Paula Pant and Permabears | White Coat Investor (2024)

In This Show:

• Taking a Year Sabbatical to Combat Burnout
• Permabears
• Spot Bitcoin ETFs
• Prioritize Your Resources
• Milestones to Millionaire
• Sponsor
• WCI Podcast Transcript
• Milestones to Millionaire Transcript

Sponsor: WCI Financial Bootcamp

Transcription – WCI – 350

INTRODUCTION

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor podcast number 350 – Paula Pant and Permabears.

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QUOTE OF THE DAY

Our quote of the day today comes from John Jacob Astor, who said, “Wealth is largely the result of habit.” I think that's the truth. Just like maintaining a healthy weight is the result of thousands of decisions made over years, wealth is also the result of thousands of decisions made over years.

Thanks everybody out there for what you're doing. I had a colonoscopy yesterday and I'm pleased to report that I have the colon of an 18-year-old. No polyps, no tumors, no diverticula even. So I'm thrilled about that. 10 years before I got to go through that prep again. Thank you so much to the gastroenterologist and the CRNA and the nursing staff that helped me get that screening exam done. And I suppose I ought to thank my wife for scheduling it for me. I'm apparently three years late, but it turned out I didn't need it anyway. So there you go.

At any rate, all of you out there, whatever you're doing, whether you're scoping for dollars or whether you are taking care of cancer patients, or whether you're an attorney or a small business owner, whatever you're doing, thanks for what you're doing. I know it's not easy and a lot of times it's thankless work, but it's important work. It makes the world go around and you're touching the lives of other people.

All right, today we're going to be talking with one of our keynote speakers for WCICON24. If you want to come to WCICON24, you still can. We could probably figure out a way to get you in there in person if you want, but most people who are signed up at this point, the things in a couple of weeks are going to be coming virtually.

We're offering a code today just for you that'll get you $100 off. $100 off the conference, the virtual version, the online version. All you have to do is put in the code VIRTUAL when you sign up. You can register at wcievents.com.

You get all the content, even if you're not able to catch it as it runs live, we bottle it all up for you. We provide it to you in the form of an online course. You get CME for it, so you can use your CME dollars to pay for it. And this promotion, this $100 off deal, this lasts through the 22nd. If you're listening to this podcast on the day it drops, you got five days to sign up for the virtual conference. You can still sign up after that, but you don't get the $100 off. Again, that code is VIRUTAL. You go to wcievents.com to sign up. You know what a lot of people do? They come virtual one year, just kind of test the waters, and then all of a sudden next year we see them in person. Maybe that's you. If so, we'd love to see you either way.

Thanks for those of you who have been filling out our annual survey. This helps us guide the content we produce and provide for you. It helps us to determine which advertisers to partner with and which ones not to. We are guided by the feedback from the WCI community and the main way we have of getting that feedback, and we are going to get it in bits and pieces throughout the year, but the main way we get that is via our annual survey, whitecoatinvestor.com/survey.

That's different by the way, from the surveys that you guys can sign up for and get paid for. That's MD Survey. Actually, we're going to change it and add some more pretty links. I got a complaint about this. You can also get there with DO survey or physician survey as well these days. So, thats for those who want to do the paid surveys where companies pay you for your opinions. We're not paying you for your opinion about WCI. That's not actually true. You do get entered in a drawing, to get some WCI swag and the grand prize winner will get a free WCI online course. But that link to take our survey is whitecoatinvestor.com/survey. I hope that's clear.

INTERVIEW WITH PAULA PANT

All right, our guest today is awesome. She's been on the podcast before. She's going to be a speaker at WCICON this year. Let's get Paula Pant on the line.

My guest today on the White Coat Investor podcast is Paula Pant. Paula is the founder of Afford Anything. This is a blog. It's a podcast. It's online courses. She is a renowned motivational speaker and actually will be doing a keynote for us this year at WCICON, the Physician Wellness and Financial Literacy Conference. Welcome back to the White Coat Investor podcast, Paula.

Paula Pant:
Oh, thank you so much for having me here.

Dr. Jim Dahle:
We're actually trying to get you to come speak at WCICON23, but you were busy doing something. You took some time off last year to do something unique. Can you tell us about that?

Paula Pant:
I did, I did. The short answer is I did a fellowship at Columbia University, a one year fellowship in business and economics journalism. The long answer to put that into a little bit of context is that my first career and really only career that I've ever had, my first job out of college, I was a newspaper reporter. I worked at a print newspaper. It was called the Colorado Daily. I was there for a number of years, and when I left that newspaper, first to become a freelance writer, and then eventually a content creator, a podcaster, the skills that I learned in my early days of working at a newspaper, a traditional print newspaper, those skills were invaluable in giving me a foundation that I used as I was building Afford Anything, which is what I've been running for the past 11 years.

And so, two things were happening at once. One was I was reflecting back on that and thinking, “Geez, if that work experience that I had so long ago, that was 2005 to 2008. If that work experience that I had so long ago was so valuable, what would it mean if I could go refresh my skills mid-career at the best journalism institution in the nation?” That was one thought.

And the other thought, frankly, is I was just sort of burned out. And this is what I'm going to be talking about on stage at the conference. I was hitting burnout and I didn't know, “Do I need to exit or do I need to double down?” It had to be one of the two. I was not willing to stick with the status quo. It was going to be exit or double down, but I didn't know which. But I knew that if I took one year off, if I took a one year sabbatical, that would give me the space to figure it out.

Dr. Jim Dahle:
So, what did you figure out? How has that changed your approach to writing and blogging and teaching about personal finance?

Paula Pant:
Well, the main thing is it reinforced the idea that yes, I absolutely want to do this because within this fellowship, it's a full-time fellowship, and they actually make you sign a contract pledging not to work during that year. And so, I had to negotiate that with them. I had to go to them and say, “Hey, look, I have a podcast. I can't just ghost my audience for an entire year, but I've developed a plan. This is the precise number of episodes that are going to air during the time of this podcast. This is the percentage of those episodes that will be run from the archives. These are the percentage of those episodes that I will pre-produce ahead of time and have in the hopper before.”

I had to go and negotiate with them just for permission to continue to release the podcast. But outside of the podcast, I had to stop doing everything, everything. And that was a contract that I had to sign and hold to.

Dr. Jim Dahle:
Yeah. I noticed when I looked at your blog, there's a big year long blank on it.

Paula Pant:
Yes, exactly. Exactly. And it's because they pay for everything. And so, in exchange for that money, they want your full-time attention. And so, in order to do that, in order to devote that full-time attention, I was contractually required to not do anything on Afford Anything in my company. And what that meant was that for that entire year, I had all of these ideas, things that I wanted to change, ways that I wanted to improve Afford Anything. I had so many ideas and I was unable to execute on any of them. And that meant that by the end of the year, I was chomping at the bit like, “Let's go, come on, graduation day, let's get here, let's go.” That was the biggest piece of it. The exit versus double down, that was answered.

Dr. Jim Dahle:
Now we've got… I think there's 18 of us now working at White Coat Investor, and I know you have staff as well.

Paula Pant:
I do.

Dr. Jim Dahle:
What did that mean for their lives, for you to take a year off from the business?

Paula Pant:
The first semester was a little bit of a learning curve because we had prepped, basically we spent all of early 2022 prepping for the fact that I was going to be going into this one year academic program. And so, we had spent months setting the stage for that. I kept saying, “Look, imagine I'm dead and you had to run this company without me. What would you do?” And that was a thought. I would present that thought exercise pretty much every day. I was like, “What would you do if I was dead?” That sounds nice in theory, but the reality was that when that first semester hit, there were still all of these little things.

Paula Pant:
The payroll system would glitch in some way or another, and they would want me to come in and handle it because they felt like as the owner of the company, that was something that I was supposed to do. And I was like, “Dude, figure it out. You've got the passwords, you've got the login, you've got the account permissions. We did all of that already. You go in and figure it out.” And they were like, “How can we figure out our own payroll glitch?” And I'm like, “If I were dead, that's what you'd do. So go do it.”

