INTRODUCTION
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.
Dr. Jim Dahle:
This is White Coat Investor podcast number 394.
Today’s episode is brought to you by SoFi, helping medical professionals like us bank, borrow and invest to achieve financial wellness. SoFi offers up to 4.6% APY on their savings accounts, as well as an investment platform, financial planning and student loan refinancing, featuring an exclusive rate discount for med professionals and $100 a month payments for residents. Check out all that SoFi offers at whitecoatinvestor.com/sofi.
Loans are originated by SoFi Bank, N.A. NMLS 696891. Advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC, member FINRA/SIPC. Investing comes with risk, including risk of loss. Additional terms and conditions may apply.
All right, we are back to a regular White Coat Investor podcast episode. I’m not going to spend all day today talking about climbing. If that was super boring for you the last couple of weeks, I’m sorry. It was a big part of our lives for a while here. And so, we felt like there were enough people interested in the story, and we thought it was an interesting enough story that we decided to spend some time sharing it with you.
But we’re not going to be doing that today. We’re going to be talking about finances, a lot of finances. And that’s okay, because this is what we do. My goal is to help you to be financially successful. This is just as important to me now as it was a year ago and 10 years ago. And that’s because I believe in what you do.
I think what you’re doing is important. Whether you’re a doctor, and I have obviously a great new appreciation for doctors, whether you are an attorney, whether you are a business owner, whatever you’re doing, you’re doing some great work for some people out there, and you ought to be proud of yourself. And thank you for doing that. It’s a big deal. And we want to help you to be successful. You’ve worked way too hard to not be financially successful.
CORRECTIONS
All right, let’s start with a few corrections. The first one, thankfully, is not even my mistake, but we ought to correct it. This is something Margaret said and just got a little bit backwards. I think she understood this, but just the way it came out didn’t come over quite right.
She said that you were allowed to roll money over from a Roth IRA to a 529. That is not the case. The new thing that came out with the Secure Act 2.0 is that after you’ve had the money in a 529 for 15 years, you can actually roll some of it out to a Roth IRA in place of your regular, or the beneficiary’s regular, Roth IRA contributions, a total of $35,000.
Now, obviously that’s going to take a few years to get $35,000 out of a 529 into a Roth IRA, but that’s the way it works. It does not work in reverse. You still can’t make Roth IRA to 529 rollovers. A more important correction has been coming in over the last few months in response to some of what I’ve written and others on this podcast have said about HSAs and when they should be used.
And I think the moral of the story is that we need to put a little more nuance into this discussion of whether to use a high deductible health plan or not. Obviously we all think it’s great because you get this cool triple tax-free account and you can put more than $8,000 in there a year if you’re a family. And it’s really cool. Because you can invest your HSA and then it can be a Stealth IRA. And it’s a great, great account to invest in. It’s the first thing we max out every year. This is first week of January kind of stuff around here at the Dahle household.
But there is some nuance to this discussion that maybe we need to have today. The first one is some interesting data that was provided to me by email from one of you listeners. And basically I’m going to read a little bit from this.
This listener said, “I think it’s important to emphasize to the White Coat community that the high deductible health plans that allow the use of an HSA may carry some downsides which the HSAs may only partially counteract. In a talk at June’s ASCO, the American Society of Clinical Oncology meeting, Justin Barnes from Washington University gave a talk demonstrating that individuals with high deductible health plans are more likely to be younger, privately insured and have a higher income than those with non high deductible health plans.”
Okay, well that’s kind of expected. “And yet cancer survivors among the high deductible health plan subscribers have an increased risk of death as compared to survivors with non high deductible health plans to the tune of a hazard ratio of 1.46. That confidence interval is significant, 1.19 to 1.79.”
This is fascinating to me. I’ve never heard this before that anybody had studied this. Basically people with high deductible health plans were more likely to die from cancer than those that did not have high deductible health plans. Dr. Barnes hypothesized that the high deductible health plans may financially disincentivize cancer survivors from using necessary medical care, compromising their outcomes, even among patients with good prognostic features like higher education and income. The emailer said not presented in this talk but referenced by the presenters that the ACS has shown that an HSA might mitigate the excess risk.
Now there’s some limitations to that analysis. There’s some selection bias maybe, a generic definition of a high deductible health plan, it’s the IRS making that definition and the one-time assessment of patients who might’ve recently transitioned to or from high deductible health plans. And of course, a small number of patients that are diagnosed with cancer.
So, this is not gospel until it is shown to happen over and over again in confirmatory studies. But it’s something to think about. Maybe a high deductible health plan isn’t the cat’s meow even when it gives you access to a health savings plan. I have always emphasized for years that you need to choose the right plan for you and your family first. And then if that right plan happens to be a high deductible health plan, then use an HSA.
Now there are some additional benefits of the HSA that maybe ought to be added into that decision. But don’t do anything to get an HSA I think is the point. It’s possible that’ll even lead you to get worse health care outcomes. I think that was an important discussion to have, an important thing to add to our discussion.
Another email I got recently was an interesting situation that a doctor had. And that also made them wonder about, kind of rules of thumb around HSAs that are out there. This listener said, “My husband and I are both employees of a large academic medical center and research foundation. One of the executive compensation benefits provided to physicians and scientists on staff is a reimbursement account of $10,000 per staff member per year. It can be used to reimburse oneself for qualifying dental services, orthodontics, or co-pays for some out of network medical services.
Because my husband and I each qualify for this benefit due to our employment roles, as a family we have access to up to $20,000 per year of free money for qualifying expenses. While navigating through our HR system to change our medical insurance selection to a high deductible plan, I discovered that making this switch would eliminate eligibility for our reimbursement accounts.” And they typically use like $3,000 per year of those reimbursement dollars.
The point that the emailer was making was it didn’t make sense for them to use a high deductible health plan, even though it gave them an HSA, because they were giving up this other huge benefit that their employer offered.
Now, I don’t think this particular employer benefit is very common at all, but if you have it and you lose it by using a high deductible health plan, there’s a good chance that’s not the right plan for you. The bottom line is it’s really hard to make rules of thumb about what health insurance plan you should use. You have to look at your situation. You have to run the numbers both ways, for a high deductible plan versus a PPO plan or some other type of non-high deductible plan. And you have to make a decision that’s right for you. You have to take in the tax benefits of the health savings account into that discussion, run the numbers, make the best guess you can.
Now, obviously some years you’re still going to pay your max out of pocket. 2024 was a year like that for us. We generally don’t pay our max out of pocket. We usually don’t even pay our deductible most years. High deductible health plan works very well for us, but guess what? This year I spent an awful lot of money on healthcare.
My three-day ICU stay where the main treatment there was me sitting up in bed for three days. The bill for that was over $100,000. Even after insurance, it was over $50,000. Just for that portion of my care. But I hit my max out of pocket before I ever got to the hospital.
