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WCICON25 Columnist Panel | White Coat Investor

Business ProBy Business ProJune 26, 202592 Mins Read
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WCICON25 Columnist Panel | White Coat Investor


Today, we are sharing one of our fan favorite sessions from WCICON25. Several of our White Coat Investor columnists joined Dr. Jim Dahle on stage for a discussion about spending extravagantly. They shared what intentional spending looks like and how their view of extravagant spending has changed over their careers. They also answer audience questions live. We hope you enjoy this peek into WCICON with

. If you want to join us in Las Vegas for WCICON26, you can snag your ticket at

.

This conversation explored how high-income professionals, especially physicians, approach extravagant spending—and how their values and emotional relationships with money shape those decisions. Dr. Tyler Scott shared that travel has become his family’s primary luxury expense, now that he feels fulfilled and stable in a new career. Previously, when he felt burnt out as a dentist, he was hyper-focused on the FIRE (Financial Independence, Retire Early) movement, viewing every dollar spent as more work to endure. But finding a career he enjoys has allowed him to ease up, enjoy the present, and spend with more freedom—especially on meaningful experiences.

Dr. Julie Alonso echoed a similar sentiment, focusing her spending on experiences and relationships that enrich life—like family travel or even expensive Taylor Swift tickets, which she admits were hard to justify but ultimately created priceless memories for her daughter. Meanwhile, others shared their own versions of values-driven extravagance: Dr. Adam Safdi, a vegan, spends heavily on shipping plant-based food to maintain his diet in an area with limited options, and Dr. Genhee So treated herself to a high-end car that makes her commute a joyful part of her day. Each person’s “splurge” aligns with something personal—whether health, joy, convenience, or relationships—demonstrating that spending big can be meaningful when it reflects authentic values.

Dr. Jim Dahle closed the conversation by reflecting on his evolving relationship with money. Though he and Katie are now in a strong financial position, he admitted that spending still doesn’t come naturally to him. He recalled his early days—donating plasma for grocery money and driving an $1,850 car as a new attending—and said those experiences help him stay connected to what many physicians go through early in their careers. To make spending easier, Jim sometimes delegates the actual transactions to others. For example, he didn’t learn the cost of a recent trip to South Africa until weeks after returning. This method helps him enjoy experiences without being mentally bogged down by price tags. Josh Katzowitz added some lightness to the moment, joking about how Jim’s shopping habits, described as hunting and dragging home the “kill,” were confirmed by his wife, Katie, who no longer lets him do the grocery shopping due to his tendency to overspend. Their banter reinforces the idea that even seasoned financial experts are still learning how to spend intentionally and joyfully. Extravagant spending isn’t inherently frivolous. It can be a thoughtful expression of what matters most to each individual.

The conversation continued the theme of emotional complexity around spending, especially for high-income professionals who have traditionally prioritized saving. Julie began by admitting that even after 15 years in her career, spending—especially on large purchases or big trips—still causes her hesitation. Pressing “purchase” can feel psychologically difficult, even when she can afford it. Josh echoed this, confessing that even buying a $15 T-shirt online can make him feel guilty, sparking a discussion on whether this feeling is driven by need vs. want. Julie, Josh’s wife, playfully suggested it might be something he should work on, but the shared sentiment revealed how deeply ingrained spending guilt can be, especially for those conditioned to save and plan.

Tyler added another layer by sharing his journey of self-awareness. At 40, he said he’s finally come to accept and appreciate his natural tendencies. He’s a planner and a saver, and he’s OK with that. Instead of fighting it, he leans on his wife, Megan, who is more comfortable with spending. She now handles much of the travel planning, including a memorable two-week trip to Iceland, because he knows he might underspend or hesitate too much on his own. By letting her lead in this area, they’ve found balance and enriched their shared experiences. This teamwork helps him live more in the present without sacrificing his long-term mindset.

Adam rounded out the discussion by tying spending comfort to personal milestones. He recalled how paying off student loans and making the decision not to have children both served as major psychological turning points. These choices brought clarity and a sense of permission to enjoy their money more freely. He credited these life events for helping him shift from a scarcity mindset to one where spending could feel justified and even joyful. Like others in the conversation, he emphasized how personal growth, relationship dynamics, and emotional milestones can transform how we approach money—not just intellectually, but practically.

This part of the discussion showcased how financial perspectives on spending evolve through education, life stage, values, and even a sense of humor. Genhee reflected on her earlier years as a high-earning but financially inexperienced physician, indulging in luxury travel and designer shoes without understanding her investment portfolio. Now after gaining financial literacy, she still enjoys spending—but with intention. She follows a clear financial plan that outlines savings targets, giving her permission to spend the rest freely and joyfully.

Adam emphasized a similar philosophy: intentional saving enables guilt-free luxury. He and his husband prioritize retirement by saving 30% of their income, setting aside additional funds for future expenses, and then spending without shame—including first-class flights and luxury cruises. Notably, he discussed the value of enjoying those experiences while still young and active rather than waiting until retirement. He shared how being among the youngest travelers on an Alaskan cruise reminded him that life is to be lived now—not postponed for an uncertain future.

Julie discussed her approach to “selective extravagance,” highlighting the twin Bar and Bat Mitzvahs she hosted for her children. She justified the significant expense as a once-in-a-lifetime event that aligned with her family’s values around experiences and relationships. She emphasized the joy that came from gathering loved ones from around the world and how she and her family prioritize these types of gatherings—attending every wedding, reunion, or meaningful celebration they can. Despite finding it hard to hit “submit” on big expenses (like the caterer’s bill), she values the irreplaceable memories they create.

Tyler brought in a systems-based approach to managing money while living vibrantly on a “moderate earner” income. He outlined his family’s four-step cash flow plan: pay themselves first, save for expected future expenses, automate bill payments, and then spend the rest guilt-free. This model lets them meet long-term goals while also indulging selectively—especially in travel. He credited a quote from Jim as foundational: “Be generally frugal and selectively extravagant,” a motto he now lives by. This intentional system allows his family to feel balanced and joyful with money.

Josh added a humorous and deeply personal take on extravagant spending with his decision to buy a Tesla. After decades of driving old, worn-down cars, he felt he had earned something new and exciting. Despite some financial debate with his family, they decided the safety, efficiency, and speed of the Tesla justified the purchase. However, the real controversy came not from the car itself, but from the fact that Josh publicly admitted to financing it. This small detail led to significant reader backlash—more than he expected—demonstrating how emotionally charged spending decisions can be, even in the context of financial transparency.

Together, these stories illustrated the rich emotional and behavioral spectrum of spending—from guilt to joy, from caution to YOLO—all shaped by each person’s values, experiences, and financial knowledge. Whether through luxury travel, meaningful family events, or even an electric car splurge, the central theme remains clear: intentionality transforms spending from a source of anxiety into a reflection of purpose.

To learn more from this conversation, including the live Q&A from the audience, read the WCI podcast transcript below.

Today, we are talking with Wendel Topper, our audio-visual guru here at The White Coat Investor. He is sharing his story of his financial awakening and slowly learning through osmosis after he started working for WCI. In just five years, he and his wife have paid off their mortgage, reached a $500,000 net worth, bought a car with cash, and so much more. He shows us that even on a moderate income, you can crush your financial goals.

Mutual funds are investment vehicles that pool money from multiple investors to buy a collection of assets like stocks, bonds, or real estate. This approach offers several advantages—such as professional management, economies of scale, and daily liquidity for publicly traded mutual funds. One of the biggest benefits is instant diversification. Rather than buying individual stocks, investors can own a portion of many stocks at once, spreading out risk. Because of these advantages, mutual funds are commonly used in retirement and education accounts like 401(k)s, HSAs, and 529 plans.

There are two primary types of mutual fund strategies: active and passive. Active funds have managers trying to outperform the market, but this can be difficult due to the efficiency of modern markets. Passive funds, aka index funds, aim to match market returns by owning all the stocks in a particular index. These tend to be lower-cost and more reliable over the long term, with studies showing that most actively managed funds fail to beat their passive counterparts. Exchange-Traded Funds (ETFs), a popular variant of mutual funds, can be traded throughout the day, and they often offer tax advantages in taxable accounts.

When evaluating a mutual fund, it’s essential to examine its underlying investments, the manager’s strategy and performance, and especially the fees. Low-cost index funds from major firms like Vanguard and Fidelity are generally excellent choices. High fees can eat into returns, so unless a fund offers a compelling, well-proven advantage, it’s wise to keep expenses low. Overall, mutual funds—particularly low-cost, diversified index funds—are a powerful tool for building wealth and reaching long-term financial goals.

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. It has exclusive, low rates designed to help medical residents refinance student loans—and 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. And if you’re already out of residency, SoFi’s got you covered there, too.

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Transcription – WCI – 425

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.

Megan:
All right, everybody, welcome back to the White Coat Investor podcast. This is episode number 425 – WCICON25 Columnist Panel.

My name is Megan. I’m hosting the podcast today. I am the podcast producer, but I’m stepping in this week while Jim is off traveling the world and having what is surely a great adventure with his family. I’m just helping out this week, and we’ve got a great episode lined up for you.

But first, 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. 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. And 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, N.A. Member FDIC. Additional terms and conditions apply. NMLS 696891.

All right, we have an awesome sale going on right now. This is our big summer sale. You get 20% off of everything. That’s courses, books, swag. If we sell it, it’s 20% off. This only runs until July 3rd, so make sure to jump over to our website and grab a course or a book or whatever else it is that you’ve been wanting to buy.

Today we want to share our columnist panel with you. We have so many diverse voices that now write for the blog, and we wanted to give you a sample of a few of those voices. We always have a columnist panel at WCICON every year, and it’s always been a fan favorite. It’s a great way to get to know the columnists, get to recognize what’s going on behind the scenes here at White Coat Investor. Who are the voices? Who are the people behind all of those posts? If you have not had a chance to come to WCICON in the past, we hope that this might give you a teeny little taste of one part of what it is that we do at the conference.

We hope we get to see you in Las Vegas at the end of March. Remember that tickets go on sale at the beginning of September. That’s going to be our early bird prices. So get excited, and we hope we get to see you there. In the meantime, enjoy this discussion from some of our columnists.

