Emergency Doc Gets Back to Broke in One Year - MtoM Podcast #205

This is the White Coat Investor podcast, Milestones to Millionaire. Celebrating stories of success along the journey to financial freedom. This is Milestones to millionaire podcast number 205 emergency doc gets back to broke in one year. Resolve is the number one rated physician contract team, reviewing 1000 plus position contracts every year. They empower physicians with location specific compensation data, which leads to unparalleled leverage. During the physician contract negotiation process, a physician contract lawyer is included and can negotiate on your behalf, alleviating the stress that can go along with reviewing complex legal terms. Flat rate pricing and flexible schedules are designed for a physician's schedule use code WHITECOAT10 for 10% off. All right, don't forget those of you who are first years out there or who know first years, right? Medical students, dental students, whatever. Students.

Okay?

White Coat Investors Champion program is in the house. This only goes for a couple more months this year and then you'll be second years and you no longer qualify for it. Okay. What is the Champion program? It is a book giveaway. We're giving away the White Coat Investors guide to students, but we can't afford to send them out one at a time. It's too much work, it's too much shipping cost. We gotta send them boxes at a time. So we need someone willing to pass it out to, to their class. So if you're willing to do that and nobody else in your class has yet volunteered, you become your class champion, your WCI champion, and we'll send you the books. And all you gotta do is pass them out. And in fact, if you'll take a picture with you and some of your classmates with the books, we'll even send you some swag to go along with it. Right? That's all it is. All you gotta do is pass out some books. It's not too much work. But you know what? You can do a lot of good for a lot of people. This information earlier in your career is worth millions of dollars over the course of your career. And you multiply that by the number of people in your class, you can make a real difference for people. So thanks for volunteering. You can sign up whitecoatinvestor.com Champion. Last day is March 16th. Don't delay. We have a great interview today. Somebody that's gotten back to broke, which is one of my favorite milestones. Stick around afterward though. We're going to talk for a minute about rollovers. Our guest today on the Milestones to Millionaire podcast is Lucas. Lucas, welcome to the podcast.

Thank you for having me. I'm very excited to be here.

Tell us what you do for a living, how far you are out of your training, and what part of the country you live in.

I'm an emergency medicine doctor. I'm one year out of training, and I live in Texas.

Very cool. And what milestone are we celebrating today with you today?

We're celebrating back to broke. All right.

One of my favorite milestones. Right. It sounds so dumb to anybody that's not in our community. Right. But this is a major accomplishment for doctors.

Absolutely.

All right. One year out, back to broke. Well, let's go to the bottom. Right. What's the worst net worth you've ever had in your life.

After graduating Residency? I had $320,000 of student loans.

Three hundred and so minus $320,000 or something similar to that is probably as bad as it got. Well, wait a minute. You're only a year out. You're a year out and your net worth has gone up over $300,000.

I'm trying to figure out how it happened. You know, I'm looking at. My savings rate must have been higher than I actually planned. I was trying to aim for 20%, and somehow I save $300,000. Plus investing, of course.

Yeah. Okay. Well, some. Let's go over your net worth right now. Tell us about your assets.

So let's see here. So I have an emergency fund that's $90,000. I have a Roth IRA that's $49,000, a taxable account, $49,000, a 401K, $85,000, and an HSA of $2,600.

Okay, so your net worth when you came out of residency was a minus 320. Because you didn't do all that in the last year.

I did most of it. I only had $20,000 in a 401k when I graduated. And then I rolled that over into my Roth IRA because it was such a small amount that I could pay the taxes on it. And the big one, I think, was just the emergency fund. Instead of spending it, I was putting it away to save.

You crushed it. I mean, you hit the ground running like crazy. This is pretty impressive. Anybody else in your life. Do you have a partner or spouse or kids or anything? Is it just you?

Yep. I'm married.

Okay. How many shifts did you work a month in your first year out of residency?

The most I worked was actually only 18 shifts a month. So compared to some other people, it's really not a lot, but it felt a lot to me.

Yeah. Yeah. Those 12s or 8s.

Those are usually tens. Ten hours.

Tens. Okay. All right. So you're working pretty hard as an emergency doc, but not like crazy, right? I mean, that's probably less than you worked as a resident in the emergency department. Yes.

Correct? Yes.

Yeah. Okay, so how did you do this? I mean, clearly you had a little bit of savings before you became an attending, but, I mean, have you been eating anything besides ramen in the last year?