So, if you’re using a lot of healthcare, if you’re consuming a lot of healthcare, there’s a good chance that whatever has the lowest max out of pocket is going to be the best deal for you. Even if the premiums are a little higher or even if that means you can’t use an HSA, but you have to run the numbers. I don’t think we can just use rules of thumb and make that decision as easy as I would like it to be. You have to put a little more into choosing the right health plan each year. I’m sorry. I wish our medical system wasn’t so complicated, but it is. And most of us are just trying to live within it, earn our incomes, and take care of our families as best we can.
All right, let’s get into some of your questions now. This one comes from Chris. He has a question about index funds. So, let’s take a listen to that.
HOW DO THE TOP TEN HOLDINGS OF LOW COST INDEX FUNDS WORK?
Chris:
Hi, Dr. Dahle, this is Chris in Florida. First of all, thank you for all that you do. I’ve been binging the podcast for the last two years or so while keeping up with new podcasts that have come out as well and have almost caught up.
Obviously, after listening to all that content, I know how much of a fan you are of low-cost index funds. I was even at your keynote address about index funds at this year’s WCICON in Orlando.
I was hoping you could explain more about how these funds actually work in regards to their top 10 holdings. The information about the top 10 stocks held in these funds is easily found in a basic Google search. But how, for example, in a total stock market index fund, do the top 10 stocks in the fund come to account for nearly 30% of the total fund?
At the time of asking this question, 29.69% of VTI is made up of the top 10 fund holdings despite having over 3,700 stocks in the fund. Can you walk us through how this came to be? Is this the goal of the fund? Is new money in the fund buying more or less of these companies? Are there any regulations or bylaws that funds have to follow? Any insight you have would be graciously appreciated. Thanks again.
Dr. Jim Dahle:
Okay, good question. Let’s talk a little bit about index funds. An index fund is a passively managed mutual fund. Mutual funds we like. Mutual funds are good. They give you professional management. They give you an economy of scale on the costs of running a fund. They give you wide diversification. They give you daily liquidity. It’s a good thing. And the data is very clear that in the long run, passively managed funds, a.k.a. index funds, are likely to outperform the vast majority of actively managed funds investing in the same stocks.
I think it’s pretty clear that index funds are the way to invest in stocks. I don’t think there’s a lot of doubt about that. I think most White Coat Investors know this.
Dr. Jim Dahle:
But let’s get into a little bit of detail about these. Now, all the facts you listed in your question are true. As I go to Morningstar and look up VTI or VTSAX, which is the mutual fund version of the Vanguard Total Stock Market Index Fund, I see that Apple makes up 6.1% of the fund. It’s a big company.
Look in your pocket, what’s in there? That’s right, there’s a $1,500 computer in your pocket that contains the world’s knowledge. They make a lot of these. And guess what? The computer sitting on my desk, both of them are Apples. We buy a lot of Apple crap. And Apple makes a lot of money. It’s a very valuable company. And when it makes money, I make money. When it makes money, if you own VTI or VTSAX or some other index fund, you also make a lot of money. But because it’s such a big company, it does make up 6% of that index fund.
Index funds, the vast majority of them anyway, are capitalization weighted. The bigger the company, the more of the index it makes up. It turns out that Apple is a bigger company, capitalization-wise, than hundreds of the smallest companies in the country. It’s a very, very large company. It makes a lot of money. It has a lot of employees, has a great deal of profit, a great deal of sales, etc. It’s just really big. And that is how funds are designed.
Now, there are some great benefits to a capitalization-weighted index. Basically, you already own the next Apple. Now, whatever it may be, whatever’s going to be huge 15 years from now, you already own it. You probably bought it low. It wasn’t worth nearly as much. And in 15 years, you’re going to be super happy that you got to ride it, enjoy its ride to the top of the charts. But that’s the way capitalization works. You’re basically taking the stock price times the number of shares that are out there. That’s the market capitalization.
The next biggest company is Microsoft, 5.7%, then Nvidia, 5.1%. They weren’t that big of a deal. They mostly just made graphics chips for gamers for a while. But it turned out that those chips were really important when AI came along. Now, Nvidia is the third largest company in the US.
Amazon’s fourth at 3%. Meta, Facebook is 2%. Alphabet or Google’s almost 2%. Berkshire Hathaway. Warren Buffett’s insurance company, it’s 1.5%. Eli Lilly. We’ve heard of that one before. That comes next. Alphabet, Class C. Their Class A shares are 1.7%. Their Class C shares are 1.45%. Together, Google is basically 3% of the US stock market index capitalization. And Broadcom comes last in the top 10 holdings.
Now, is the US market currently a little more concentrated in the top 10 holdings than usual? Yes, it is. It is more concentrated. But always it has been concentrated in the top 10 holdings because it’s capitalization is weighted and these are the biggest companies.
I think historically, if you look back, it might only be 15 or 20% or whatever on average. I don’t know what the average is, but it’s less than 29% or whatever it is now. But this just reflects the incredible run that number one, US stocks have had. Number two, large stocks have had. Number three, growth stocks have had. And number four, tech stocks have had.
These large US growth tech stocks have grown dramatically in comparison to the rest of the US stock market. And that has resulted in them being at the top of the list and then making up such a large percentage of the overall stock market.
And obviously the pendulum swings. We don’t know when it’s going to swing, but it does swing. The stock market looked kind of similarly back in early 2000 and then it swung. It swung away from the large growthy techie stocks. And small and valuey and boring stocks and the international stocks did better for like a decade. The US overall stock market index didn’t do very good from 2000 to 2010. It was basically flat. I think it was slightly better than flat, but not by much. Whereas international stocks did better, small stocks did better, value stocks did better.
If this is something you worry a lot about, you might want a portfolio that looks somewhat similar to mine. And when we look at our US stocks in our portfolio, we’ve got 25% of the portfolio in boring old VTI or VTSAX. A total US stock market, which is of course dominated by large growthy tech stocks.
But we’ve also got 15% of our portfolio in small value stocks. Which is like 3 or 4% of the stock market by capitalization. But there’s some data out there suggesting that in the long run, small and value stocks outperform. That hasn’t been the case over the last 20 years. That has been the wrong way to bet over the last 20 years because of this outperformance of large growth tech stocks.
But I think that the pendulum is going to swing at some point. I have no idea where or when, but we’re going to stay the course with the portfolio we’ve had for the last 20 years. And when small and value stocks outperform, we’re going to reap the rewards of doing that.
If this is something that worries you a lot, the fact that your money in a total market index is concentrated in a few stocks, you might want to consider tilting some of your portfolio towards something like small and value stocks as well.
But otherwise, this is a feature of a capitalization weighted index, not a bug. I wouldn’t spend a lot of time lying awake at night about it, even after the pendulum swings and small value outperforms large growth for a while, the top 10 holdings in the market are still going to be 15 or 20% of the market. That’s just the way it’s going to work because it’s a capitalization weighted market.
The alternative to a capitalization weighted market is like an equal weighted index fund. And that puts the same amount of money into every stock. And that’s really hard to run for a lot of reasons. It is more complex and more expensive to run. And mostly all you’re doing is giving your portfolio a small and a value tilt.