Dr. Jim Dahle:
Yeah. That's really funny. Because the first job I gave to my first employee, who's Cindy, who's helping us record this podcast today, she's filling in for Megan, was figure out how to pay yourself. That was her first job when I hired an employee. I outsourced that long ago. I haven't paid anybody in this company since 2014, I think.

Paula Pant:
Oh, fantastic, fantastic. Yeah. That was one of the things that they were uncomfortable doing because they felt like that was crossing a boundary line. Those were the moments where I would get a call at 9:00 PM and they'd be like, “Payroll's glitching.” That was kind of the learning pains for the first semester. By the second semester it was handled. By the second semester, I never heard from them.

Dr. Jim Dahle:
I can really relate to your comment about having to either get bigger and do more, or get smaller and do less. That is the way that we felt at the end of 2019 with WCI. And after much thought, prayer, meditation, whatever, we decided to get bigger and we hired a whole bunch more people. We went from four or five part-timers to now 18 of us, most of which are full-time, over the last few years. But I was completely burned out at the end of 2019 trying to run the business and create the content and all of that kind of stuff.

So I can totally relate to your burnout as well as the journalism background. I don't have a journalism background, but our content director does. He used to write about boxing, actually, it was what he spent most of his time on, but had his journalism background. And so, him coming on board the last few years has really upped the quality of a lot of our content in a lot of ways. I think that's pretty valuable and I suspect what you've learned in the last year, and not just the ideas you had from not being able to work, but what you actually learned about journalism is going to help you going forward.

So, it sounds like a great year to me. It reminds me of my neighbor. I've got a neighbor that's a radiologist that basically has taken an unpaid sabbatical for the next year. I think he flew out to New Zealand yesterday. I'm super excited to hear from him in a year about what he learns about himself and what he's able to accomplish and do during the next year. Taking a year off is pretty common in academia, but for those of us that work in the corporate world, that work in the private practice world, it is not very common at all. And maybe we ought to think about ways to do that more often in our lives.

Paula Pant:
Yeah. And I find, for me at least, it helped a lot to take that year off in the context of a defined, structured program with a very definitive start and end date and a very definitive goal. If I had simply taken the year off and sat on a beach somewhere, I don't think I would've gotten as much out of it. I know I would not have gotten as much out of it. For one thing, the sitting on a beach somewhere can actually be a very lonely, very isolating experience unless you already have a strong community built there.

And then for another thing, if there's anything that you particularly want to learn, it's on you to self-motivate to do that. You have no sources of feedback, no mentorship, no guidance, no accountability. And then the third piece of it is simply the people that you meet. Being at a journalism program at Columbia University, we were having dinners every Tuesday with some of the most incredible names. We had dinner with Jamie Diamond, the CEO of JP Morgan Chase. It was a 12 person dinner. That level of access I never would've been able to have on my own.

And so, for me, taking that year off in the context of doing something really structured with a group, I think was a huge piece of it. Whereas I think if I had simply taken that year off to read books on my own, those other dimensions would not have been there.

Dr. Jim Dahle:
How did it affect your burnout? How long did it take before your symptoms of burnout were gone, you think?

Paula Pant:
That's a great question. I'm not sure they ever fully abated but I do think they morphed. Academia, it's inherently a very social place. You go to the same building every day, and inside of that building, you have your fellow students, you have your professors. You have the same cast of characters who show up to a physical building, the same physical building, every single day. And so, you have these collisions in the hallways. I imagine working at a hospital or working at a medical center must be similar, although I've never done that.

And so, there's a certain comradery that forms when you have that frequent, unplanned, in-person interaction. And that is something that you don't get when you're doing a lot of solo, deep focused work in front of a computer screen all day, which is what content creators or podcasters often do. I think that there were a lot of what I thought was burnout, that was actually just isolation. And that went away pretty rapidly as soon as I started the program. And it informs the way that I hire and grow now.

I live in New York City. From this point forward, I'm only hiring people who live in New York City, unless if it's a contractor, a 1099 contractor for a very specific thing, that's different. But anybody full-time, W2 full-time employee, they must live in New York City. Even if they don't come into the office every day, even if it's a hybrid arrangement, seeing somebody two days a week is drastically different than seeing them zero days a week.

Dr. Jim Dahle:
Very interesting. Yeah. We've got about half of our staff here in Utah and the other half spread across the country, but we make a pretty significant point to get together. And it's not cheap when everybody lives all across the country, but if you don't get together, you don't form that comradery and those shared experiences that later you might be on Zoom or joking around online or whatever, but you've got that shared experience. You know each other's partners, you've partied together and you've done things together. And I think that's pretty important to build that in any company. But it's interesting to think about it in the setting of burnout, of reducing burnout by having that camaraderie and that interaction at your daily work.

Paula Pant:
Right.

Dr. Jim Dahle:
Well, I thought it was interesting to see your first blog post back. And I thought it was interesting because it's a subject I've thought about and I've talked about in the past. You wrote a little post recently specifically about Robert Kiyosaki, but generally about permabears. Can you share your thoughts on those subjects with us?

Paula Pant:
I think in the world of finance, you hear a lot of people who have this Chicken Little attitude, the sky is falling. And there's that joke that you've predicted 17 of the last two recessions. Not you, but that a person might predict 17 of the last two recessions. And I think where a lot of that comes from is that in the media, bad news travels faster than good. And there's a good reason for that. If it’s a sunny day outside and the butterflies are flying and everything is pleasant, I don't necessarily need to know that information to survive. If a grizzly bear is going parading through the door, I do need to know that information, and I need to act on it and quickly.

And so, of course, we are naturally inclined to pay attention to any negative news, any warnings, any threats, anything that might endanger us. And the way that that plays out in the modern financial media is that you have these permabears who are constantly saying the market is about to crash, everything is going to come down. We're going to head into a deep recession, and the stock market is going to tank, and housing prices are going to tank. Robert Kiyosaki often says “Cash is trash.” It's one of his favorite colloquialisms. Get your money out of US dollars and put it into Bitcoin and cattle and gold and silver.

He says all of this stuff that, frankly, I believe is nonsense. And I think that as a business person his job is not necessarily to be accurate. And what I mean by that is he is not held accountable for any predictions that he makes that are incorrect. There's no accountability. His job is not to be accurate or to be accountable for his words. His job is simply to have the greatest number of eyeballs on his work. And he's done that very successfully. He has somewhere in the neighborhood of 3.5 million Instagram followers and 2.5 million Twitter followers. He has the number one bestselling book in personal finance history, I believe, or if not the number one, at least certainly the top five. He's done that better than almost anyone.

But there's a distinction between those who are good at knowing how to command attention versus those who are deliberate and thoughtful in what they say. The audience is best served by knowing that the loudest voices are the ones who are the most confident, not necessarily the ones who are the most accurate.

Dr. Jim Dahle:
Boy isn't that the truth? And pessimism is so sexy. You sound so intelligent when you're pessimistic. When you're optimistic, you sound like Pollyanna, everything's going to be fine. Well, what about this and this and this and this and this?

Paula Pant:
Yeah.

Dr. Jim Dahle:
But the truth is, if you look back at the history of the world, the history of economic news, the history of investing, it should be titled “The Triumph of the Optimists”, because the optimists were right.

Paula Pant:
Exactly.

Dr. Jim Dahle:
The optimists were right, and they probably are going to be right in the future.

Paula Pant:
Exactly. Exactly. And what's interesting about this particular point in history is that the gulf between economic data and consumer sentiment right now, and by right now, I'm talking January 2024, the beginning of this new year, and this is a trend that really started towards the end of 2023, we started really seeing this.

The gulf between economic data and consumer sentiment is further apart than it has ever been. And the way that that is measured, economic data, of course, is measured in all the tried and true ways. There's the jobs reports, there's consumer spending.

When we look at all of the economic data, we see very, very positive indicators. In the month of December, the US grew another several hundred thousand additional jobs. Our unemployment is at a historic low, a 50 year low, and it has remained steadily at a historic low for several months. The stock market in 2023 performed at 23%.

We have all of this very, very positive economic data, and yet consumer sentiment, which is measured by, for example, the number of people on glassdoor.com who search for a potential job loss. They have not lost their jobs yet, but they anticipate that they will. And they have search queries that indicate that they are anticipating the risk of job loss. That number has actually spiked, and there are a number of other indicators of consumer sentiment that show that people generally feel pessimistic despite really strong economic data.

