Financial Advice For Residents, White Coat Investor Part 2

um do you think you could just kind of give us a little overview about who you are how'd you get started in all this like you know you're an emergency medicine physician but what's your kind of background and how'd you get into all of this well that's right professionally by training I'm an emergency physician you know an undergraduate what I studied science I had zero interest in business whatsoever always been a little bit interested in personal finance but not not dramatically certainly not as an undergraduate certainly not in medical school it wasn't until I got to residency earn my first few paychecks that I really started being interested in in making money and what's with money once you make it amazing how your first paycheck does that and it turned out my first few interactions with financial professionals didn't go so well I got ripped off by a financial planner I got ripped off by an insurance agent who happen to be one of my best friends I got ripped off by a lender I got ripped off by a realtor I got ripped off by a recruiter and at a certain point I just said if I don't do something about this this is just gonna continue throughout my career in my life so I decided well I'm gonna self educate a little bit my house was next to a used bookstore in residency and so I'd walk over there and I'd look through the financial racks you know they'd have a few racks of books and I buy books at two or three bucks a piece and I'd read it and after 20 bucks or so I realized that stuff isn't that complicated you know I got bad books but I also read a few good books and realized hey you know there's there's not that much to this and then I started looking around and realizing there's no other doctors that know this stuff yep and so I just started being the resources for other doctors around me and I was helping other people online and then finally in 2011 I decided well instead of just typing the same thing over and over again into internet forums I'm gonna start my own website then I can just paste a link in and they can go read what I wrote on they have to write once and that is how the way could investor was born now I kind of had an entrepreneurial idea with it from the very beginning so it was a for-profit website from the very beginning I threw some ads up there you know in the first week but it didn't make much money for a couple of years now it's been quite a financial success as well which I'm obviously happy about but most the goal of it is to just help those who are willing to go into fields like medicine get a fair shake on Wall Street so they can have this knowledge that took me years of self-study to pick up of how the financial world really works and get it ready to the beginning of their career when it's most useful so that's the whole point of it then in 2014 I wrote a book called the white sister a doctor's guide to personal finance and investing basically I've been encouraged by blog readers to write a book and I said I'll get to it I'll get to I'll get to I should have done that two years earlier because it just sold like crazy it still sounds like crazy it's by far and away it's the most frequently purchased book in that niche and there's probably 20 or 30 books that are about physician finances just because it's one of the few that's written by Doc's and it's got the information that you really want a need and so you can get that at Amazon it's available also a Barnes and neo Noble you can buy it for your iPad it's you know available for your Kindle but highly recommended I've got a few chapters in there for pre-meds and medical students as well yeah although you know half the book isn't gonna apply to you that's okay it will eventually and it's good to get the knowledge earlier rather than later exactly I think it's good to know what you need to be thinking about in the future because I was reading this stuff in college and medical school and it's like well I have no income I have no money but I need to know what I need to be thinking about in the future so that I don't you know have regrets or realize that I've missed the boat on something that's always been my fear that I'm gonna miss the boat and 10 years later realize I should have been investing in this ten years ago so that's I think it's really good to start thinking about this stuff early and to know what you need to know yeah I'm part of the difficult thing is realizing what the big things are you know like that it's like that display they give you at some point in their life where they where they take the big rocks yeah pebble and the sand and the water right put water in first or the sand in first into the jar you're not gonna have room for the big rocks you can figure out what the big rocks are take care of those at least then you'll be fine on a position income you can figure out later but get things right at the beginning it's pretty important so kind of what you said so far is that as a pre-med pick and inexpensive undergrad pick an inexpensive medical school and kind of live frugally are those the big rocks what other things should we big rocks I mean the truth of the matter is for a physician the big financial deal is your first year out of residency and so what you're doing is an undergraduate and as a as a medical student and even as a resident is all in preparation for that year because for a doctor when you come out of residency you go from living on $50,000 a year so all of a sudden making 200 or 250 or 300 thousand or more for some specialties and doctors can't handle that jump and that's where they get into trouble and if you can just keep living on $50,000 for a couple of years all your loans will be paid off all your you know