So, if you want to do that, I just encourage you to put some of your money into a small value fund. And we’ve talked about that on the podcast before, certainly have blogged about it many, many times on the blog. But I think that’s probably a better option than using an equal weighted index. But you’ll see a few of those out there. And if you think those are cool, you can invest in that. Instead of a capitalization weighted market index.
But I think the capitalization weighted ones like VTI or VTSAX or the Fidelity or Schwab or iShares equivalents are just fine to use. And obviously make up a huge percentage of our portfolio. And obviously over the last 20 years, that has rewarded us well. I hope that’s helpful.
Hey, if you need a little bit of extra income and don’t want to spend a lot of time or a lot of effort doing it, I’d encourage you to look into some of these physician surveys we have out there. If you go to whitecoatinvestor.com/paidsurveys, you can look at what’s available. For some specialties, there’s a lot available. For other specialties, it’s less. But the more expensive drugs and treatments you tend to use in your specialty, the more likely you are to have lots of surveys available to you.
These companies, whether they’re pharma or device companies or whoever, they want your opinion. They’re willing to pay you for it. And sometimes on an hourly rate, that works out better than your clinical work. And you can often do this in kind of downtime, while you’re sitting there watching a really boring high school football game or while you’re commuting on the train or while you’re watching TV and vegging at the end of the night, you can knock out a survey or two.
And you’d be surprised, this stuff can add up. I know a few docs that are making tens of thousands of dollars a year on just doing paid surveys. So, take a look at it, check it out, whitecoatinvestor.com/paidsurveys.
Let’s take our next question from Mike.
TAKING A LOAN FROM YOUR SOLO 401(K)
Mike:
Hi, Dr. Dahle. This is Mike from the Midwest. Appreciate all that you’ve done for us. I had a moderately in the weeds question to ask. I have a solo 401(k) through mysolo401k.net, which I greatly appreciate your recommendation on. I had taken out a loan on the solo 401(k) to invest in some real estate. This year, partially because of those real estate investments I’ll have a lower W-2 income year than most. And I therefore wanted to roll my solo 401(k) into a Roth IRA.
My question is, I know I can roll what I have currently in my solo 401(k) into the Roth IRA.I have no pro rata issues. The question is, could I also put the indebted part of my solo 401(k), which I’ve borrowed on into the Roth and pay it off in the Roth? My guess is no, but if I could, it’d be pretty cool as a double secret backdoor Roth that’d be paying my solo 401(k) loan back with 9% interest. I appreciate your thoughts and appreciate the show. Thanks.
Dr. Jim Dahle:
Okay, Mike, great question. I love it. I don’t think I’ve ever had this question before, which is saying a lot after whatever we’re on, 400 podcasts or something. IRAs can’t have loans. You can’t borrow from your IRA. So, if you converted this to an IRA, whether it was a traditional IRA or a Roth IRA, basically that loan is going to be treated as a withdrawal and it’s going to be a non-qualified withdrawal. So you’re going to pay taxes and penalties on that. That’s no bueno.
I think before you move this money into an IRA of any kind, whether there’s a Roth conversion involved or not, I think you need to pay the loan back. I wouldn’t do that. 401(k) loans are convenient, but really they need to be looked at as pretty short-term loans. If you need money for a few months, fine. Get it out of your 401(k), pay it back fast. The limit on this is $50,000 or 50% of your balance, whichever is smaller. So, it’s never a huge loan. I would hope that you’d be able to pay that back first before doing any sort of a rollover.
The other thing to look into is you may not have to take this money out of the 401(k) to do a conversion. You likely have a solo 401(k), this customized solo 401(k) you set up. You pay $125 a year or whatever it is, but you get some great features from that. One of which is the ability to do some in-plan conversions. So you don’t have to take this money out of the 401(k). You can just roll it over from the tax deferred side to the Roth side. And I don’t think you have to pay the loan back to do that.
Now, whether you can convert a loan or not, I’m not entirely sure. That’s a question I would probably give to the mysolo401k.net guys and ask them whether they would allow you to do that. I suspect they may not. They may roll over money that’s not the loan, but I don’t know that for sure. I don’t know how that a loan being converted would be treated.
It’s a very interesting question. I don’t think I’ve ever heard anybody ever discuss it. Maybe somebody out there that really knows the answer can send me an email and we’ll run it as kind of a correction clarification later. But I’d try not to do that sort of thing. It’s just getting really complex. I’d probably try to keep it in the 401(k) even if you want to do a Roth conversion, but I might take the money I was going to use to pay the taxes on that conversion and just pay off the loan instead first and think about the Roth conversion later. I hope that helps.
All right, we’re going to talk for a few minutes, Mike mentioned real estate. We’re going to talk for a few minutes about real estate. We’ve got blog sponsor Paul Moore here. We’re going to do a short interview and talk a little bit about the current real estate market as well as what they do over at the Wellings Fund, which is one of our sponsors here on the podcast. Let’s do that interview and then we’ll get back to your questions.
WELLINGS CAPITAL INTERVIEW
Our guest on the White Coat Investor podcast today is Paul Moore. He’s a managing partner for Wellings Capital. You may know him from the Wellings Real Estate Income Fund or from his books that he’s written or from the contributions he makes with Bigger Pockets.
But today he’s obviously a sponsor of the White Coat Investor podcast and we just wanted to talk with him a little bit about not only what they do at Wellings Capital, but about real estate investing in general.
Now, Paul, welcome to the podcast, first of all.
Paul Moore:
Thanks, Jim. Great to be here.
Dr. Jim Dahle:
Now, the Wellings Real Estate Income Fund is a little bit unique from a lot of our sponsors. A lot of our sponsors invest pretty much only in multifamily real estate in apartment complexes, essentially. But one of the fun things about the Wellings Real Estate Income Fund is that it invests in several non-traditional asset classes, particularly self-storage, RV parks, manufactured housing, and there’s still a fair amount of multifamily in the fund. But I’m curious if you could explain to the audience what you see as the main advantages of having these other asset classes in the fund.
Paul Moore:
I wrote a book on multifamily and I called it The Perfect Investment, which I think is a pretty humble title. But we found over the years that multifamily, for us at least, a lot of the value-add opportunities had already been extinguished by great operators who have already acquired these, who have already upgraded these assets.
And we found that there are a lot of mom-and-pop-owned opportunities in some other recession-resistant asset types, like you said, self-storage, mobile home parks, RV parks, where the mom-and-pop operators typically don’t have the desire or the knowledge or the resources to upgrade these assets to provide a better situation for tenants, to increase the income and maximize investor ROI.
By taking advantage of these opportunities, we’re giving the seller, the mom-and-pop seller, a great exit. We’re also increasing the viability of these, the profitability, I should say, of these assets. And we’re actually creating a very nice margin of safety for difficult times, profitable cashflow, and hopefully a profitable exit on these assets as our operating partners grow the value and as they continue to add value to these assets.
For example, in self-storage, a typical self-storage asset is owned by a mom-and-pop operator. You can acquire these. Sometimes they’ll say, “Hey, there’s six acres out back we don’t really use.” Well, sometimes you can gravel or pave that and add storage for boats and RVs. You can put a billboard out front. I’ve seen some put propane filling stations, ATMs out front. There’s a chance to put a cell tower in the back in some cases.