And so, there are a lot of theories as to why this is. I'll tell you two. The most popular theory is not the one that I necessarily think tells the full story, but the most popular theory is that it's due to inflation. The economic data is strong, but that data is K-shaped. The stock market is on a tear largely because of a small handful of tech giants like Nvidia that have really skyrocketed.

But that doesn't necessarily translate to wage growth, and particularly among the people whose wages have grown in an inflationary environment, that's been a bit of a K-shaped distribution. And so, you've got a huge segment of the population that their wages haven't kept up with higher costs, and that's the reason that people feel so pessimistic.

I think there's a lot of validity to that, but I think there's another element to that story as well. What I would add is that you've got right now a situation in which existing homeowners feel locked into the mortgage that they have because 80% of mortgaged homeowners have a mortgage that is 5% or lower. Four out of every five mortgaged homeowners feel locked in. They are disincentivized to sell their home.

Meanwhile, due to the high interest rates on homes, plus the price run up in housing that really peaked in 2020, people who have not yet purchased homes feel shut out of the market. You have these two different classes of people. One, potential homeowners, and the other, current mortgaged homeowners, both of whom feel as though they don't have mobility. And when people feel that they lack mobility, they often feel pessimism. And so, that's my hypothesis as to why there's such a disconnect between economic data and public sentiment.

Dr. Jim Dahle:
Let me throw out a third hypothesis and see what you think of it. I don't want to get too political, but I'll tell you, I read left-sided and right-sided news sites, and the idea that the economy is in a terrible state is far more common on right-sided news sites right now. And obviously despite the fact that the president actually doesn't have all that much to do with how the economy performs, people think the president does.

And my theory is that the right-sided media has an incentive to make you think the economy is doing worse than it is. And so, they tend to promote and run more often pieces that suggest or highlight negative economic numbers and don't mention the positive ones. Do you think there's much of that sort of a political effect on this phenomenon? Or do you think it's mostly just an economic effect?

Paula Pant:
I certainly think it plays into it. I remember reading a study once, and I don't quite remember the details, but there was some study in which people generally were more pessimistic about the economy in years in which they lived under a presidency of the party to which they did not belong, the opposing party. I remember that study showed, I'm sorry, I forget exactly what the details of the study were, but I recall that that was a study that looked at public sentiment across a number of nations, and they found that, to some extent or another it existed internationally, but that polarized view of the economy is stronger in the United States than it is in several other countries.

Dr. Jim Dahle:
That does not surprise me in the least. All right. You mentioned housing a little bit and how people feel locked into their homes, that they can't move, they can't take a new job, can't go to a new part of the country because they lose their 3.5% mortgage, while other people are feeling locked out.

But there's a lot of these people that are locked out that are wondering, should they hold off and wait until interest rates come down, should they buy, are housing prices going down? How much influence really should current interest rates have on the decision to buy a home?

Paula Pant:
So long as a person can afford it, never stretch your budget too thin, never raid your emergency fund, all of the tried and true personal finance principles. So long as you have the space within your budget to buy, buy now. And that's for a few reasons. Number one is that there's an adage “Marry the property, date the rate.” The property is what you will be holding onto for the long term. The rate is temporary. The rate is just something that you're going to have for a brief period in time until interest rates decline, at which point you can refinance.

But at the point when you refinance, home prices are likely to be higher. And that's for a couple of reasons. Number one, we have and have had for many years a severe housing supply shortage in the US. And that supply shortage is not going away anytime soon. That housing supply shortage is only intensifying.

Given the imbalance between supply and demand in housing, there is only upward pressure on houses over the long term. Quarterly, there might be some fluctuation, but over the long term, there's only upward pressure. In addition to that, when interest rates decrease, home prices are likely to increase.

Because basically the simplest way to say it is if you are waiting until interest rates drop, then everybody else is waiting alongside you. You're not the only one who had that idea. Everyone else is also waiting. And that means that when interest rates drop, that pent up demand will start to enter the market, and you'll be competing against all of those people for those homes. And when there's a lot of buyer competition in the market, what happens? Home prices rise.

If you recall back in 2020, there was intense competition between home buyers. A home would get listed, and I'd hear this all the time from my audience, the moment that a home goes on the market, it immediately gets five offers on the day that it's listed and it goes under contract that night. Anecdotally, I would hear that all the time.

And if you want data to back it, that data comes from average days on market. The metric called average days on market. In 2020, average days on market is measured city by city, but in Boise, for example, Boise, Idaho, it went to as short as eight days, which is unheard of.

That metric of average days on market, right now it's sprawling, it's so long. Houses just linger on the market. They languish there. There's very little competition from other buyers. It is a great time to go in as a buyer because you're going to face very little competition. You're probably going to be able to negotiate harder, ask for more concessions, request more contingencies. You're in a much stronger negotiating position because you might be the only offer, or you might be one of two offers, and that's likely not going to be the situation when everyone dives back into that housing market, that when that pent up demand starts getting realized.

Dr. Jim Dahle:
It's interesting. The current 30 year mortgage rate is 7, 7.5% right now. My first mortgage in 1999 was 8%. People are acting like these are super high mortgage rates. I'm like, these are far more normal than what we've experienced in the last five or 10 years. This is where mortgages are supposed to be, 6%, 8%-ish.

Paula Pant:
Exactly, yes.

Dr. Jim Dahle:
That’s basically where they're supposed to be. So if you can't afford the home at this mortgage rate, you got to ask yourself if you can afford the home at all.

Paula Pant:
Yeah. Precisely. This is historically normal, but people's memories are fairly short and the memories of the last 10 years dominate.

Dr. Jim Dahle:
Yeah. Although the Fed has called for an interest rate cut or two, at least on the short term rates that they control in the next year, I wouldn't expect them to go back to 3% anytime soon.

Paula Pant:
Oh, no.

Dr. Jim Dahle:
And you may never see 3% again the rest of your life. So if that's what you're holding out for, you may be out of the housing market forever. Still, you don't want to buy a house if you're only going to be there for a year and a half. You've got to be in there long enough that the appreciation will make up for the transaction costs. But if you're going to be someplace for three to five years, you know your job is stable, your family is stable, it's time to buy. I agree with you.

Okay, different subject, but also very current. Bitcoin spot ETFs are likely to soon hit the market. In fact, they're probably going to be approved before this podcast even runs on the 18th. Should that change what people think about investing? And I always put “investing” in Bitcoin in quotes. Should that change what people think? The fact that they can get it in a spot ETF form now?

Paula Pant:
There's really one thing that is changing dramatically and what that one thing is. So, let's back up a second and look at the risks that are associated with investing in Bitcoin. When you are investing in any type of speculative asset, and let's actually back up further. An asset, any asset, gains value in one of two ways. There's the appreciation on the asset and then there's the income stream that that asset produces. So, a share of Coca-Cola stock ideally will appreciate in value over time and also has a dividend that it pays. A rental property, same thing. Ideally it'll appreciate over time and it also has an income stream of rental income that it pays.

Now you have this class of assets that don't produce any type of income. Art is one of them. If you invest in a painting, there's no income stream that comes from that painting. But people who invest in paintings or who invest in art do so because that's a speculative investment.

Bitcoin is very much the same way. It's purely a speculative investment. It is worth whatever other people are willing to pay for it. There is a limited supply of it, which is why some people believe that it will be worth more than the price at which they bought it for.

The risk associated with buying a speculative asset, that does not change. But what does change with the introduction of a bitcoin spot ETF, is that the risk associated with failure of the underlying institution and the risk associated with theft of the asset from nefarious actors, those two risks get significantly reduced. Before it used to be the case that if you were buying Bitcoin directly, you would have to store it either in cold storage, cold storage is a piece of hardware that you have that you hold in your hand. You have to store it in this little piece of hardware that you can easily lose. You can accidentally throw it in the trash, you can pack your boxes when you're moving and not know where you kept it. And boom, now you just lost $100,000 because you misplaced this tiny, tiny little piece of hardware. That risk is no longer present.

Now, if you didn't want to hold Bitcoin in cold storage, your other alternative would be to hold it in a crypto brokerage or on a crypto exchange. But then what happens when that institution collapses?

