Financial Basics for Medical Students - WCI Student Webinar 2025

Hi, everybody. Welcome to the White Coat Investor Student Webinar. We're excited to have you here. Let's start by just telling you thank you. Thank you not only for coming tonight, but thank you for what you do. You've chosen a difficult career. If you are a student watching this, you are likely in medical school, maybe dental school, another professional school. You've chosen to do something hard with your life that makes a serious commitment to society, and we are grateful for it. I'm particularly grateful. I had great need of the medical system this last year since I did a student webinar, and I'm sure grateful for all the many, many years of training and education that those who took care of me put in. So let's start with that. Just saying thank you. Tonight's presentation is going to be simply what we would give if your school flew us out to talk to you in person. Okay? So we're going to try to make it as much like that as we possibly can. I'm here with Andrew Paulson, who is our student loan guru here at White Coat Investor. He's one of the principals@studentloanadvice.com and it's great to have him with us. The reason why he's here is because he knows more about physician student loan management than anybody else on the planet. And so he's a great resource to have here tonight. And he'll be giving the student loan portion of the presentation. But our idea here tonight is that we're going to be talking to you for it's probably going to be an hour 15 to an hour 30. And after that, we're going to do a Q and A session. So we're going to stay here and answer your questions just like I would if I just got done speaking to your group in person. And we'll stay for about an hour answering your questions. Last time it was still going. It was strong at an hour. So we know we're going to be not answering everybody's question if we cut it off in an hour. But that's what we've committed to do tonight is the presentation plus an hour of Q and A. This is all being recorded. If you got to leave or you got to go do something, know that you'll get. If you signed up for this, you'll get an email with the whole recorded presentation. So we just want to get you this information whatever way works best for you. All right? We call this Financial Basics for Medical Students. Okay. Does it apply to dental students? 99.9% applies to dental students, and about 98% of it applies to every other possible profession, Pretty much like everything else we do here at the White Coat Investor. Okay, some caveats as we talk about this in a medical setting. The first one is that money doesn't necessarily make you happier. That's not entirely true, actually. The happiness studies show that an increase in income does make you happier. It's really quite a steep curve on that chart, up to an income of about 75 to $120,000 a year. After that, the curve is not nearly as steep. But especially at lower incomes, more money does make you happier. But none of you went into medicine or dentistry or your profession or whatever for the money. You did it out of a commitment. I've read your med school admissions essays. I know what made you go into this. But the truth is, you thought you'd probably make some money at the same time if you're like most of us. And if you ignore money, it can make your life miserable, right? We all wrote these great admissions essays about how we love science and really want to help people. But we're not all doing what my friend Rick here, who's the doctor in the picture there, is doing in Africa, which is treating people with tuberculosis in their spines for almost no income whatsoever, Right? Most of us are practicing here in the United States. We're making good salaries and trying to manage our money well, despite going to medical school because we love science and really want to help people. So with those caveats out of the way, here's why I'm given the talk tonight. I'm the founder of the White Coat Investor. I'm a practicing emergency physician. But back in residency, I got sick of being ripped off. I'd been ripped off by just about every kind of financial professional there is. Recruiters, realtors, lenders, insurance agents, financial advisors, appraisers, et cetera. So I set off on a journey to become financially literate. I figured if I didn't learn this stuff, I was just going to continue to be taken advantage of over and over and over again. So I started learning. I started reading books. I lived across the street from a used bookstore. I started participating on Internet forums. After a few years, I realized that I was doing far more teaching than learning. And I was starting to get sick of typing the same thing over and over again into the Internet. So I started a blog in 2011 called the White Coat Investor. We came out with a newsletter a year after that. A couple years after that, the first book was published. We started a forum after that, then a podcast, put out a book called Financial Boot Camp. Then we started a conference in 2018 and started making some online courses. We now have a subreddit and a Facebook group and a YouTube channel. Wrote the student book a couple of years ago and put together another podcast called the Milestones to Millionaire podcast and then came up with the asset protection book. So we're trying to put all this information into whatever format you prefer. If that's text, great, we'll send you an email. You can read the blog. If it's video, we've got the YouTube channel. If it's audio, we've got the podcast. If you like online courses, we have that. If you like books, we have that. Whatever way you like to learn, you know, whether that's an online community or just sending me an email. And you can do that at any time, too. Editor@Whitecoatinvestor.com will come to me. I've answered all the emails I've gotten over the last 15 years from people just like you with their individual questions. That's what we're doing here at the White Coat Investor, and that's why we think this is important stuff for you to learn. Okay, A few disclosures and disclaimers. White Coat Investor is actually a for profit business. Okay? 98% of what we produce is totally free to you, but we sell your eyeballs. Okay? If you listen to the podcast, there's some ads on it. If you go to the website, there's some ads on it. I'm really big on disclosing our financial conflicts of interest, but because there are ads and we make money, we do have conflicts of interest. If you buy any of our books, if you buy the courses or conference, we get paid royalties. Now that's really important to us because 18 people work here and we have to make payroll every month. But be aware that we make money here. This isn't just a labor of love by any means. Although we didn't make money for a number of years, we do make money at this point. But I'm a practicing doc. I'm not a licensed accountant. I'm not an attorney, I'm not a financial advisor. So this has to be for your entertainment and information only, not official formal financial advice. Okay? What we're going to talk about today is financial literacy, specifically how important financial literacy is now for doctors now that burnout rates are at epidemic levels. We're going to talk about living frugally in medical school. Why that might not be as important as it used to Be. This is from a survey done by Medscape. They asked millennials about burnout, and they asked boomers, and they asked my generation, generation X. And as you can see, it has a strong impact on the lives of all three generations. 36 to 50% of doctors, depending on generation, said it has a strong or severe impact on my life. I mean, that is huge. 50% of boomers and more than a third even of millennials. And if you ask doctors what is making you burned out, and for the most part, it's spending too much time at work. Right? It's too many bureaucratic tasks, and it's not being respected. And if you ask the boomers, they say it's the EMR that's driving me nuts. But the rest of us can apparently handle the emr. And it's work. It's work that's making people burned out. Okay, so this is another thing that I almost hate to tell you this, but I do these surveys among practicing physicians, and I asked them, I said, if you didn't need the money, if I wrote you a check for $10 million or $20 million enough that you never have to work again for sure, what would you do? And what they tell me is that a third of them would basically not come into work tomorrow. They're done, they're out. Okay? And about 47% of them would come and basically say, you know, I'd cut back, I'd drop call, I'd work fewer days a week, I'd go part time, I'd stop doing procedures I don't like, et cetera. They'd cut back in some way. And only about 10% of docs. And I've done this survey many times, and it's always the same. Only about 10% of docs are like, I wouldn't change anything. So what that tells me is a significant percentage of practicing docs out there are doing their profession at least partially for the money. That's fine. It's fine to do that. Right? But I hope there comes a time in your career and if you manage your money well, there will come a time in your career by about mid career when that is not the case, when you do not have to practice medicine for the money. And I'll tell you what, as one of those people who's still practicing beyond financial independence, I can tell you medicine is a whole lot more fun when you don't have to do it. Okay, so here's some truths about burnout. Number one, medicine's a hard profession. This is a Hard job. Okay. There's lots of things you gotta keep up on. Staying board certified and staying licensed and taking care of sick and injured people and dealing with their family members. It's hard. It's always going to be hard. If you own your practice, that helps a lot of people not be burned out because they have more control over their work. So if you would consider ownership of your practice, I totally encourage you to do that. Even if you're in, you know, a shift based, hospital based specialty like emergency medicine, like mine. Better to own your job than to simply be an employee as far as control goes. And that control will matter a lot more to you as you get toward mid career when burnout starts peaking. Burnout has a pretty high correlation with depression. So if you feel like you're getting burned out, get evaluated for depression too. And if you have any depression, identify that and treat that. There are both institutional and personal factors that contribute to burnout, right? You can put two docs into the same job and one gets burned out and the other does not. But the truth is, a lot of burnout is from toxic workplaces. It's just docs really aren't being treated very well. So work on both factors, both your personal resilience as well as improving the workplace and the job, et cetera. But the truth about burnout is that financial freedom allows for all kinds of burnout, reducing changes. Let me give you an example. I often run into docs who tell me they're burned out. And the first thing I suggest to them is, why don't you cut back to full time? Because so many docs are working 60, 70, 80 hours a week. And you know what? They would love their job if they were only working 40. So what allows you to cut back to 40? Well, sometimes you need to get a little more help to take care of the patients. But often it's simply living your financial life in a way that you can cut back your hours and likely decrease your income. So here's what I can tell you about burnout. Career longevity is so important. Burnout is the biggest financial risk that you have in your career. Okay? It's a financial risk because if you get burned out, you can no longer earn that high income that allows you to build wealth. And so every time you make a career decision, the primary concern should be career longevity. How long can you do this for? If you make this change, can you do it for longer? Great, make the change. Okay. Financial planning though, provides a lot of tools to help you to beat burnout. You won't have student loans hanging over your head. Eventually you'll be debt free. You're going to know how much you're worth, so you're not going to be underpaid. You can cut back on your call on work days, your work weeks, take more vacation, etc. You have the money that allows you to leave a toxic job and to tell administrators they can either change it or you're walking out the door. In fact, if you're just totally burned out on medicine, you can afford to change careers, even if you're going to what I'd call an encore career, you know, and maybe you want to go be a ski instructor or a rafting guide or something. You can afford to do that if you do good financial planning during your career. And of course, there's always the option to punch out of work completely and retire early. Okay, let's talk about frugal living now. This section has been in this presentation since I've been talking to students starting back in 2011. I feel like I need to add a caveat to it this year. So here's that caveat. Here's the caveat about frugal living. We used to tell people to be very careful about how much they spend and how much they borrow and to spend their own money first before borrowing. At current student loan interest rates for professional school, which is 6 to 10%, I think federal student loans this year are 8 to 9%. And the reason why is because student loan programs, particularly Public Service loan forgiveness, but also student loan holidays and income driven repayment programs like save, which we'll talk about more later, have become so generous that this might not be the right advice anymore. For a lot of people. What borrowing does is it preserves optionality. If you borrow money despite having money, you can actually pay off that loan with the money you have at any point. But if you don't borrow the money, you don't have the option to borrow it later. And for many, many docs these days, their student loans are being forgiven via the Public Service Loan Forgiveness Program, at least federal student loans. So it's a little bit hard now for us in good faith to tell you to not spend other people's money when there is actually a pretty good chance that there will be no consequences for you doing so. Okay, but we're going to do it anyway in this session. Now, this still applies to lots of people who are going to be paying back their student loans. You may not know if you're going to be paying back your student loans or getting them forgiven at this point. So it's probably worth still living frugally during medical school, even if you might end up getting some money forgiven later. So the money, the things you buy with borrowed money, costs a lot more than you think it does. Everything you're buying is really probably two or three dollars. If you spend a dollar on it now, it's probably $2 or $3 by the time you pay it back. So you should spend carefully. So how is that possible that it costs so much more? Well, one effect is the time value of money, right? Because as time goes on, money becomes more and more valuable. It earns money. And the second is the effect of higher tax rates as an attendee. Okay, so here's what I mean. If you borrow $1,000 at 7% to pay rent as an MS.1, and then let that interest accrue for four years of school, three years of residency, three years of fellowship, then you pay it back over 20 years. By the time 30 years have passed, that $1,000 will have become $7,612. Even if you pay it off within five years of finishing your training is still $2,759, right? So basically, you're paying $3 for every $1 you spent during that first year of medical school. And then the effect of higher tax rates, right? When you borrow money, it's always after tax money. You don't pay taxes on it when you borrow it. You pay it back with after tax money. So right now you're in a very low tax bracket because you don't have much income. But later you're going to be in a higher tax bracket. You might be in a marginal tax rate of as high as 45%, meaning 45 cents of every dollar you earn goes to the tax man. That means you would have to earn $13,840 to pay off that $7,612. So it could be really bad. You could be really having to turn that $1 you borrowed into $14. So if you borrowed $100, that's 1,400. If you borrowed $1,000, that's 14,000. If you borrowed $10,000, that's $140,000, right? So it really does add up over time. So frugal down, right? Be a poor medical student. This is the easiest time in your life to be poor. Everybody else around you is poor too, so it's fine, right? Limit how much you eat out. Recognize that a lot of the food you get at the hospital is totally free. Don't forget that you aren't what you drive, right? You can get reliable transportation for just $5,000. Okay? Get roommates if you're single. Okay. Send your partner to work if you're not single. That all helps you your money to go further. Okay? Minimize your debt. That allows you to, if you spend less, use your savings, use any family help you have first, and then don't take out debt until you must. I knew a doc who borrowed on 0% credit cards for a few months, I think as long as 13 months with some deals, and then took out the student loans and paid off the credit cards with them. Because once you start taking out those student loans, that interest isn't subsidized during medical school. It starts accruing the next day as soon as you take that money out. So don't take it out if you don't need the money till November, don't borrow the money till November. It only takes a couple of weeks to get it through the school. Money you don't need until March, don't borrow until March. Right? And if you have to borrow, get the best terms. What does that mean? That means federal student loans, right? Federal student loans are the ones that are eligible for income driven repayment programs. They're the ones eligible for public service loan forgiveness. Private loans are not. You're going to be paying back the private loans. You might even want to consider home equity and family loans and 0% credit cards like I mentioned. Keep in mind none of those are eligible for public service loan forgiveness. But they probably come at a much better interest rate than federal student loans do right now. Okay, let's talk about your specialty choice. This is a big question for medical students, right? You spend lots of time talking about this. You go to all the lunch and learns as first years and second years. You rotate through the core specialties as third years. And you maybe use your elective for something you think you're interested in. Then fourth year's, all kinds of electives. You're trying to button down your final choice. Well, let me tell you how to choose especially. Okay, here's the truth about medicine and money. How much you get paid does not depend on how much you know. It doesn't depend on how much time you spent in training, nor does it depend on how unpleasant your work is. Market forces do not work very well in medicine. And as a general rule, procedures pay better than thinking does. Okay, there's lots of specialists specialties where you do lots of thinking. And there's other specialties where you do lots of procedures. And as a general rule, the ones that do lots of procedures pay a lot better. But the truth is, everyone tells you medicine is going to hell in a handbasket. Well, it's not. Okay, here's the salary trends. Yes, doctors get paid more every year. You know, and even if you go back to the 1980s, which was supposedly the golden age of medicine, if you adjust for inflation, doctors are still getting paid about the same or better. Okay? So don't believe people that are telling you medicine is just terrible. Yes, maybe their situation is terrible, but on average, doctors are making more money year after year after year. And in fact, this year most recent survey from Medscape suggested the following average incomes for each of the given specialties. And you can see, you know, endocrinology down there at 256,000. You can see orthopedics up at the top at 558,000. And everybody else is somewhere in between. You know, my specialty of emergency medicine always ends up about the middle, and there it is in the middle, $379,000. And that's pretty accurate for emergency docs as an average. However, what nobody ever tells you is that intra specialty pay variation is way bigger than the difference between specialties, the inter specialty pay variation. Okay, I know pediatricians and I know family practitioners and I know psychiatrists that have seven figure incomes. I know orthopedists that often have incomes that are barely six figures. They tend to be working in the military. I know pediatricians with five figure incomes. It's entirely possible to not make all that much money in medicine, especially if you're working part time. So the pay variation in any given specialty is really, really large. You'd be surprised how big this is. Okay, but as I tell medical students when they come over to the house, if you can't live on a couple hundred thousand dollars, you have a spending problem, not an earning problem. You know, when I tell that to attendees, they don't think that's funny at all because lots of them are spending $200,000 or more a year and having trouble saving anything. But medical students still laugh when I tell them that joke. So hopefully you still find that funny. All that said, it's way easier to pay off debt, to build wealth, to give to charity, to buy expensive stuff. If your income is higher, it's just way easier to live on $400,000 than it is on 200,000. And it's way easier on 600,000 than it is on 400,000. You're going to care more about your income and lifestyle a lot more 10 years out of training than you will as an Ms. 3. Choosing a specialty I promise there is no more idealistic time in your life than when you're sitting there in medical school choosing a specialty. I promise you future you is going to care more about your lifestyle and your income than you do now. So give it a little more credence in your calculations as you choose a specialty than maybe you think you ought to. But that said, the most important factor, as I said earlier, is optimizing for longevity. Choose something you will love doing for a long time. You're going to be way better off as a pediatrician working for 30 years than spending an extra three years training to do critical care and then burning out in 10 years. Okay, that's the truth. That's just the way money works. You get compound interest working longer, you pay less in taxes, et cetera, and you end up being wealthier if you can do anything for 30 years than if you burn out of anything in 10 years. But if you love two specialties equally, for heaven's sake. But if you love two specialTies equally, for heaven's sake, choose the one that pays more and or has a better.