your retirement accounts will be you know you'll catch up to your college roommates I have a down payment for your dream house but the problem is is people come out of residency and even before they've come out they've already committed to buy this super expensive home they've got two car payments you know their credit cards are maxed out and it takes them a decade before they even start you know seriously saving and investing or is if they can just manage that jump a little bit better they would they would be set for life basically because the thing is when you first come out of residency you're used to living about $50,000 a year yeah and and the thing is is you know it's no hard thing to do it for another year you just grow your income as slowly as you can okay I know one resident that's kind of a supersaver she's saving far more than I ever did as a resident but she put $23,000 away as a resident Wow Herman you know obviously most people are gonna be able to do that because it's almost half your income as a resident yeah but basically she took what I said about living as a resident when you're an attending yeah flight it to the stage before she kept like a medical student as a resident yeah and it works there too it's not dramatic of a change but it does work and the truth is is getting that money working for you early allows compound interest to work and then do you have any kind of tips for residents in terms of it investing or what should we what should we be doing with our little tiny income now that we actually have something well one thing I think is to pick up a little bit of perspective right I mean it seems like tiny income making fifty thousand dollars a year but keep in mind that's the average household entry and so I think getting a little perspective and realizing yeah I'm living on fifty thousand dollars and it feels a little bit tight but there I assure you there's a family down the street living on forty five thousand dollars and so even as a resident I think it's possible to save I would get in the habit of saving a significant chunk of your income even as a resident in general that money should go into what's called a Roth type of investing account which means you pay taxes up front and then it's never taxed again whether that's in your Roth 401k at work or your Roth 403 B at work or whether that's a Roth IRA doesn't matter so much to me although if your employer is offering what's called a match I mean you put some money and they put some onion I would be sure to get that but the point is you're never going to be in a tax bracket this low ever again not as an it and not during retirement so as a resident it's all about the Roth account so it gives much into a Roth as you can even if you're if you're using your 401k at work and they don't offer a Roth option your last year of residency you know right when you come out you can convert that to a rock a little bit of tax money but again even that year where you're half a resident have been attending you're going to be in a tax bracket that you probably won't see again at least not for a very long time and so try to have all your all your investments inside a Roth account by the time you get out of residency but the main thing I think is probably protecting against financial ruin by that is mostly insurance okay if so if you're married somebody's depending on your income or you have kids you got to have life insurance don't get suckered in to buy a whole life go buy a big long term life policy you know something like a 30-year level term life insurance policy you can buy a million bucks as a resident for four or five hundred dollars a year you know and if you die your family gets a million bucks you know it's just there's no reason not to it's so inexpensive just go get the other thing that costs a little bit more money but is just as important as disability insurance sometimes when we're young we feel invincible well once you start working in a hospital full time you don't feel nearly as invincible you start seeing these people that are young and healthy and bad things happen to them they get diagnosed with cancer they get diagnosed with the neurologic disease are they getting a trauma or whatever and and being able to keep some kind of income going the rest of your life if you're permanently disabled is pretty important and so I recommend at a minimum as an intern that you get out there you know whether anybody's depending on you or not there you go buy some disability insurance yeah I am from a good independent insurance agent someone who can sell you a policy from any company that way they can put two or three policies up show you the differences between them and make some recommendations yeah you know this is something that you really only have to purchase once or twice in your life so you might as well learn a little bit about it and and you know and buy a nice policy that you can carry with you throughout the rest of your career yeah now you they don't let you buy that much as a resident the biggest benefit you're probably gonna be able to buy is probably about $5,000 per month but even having an income of $60,000 a year tax-free the rest of your life and is very different from living on Social Security yeah that's great advice I got mine last year because Mayo I'm at Mayo Clinic and they offer disability insurance to their residents but I wanted an ophthalmology specific policy because it's otherwise I you know there's all these technicalities you have to look into and things I had to learn and to get kind of a gender-neutral policy and all these writers and man it's there's a lot it's you have to have insurance is complicated the reason why is because disability is 50 shades of grit right I mean you've got