Dr. Jim Dahle:
Oh, come on. They have an excellent track record, Paula, and none of those institutions ever go out of business.

Paula Pant:
Yeah, exactly. Exactly. Exactly. All of the people who were depositors, when those institutions collapsed, they lost their deposits. There's no FDIC insurance for a Bitcoin exchange or a cryptocurrency exchange. The risk of loss from the collapse of the underlying institution, or the risk of loss through theft such as hacking, or through loss of hardware, that is abated through a bitcoin spot ETF, you now have the same level of security that you would have if you were buying any type of speculative asset in the form of an ETF through a major brokerage like Fidelity or BlackRock.

Dr. Jim Dahle:
Yeah, it's certainly going to be more convenient to buy it. Now in your IRA, you don't need a self-directed IRA to go buy Bitcoin. You can just buy the ETF. It's super easy. It takes 30 seconds online and you own Bitcoin. Maybe it ends up in 401(k)s and 529s and HSAs as one of the options. I think the convenience of buying it becomes easier. But the sophisticated investors who are going to buy Bitcoin, I feel like they've already bought it. What this may do, though, is draw in a lot more unsophisticated investors and maybe that will push up the price of Bitcoin in the long run. Certainly in the short run, it's come up in anticipation of this event, but I don't know exactly what's going to happen to the price of Bitcoin in the long run due to the creation of these spot ETFs.

Paula Pant:
Right, right. It's interesting because in other countries, in Canada and in Germany, you can already buy Bitcoin as an ETF. Opening up the US market will certainly as you said, open this up to a lot more buyers. And I hope that those buyers will only use a very, very small percentage of their portfolio, if anything at all 1%, 2% of their overall portfolio. I hope that most of those buyers don't go anywhere beyond that.

Dr. Jim Dahle:
Yeah. And the truth is, you've been able to buy Bitcoin in ETF form for a long time. They've got these futures ETFs that essentially buy Bitcoin, futures contracts, and they've got ETFs that only buy companies that are involved in producing bitcoin, miners and companies that own a lot of bitcoin. So, it's not like you couldn't find something to invest in that is somewhat correlated with Bitcoin, but not nearly as correlated as an ETF that's actually buying bitcoin, which is what these new ones are. So, it'll be an interesting development to watch. Like the rest of the Bitcoin saga, I plan to watch it from the sidelines.

Paula Pant:
Exactly. Exactly.

Dr. Jim Dahle:
All right, a different subject. Lots of people upon becoming financially literate, they discover their family and friends and coworkers are doing things, let's call them suboptimal. They're suboptimal financially and they feel like they should do something about it. What should you do about the fact that your parents or your siblings or your coworkers are not investing in a particularly wise way or are making other personal finance mistakes?

Paula Pant:
Well, the first question that I would ask is the suboptimal thing, is it associated with spending and lifestyle or is it associated with investing-related decisions or decisions related to the team of advisors or decisions related to insurance, for example, or other forms of protection? And the reason that I differentiate between the two is if you feel as though people are spending suboptimally, but the lifestyle and spending is suboptimal, I probably wouldn't say anything. That's how they choose to spend their money. That's the lifestyle that they have. It's really not anyone's place to comment on whether somebody wants to buy a new car versus a used car or a big house versus a small house.

But where I would at least test the waters as to whether or not I would step in is if I knew that somebody was, for example, really overpaying for a bunch of different insurances that they just didn't need, or if they had somebody who they thought was a trusted advisor without realizing that that advisor is not actually a fiduciary and is really just frankly a commissioned salesperson who is acting in the guise of an advisor.

If I were to see something like that, then I would pipe up, but do so in a way in which I think that deference to authority. Give them a book and don't make them read the whole book because they won't, but put a bookmark or put a sticky pad of sticky note in the exact section of the book that pertains to their situation and say, “Hey, why don't you read this? I think you might be interested in that. Check that out.” And that way it's not you, you're not the one saying it. The book is saying it.

Same thing with a podcast. Send them the podcast and send them the exact timestamp of where a particular discussion starts because you know they're not going to listen to the whole episode and say, “Hey, 35 minutes, 51 seconds, start there. Listen to that, that part where they discuss annuities. I just thought you might be interested in that.”

Dr. Jim Dahle:
And you'll either hear back from them, “Thank you, thank you, thank you so much.” Or you'll never hear back and you'll know where to go from there. It's interesting. The goal of course is to make them think it's their idea to make the change. And that takes a fair amount of emotional intelligence, I think, to be able to do that rather than trying to convince them because nobody likes to be convinced of anything.

Paula Pant:
Right.

Dr. Jim Dahle:
Just like we don't like to be sold anything. You mentioned you don't like to touch the lifestyle issues. What if the lifestyle issues are going to come back and affect your financial life? These are your parents and they're just blowing money left and right and you know that you're going to now have to be supporting them in your old age. Does that cause you to want to say something a little bit sooner? And if so, is there anything that can be said?

Paula Pant:
Yeah. For an example like that, I would sit down with my parents and say, “Hey, what's your plan? Let's model out your retirement. What's your plan? How do you plan to support yourself with this level of spending for this number of years?” And particularly in presenting that as a question of “How do you plan to pay for it? How do you plan to support it? Let's spreadsheet this out. Let's look at the numbers. Let's run this through a retirement calculator.”

In doing that, often they will have the realization themselves. To what you said, you want it to be their idea. If you just say, “Hey, Mom and Dad, you do not have enough saved for retirement.” If you're telling that to them, they're not going to hear it. But if you bring them to a calculator, bring them to a spreadsheet, bring them to the tools. Have them play with the tools. Heck, if they don't want to share their exact numbers with you, do a few hypotheticals on your own or tell a story about a friend. It could be an imaginary friend. “Hey, you know what? My friend, she's in her mid-50s and she just got divorced and these are her numbers. I was on the phone with her the other day and she told me these numbers. Oh, my goodness, look at that. Isn't that scary? Can you imagine? Hey, Mom and Dad, how are you doing?”

Tell them the story of a friend. Could be a real friend, could be a fictional friend, it doesn't matter. But tell them the story of a friend, present your “friend's” numbers, and let that be the on-ramp to a discussion about how are you doing? Does this remind you of anything? What do you think? Do you have plans that would put you in a better position than this other person?

Dr. Jim Dahle:
Yeah. And I think the key is knowing them and understanding them and what their triggers are. For example, my parents are very cheap. They're cheap, frugal, whatever you want to call it. They don't like paying for stuff they don't absolutely have to pay for. And after I became financially literate two plus decades ago, I was helping them, taking a look at their investments and realized they were paying somebody like 2% a year asset under management fee in order to pick stocks for them, which were underperforming the market.

And so, I calculated out what they were actually paying, what they were actually getting. And looking at what their fees actually were made them sick, especially when they realized that they could have done dramatically better just plopping it all into an index fund and buying all the stocks.

And so, I think it's important to understand what motivates them and taking advantage of that. I have my feet in two worlds. I go to the hospital, I see patients. I talk to doctors all the time. And then I have this other foot in the personal finance blogosphere, and I interact with other bloggers and podcasters and what I call “regular Joe” financial bloggers. They're not writing for doctors, they're not writing for high income professionals.

And then talking to the people in my audience, I just shake my head when I see them struggling to cut their spending to an amount that should allow them to rapidly build wealth. Most of my audience is making $200,000, $300,000, $400,000, $500,000 a year or more, and they really only need to be relatively frugal. They don't actually have to even be frugal. And then I go to these FIRE blogs and people are making half as much or less, and they're saving 50% or more of it.

What lesson do you think the doctors and other high income professionals can take from “regular Joe” financial bloggers, “regular Joe” financially literate people in general?

Paula Pant:
What's tough about that question is that doctors have also had to make sacrifices throughout their 20s. The years spent in med school, the years of deferred compensation of making nothing and studying, hitting the textbooks and studying until 2:00 AM and then waking up at 9:00 AM and then all of the loans that follow. I don't know if that can really be compared to someone who's earning a full-time salary at the age of 22 and has never experienced large sections of adult life in which they are a student and not earning an income and racking up a bunch of debt along the way.