You can expand the asset. You can add retail items like locks, boxes, tape, and scissors. You can add U-Haul. U-Haul rentals can add thousands of dollars a month to the net operating income, can pay for an additional employee or more, and sometimes create an additional, let’s say, million dollars of value at the asset.
Doing these things, it’s a hassle, but a professional company like the kind we partner with in our fund, they do this as a matter of course where this would be a huge heavy lift for the previous owner, the mom-and-pop operator.
Dr. Jim Dahle:
Yeah. Now, the main value proposition of the Wellings Fund is that the investors get pretty darn broad diversification as well as the services of your team doing the due diligence. For just a minimum investment of $50,000, you’re investing across 20 states, a bunch of different asset classes, a bunch of different operators. Of course, that comes at a price in exchange for an additional layer of fees on the majority of the fund. Can you make the case to pay Wellings for those services, that diversification, and that due diligence?
Paul Moore:
Yeah. Jim, last year we reviewed 515 operators and assets. And honestly, if you are a White Coat professional, or even if you’re retired and you’re spending time with your family or with your hobbies, it’s pretty hard to imagine how you could even really do due diligence on more than 10% of that many if you have the skills, and if you have the knowledge, and if you have the software and the different programs that we have.
We have a 27-point due diligence checklist. And we really like to say no. Warren Buffett said that the best investors say no a lot. The very best investors say no almost all the time. And that’s what we do as well. Of the 515 deals we reviewed last year, we only invested in four new operators and 11 opportunities total. And so, we do say no a lot.
Just some examples. We do very deep dive, criminal checks, background checks, reference checks on these operators. We fly out to their headquarters. We see how they talk about their spouse. We see how they talk to the waiter. We see how they talk about their investors. We do criminal and background checks on some of their vendors. Last year, we were about to invest with somebody and we found out that one of their vendors was in jail for fraud. That raised a big, big red flag with us. And we eventually did not invest with that operator.
We just do all types of due diligence. One of our folks on our team is actually trained by former CIA agents and uncovering facts that you wouldn’t know on the surface. We actually do NOI audits on these assets as they’re being acquired to prove the net operating income really came from where the seller said it did. We do a lot of things like this that an individual investor probably wouldn’t have access to, even if they had the ability to take $50,000 and somehow spread it across 20 or 30 different investments.
Dr. Jim Dahle:
Now, lots of professional real estate fund managers feel like credit and preferred equity is more attractive than common equity right now. Do you agree with that? And if so, why do you think that is?
Paul Moore:
Warren Buffett invested $5 billion in Goldman Sachs when nobody else would touch them in the very worst weeks of the great financial crisis in the fall of 2008. And we believe that was a good investment because he limited his downside risk, but he got preferred or priority returns when things went well.
And at times like this, when there’s uncertainty in the economy and it’s really hard to get double digit returns penciled out, we really feel like limiting the risk and getting a contractual return, even if it’s limited, is a very nice place to be.
So we’re investing in preferred equity in real estate. A lot of these deals are multifamily. These are not rescue capital deals. These are actually either recapitalization or acquisition. Basically what it means is if the debt comes in instead of at 75%, like it was five or six years ago or less, let’s say the debt comes in at 60% and the equity, instead of being able to fill that 40% gap, let’s say only 25 or 30% is there.
We come in in the middle and we typically get a personal guarantee from the sponsor, which is worth a lot. We get depreciation, just like common equity. We get cashflow, typically nine or 10% contractually right on the front end. And then on the backend, when we’re taken out, we typically get another 5, 6 or 7%, sometimes more, and that accruing compounded upside plus the regular cashflow we get along the way can return IRRs of 17 to 19% for the small check sizes that we’re writing. When I say small, I mean two or three up to 5 or 6 or $7 million, where a lot of institutional players won’t play. They’re calling us and we are filling those gaps on behalf of our investors right now.
Dr. Jim Dahle:
Paul, thanks so much for coming on. For those who are interested in learning more about Paul, about Wellings Capital or about the investment opportunity available there, you can go to whitecoatinvestor.com/wellings and get more information. Thanks for coming on the podcast, Paul.
Paul Moore:
Thanks, Jim.
Dr. Jim Dahle:
Okay. Our next question comes from Danielle. She wants to ask about buying into a partnership and a whole bunch of other questions. So let’s take a listen.
WHAT TO THINK ABOUT WHEN BUYING INTO PARTNERSHIP
Danielle:
Hi, Dr. Dahle. This is Danielle from Illinois. I have a mathematics question for you. I’m going to be buying into a partnership in the fall and historically the partnership has paid about 9% dividends on the funds put into the partnership. I have a mortgage that’s 5.5% interest and student loans ranging from 5% to 7% interest. I also have three kids and contribute to 529s for them and Illinois gives a tax break on up to $20,000 and Illinois taxes are about 5% on income.
The question is, how much should I max out the partnership? My husband thinks that we should put in as much as we possibly can since it pays 9% dividends, but there’s no guarantee. There’s also no limit on the amount I can put in, at least that’s feasible to me at this point. And so, I could endlessly contribute even on the dividends. But to me, paying off the loans makes more sense since it is a guaranteed debt that we are going to have to pay.
The question is just how much do I put into partnership and at what point do I stop and start focusing on paying down the loans as fast as possible? Thanks for your help.
Dr. Jim Dahle:
All right, Danielle, great question. This is classic doctor financial stuff. We all have these questions, especially the first few years out of training. We have all these great uses for money, but not enough money to do them all. So, we have to choose. We have to choose what our financial goals are, and then work toward those goals in the order that they matter to us.
I think you’ve already identified the key points in this decision. You have the potential to make 9% on this money, which is a higher interest rate than all of your loans, but it’s not guaranteed. And in a risk adjusted way, it’s probably not even higher. This is a pretty risky thing to do to be putting money into a small business.
Now, would I still do some of it? Absolutely I would. I like taking risks. I like ownership. I like the benefits that come from owning your job and owning your business. I think it’s a great place to put money. I would much rather see people buying practices than buying homes for instance, but you got to balance everything.
So, what I would do is I would sit back and look at your financial goals. What is your goal for paying off your student loans? When do you want to be rid of them and how much money needs to go toward them each month in order to reach that goal? I would put that much toward the student loans.
Same thing with the mortgage. When do you want to be rid of the mortgage? How much do you have to put toward it each month in order to reach that goal? Put that much toward the mortgage. How much do you need in the 529s in order to reach your goals? Now you’re talking, you get a tax benefit on your state income taxes in Illinois of up to $20,000. I don’t know if that’s per student, but that’s a lot of money for most doctors to put in a 529 every year.
If I run the numbers here, if I pull up my Excel spreadsheet and I look at putting $20,000 into an investment, let’s say it makes 5% real for 18 years. I put $20,000 in there a year that adds up after 18 years to $560,000. That’s a lot of money in a 529. I don’t think you have to put $20,000 a year into every kid’s 529, no matter where you’re going to send them to school.