 

COLUMNIST PANEL

Dr. Jim Dahle:
Welcome, welcome. This is going to be awesome. This is a conversation with the columnists, which is an important part of what we do here at WCI. We have columnists for two reasons. Number one, because we want you to hear from people like you, and I’m not exactly like all of you. We want people of different genders, different professions, different specialties, et cetera, that can speak to you from your stage of life. That’s number one. Number two, if I fall off a mountain or something, we don’t want WCI to go away. That’s the other reason we have columnists.

We have 13 columnists now. Let’s bring that slide up on the screen. 13 columnists. Three of these are new in the last year. One’s Dr. Erik Hoffmeister, who is writing about retirement, early retirement kind of topics. Genhee So is here as well. She’s on stage with us. And Adam Safdi is also here with us today and is one of our new columnists in the last year. The rest have actually been with us for over a year. I know you recognize some of the writing. We’ll talk today about some of the columns they’ve done. But this is going to be a lot of fun. Josh makes me do this every year because he wants to make fun of me on stage, so you get to enjoy that as well.

Okay. We’ll talk about the new columnists. Don’t forget, you can ask your questions through the app. We don’t have enough questions for the whole session. Actually, we do, but we don’t want to use all those questions because I don’t want to ask the ones Josh wants me to ask. We’re going to take your questions, the ones that come in through the app, and then in a little bit, we’re going to start throwing something around the room. So, make sure you have eye contact if you throw this to somebody. It’s very soft. It’s not enough. It’s going to hurt anybody, but it could knock your drink over or something like that.

 

INTRODUCTIONS TO THE COLUMNISTS

Okay. Let’s get into this a little bit. Let’s first start by introducing you guys. Let’s start over here, Genhee, and tell us who you are, what you do for your main gig, and where you live, and what you tend to write about.

Dr. Genhee So:
Sure. Hi, my name is Genhee So. Genhee, like three wishes, I dream of. And I’m coming to you from the snowy north up in Canada, where I’ve been a practicing radiologist for about 18 years now, and more recently, acting as a physician advocate in the financial realm. And what I hope to do is normalize a conversation about money amongst our peers, and really try and bring relevant financial information and education to our community. At WCI, I write about my ups and downs of my financial journey, and how it integrates into my professional and personal life.

Josh Katzowitz:
I’m Josh Katzowitz. I’m the content director here at WCI. I’ve been like three and a half years now, this is my fourth conference. I’m a sports writer by trade, before I became a financial writer, sort of. I’m married to a physician. I’m not a physician. This is my wife. She’s a physician. She fed my sports writing habit for many years.

At WCI, I try to bring some fun to the blog. My last column was about how a dentist fed LSD to the Beatles and changed their sound. That was kind of fun. But I also like to take people behind the scenes a little bit. When we have a controversial post, oftentimes I’ll go back six months later, Jim and I will talk about it, and then we’ll see how that goes.

And also try to keep up with the trends. A few months back, I was thinking, is anybody worried about an AI bubble explosion on the stock market? I talked to some people, did some research. That’s the kind of stuff I like to bring to the blog. It’s not like so hyper financial specific, but I just like to bring a little levity.

Dr. Julie Alonso:
Hello, I’m Julie Alonso. I’m a child, adult, and forensic psychiatrist. And I live in Austin, Texas with my husband and our teenage twins and our cute little Shih Tzu. In general, I’ve been writing about physician wellness, mental health, and issues that are relevant to women physicians and professionals.

Dr. Adam Safdi:
Hi, I am Adam Safdi. I come from beautiful Reno, Nevada. I’m so honored to be part of this community. When writing, I like writing about various things. Among other things, I write about the intersection of LGBT issues and non-traditional families with finance.

Tyler Scott:
My name is Tyler Scott, and my first professional chapter was as a dentist. I was a public health dentist in Oregon for 10 years. I now live in Salt Lake City, Utah with my wife, who is the podcast producer for White Coat and our three girls. And now I have transitioned careers to being a flat fee financial planner for physicians and dentists. And part of that transition was burnout, and part of that transition was a disability experience I went through. And at the blog, I write about my career change. I write about my disability journey. I write about dentistry and family finance as it applies to what we would call at White Coat, a moderate income.

 

WHAT DO YOU SPEND EXTRAVAGANTLY ON?

Dr. Jim Dahle:
Okay, we have a topic today, although I know this conversation is going to go everywhere, especially once the catch box starts making its rounds. Our topic today is spending extravagantly. We talk about spending extravagantly on the things you care about and then being thrifty on what you don’t care about. The first question for the panel is, what is something you spend extravagantly on and has been difficult for you to do that? Let’s start with Tyler.

Tyler Scott:
Yeah, for us, travel has been our area where we really spend big by our definition. We identified that as a shared value in our family. And the way I was able to make that transition to spending more and justifying it is that I’m happy in my career now. When I was a dentist and feeling physically and emotionally burnt out, I was really fixated on the FIRE movement. I really wanted financial independence, retire early so that I could escape this career that wasn’t serving me. Every expense, I just viewed that through the lens of 22 more chart notes I’d have to fill out before I achieved liberation.

And so, now that I am in this career that I love and that feels sustainable and joyful, it’s given me permission to spend more because if I need to work a little longer, that’s okay, because this is a job that feels sustainable. And that’s allowed me to have a little more ability to spend and enjoy the present.

Dr. Jim Dahle:
Okay. Julie?

Dr. Julie Alonso:
Yeah, it is hard for me to spend extravagantly, but I try to guide that with what we’ve heard from some of the speakers here, experiences and relationships. Does it enhance an experience or a relationship? We also really enjoy travel as a family. It’s something that we’re able to show our kids, parts of the world that they don’t know about. And it can be hard to justify those expenses sometimes. But I try to think of it in a sense of these are things that we can afford. We worked really hard to get here. And is it something that will enrich our lives? If you buy something, stuff, eventually you’re going to habituate to it. But a travel experience is something you can never never lose. And even things like we bought Taylor Swift tickets.

Josh Katzowitz:
How many times did you buy Taylor Swift tickets?

Dr. Julie Alonso:
Two.

Dr. Jim Dahle:
Am I the only one who is still calling it The Eras Tour?

Dr. Julie Alonso:
But no, the first time we got them at face value. So it was a difficult experience to pay 10 times more than that, perhaps, to get another set of tickets. But once the TTPD set came out we had to do it. And he ended up wanting to go at the last minute as well.

Josh Katzowitz:
And it was in a suite with other doctors. I wrote a column about it, about how I spent six hours with Taylor Swift-obsessed doctor moms. Here’s what I learned. And I put it in for expenses. I still haven’t gotten that check back.

Dr. Jim Dahle:
Weird.

Josh Katzowitz:
I wanted to ask you about that.

Dr. Jim Dahle:
Just keep turning that in and see what happens.

Dr. Julie Alonso:
I will say my teenage daughter said it was the best day of her life. That’s priceless. You can’t put a dollar value on it.

Dr. Jim Dahle:
All right. Adam, please tell me it’s not Taylor Swift.

Dr. Adam Safdi:
No, no, no. I joke with patients when they meet me for the first time that they get the hippie granola doctor because I am a vegan and it’s important to me to follow a plant-based diet. And I identify that as one of my values. And while Reno, Nevada is a beautiful, beautiful place, it is not easy to be vegan on the fly. There’s not many vegan restaurants that I can order DoorDash from. For me, I spend extravagantly on shipping my vegan food in to Reno. I prioritize my health and my values for that price of convenience.

Dr. Jim Dahle:
All right, Genhee.

Dr. Genhee So:
For being candid, I like cars. I like maybe fast cars. I was a commuter for most of my life as a student and then as a medical student. And so, you spend a lot of time on the road admiring other people’s really nice cars. And I thought that if I’m going to spend extravagantly, then I want it to be something functional where I can enjoy it every day. And I have to say, even coming home after work, it brings a smile to my face to get into my car and just have that me time between work and home.

Josh Katzowitz:
What kind of car is it? What kind of car?

Dr. Genhee So:
It’s a nice car. It’s a German car. It’s an Audi.

Josh Katzowitz:
Okay. Jim, let me just ask you a question because most of this is going to be focused on us. But when you started the site in 2011, you and Katie were in a much different spot in your financial. You talked about that yesterday, kind of your guys’ progression. And when you were writing at the time, I’m sure you could relate to what most WCIrs were going through because you were going through that yourself.

And now I don’t know if you guys went to Katie’s talk with marriage and spouses. She was talking about how you go to the grocery store and on a rampage, you don’t check prices. You just buy whatever. And when you come home, it’s twice what she spends at the grocery store, which is why you don’t go to a grocery shop anymore. But can you at this point in your life and your career and with your net worth, can you relate to most what WCIrs are going through? You write a lot for the site. Can you relate to them?

Dr. Jim Dahle:
Yeah. I fully admit I am not a talented shopper. I shop like a hunter. Find the animal, kill the animal, drag the animal home. That’s how I shop.

Josh Katzowitz:
That’s what she said. That’s exactly what she said.

Dr. Jim Dahle:
Yeah, it’s true. Can I relate? Well, first of all, it hasn’t been that long, since we were just like everybody else. And I hit my head this year, but I still have a pretty good memory. And so, I can certainly remember donating plasma for grocery money as an undergraduate. I can remember pinching pennies as a new attending. That first car I drove as an attending cost $1,850. I have not forgotten what it is like to have 20 things to spend money on and only enough money to spend on three of them.

I interact with five or 10 of you every day, usually by email, sometimes in person. And so, no, I’m not having trouble relating to the White Coat Investors in the least. Is my spending a little more free than it used to be? Yes. Am I still trying to get better at spending? Yes. Of the five money activities, earning, saving, investing, spending and giving, spending is still the one I’m not as good at. But I have lots of people to help me like Josh, for instance, sending expense reports.

What actually helps me a lot, and I may mention this a little bit later, is I have other people actually run the card. I have other people actually look at the expense. Like this trip we took to South Africa last fall. I didn’t know what that ticket cost until I was back from the trip for several weeks. And that helps me to spend money when I don’t have to actually spend the money. So, you do what you can.