Those life experiences are so different. If you have two siblings, but those two siblings have had extremely different career paths or extremely different life experiences, I wouldn't make it one of those, “Why can't you be more like your sister?” kind of things. Because I think it needs to be honored that each person has made very different sacrifices and has made very different choices. And each one has different chapters in their life that are their chapters to shine.

For the 22-year-old who's straight out of college, lands a full-time salary at the age of 22 and never goes back to school again, and has all of their student loans paid off by the time they're 25, maybe they spend from age 25 to 30 spending lots of flash, lots of cash. They buy their fancy cars, they go on their big trips, they stay at five star hotels, and then at 30 maybe they wake up and they're like, “Oh man, I should be saving more.” And they find the FIRE movement and they drop their expenses down and they live on half of what they make.

That person, they've had from age 25 to age 30 to just be a goofball. They've had those years to be a goofball and they've enjoyed that, and now they're ready to live on half of their income because they've gotten that out of their system. When you've got this other group of people who maybe they've never had those goofball years, maybe that's something that's important to do at some point, because if not now, then when?

Dr. Jim Dahle:
Yeah, yeah, for sure. If you put it off till you're 60, 65, 70, there might not be a 60, 65 or 70.

Paula Pant:
Yeah, exactly.

Dr. Jim Dahle:
That's a fair point. All right, your brand is Afford Anything. The idea being you can buy anything you want, but not everything you want. I had a doc post on our WCI forum this week about what he really had were three financial goals. He wanted to put his three kids in private school, which turned out to be not as expensive as it is in a lot of places, which can be as much as $40,000 a kid a year. It was only $36,000 total for the three kids.

He wanted to buy a home that was $800,000 or $900,000. And he also wanted to be Coast FIRE, essentially, not have to save anymore for retirement in five or eight years. All on an income of $250,000 and really nothing saved yet. Basically the numbers didn't work. He could not do all three of those goals and would have to choose between them. Probably he couldn't even do two of them. What advice would you give to somebody in a situation like that? How do you decide which of your goals to prioritize?

Paula Pant:
Well, I would ask a couple of questions. The first question I have is why does he want to be Coast FIRE? Because the notion of being Coast FIRE is fundamentally a budgeting issue. When you're Coast FIRE, you simply don't have to contribute any money into your retirement account, which strictly speaking, that's just budgeting logistics. It's logistically not hard to make a retirement account contribution. You simply set up an automation and boom, you're done. It takes no time, it takes no effort. You set it and forget it.

If his goal is to be Coast FIRE, my interpretation of the motivation behind that is that he wants to redirect that money towards something else. But what? And is there an alternative way to fund that, whatever that “what” is. What does he want to redirect that money to? Does he even know or does he just like the idea of checking the box on retirement? And if there is a particular thing that he wants to redirect that money towards, can that other goal be funded in some alternative way?

That's the first thing I would say about specifically the Coast FIRE goal. Private school is a service that you receive in exchange for money. A house is a product that you receive in exchange for money. Coast FIRE is simply the way that numbers move around on spreadsheets. That doesn't really affect your lifestyle. So, that's the reason that I hone in on that piece first. So, let's see if we can pull Coast FIRE off of the table, or at least question the why underneath it and find alternative ways to satisfy that why.

And then the next thing that I would look at is between sending the kids to private school versus the home, there's urgency. There's time and there's urgency. The kids are only going to be young once, they're only going to be in middle school, high school once. Elementary school, middle school, high school, once. This is a very limited time window that if private school is important to you, this is your only opportunity to send your kids to private school. When they're 45, you can't be like, “Hey, junior, now I'm ready.”

I would prioritize that above all else because the window of time is so limited versus this $800,000 or $900,000 home. If necessary, he and his family could live in a cheaper home. I don't know what part of the country they live in. Maybe that would be very cramped. Maybe it would be way out in an inconvenient location. Maybe it wouldn't be ideal, but he's got the rest of his life to have an ideal housing situation. That's not something that has a time limitation on it in the way that educating his kids does. So, that's how I would frame it.

Dr. Jim Dahle:
It was interesting as the forum explored these ideas, the purpose for the house was to provide this great upbringing for the kids. The house and the school was for the kids, was the main justification for it. And it turned out as you explored it, that the private school was kind of non-negotiable. And the other two turned out they were nice to have items. And I think you just have to think about them that way. You have to run the numbers, first of all, and see what's actually possible. And two, figure out what's really your priority. And like you said, Coast FIRE, if you're planning on continuing to work, what difference does it make if you hit financially independent at five years or 20 years? It really doesn't make that much of a difference if you're planning to work 20 years.

Okay. We're starting to run out of time. We're excited to hear more from you at WCICON and get to know you a little bit there and hear about what you've done to overcome burnout, as well as how we can decide what to afford and what maybe we shouldn't try to afford. But right now you've got the ear of something like 30,000 people that are going to listen to this podcast. High income professionals, mostly docs. What haven't we talked about today that you think they should know?

Paula Pant:
On the subject of figuring out what your priorities are, what I would like to really emphasize is that as you think through how to make decisions about your money, don't just think of money in a vacuum. Think of all limited resources that you have. Money is a limited resource. Time is a limited resource. Your energy and your cognitive bandwidth, those are perhaps the most precious. Those are even more precious than time. Most of us, when we say that we don't have enough time, we have even less energy and attention.

And so, when it comes to prioritizing, think about the trade-offs you make between all of those limited resources because often one can get traded for another. Some amount of money can get traded in order to buy back your time. And some amount of money can be traded in order to buy back your energy and your attention. And they all work together. Some amount of time can be used to save yourself energy.

As you're thinking through your priorities, think about how all of those limited resources work together in tandem. And if you want to talk about comprehensive budgeting, try budgeting your energy, try budgeting your attention and see where that takes you.

Dr. Jim Dahle:
Great advice, Paula. If you want to learn more about Paula Pant and the work she's doing, you can find her website at affordanything.com or better yet, come attend WCICON. She'll be one of our keynote speakers this year. You can still come virtually, and you can sign up for that at wcievents.com. Paula, thanks so much for being on the White Coat Investor podcast.

Paula Pant:
Oh, thank you for having me back on.

Dr. Jim Dahle:
All right. I hope you enjoyed that interview as much as I did. Paula is great. It's super fascinating to me that when you get out there into the financial blogosphere, the financial podcastophere, the reputable online investing forums, everybody is saying the same things most of the time. Yes, there's a few areas of controversy, but for the most part, if you're going to reputable places, you should be hearing the same thing over and over again. And I pretty much endorse everything Paula said about the subjects we talked about today. And you'll find that most reasonable financial authorities, gurus, journalists, authors, bloggers, podcasters, whatever, are going to have similar opinions on these sorts of things.

And that's because there is some truth out there. And you need to be a little bit careful, not listening to the people who are just trying to get eyeballs, trying to get ears on their material and telling you whatever you want to hear or something that shocks you in order to get you to click on their article and sort out the truth out there.

Just because something is on the internet, it doesn't mean it's true. For crying out loud people. Let's use a little bit of common sense as we sort through what's out there. Let's check it out in multiple places, see what other people that we've trusted on other subjects are saying about that particular subject, whatever the new and interesting subject of the day might be.

All right. Don't forget, we've got our survey to do, whitecoatinvestor.com/survey. It does not take that long to do it. We read every word of it. I swear your suggestions are used. When we get multiple suggestions to do something or multiple negative feedback on something, we do make changes. And so, we appreciate you sharing that. You'll be entered to get some WCI swag including being entered for the grand prize drawing, which is a WCI online course absolutely free just for a few minutes of your time filling out that survey, whitecoatinvestor.com/survey.

Don't forget, if you still want to come to WCICON24, you get $100 off using code VIRTUAL through the 22nd of January. Also, thanks to those of you who have left us a five star review and or told your friends about this podcast. That really is how we spread the word about this.

A recent one came in that said “Excellent and thorough. This podcast is an example of a motivated physician gaining substantial knowledge on a non-medical topic and sharing it with everyone. He is altruistic and thoroughly engaged in this material. I find when he lacks information on a topic he is not afraid to admit it and research it thoroughly to provide an accurate and actionable answer.