Maybe if you’re going to send them to a really expensive private college, and then they’re going to go to a really expensive med school. Maybe you could blow through $560,000, which would further increase by the way, during those years they’re in school. Maybe you could blow through that.
But come on, that’s a lot of money for education. My kids’ 529s are around $150,000, and I think they’re all going to be overfunded. They’re just not going to use that much for college, given the cheap schools they’re talking about attending. I’ve already really probably funded all my grandkids’ 529s, and that’s far less than $560,000.
But you got to look at your goals. How much money do you want to have saved up for college? How much do you need to put in there each year? I would look at all those things. How much toward the student loans? How much toward the mortgage? How much toward the 529s to reach your goals?
And then if you can still invest more, and the partnership seems like a good deal, put some money into the partnership. But don’t put all your investment money into the partnership. You probably also have some 401(k)s and some backdoor Roth IRAs available to you. You might want to invest some into a taxable account. You probably don’t want it all going into the partnership.
So, figure out the balance, put some money in there though. 9% sounds awesome, and it’s good to be invested in your business, but don’t put all your eggs in one basket. Find some balance. There are many right answers to this question, but all you have to do is find the right answer for you. It doesn’t have to be the right answer for me or anyone else out there. Sorry. How’s that for a non-answer? But I hope the reasoning is helpful to you.
QUOTE OF THE DAY
Our quote of the day today comes from Epictetus. I’m not sure if that is a Greek or a Roman, but it is somebody from the classical world who said, “Wealth consists not in having great possessions, but in having few wants.” There’s a great deal of truth to that, of course.
Okay. Let’s take this question from Bob. He’s got a question about portfolio management and behavioral economics.
PORTFOLIO MANAGEMENT AND BEHAVIORAL ECONOMICS
Bob:
Hi, Dr. Dahle. I have a question about portfolio management and behavioral economics. It specifically concerns the topic of the recommended frequency of rebalancing. I DIY my portfolio about $1.2 million in liquid assets, about 85% equities and 15% bonds, all broad market ETFs or mutual funds.
I’ve heard that the recommendation in general for time-based rebalancing is about one year to 18 months and that evidence shows no significant benefits in more frequent intervals. I’ve also heard that for criterion-based rebalancing, the recommendation is to trigger rebalancing when an asset class deviates more than 5%, say. And the assumption here is that triggering at smaller deviations doesn’t yield any greater benefits.
My problem is that I like to tinker. I think on the one hand, that’s what gives me the wherewithal to DIY, but I also know I need to keep it in check. All the time, for example, I have urges to check my portfolio, to change asset allocations based on market predictions, to performance chase, buy and sell individual stocks, all the things that I know would get me in trouble.
My theory is that frequent rebalancing satisfies this maximizer urge and allows me to systematically buy low and sell high. So, my question is really, what is the problem with rebalancing too frequently? From a relative perspective, wouldn’t rebalancing a portfolio with a fixed asset allocation always lead to buying low and selling high, assuming it’s done in a tax conscious way?
And if it scratches an itch, what’s the harm of doing it monthly or even weekly when there are big market swings, such as those in April, May and July, August this year? Looking forward to hearing your thoughts. Thank you.
Dr. Jim Dahle:
All right, Bob, we have to get you a new hobby. Rebalancing your portfolio every month, every week, every day is not a good hobby. Maybe you shouldn’t take up rock climbing. I heard bad things can happen when people do that, but you need to look around and see what other ways you can use your time in a way that will improve your life.
We’ve only got limited resources. We’ve got limited money. We’ve got limited time. We’ve got limited health. It’s not all about just maximizing the money aspect. You’ve also got time and health to consider. So maybe that time ought to be spent out walking rather than rebalancing your portfolio. I know that might not meet your desire to tinker with your portfolio, but maybe there’s something else in your life you can tinker with. Because this is not an effective way to do it.
Rebalancing is somewhat important. This is not a really important part of personal finance or investment management. It’s interesting to look at the data. The data suggests that the proper interval is yes, between one and three years. As far out as every three years, rebalancing once is okay. You don’t have to be rebalancing any more frequently than that.
And that same data suggests the rebalancing more frequently than once per year is actually detrimental. Well, how can that be? How can it be detrimental if you’re selling high and buying low? Well, it’s because the high is going to go higher first.
For example, let’s consider 2024. Stocks have basically gone up throughout the year. Yeah, there’s been some up and downs, but mostly throughout the year. At any point this year that you sold stocks and bought bonds, you’ve come out behind for it. Your portfolio is now small.
Yes. Your risk is a little bit lower as well, but your portfolio is smaller. And if you had waited until the date I’m recording this podcast, which is late October and rebalanced it all now, and if you had done it at any point earlier in the year, and that’s why frequent rebalancing can hurt you is because those stocks still had some more time to run or more time to drop or whatever the case might be.
But you don’t need to worry about this too much. For the most part, I don’t rebalance my portfolio. I just direct new money where it needs to go. For example, I smacked my head a few months ago. You might’ve heard about it. And I didn’t touch my portfolio for months afterward.
And so just this week, as I’m recording this, again, this is late October, just this week, I went in and I had some money to invest from the last couple of months. And I looked, “Well, what’s behind in my portfolio?” Well, guess what’s behind after 2022? Bonds are behind. My real estate’s done okay. Stocks have done great, especially US stocks.
And so, my new money needed to go toward bonds to bring the portfolio back into balance. Every bit of my investment for October and really for September as well, went toward bonds. And that’s okay. It doesn’t have to be perfectly in balance. If you’re a percentage up or percentage down, that’s okay. You don’t get any magic rewards for being perfectly balanced.
And besides, even if you did perfectly balance your portfolio, two minutes later, it’s out of balance again. The next day it’s out of balance again. The next week it’s out of balance again. You don’t have to be perfectly balanced. It really doesn’t matter if you have a 75% stock allocation or a 70% stock allocation. So, how much can it possibly matter that you’re out of balance by 5%? It doesn’t matter that much.
Now you don’t want to ignore this and end up having your portfolio go from 60-40 to 90-10 never rebalancing and always just contributing in those same percentages. But you don’t have to spend a lot of time worrying about rebalancing.
You’ve figured out the two reasonable ways to rebalance. One is on a time interval. This is how I do my parents’ portfolio; it is rebalanced once a year. The other way to do it is on when it goes up and down by a certain amount. If an asset class goes up by 25% relative or 5% absolute, that’s a trigger to rebalance and you rebalance the whole portfolio also a reasonable way to do it, but you do have to pay more attention, particularly in down markets that might be triggered. And maybe that’s not great behaviorally. You would be paying more attention in a down market, it might lead you to do something dumb. And so, maybe that’s not a good thing.
I hope I’ve talked you out of tinkering too much. You really don’t have to tinker with your portfolio to be successful. Katie and I have reached all of our financial goals. And how much tinkering have I done in the last three months? None. I’ve done no tinkering. After three months, I added up what we had, updated the spreadsheet and made one purchase. That’s all the tinkering I’ve done in the last three months.
And that works just fine. We’ve reached all our financial goals. We’re plenty wealthy. You don’t have to mess with your money all the time in order to be successful. In fact, you are probably better off if you do not mess with your money all of the time, because you’re probably hurting yourself.