Lifestyle My name is Andrew Paulson. I have a Master's degree in accounting and I'm a certified student loan professional. I'm the co founder and lead consultant@studentloanadvice.com Our team of student loan professionals has advised on $850 million in student loan debt for doctors and dentists all across the country. My inspiration initially came because I married into medicine. My wife had a nice chunk of loans from her nursing school and that was my first foray into understanding what it feels like to have student loans hanging over our heads. So just a little bit about studentloanadvice.com it's a white coat investor company and we create customized student loan plans using the principles of White Coat Investor. All of that stuff that we are covering today that you need to be aware of while you're in medical school. We do one on one meetings with a student loan pro to guide you through your best options to manage your student loans. We talk about PSLF and refinancing and married filing separately and all the different income driven repayment programs and need to be aware of and bottom line. How studentloanadvice.com helps docs out is we help you save time, money and give you answers on your student loans. You can have peace of mind. All right, here's what I'm going to be covering today, a little bit of Student Loans 101 for Federal Student loans, private student loans, loan forgiveness programs, and then how to manage it. How do you manage it while you are in school? And we'll talk a little bit about what it looks like post met, post school life when you're working, maybe you're in residency and then of course when you're in practice. And we're going to talk about should I be paying them off aggressively or should I be doing a loan forgiveness program? Okay, so let's first start out with where things are for new graduates. Back in 2020, the average student loan balance for DOS was $240,000. For MDS was 200 grand and for dentists it was a little over $300,000. Well, fast forward four and a half, five years later, it has gone up. Right. I think it's 20, maybe $30,000 more in each of those respective categories. And half of indebted docs and dentists owe more. We are commonly seeing here at student loan advice doctors anywhere from 300 to $450,000. And the average doc that I work with on a daily basis owes about $330,000. Okay, you know, so it's definitely gotten very, very expensive to go to school these days. There's $1.6 trillion in student loan debt. And a big portion of that is those that have gone to graduate and professional degree programs like yourselves. Something to be aware of is these federal student loans that you're taking out right now while you're in school. If you borrowed at 8 and 9% this year and then rates go down next year, your existing interest rates won't go down. Now if you do need to borrow this this year. Right. They will adjust accordingly and they adjust about once per year. But know that the federal government won't ever refinance your loans and lower them for you automatically. So let's talk about federal student loans. This is the most common form of borrowing for college. And we would encourage any of you right now in borrowing for school, take out federal student loans. As Dr. Jim Daly was talking about. There is the most flexibility with federal student loans. They come usually anywhere from 3 to 9% federally. We're put that upper bound at this point right now where it's 8 and 9% for those Stafford and those direct plus graduate loans. And they come in three flavors here. Stafford unsubsidized, Stafford subsidized and plus graduate loans. Stafford subsidized are a nice kind of Federal student loan where the interest doesn't accrue while you're in school. Well, unfortunately back in 2012 they discontinued subsidized loans for graduate and professional degree programs. As a result, any of the federal student loans that you are borrowing are in the unsubsidized variety, which means that they do start to grow while you are are in school. Okay. And so then you know most of you are going to be taking out Stafford unsubsidized. And then if you need more than the Stafford unsubsidized amount per year, which is usually about 40,000, 40,500 ish, then you dip into the plus graduate loans. There's four key federal protections. I want to talk about repayment plans, forbearance, deferment, death and disability and loan forgiveness. We are going to go into tail on repayment programs and loan forgiveness programs. Now what you need to be aware of with forbearance and deferment is it's a temporary period of time where you don't have to make payments. While you are in school, you're in deferment, you don't have to make payments. Can you make some payments if you want to, maybe on their interest? Sure. Should you? Well, it depends on kind of what your overall approach is to your loans. There's also forbearance and that is when you have exited school. And what forbearance does is it temporarily allows you to put off making payments. Maybe you've come upon a hard financial time, maybe there is you're out of a job or you just simply cannot afford your student loan payments for a temporary period of time. Forbearance is a lifeline for you.

Okay.

But please, if possible look at some other options, maybe income driven repayment and other ways to stay current in repayment on your loans. The reason why is during forbearance your loans continue to accrue and accumulate interest. And in addition, any time in this forbearance timeframe does not count towards any loan forgiveness programs and you're not making any progress on paying the loan down. And thirdly is any of the interest that is assessed during a forbearance would, would be capitalized once you exit said forbearance and move back into repayment. And this, this process is great when we are the ones who are collecting on the interest or compound interest as we call it with investing. But when there's capitalization of interest, the principal balance on your debt grows and it's the concept of interest accruing on interest.

Okay?

So really try to avoid forbearance at all if all possible. There's also death and disability discharge. In the event you die or your federal student loans or you're totally and permanently disabled, your federal student loans go away. They're not passed to a partner, to a spouse, child, family member. So there's a little bit of an insurance policy baked in on your federal student loans. One other key point that I cannot emphasize enough is if you're when you graduate from medical or dental school, please do a direct federal consolidation right after you graduate. I was just working with a doctor who was eight years into practice yesterday and she wishes she had done this federal consolidation right when she graduated from medical school. The reason being is that your loans will enter a grace period where you don't have to make any payments for the first six, five to six months after you graduate from your program. This is problematic for a couple of reasons. Number one is your loans continue to grow and accumulate interest. Number two, the clock has not yet started for loan forgiveness. Okay, so the benefit of doing a federal consolidation is instead of moving into repayment in November or December of your first year out of school, you can start your repayment in June or July and start your clock for forgiveness as well. The sooner you can do that, the better. Let's talk about some of the federal repayment programs that you need to be aware of. The first four are what I call time based and the bottom four are income driven repayment programs. The first is standard repayment that's fixed payments over on a 10 year schedule. You know, think of it kind of like a mortgage, but over 10 years. There's also graduated. Graduated is a 10 year payment schedule. But those student loan payments step up every two years. So it starts out a little lower and then it gradually increases above what it would have been on the standard fixed repayment program. There's also extended it's fixed payments over 25 years and the extended graduated where payments start out lower and increase every two years. But over a 25 year time period there's income driven repayment programs. And this is generally where we want you to start when you are fresh out of school. Reason being is payments can be pretty reasonable and pretty affordable. There's four income driven repayment programs. Income Contingent repayment, icr, Income based repayment, ibr. So know that idr, icr, ibr, it all kind of gets muddled together. But know and understand this distinction, that income driven repayment, IDR is the umbrella term for ICR IBR pay as yous Earn pay and saving on a valuable education Save. And we'll talk a little bit more about the SAVE program as it's had some recent, recent legal troubles. If you have a mortgage of Federal student loans, 200, $300,000, please learn the ins out. Learn the ins and outs of these programs. And if you don't want to learn it, hire a, hire a professional that can help you out with this. So income driven repayment programs have nothing to the payments have nothing to do with your interest rate. They have almost nothing to do with your debt burden. And they're based solely on your income and the number of people in your family. Say, for example, you're making $60,000 as a resident physician fresh out of training and you're single. What would your payments look like on a $60,000 income? Well, it depends on which income driven repayment program you're in.

Okay.

ICR, it's about $750. IBR actually has two versions. One would be about 450, the other is 300, 300 bucks. And then the pay and the save plan are respectively $300 and $200 per month. So of course, when you're starting out, you probably want to look at one of those ones that's the most affordable, like new IBR pay or the SAVE program. Let's say you're married, you have two kids and you're the single. You're the sole earner in your household. So go down to where it says four people. What happens is as your household size increases, they provide you with a larger federal poverty line deduction. And that's simply a calculation that the HHS has come up to help calculate, you know, what you should be paying on a monthly basis on these IDR plans. But you can see if you go to line four, that payments in the pay plan have gone down from 300 to about $100 a month. So this means that the more people in your household size, the lower that your student loan payments would be. And at a certain point you can see those payments drop to zero. You got four kids, if you have a large family, know that you could have really next to nothing payments while your, you know, early career. Let's talk about the SAVE program. This was the most generous income driven repayment program that we had ever seen. Maybe a little bit too generous because the SAVE program was very short lived. It was rolled out in the summer of 2023 by the Biden administration and a lot of people were funneled into it really in September and October of 2023. Well, about less than a year into its life. Multiple states sued the implementation of the SAVE program and it has been stuck in this legal injunction now for more than six months. Well, we're waiting for a ruling from the 8th Circuit Court of Appeals and it's expected soon. This could be any day now. I listened to the hearing on, on the SAFE Fund. It does not look good in the slightest day. We highly doubt that it's going to survive. You should not plan on the SAVE program being around for you. Historically, the SAVE plan was the best IDR plan for early career dogs because it had a big interest subsidy that help keep your balance from growing. So if you made minimum payments, even as a resident, even when you were early career, you would never, your balance wouldn't grow. It would stay there, would only go down once, once you financially get to a standpoint where you could pay it down. It also had the lowest monthly payments. We even saw some docs that were some students that were enrolling while they were in school to try to help kind of subsidize the interest. But know that that's kind of off the table at this point. And another thing that this brings to the forefront is student loan policies can change. So this is very important for you to stay up to date on this and to stay apprised of these changes. Let's talk about some loan forgiveness programs. Public service loan forgiveness. This is the holy grail of student loan forgiveness programs. We're going to talk about it. Every single doctor needs to know how that program works. There's also IDR loan forgiveness. That's where you pay for 20 to 25 years and then your student loans just go away. Now the kicker with that one is that whatever your outstanding student loan balance is after 20 to 25 years, they make, they tax you on that. So say you're living in a high tax state and you owe 300 grand in student loans. In 30 years you may have $150,000 tax bill when it's all said and done. Okay, there's loan repayment assistance, loan repayment assistance programs. There's a plethora of those depending on the state that you practice in. I was just talking to somebody that was working in North Carolina the other day that told me about some new loan repayment assistance program. There's, they're all over the place out there based on where, what area of medicine you work in and the state. And depending if you're working maybe in a place that's more rural, maybe it's Harder to staff. There's also military. Dr. Jim Daly was in the military and he could speak to that a whole lot better than me. But the military can pay all your student loans, right? They can help you. They can pay your way while you're in school. But as a result, there is some service requirement. You know, maybe it's during residency or it's even post residency that you would need to fulfill if you want to do military. There's also National Institutes of Health if you're interested in doing research work as well. They have a plethora of options right now. NIH is in the news a whole lot right now, but there's about 40 to $50,000 per year that they're willing to offer in loan repayment assistance. There's also National Health Services Corp. You want to work in a health professional shortage area, you want to work in a rural area, do you want to work with underserved populations or on an Indian reservation? There are a plethora of those, right? They are. They would love to recruit doctors, lots in primary care and psychiac. You want to work in a rural area, do you want to work with underserved populations or on an Indian reservation, right? There are a plethora of those. They are trick health. There are lots and lots of opportunities. They also provide usually 40, $50,000 per year. But you got to stick around for a, to make a two to three year commitment for one of. There's also a very generous program that the VA offers Veteran affairs called the Education. They would love to recruit doctors lots in primary care and psychiatric reduction program. The VA in certain locations will reimburse you up to $40,000 per year in student loan payments for your first five years out of training or out of dental school. And this is a really, really beneficial program where say you paid $30,000 in student loan payments for the year. They reimburse you for all that at the end of the year. So, you know, definitely look, look at all, you know, don't, don't leave any stones unturned when you are looking at ways to, you know, have an employer or some organization to help you pay your loans down.