Josh Katzowitz:
Okay, so you can still keep writing for us. You’re not fired.

 

HOW HAS YOUR MINDSET AROUND EXTRAVAGANT SPENDING CHANGED OVER YOUR CAREER?

Dr. Jim Dahle:
All right. Let’s do our next question. Everyone here on this panel is basically mid-career. And I’m curious over the last 10, 12, 15 years, whatever it’s been since your career started. How much has your mindset changed about spending extravagantly since you got out of training and maybe had student loans, didn’t have as much money? Is it easier now for you to spend or do old habits die hard? Anybody can answer that. It feels like they’ve got a good answer.

Dr. Julie Alonso:
Okay, I’ll say both. I think old habits die hard. I definitely have seen my spending evolve over the past 15 or so years of my career. But still, if I’m booking a big trip or buying something, pressing that purchase button is painful. I have to psychologically work myself up and maybe justify it a bit to myself. So I think both.

Josh Katzowitz:
Maybe I asked a better question because maybe the better question is, do you feel guilty while spending? Because I feel guilty sometimes, even though even if it’s like I’m going to buy a t-shirt online for 15 dollars, it takes a really big effort for me to hit submit. I don’t know if it’s because of the guilt of some. It’s not really something I need or it’s more something I want. I don’t know if it’s a guilt thing or not.

Dr. Julie Alonso:
It sounds like an issue you can work on.

Josh Katzowitz:
Sounds like an issue.

What do you guys think?

Tyler Scott:
Yeah. For me, I have just learned I’ve come to know myself. I’m 40 years old now and it took me this long to really know who I am and own that and love that and not feel shame or guilt about my weaknesses and feel proud of my strengths. I am inclined to be a saver. I am inclined to worry and plan for the future and look ahead. I’ve come to love that part of myself.

Because I know that I need help, not unlike Jim, of people in my life willing to help me live now and experience the things I do want to experience in the present. And so when it comes to travel and traveling extravagantly, Megan is our travel agent. We went to Iceland for two weeks last year and she planned it and booked it all and told me not to look at the credit card statement and not to look at the report until we got home. We had the best time and I wouldn’t have booked the same trip if it had been left to my own devices. We had such a better experience because I turned over, I owned who I am, let my wife, who’s more spending inclined, which makes us a great team to have someone a little more saving oriented and someone more spending oriented. And that has helped change my mindset and help me live this life I know I want.

Dr. Adam Safdi:
I remember for me, as I went on in my career, I remember some of these milestones that I listened to Jim’s Milestones Millionaire podcast all the time. I remember when we paid off our student loans. This is another milestone might not be relatable to a lot of folks, but when we personally decided as a family not to have children. And reaching these milestones, Jim asks when people pay off their loans, what are you going to do with that extra money? I remember that mind shift saying, “Oh, I have a little bit of permission now.” I think that that helped to make it easier to spend.

 

COLUMNISTS POSTS ABOUT SPENDING

Dr. Jim Dahle:
Yeah, absolutely. Okay. Each of you have written a column at some point or another about spending. So, let’s look at some of these columns. Let’s bring up a quote from Genhee here in a column she wrote. Let’s bring this up on the screen. The column was called I Was a Doctor for 13 Years with an Eye Toward Luxury Before Starting My Financial Education.

She said “Breaks from work were spent enjoying the fruits of my labor as a single professional traveling the world, savoring fine dining and amassing a fun but tasteful shoe collection. At that point, I knew so little financially that I embarrassingly can’t recall what securities my financial advisor used for my portfolio.” Well, now that you’re financially literate, Genhee, how has your attitude about spending changed?

Dr. Genhee So:
Well, Jim, as you can see with the shoes that I’m wearing today, I still have zero difficulty spending extravagantly. But what financial fluency really taught me was to be able to spend with intention. And so, now that I have a very clear plan and roadmap of what I need to save to reach financial independence, I know exactly how much I have left to spend. And when you can see the positive results of good saving habits and a clear plan, then you can spend so much more freely and have so much more fun doing it.

Dr. Jim Dahle:
Yeah. Okay. Let’s bring up the one from Adam here. “Financial tasks when you are childless or child free by choice. Of course, you should save enough money to meet your retirement goals, but then spend extravagantly on the things you love like flying first class and do it. I feel zero guilt for buying business class, life flat ticket for overseas flights, like taking luxury cruises, do it.”

Adam, in that column, you said that on a luxury cruise to Alaska and your husband were some of the youngest passengers on the trip. How do you balance taking these awesome luxury vacations when you’re in your 30s and 40s and still saving up for retirement this day?

Dr. Adam Safdi:
I put the principles in practice that you and this team preaches all the time. We pay ourselves first. We as a family decided 30% is what we want to set aside for retirement. As Tyler talked about in his talk yesterday, he has squirrel funds. We put money into squirrel funds for expected future expenses.

When there’s a bonus that comes along with my awesome job, thank you, I’m not ashamed to spend it. As Dr. Grumman referred to yesterday even if you’re scared of dying old and broke, you still have to yellow with some time that you have. That’s what we try to do.

Josh Katzowitz:
But what struck me about that was the next line was about how you guys were the youngest on this trip. I don’t know if that helped you with the mind shift. Like maybe these people, maybe this is their first time ever doing something like this. And I’m in my 40s or 30s or 20s probably. And you were doing it then. So was that just kind of reinforce the idea of yellowing a little bit?

Dr. Adam Safdi:
It reinforced, again, going back to what Jim says all the time in retirement, there’s go go, slow go and no go years. I don’t necessarily want to wait until I’m retired to experience those years. And if there is a hiking on an Alaskan glacier, I want to be young and fit enough to do it and not just look at it from afar.

Dr. Jim Dahle:
Yeah. Having spent three weeks of my life on an Alaskan glacier is not as awesome as they make it sound that way. Okay, Julie, now we’re going to bring yours up here. Let’s get it up there. She wrote a post called Justifying and Cash Flowing a Selective Extravagance.

“I framed my mindset in the context of this being a much more expensive year than average and allowed myself to accept that idea, a selective extravagance, if you will, that aligns with our life goals. I had to psychologically accept the thought that it was okay to spend on something that was a once in a lifetime event.” And I’m super grateful for this event because I went to it. It was a heck of a party. Tell us about that Julie.

Dr. Julie Alonso:
Well, this was in reference to my twins, Bar and Bat Mitzvah, and those are our only kids. I figure I already got a two for one deal on that. I mean, seriously, because of that, we were only going to be doing one of these. So it did help to justify that a bit. And truly going back to what I said about experiences and relationships this was an opportunity for us to bring almost all of our loved ones, friends from across the world, across the country, family members from all over together for a joyous occasion. And you don’t get too many opportunities like that.

I was able to justify that in that sense. And we value that as well. We go to every family or friend wedding that we can medical school reunion, high school reunion. We’ve been to all those events because that gives me a lot of joy. And I feel like you can’t get that value from a lot of things in life, a lot of other things.

Josh Katzowitz:
Was it hard to pull the trigger? You said it’s hard to pull the trigger sometimes to spend? Was it hard to pay the caterer or whatever?

Dr. Julie Alonso:
The catering bill was painful. Food is expensive.

Dr. Jim Dahle:
It was really good. So Josh invites Katie and I to come to this Bar Mitzvah. And I don’t think he expected us to say yes.

Josh Katzowitz:
It was a courtesy invite for sure. It was “Don’t show up and make sure you send us a gift.”

Dr. Jim Dahle:
It was an epic, epic party. It was something. Okay, let’s go to Tyler’s now. He wrote a column, How Much We Make, Save, and Spend as ‘Moderate Earners’. And I love this term Moderate Earners. We batted this around the room for like an hour saying we can’t call people low income physicians anymore. We’re going to call them moderate earners.

And so, it’s a term we use at White Coat Investor all the time. But it’s a great term because it really does describe what it is like to be in that space where you’re making $150,000, $200,000, $250,000, those sorts of things that lots of physician families are. But it’s a different life than when you’re making $800,000 as a surgical specialist.

He wrote this column saying, now let’s look at how we sliced up our $297,000 in 2023. We have four stops on our cash flow train to help us determine how to slice up our income, pay ourselves first, save for future expenses, pay the bills, spend the rest. How’d you come up with that plan?

Tyler Scott:
Yeah. Well, we wanted a cash flow plan that we knew would help achieve our retirement goals, but that also didn’t feel restrictive or constraining. We wanted to have the security of sharing up the long term, but infuse some YOLO and some joy along the journey.

And so, we utilized this system. This is not my idea. This is something I learned from Sarah Catherine, who gave the keynote this morning. The first stop on the train is to pay ourselves first. We set our savings rate first. We identified how much we need to set aside to retire when we want. Then we set money aside for future expenses and our squirrel funds so that when the big home repair, the health care expense or the new car came along, we were already ready for that. We put our bills on auto pace and those just happen automatically. And then we get to spend the rest like no questions asked, just joyfully.

That has given us the balance we hoped for of living the vibrant life we want now and being totally certain that our long term goals are not going to be compromised. It’s been just an incredible way to relate to our money. It’s given us the permission to live and spend extravagantly.

One of my favorite quotes, my tagline on my Bogleheads signature is “Be generally frugal and selectively extravagant.” One of the first things I read from you, Jim, in 2018. I have lived that way, generally frugal, selectively extravagant. And this system’s helped us do that.

Dr. Jim Dahle:
Awesome. Still good advice. Still works. All right, Josh, let’s get into our annual shouting match about you buying a Tesla. You wrote this column in 2022. Let’s talk a little bit about that. Shall we? Have you paid it off yet?

Josh Katzowitz:
No, it’s not paid off yet.

Dr. Julie Alonso:
It’s a very low interest.

Josh Katzowitz:
All right. So here’s the deal. I’d never had driven a new car before. My first car was a 1984 Chevy Cavalier with one of those push button radios I got from my grandparents. No AC. I lived in Atlanta. It was not good. Then I had a Saturn, which I drove into the ground. 200,000 miles on a Saturn. That’s pretty good. And then I had an old used Toyota Camry. I drove that for a long time. I actually sold that to a junkyard for $50.