Now, usually that takes the form of buying individual stocks or messing around with options or something that causes you to lose money, but in your case it’s taking the form of just rebalancing too frequently. And that is hurting your returns. You should stop doing it and find another hobby.
I don’t mean that in any sort of a mean way, but I want to be direct. So you have the picture of this hobby and what it’s costing you in order to do this hobby. Because it is costing you something to rebalance every day or every week or whatever, that you wouldn’t be paying if you were spending less time messing around with it.
SPONSOR
Okay. As I mentioned at the top of the podcast, SoFi is helping medical professionals like us bank, borrow and invest to achieve financial wellness. Whether you’re a resident or close to retirement, SoFi offers medical professionals exclusive rates and services to help you get your money right. Visit their dedicated page to see all that SoFi has to offer at whitecoatinvestor.com/sofi.
Loans are originated by SoFi Bank, N.A. NMLS 696891. Advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC, member FINRA/SIPC. Investing comes with risk, including risk of loss. Additional terms and conditions may apply.
All right. Don’t forget about the paid surveys I told you about, whitecoatinvestor.com/paidsurveys. Check those out. They may work for you, they may not, but it doesn’t hurt you to see.
Thanks for those of you leaving us a five-star review and telling your friends about the podcast. A recent review said “Empowering physicians. The White Coat Investor podcast, hosted by Dr. Dahle, stands out as a beacon of financial education for physicians, offering invaluable insights that has been as influential to my life as my actual medical education.
With effortlessly delivered content and a lineup of knowledgeable guest speakers, the podcasts are not only informative but remarkably easy to listen to and enjoyable on my commute. Since turning in as a fellow in 2019, I’ve witnessed a remarkable growth in our net worth, surpassing $2 million in less than 5 years, a feat I attribute to the wisdom gleaned from WCI.
Despite having delved into Dr. Dahle’s books, blog posts, and earlier podcasts, the newly released material continues to provide fresh prospectives and actionable advice, making it an indispensable resource for physicians navigating the world of personal finance.”
I feel like I need to put that into my resume or something. That was awesome. Thank you so much, Blimm_C, for that five-star review. We do appreciate you guys putting those in because they help us spread the word about the podcast. The more five-star reviews you get, the more people hear about the podcast, the more people fix their finances, the more people are able to concentrate on what really matters in life, and that’s an awesome thing.
So, keep your head up, shoulders back. You’ve got this. We’re here to help. Thank you so much for what you do, and thanks for being part of the White Coat Investor community. See you next time.
DISCLAIMER
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.
INTRODUCTION
This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.
Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 197 – Rehab doc pays off student loans in 16 months.
One of the most underrated financial moves in medicine is working locum tenants. It pays significantly more on average and you can work locums full-time or on the side of your full-time. When you work with CompHealth, the number one staffing agency, they cover your housing and travel costs, which on top of higher pay really adds up.
Locums also gives you more control of your career, allowing you to go where you want, when you want, with a schedule that works for you. It’s the perfect way to get ahead financially while getting focused on what you love. Whether it’s locum tenens or a regular permanent position, build your career your way with the power of CompHealth. Learn more at comphealth.com.
All right, welcome back to the podcast. Lots of fun stuff going on here at WCI. We recently finished our scholarship program, which is one of our biggest outreach things that we do. You can check out those winning essays that were submitted. There’s 10 of them. They each got almost $6,000 cash for winning the contest.
That’s also a great way that we can help medical students become more financially literate, because they find out about the White Coat Investor through this scholarship thing. But a better way to make them financially literate is what we call our Champions program. And you can get more information about this at whitecoatinvestor.com/champion.
What is the Champion program? It’s a book giveaway. We’re trying to give a copy of The White Coat Investor’s Guide for Students to every single first year medical and dental student in the country. NPs, pharmacists, PAs can also qualify for this. Veterinarians.
We’re opening the doors this year. Obviously the book is written primarily for medical students and dental students. But as you know, if you’ve been listening to this podcast for long, there’s tons of overlap with everybody. And it’s certainly applicable to a lot of those other professions.
But what the Champions program is, is it is a champion in each first year class. What does the champion have to do? Not much. All they got to do is volunteer to be the champion, give us your mailing address. And we’re going to send you enough books to pass out to your entire class. Now you have to pass them out. You can’t just put them on eBay. You have to pass them out. If you do, and you take a picture with some members of your class and send it to us, we’ll send you some swag as well.
And so, you get to be the champion. And more importantly, you know what you’re doing besides just being the guy who got everybody a free book that made them financially illiterate. You literally saved your classmates millions and millions of dollars. If becoming financially illiterate early in your career is worth, I don’t know, $2 million, let’s say. Multiply that by the number of people in your class. Let’s say there’s 100 people in your class. We’re talking about $200 million in value you just created by volunteering to be the champion for your class.
So please, if nobody’s volunteered yet for your class, whitecoatinvestor.com/champion. I think in past years, we’ve gotten this book out to about 70% of the first years in the country, as far as medical students go. And we’d like to beat that this year. I’d like to get a heck of a lot closer to 100% than we are at right now.
These books are totally free. We cover everything, but we can’t afford to send them out one at a time. We got to send them out in bulk. And that’s why we need a champion to help pass them out. So, thank you, those of you who have volunteered and those of you who will volunteer. I think this program stays open through March. Don’t wait till the end though. The sooner you get this stuff and pass it out, the more good it can do.
Stick around after the interview. We’re going to talk for a minute about pessimism. This is something I’ve blogged about before. I think I published a blog on it a few weeks ago. But I think it’s a really important subject and something that’s really important to understand out there. So, stick around. We’ll talk about pessimism and why it’s a problem.
INTERVIEW
Our guest today on the Milestones podcast is Hunter. Hunter, welcome to the podcast.
Hunter:
Hey, thanks for having me.
Dr. Jim Dahle:
Tell us what you do for a living, how far you are out of training, and what part of the country you live in.
Hunter:
I graduated from residency in 2022. I currently live in Texas and I am a PM&R physician and I do strictly inpatient rehab medicine.
Dr. Jim Dahle:
Very cool. And what milestone are we celebrating with you today?
Hunter:
I finally paid off all my student loans just about two months ago. It was about $380,000, just a pocket change there.
Dr. Jim Dahle:
Wait, wait, wait, wait, wait, wait, wait. You said you left residency in 2022. You’re a PM&R doc and you paid off $380,000 in student loans already?
Hunter:
Yeah. If you hate yourself enough and you work hard enough, you can accomplish pretty much anything I’ve learned.
Dr. Jim Dahle:
Well, I think most of us who’ve been through residency would attest to that. But you must have had a pretty similar life after residency. How much have you been working the last couple of years?
Hunter:
A lot. It’s kind of funny. My story is a little unique. When I first graduated from residency, I took a 1099 position in Austin, Texas. And that job didn’t really actually pan out. I was essentially just working part-time and I was really struggling financially for a good while. My student loan was accruing so much interest. It was outpacing what I was actually earning per month almost. That really lit up a fire underneath me to really get my loans paid off as soon as possible.