Okay?

Public service Loan forgiveness. It's been around since 2007. There are more than a million borrowers. They have hit public service loan forgiveness. And I, if I could show you all a chart. It looks like a hockey stick. Recently, you know, four or five years ago, there was 10,000, 15,000 borrowers that had gotten public service on forgiveness and it has exponentially increased. Okay. A lot of it is because there's, there's a lot more good information getting out in places like, you know, white coat mesher. And it's, it's going to the dental schools and the medical schools. Right. But, but, but also the process has gotten better. It's all electronic and the rules have, you know, been a bit more streamlined. So there's four rules. Number one, you need to be in a qualifying repayment program. Icr, ibr, Pay and Save are payment programs that we count. You need to make 120 payments on time, cumulative, not consecutive. So generally that is over 10 years of, of employment post school. Then you need to be working full time or usually at least 30 hours per week and be working at a non for Profit or a 501C3. There's an employer certification process that would allow you to calculate your time and to qualify you for this program. You can find that on studentaid.gov after you've met requirements. 10 years of payments, 10 years of employment. Whatever the outstanding loan balance is, they forgive it tax free. Most residencies and fellowships are 501s, as are academic positions. Those, a lot of those are 501C3s. But beware, there's a lot of doctors that are working at non for profit hospitals but are not employees of that hospital. They work for a contractor, a surgery group, a physician group that is contracting them there. Maybe it's locums. Now there is one caveat to this. If you are interested in practicing in California or Texas, you can now be working for a physician group that contracts at a hospital and that now qualifies for public service loan forgiveness. That was rolled out a couple of years ago.

Okay.

Virginia military, CHCs, public health, those are all the sorts of institutions that would qualify for public service loan forgiveness. There's more jobs than you would think that qualify for this program.

Program.

Why does it work? Well, usually it has very affordable payments when you're in training. And the amount that you're forgiven is generally about what you owed when you graduated from medical or dental school. It is almost always the best option if you qualify. But to help offset the risk or hedge your bets here you could set up a side fund.

Okay.

And that is in the event the government is able to get rid of this. Or frankly, you start out your job in public service after you get out of training and maybe it's not the right fit for you and you want to work at a private practice or a private employer. Okay, well this is where a side fund could come in handy to be able to pay the loans down and it wouldn't financially set you back. Let's talk about private student loans. They're not as commonly used when you're in the borrowing phase in school. More commonly used after graduation when you're looking to privately refinance your loans or take your federal loans and get them out of the government into a private loan and perhaps be able to lower your interest rate. That is the number one reason why someone would refinance their federal student loans is they're trying to get a lower rate. And we'll talk about more ramifications. This is a very, very important point. They're not as eligible for flexible repayment or forgiveness provisions. And I should also say don't borrow federal right now. Borrow. Excuse me, don't borrow private right now. Borrow federally. They're less likely to be discharged in death or disability.

Okay.

Than federal loans. And this goes for private and for federal. It is extremely rare for student loans to be discharged in bankruptcy. Private loans come in variable and fixed interest rates and we have seen anywhere from 0 to 14%. I am seeing some private student loans that are darn near what credit card interest rates are. And the variable variety mean that if interest rates go up, so will those private student loan interest rates. I have seen some docs that I was working with that their interest rates were 3% three years ago and now they're 7% because they had the variable interest rate loans. Talk about private refinancing. There's some awesome resident refinancing programs that will allow for you to have 0 to $100 payments while you're in residency. It is an excellent option if you have private student loans. You could, you'll probably be able to lower the interest rate if you already have private student loans. But I would advise against refinancing federal student loans while you're in school or while you are in training. Once loans are refinanced, meaning federal loans converted into private loans, you do not qualify for federal programs such as IDR and pslf. And I can't tell you how many doctors I have worked with that had no idea they were going to end up loving working at a non for profit or an academic center. And they do. And they have refinanced their loans and they've squandered the ability to do public service loan forgiveness. So please wait this out and decide when you're picking your job, whether you know, once you finish your training program, how do you manage your loans? There's two ways it is this simple. Number one is you just pay them off and you private refinance your loans. You live like a resident, you pay them off in three, four, five, six, seven years at a train. Or number two is you pick a loan forgiveness program. Now how do you pick Debt to income is a great measuring stick. Say you owe $300,000 in student loans and you're going to make $300,000 in the future. That's a debt to income ratio of one to one. If your debt to income ratio was one or lower, meaning that you make more than your student loans, maybe you're one of those fortunate souls that only had to take out $50,000 right for your school, okay, that's probably where you're going to refinance your loans. Generally when you're making more than your student loan balance, you're going to refinance and just pay them off. Now what if your debt to income ratio was 1 to 1.5? Now say your balance is $450,000 and you make $300,000 of income. That's where PSLF starts to become more advantageous. Throw on of income. That's where PSLF starts to become more advantageous. Throw on there. If you did five, six, seven years of training, this all kind of more moves you in that direction towards doing a program like public service loan forgiveness. Because generally those of you that are going into surgery or are going into GI or cardiology are going to be in training for five, six, seven years and most of the time all that, all that time and training counts and you've made little tiny payments when you were in training along the way. If your debt to income ratio is 1.5 or higher, say you owe 600 grand in student loans and you're going to make $300,000. That's really where you probably want to do public service loan forgiveness. Okay? But it also depends on what kind of employment you're looking for after training. If you want to work in non for profit, want to work in private practice, if you're not sure yet, that's, that's okay. You've got plenty of time to figure that out. Let me take you through a quick case study here. Let's suppose you're a single emergency medicine doctor, you have three years of residency and your resident income is $65,000. Once you finish your training program, you're going to make $300,000. Okay? You have $300,000 in student loans as well today. Well, what would your payments look like if you were making your required payments on the income driven plans. Your first year in residency, zero. Your second year in residency, 100 bucks. And the next three or so years it's 3, $400 a month. And then it jumps up to that, you know, $2,300 number. Because year after year you have to recertify your income. Just as you'll be doing your taxes each year, you'll need to recertify your income to stay current with your loan servicer. Over 10 years you paid $142,654. What if you refinanced your loans fresh out of school and you started to pay these off on a 10 year term and you were also able to lower your rate from 7% to 5% to refinance them right now, what would that do? You'd have a 31 $3200 payment. No, I'm not expecting if you're single that you're going to be able to pay that $3,100, but let's just say you could. Over 10 years, the total amount paid is $380,000 in your student loans. That is a huge difference. PSLF is a very powerful tool. If you qualify, this doc could save $240,000 in student loan payments over the first 10 years of their career. Okay? That means maybe another $100,000 in retirement accounts, $100,000 in their home, you know, $40,000 in their, you know, their kids, five hundred and twenty nine plan. Right? And then that money has the ability to grow and compound over time. Okay? Another thing you do want to consider here is pay at a non for profit and pay in a private practice are not always the exact same. Sometimes there's a huge discrepancy. Right? But looking in this, in a vacuum, right, this can have a big difference when it comes to paying down your loans. So consider this on there. If you did five, six, seven years of training, this all kind of more moves you in that direction towards doing a program like public service loan forgiveness. Because generally those of you that are going into surgery or are going into GI or cardiology are going to be in training for five, six, seven years. And most of the time, all, all that, all that time and training counts and you've made tiny payments when you were in training along the way. If your debt to income ratio is one point, here's the takeaways. Number one, IDR is a great option for early career docs. Number two, hold off on refinancing your federal student loans while you're in school and frankly while you're in training. Number three is private refinance your student loans early and often. And last of all is consider public service jobs for PSLF after all.

Right. Great job, Andrew. Thank you for going through that in such depth and I hope that's really helpful. I know when I talk to students.

Five or higher, say you owe 600 grand in student loans and you're going to make $300,000. That's really where you probably want to do public service loan forgiveness. Okay. But it also depends on what kind of employment you're.

These are their biggest questions is how to manage their student loans. So I appreciate having you here that. Okay, let's move on to the next section. There are a few of you out there that have some money. It's not a lot of medical students, but about 27% of medical students graduate debt free and some percentage of them actually have some money. You know, it might be that they have some family money you're looking for after training.

If you want to work in non for profit, want to work private practice.

If you're not sure coming in or they have a working spouse, maybe their spouse has a job during school and maybe you have a job during school or you had a prior career career or something so you have some money. So we're going to spend just a few minutes about some things to think about while investing during school. Your best investing move, if you have some money in some sort of a tax deferred retirement account like a traditional IRA or an old 401 or something, you have no significant taxable income yet.

That's okay. You've got plenty of time to figure that out. Let me take you through a quick case study here.

During school, particularly if you're single, I guess if you're married to somebody that's working, that's not the case. But most medical students have no significant income during school and the standard deduction is $15,000 a year. That means you can do a Roth conversion of up to $15,000 each year and pay no taxes on it whatsoever. In fact, you could convert another 12,000 each year and pay only 10% in taxes and another $36,000 and pay only 12% in taxes. So if you've got some sort of a tax deferred account, convert it during medical school. And if you anticipate you're going to be enrolling in some sort of an income driven repayment program, try to do it in the first couple of years because remember you're filing A tax return that last year to establish your income for the first year plus of residency for your IDR payments. And it's best if that income's $0. So try to do the Roth conversions relatively early during school, okay? The second best investing move if you have money is what's called tax gain harvesting. This is for people with a taxable non qualified brokerage account with some investments in it. And what this is all about is, it's all about upper updating your basis. Okay? Your basis is what you paid for an investment, okay? So your capital gains, when you sell something, you have to pay taxes on capital gains. That's the sale price minus the basis what you paid for the investment and the capital gains tax bracket. The 0% taxable cap. 0% capital gains tax bracket this year is like $48,000. Meaning you can realize a $48,000 gain and pay no taxes on it. Right. And basically update your basis so later, whenever you sell this investment, you'll have less of it that you have to pay taxes on. I mean, as a general rule, when you're investing, you don't realize gains that you don't have to realize. But when you're in the 0% tax bracket, you should update that basis by what's called tax gain harvesting. You're selling and then immediately rebuying the same asset at a now higher price. There's no tax cost and you have a reduced tax cost later. Okay? As a general rule, and this again comes with a caveat, that PSLF is pretty generous these days. But as a general rule, the best use for your cash and even your taxable investments is to minimize that 8 to 9% student loan debt. Right. The exception, of course, is public service loan forgiveness. But there's some hazard there you might not match. Right? It does happen to students. And all of a sudden now you're doing something besides doctoring as a career. And now there's a whole lot fewer PSLF qualifying jobs out there available to you. You might not get a PSLF qualifying job or might not want a PSLF qualifying job. And PSLF might change. You know, there is some legislative risk there. I think it's low for those who are currently borrowing, but it's not zero. And so it still applies to maybe minimize your debt as much as you can. Try to keep a little bit extra cash though, right? There's a lot of things you got to pay for during school and as you come out of school, your emergency fund is worthwhile. Emergencies happen. Sometimes you got to buy a Ticket fly across the country for grandma's funeral. You're going to have some expenses for interviews now. It's a lot less than it used to be now that people are interviewing on zoom. You're going to have some moving expenses when you go to wherever your residency is. And keep in mind they're not going to pay you during July, okay? You come out of med school in May, and you may not get that first paycheck until August 5th or August 10th. So you got to have something you're going to use to eat your first month of residency as well. So you don't need to invest everything. It's okay to keep some money in cash. But for money you truly don't need anytime soon, you're thinking, this is long term money, retirement, whatever, okay? If it's earned income, invest it in a Roth account. You're going to be in a much higher tax bracket later. Get any match that's available. It's usually we're talking about spouses here, since most medical students don't have a job that's going to provide a 401k match. And invest your money pretty aggressively. Intelligently, but aggressively. This money has the longest time of any money you ever invest for compound interest to work on it. So in general, when you're investing, when you're young, and this is long term money, you're not going to spend for 20 or 30 or 40 years. Put it in stocks, right? Not a bunch of bonds and CDs and gold and things with relatively low returns. And the best way, the studies are very clear on this. The best way to invest in stocks is to use low cost, broadly diversified index.

Let's suppose you're a single emergency medicine doctor. You have three years of residency and your resident income is $65,000. Once you finish your training program, you're going to make $300,000.

Okay?

You have $300,000 in student loans as well today. Well, what would your payments look like if you were making your required payments on the Income driven plans? Your first year in residency, zero.

Your second year in funds. These are things like the ETFs, VTI. That's the Vanguard Total Stock Market Index ETF and VXUS. This is the Vanguard Total International Stock Market ETF. You can use Target retirement funds. They're particularly helpful if you just have one investing account like a Roth ira. It's just a set it, forgive it and forget it type of account. And it's a, you know, it's a fund of funds. It includes things Like VTI and VXUS in it. Okay, let's turn the page. Now, most of you don't have money to invest. I totally get that. So I keep that section short. Don't worry. We'll talk more about investing as the years go by, as you become a resident and an attendee. For now, I want to talk about something I've been talking to medical students about for at least the last 15 years. And in that time, I don't know that I've ever talked any resident out of buying a home. But let's talk for a few minutes about why you ought to at least consider renting. During residency, medical students, and particularly their spouses, have this burning desire to buy a house. I'm not sure where it comes from. I think it might come from the realtor industry and the mortgage industry. They tell you that this is the American dream. It's not okay, this is not the American dream to own a house. They tell you that renting is throwing money away. It's not. It's exchanging money for housing. And the truth is, when you own a house, you throw a lot of money away too. We call it property taxes and realtor fees and mortgage interest, right? All those other expenses that go along with homeownership. And people sometimes say, well, my mortgage is less than rent would be. Your mortgage is supposed to be less than rent would be. Imagine you're a real estate investor, right? You own this property and you're renting it out. Well, that rent has got a not.