And then I used her Mazda CX-9 when she got a new car. And I kind of drove that in the ground, too. I thought I earned it. I earned a new car. I earned a Tesla. And financially, we talked a lot about whether or not we should just keep the Mazda for another couple of years. We actually talked about with our kids.

Ultimately, we decided that because of Tesla, this is free. This is pretty… Okay, not to get political.. It’s in the before times, it’s in the before times. It’s a little bit different now, but the safety features are great. We like the fact that it’s an EV. And so, we like that. And then it goes fast, which is awesome. All that I felt great. I think we felt great about purchasing a Tesla, but that wasn’t the real problem. The real problem was what? I financed it.

Dr. Jim Dahle:
Well, no, the problem was not that you financed it. The problem was you told them you financed it.

Josh Katzowitz:
I did. Sometimes you’re right. You write a column and you don’t know what’s going to hit or does one little line in there cause hate mail to come at you for days and days and days. And that was the fact that I financed it.

Dr. Julie Alonso:
We can afford to pay it off today, but it doesn’t make sense because the interest rate is very low.

Josh Katzowitz:
This is Jim and I convert my Tesla in Austin after I gave him a thrill ride.

Dr. Jim Dahle:
All right. Well, that wasn’t necessarily the reason why you were not super happy about this column. There’s another reason you weren’t happy about the column, the reason you had to amend the title, and that may have been related to this column.

Josh Katzowitz:

Yeah, I started with the headline to my column, which was, I bought a Tesla. No, this is not an April Fool’s joke, because this was an April Fool’s joke from Jim in 2021. This is probably one of your most famous columns.

Dr. Jim Dahle:

Well, the best part about this is I’m still getting emails asking for advice for people buying Teslas. They want to know what features I got on the Tesla, whether I still like it, I get all these things. Isn’t this a great Instagram job? I don’t know if you saw the license plate, but it’s like WC Investor. This is somebody’s Tesla who’s in my neighborhood on the street. That’s what this was.

Josh Katzowitz:
That kind of kicked off the annual tradition that Jim writes an April Fool’s Day post. Like this, this was funny. People got fooled, I think. And then we continued on with that tradition.

Dr. Jim Dahle:
Yeah, we’ve done that every year now. Here’s the 2022 version. “A short in Ethereum Helped Us Make Payroll.” I think these April Fool’s Day posts are so insane that no one’s ever going to believe it. But that is not the case, apparently, it turns out.

Josh Katzowitz:
Now, I remember we were in Austin, Texas at Gus’s Chicken trying to figure out the next April Fool’s and we’re like, “Well, WCI is going to put together or release a meme coin. Or you’re going to do an NFT? How ancient does that sound now, the NFT.

Dr. Julie Alonso:
You’re giving away all the ideas.

Josh Katzowitz:
Well, we can’t do NFTs anymore because NFTs are no longer. But then you decided, “No, let’s just do this one, shorting Ethereum.” And I think people believe this one too, didn’t they?

Dr. Jim Dahle:
Yeah. Oh, yeah. Well, I think a lot of people tuned out after a paragraph or two. They’re like, I don’t want to read anything about Ethereum. Nobody even found out we didn’t short Ethereum because they never got to the end of the post.

The next year was “Why and How We’re Disinheriting Our Kids.” This one was a lot of fun to write. And I made all the kids read it. They weren’t sure if it was an April Fool’s joke.

I really enjoyed this. I had such a good time writing this one that the next day, April 2nd, 2023, I wrote the post for 2024. And I’m like we’ll make it just as ridiculous as all the other ones. There’s no way anyone’s not going to realize when they read the title on April 1st that this is an April Fool’s joke. And we ran this column. And nobody thought it was funny.

Josh Katzowitz:
It did not originally say April Fool’s. It just said “PSLF canceled!” And that was it.

Dr. Jim Dahle:
Yeah. We added the April Fool’s later in case people find this post on some other day of the year.

Josh Katzowitz:
We really thought this was a good idea.

Dr. Jim Dahle:
I really thought this was a good idea. Remember, this is 2023. Nobody’s talking about canceling forgiveness at this point. Everything’s getting more and more generous every year. I thought it was pretty funny. By the time it ran a year later, some people thought it was funny.

Josh Katzowitz:
The staff thought it was funny. That was it. Nobody else thought it was funny.

Dr. Jim Dahle:
Yeah. That was our last one. And so, we have a poll for you. Those of you who have your phones, your apps, you can answer this poll. Let’s put the poll up on the screen here. And the poll is very simple. Should we continue this April Fool’s Day tradition? You’ve got a number of choices on your poll you’ll find in your app. Yes, it always fools me. Yes, but I always figure it out before the end. Yes, it’s a funny tradition. No, it hurts your credibility as a financial website. No, I don’t like to be tricked. Or no, it never makes me laugh. It’s kind of stupid.

Josh Katzowitz:
Now, keep in mind that this “PSLF Canceled” was one of our biggest traffic days of the entire year. From a traffic and engagement perspective, it was fantastic. It was a huge success.

Dr. Jim Dahle:
Apparently most of the people here at WCICON are perfectly fine with this tradition, even though we got plenty of hate mail about that particular episode. We’ll try to be a little more careful about what we joke about at WCI.

 

AUDIENCE QUESTIONS

Dr. Jim Dahle:
Okay, let’s get the mic box out. Let’s take the catch box out. Okay, this is padded. So if you get hit in the head, it probably won’t kill you. But let’s make sure if you throw it to someone, they’re looking at you and you actually make eye contact first. Don’t throw it from the strap on the bottom. Just throw it like this.

Okay, who wants the box? We’re going to do a mix of mic box questions. And we’re going to do a mix of the ones you guys are putting in on the app. And they’ll get funneled to me here on the iPhone. I saw somebody back here. Who’s got a question? Ready? Here we go. My first toss.

Tyler Scott:
Good catch.

Dr. Jim Dahle:
All right.

Speaker 1:
How do you get your spouse or other significant partner involved in a budgeting process if they have no interest in that?

Tyler Scott:
Hypothetically.

Speaker 1:
Hypothetically.

Tyler Scott:
Yeah. Yeah. For those who might be interested. For us, this is more my area. I care about this and Megan cares less about it. The way that we got involved was talking about how much we could spend freely and without regret. That was something that really resonated for her.

I talked yesterday about what I call the scarcity gremlin that sits on the shoulder. This gremlin shows up. Some of us were in childhood based on our upbringing. Sometimes it can be in training when money is low that kind of whispers to us, you’re out at dinner and you spy the raspberry cheesecake. And the gremlin’s like, “You can’t afford the cheesecake. Don’t eat that.” Or you see a cool jacket at REI that you want and the gremlin tells you no.

And that connected for Megan. I said, let’s talk about a way to when you have those moments that you can get the cheesecake, you can buy the cute shoes in the window and not have any shame or regret or anxiety about that. And so, that’s what worked for us was this notion of totally guilt free abundance mindset.

Dr. Adam Safdi:
For me and my spouse, it was just talking about our goals. We were working really, really hard and we sat down at dinner after a long day for each of us and it was just like, “Do we want to keep doing this forever? – No.”

Okay. So what is our shared goal? I’m more into the investments and things and he might not be into that as much, but really just making sure you have the same goal in mind and just slowly introducing things a little bit at a time. “Oh, did we go a little heavy on the credit card this month? Let’s talk about that.”

Josh Katzowitz:
What about us, Julie?

Dr. Julie Alonso:
Yeah. Well, I was the one or am the one who manages most of our money, keeps track of things. I’ve always liked math and such. And even back in the day, we used to watch Susie Orman together. We loved the “Can I Afford It?” segment that was about spending extravagantly.

I started reading WCI, I think probably around 2014, 2015 and started doing all the stuff it said to do. Do your backdoor Roth. I opened an individual 401(k) along with my regular work. I had multiple income streams, all those kind of things, started investing more taxable and such.

I was trying to get him interested in this stuff. But it was a bit of a challenge. And maybe you can talk more about that. But it took a couple of years, three, four years. And I was like, “Hey, you should read WCI.” There was a button that said “Start Here” at that time. I don’t know if it’s still there. It was the top 10 basic introductory articles. And he finally one day did it. And then it led to this job. We’re very blessed by that.

Josh Katzowitz:
My version of the story is a little different. No, it’s probably not much different. When 2018 New Year’s Day rolled around, I’m not a New Year’s Resolution guy. But I decided to make a New Year’s Resolution, maybe 2019. I decided to make a New Year’s Resolution to learn more about finance, because at some point, it was like, “It’s kind of unfair that Julie has to do everything.”

She turned me on to White Coat Investor. I started reading blogs and listening to podcasts, watching some, we still have that Suze Orman background. So I wasn’t totally ignorant. But yeah, then eventually, WCI said they needed somebody who could do this job. And I said, I think I could probably do that. I can’t remember if I’ve mentioned this before but one of the questions that they asked me in my interview, I could do because I was a journalist. I knew how to do be a content director.

I think Katie asked me the typical “What’s your biggest weakness would you say?” One of those questions, which everybody probably hates getting. I said, probably the content. Which I don’t know if that was a good answer or not. Turned out it was an okay answer, I guess. But for me, I need to at least be able to have a conversation with my wife and know a little bit so she feels a little more supported. And so, that I just know more things.

Dr. Jim Dahle:
All right, let’s take one question off the app here. And this one is “How do you decide what budget to give your teenager? Do you give them cash or a credit card?”

Dr. Julie Alonso:
We have teenagers. My kids have a green light card. We got it for them when they were about 12. And they do get an allowance on it every week, like $10. I will say neither of them are spenders, though. The money has just kind of accumulated. I’m like, “Should I still be giving them this allowance or not?” They’ve started now that they’re getting out a little bit more. They’re in high school, if they go out to roller skating, buying their own snacks or paying for things like that.