I switched jobs. I’m still 1099. And I took an inpatient rehab position. And with that job, what I had signed on for, I took on a little bit more than I initially bargained for. So, what happened is that there were three full-time physicians at this inpatient rehab center. One of them had quit or had left. And so, then it came down to two. And what ended up happening is that I was having to work every other weekend. I was working 11 days on, three days off. And I did that for about 16 months. And I was carrying a census of 16 to 25 patients every day, taking minimal vacation. And pretty much everything that I had, whether it was my sign-on bonus, relocation bonus, I threw everything out my loans.
Dr. Jim Dahle:
How much were you making a month during those 16 months?
Hunter:
Quite a bit. It wouldn’t be unusual if I was making $55,000 a month. That would be a good month, but definitely on average, probably $40,000 or more.
Dr. Jim Dahle:
Okay. This is a $500,000, $600,000, $650,000 income you had for that period of time.
Hunter:
Yeah.
Dr. Jim Dahle:
Which has got to be double the average for PM&R at least?
Hunter:
Yeah, correct. Yeah. I knew that this was going to be a narrow window of time for me to take advantage of this. I knew this wasn’t going to be something that was forever. I wanted to take advantage of it and just really hamper down on the loan situation, especially with my situation with my first job, I was very debt adverse.
Dr. Jim Dahle:
Now you mentioned the loans were growing rapidly. Part of this time period was still during the student loan holiday. Were these not federal loans? Or are you just referring to the period after that holiday ended?
Hunter:
After the holiday ended. Yeah. That was very helpful. Yeah. I probably saved at least five figures during that timeframe. That was really beneficial for me.
Dr. Jim Dahle:
Yeah, absolutely. Well, tell us about your household. Are you single? Are you married? Are there kids?
Hunter:
I have a spouse. She is a nurse anesthetist. We have one kid on the way. But me paying off my loans, that all came from my income alone. And she had offered to help pay it off. But I said, I’ll handle my loans. And how you can help contribute is saving for retirement. And so that’s how we divided and conquered.
Dr. Jim Dahle:
Okay. And then as far as living expenses, where were those coming from? Were those coming from her income or?
Hunter:
Equally both. We split everything essentially like 50-50 almost.
Dr. Jim Dahle:
Okay. What’s your lifestyle looked like over these 16 months? Are you basically living like a resident? Did you give yourself somewhat of a raise? Give us a sense of what you’re driving and where you live and how often you go out to eat and that kind of stuff.
Hunter:
Yeah. I still drive my car from high school, actually. I’ve had it for more than half of my life. I’ll eventually upgrade now that I have more financial means to do so. But the car was running. It just needed me to get from point A to point B. I didn’t really have a strong urgency to change my car essentially.
And then in terms of our lifestyle, we eat out occasionally. I’m very lucky. My wife, she likes to cook. And so, she does pretty much all the grocery shopping. She does all the cooking. That was a big help. She was able to help support me in that. And since I was working so much, I wasn’t able to contribute as much in those regards.
Dr. Jim Dahle:
Or go on expensive vacations, I’ll bet.
Hunter:
Yeah, exactly. Yeah, we would have family reunions and stuff like that. But nothing very extravagant.
Dr. Jim Dahle:
Now, when I tell people to live like a resident, I’m mostly telling them about how to spend, not how to work. But obviously, you can apply that to working as well. And you worked hard during those 16 months. Would you say you’re working harder or less hard than you did as a resident?
Hunter:
Yeah, on average, I would say a lot more. Yeah, I was definitely working far more than what I did as a resident, at least in the PM&R residency program that I was in. Yeah, the amount of work that I was doing as an actual attending was far more.
Dr. Jim Dahle:
How long do you think you could work like that without burning out?
Hunter:
That’s a really good question. I did eventually hit a wall of burnout. And that was maybe probably around month 11 or 12, where me and my colleague, who I was alternating weekends with, we were both getting really stressed out, it was just no longer really feasible to do.
Some of the things that I am very thankful for is that, one, I really like the people that I work with. If I didn’t like the people that I work with, I don’t know if I could have been celebrating this milestone. My CEO that I work with, I could always come to him about problems that we were running into, like, “Hey, we’re really burnt out, we really need additional help.” And it wasn’t until both of us were on that same page that they started really hunting down for getting another physician on board to help lighten our load. And thankfully, that’s actually happened. We do have someone that’s going to be starting next month. So, that’s been a big relief.
Dr. Jim Dahle:
Awesome. I’m kind of envisioning these conversations you had with your wife. How long have you been married now?
Hunter:
We just recently got married.
Dr. Jim Dahle:
Oh, so it’s relatively recent. Okay. And when she found out that this is what your plan was for your student loans, how did that conversation go?
Hunter:
She was very supportive. This was a goal of mine. I had this envisionment that I was going to pay off my student loans. When I was in medical school, I had this planned out that I wanted to be about debt-free within about five years. That was my aggressive goal of what I wanted to accomplish.
And then when I was talking with my spouse, she was very supportive. She knew that this also wasn’t going to be forever, that this was going to be a temporary moment in our lives. And that we could really come out financially ahead once we have this behind us. So, it’s very fortunate that she and I are both financially on the same wavelength.
Dr. Jim Dahle:
Okay. There’s somebody out there that’s like you were a couple of years ago, maybe three or four years ago, that’s sitting on a big, huge pile of student loans. Maybe it’s twice the average. It’s $400,000. What advice do you have for them?
Hunter:
My advice would be you need to create financial goals. You need to create some kind of roadmap to know how to get there. It could be paying off your student debt, it could be aggressively saving for retirement or down payment for a house, whatever your financial situation might be. You need to figure out some kind of plan on how you can accomplish your goals, what kind of income you need to make on your cost of living, all those things. You should probably start having that calculated out before you graduate from residency if you’re really serious about it.
Then the second part, which I would argue is a little bit harder because it’s kind of self-reflection, but it would be determining if your psychological tolerance is going to be congruent with your financial goals. If you are like, “I really want to invest aggressively for retirement”, that’s fine.
But if you’re one of those people that checks your portfolio every day and you see a drop of 3% and you’re like, “Oh, I can’t invest now, stock market is in flames”, you would probably be better off just paying off the debt or reevaluating your financial goals. Understanding your risk tolerance is going to be really important to your goals there.
And then like the things that you’ve espoused multiple times in your show or in your book about living below your means. You either have to make more money or spend less of it. That’s pretty much how you’re able to get to your goals. There’s no easy way about it.
Dr. Jim Dahle:
Yeah, it’s just basic math in a lot of ways. All right, what’s your next goal that you’re going to be working on?
Hunter:
My next goals are going to be learning to meet my financial goals in regards to saving for retirement. I was trying to do both essentially at the same time, meeting the bare minimum threshold to make my retirement goals. That’s kind of my next thing that I’m looking at. I play with retirement calculators multiple times to figure out what strategy I need to take in order to meet those goals.
Dr. Jim Dahle:
Do you guys expect to increase your spending in the next few months now that this goal is met?