Only residency, 100 bucks, and the next three or so years it's 3, $400 a month. And then it jumps up to that 20 $300 number. Because year after year you have to recertify your income. Just as you'll be doing your taxes each year, you'll need to recertify your income to stay current with your loan servicer. Over 10 years, you paid $142,654. What if you refinanced your loans fresh out of school and you started to pay these off on a 10 year term and you were also able to lower your rate from 7% to 5%?

They cover the cost of the mortgage, but all the other expenses of ownership and leave you something for profit. The rent is supposed to be more than the mortgage would cost. That's the normal situation, okay? Just because you sell a house for more than you bought it for, doesn't mean you made money on the house. You have to consider the transaction costs. And typically when you buy a House, it's going to cost you about 5% of the value to get in and about 10% of the value to get out. So you need the home to appreciate at least 15% while you're in it in order to come out ahead. And that probably happens on average. Historically, you know, not the last few years when housing prices went crazy, but historically that happens about a third of the time in a three year residency and maybe half the time in a five year residency. But it's entirely possible to not make money for a longer period of time. I bought a house in 2006 coming out of coming out of residency. It cost $138,000. I was finally able to sell it nine years later for like $116,000. Still underwater after nine years. There's no guarantee after five you're going to come out ahead, but that's probably the way to bet. If you're going to be there five or more years, you'll probably come out ahead. Less than five years, you'll probably come out behind. So renting, aside from the fact that it's probably going to work out better financially, also allows you to focus on your training. Right. If the air conditioner stops working, you just call the landlord and the landlord takes care of it. Right. If there's a plumbing issue, you call the landlord. You don't have to spend time doing home improvement projects on your one day off in the last two weeks. Okay? There's a lot of benefits when you have a very busy life to renting. And the truth is, mortgage interest isn't even deductible for most residents because the.

Standard deduction refinance them. Right? Now, what would that do? You'd have a 31, 30, $200 payment.

Action is so high you're single, it's 15,000, if you're married, 30,000 this year. That means you've got to have $30,000 worth of itemized deductions like mortgage interest before that. Mortgage interest is really any more deductible to you. And so it's not this huge tax play either. And besides, when you graduate from residency, that's a particularly difficult and busy time to sell a house. And lots of people get stuck becoming accidental landlords in the state where they used to live because they bought.

No, I'm not expecting if you're single that you're going to be able to pay that $3,100, but let's just say you could. Over 10 years, the total amount paid is $380,000. In your student loans. That is a huge difference. PSLF is a very powerful tool if you qualify.

This doc bought a house during residency, so at least consider renting for residency. I know I'm not going to talk most of you out of buying a home. Most of you are going to buy it no matter what. You use a doctor mortgage, put nothing down, and then be surprised in three years when you don't actually come out ahead. Or maybe you won't run the numbers and find out you didn't come out ahead. And the nice thing about it, if that does happen to you, is you're usually saved by your now higher attending income. But maybe it's just not the right thing to do in the beginning. You can rent a house with a yard, with a fence that you can have dogs at. You don't have to live in an apartment, but at least consider renting for residencies, particularly short residencies. Okay, let's talk about avoiding financial catastrophes. Catastrophes are bad things. I had a climbing catastrophe last summer. It's been a very bad part of my life, I assured you. But financial catastrophe is not so good either. And they tend to be pretty common for doctors. Doctors often make the same mistakes over and over again. So let's talk about some of these financial catastrophes that really crush your financial plan. Okay, there's seven of them. The first one is living hand to mouth, just spending too much money. Second one is divorce, an inadequate insurance, too much leverage, a poorly thought out investment plan investing related costs and uninsurable risks. Okay, so the first one is living hand to mouth. I put this chart up earlier. This is what doctors make on average in their specialty. It's a lot of money, Right? We can see at the bottom, you know, the endocrinologists and pediatricians and preventive medicine, infectious disease, and these sorts of things are in the mid to high two hundreds. At the top of the chart, we see people making $500,000 plus. It's a lot of money. And I know it seems crazy to you at this point in your career that somebody can spend that entire thing, but I assure you they can. There are lots of doctors out there living hand to mouth. They do surveys asking doctors their net.

Worth, let's say $240,000 in student loan payments over the first 10 years of their career. Okay? That means maybe another $100,000 in retirement accounts, $100,000 in their home, you know, $40,000 in their, you know, their kids, 529 plan. Right? And then that money has the ability to grow and compound over time. Okay, Another thing you do want to consider here is pay at a non for profit and pay in a private practice are not always the exact same.

Everything you own minus everything you owe. It's the measurement of wealth. And of course, young doctors, you don't expect to have much wealth, but you expect doctors in their 60s, after 20 or 25 or 30 years of physician attending level paychecks, to have substantial wealth, to be multimillionaires. And yet surveys show that about 25% of doctors are not millionaires in their 60s. In fact, 11 to 12% have a net worth of less than half a million dollars. And so this does happen now. Bad things happen to people. You know, maybe you got disabled and weren't able to buy disability insurance, or maybe you went through three different divorces or something. But most of the time, these doctors who are not millionaires in their 60s just spent it all. They just didn't save enough money. And that happens a lot. So this is the first big catastrophe is living hand to mouth. All right, and here's that chart shows physician net worth by age. You can see 60 sometimes there's a huge discrepancy, right?

But looking in this, in a vacuum, right, this can have a big difference when it comes to paying down your loans. So consider this. Here's the takeaways. Number one, IDR is a great option for early career dogs.

Number five and older, you know, 24% still not millionaires. Okay? And that's because a lot of them live above their means. If you ask them, 5% of them will admit I live above my means. But another 48% say I live at my means. That essentially means they're living hand to mouth. 50% of doctors living hand to mouth. If you want to ever retire, if you want to ever have any sort of wealth, you're going to have to spend less than you earn. It's not a hard concept to understand, but apparently it's not that easy of a concept to do. All right, second financial catastrophe. This one is divorce. Doctors have this reputation for getting divorced all the time. That's not actually true. Doctors get divorced less than the average American. The average American divorce rate is pushing 50%. It's about half that for doctors. And in fact, if you marry another doctor, it's only about 1 out of 10 it gets divorced. But it really is a financial catastrophe. It cuts your assets in half, it cuts your income in half. You pay a whole bunch of money to attorneys. And that last year before you actually get divorced, Everybody's spending money hand over fist because they're like, well, 50% of it's not mine. I'm just gonna spend it. So when people start worrying about losing money to their patients, I tell them, quit worrying about your patients and worry about your spouse. Date night is the best asset protection technique out there. Preserve that relationship, okay? Another financial catastrophe we see very commonly is people just don't buy the right insurance. They spend too much money insuring their.

Two hold off on refinancing your federal student loans while you're in school and frankly, while you're in training. Number three is private. Refinance your student loans early and often. And last of all is consider public service jobs for PSLF after training.

All right, great job, Andrew. IPhone. And not enough insurance, you know, not enough money insuring their career and their ability to earn money. That's disability insurance. If someone else. That also depends on your ability to earn, you need some term life insurance. Not whole life insurance like I was sold as a medical student, but term life insurance. Thank you for going through that in such depth, and I hope that's really helpful. I know when I talk to students, to protect them if something happens to you, you need health insurance, okay? I spent $88,000 before I even arrived at the hospital last August. You know, that's what my helicopter price was that was billed out $88,000 from a helicopter ride to the hospital. Have health insurance. You don't need that sort of a financial catastrophe hitting your bottom line. Liability insurance, okay? This includes both professional your malpractice and your personal insurance. So that's on your homeowners or renters insurance. That's on your auto insurance. And most doctors, at least by the time they're an attending, have an umbrella insurance policy that sits over the top of those, provide additional liability. These are their biggest questions is how to manage their student loans. So I appreciate having you here for that. Okay, let's move on to the next section. There are a few of you out there that have some money. It's not a lot of insurance. And if you have something really expensive that you can't afford to replace, put some insurance on that, like your home, right? Talking about property and casualty insurance. Okay? The fourth catastrophe is just having too much debt, okay? And yes, it is true that if you borrow at 2% and invest at 10%, that's a winning strategy. The math doesn't lie, okay? At least most of the time, sometimes you get closed out if the value of the investments falls and you get a Capital margin call or something. But you got to be a little bit careful, particularly with real estate investing. People get excited about leverage and they just use too much of it. You need to make sure that you can cash flow your debts. So if you buy a property with a bunch of leverage, you better make sure that it's cash flow positive. Even a physician income can't carry very many cash flow negative properties very long. So be careful with how much leverage you use throughout your career. Most of you are starting with a gob ton of debt. You know, between your student loans and a mortgage and maybe a practice loan, you've already got more than you probably ought to have in the beginning. Don't go crazy picking up more. Another problem docs have is they have a poorly thought out investing plan. Sometimes they're just not taking enough risk. Right? If you're not willing to invest the majority of your portfolio in risky assets like stocks and real estate, you have to save a ton of it, like 50% or more of your earnings in order to have enough money to retire on. And most of us just aren't willing to save that much money. And so you got to take some risk while you're investing. Don't think you can time the market. All right? Your crystal ball is just as cloudy as the rest of us. You can't get out before the market goes down. Get back in before it goes up. Just accept that and invest like it's true. Even if you're not 100% sure it's true. Trust me when I say invest like it's true. Medical students. But about 27% of medical students graduate debt free. And some don't go picking stocks. Okay? You'll feel like a genius when you pick an Nvidia that goes up before, you know, goes up like crazy. And you bought it before it really peaked. But over time, this is an uncompensated risk. You're not getting paid for it because it's a risk that you can diversify away. Percentage of them actually have some money. You know, it's. It might be that they have some family money coming in or they have a working spouse. Maybe their spouse has a job during school. And maybe you have a job during school or you had a prior career or something, so you have some money. So we're just spending just a few minutes about some things to think about while investing during school. Your best investing move. And in general, you do not pick stocks well enough to beat an index fund. Okay? The professionals don't pick stocks well enough to Beat an index fund. Just invest in the index funds long term. They're diversified, they're tax efficient and they work. Don't put all your eggs into one basket. That's a real problem if you end up gambling in what I call speculative assets. These are assets that don't pay you anything, right? There's no earnings like a stock, there are no interest like a bond, there's no rents like real estate. It's just you're hoping somebody else is going to pay you more for it later than you've paid for it. We're talking about crypto assets, we're talking about precious metals, we're talking about empty land, you know, those sorts of things if you have to invest in them. And yes, I know Bitcoin went up like 100% last year, but if you have to invest in them, limit it to a small percentage of your portfolio, maybe like 5%. Okay? Another problem is not paying attention to your investing costs. If you're paying even what seems like a low percentage, just 2.5% a year, after 30 years, it turns that out, 60% or more of the earnings, the money your money earned over that 30 years has gone to the financial services industry in fees. It's okay to use a financial advisor if you need advice, but make sure you're getting good advice at a fair price. And recognize that if you have some money in some sort of a tax deferred retirement account like a traditional ira, this is the best paid hobby out there. If you can learn to be your own financial planner and investment manager, it's worth, even if you're paying a fair price for advice, it's worth five to $15,000 a year. That's what it costs to get good advice and service. And that can really add up over time, especially if you apply some compound interest to it over the years. Low cost, broadly diversified index funds are practically free. It's practically free to invest these days. So pay a lot of attention to investment costs. If there's fees, the only place it can come from is your investment return. Okay? And then of course, be careful about uninsurable risks. Right? We talked about burnout earlier. You can't insure against it. It's probably the biggest financial risk to your career. But other things like fraud, sexual misconduct, alteration of medical records, criminal acts, drug and alcohol use, all of that is not covered by your disability insurance. You can't buy insurance against that stuff, but it can really sabotage a career. Okay, this is our last section. Then we're going to get into The Q and A section. Don't forget to make sure you put a comment in. That's how you enter into the drawing for the free WCI Fire your financial advisor student course. Yes, you can buy that at a discount, right? The discount code is webinar20. That gets you 20% off on it from now through February 20th. But you can win one. You know, one person is going to be selected as soon as I finish this section and we will give away one of those courses. Okay, here's a. Or an old 401k or something. You have no significant taxable income during school, particularly if you're single. I guess if you're married to somebody that's working, that's not the case. But most medical students have no significant income during school. And the standard deduction is $15,000 a year. That means you can do a Roth conversion of up to $15,000. What you got to do when you come out of medical school, first, take care of your student loans, okay? If you have private loans, refinance, enroll in whatever IDR program is best at that time. It's probably not going to be saved. It may not be pay or repay. We're not sure what it's going to be. Even in May, when the fourth years are graduating, much less in years, years from now, when the first and second years are graduating, file a tax return the year you come out of medical school. Okay? So the year that encompasses half of third year and half of fourth year, file a tax return for that year. That starts the clock. Or it doesn't start the clock, but it establishes your income as $0 for most of you. And that's what they use to determine how much your IDR payments are complete. A federal consolidation that starts the clock on your payments. And you want your payments to start, especially while your payments are $0, because all those $0 payments count toward the 120 you need to get public service loan forgiveness, okay? IBR is probably going to be the program of choice if you're single or you're a single earner. As more things come up, the more it's worth getting advice from somebody like andrew@studentloanadvice.com he helps you decide which IDR to use each year and pay no taxes on it whatsoever. In fact, you could convert which type of retirement account to contribute to, how to file your taxes, married filing singly, single, married filing jointly, et cetera. When to refinance your loans, those sorts of issues, all for one flat fee, okay? Get some insurance, okay? As soon as you start earning money, buy some disability insurance. Your most valuable asset is your ability to turn your time into money at a high rate. You want own occupation, specialty specific disability insurance. Now, your residency program may offer a disability insurance policy, but you should probably still buy an individual portable policy you can take with another $12,000 each year and pay only 10% in taxes and another $36,000 to you when you leave training. The general rule is that you buy as much as they're going to sell you during residency. That's typically dollars, and pay only 12% in taxes. So if you've got some sort of a tax deferred account like a $5,000 monthly benefit, I think residents can actually get a little bit more than that now, maybe as much as 7,500, but buy as much as they'll sell you. Because if you get disabled, and residents do get disabled from time to time, that's what you're living on the rest of your life. Okay, $5,000 a month, that's it. That doesn't go that far. That's basically a resident salary the rest of your life, but it sure is better than zero. The other issue is you might develop something during residency that keeps you from being able to qualify to buy disability insurance. So get it in place early. If someone else depends on your income, buy yourself some term life insurance. It's usually a seven figure amount that you need. You know, maybe buy a million as a resident. If you can't afford a million in 20 or 30 year level term insurance, maybe get a million in five year level term insurance. That's very cheap. And then when you become an attending, bump it up if you can. Don't go buying whole life insurance. It's a product designed to be sold, not bought. Okay? Get yourself an umbrella policy, okay? They're not expensive. They're way cheaper than malpractice policies. You can get a seven figure amount. A million dollars is probably enough, certainly for most residents. And most attendings convert it during medical school. And if you anticipate you're going to be enrolling in some sort of an income driven repayment program, try to do it in the first couple of years because remember you're filing a tax return that last year to establish your and that's not that expensive. 2 or 300 bucks a year will give you a million dollars in personal liability coverage. Meanwhile, your malpractice might cost you 10, 15, 20, $25,000 a year. Okay? Make a budget, learn how to live on it. Now, all a budget is prioritizing your values, making sure your money is going toward those things you care about most. Okay? So make a budget, live on it. And don't go telling everybody that you're dirt poor. You're not. A resident makes the average household salary in the US if you can't live on that, how do you think your patients are living on it? It's not a bad exercise to live on the average American household income for a few years. You're going to make lots of money eventually. Trust me when I say you can get through this without doing anything crazy. You shouldn't be having to donate plasma to get grocery money during residency. Try to save something during residency. It's not the time to get rich. Right. The time to get rich is once those attending paychecks start rolling in. But make sure you get any match they're offering you on your 401 or 403. A match is like part of your salary. If you don't get it, you're leaving your salary on the table. As a general rule, use Roth accounts when you're saving for retirement during residency. That may not be the case if you're trying to keep your IDR payments very low, though. That's the big exception to that rule. Okay, do you need an advisor? Well, my estimate is that probably about 80% of docs want and probably need an advisor. It's okay to use one. You just need to make sure you're getting good advice at a fair price, like five to $15,000 a year. But it's okay to do your own financial planning, investment management. It's the best paying hobby out there. But you do have to actually do it, do it right. You have to pay some attention and enjoy this stuff. It does help if you like it because then you're more comfortable being a hobbyist. If you need help figuring out your student loans, you can book a consult with student loan advice. Not only do you get an hour with Andrew, but you also have email follow up for months afterward to ask any additional questions you forgot to ask during that initial session. Okay, have a simple investing plan. If you want a plan that's going to get you through residency, use Roth accounts. Put everything into target retirement funds, right? They're basically broadly diversified index funds. They're low cost, but they automatically rebalance. They're set it and forget it plans. The truth is, what you invest in doesn't matter all that much. Early on, it's all about how much money you're putting in there. Don't mistake investing for Gambling. It's not gambling, okay? Don't go following crazy subreddits and paying attention to what people are talking about in the financial news about crypto or about Tesla or about Ark funds or Robinhood or Wall street bets or, you know, this year has been the Mag 7 stocks. It's not about your income for the first year plus of residency for your IDR payments. And it's gambling. It's not trying to figure out what's hot for the next few months. Right? You're buying stuff with money you don't need for 20 or 30 or 40 years. What's most likely to have a solid return between now and 30 years from now? That's the question you should be asking yourself when you're investing long term money. Okay, here's what best if that income's $0, so try to do the Roth conversions relatively early during school, okay? The second best investing move if you have money is what's called tax gain harvesting. This is for people with a taxable non qualified brokerage account with some investments in it. And what this is all about is, it's all about up updating your basis. Okay? Your basis is what you paid for an investment. Okay? So your capital gains. When you talked about today, we've talked about becoming financially literate. That is your second job to learn personal finance and investing. We talked about how everything you buy during medical school you're probably going to pay three times the sticker price for by the time you're done paying off those student loans. I mentioned the importance of considering the cost of living when you choose a residency and to choose your specialty carefully. Have a written plan for managing your student loans. Renting a home during residency should be the default choice, even though it's not chosen very often. And you need to hit the ground running with a solid financial plan as you receive your first paycheck. Basically, you should know where your money is going when you get it. Okay? So have that done in advance. Okay, let's announce our winner here. I think Michelle's gonna send me a message here about who our winner is and those of you who don't win, this is where you go to buy the course. If you're interested. Like I said earlier, there's a one week, no questions asked money back guarantee. You don't like it, we'll give you your money back. Okay? There's the URL to sign up and the code you use to get the 20% discount through February 20th is webinar 20.