But neither of them are really spenders. They don’t ask for a lot. Either we’ve modeled that or they just don’t want a lot of things. But we do have the green light card. They have a teen Venmo account. I don’t think they’ve actually ever spent money on it. They get pet sitting and babysitting jobs paid through Venmo, things like that.

It’s worked out well. It’s easy for them to manage their own money. They can log onto the app and look at their balance. And we’ve donated a portion of it to charity, like my daughter donated a portion to the Humane Society a year or two ago. We try to do that.

Josh Katzowitz:
What about you when your kid becomes that age?

Dr. Genhee So:
Well, I’m listening to you guys for the advice. My daughter’s 10. But the funny thing is, now that she hears me, I’m just writing columns about finance and listening to you on the webinar. She’s actually starting to become afraid of spending money and she’s a bit more hyper aware. Yeah, I think we’ll see it’ll be sort of a balance of making sure that she understands value and being something that she earns and that she works for, I think. Hopefully that’ll kind of set her on the right path.

Josh Katzowitz:
Tyler, do you talk to your kids? Your kids are a little bit younger.

Tyler Scott:
Yeah, my girls are about to be 13, 11 and 9. And we pay for grades, which may be controversial, but it’s the closest proxy we can think of. We talk to them about that’s their job. That’s their 09:00 to 05:00. And it acts for us as a corollary. If you excel at your job, then your compensation will increase.

And so, we pay based on grades and there’s a multiplier if they get straight A’s or their citizenship is good or if they do extracurriculars as well. And this is probably a bad thing, I pay interest. They get a 10% monthly interest rate on anything that’s not spent.

I had to do that because they weren’t really getting stoked about having $6 and earning like 38 cents as a 5.5% annualized rate of return wasn’t quite getting through. We had to go to, “I had $10, now I have $11.” That got through and it’s a price worth paying. Hopefully I can teach them over time about reasonable return assumptions. That’s how we handle it.

Dr. Jim Dahle:
As I look around the stage, I realize I’m the oldest one on the stage. I’m the only one making catch up contributions this year for sure. But we’ve got one in college and we’ve got a couple of teenagers and one in grade school. We get real serious about the budgeting, about the allowances. They turn 16 and start driving. They get a lump sum of money and this has got to cover all your gas, including taking your younger sibling to school. It’s got to cover all your clothes, et cetera.

And we find out very quickly which of our children are spend thrifts and which ones are cheapskates. We’ve got one of each so far. And it’s been a very interesting journey, but we don’t give them a credit card or anything. They’ve got their debit card for their checking accounts. And I think that’s what they’re using when they buy gas.

But to be honest with you, I don’t know. Katie manages a lot of that. She does a great job with it because they are definitely financially literate when they become adults. Our kids sit in the mandatory financial literacy class at the high school and they ask them, “Okay, who knows what a Roth IRA is?” And my kids raise their hand and they look around and realize they’re the only one with their hand up. The teacher’s not asking who has a Roth IRA. They’re asking who knows what it is and they’re the only ones. So you can definitely teach your kids stuff and you don’t have to teach them very much for them to know a whole lot more than their peers.

All right, let’s get the bouncy box moving around. Who else has a question?

Josh Katzowitz:
It doesn’t have to be about spending either. It can be about whatever you want.

Dr. Jim Dahle:
Yeah, we got all kinds of questions. I’ll start asking these questions coming in on the app if we don’t move the bouncy box around. But it’s a lot of fun. Eye contact. Remember, that’s the key before we throw this thing. Eye contact. All right. What’s your question?

Speaker 2:
Can you explain the mechanics of the squirrel funds? The Ally or SoFi, how the mechanics of that work?

Tyler Scott:
Yeah, just the mechanics of squirrel funds.

Speaker 2:
Yeah. Yeah.

Tyler Scott:
I have an account at Ally because it pays a good interest rate and it allows sub accounts, which at Ally they call buckets. We’ve identified our various episodic expense categories. Travel, home, cars, health care, holidays. I also have a bucket for my future backdoor Roth contributions so that every January $14,000 is accumulated so that I’m ready to do those.

And then I just set up an automatic monthly transfer from my checking account to each of the buckets. And that happens on the 12th of each month. And then once the expense arises, which may not be every year or may not be every 10 years, like we keep our cars 15 years at least. But when the car purchaser comes up, I pay for it or the large expense. If I can pay for it with a credit card and get my points or my cash back, I do that.

And then I reimburse myself from the Ally bucket back to the checking account. So if I bought a $25,000 car, I move $25,000 back to the checking account, then I just pay off the credit card. And the automatic transfers never stop. The money just keeps building up in each bucket so that when the large expense comes up one day, we’ve already got the cash set aside for it.

Dr. Jim Dahle:
Okay. Let’s take one off the app here. And this one’s really good for the topic of this conversation. “Any tips for transitioning from the “live like a resident” phase to the next step? How do you know when it’s time to quit living like a resident? And how do you do it?

Dr. Julie Alonso:
I had kids when I was still in training, so I think it made me more frugal. We were living on a fellow salary and two incomes, but still not an attending salary. I think it was kind of gradual. We were still saving to buy a house and other things at that time. I think it took me at least four or five years to really feel like I could start maybe spending a bit more on vacations and such. I think just having a little bit of a gradual mindset shift and giving yourself some time to become comfortable with that idea that you can loosen your purse strings a little bit.

Dr. Jim Dahle:
Anybody else? Tips on leaving the “live like a resident” phase?

Dr. Adam Safdi:
For us, it was what I alluded to earlier, that mind shift of when the loans were paid off and that payment wasn’t going to loans anymore. And at the end of the next year, I saw our checking account was higher than I expected it to be. I was like, “Oh, I guess I don’t have to look at all the vegan meals on the budget websites. I can order some food or we can start planning for a luxury cruise.”

For me, it was that visual cue of the checking account balance being higher and saying, “Okay, now we need a plan for this.” Because if you don’t have a plan, then it’s just going to sit there in the checking account. It’s not good.

Dr. Jim Dahle:
Fail to plan, plan to fail. Okay. Let’s pass the bouncy box around. Where’s it at? Who wants it? Who’s got a question? All right. Now everyone’s afraid to hit each other in the head. I gave too many cautions. It really is pretty soft if you get hit in the head.

Speaker 3:
All right. I’ve been wondering, should you calculate or should you consider your real estate equity when you come up with the number of 25X in order to retire? Or that amount should just be in the taxable account?

Dr. Jim Dahle:
Are we talking about our home that we live in or are we talking about the equity in rental properties?

Speaker 3:
Equity rental property that you’re still paying the mortgage on.

Dr. Jim Dahle:
Okay. So, how to consider your rental property equity when you’re determining if you’re financially independent or not using a 25X kind of rule. Anybody got thoughts on that, Genhee?

Dr. Genhee So:
For us, our family is diversified across real estate, stocks, bonds. And then I guess for Canadian, the equivalent of government, I guess your equivalent of Roths and 401(k)s. And so, my kind of founding principles, I always try to make sure that I look at our wealth in its entirety and as a blueprint. And so, we have a bird’s eye view. We know how much is in which accounts, including the real estate. And that way, if we know how much is where and what the government climate is with taxes, then we have a good idea of where to pull money when and where to invest to make sure that we’re always mitigating tax to the best that we can and that we’re making sure that our dollars grow. I always look at not just the account in isolation, but also as one piece of a larger puzzle.

Dr. Jim Dahle:
Is it true that your portfolio is 20% stocks, 20% bonds, 20% real estate, 20% oil and gas and 20% ice and snow?

Dr. Genhee So:
A little bit more on the ice and snow.

Dr. Jim Dahle:
I think that’s the way to consider it. It can include it. It’s investment money. I wouldn’t include your home equity in your home, but I would include the equity in your rental properties. Now, if you decide to take those out and just consider the cash flow and make a calculation based on cash flow, then obviously you’re calculating in a different way, but it’s your ability. You can decide how you want to calculate that number. Nobody else gets to tell you how to do it. We just can tell you some reasonable ways that other people do it.

All right. The other questions, we pass the box around. Who else has a question? Right up here. Let’s give it a toss. Everybody between you look this way. Touchdown, beauty.

Speaker 4:
The 4% rule assumes, I think, 30 years. If you retire early, you may outlive 30 years. So maybe that doesn’t make sense if you’re retiring early.

Dr. Jim Dahle:
The question is, how much do you dial back your withdrawal rate if you’re retiring at 50 instead of retiring at 65? And you need the money to last longer than 30 years.

Tyler Scott:
Yeah, there’s no right answer. It has to be what brings you peace of mind. But you’re right that the Trinity study that gave birth to the 4% safe withdrawal rate assumed that the person works until 65 and died at 95. That 4% safe withdrawal rate is presuming a 30-year retirement and baking in even bad sequence of returns during that time.

And so, we do these plans for people that say, “Hey, I want to be financially independent at 55.” We use a lower safe withdrawal rate calculation because if the money is going to last longer, then you have to take out less of it if you expect it to last longer.

And just because you retire at 55 does not mean you’re going to die at 85. Hopefully, we still plan on dying at 95. So now we’re planning on a 40-year retirement. We would want to operate on a 3.5% or 3% safe withdrawal rate when we’re doing our calculations now. Does that answer your question? Is that what you’re getting to?

Dr. Jim Dahle:
Of course, 3% is an incredibly conservative number. Because most of the time, the worst-case scenario doesn’t show up. That’s the truth. Most of the time, there is no sequence of returns risk. And the truth is most of the time, you can take out more than 4%. Your money lasts 30, 40, 50, 60 years. Because on average, after 30 years, if you take out 4% adjusted for inflation, historically, on average, you die 30 years later with 2.7 times what you retired with.

The only reason you’re dialing it back is because you’re worried you might have a bad sequence. And if that doesn’t show up, you can make adjustments and you can spend more. And there’s all kinds of studies out there. There are people who make their entire living talking about nothing but this, how you adjust it, how you take money out in retirement. But the truth is anything reasonable is probably okay.

So yeah, dial it back a little bit. But when we’re talking about dialing it back, I’m not talking about going to 2%. If you get on some internet forums, people are saying, “2% is the new safe withdrawal rate.” Well, those people are going to make their heirs very happy. They’re really going to appreciate that 2% withdrawal rate.

