sort it out. Now, if you're trying to decide between a job that qualifies for PSLF and a job that does not qualify for pslf, well, that's a different story, right? It's certainly worth hiring our folks@studentloanadvice.com, help you run the numbers, figure out exactly how much you're going to get in pslf, and then you can compare apples to apples between the two job offers. That's reasonable to do. But as a med student, you don't even know what specialty you're going into. You don't know how long you're going to be in training. You don't know what job you're going to take afterward. It's way too early to be making this decision. So if you have private loans, it's fine to refinance them at any point during med school. If they will, they probably won't. Or residency. You can refinance those private loans early and often. But don't refinance your federal loans until you know for sure whether or not you're going for pslf. And that's probably at least your last year of residency, right when you're applying for jobs. So way too early to be making this decision. Now, your other part of your question was the classic question we all struggle with. At least until you're debt free, you'll struggle with this question. It's probably the second most complicated topic in personal finance. The first most complicated is whether you make your Roth or your tax deferred contributions to your retirement plans or whether you do Roth conversions, right? That's the most complicated thing in personal finance and investing. But the second most complicated is trying to decide whether to pay down debt or invest. There's a lot that goes into it, right? Interest rates go into it. Available investments go into it. The terms of the loan go into it. Your current financial situation, if you're declaring bankruptcy and that debt's going away, goes into it. You know, what retirement accounts you have available to you, whether you're getting an employer match. You know, there's all this stuff that goes into the decision. But for the most part, if you've decided you're not going for PSLF and you're going to pay your loans back, well, not only do you want to refinance them early and often, but you want to decide when you want to be out of debt. Now, maybe that's in two years, maybe that's in five years. I would not recommend picking a date beyond five years from finishing training. I think very few people want to still have student loans when they're five plus years out. So I would pick a date within five years of graduating and set that as your goal to pay off your Student loans by then. Now, if you really hate debt, maybe you're going to pick an earlier date if you don't mind it and you're like, well, if I'm investing, if I'm borrowing at 4% and I'm earning 8% on my investments, I could come out ahead. Well, maybe you're picking a date that's four or five years out. And then just work backwards. How much do you have to pay every month to be out of debt in three years or whatever your goal is. And if you owe $360,000, right, you have to pay a little more than $10,000 a month to be out of debt in three years. So set that goal, make those payments, everything else gets invested. It's really that simple. On the other hand, if you're like, I hate debt, I want to be out of debt asap. I don't care what employer match I'm missing out on, I don't care what tax protected space I'm going to lose out on. Everything's going to debt until the debt's gone. I'm going to live like the most hardcore resident ever until the debt's gone. Well, the wonderful thing is the debt's probably gone very quickly and then you can get on with the rest of your financial life. The downside is you might miss out on some employer match, you might miss out on some tax protected space, you might miss out on some compounded interest on your investments. If you were paying off debt this 3 or 4% and you could have been earning 8 or 10%, well, you're going to come out a little bit behind mathematically, but you're probably going to catch up very quickly. Right, because you're so hardcore about it. You got rid of your debt early on. What I would not do is be unintentional and just let it ride or just make the minimum payments on your debt or heaven forbid, set up a plan to be in debt for the rest of your career. I think most people that do that, regret it, don't do that. But you don't have to decide today if you're going to go for PSLF or not. I mean, I appreciate the anxiety that medical students feel when they start having owing more money than they've ever made in their entire life. But I promise you, if you manage your finances well, it's still a good investment to go to medical school. Even if you got to borrow 400 grand to go because the average doc is making close to 400 grand. And if you'll just live on half of what you're making. You can pay off your student loans in a couple of years or so. It's not that complicated. You can do it. You'll be able to take care of this debt. You don't want to ignore it. You want to be intentional. But don't lay awake at night worrying about it. You should be worrying about how you're going to pass the usmle or how you're going to pass histology, or how you're going to get the grade you want in your pediatrics rotation. Worry about that. Don't worry about the money so much. It's going to take care of itself. As long as you're intentional, reasonably financially literate, reasonably financially disciplined, you can take care of your med school debts. All right. You don't have to plan it out seven years in advance, but you want to as you're coming out of school, put together a student loan plan so you're managing appropriately during your residency and fellowship in your first few years of attending hood. But the plan can be relatively simple. At most, you're going to have to pay a few hundred bucks and sit down with Andrew or somebody else@studentloanadvice.com and work out a plan if your situation is really complicated. But most of you can probably come up with a plan on your own. It's going to work out just fine. Okay? All right. As I mentioned at the beginning of the podcast, SoFi could help medical residents save thousands of dollars with exclusive rates and flexible terms for refinancing student loans. Visit sofi.comwhitecoatinvestor to see all the promotions and offers they've got waiting for you. One more time. That's sofi.com whitecoatinvestor Sofi student loans are originated by Sofi Bank NA member FDIC. Additional terms and conditions apply. NMLS 696891 don't forget about our real estate masterclass. You can sign up for that@whitecoatinvestor.com remasterclass thanks for leaving us 5 star reviews. A recent one came in from Rural Main Doc. Thanks for being a doc in Maine. I love Maine. It's super pretty and I want to spend some more time with it. But this review says help me get on track. This podcast has a practical and pragmatic approach for high income professionals become financially literate and achieve the financial goals they may not have even known they had. I appreciate that so much of what is discussed here is good sense for everyone to live below your means and to make a plan for the future. The variety of people at many different stages of career brings a depth of perspective. I love and appreciate growing my financial literacy while feeling connected to a larger community. Thanks for all you do. 5 stars. Thanks for that great review. All right, we're out of time. Keep your head up and shoulders back. You've got this. We're here to help. We'll see you next time on the White Coat Investor 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.