Oh, Jim, here it is.

You Got it.

It's Jared Yank.

Okay, Jared Yank, congratulations. You're the winner. I need you to email Michelle, though. Okay, Email michelle@social mediatecoat. Sell something and have to pay taxes on capital gains. That's the sale price minus the basis what you paid for the inputinvestor.com and we'll get you hooked up with that free course. Congratulations on that. Everybody else, I guess you gotta pay for it. So if you want the course, it's only 79 bucks with this 20% discount. And trust me, you're going to get your money's worth out of this. And if you don't, I'll give you your money back. Okay? We're not going to rip you off. If you really don't think it's worth 79 bucks, just email us in a few days and we'll send your money back to you. Okay? If we don't get to your question today or you don't want it asked in this format or whatever, you can email me at Editor Investment and the capital gains tax bracket. The 0% taxable, 0%. Whitecoatinvestor.com you can also ask the question. In our communities, we have a forum on the White Coat Investors site. We have a Facebook group, we have a subreddit, if you like Reddit, we have the financially empowered women's group. Capital gains tax bracket this year is like $48,000, meaning you can realize a $48,000 gain and pay no taxes on it. Right. And basically update. If you just want to be in a group with all women, you can ask your questions. There's. We have all these great communities, and of course, we have a blog and a podcast and a YouTube channel to help keep you financially literate. All right, let's take some questions here. Okay, I'm going to pull up this first one. This one's from Paul. Can you go over how to use Morningstar to evaluate index funds for those who don't know what Morningstar is? Morningstar.com is a website that evaluates mutual funds. It gives them ratings and will tell you what the expense ratios are and what they invest in and all these sorts of fun facts about mutual funds. It's a great way to learn more about mutual funds. But the truth is, if you're buying an index fund from Vanguard or Fidelity or Schwab or blackrock or a place like that, you're not going to go wrong. And you don't need to know how many stars Morningstar gives. Most index funds get three stars. That's what they give them because they give you the average return for the prior year, but over time average ends up thumping the vast majority of investors. So what I do when I want to look up an index fund is I put its ticker in like VTI and then Morningstar. That's what I put into Google and it pops up a page and I can learn all about that particular index fund. I hope that's helpful. We've got some blog posts on that topic as well. If you go to whitecoatinvestor.com, and search that topic, you will see some more information on that. All right, here's our next question. How to own a practice and sustain it considering PE firms are buying them out at record numbers. Well, I didn't expect this question from a medical student, but I do hear this question very often. This is a big trend in medicine. There are fewer and fewer owners and more and more employees every year. That said, you can still own a practice. If you want to own a practice, you just go out there and open it. Typically what most people do though in medicine is they have partners and they join a partnership and that's how they do it. And it usually has a buy in of some type. It's maybe a sweat equity buy in. That's what mine was in my emergency medicine partnership. Sometimes it's a financial buy in and you might even have to borrow some money to make that financial buy in. But you can still own a practice in just about every year basis. So later, whenever you sell this investment, you'll have less of it that you have to pay taxes on. I mean, as a general rule, when you're investing, you don't realize gains that you don't have to realize specialty. So don't feel like you can't do it. The PE firms are not buying you out against your will. Okay, they can't force you to sell to them. But what happens with the consolidated. But when you're in the 0% tax bracket, you should update that basis by what's called tax gain harvesting you're selling and then immediately rebuying the same asset at a now higher price. There's no tax cost and you have a reduced tax cost later. Okay. As a general rule, and this again comes with a caveat, that PSLF is pretty generous these days of medicine is that people are having trouble negotiating with insurance companies to pay them fairly if they're only a one doc or a multi document partnership. And they're not getting paid very much. And so the hospital comes along or A PE firm comes along and says, hey, join us, and we can actually pay you more as an employee than you're making as an owner. And no surprise, a lot of people decide, okay, time to give up my ownership if I can get paid dramatically more. So the way you avoid this is by running a very efficient practice, making sure you're negotiating hard with the insurance companies to make sure you're being paid adequately. And another option is to just avoid insurance altogether. You know, there's a lot of people out there. You've heard of doctors for patient care, these sorts of concierge or direct care. But as a general rule, the best use for your cash and even your taxable investments is to minimize that 8 to 9% practices where people don't take insurance. They can charge the patients whatever they want, and they find that they can charge them very, very fair prices. The patients are more than willing to pay if they just don't have to deal with the insurance company. And so that works very well in a lot of specialties, particularly primary care. It's a little harder in something like emergency medicine, though. Okay, next question.

All right, here's one for me. This is from Karishma Patel. Aren't PSLF and SAVE currently in jeopardy? How would you advise we plan for this uncertainty? Krishna, this is a good question. And I know that student loans are in the news. They're in the news a lot. And they're in the news a lot right now, this week, as we are seeing things in Washington, D.C. unfold. What do we know right now? We know that the SAVE program is currently tied up in the courts. It does not look good. It looks to be that I think by this summer, the SAVE plan is going to be eliminated.

Okay.

The public service loan forgiveness program, on the other hand, was created through a different legal mechanism. It was created by Congress, whereas the program SAVE was created by the executive branch through a process that is called administrative rulemaking. Just a little bit on the legal situation here and just how student loan debt.

Right. The exception, of course, is public service loan forgiveness. But there's some hazard there. You might not match. Right. It does happen to students. And all of a sudden now you're doing something besides doctoring as a career. And now there's a whole lot fewer.

PSLF regulations come about. Well, administrative rulemaking, executive orders.

These don't have qualifying jobs out there available to you. You might not get a PSLF qualifying job or might not want a PSLF qualifying job. And PSLF might change. You know, there is some legislative Risk there.

I don't need bipartisan support. This can be done unilaterally by the President or their sitting Education Secretary at the Department of Education, as was the case with save. The Public Service Loan Forgiveness program was passed back in 2007, 2008 by Congress. So in order for them to enact changes to the PSLF program, it's got to go through Congress. So could that happen right now? Maybe. It seems very, very unlikely. And the reason being is because not only does a bill introduced on PSLF have to go through the House, then it has to go through the Senate. Yes, There is a 53 to 47 senator Republican majority here, but it's very likely that if there was something that made its way into the Senate on PSLF, there would be a filibuster and they would need 60 votes. I don't think the Senate is going to get 60 votes that is in favor of eliminating the Public Service Loan Forgiveness Program. But let's assume they're able to.

I think it's low for those who are currently borrowing, but it's not zero. And so it still applies to maybe minimize your debt as much as you can. Try to keep a little bit of extra cash though. Right. There's a lot of things you got to pay for during school and as you come out of school, your emergency fund, do that.

Okay. This is likely going to impact those that have not even borrowed yet, those that are not even pre meds yet. Our thought is that anybody that is already in, has already borrowed their federal student loans is borrowing right now or you're already in the workforce that you would be grandfathered in to the Public Service Loan Forgiveness Program.

You know, there's, there's some talk, there's some talk about, you know, eliminating the Department of Education is worthwhile. Emergencies happen. Sometimes you got to buy a ticket, fly across the country for grandma's funeral. You're going to have some expenses for interviews. Now. It's a lot less than it used to be. Now that people are interviewing on zoom, you're going to have some. In which case they'd have to move Public Service Loan forgiveness to a different department of the government. But I expect that's what would happen if they eliminated that department.

Yeah. And maybe just on that, it's not going to go away. Right. They can't just issue an executive order and it gets moved to a different department and it's gone and there's no more federal student loans. It's just going to get rolled into a different department.

All right. Next question, moving expenses when you go to wherever your residency is. And keep in mind they're not going to pay you during July. Okay? You come out of med school in May, and you may not get that first paycheck until August 5th or August 10th. So you gotta have something you're gonna use to eat your first month of residency as well. So you don't need to invest everything. It's okay to keep some money in cash. Okay? But for money you truly don't need anytime soon, you know, you're thinking this is long term money, retirement, whatever, okay? If it's earned income, invest it in a Roth account. You're gonna be in a much higher tax bracket later. Get any match that's available. It's usually we're talking about spouses here, since most medical students don't have a job that's Gonna provide a 401. And invest your money pretty aggressively. Intelligently, but aggressively. This money has the longest time of any money you ever invest.

This comes in from Edsel, Lorraine Coe. Can an international student have a federal student loan? Generally, Edzell, no. And what you need to get a direct federal student loan is you need to be a U.S. citizen, a permanent resident, have a green card, and there are very few others that can kind of fit that those parameters as far as refugees and asylees. But from our experience, usually I'm seeing international students are going to have a hard time getting federal student loans. Now, you could get private student loans through a US Institution, but you generally need a US Co signer. So you have a spouse here. If you have a partner, significant other or family member, maybe you go about that way. But what I would have you do is contact your school's financial aid office. They're going to have the most up to date information. Good luck. This comes in from Paul Clancy. I have been delaying loan disbursements to minimize debts. This increases the number of loans, decreased age, average age of credit, and lower credit score as an M3. I assume it's worth it for now. So it sounds like, Paul, what you're trying to do here is kick the can down the road as far as you can as far as disbursements. And rather than taking your entire full year of medical school school tuition in a lump sum in the fall, you're taking this in multiple disbursements. I like that approach because what it does is it makes it so you have these smaller chunks and it's growing less over the course of a year. Because if you borrow $80,000 up front for your M3 year. Well, that $80,000 has an entire year in your third year to grow, an entire year in your fourth year to grow. But what if you took it out in $40,000 chunks, you know, for, for the fall and then for that, for the winter? Well, that 40, that, that, that 40, that $80,000 that you needed to borrow for your M3 year. Well, only, only half of it's going to grow for the entire year and the other half's only going to grow for half of the year. So what I tell most medical students that come in and meet with us is try to take this in multiple disbursements to cut down on that interest.