Josh Katzowitz:
And we do have two columnists who write about retirement. One is Anthony Ellis, who was actually in Orlando at WCICON last year. He retired, I think, when he was 58. A little bit later than maybe a FIRE person would.

But one of our new columnists, Erik Hoffmeister, is retiring, I think, in next month, March. He’s retiring at the age of 47 and his wife is 43. So, he’s already written a few columns about that and about how he plans to live the next 40, 50 years without making any more money. Well, that’s not really true, but retired and what that means for him and how he’s going to do that. Check out Erik Hoffmeister and check out Anthony Ellis. And there’s a lot of content those guys produce.

Dr. Jim Dahle:
Okay, let’s take one off the app here. Your opinion on investing with Berkshire instead of an index fund. We’re talking about buying the company Warren Buffett controls, just buying the stock of Berkshire Hathaway because it owns so many different companies rather than buying an index fund. Thoughts on that?

Tyler Scott:
I think I’m in safe company here. We don’t want to buy individual stocks. That is a reasonable position. If we believe in how index funds work, we can’t pick the winners or losers effectively.

Dr. Jim Dahle:
But it’s Warren Buffett.

Tyler Scott:
Hey, the Oracle of Omaha, what could go wrong? Well, he wouldn’t want you to do that. That’s something I point out to people. He doesn’t think that’s a good idea. But I get the premise. If you’re owning an individual stock, a company that is that diversified and owns that many different things is better than taking a flyer on some random next AI tech. So, it’s not irrational. And people really like that it doesn’t pay dividends. So it’s fun in the taxable account.

But the premise. If we’re applying for adopting principles and maintaining our financial, our written financial plan, we don’t buy individual stocks. So, it’s far from the worst one. It’s got some trade-offs, but I certainly don’t own Berkshire as an individual security.

Dr. Jim Dahle:
Anybody else have a different opinion about Berkshire? Okay, let’s toss the box. Who else has a question out there? Raise your hand. We’ll get the box to you. Oh, that was an easy one.

Speaker 5:
This is a question for Jim. Since your fall, have you changed anything in your life?

Dr. Jim Dahle:
Yes, I’ve changed what I do with my left hand three times a day for about 30 minutes. Yeah, I do a lot of PT in my life. I think about risk a little more carefully, not because I’m worried about getting hurt or having to have surgery, but because I don’t want to do PT again.

All right, let’s toss the box. Who else has a question?

Josh Katzowitz:

It was interesting too when that fall happened with the company. We’d always had this plan of “What happens if Jim gets hit by a bus?” We didn’t have a “What happens if Jim falls off a mountain?”

Dr. Jim Dahle:
That is what the plan’s called now though.

Josh Katzowitz:
What happens if Jim falls off a bigger mountain?

Dr. Jim Dahle:
The company did great. The company did great. A lot of people didn’t even realize I fell off a mountain. They’re just like finding out today at the conference. So, the written content issue is kind of already managed. Look around. There’s 13 columnists besides me. We’re not going to have any trouble creating high quality written content going forward without me.

The podcast hosting issue was a little bit trickier, but those who remember last fall, we had some great episodes hosted by guest hosts. And so, those were the big concerns because they’re the big pieces where my face gets out there. And I think the philosophy of the White Coat Investor has been spread throughout the company enough that the other decisions of how to run the company and who we’re going to take as advertisers and those sorts of things has already been set. I’m impressed with how well the company did, but I wasn’t surprised.

Josh Katzowitz:
We have so many columnists and we probably have three months’ worth or maybe even more of Jim content that has not been published yet. Even if you were to fall off a bigger mountain, nobody would know about it from the content side for probably another six months.

Dr. Jim Dahle:
Yeah. Especially if we start mixing in the old stuff that you guys haven’t read yet anyway. So, it works well. Okay, let’s take another question off here. How do you manage your inner circle, your parents, in-laws and friends who don’t quite understand our financial goals or judge us on our saving or spending? Genhee, you’ve been quiet. Inner circle, parents, in-laws, friends. How do you manage that?

Dr. Genhee So:
Yeah, family is interesting. My policy, I think, especially as I was doing a real big, deep dive into finances and learning about it was just to let them know my enthusiasm and my passion for learning about this. And if they had questions, then I would entertain them and we would have a conversation about it. But I would let them initiate the conversation with me.

And as far as sort of judgment is concerned, as far as how much I made and how much I earned, I think in my family, it was always nice because there was a respect there for if you’ve made the money, then you can spend it and save it as you like. So, pretty lucky that way.

Dr. Jim Dahle:
Anybody else? Inner circle. This is no small feat. It’s relationships. It’s way harder than money.

Dr. Julie Alonso:
Yeah, I think it can be tricky. We have friends who make more than us. We have friends who make less than us. I think you have to have some awareness and be sensitive to those issues. We know somewhat which friends we can talk to, maybe a bit more about some of our financial goals or some of the things that we’re learning at places like WCICON and some who are maybe not as interested. Sometimes I might bring something up in conversation, though, just to get it out there. But I think you do have to be sensitive to those income differentials with close friends and not put your foot in your mouth.

Josh Katzowitz:
Oh, geez. I always put my foot in my mouth. We do have some people in our life, friends who say things like, “Wow, you guys always travel”, which I don’t know how to feel about that. It almost makes me feel a little guilty, even though we don’t really travel that much. We’re not traveling once a month. We don’t have as much as this guy. That’s for sure. But it always feels a little weird when they say “You guys travel so much.”

Dr. Julie Alonso:
Yeah, but we value travel. Like we haven’t done a lot of home renovation projects because I’d rather go on a trip. My kids are going to be out of the house in the next couple of years. That’s my value. And I try to explain that when I can. And also I plan all of our travel. So I do try to get good deals on things and we use points and things like that.

Dr. Jim Dahle:
That’s weird. You like walking through the Louvre better than laying tile. So surprising. That’s what it is. Okay, let’s move into our lightning round. We’re looking for shorter answers. We just want your opinions on the topic. We’ll hit everybody. Let’s start with Bitcoin. Do you like it and do you have any? Let’s start on the far side and back this way.

Tyler Scott:
No, no.

Dr. Adam Safdi:
No, no.

Dr. Julie Alonso:
We don’t have any.

Josh Katzowitz:
No, no.

Dr. Genhee So:
No and God no.

Dr. Jim Dahle:
I love Bitcoin. I find it super interesting. It is fascinating. But I don’t put real money in Bitcoin. In fact, I don’t have any money in Bitcoin. I watch it from the sideline mostly because I have no idea what it’s going to be worth in a year, five years, ten years. I don’t know. My crystal ball is totally cloudy. And since the entire return depends on that question, I don’t own it.

Josh Katzowitz:
Do people here have Bitcoin?

Dr. Jim Dahle:
Let’s be honest. It’s the highest performing thing since it showed up on the planet. The Federal Reserve is even talking about having some Bitcoin. Is it adopted by more and more people? Well, I don’t know. It’s hard to tell if it’s being adopted by more and more people. When it goes up, it seems like more and more people are adopting it. When it goes down, it seems like fewer and fewer. I do know I can’t go out and use it to buy anything yet like they’ve been promising me since 2011.

But it’s still pretty cool to watch. And if you want to put some small percentage of your portfolio into it, I don’t have a problem with that. But if your portfolio is 50% Bitcoin and 50% NVIDIA, you’re not doing this right. I can tell you that.

Okay, next question. Travel hacking with credit cards. We’re definitely starting this one with you, Tyler. Is this something you do? Travel hacking with credit cards?

Tyler Scott:
I now infamously do not do that. Though I think I have always thought it is great for those who enjoy it. I think it can add real meaning and real value as a hobby and give people permission to travel in ways that they wouldn’t otherwise. I don’t think it has as large of an impact in a comprehensive financial plan as other areas. I’m very happy with my cash back.

Dr. Jim Dahle:
Okay, that’s too long for the lightning. So sorry. Travel hacking, yes or no?

Dr. Adam Safdi:
Slightly longer than lightning. I got burned by travel hacking in March of 2020 when I earned my Southwest Companion Pass and couldn’t travel for the next year and nine months. So no, don’t do it anymore.

Dr. Julie Alonso:
Yeah, I’d say I’m at an intermediate level. We’ve stayed at multiple hotels that we never would have spent the money on that were really nice in Paris and London and such based on points.

Josh Katzowitz:
I think it’s a balance. We do some of that. But I don’t think we’re going to go buy gift cards and try to get travel points that way. Although I’ve been listening to more podcasts about travel hacking, so maybe my answer will be different next year.

Dr. Jim Dahle:
Genhee?

Dr. Genhee So:
In my earlier career, I was obsessed with travel hacking and credit card points and stuff. But now I’m finding as you develop more wealth, the opportunity cost isn’t so awesome anymore. Yeah, I probably don’t look at it as much.

Dr. Jim Dahle:
Yeah, we operate at a one-on-one level. We got cards that pay us 2% back or 5% back on gas or whatever, but we’re not signing up for new cards every three months and trying to get the sign-up bonuses or anything like that.

That said, if you really enjoy traveling and you like that as a hobby, it’s not crazy to do. This is not foolish to do or anything. It’s just not what I choose to do with my time and energy. And at this point, it’s one of those things we’ve chosen to make our lives a little bit simpler than they have to be.

Okay, let’s talk about private equity or in the dental world, the DSO ownership. Is this good? Is this bad? Are we okay with it? Should we be fighting against it, kicking and screaming? Genhee, let’s start with you and go back across.

Dr. Genhee So:
I think it has its positives and negatives. I think for physicians, it’s difficult to maintain a level of quality. And I think it puts more strain on us from a business and income perspective. I’d say no.

Josh Katzowitz:
Yeah, I think for people who sell the DSOs or who sell their private equity, it’s a great thing for them. But for the world, it doesn’t seem like it’s a great thing.

Dr. Julie Alonso:
Yeah, we’ve had a couple of friends who’ve sold practices to private equity and have done quite well. So, for them, again, it can be positive. But I think they want to come in and make a profit. So, how does that affect the people behind the practice?