You know, it's amazing that what opportunity being a physician grants us, because I really don't. Did not sacrifice much at all. I don't do much cooking, so my grocery bills are pretty small just because it's mostly just liquids and snacks and easy stuff to make. But the big thing I did right before graduating was read your book, the financial boot camp course, and really just kind of followed that to the T. It's kind of funny. The day I read that, I was on a plane flying to a wedding, and the first event was horseback riding. And the first chapter is disability insurance. And I was like, I gotta get disability insurance right away. I might fall off this horse and paralyze myself and won't be able to work. So either way, I followed your course as quickly or as closely as I could. And even really when I graduated, I was completely broke. I was living off a credit card because there was like two or three months of no paychecks, and I just moved into a new apartment and bought furniture. So the way I really did this was making everything automatic. I kind of do what Ramit kind of preaches, the kind of the reverse budgeting, where as soon as you get your paycheck, everything gets taken out right away. So all my credit card bills get paid off right away. My. My investments come out right away. I maxed out the 401k. I have a very generous employer who gives 10% of your income into a 401k. So a lot of that 401k was from them. And then I wanted to build the emergency fund, so I was putting everything extra just into the emergency fund.

Okay, well, this is. This is pretty impressive. I mean, it is a huge turnaround. You did not have average. I mean, the average student loan burden. If you look at the surveys of students coming out of school, they will tell you, for MDs, anyway, it's about $200,000. It's a little more for DOs and even more than that for dentists, but $200,000, and you owed more than that. You owed 320 and yet still managed to, you know, get back to broke. Within a year. How much do you still owe on your student loans now?

So my student loan is still $277,000.

Okay. What other debts do you have?

I have one car loan. I've got the affliction of being attracted to shiny German cars.

What are you driving right now?

I have a BMW 3 Series.

Okay. When did you buy that?

I bought it maybe two months ago.

Oh, you just got it. You're out of training. Okay. Yeah. You made a decision that you were going to rent an apartment as an attending, it sounds like. I don't know if you moved for your job, changed cities or whatever. Why. Why did you decide that instead of buying a house?

So, you know, I really don't have the classic American dream of owning my own house and having the responsibilities of that. Maybe one day I'll get there, but as of right now, I'm happy to rent. I love calling the landlord when everything. Anything's broken. You know, I'm pretty flexible when it comes to where I live. My family is spread out all over the country, so I don't really have a place to call home where I can go back and see everybody. Everybody's separated, so it's always a flight to see anybody. So I wasn't sure if I was going to like this job. You know, thankfully I have, but I wasn't sure. I thought maybe I come down here, it was going to be a nightmare, and I wouldn't want to, you know, be stuck trying to sell a house again or I know how much of a process that is. So maybe one day I'll get there. But as of right now, I'm very happy renting.

Very cool. And it doesn't seem to have held you back financially. I mean, you made incredible progress in the last year. You make progress like this every year of your career, and you're going to be retiring early as a deca millionaire. I mean, it's just very impressive what you've done so far. Okay, so you read Financial Boot Camp. You came up with a plan. Was it ever hard to follow the plan, or did you find it pretty easy? Actually, once he knew what to do.

So, you know, being financially illiterate, pretty much when I read that book, it was actually kind of confusing, especially the investing portion. So thankfully, I had a lot of people that I worked closely with that were very smart and really could understand that information, kind of translated it for me. And then it's one of those things, once you read it more than once, it makes sense. The second or third time you Go through it. So really just making it automatic, it's really what it came down to. It makes, making things automatic, makes things easy. You don't. I don't even have to think about it. You know, I just look, log into Fidelity every once in a while and just see, oh, there's more money. You know, the number grew again. You know, I see it leave my checking account, but it's expected. And you know, it really was not very hard for me being unmarried, not having any expensive responsibilities. You know, I've been traveling and I have a dog. But, you know, that's as expensive as you want to make it.

So now you decided not to throw everything you were making at your student loans, but to invest, you know, it sounds like maybe even the majority of it, and put that toward your emergency fund, etc. How come. How come it wasn't as big of a priority to you to wipe out your student loans?