Yeah, I totally agree with that. You're worried about your credit score. Quit worrying about your credit score. Okay? My daughter has a credit score of 794. All right? She had no credit score six weeks ago, none at all. And she's only made like $1,000 in that time period. Okay, how did she get a credit score of 794? I put her on my oldest credit card as another signer, and now she has a score of 794. Credit scores are not that hard to get, right? If you get a credit card, a student credit card even, and you put your gas on it, you know, maybe it's $80 a month is all you're putting on it. You do that for six months or a year, you have a good enough credit score to buy a house. All right? You don't have to jump through hoops to have a decent credit score. All you gotta do is basically pay as you agreed. And it does not take very long at all to have a higher credit, high enough credit score to do everything you want to do with it for compound interest to work on it. So in general, when you're investing, when you're young, this is long term money you're not going to spend for 20 or 30 or 40 years. Put it in stocks, right? Not a bunch of bonds and CDs and gold.

This comes in from Ryan Richards. For borrowers who are in IBR for 20 or 25 years, depending on when federal loans were dispersed, do you think they will still be eligible for forgiveness?

This is a good question.

And this is for those that are not doing public service loan forgiveness, but perhaps are working in private practice, private groups, a private employer that is not a non for profit. But you still want to do the IDR plan. Are you sure you want to do that, Ryan? That's a long time to hold onto the debt. I don't like the 20 year track. I don't like this 25 year track. It's called IDR Forgiveness because not only do you have to pay for 20 to 25 years the majority of your career, but then you got to pay a tax on that student loan balance after 20 years of payments.

Okay, so suppose you know things with relatively low returns and the best way, the studies are very clear on this.

You're making payments for 20 years. And after you've made your payments for 20 years, you still owe $300,000. If you're living in New York or California. Right. You're going to.

It's the best way to invest in stocks is to use low cost, broadly diversified index funds. These are things like the ETFs, VTI, that's the Vanguard total stock market penny.

About $150,000 on that, you're probably going to be in the top income bracket. Well then throw on that additional $300,000 and you know you're going to have to pay a huge tax at that point. Okay, but as far as the feasibility of this being around, you know, this, this is another program that is created, you know, income based repayment was, was created by Congress. So do I think that this IBR forgiveness is going to be around 20 to 25 years from now? Yes, I do.

Yeah, I think it's going to be around too. But I hope you don't use it. I hate the idea. I mean, I am sitting here, I came out of Medical School in 2003. I'm still not 25 years out of medical school. Right. If I had enrolled in a program that required 25 years, that would be three more index ETF and VXUS. This is the Vanguard Total international stock market for years. Right? 53 years old. You really want to have student loans until you're 53 years old? I wouldn't wish that on you. I look at this plan, this plan is for etf. You can use target retirement funds. They're particularly helpful if you just have one investing account like a Roth and disaster happens. For some reason, something bad has happened in your life. And this is the only way out of these student loans. You know this, maybe this is what you do. If you don't match into a specialty and you can't get any other job that qualifies for pslf. And you go along for years and years and years making 100 or $200 a month payments and after 25 years it all goes away and then you have this huge Tax bomb. You got to talk the IRS into not making you pay. You know, it's not an awesome plan. Can it work out okay? It can, but shoot. This is so much worse than public service loan forgiveness. I would almost recommend people just take any job that qualifies for PSLF and do it for, you know, Iraq. It's just a set it, forgive it and forget it type of account. And it's a, you know, it's a fund of funds. It includes things like VTI and VXUS in it. Okay, let's turn the page. Now, most of you don't have money to invest. I totally get that. So I keep that section short. Don't worry. Three to seven years coming out of training, then spend 25 years dragging your student loans around. It's just sounds terrible to me and.

Maybe I'll kind of talk a little bit about where could.

We'll talk more about investing as the years go by as you becoming a resident and an attendee. For now, I want to talk about this actually work.

If you can't do pslf, there's no way that's going to happen. And refinancing your loans is untenable. They won't work with you because of your debt to income. So I've worked with a fair amount of docs that owe 700k, 800k, 900k. I've worked with some doctors that owe more than a million dollars in student loans and some that are both doctors and they have 800, 900,000 a piece.

So we're about something I've been talking to medical students about for at least the last 15 years. And in that time, I don't know.

Talking in the mid, you know, 1.5 to 2 million dollar range. There are some unique circumstances. This is not physicians, this is for dentists. This is for orthodontist, this is for periodontist endodontists. Right. Those that have to also, not only do they borrow for dental school, but they have to borrow for their residency programs. There's a few unique circumstances where this could work out, but generally they're going to be doing quite well financially with that level of training. But if they are working as associates and they're making $300,000 a year and you have 850 grand in student loans, the numbers could work out for this. As much as I don't want to stomach that because I also think about how are you going to buy a house when you owe 900 grand in student loans 20 years into your career? How you Know, how are you going to get any financing of any kind to buy a practice in that case, too? But no, there are some unique circumstances that could merit benefiting from this plan.

Yeah, yeah. It's not a great plan that I've ever talked any resident out of buying a home. But let's talk for a few minutes about why you ought to at least consider renting during residency. Medical students, and particularly their spouses have this burning desire to buy a house. I'm not sure where it comes from be in. But it is the right plan for a few people. There's no doubt about that. All right, next question.

Okay, this comes in from Mary Piedad. What is the most conservative way to pay to spend your first year residency income? Do I aggressively pay off my loans?

Tough question. I don't know what you mean by most conservative way to spend your income. Right. A couple of things. One, don't try to get rich as a resident. Okay. You're not going to do anything dramatic during residency that makes you wealthy. The way doctors get rich is they manage their first few years of attending payments well, attending salary well. That's where the wealth comes. That's where you pay off your student loans. That's where you build up a big. I think it might come from the realtor industry and the mortgage industry. They tell you that this is the American dream. It's not okay. This is not the American dream to own a house. They tell you that renting is throwing money away. It's not fat nest egg. Right. It's the attending income. So don't get too crazy trying to build wealth. As a resident, it's okay to save some money to use a Roth IRA, get your match and your 401k. Occasionally I see people that max out both a Roth IRA and a 400 or 403, and I'm super impressed. But you're probably not paying off your student loans. If you're a typical resident who owes 200, 300, $400,000 in student loans, you're probably not going to have some huge nest egg by the time you come out of residency. So save something, have an emergency fund, learn to live on the budget. Make sure you get the right kinds of insurance in place. And then you've got the same dilemma everybody else with debt has. Do I invest or do I pay off my debt? And in the case of federal student loans, when you don't yet know what your job is going to be after residency, I would say don't pay on those federal student loans any More than you have to in your IDR program. The reason why is the taxpayer may be paying those off for you if you take a job that qualifies for pslf. And you really won't know that until you get toward the end of residency. And sometimes people even change, you know, a year out or two years out into a PSLF quality. It's exchanging money for housing. And the truth is, when you own a house, you throw a lot of money away too. We call it property taxes and realtor fees and mortgage interest. Right. All those other expenses that go along with homeownership. And people sometimes say, well, my mortgage is left behind jobs. So if you're not sure that you're not going for pslf, I wouldn't make extra payments on your loans. You know, private loans, fine, you can pay on those extra. That's a good use of your money. But as a general rule, I would probably invest and preserve the optionality of paying off those student loans later or going for forgiveness. Any other comments on that one, Andrew?

Yeah, I definitely agree that, you know, as much as hard as you want to work and even if you can start moonlighting in your second year, right. End of your second year or in your third year and you're able to double your income, Instead of making 70, you're now making 140. Remember, you're probably not going to be able to make that large of a dent in the loans right now. And don't beat yourself up about it. Do the best you can with keeping your financial house in order, not, not getting a bunch of credit card debt. Right. And, you know, perfecting your craft and finding where, where you fit in medicine. Right. And then, and then I think regarding the, the loan payoff, you just don't know what you're going to do yet, right?

Less than rent would be. Your mortgage is supposed to be less than rent would be. Imagine you're real and people change their mind.

Like I meet with people that are, that are interns. They're like, oh, I'm going to join this private practice. And then they end up working at the va, right. And I see the other end of the spectrum where someone starts out of that nonprofit job and they start there as an attending for a year and then they decide that's not the right fit for me. And then they, and then they go into a private practice and they refinance. Don't, don't, you know, start making payments on your loans right now when you're not sure about what you're going to do. Just keep your options open, keep them federal, and then you can. You can decide on your overall pay strategy when you get your attending job.

Yeah. Don't freak out about this, okay? There are a million doctors in this country. They have navigated the same system you're going through and turned out okay. At least three quarters of them turned out okay. Right. Cause they learned how to manage money at some point during their careers. And you're gonna be okay, too. So don't freak out about it. This is the pathway to being a dog, right? You borrow a bunch of money, it just sits there for a few years in residency, and then you can pay it back. That high salary is coming. It is going to work out. I do a podcast. It drops every Monday. We call it Milestones to Millionaires. And every week we have somebody that's paid off their student loans or become a millionaire or gotten back to broke, got their net worth back to zero, which is a big deal for doctors. Right. People are doing this. You can do it, too, if you learn how to manage money. Real estate investor, right? You own this property and you're renting it out. Well, that rent has got to not only cover the cost of the mortgage, but all the other expenses of ownership and leave you something for profit. The rent is. These loans are not gonna hobble you for the rest of your life. You're going to be able to take care of them. You don't have to figure it all out as an intern. All right? Just get the few basics taken care of during residency and make sure you have a plan for when you become an attending. All right, next question.

All right, this comes in from Leslie Flores. Are there options for interns who haven't made any changes to loans when they graduated? Okay, Leslie, I just worked with another intern in your same exact situation just a few hours ago. Earlier today day. You are in an unfortunate position because you probably tried to get into an income driven repayment program this last year after you graduated from medical school, and everything's kind of been on hold. Right? And it's because of that save program. You may have consolidated, you may have applied for that save plan, and everything has been sitting in limbo. Okay? I definitely. I feel for you, but here's what you need to do. Apply for the income based repayment program. Go to studentaid dot.

Supposed to be more than the mortgage would cost. That's the normal situation. Okay? Just because you sell a house for more than you bought it for, doesn't mean you made money on the house. You have to consider the transaction costs. And typically when you buy a house.

It'S going to go. There's an application right on there. If you click on the loan payment area, you can apply for an income based repayment plan. You can probably still use your income from 2023 if you file a tax return and get $0 payments starting now for an entire year. Unfortunately, there's probably going to be about a half a dozen months that haven't initially counted for your intern year. But this is what's going to get you on the right track at this point.

Yeah, good advice. Good tip, Andrew. All right, next question. Cost you about 5% of the value to get in and about 10% of the value to get out.

Okay, this is coming in and it asks. The amount forgiven after 20 to 25 years is tacked on as ordinary income. So would that taxable amount be total of your attending salary, physician pay plus total amount forgiven?

Yeah, that's the way it works. That's exactly the way it works. Yeah. If you get an IDR forgiveness, you know, in save or repay or pay or ibr, whatever the program is at that time, that's how it works. The amount forgiven is taxable income to you in the year it's forgiven. Very different from public service loan forgiveness. PSLF is tax free. IDR forgiveness is taxable forgiveness. And your tax bill is probably going to be an amount equal to the amount you owed originally in student loans anyway. So it's not an awesome deal. You make payments for 25 years and then you still owe the same amount anyway. So not awesome. Okay, next question. Dti. Yeah, I think they're referring to your slide with dti.

Yeah.

Yeah.

So you're asking about the slide a little bit earlier when I was discussing the two strategies for doctors to pay down their loans. One is you just pay them down, you refinance them, get out from under this. And the second is pursuing loan forgiveness, like public service loan forgiveness. Debt to income is based on your income for one year. So say you're making $350,000. Right. And your student loan balance is also $350,000. That's a debt to income ratio of one to one. And that's usually where someone, they could look at doing public service. If you're going to work in academia, if you're going to work at the va. Yeah, then it's probably going to work. It would work out. Right. But say you only owe.

So you need the home to appreciate at least 15% while you're in it. In order to come out ahead. And that probably happens on average, historically, you know, not the last few years when housing prices went crazy. But historically that happens about a third of the time in a three year residency and maybe half the time in a five year residency. But it's entirely possible to not make money for a longer period of time. I bought a house in 2006 coming out of coming out hundred grand in.

Student loans and you make 350. You could pay those off this year, pay them off in a year or two. Right. Now if we look at things where your debt is two times your income or two to one, say you're making 350 and you took out you're a career change or you were an attorney and then you decided to become a dentist and now you owe $700,000. Well, that's where you really want to look at a program like public service loan forgiveness. You get a whole lot of bang for your buck.

But yeah, to answer your question, the debt to income, it's annually, it's your annual income, not your monthly income or anything like that. Okay. Does the spouse's income get factored into the tax bracket for capital gains? Yeah, if you're filing married, filing jointly, you know your spouse's income goes toward that. Now if you file married filing separately, you can avoid having their income count toward that. Now then you're using a smaller capital gains tax bracket than you would have married filing jointly. But it may still work out. Keep in mind that residency, it cost $138,000. I was finally able to sell at 9. Capital gains and qualified dividends always stack on top of income. But you may not have I think we're talking about tax gain harvesting with this question. You may not have a 0% bracket if your spouse makes a whole bunch of money unless you file a married filing separately. And I don't know if that's going to worth it because it's going to be worth it because it's probably going to increase your tax bill.

And I just want to jump in here before we pop on the next question. Jim. And just a reminder for everyone, if you're interested in the fire your financial advisor course for students, you can get 20% off right now if you go on to, you can go ahead, pop on the white coat website, click on courses and then if you enter in the code webinar20 by February 20th. So you only got about a week to do this. We'll take another 20% off the course price.