His staff should be given significant credit for the success of this podcast as it clearly must take more effort than just one man can muster. A great combination for a podcast, knowledgeable, altruistic host who surrounds himself with intelligent guests and a hard working staff. All… keep it up the great work!” Five stars.

All right. Well, thanks. That's a great review. Very kind words. We appreciate the kind words, makes us feel good to keep producing this stuff for you. We know it's making a difference because we're hearing back from you guys all the time. And we thank you for that. We thank you for what you do on a daily basis. You deserve to get a fair shake on Wall Street, and we're here to give it to you.

Keep your head up, your shoulders back. You've got this. We can help. Thanks for being part of the White Coat Investor community. See you next time on the podcast.

DISCLAIMER
The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.

Transcription – MtoM – 153

INTRODUCTION

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

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 153 – Emergency physician pays off $315,000 in student loans in one year.

If you are like most doctors, nobody taught you anything about personal finance or investing during your undergrad professional school or residency. Even though your family, and perhaps even your business rely on you to be the chief financial officer, you've never been given the tools to succeed.

Enroll in WCI Financial Bootcamp, a free educational email series and learn to convert your high income to wealth. You'll learn the basics of investing, saving, insurance and more.

Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com/financialbootcamp to sign up today. You can do this and the White Coat Investor can help.

Okay, this podcast drops on January 15th. We're recording it back in December, actually before Christmas, but it drops on January 15th. So if you are a member of the Financially Empowered Women a.k.a. the FEW, there is an event January 17th, 2024. We know what time that is in the evening? 06:00 Mountain. It is going to be on the topic of work-life balance.

We have the incredible Dr. Dawn Baker, who will be speaking at that event. You're going to love her. If you've never heard Dawn speak, she's very awesome. And she's going to teach you to stop the overwhelm of trying to be all the things to all the people and create your own unique blend of work and life. You can sign up for that at whitecoatinvestor.com/few.

That's totally free, by the way. If you're not a part of that group, that is a free group to be a part of. It's a free event. No reason not to sign up for it. So, it's pretty awesome. In fact, at the conference this year, we're going to have an event for the FEW, kind of a women's happy hour. But it's going to be pretty awesome. I say we, and when I say we, not me, but the women of WCI who actually run this entire thing. I actually have nothing to do with it except tell you about it on the podcast.

All right, we have a great guest today. This is a pretty awesome accomplishment that these two have done. We'll get them on the line and talk to them about that. But stick around afterward, we're going to talk about health insurance in early retirement.

INTERVIEW

Our guest today on the Milestones to Millionaire podcast have completed a pretty awesome goal in a pretty short time period. This is a husband and wife who are both… Well, he is an emergency physician and she is a stay-at-home mom to four children. Single income family, and they have accomplished some awesome stuff. So, welcome to the podcast, both of you.

Husband:
Thank you.

Wife:
Thank you for having us.

Dr. Jim Dahle:
Who wants to give the big news? Tell us what you did.

Husband:
Okay. Basically, we paid off $315,000 in student loans in one year. And it was a lot of work, but it definitely paid off. Now we feel free that we can focus on other things in life. And now we're kind of moving on to other things.

Dr. Jim Dahle:
I'm gobsmacked by this. Because I'm an emergency doc, I did not make $315,000 last year practicing emergency medicine. I granted I'm part-time, but I know what emergency docs make. And when you look at the field on average, the average emergency physician in the country is making about $375,000. After paying taxes on that, you're probably left with $250,000, $275,000. And yet you somehow managed to pay off $315,000 in a year, which is super impressive to me. The only logical way you could have done that is by working a whole bunch. So, tell us about how much you worked in this last year.

Husband:
Yeah, that's true. I worked more than I did in residency. You hear a lot with these financial podcasts and such, “live like a resident” and “work like a resident.” And essentially, I worked harder than a resident and I lived like a resident.

In residency, the hardest I worked was my intern year. I'd average about 18 shifts a month. And first year out of residency, I'd average 20 shifts a month, and I'd get up to 24 shifts a month. For those that don’t work in ER, that's a lot. I'd say the average ER doctor is working somewhere around 12, 13, maybe 14 shifts a month. And I was hanging around 20 shifts a month. Essentially I had a full-time job, and then I had a part-time job. I was essentially working two jobs.

Dr. Jim Dahle:
How long are these shifts? These eights, nines, tens, twelves, what are they?

Husband:
It's a mix of tens and twelves.

Dr. Jim Dahle:
Tens and twelves. Yeah, I consider full-time emergency medicine, 15 eights. I consider 15 eights full-time, or 12 twelves. That's essentially what a nurse works. It’s 12 twelves. They work three twelves a week for four weeks. 12 twelves. And you're talking about doing 20 of these. This is a recipe for burnout if done long term. What do you think about that as you worked this hard? Could you imagine yourself working this hard for much of your career?

Husband:
I've already toned it down a little bit. Now I'm hanging around 16 or 17 shifts a month. After paying off student loans, I'm like, okay, now I can tone it back a bit. And now I'm hanging around like 16, 17 shifts a month but it definitely helps to legitimately enjoy my work. There's never any time that I've been going into work where I've thought I just don’t want to go to work today. It's never been a real burden for me because I legitimately enjoy it. And that's most of the reason why I got into it is because that's just always what I wanted to do, is I always wanted to be an ER doctor. So, that definitely helps.

Dr. Jim Dahle:
And these are rotating shifts.

Husband:
Yeah.

Dr. Jim Dahle:
These are evenings and nights and everything.

Husband:
Yeah. Yeah. These are everything.

Dr. Jim Dahle:
Okay. This was deliberate. You did this deliberately to pay off these loans. This was part of the plan. You asked for 20 or 24 shifts a month.

Husband:
That's right. Yeah.

Dr. Jim Dahle:
Okay. Did you guys talk about this before the year started? I'm curious to hear from your good wife. What did you think about this plan for him to work 20 to 24 shifts a month? You'd been through residency with him, you know what 20 looked like. What did you think about him doing that for another year?

Wife:
Yes. It was a lot to take, but I knew that we had that goal to pay off our loan in a year and a half, and we did it in a year, and I feel like it paid off. And we had a baby during that time too.

Dr. Jim Dahle:
Oh my goodness.

Wife:
He was working a ton and I was pregnant. We just worked together as a team. We read the books, I read them first and then I introduced him the book or both of your books. And I was so excited to set these goals and achieve them.

Dr. Jim Dahle:
Who was the first person that kind of got on board with this financial literacy stuff?

Wife:
I actually did.

Dr. Jim Dahle:
You did. Okay.

Wife:
I found the book at the library. I heard about it and I rinsed at the library in residency and I was just so excited. I had never really read any financial book. And so, for me it was like a light bulb went off and I was just so excited to follow everything that you had preached in your books. And I introduced the books to him and he looked at them.

Husband:
I kind of had tunnel vision through medical school and residency. I was the tunnel visioned in on “Okay, this is what I'm doing. I'm doing medical school, I'm doing residency, I'm going to put all my energy into medical training.” And then she was like, “Well, we're going to be in an interesting financial situation. So let me educate myself financially.”

Wife:
Yeah. I was kind of in charge of the finances and he was a workhorse. And then we both came to the same page.

Dr. Jim Dahle:
Interesting. It is an interesting way to describe it. A lot of people look at the $315,000 in student loans and would describe that as a desperate financial situation. And to be fair, I don’t recall my book ever telling you, you had to be out of debt in 18 months, much less 12 months.

Wife:
We set ourselves high.

Dr. Jim Dahle:
What motivated you to set such an aggressive goal?

Husband:
I guess laying the groundwork for the rest of our lives. The way I see it, the easiest time to do it is right up front. If you think about it, we have four kids. Our expenses are only going to be in a trajectory upwards for the rest of our lives until they move out of the house until they're out of college essentially.

The way I see it, our costs are going to be the lowest right now early on and with the whole COVID pause on student loans, we had our loans at 0% interest. And I also saw that as another opportunity to just pay down the principal. Instead of putting it off, instead of being like, “Oh, it's at 0%, let's just kind of forget about it”, the way I saw it was, “Oh, this is a great opportunity to pay down the principal and get rid of these loans before we start racking up interest.”