Sure. So I refinanced my student loan right before COVID started. So I put in some variable account. I think it was as low as 2% at one point. And then they decided they were going to freeze the interest rates for the federal loans. Of course I was kicking myself. I was like, oh, I shouldn't have done that. But it was still pretty low. It was like 2.25% or something. And then thankfully, Powell kind of advertised that he was going to start increasing rates soon. So as soon as I heard that, I changed it from a variable rate to a fixed rate. So right now my student loans at 2 and a half percent interest, which is pretty low. It's lower than my high yield savings account. It's lower than what I expect to make in the market. So I've been kind of just doing.

The arbitrage in a little bit.

Arbitrage there.

Not that hard to out invest 2.5% when you can get 5% guaranteed in the money market, is it?

No, no. And it's really. I'm not that debt averse as some other people. So to me, really, it's not a high priority. It does hurt, you know, seeing $6,000 a month come out of my checking account, which is, you know, hard, but at the same time there's plenty to go around, as you can see.

Well, is that what you're putting toward your loans right now is $6,000 a month?

Correct? Yeah, it's a five year term. So.

So okay. So, yeah, I mean, you're still going to be done within five years on that plan. It's not like you're dragging these things out forever, correct?

Yeah. So yeah, it'll be done in about four more years from now. And then I'll have that extra $6,000 a month that I'm going to have to decide what to do with. If I want to continue this rapid rate of improvement of my finances. I would start investing it, but we'll see how much willpower I have when I see all that extra money.

Might be time to start spending a little bit of it by then, huh?

That's right.

Very cool. What's next for you and your financial goals?

So, you know, I really don't have a great why or why I want to become financially independent other than go part time. So the next big goal for me, I want to hit the 500,000 of investable assets. And then at that point I want to. As of right now, everything's in an index fund S&P 500. So at that point I want to start diversifying. Maybe take your course on the fire financial advisor and, and that's really all I got so far. You know, maybe the $6,000 in five years I'll start saving that and just maybe buy a house. But as of right now, I don't have the next step.

A little bit vague on the goals, which is okay. Right. You're only a year out of training. Question for you. If you could go part time today, would you.

If I could go part time today? You know, it sounds very tempting, but then you kind of get bored when I'm at home, you know, there's only so much TV I can watch. There's only once you start going on trips, you start wanting to be home. So I probably wouldn't go part time quite yet.

Yeah, yeah, it's, it's, you know, medicine is a fun career and there's no doubt that lots more people become more interested in part time work, feel a little more burned out at mid career. But you know, there's not a lot of us that are a year out that would already go part time. You know, it's still pretty fun and still new and exciting. I think a year out of training and it is an important job and something where you're doing a lot of good in the world. So I think it's great to be full time at least for a few years after you come out of training to solidify all of those skills. Well, very cool. Do you have any advice for somebody that's like you were a year ago coming out, maybe not that financially literate, but doesn't want to screw it up. What advice do you have for them?

So my advice is to make it easy on yourself and make everything automatic. Go into your Fidelity account. Put up the automatic withdrawal or the automatic investment once a month. Try to schedule it soon after you get paid. Same thing with your credit card bills. Make sure you're paying them off 100% every time. I don't care how big it is. Just pay it off. And don't forget to enjoy yourself. You know, we've worked hard to get where we are, and it's really not that big of a deal. If you want to spend $1,000 on a vacation, you can make that up in an extra shift or two as an emergency doctor. And I think it's worth the experiences while you're young and healthy and still don't have as many responsibilities as you might have in the next decade of your life.

Yeah. Very cool. Well, Lucas, congratulations on your success. Thank you for being willing to come onto the podcast and share it with others and hopefully inspire them to do the same.

Thank you for having me. I'm very, very excited to be here. And thank you so much for the wisdom that you've given me. Without your that book, I would not be here right now.