Yeah. And the bootcamp thing at the bottom. That's free, by the way. That's just a 12 email series. You get to help you get your financial ducks in a ro. Financial boot camp is totally free, so everybody ought to sign up for that. But we do charge you for the online course. That's $79 with the 20% discount. Okay, next question.

Jim, I'll read this one out. Luke, word A Kemper. What would you suggest is the best saving investing repayment strategy for a first year of income out of residency?

All right, I think we got some residents and attending sneaking into the webinar here, right? This is still years away for you medical students. If you're an Ms. Two, this day is at least five years away, you know, okay, but here's the deal. Here's what I teach graduating residents, okay? I teach them a four word strategy that will basically guarantee you will have an awesome financial life. I call it live like a resident 10 years later for like $116,000. Still underwater after nine years. There's no guarantee after five you're going to come out ahead. But that's probably the way to bet if you're going to be there five or more years, you'll probably come out ahead less than five years, you'll probably come out behind. So renting, aside from the fact that it's probably going to work out better financially, also allows you to focus on your training, right? If the, you know, air conditioner stops working, you just call the landlord and landlord takes care of it, right? If there's a plumbing issue, you call the landlord. You don't have to spend time doing home improvement. What I tell people to do is to try to maintain their lifestyle something similar to what they were living as a resident. Maybe give yourself a little bit of raise. Maybe give yourself a 50% raise from what you were doing in residency. That's huge in the corporate world, right? To have a 50% raise. Give yourself that, okay? But take everything else out of that attending income and put it toward wealth building. Now, if you're paying off your student loans and by then you ought to know if you're going for PSLF or not. If you're paying off your student projects on your one day off in the last two weeks, okay? There's a lot of benefits when you have a very busy life. Loans put a big old chunk toward it. You know, 200 or 300 or $400,000 in student loans does not last very long when you're sending the lender $10,000 a year. So big chunks probably Going to, paying off loans and you know, and it's time to start catching up on retirement savings. I Recommend attending save 20% of their gross income for retirement. Okay. And that typically goes into 401s or 403bs or backdoor Roth IRAs or into taxable investing accounts. But it needs to be saved for its long term retirement money. And so if you're putting a big chunk toward your student loans and you're putting a big chunk toward, toward retirement, you probably don't have that much left. Okay. You know, even if you're keeping your spending down pretty good. But other priorities people may have in that first year out, they might want to do a Roth conversion of any tax deferred money they might have. They probably need to save to renting. And the truth is mortgage interest isn't even deductible for most residents because the standard deduction gave up an emergency fund. They may have some credit card debt left over from residency. They might have an auto loan left over from residency. Maybe their car is just dying and it's time to get some sort of a new car and quit driving the beater. Right? The typical issue coming out of residency is you got all kinds of great uses for your money and not enough money to do them all. So you'll have to make a list and prioritize. But the secret to doing as many of them as you can is just not growing automatically all the way into your brand new attending income. Try to live like you were living as a resident for a year or two or three or four even, and put the difference between your resident lifestyle and your attending income into building wealth. And honestly, it doesn't matter how much goes toward loans and how much goes toward investments. It's all building your net worth as you go along. And you'll be really glad you front loaded the financial tasks of your career.

And I, you know, I tell a lot of these, these doctors that I'm working with, you didn't start that six figure job when you were 22 and.

20 deduction is so high. If you're single it's 15,000. If you're married, it's 30,000 this year. That means you've got to have $30,000 worth of itemized deductions like mortgage interest before that mortgage interest is really any more deductible to you. And so it's not this huge tax play either.

Three, like your friends that did engineering, right, and maybe that studied accounting and you, you know, you spent your 20s studying and maybe the end of your 20s as a resident, maybe into your early 30s. But that's okay. You have this large shovel that can make up for that. It's just imperative that, that you do start storing that.

You have to use that shovel. Exactly. Too many doctors don't use the shovel. They have, they start spending automatically and, and they come out and they've already got a mortgage on a million dollar house and a couple of Tesla car payments and they want to start vacation in Europe two months out of residency. And it's not that hard to spend $400,000 a year. I assure you that if you try just a little bit, you can do it. All right, disability insurance. Should you get your own disability if your attending job provides you with it? Most of the time, yes. You ought to get an individual disability policy for a couple of reasons. One, it's usually better, it usually has a stronger definition of disability, and two, it's portable, meaning you can take it with you when you go. It has a couple of downsides. One, it takes a little bit longer to get than your employer just handing it to you. Right? You got to go apply and go through underwriting and pee in a cup and they draw your blood and take your vital signs and, and those sorts of things. So it's a little bit more of a pain to get it. And some people don't qualify. Right. It's easier to qualify for the one your employer is offering you than an individual one. If you have significant medical problems, you want to look at employer ones and you want to look, especially if you're at some sort of an academic center. Now, what's called a GSI or guaranteed standard issue policy, because those are guaranteed, they'll issue them to you even if you just had a heart attack last year. And so those are great policies for those who may not qualify for their own individual disability policy. But when you leave the employer, that policy doesn't go with you. That's a real downside. It may cost you less, but that's usually because it's not as good of a policy in the first place. So yes, you ought to look into an individual policy, at least for some of your coverage, even if you're attending job or your resident job offers you disability insurance. All right, next question. What disability riders would you recommend at this stage of life? Well, few medical students are buying disability insurance. All right, so we're really talking about interns. That's when you buy your disability insurance, when you start having an income. But the ones that are generally worthwhile is your residual and Partial disability riders. Those are the ones that cover you when you're coming back from a disability or if you're only partially disabled. And a future increase option is well worth buying during residency because when you become an attending, that allows you to buy more coverage without having to prove you're still insurable. It'll cost a little more than the original stuff you bought three years earlier, but at least you can get it. And then some sort of a cost of living rider is well worth buying. Anytime you buy a policy in your 20s or 30s or or even your 40s, you know, if you're buying at 55 and it's only gonna pay till you're 65, maybe you don't need a cost of living rider. But if you're buying one early in your career like you should be, you ought to get a cost of living rider. But also all the other ones are garbage riders, right? There's a retirement rider and a student loan rider and a catastrophic disability. And besides, when you graduate from residency, that's a particularly difficult and busy time to sell a house. And lots of people get stuck becoming accidental landlords in the state where they used to live because they bought a house during residency. So at least consider renting for residency. I know I'm not going to be a rider. I would recommend you just buy a bigger base policy rather than spending your money on those riders. Okay, next question.

Dr. Dali, do you view owning the real estate of your practice the same as a house? I know there are many factors.

Talk most of you out of buying a home. You going to buy it no matter what. You use a doctor, mortgage, put nothing down and then be surprised in three years when you don't actually come out ahead. Or maybe you won't run the numbers and find out you didn't come out ahead.

First consider. But generally, do you recommend renting the office space versus owning it?

Okay, you're right. There are many factors to consider, right? This is not always and never are very dangerous words, right? And there is no always or never never when it comes to this. But as a general rule, I'm a big fan of ownership. People think, I don't think anybody ought to own houses. That's not true. And the nice thing about it, if that does happen to you, is you're usually saved by your now higher attending income. You're going to be in a house long term, you should own it. You're going to come out ahead. Owning versus renting. I like it when doctors own their jobs. I think they generally do better financially, and they're happier in the long run because they have more control over their practice. And if you're going to be practicing in one facility for a long time, I think you're generally better off owning it. So, yes, own it when you can. If you can't, renting's okay. It's just a business expense. It's deductible. Right. But if you can own it, I think that's even better. And surprisingly, a lot of times the real estate that the practice is in ends up being worth more than the practice is when you go to sell in 20 or 30 years. So, yeah, try to own real estate in the long run. It generally works out very well.

Okay, this is coming in from Parker Mitchell. What are your thoughts on consolidating loans after graduating medical school? How does consolidating my loans affect my repayment terms and interest rates? Okay, Parker, we talked quite a bit.

About this, but maybe it's just not the right thing to do in the beginning. You can rent a house with a yard, with a fence that you can have dogs at. You don't have to live in an apartment, but at least consider renting for residencies, particularly short residencies. Okay, let's talk about avoiding financial catastrophe.

So file your taxes right after you match.

Okay?

Whenever that year is, when you're in that, you know, I guess March time frame of the year that you're graduating from medical school, and then do a federal consolidation.

Okay.

And the reason for that is, if you don't do the federal consolidation, what happens is you're not going to move into repayment in July when you start your intern year. You're going to move into repayment in November or December.

Catastrophes are bad things. I had a climbing catastrophe last summer. It's been a very bad part of my life, I assured you. But financial catastrophe is not so good either.

That's problematic because you're going to continue to accrue interest and you're not going to be in repayment. So you're not making any progress on the loans, and you're not qualifying any of that time for public service loan forgiveness. So you move six, you lose six months of PSLF credit. Okay, so now what does it do? It takes your seven or 10 or 15 loans, and it'll lump it all together into like one or two loans, nice and neatly, and they take your interest rate and they take a weighted average of all of your different federal student loans, and they rounded up one eighth of a %, which is 0.12,5. It's teeny, it's minuscule, and it's worthwhile for you to do the federal consolidation. Okay, this federal consolidation is different and distinct from private consolidation or private refinancing that we've talked about earlier. A private refinance is one that could actually lower your interest rate potential, whereas a federal.

And they tend to be pretty common for doctors. Doctors often make the same mistakes over and over again.

So let's talk about consolidation is going to slightly bump it, but the big benefit here is that it's going to allow you to move into repayment as soon as you start your intern year. And here's another point too. You can't do this federal consolidation until you've graduated. I wish you could do it while you're still in school, but they're not going to let you do that because.

Talk about some of these financial catastrophes that really crush your financial plan. Okay, there's seven of them. The first one is living hand to mouth, just spending too much money. Second one is divorce, an inadequate insurance, too much leverage, a poorly thought out investment plan investing related costs and uninsurable risks. Okay, so the first one is living hand to mouth. I put this A lot of those.

Loans that are sitting in that deferment, they just don't let you consolidate them while you're in school. So do it after you graduate.

Yeah, this is generally a June activity. Right. You graduate in May, they take a few weeks before they let you do it. You do it in June and hopefully you're making payments. They're $0 payments most of the time, but you're making payments by July.

Yep. Okay. This comes in from Emma Priel. What is a PSLF side fund? Emma? A PSLF side fund is what we call a little student loan slush fund in case PSLF doesn't happen. And generally what we see people do is if you're on track towards public service loan forgiveness and you feel good about it and you see the numbers, hey, there's a million people that have already gotten this. But the investment adage comes up that past results aren't always what happens in the future. Right. That kind of rings true in our head a lot of times here. Well, what the side fund does is in the event they pull the rug out from under you in the last month before you hit your 120th month, you have enough money in this side fund to dump it into your student loans to pay it all off. And what I generally recommend is when you get done with residency, start setting aside Money in that side fund, albeit the amount that you would have been.

Paying if you were going to chart up earlier. This is what doctors make on average in their specialty. It's a lot of money. Right. We can see at the bottom, you know, the endocrinologists and pediatricians and preventive medicine, infectious disease and these sorts of things are in the mid to high two hundreds. At the top of the chart, we see people making $500,000 plus. It's a lot of money. And I know it seems crazy to you at this point in your career that somebody can spend that entire thing, but I assure you they can. There are lots of pay it off.

In three, four, five years or even on that standard tenure repayment program that is going to help you feel better. And this is really a fallback. If there is legislative, you know, why is that they eliminate it. Or frankly, if you don't end up working at a job that qualifies for PSLF for a decade.

Yeah. Or you don't work full time. You know, just decide you want to go on the parent track. Right. You're two years out of residency. You're like, you know what? I want to stay home with my kid for a year and then I want to work part time. Those years don't count toward public service loan forgiveness. And you may decide, well, maybe I should have just paid these things off. And so that's all it is. You know, I tell people, live like a resident whether they're going for PSLF or not. And instead of making big $10,000 payments a month toward your student loans, those big $10,000 a month payments are going into your investment account. And if you end up getting pslf, great. You're that much wealthier if you don't, for some reason, you can take the invested money and use it to pay off the loans. That's what a PSLF side fund is. All right, next question.

And I would also just say on that, Jim, that you can leave it in something that's very liquid. You don't.

Doctors out there living hand to mouth, they do surveys asking doctors their net worth.

Have to tie this up in, you know, a real estate property or in, you know, mutual funds. If you're going to need this potential in three years, maybe you put it in like a high yield savings account or something that is a lot more liquid.

Okay, next question is about Roth accounts in residency. You mentioned earlier that starting a retirement Roth account in residency, but you also added that IDR payments are not in line with the retirement Roth account. While in residency. And I'm confused. Okay, here's the deal. As a general rule, when you're trying to decide whether to make Roth contributions or tax deferred contributions to a retirement account, you want to consider your income. Okay? If you're in one of your peak earnings years, you generally use a tax deferred account. If you're in a lower income year, you generally use a Roth account because you're in a lower tax bracket than you will be later. And residency is the classic relatively low tax bracket year in the life of a doctor. And so, as a general rule, the right type of account to contribute to in those years is a Roth account. However, there is one complication, and that is if you are going for public service loan forgiveness, if you're going for public service loan forgiveness, or you think there's a good chance you will, you try to keep your IDR payments as low as you can. And the lower your taxable income, the lower your IDR payments. So one way you can lower your taxable income is instead of making those Roth contributions, you make tax deferred contributions to your retirement account, and that lowers your income, thus lowering your IDR payments and thus potentially increasing the amount of money you get forgiven via pslf. So are you likely going to pay more taxes later because of that? Yes. But you might make up for it with getting more money forgiven in pslf. So those are the two factors you're weighing. And if you need some help running those numbers, booking an appointment with everything you own minus everything you owe, it's the measurement of wealth. And of course, young Doctors. Andrew@studentloanadvice.com is a great way to do that. This is one of the main questions he helps people with. When you don't expect to have much wealth, but you expect Doctors in their 60s, after 20 or 25 or 30 years, they're trying to decide how to manage their student loans. But those are the two factors. You know, one of them is better for taxes. The other one's typically better for student loan management. And it's hard to say which one's going to work out better for you in the long run.