all these different gradations of what what's disability and what isn't and yeah what about psych stop what about you know neurologic stuff and it just gets very complicated whereas life and death it's pretty black and white I'm an emergency doc and I see I see all the great wean life and death and it only lasts about 15 minutes and it's pretty clear what's going on there's someone's alive or death disabilities not like that and that's why you have to go get a doctor's signature every year saying you're still disabled and why you know why these policies are so complicated is just because there's so much gray in there and it's really for the most part the more you spend on a disability insurance policy the more stuff it's going to cover yeah and so but I think the main things our resident is just get something if your employer offers something get that get a little better policy when you become an attending if your employer doesn't offer anything we'll buy an independent policy on individual policy you know I own both a group policy and an individual policy for various reasons I write about on my blog but you're right the stuff is a little bit complicated but the point is get something any disability insurance anything is better than nothing yeah other things that residents have a big concern about is managing their student loans yeah just gotten more complicated it gets more complicated every year it seems like a couple of years ago basically you didn't have any choice but to wait until you finished residency and then you had a big decision to make you either stayed in the federal programs or you refinance their loans the federal programs people would stay in sometimes because they were hoping to get loan forgiveness if they were working for a non-profit 501 C 3 but the most part these were academic physicians but there were a few community positions that were also with the 501 C 3 but now it's gotten a lot more complicated initially it was because of a good thing because some of these refinancing companies decided hey you know maybe we'll get to the these doctors a little bit earlier and refinance loans as a resident yeah so that's exciting because all of a sudden you can take these 6% 7% 8% loans and refinance them to 3 or 4% as a resident so not only did they allow you to do that but also like the federal programs these two companies that did this allow you to have these really low payments during residency of either zero dollars or a hundred bucks a month which is wonderful because it's the best of both worlds and so then people started going crazy refinancing their their student loans as residents you know the only downside is once you get that you couldn't stay in the federal forgiveness programs but if you knew you weren't going to work for a 501 C 3 it was a great move well just in fact I think it's in three days it goes live there's a new federal program called repay and what makes thing complicated with it is it basically subsidizes your interest okay or in residency so your interest rate is really about half of what it was which is more or less in the same neighborhood as the as the student loan refinancing companies will get your loan in two yeah and so dependent you know there's a few other downsides are going into this repay program but it's just a much much more complicated decision now than it used to be so it's almost worth paying someone a few hundred bucks for advice as an intern to decide what to do with your student loans now it's just got to be such a complicated decision because the right move if you're still going you know if you're if you gonna work for a 501c3 and who really knows that it beginning the residency then work for 501 C 3 you definitely want to stay in the federal programs but if you're not now you have a hard decision and you've gotta weigh the rates that the refinancing companies are offering you basically half of the rate you're getting from the federal government and that's assuming you don't want to stay in one of the programs you're already in such as the IBR or the pay program it's just gotten a lot more complicated but the truth is when you're talking about several hundred thousand dollars in loans it's worth becoming an expert yeah I know that kind of money I know everything about those programs yeah and so I think you I spend a little bit of time on that as arrested too but those are the main things the insurance getting started a little bit on investing practicing living within your income getting ready for that year when you're gonna graduate being attending and and managing your student loans properly I think those the main issues for residents to hit on okay so maybe talking to an advisor about managing your student loans because one of my co residents is kind of up the mindset like I'm just gonna pay off my loans as fast as possible and just put all my money towards my loans and not do anything else until my loans are gone but but if your were if you're gonna work in academics if you're gonna work like you said for a 501c3 which most big hospitals are then maybe that's not the best decision well I think it really comes down to specialty and what areas for example if you want to be an emergency doctor you want to live in Salt Lake like I do don't think 501c3 you can work for is the local academic Medical Center there are other 501c3 hospitals here but none of them employ emergency Doc's directly they contract interesting so even though a lot of hospitals are 501 C 3 s doesn't mean your job will be oh it can get a little bit complicated a lot of people email me asking you know what are the chances of me working for a 501 C 3 as a radiologist it's hard to say because it just varies across the country plus you've also got the risk