Dr. Adam Safdi:
I’m quite happy working for my not-for-profit hospital right now.

Tyler Scott:
Yeah, I think it’s concerning. I also think it’s inevitable. And so, learning to manage this transition to ensure that providers can have the autonomy they want and patients can have the outcomes they want is part of our job collectively as a community to help inform and have those conversations to manage those inherent conflicts of interest that will arise.

Dr. Jim Dahle:
Okay, last question. You get a one-word answer. Is it ethical to retire early as a physician or dentist?

Tyler Scott:
Absolutely.

Dr. Adam Safdi:
Yes.

Dr. Julie Alonso:
Yes.

Josh Katzowitz:
God, yes.

Dr. Genhee So:
A thousand percent.

Dr. Jim Dahle:
It’s your life. You get to live it the way you want.

Dr. Jim Dahle:
Okay, thank you so much for your attention today. We’re going to let the panelists get off here. We appreciate you guys coming and especially appreciate you contributing your voices to the White Coat Investor blog.

Megan:
All right, I hope you enjoyed listening to the columnists have that discussion. We have so many great diverse voices here contributing to the White Coat Investor to all the content that we’re creating for you and we hope that you enjoyed getting to hear from some of those people.

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Thank you, Gail. We appreciate that awesome review. And thank you to all of you. We really appreciate that you are spending your very valuable time here learning with us and building our community together. I know that it is. There’s a lot happening in life, whether it’s with your patients or your job or your family or working on yourself, whatever it is. It’s a lot. We recognize it, we see you, we appreciate you and we’re here for you.

Until next week, keep your head up, your shoulders back. You’ve got this and we can help. We’ll see you next time on the White Coat Investor podcast.

 

DISCLAIMER:

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Transcription – MtoM – 228

INTRODUCTION

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Tyler Scott:
Welcome everyone to episode number 228 of the Milestones to Millionaires podcast. Our guest today is going to be Wendel Topper. Wendel actually works with us here at the White Coat Investor behind the scenes on the podcast. He’s the audio and visual guru. And so, he has put together all of the podcasts you’ve listened to and is the hero behind the scenes along with Megan to bring this to pass each week for us. And we’re excited to talk to him today.

The sponsor for today is Bob Bhayani of Protuity. He is an independent provider of disability insurance and planning solutions to the medical community in every state and a long-time White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies.

If you need to review your disability insurance coverage or you just need to get this critical insurance in place, contact Bob at www.whitecoatinvestor.com/protuity. You can also email Bob at [email protected] or you can give him a call at (973) 771-9100.

Our summer sale is happening right now at WCI until July 3rd. We’ve got everything 20% off, the courses, books, merch, anything there on the website is 20% off until July 3rd. Use code SUMMER20 at checkout to get that discount.

 

INTERVIEW

Now we’ll get Wendel on the line and we’re excited to talk to him and celebrate some milestones. Thanks for joining us today, Wendel, on this side of the podcast for you, you’re always on the other side hearing it and putting it together, getting things edited. Thanks so much for joining us today. Tell us a little about yourself. Where do you live? How would you describe what you do? And tell us a little bit about your financial background.

Wendel Topper:
Yeah, I’ve worked for White Coat for going on I think six years now and I do all the audio and video stuff. So, if you guys watch YouTube videos or social media videos and you listen to the podcast, I take care of all that stuff on the backend. It’s been an interesting journey learning through osmosis, all of this personal finance stuff. But I live in Florida with my wife and got some exciting milestones that we’ve hit the last year or so.

Tyler Scott:
Awesome, excited to hear about that. Tell us a little about where you’ve come from financially, about your relationship with money growing up and then walk us into some of those milestones that we’re here to celebrate today.

Wendel Topper:
Yeah, I grew up relatively poor. My wife wasn’t much different. We always had a roof over our head and food to eat, but money was scarce. Money was always scarce growing up. And even the first couple of decades of my adult life, money was scarce.

It’s kind of hard to get out of that mindset. I’m super thankful to the White Coat Investor for the education that I have gotten and really been able to turn my financial life around in these last five or six years since I actually figured out what I’m supposed to be doing. Yeah, I’ve come a long way, I feel. And I’m excited of where we’re going from here.

Tyler Scott:
Awesome. From that background where you had that sense of scarcity growing up, I can relate to that. My mom was an elementary school teacher. My dad hung drywall. As I started to grow in my own academic and professional world, I didn’t really have a reference point. I resonate with you on that. And I think we both identify as moderate earners. I’ve written about that on the blog as a public health dentist and now a flat fee planner. I’m not personally in that demographic of a lot of our listeners of the high six-figure income. And I think you and I share that. But do you mind telling us a little about how much you make? How much is your household income and how do you view that income? How does that feel to you now?

Wendel Topper:
Yeah, last year was our best year ever. Our total gross was $167,000 between my wife and I. We both worked for ourselves from home and probably maybe $90,000 of that was mine and $40,000 of that was my wife’s and the rest comes from VA disability that I received from my time in the Army.

But how do I feel about it? I feel wealthy. Growing up, my mother was a real estate broker and my stepfather was unemployed for most of my childhood. You hear real estate broker, but it wasn’t like you’re thinking. It was rough.

Most of my adult life, I made $35,000 a year and my wife made something similar. To go from that sort of average American income of $60,000, $70,000 a year to now more than double that, I feel wealthy and I feel like we have lots of good things to do with our money and we’ve been doing good things with our money the last five years.

Super excited that we were able to pay off our house. We are 100% debt-free. We have a net worth of a little over half a million dollars. We’re half millionaires. We just bought a brand new car with cash this year.

Probably the thing that I’m most excited about is my wife was having a really, really hard time recently with work and burnout. Physically, sitting at a chair was just detrimental to her body because of some injuries she has. And she has been able to cut back by 90% her workload just to take care of her health. All of these things that we’ve been able to accomplish in the last year, it’s super exciting. Yeah, I feel wealthy on my low, moderate income.

Tyler Scott:
Wendel, that’s so cool. Congratulations on achieving those milestones. Those are meaningful numbers, in my opinion. They’re clearly significant to you emotionally and relationally. How did you get there from a place of feeling like you had not a lot going when you were a kid to feeling that experience of wealth now? Connect those dots from us. What were some pivotal learning points from you? What were some decisions you made individually or with your wife that, what do you attribute led you to be able to achieve these goals?

Wendel Topper:
The obvious answer is the White Coat Investor. Spending the last six years listening to every podcast episode multiple times with editing the audio and the video, there’s just so much information that I have absorbed through osmosis. And I didn’t really do much for about the first year of working for White Coat. I just sort of absorbed and watched.

And then I started taking small little actions to improve my financial situation. I am not a doctor and I can’t go out and get a job making $800,000 a year, but no matter where you’re at or what you make or what your finances are like you can always move in a positive direction.

And so, that’s what I started doing, just making small incremental steps towards goals that I found had value to me or us. One of which was paying off the house. And a lot of people would probably and have on this podcast I don’t want to use leverage. For us, the way that we grew up and money was scarce and you’re always on the verge of “What if I lose my house?” or “What if I lose this kind of mentality?”

For us, it was really important to have security, security base, or basic security in our life. We own our house and no one can ever take that from us. I am very debt averse. We paid off all of our debt and I am not interested at all in taking out any more debt. We started with Dave Ramsey’s snowball method, paying off this tiniest amount first, which for us it was a $300 credit card. We paid it off, great. And we paid off a credit card that had $1,000 on it and we just worked through that. And before we knew it every month our financial situation was just getting better just by taking those small actions every chance you get.

Tyler Scott:
That’s awesome. Those little steps, while mathematically maybe not profound, what I’m hearing you say is it created a sense of victory. As Jim says so often, personal finance is about 90% personal and about 10% finance. The math and the numbers matter and we spend a lot of time on the podcast and blog talking about numbers.

But really what I see in my life as a financial planner is it’s the emotions, it’s the behavior, it’s how things feel to people. I’m hearing you say that even paying off the $300 credit card debt felt like a win and that gave you some positive momentum to go to the next thing. Am I hearing that right? Or do you want to add any context or color how that felt for you, how that felt for your spouse? And what else would you say to those who feel like they’re not making huge gains on the finance, the numbers side and maybe are just feeling a little stuck on that part?

Wendel Topper:
Yeah, absolutely. It is so true. I think that personal finance might be 95% personal and 5% math. The more that I focused on that personal part and the less that I focused on the math, it’s easy to focus on the math. I like math, I’m a math-minded person. But stepping away from the math and focusing on the personal part is really kind of what turned the tide for us.

Realizing that the problem was not that I didn’t know the math. The problem was that my personal habits were not suiting my values. We talk a lot on this podcast about values and putting your money where your values are. I had to take a hard look at it. There are a lot of negative emotions for a lot of people surrounding money. Shame and fear and anxiety and embarrassment. If your finances are in a mess, it’s embarrassing. You don’t want to look at it. You don’t want to talk about it. You don’t want to talk about it with your spouse, much less on a podcast.

The big thing for me was realizing that the boogeyman is only scary in the dark. Once you shine a light, you’re not scared of the boogeyman anymore because he’s not there. And so, shining a light on my finances, looking at where we were, just starting a basic spreadsheet of our income and our expenses just to see where things are going, just to shine that light for a second, makes it much less scary.

And then just executing on any small, tiny, positive step. That’s what I would encourage anyone out there who’s listening. If you have negative emotions around your finances, shine some light on them. Just start tracking it. And then identify one tiny thing that you can do, whether it’s one extra payment on a car or sending an extra $100 to your student loans or anything, anything that you can do that’s a positive step. Take that action. And then when you have a little bit of extra money, take that action again. And eventually you’ll get there.

Tyler Scott:
Awesome, such actionable advice and cool to see how it’s played out for you to get you to a place where you’re feeling abundant, from a scarcity mindset to a place of abundance and gratitude and wholeness. What more can we ask for?

Wendel Topper:
That’s right.