Hunter:
Since we have a child on the way, I do anticipate that to definitely happen for sure. That was the other motivator. I wanted to make sure that I had my student loans paid off before we tried buying a mortgage and then having a child. I knew I wouldn’t be able to balance tackling all these financial responsibilities very well. I just want to focus on one and go from there.
Dr. Jim Dahle:
I love that you call it buying a mortgage instead of buying a house. I bet that’s how a lot of people feel, especially if they’ve got a really big mortgage. Very cool, very cool. All right. Well, I think the hardest part for you is probably all the hard work you put in. But was there any period of time in that 16 months when you felt like you made a big financial sacrifice? You didn’t buy something you wanted to buy, something like that, that you felt was particularly difficult?
Hunter:
I won’t lie. There were a couple of times when I had a really long week when I was covering for one of my colleagues who took vacation and I was covering his census and my census at the same time and working two weekends back to back. It was a lot. I did splurge here and there. I bought small things to keep myself sane during that time period.
But for the most part, the thing that I value more than material things is the freedom to choose what I want to do in the future. To me, having extra time to myself, I knew that was going to be the end goal. If I look at a new job in the future, I’m not looking at what is the amount of income that I can expect to receive for that. It’s like now I can focus on the quality of my life a little bit easier now.
Dr. Jim Dahle:
Do you remember back in medical school when you were borrowing all this money? Was that stressful to you? Did you worry that this was not going to pay off at any point, that you were making a bad investment by borrowing $350,000 plus to pay for your education?
Hunter:
I knew it wouldn’t be a bad investment. I just knew that it was going to take a lot of work to pay it off and that I was going to have to make some sacrifices coming out of residency in order to set myself up for financial success. I knew I wasn’t going to be able to have everything I wanted right coming out of residency. I knew that there were some sacrifices that were going to have to be made. And I was already calculating what I needed to do while I was a med student, how to get there. It was a normal expectation for me.
Dr. Jim Dahle:
Very cool. Well, Hunter, congratulations on your success. Thank you for coming on the podcast to share it with others and inspire them to do the same. We’re all very proud of you here at WCI. So, congratulations.
Hunter:
Thank you so much. So happy to be here.
Dr. Jim Dahle:
All right. I hope you enjoyed that interview. It’s always fun to have a good interview. In this case, it was a good example of living like a resident. Not only did they spend like a resident, her income was going toward retirement savings, his was going toward paying off loans.
Obviously, there’s a lot of income there when it’s a CRNA plus a rehab doc working basically two jobs. But you know what? That’s a lot of power you can harness too to take care of your financial goals. You can meet them very, very quickly when you’re working that hard and spending that little.
FINANCE 101: PESSIMISM
All right. I promised you at the beginning, we were going to talk a little bit about pessimism. What do we mean about pessimism? Well, if you read blogs, if you read financial media, if you’re on financial Twitter or TikTok or whatever, if you go to conferences, you will notice that the pessimists, the people who say things are going to go badly now or we’re in for some rough times soon, sound smarter than the optimists.
The pessimists have all kinds of great arguments about why things are going to be terrible in the future. And the optimists sound like Pollyanna. But the truth is the history of investing, and there’s a book with this title, but the history of investing should be titled Triumph of the Optimists because the optimists win in the long run. Because there’s a lot of people going to work every day trying to make the world a better place, trying to make their own lives better. And they are gradually improving the world around them.
We think, especially during political season, that the world is a terrible place and everything’s worse than it used to be. But let’s really consider for a minute how things used to be. Let’s go back, let’s just say a couple hundred years. A couple hundred years ago, the vast majority of people on this planet, including in the United States, lived in poverty. They spent most of their day just getting enough money or food to eat. When is the last time we worried about having enough food to eat? I don’t care how unsuccessful you are financially, you’re probably not worried about food. You can feed yourself just fine. But that’s the way it was 200 years ago.
A couple hundred years ago, before the invention of really the railroad, well, I guess the telegraph. The fastest information or anybody ever traveled for millennia was the speed of a horse. That’s it. Ships went even slower than horses. If you needed to send something across the world, or you needed to travel across the world, it might be a different group of people that arrived there when you were done. It wasn’t just a matter of taking years to get there. Half of you died on the way. And that’s just the way the world was.
Things are dramatically better today. And in most ways, things are dramatically better than even they were 10 years ago, or 20 years ago, or 30 years ago. The world is improving. And being an optimist when it comes to investing usually leads to better returns, to better performance, especially in the long run.
Yes, crazy things can happen in the short run. Stock market crashes happen. And sometimes one particular sector of the market is overbid. Sometimes even bonds have a lousy year like 2022. But the truth is most of the time your investments increase in value. Most of the time companies pay their dividends and bonds pay their interest and renters pay their rent. And it works out pretty well to be an investor.
So, don’t put too much account into the pessimists. They’re usually wrong, especially in the long run. And the history of the world and the history of the markets is one continual example of just how many times they’ve been wrong.
We forget they’re wrong. These pessimists, these permabears, they’re always saying pessimistic things. And eventually it seems like they’re right because something bad happens. But that bad thing goes away in a year or two and they’re still wrong in the long run. So, don’t put too much emphasis into what you hear pessimists say on social media or in the regular media or in your personal life. Try to be an optimist throughout your life and you’ll find a lot more success in your finances.
SPONSOR
Earlier, we mentioned working locums with CompHealth, the number one staffing agency. But CompHealth isn’t just a locums agency. CompHealth staffs regular permanent positions across the nation as well. They also offer telehealth, medical missions, and more. And 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, use the power of CompHealth to build your career your way. Learn more at comphealth.com.
Also, thanks for those of you out there who are sharing episodes with friends, whether it’s a Milestones episode and that person is working on a similar milestone, thanks for sending them a link. Or if it’s a regular episode and you just hear a question that you think applies for them.
The only way to share this podcast with people is not just to put in five-star reviews. That does help and we appreciate those, but just sharing it directly. This is a great deal how the White Coat Investor community was built, was just one White Coat Investor sharing stuff with another one. So, send links to the episodes that you think your friends would really benefit from. Maybe they listen long-term, maybe they just listen to that episode, but in a lot of ways, you might save them tens of thousands, hundreds of thousands, even millions of dollars over the course of their career. And they will thank you for it later, I assure you. Thanks for those of you who are out there doing that.
All right, we’ve come to the end of another great episode. Thank you so much for listening. We’re grateful you are here. Without an audience, there is no podcast, so you’re an important part of this deal here. Thank you so much for being here and thank you for what you do in your daily life.
As you know, I’ve had quite a few interactions with the medical profession in the last month, and I’m very grateful for all the care I’ve received and I’ll bet most of your patients are too. So, thanks for what you do on a day-to-day basis, even if nobody’s told you thank you yet today.
See you next time on the podcast. If you want to be on the Milestones podcast, you can get on it at whitecoatinvestor.com/milestones is where you apply. We’d love to have you on, celebrate your milestones and encourage others to do the same. Thank you so much. See you next time.
DISCLAIMER
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.
(Source)