Dr. Jim Dahle:
Did you happen to work on any other financial goals during the last year, or was everything going toward this debt?

Husband:
Not really. Yeah.

Wife:
We maxed out our 401(k).

Husband:
Yeah.

Dr. Jim Dahle:
You still maxed out a 401(k). Did you save up an emergency fund or pay off a car or pay off some credit cards or anything like that?

Wife:
Yes, we paid off all our credit cards. We've always kept a zero balance on all our credit cards every month, even through residency. That was a big goal of ours. And save for a house after we paid off loans.

Husband:
Both of our cars were paid off in residency. That was nice. And then we did have some help along the way. Right now, we've been living in my parents' next gen living space. That's definitely a huge help.

Dr. Jim Dahle:
Is that free rent or reduced rent?

Husband:
Yeah, that's free rent. Yeah.

Dr. Jim Dahle:
You can't beat that. That certainly helps, reducing your expenses. Is that the same place you went to residency? Were you living there during residency?

Husband:
No, we were out of state. We were in another state doing residency. So we paid rent and did all the normal things all through residency.

Dr. Jim Dahle:
You moved home, and this isn't quite living with mom and dad, but it doesn't sound like it's that different. This is a big sacrifice to get rid of this debt really quickly.

Husband:
Yeah. We do have our own living space, but we are under mom and dad's roof.

Dr. Jim Dahle:
Yeah. Have you told them about this goal?

Husband:
Yeah, they know about it. Yeah, we went out and celebrated. I took them out to dinner.

Dr. Jim Dahle:
Awesome. That's pretty cool. Okay. So, how did you end up with $315,000 anyway?

Husband:
I went to a fairly cheap medical school. I think nowadays that's a pretty average or maybe even below average debt, I would probably say. I went to a cheap medical school and I didn't have any college debt. Undergrad was all paid for. And so, that's all medical school debt.

Dr. Jim Dahle:
Did you feel like you lived it up in medical school or was this like the bare minimum you could borrow to get through?

Husband:
That was pretty bare minimum. We were on a pretty strict budget. We didn't really buy a lot of things. That was pretty bare bones. Yeah.

Dr. Jim Dahle:
Did you have kids while you were in medical school?

Husband:
Yeah.

Wife:
Yes. We had two in medical school, one in residency, and then one first year out of residency.

Dr. Jim Dahle:
Okay. Did either of you work during medical school?

Wife:
I did graphic design and so I helped out a little bit.

Dr. Jim Dahle:
But it's hard with two young kids.

Wife:
Yes. I didn't work as much as I would've liked.

Dr. Jim Dahle:
Yeah. Very cool. Were you scared during medical school when you started seeing this deck kind of racking up? Do you remember what your emotions were as this went from $100,000 to $200,000 to $300,000?

Husband:
I don’t think I was ever really scared. Were you ever scared?

Wife:
No, I was kind of oblivious to how much money we were actually borrowing. It didn't really hit us until residency.

Husband:
Yeah, yeah. Until residency. That's when I realized, “Oh man.” With our kids in residency, we couldn't really afford to start making payments. So that was kind of a shocker. We put our loans in deferment and then when we came out…

Wife:
COVID hit. We had 0% interest during that time. So that was nice.

Dr. Jim Dahle:
Yeah, that's been a nice benefit to a lot of people in the last few years.

Wife:
Yes.

Husband:
Yeah.

Dr. Jim Dahle:
Okay. So you pulled this off. What's next for you guys? I often call paying off your student loans quickly, and by quickly, I mean less than five years as a trial run for early financial independence. If you keep saving like this, you're FI in like three years or something. What's your next plan?

Husband:
Our next plan is to start obtaining rental properties and get into investment properties in real estate and then develop a broad investment portfolio. Get a little bit of investments and stocks and kind of spread out pretty widely.

Dr. Jim Dahle:
Do you expect this to be a long-term job for you?

Husband:
We're not sure. We're kind of like playing it by ear.

Dr. Jim Dahle:
So maybe not quite ready to buy a house yet then, huh?

Husband:
Yeah, we're still talking about it. We're not sure. We'll definitely be here another year or two, but after that it's kind of up in the air.

Dr. Jim Dahle:
All right. Man. So, how's that feel? You worked hard for this for a long time. The student loan monkey is gone. Your net income just went up by $300,000 a year. How does that feel?

Husband:
It feels great. Yeah.

Wife:
Yeah, it really does. It's so nice to be able to put that money towards other things like saving and our future. So, it's just nice to have that completely taken care of.

Dr. Jim Dahle:
How much longer does this “live like a resident” period last for you guys?

Husband:
We are kind of slowly living a little bit better, living less like residents.

Wife:
Yeah, we gave ourselves some spending money in our budget so we didn't feel like we were so restricted. And I think that helped because we had a goal to not make any large purchases during these first two years out of residency. And I think that helped.

Husband:
Yeah. I think the not making big purchases part was really key to it. Both of our cars are paid off. We didn't upgrade our cars, we didn't buy a house. Like we said, we're living rent free. Those were the main things. People call it the big three. Housing, transportation and food. And we've kind of minimized those.

Dr. Jim Dahle:
But even if you'd been paying rent for your basem*nt apartment, because this is what I always get, people are like, “Oh yeah, they did it, but they were able to live in their parents' basem*nt apartment for free.” Even if you had been paying rent, you still would've paid it off in 13 months. You guys crushed it. You absolutely crushed it, which is pretty awesome.

All right. What advice do you have for somebody else that maybe their spouse is in residency and they're starting to get those residency paychecks and they just kind of realized what a big hole they're in and are feeling maybe a little bit of despair about being $300,000 or $400,000 in the hole? What advice do you have for them?

Wife:
I would say listen to your podcast because that gave me a lot of hope. Read the books and just write down those goals that you have because I look back at everything I'd written down, all my goals during that time where I was just so excited to start paying off loans. And I think that helped me. Every month after residency we would color in on our thermometer we had on the wall. We'd drawn a thermometer and with the kids we colored in how much we paid off every month. And so, it got them excited, it got me excited and it just helped us pay those off.

But in residency it was discouraging to not be able to pay anything right away. But because we had those goals and we had agreed to those goals to pay off our loans so quickly. We would tell people in residency, we want to pay off our loans in a year or two years and they would laugh at us and I was like…

Dr. Jim Dahle:
Hey, who’s laughing now, clowns? Who's laughing now?

Wife:
Exactly. And I told my husband, I'm like, if we pay off our loans, I want to go on the podcast because that is what made me want to pay off our loans so quickly is because I wanted to show people that are in my position that you can do it, even though it looks like a huge, huge burden, you don’t think you can, that you actually can do it if you set the goals and you stick to it.

Dr. Jim Dahle:
Preach it. Awesome. You guys should be super proud of yourselves. You've really done something remarkable.

Wife:
We really are.

Dr. Jim Dahle:
And I think there will be other people who take a lot of inspiration from what you've done. Because it sounds all theoretical when I write a blog post about it. When I talk to someone who actually did it, that makes it real. Thank you so much for volunteering to be on the podcast. Congratulations on your success and we look forward to hearing more from you over the years as you accomplish more financial goals.

Wife:
Yeah. Thank you so much.

Husband:
Yeah, thanks for having us and thanks for everything that you do.

Dr. Jim Dahle:
All right. Was that awesome or what? Totally impressed. $315,000 in one year. One year. That's incredible. The rate of paying that off is just spectacular. Yeah, they had a little bit of help, but it's not like they won the lottery. It's not like some family member died and left them $100,000. Their parents just let them stay in the basem*nt for a few months. But it's not like that's not a sacrifice. Which of us wants to go back and live in our parents' basem*nt in order to pay off our student loans? Not very many of us.

But you know what? These two were motivated. They had a goal, and you know what? They can accomplish anything they want to financially in their lives. It wouldn't surprise me at all if they have crafted the most incredible financial life possible within the next five or 10 years and just have a wonderful opportunity to enjoy some luxuries and just be incredibly generous and be able to concentrate on those things that really matter in their lives as practice, raising their kids, et cetera.