Tyler Scott:
Yeah, we often talk about in personal finance that if we can just feel organized and intentional, that regardless of how much we make, that if we can know where all the dollars are and feel like we have our hands on the wheel and decide where the dollars go, that feels good. And then I’m hearing you say that that has been meaningful to you.

If you had to boil down one or two things that you think you did really well, specific tactical, we’ve kind of talked philosophically to this point, big picture are there one or two memories you have when you and your wife reflect on this of like, “I’m so glad we did that thing?” Can you point to one or two specific actions that you felt like turned the tide?

Wendel Topper:
Yeah, tactically, if you listen to the podcast at all, you’ve heard Jim talk about offense and defense with your finances. The offense is making more money and the defense is spending less money. And so, we attacked both sides of that.

Again, you’ve heard Jim say a lot of times, you overestimate how difficult it is to double your income. Well, we did that. I took that as a personal challenge. He says, it’s not that hard. Well, I’m going to show him, I’m going to try real hard. And actually, from my days of earning $35,000 a year, and I’ll earn $100,000 this year. I’ve tripled my income.

It was by changing careers. I used to have a completely different career and I’m in a completely different industry now. The steps can be difficult and sometimes they’re large. But attacking our finances from the offense side, increasing our income while not increasing our lifestyle.

And then from the defense side, my wife is excellent at budgeting and saving, taking dollars and throwing them under the mattress. And then I go and take them out from under the mattress and do things with them.

The other thing is just getting on the same page with her. Like I said, she’s always been excellent at saving. And when we met, she had, I think it was maybe, I don’t know, $18,000 in a savings account. And my mind was blown. How did you hold on to all that money? She’s just excellent at saving money and not spending it. But it was in her bank savings account, earning 0.02%. And she would show me her statements. And she’s like, “Look, I earned 37 cents of interest this month on my $18,000.” And I’m like, oh boy.

Over the years, she and I sit down and we have discussions about money. She doesn’t like math and she doesn’t like finance. But she understands that part of it is important. You can’t earn 0.02% on your money and get anywhere. But at the same time, we don’t have to be buying on margin calls and trading options and doing every sort of mathematical financial tactic in order to reach our goals.

We actually keep a lot of money in cash in a high yield savings account because that makes my wife very comfortable. It makes her comfortable that it’s FDIC insured and that we’re earning 4 or 5%. And she loves that I’m trying to get more of that money in the market where we can earn 8% on average.

But coming at it as like a team aspect of she needs to be comfortable with what we’re doing and I need to be comfortable with what we’re doing so that we have a shared goal. Those two things I think were really key for us.

Tyler Scott:
Awesome. Yeah, great collaboration between you two finding your shared risk tolerance and enacting an intentional plan around what works for you both. I love what you said earlier too about just shine a light on it. That the boogeyman is only scary till you put the flashlight under the bed and realize he’s not there.

I have an oncologist client who has said, people are more scared of wondering if they have cancer. Once they find out they have cancer, even if that’s bad news, that feels actionable almost. Okay, we can take it on. We have a treatment plan. We know what we’re going to do now. And in some ways, people’s anxiety goes down just knowing if the boogeyman is actually under there or not.

And it’s the wondering. It’s the laying in bed at night. “Can we patch the roof? How much more can we afford?” It’s the wondering that can be most anxiety producing. But when we shine a light and go look and make a plan, even if the news isn’t good, at least there’s something we can do about it. I’m hearing that in your story of taking it on, putting it all out on paper, having the conversations with your spouse about “This is what’s going well, this is what could be better” and finding a shared path forward is really cool.

Wendel, this has been so wonderful. I so appreciate you taking the time and joining us on this side of the audio and visual experience. I feel confident this will be a valuable addition to the milestones storyline. Is there anything else that’s on your mind or on your heart today that you want to share? Anything you wish we would have touched on before we sign off?

Wendel Topper:
I would just encourage everyone. My favorite word is “execute.” I would encourage everyone out there to go out and execute some positive action in your life. And once you reap the benefits from that, execute another positive action. And you will be surprised at how quickly your life gets really, really good.

Tyler Scott:
One step at a time.

Wendel Topper:
That’s it.

Tyler Scott:
Yeah, we’ll get there. Awesome. Well, Wendel, thank you for joining us today. Really appreciate your candor and your vulnerability and sharing your story with us. Have a great rest of your day. And thanks for all the magic you do behind the scenes.

Wendel Topper:
Thank you so much for having me.

Tyler Scott:
Wonderful, everyone. Thank you so much for joining us on today’s episode of Milestones to Millionaire. We’re going to turn it over to Jim to give us our Finance 101 on mutual funds.

 

SPONSOR

But first, a reminder that today’s podcast was sponsored by Bob Bhayani of Protuity. One listener sent us this review about his experience with Bob. “Bob has always been absolutely terrific to work with. Bob has quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications underwriting process in a clear and professional manner.”

Contact Bob at www.whitecoatinvestor.com/protuity or by email at [email protected] or by phone at (973) 771-9100 to get disability insurance in place today.

Thank you so much again for joining us and we’ll pass it on to Jim to learn a little more about mutual funds.

 

FINANCE 101: MUTUAL FUNDS

Dr. Jim Dahle:
A mutual fund is simply pooling money together with other investors in order to invest together. By doing that, there are a number of advantages. One of which is you get professional management of the portfolio, whatever you’re investing in, whether it’s stocks or real estate or bonds, you get a professional manager. You also benefit from some economies of scale and as long as you’re investing in a true mutual fund that’s publicly traded, you get daily liquidity and you can get out of that fund and turn your money into cash any day and the market is open.

But one of the main reasons people invest in mutual funds is simply because you get instant diversification. Instead of buying one stock at a time, you could be buying thousands of stocks at a time. And so, your investment turns out to be much more diversified.

This is the reason why mutual funds are the main investment in 401(k)s and HSAs and 529s and the vast majority of investors do and should use mutual funds for most of their investments. What makes it mutual? Well, it’s just multiple people working together. That’s why it’s called a mutual fund because we’re working together for the benefit of everybody.

There are two main strategies when it comes to mutual funds. One is an active strategy and the other is a passive or index strategy. When you have an active mutual fund, the manager is trying to beat the market. They’re trying to have higher returns and lower risk than the market itself has. And it turns out that’s kind of hard to do because there’s so many people out there trying to do it, making the market so efficient when it comes to pricing stocks or bonds or whatever, that it’s actually pretty hard to beat the market.

And so, for the last 50 years or so, the advent of passive funds has come along. And the strategy with a passive fund is just to buy all of the stocks and get the market return. And this is not that hard to do, so it doesn’t take a lot of resources or expenses to do it and eliminates the risk of underperforming the market.

It turns out when you look at the academic studies, that risk is actually pretty high. Over the long-term, even before tax, 90 to 95% of the actively managed mutual funds underperform a strategy of just buying all the stocks. And so, savvy investors generally use index funds, these funds that just buy all of the stocks in order to be successful.

Now there are closed-end funds and open-end funds. And almost every mutual fund you’ve ever heard of is an open-end mutual fund, but there are a few closed-end mutual funds out there. There’s really not a lot of reason to use them, but the difference between an open-end and a closed-end fund is all the money is raised and put into a closed-end fund at the beginning. Whereas with an open-ended fund, the fund can be bigger or smaller over the years, typically gets bigger as more contributions are made to it, at least if it’s successful. And so, that’s typically the fund structure you see out there.

These days, a much more common thing to see is an exchange-traded fund. Now with the traditional mutual fund, you can’t trade it during the trading day. If you want to get out of it or you want to get into it, that happens at 04:00 P.M. Eastern every day.

With an exchange-traded fund, you can get out any minute the market is open, you can get back into it a minute later if you want to. That has some advantages for traders, but there are a few advantages for an exchange-traded fund, and even for long-term buy-in holders, particularly in a taxable account.

Due to the way the shares of these exchange-traded funds are made, there’s an opportunity to flush some of the capital gains out of the fund to people that put these shares together called authorized participants. And so, all things being equal, you’re generally better off with an ETF-type structure if you’re investing in a taxable account.

Now, what makes for a good mutual fund and what makes for a bad mutual fund? Well, the first thing to look at is the underlying investments. What are you actually investing in, and do you want to be investing in it? For example, if you want to be investing in U.S. stocks, you can use a simple total stock market index fund. But if you wanted to invest in international stocks instead of U.S. stocks, that’s a terrible fund to invest in. So, you got to look at what is actually being purchased by the fund manager. That’s the first thing to look at anytime you compare a mutual fund. And you want to make sure they’re buying investments that you want to be invested in.

The next thing to look at is really who the manager is, what their track record is, and what strategy they’re using. If it’s an index fund, their strategy is just to match the market. And you can look back over the last few years and just make sure they’re doing that. It’s not that hard to do, but there’s a few index funds out there that aren’t all that good at doing it. The main ones you see from Vanguard and Schwab and Fidelity and BlackRock, they do just fine. And you’re fine to use those.

But if you’re considering using an actively managed fund, you better take a real careful look at that fund manager, what they’re trying to do, and how good they are at doing it. All of a sudden then the track record matters a lot, even though there’s no guarantee if they’ve outperformed in the past that they will continue to outperform in the future.

Perhaps the most significant indicator of future mutual fund performance is the cost of the fund, the fees being charged to you. The more fees you’re charged, the lower your performance is what the studies show. And so, you want to make sure you’re keeping your costs low.

And the truth is with the advent of very low cost index funds these days, investing is essentially free. If you’re going to pay more than a handful of basis points, a basis point is 0.01% of the money in that fund that year. If you’re going to pay more than 0.05 or 0.1, you’ve got to really be convinced that this fund and its strategy is worth the additional expenses that you’re paying.

Don’t ignore fees. Don’t ignore the costs of investing. If they’re not close to zero, you need to make sure you’re getting your money’s worth out of those. Mutual funds are just a way to work together with other investors to get a diversified, liquid investment that’s going to help you get to your financial goals.

Tyler Scott:
Thanks so much for joining us today, everyone. We look forward to seeing you next time on Milestone to Millionaire.

 

DISCLAIMER

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.





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