Well, it's our pleasure. Okay. I hope you enjoyed that interview. I love the beginning milestones, right? It's not that impressive to me when somebody goes from 6 million to 8 million, let's be honest, right? It just kind of happens naturally as you stay on the path that you put yourself on early on. But the beginning ones are the hard ones, right? Getting back to broke, saving up your first 100 grand, establishing an emergency fund, opening up a 401k. You know, that's the hard stuff when it comes to personal finances, getting going. And so I'm always impressed when people do that. And as we talked about after we stopped recording, this stuff's not that complicated. It seems like it in the beginning, but once you get going, it's not that hard. I promise you can handle this. A lot of you are doctors. You have people's lives in your hands every day, right? That's hard. That's stressful. That's scary. Managing your finances should not be. And I just think you'll be a better doctor. You're going to be a better physician, better partner, better parent. If you get your financial ducks in a row, I promise you at the top, we're going to talk about rollovers, all right? And rollovers are super intimidating to people for some reason. In fact, I'm convinced that the need to roll something over sends just tons of people into the hands of unscrupulous financial advisors every year because they just don't know what to do. And they know they need to roll over something. Right. Take a deep breath. Rollovers are not complicated. Once you've done two or three or a dozen of them, you're going to go, oh, this is no big deal. If you need help, there are people there to help you. Typically on both ends of the rollover, the company that the money's coming from and the company that it's going to. As a general rule, you do not want to do what is sometimes referred to as a rollover, where you take possession of the money, they send a check made out to you. That's generally not the way to do a rollover. What you want to do is what's called a transfer or a direct transfer, where it's going from one provider, one 401 provider, to an IRA provider or another 401k provider. Right. From your old 401k to your new 401k, whatever. Right. But there's somebody on both ends. You can call up and say, hey, this is what I want to do. I want to transfer the money from your 401k to my new 401k. What do I need to do? And as a general rule, it's best to start at the destination, pick up the phone, call them up, say, what do I got to do? Do I got to fill out any paperwork? You know, can I do this online? What's the way to do this? Have them walk you through it. Yeah. You might be on the phone for 20 minutes the first time you do it. And this whole process might take you two or three weeks for the money to actually be gone from the old account and be in the new account. But I promise you, they will help you do it. It's not that complicated. You don't have to figure it out all on your own. This is what these people do, right? They move money around all day. They're used to rollovers. It's not an unusual thing for them. And so it shouldn't be an unusual thing for you. I have to do a rollover. It seems like, I don't know, every two or three years, it feels like I've done a rollover for some reason or another. And so I've done this, I don't know, a dozen times in my career. Maybe people are too afraid of it. It's not that hard. You don't have to Hire a financial advisor just to do a rollover. And don't leave your money in an old plan with crappy investment choices and all kinds of problems making your life all complex. Just roll it into your new plan. Unless your new plan is just terrible, just put it in your new plan. It's fine. Roll your old 401k into your new 401k, your old 403 into your new 403 or 401. If you had a governmental 457, you've left that employer. You can roll that into your new 401 as well. Non governmental 457s can only be rolled into non governmental 457s, but that's something to consider when you decide whether you're going to contribute to it in the first place. By the time you're leaving the employer, that decision is long in the past. All right? Don't be afraid of rollovers. They are not that hard. You can do them, I promise. If you're having problems, ask on our communities. We've got the financially empowered women community, the few. We've got our white coat investor Facebook group. There's close to 100,000 doctors in there. Doctors and other high income earners. The subreddit. White coat investor subreddits now close to 100,000 people in there. The WCI forum's been around since like 2016, right? Easily searchable, a little easier to find old stuff in there. It's not as big of a community as the Facebook group and the subreddit, but there's been a lot of people that have been there for a long time and I think a skew's a little bit older and a little more experienced than some of the other communities. So you can check that one out as well. If you can't find an answer there, you can even shoot me an email, right? Editorwhitecodeinvestor.com I'll try to help you figure out your rollover and why it seems complicated to you, but trust me, they're not that hard. Sometimes they're a pain. You're like, ah, these guys are pain. But it's not that bad, right? This is not something you can't do. Resolve is the number one rated physician contract team, reviewing 1,000 plus physician contracts every year. They empower physicians with location specific compensation data, which leads to unparalleled leverage during the physician contract negotiation process. A physician contract, lawyers included, can negotiate on your behalf, alleviating the stress that can go along with reviewing complex legal terms, flat rate pricing and flexible schedules are designed for a physician's schedule. Use code WHITECOAT10 for 10% off. That's Resolve, right? You go to white coat investor.com resolve and get there and get your contract reviewed. You know, you pretty much should get all your contracts reviewed. Any employment contract, any partnership contract, all that stuff. There's really no reason not to. It's only a few hundred dollars to get them reviewed and it could save you, you know, years of hassle, tens or hundreds of thousands of dollars. This is a no brainer. Get your contracts reviewed. All right, we've come to the end of another great podcast. This is the Milestones Podcast. You are invited to apply to be on this podcast. You can sign up whitecoatinvestor.com milestones till next week. Keep your head up, shoulders back. You can do this. We're here to help. See you next time. 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.