that that the federal program doesn't work out for whatever reason I mean when these when doctors start getting three and four hundred thousand dollars worth of student loans being forgiven it's going to show up on the pages of the New York Times it's gonna be a headline doctors getting thousands for hundreds of thousands you know and there's some risk of that program will be modified yeah that it will go away completely now I like to hope that those who are already you know will be grandfathered in oh there's no promise you know I mean Obama's budget last year suggested limiting that forgiveness to just fifty seven thousand dollars that's basically a non-starter medical students if Congress changed it to that and didn't grandfather anybody in it's like the program doesn't even exist for nine years yeah because the plan of doctors that are going for this or basically to have forgiven an amount pretty similar to what they had when they came out of medical school yeah you know after three to five years of residency or fellowship you know they make payments for five years and then basically they're back at the level they were at when they came out of medical school so they're hoping to get two or three or four hundred thousand dollars right and you know there's some risk that that could go away nobody really knows what's going to happen I think people who are already in the pipeline are gonna get grandfathered in promise and so I don't know that I don't know there's necessarily the wrong move to just throw everything you make it your loans for example if the loans you have are six or eight percent that's a pretty darn good guaranteed investment but if you can refinance them to three percent well I'd start looking at maybe investing in a Roth IRA instead of throwing every dollar you have at your student loans but at the same time I think people need to get those loans paid off within two to five years of getting out of residency these things out for 20 years they shouldn't be like your mother-in-law that you keep in the basement for your whole life okay it's just hard because it kind of like you just said there's no straightforward answer there's no clear-cut this is what you should do nobody I mean I think few residents know where they're gonna end up practicing or what kind of practice they're gonna end up having unless they are dead set on being a hospitalist then like how do you know and Wow well you're right that it's difficult to make that decision the closer you get to the end of your residency the easier that'll be I mean but I'm you're you're into your last year you probably already got a contract you know exactly what a certain point you figure it out but you're right it's difficult to begin your residency to know to know what exactly to do with your student loans in particular you can delay that decision a few years it'll cost you a few thousand that they but you know sometimes having your options open is worth a few thousand yeah okay great advice for residents really great thank you so much very welcome any other big things that you think you wish you would have known or um what you want to tell the pre-meds and medical students and residents of America well sometimes I see people that are maybe a little bit too focused on the financial stuff as a medical student president I mean the truth is medical school residency is a time to be learning medicine you know you become the best doctor you can this should be really something pretty minor on the side rather than a huge focus for you you know I mean if medicine is just a means to an end just a means to becoming financially independent you're not gonna like it you didn't go to medical school for the most part because you want to make a ton of money you went because you wanted to help people because you loved science etc etc you know and so in your training focus on learning medicine that's probably the best thing you can do for your financial future is find a career that you're going to be happy doing every day for the rest of your life yeah because the truth is it's far easier to become financially successful if you're willing to do a job until you're 60 or 65 or seven you can just find a job you love that much I think you're set whereas if you if you turns out you hate it and you're doing everything you can to get out by 45 or 50 you know that's you really got to save a lot of money and you got to make some smart financial decisions to be able to pull that off and it's far easier if you can extend your career a little bit the other benefit of doing that is you got more time for your money to compound you got less time in retirement that that money's got last you know it just works out a lot better mathematically if you can work longer so I would focus on rather than figuring out how to get out of work as soon as you can is finding a job that doesn't feel like work to you yeah great advice so great well thank you so much for talking with us I think I mean this is just amazing information that everybody wants to know I think this is gonna help so many people I really appreciate it you're very welcome and I learned a time there was somebody at hand with this information to me when I was leveraged yeah for sure it's something everyone needs to know and I'll be sure to link to your blog and link to your book and it's a fantastic resource you're doing amazing things thank you so much you're very welcome okay okay

Channel: Andrea Tooley

Views: 10,050

Rating: 4.9052134 out of 5

Keywords: residency, resident physician, financial advice, student loans, disability insurance, life insurance, medicine, pre-med, Financial Adviser (Profession), investing

Id: EkxEDoGgc9o

Length: 21min 13sec (1273 seconds)

Published: Mon Dec 14 2015