FINANCE 101: HEALTH INSURANCE IN EARLY RETIREMENT

Okay. I told you I was going to talk to you a little bit about health insurance and early retirement. And this is a funny thing because it's a common question I see on the forum, the Facebook group, the Reddit, in my email box. It's like, “Oh, what should I do for health insurance between the time I retire early and age 65 when I become eligible for Medicare?” You buy it.

This cracks me up because there are so many people in America who have never bought health insurance. Yeah, you can buy it just like you buy car insurance, just like you buy life insurance, just like you buy groceries, just like you pay rent. You can go out and buy health insurance.

There's nothing special about health insurance other than our convoluted system where so often it's purchased in conjunction with your employer. A typical employer plan, like the one we have here at the White Coat Investor, the employer pays 80% and the employees pay 20%.

But what happens is people assume that health insurance only costs 20% of what health insurance actually costs. Health insurance is expensive stuff. The first thing you will do if you go out to buy health insurance on the open market, if you call up a health insurance broker in your area, and you can just Google health insurance broker in your town and find a bunch of them, is that it's expensive stuff.

It might cost you, if you've got a family like these folks on the podcast, you're a married couple with a family of four, you're doing pretty good if you can get health insurance for $1,200 a month. It wouldn't be terribly unusual for you to be paying twice that.

Health insurance is expensive stuff. And the reason why is because we use it, number one. Number two, healthcare is really expensive. And number three, there's all kinds of inefficiencies built into our stupid healthcare system. All this fighting back and forth between hospitals and docs and insurance companies and pre-authorizations and all this stupid stuff that's built into the system. You add it all together and it's just really expensive. Yeah, that's what you do. You buy health insurance.

Now, what a lot of people can do if they're really into this FIRE thing, is they are living on what kind of income during those years in their 50s or early 60s. Well, they're often living off some pretty tax preferred income. Things like qualified dividends, things like long-term capital gains, or better yet just the principle. If you sell high basis shares of your mutual funds, you might only be paying gains on 10% of it or so.

And so, you can end up having a pretty low actual taxable income. And what that allows you to do is to qualify for the subsidies inherent in the Affordable Care Act. You can actually spend a lot of money and still get a big fat ACA subsidy because it's all based on your income, your actual taxable income, not how much you're spending.

So, if you're spending a bunch of principal or money from your savings or whatever, you may not actually have much taxable income. You may get a big huge ACA subsidy on buying health insurance through the exchange. If you're in that sort of a situation where your income is really less than six figures, you'll get an ACA subsidy. So consider buying it through the ACA marketplace.

But in general, when you have all kinds of choices for health insurance, you just got to decide which end of the spectrum you're on. Some people know they have health problems, they're on expensive rheumatologic medications or neurologic medications or whatever. They know they're going to hit their out-of-pocket max every year.

These are the people that go for maybe a little bit higher premiums, but they have lower copays, they have lower coinsurance. They have a better panel of docs and hospitals to choose from. Whereas people who are in a really healthy family where they hardly spend anything on healthcare, they're looking for the low premiums, high deductibles, high insurance, or high coinsurance, high copays. Maybe not that big of a panel, but they're less likely to use their health insurance. It's more of a catastrophic coverage kind of thing. So, you can get a lower premium plan.

Those lower premium plans are also often HSA eligible. And so, that's pretty awesome if you can put some money away and then pay for those copays and coinsurance and those sorts of things using pre-tax dollars. If the right plan for you is a high deductible health plan, be sure to use the HSA that comes along with it.

But anyway, the main thing is when you go to buy this stuff, you're going to get sticker shock. It's super expensive. You thought disability insurance was expensive, wait until you're actually paying full freight for health insurance. But if you can't afford to pay for your healthcare, for your health insurance as an early retiree, newsflash, you can't afford to retire early. Keep working until you have a bigger nest egg or until you get closer to where Medicare will at least help out.

But don’t forget that it's not like Medicare is free. Medicare is not free. People think their health costs end at 65, not even close. Despite the fact that 2.9 to 3.8% of all the earned income you ever made, which for a high earner is a lot of income, has been taken from you by the government to pay for Medicare. You have to be eligible for Medicare. That means you have to be 65 plus, you have worked for at least 40 quarters, be a US citizen or permanent resident for at least five years or be disabled. Most of you qualify for that.

But that's Medicare Part A. Medicare Part A just covers hospitalization. It doesn't cover doctor visits, it doesn't cover medications. Doctor visits are Part B and you have to pay for that. And Part D, it covers prescriptions, and you have to pay for that.

There's also all this other stuff, Medicare Part C and Medicare Advantage plans and all that sort of stuff if you want it. But my point is it's not like it's totally free when you turn 65. You're going to have to pay something still.

So, what are your options really for those early retirement years? Well, the first one is you just roll the dice. I don’t recommend this but you could go bare. About 17% of my patients have chosen this option, and do not have health insurance despite the fact that many times the government would pay for almost all of it through the ACA or if they would just apply for Medicaid. But that's one option is you can go bare.

Another one is to just go to a broker and buy health insurance. I've done this myself for a number of years. I know what it costs. It's expensive. If you're self-employed, you can deduct it, but it's expensive stuff.

Another thing you can do is you can keep the health coverage you had from your employer. You just COBRA it. Meaning you take over the premiums that your employer was paying. You might've only been paying 20% before, now you're paying 100%. But you can keep that plan. If it's a particularly great plan or you really like it or you just don’t want the hassle of changing, you could do that. You could COBRA your employer's health insurance.

I mentioned the ACA. Go check it out. Run the numbers, see what your substitute would be. It's probably significant if you have less than $100,000 in earned income. I think actually you can get something up to $120,000 or $130,000 I think these days. It's probably family size dependent, but run the numbers and see what you actually get.

Another thing you could do is you could get a job. Yeah, lots of people do that in early retirement. It turns out that they didn't want to retire to nothing after all. They didn't just want to spend all their time golfing so they get a non-core job. Maybe it's being a rafting guide. Who knows what it is, but that job might come with health insurance.

You might also consider a health sharing organization. These are often Christian-based ministries. And the equivalent of premiums, I believe they usually call them shares, can be half the price. It can be dramatically cheaper than health insurance. What you need to remember is that it's not health insurance. There are a number of things that they do not cover that you might think are covered because they're often covered by health insurance. So you need to really read what's excluded, what is not, and make sure you're okay with that.

But these programs do tend to self-select a healthier population. And if you come down with something that requires expensive neurologic or rheumatologic or oncologic medications, you can always in the next open enrollment period, just go back into regular health insurance because there's no exclusions now for pre-existing conditions.

A couple of other options. The Trump administration passed a law, and I believe it's still in effect, that allows you to just buy a bare bones health insurance plan for up to one year. And that sort of a plan can exclude medications and maternity and mental health expenses and have high deductibles and have a really low premium. It's only for one year. So, it's a little bit like COBRAing your insurance. It's usually only done short term, but it might be an option for you. It's a little bit like health insurance used to be that plan. It can be a lot less expensive.

You can also do medical tourism for stuff that's a little bit elective. It's just cheaper in Thailand, it's cheaper in Mexico. Now you might argue there's reasons for that, but it is an option to help reduce the cost of some things.

But health insurance is expensive. It tends to inflate at a rate faster than the general rate of inflation for various reasons. But this is not something that's going to keep you from retiring early if you otherwise have enough money to retire early.

Yes, it's a big expense, but there are lots of other big expenses you paid for in your life, like your housing, your groceries and stuff. What you need to realize though is the cost of medical care is much more similar to the cost of your food than it is to the cost of your cell phone. So it's expensive stuff, expect to pay something for it.

SPONSOR

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All right, we've come to the end of another great episode of the Milestones to Millionaire podcast. If you'd like to come on this, you can apply. Just go to whitecoatinvestor.com/milestones.

By the way, our sister podcast, the White Coat Investor podcast, you can also leave your questions on that. If you have questions that you'd like to get answered on the podcast, you can leave those at whitecoatinvestor.com/speakpipe and we'll get your questions on.

All right, it's been great to be with you. You can do this. I hope you found this episode inspiring. I know I did. And I hope to see a lot of other White Coat Investors accomplish the same goal. See you next time.

DISCLAIMER
The hosts of the White Coat Investor podcast are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.