Okay, this has come in from Marlena Brown. I'd love to hear more about paying for expenditures with save money if doing an MD, PhD route. Not interested in taking out loans to fund my education.

Okay, if you don't want to take out loans, then pay for your needs. Right? If you got some saved money, use that to pay your rent. Physician attending level paychecks to have substantial wealth to be multimillionaires. And yet surveys show that about 25% of doctors are not millionaires. To buy your groceries, to do whatever. The nice thing about an MD PhD is you're not usually paying any tuition or expenses for your education. And there's often a stipend in addition. Now, hopefully the stipend's enough that you can live on it, but I get it in some expensive cost of living areas, it may not be enough. Thankfully, you've got some money saved, so use that to make up the difference. But I don't know what else to tell you other than try to live as frugally as you can. You know, it's not, the stipend's not huge. And especially if you're, you know, if you're burning through your saved money, it may not last forever. So try to live frugally, but that's the way you do it. You know, lots of other people before you have gotten through medical school not spending very much money at all. I remember my HPSP stipend was like $921. That's what I was paid by the military while I was in school. And that's essentially what we lived on for those years we were in medical school. And it was supplemented a little bit by some of Katie's work. But then she went back to school as well and got a master's degree. So that was a big chunk of what we were living on, was $921 a month. So it's not easy. I get it. You're not going to be eating out all the time, but it does help you not run out of money. And if you don't want to take out loans, you got to make sure you don't run out of money. Any other comments on paying using MD PhD Andrew?

Yeah, I mean, if you have to take out a little bit, don't beat yourself up about it, right? If you pay, if you take out $50,000, you can pay that off in your first year, right. When you're, when you're done with your residency program.

Right.

And it's, you know, so, I mean, it would be ideal if you don't have to take any federal student loans out, if you could get a loan from, you know, a family loan. Right. Instead of taking out these federal loans. Because, I mean, they're 8 or 9% right now. It's expensive. And if you want to go the private route, they're probably more. Right. But know that if push comes to shove and there's no way that you're going to be able to foot the bill.

In their 60s, in fact, 11 to 12% have a net worth of less than half a million dollars. And so this does happen now. Bad things happen to people. Maybe you got disabled and weren't able to buy disability insurance, or maybe you went through three different divorces or something. But most of the time these doctors who are not millionaires in their 60s just spent it all. They just didn't save enough money. And that happens a lot. So this is the first big catastrophe is living hand to mouth for the.

Entire time that you're in your program. You can always go to the well and get a little bit of federal loans and you'll knock that out very quickly.

Yeah. If you will live like a resident when you become an attending, you can pay off loans very quickly. I promise you. You can live just like the average American while earning 250, 300, $400,000 and send big checks to the lender. And those loans go away very quickly. You just have to be disciplined enough to manage your money well.

Okay, this comes in from Daniel Lomboy. What should I do with existing funds spread across Roth, traditional IRAs, HSAs and taxable account starting school, should I liquidate some or all of my investments to reduce loan interest?

Oh, Andrew, I hate answering this question. Can you answer it for me? I don't want to tell them the answer.

So can I say that this all depends?

Okay.

And I've worked with a lot of medical students.

All right? And here's that chart shows position net worth by age. You can see 65 and older, you know, 24% still not millionaires. Okay. And that's because a lot of them live above their means. If you ask them, 5% of them will admit I live above my means. But another 48 are people that are.

Getting into medical school this year and they're like, Andrew, I have some money. My family is willing to help out and it's going to be enough to pay for a year of my medical school. Like what, what should I do? And the old advice was pay as much as you can up front to have the least amount that you need to borrow over, over your, your entire time in, in medical school. With the way that income driven repayment programs have gone, getting more and more generous over time, and with the invent of this public service loan forgiveness program around whatever you end up borrowing, you might end up paying back about 20 cents on the dollar. If you borrow $300,000 for student loans, you could end up paying 50 to $75,000 in total over the 10 years. A lot of this money that you already have in these savings percent say.

I live at my means. That essentially means they're living hangings in these investing accounts.

Right. I would be inclined to leave this where it is and to not touch that until I'm positive about what I'm going to be doing once I am done with residency. So this is a long ways out. But I wouldn't put an extra dollar into these loans until you can see the future as far as what you're doing for your career as a doc.

Yeah. And even previously, even previous end to mount 50% of doctors living hand to mouth. If you want to ever retire, if you want to ever have any sort of wealth, you're going to have to spend less than you earn. It's not a hard concept to understand, but apparently it's not that easy of a concept to do. All right, second financial catastrophe. This one is divorce. Doctors have this reputation for getting divorced all the time. All these programs becoming so generous. I would have told you, don't liquidate your retirement accounts or HSAs. We'd just be talking about your taxable money anyway. In fact, traditional IRAs, any sort of tax deferred money you have in med school, you ought to be doing Roth conversions on. They're free roth conversions, right. 0% Roth conversions. So do that on any tax deferred money you have. Generally tax protected accounts are so valuable, leave them alone. Even if it means borrowing a little bit more money. Think about it with the taxable account. But the optionality is valuable, right? Even if you take out the loans this year and you change your mind next year, you can liquidate the taxable account and wipe out the student loans. Right. You've still got that optionality. But if you pay for school, you can't go back later and then borrow that money, which Joe Taxpayer may be more than willing to pay for on your behalf. I hate giving that answer, Andrew, but that's really the right answer right now, which is unfortunate.

Yeah. Okay, this comes in from Bjorn. Do you think it makes sense to work a lot as an attending if you're at a greater than 50% marginal tax rate?

Hey, hey, attendings. This is the student webinar. Man, you're you guys sneaking in. I was going to say, I know.

That there's some residents and some fellows maybe that have snuck in, but now, now we're jumping right to the attendings here and those that have been practicing.

I am going to do an attending. We're webinar this year. I know I haven't done it in the past, but this year we're going to do an attending webinar too. But we'll answer your question. Thanks for being that's not actually true. Doctors get divorced less than the average American. The average American divorce rate is pushing 50 here. We do appreciate what you're doing. I'm just giving you a hard time. Does it make sense to work a lot as a new attending if you're percent? It's about half that for doctors. And in fact, if you marry another doctor, it's only about 1 out of 10 that gets divorced. But it really is a financial catastrophe. It cuts your assets in half. It cuts your income in half. You pay a whole bunch of money to attorneys. And that last year before you actually get divorced, everybody's spending money hand over fist because they're like, well, 50% of it's not mine. I'm just going to spend it. So when people start worrying you're at a 50% marginal rate, well, it sucks that you're at a 50% marginal rate. I'm not sure what state you're in. I'm guessing California or New York because that's the 37% federal tax bracket plus 3.8% in Obamacare tax, plus what? 9% plus in state income tax. That's brutal, man. That is brutal. Now, to be fair, you've gotta be making, you know, if you're married, we're talking like $700,000 plus before you even start getting into that top tax bracket. So you're already working a lot and making a lot. Maybe it doesn't make sense for you to work more. Maybe you're better off spending that time doing things that are going to keep you from getting burned out, spending it with your family, that sort of a thing, and maybe taking a little bit longer to reach your financial goals. Obviously, if you're in a 2 doc household, you can get to that level of income a little bit faster. But man, you're broke. You're technically broke, meaning your net worth zero. It's time to make some money. It's time to put some money away. It's time to build some wealth.

Wealth.

You're attendings now. You're making good money. You're a 2 doc household and you don't have any wealth yet. You're a Henry. You're a high earner, not rich yet. About losing money to their patients. I tell them, quit worrying about your patients. And worry about your spouse. Date night is the best asset protection technique out there. Preserve that relationship. Okay, another financial it's time to get rich. And yes, it sucks that you're a doctor and you're paying a whole bunch of money in tax, but that's the game, okay? There is a downside to making a whole bunch of money. And the downside is you pay a lot of money in tax. Now you can use tax Deferred Retirement Accounts, 401 s, 403 s, 457 b's, Defined Benefit Cash balance plans. There's all these ways you can lower your income by saving more for retirement, which is what you want to do in the first place anyway. But you're still gonna be paying a lot of money in taxes. And that's just the truth. Now, the good news is, even if you're at a 50% marginal tax rate, your effective tax rate is probably only 30%, maybe 33%, something like that. And so you're not actually having 50% of everything you make go away. It's just 50% of every additional amount you make that's going away to the tax man. So console yourself with that thought. Recognize that this is the price you pay for having this huge income, and be glad you didn't have to pay these sorts of taxes when you were a med student or a resident. You know, a lot of new attendings are totally flabbergasted when they realize their tax bill is higher than what they made. We see very commonly is people just don't buy the right insurance. They spend too much money insuring their iPhone and not enough insurance, you know, not enough money insuring their their career as a resident. But that's basically the case for just about all doctors. You will be paying more in taxes than you made as a resident. All right, can you sell your brokerage stocks and reinvest them as income into a Roth ira? If you're a med student without a part time job, well, you can do this, right? Money is fungible. You can put any money you want in the Roth ira, but there is a requirement. You have to have earned income. So if you don't have any earned income, you don't have a part time or a full time job. Your spouse isn't working, remember, because you can fund it using your spouse and their ability to earn money. That's disability insurance. If someone else. That also depends on your ability to earn. You need spouse's income. You can't put money into a retirement account. Sorry, it'd be really cool if you could, but that's not the way it works. You have to have earned income to make a retirement account contribution. Need some term life insurance. Not whole life insurance like I was sold as a medical student, but term life insurance.

Okay, this comes in From Zachary Meyer, 4th year medical student here. Is there any way we can start SAVE now if it continues to get out of our interest accumulating right now? So Zachary, if this was a year ago, I would say yes, but the SAVE plan's in limbo right now. There's 8 million people in the SAVE program that haven't been able to make a payment since July last year. And any day now we're going to hear from this district court of appeals that has the SAVE plan right now in its arms and they're going to eliminate this. They're not going to support it. Bottom line is I would not plan on the SAVE plan. Now for you and for anybody that.

Is students, to protect them if something happens to you. You need health insurance. Okay?

And I wouldn't plan on that being your option. You know, when you start residency this year, you gotta be looking at one of the other plans like ibr. And you know, understand unfortunately that none of the other income driven plans out there had that generous interest subsidy like the save plan. And for example, say your interest is $1,000 a month and your monthly payment was $200. That unpaid interest of $800 in the.

Past spent $88,000 before I even arrived at the hospital last August.

You know, that accumulates and that gets added to your balance month after month, year after year. And that's why, you know, when you get done with residency, usually you have a quite a bit larger balance. The loans have grown 30 or 40, $50,000. Right. Right before your eyes, even though you had made payments. But with Save, that $800 of unpaid.

Interest, that's what my helicopter price was, that was billed out $88,000 from a helicopter ride to the hospital. Have health insurance. You don't need that sort of a financial catastrophe hitting your bottom line. Liability insurance, okay? This includes both professional, your malpractice and your personal insurance.

So that was waived, which basically made your effective interest rate when you were early career next to nothing. And that's why we saw a lot of people that while they were in school, they wanted to apply for SAVE to try to curb some of the interest on some of their federal student loans. But at this point in time, unfortunately, you're not going to be able to do it.

Okay, this one From Paul, can you explain the difference between Roth conversion contributions, backdoor Roth, et cetera? Yes, I can. I spend a lot of time explaining the differences to doctors all the time. There are basically two types of retirement accounts, right? There are tax deferred retirement accounts or traditional retirement accounts, and there are Roth or tax free retirement accounts. With the tax deferred retirement account, you get your tax break up front. With the tax free retirement account, you get your tax break on the back end. Okay? So you've got to choose. Most retirement plans offer you the choice of making either type of contribution. So when you're first putting money in, that's a contribution, okay? So you gotta decide, am I gonna put it in a tax deferred account or a tax free account? And the main factor that goes in there is complicated, but the main factor is, do you think you're in a lower tax bracket now than you will be later when you take this money out? A Roth conversion is simply moving money from a tax deferred account to a tax free or Roth account. You're basically prepaying the taxes on it rather than paying the taxes. When you take the money out of that tax deferred account, you're paying the taxes. When you do a Roth conversion, however, there's a cool way that that's on your homeowners or renters insurance, that's on your auto insurance. And most doctors, at least by the time they're an attending, high earners can contribute to a Roth ira. They're normally not allowed to make this contribution because of a rule that says high earners can't contribute directly to a Roth ira, but they can contribute to a traditional Iraq. And because they're a high earner and they have a retirement plan at work, they can't contribute directly to a Roth ira. So they put the money in the tax deferred, traditional ira. They don't get a tax break for it, they don't get a deduction for it, and then the next day they move it to a Roth ira. And that's all allowed. That sort of an indirect Roth IRA contribution is called the backdoor Roth IRA process. And most attending physicians in the know are doing this for themselves and their spouse every year. I think this was the 16th year that Katie and I made backdoor Roth IRA contributions. So you should plan on doing that when you become an attending. Just know that that's out there. We have tutorials on all this stuff. If you go to the website, have an umbrella insurance policy that sits over the top of those to provide additional liability insurance. And if you have something really expensive that you can't afford to replace, put some insurance on that, like your home. Right? Talking about property and casualty insurance. Okay? The fourth catastrophe is just having too much debt. Okay? And yes, it is true that if you borrow at 2% and invest. Search those terms, you will learn them. And this is all part of the terminology of finance that you got to learn to be able to manage your money well, just like you're learning the terms you need to know in nephrology or pulmonology, you got to know the terms in finance that you'll need to understand as well. And these are good examples of those terms.

I will start medical school in fall. I'm looking to buy a house to live in while renting its bedrooms to fellow students. Would. Would you folks be qualified to advise me in this process?

All right, well, let's. Let's start with the last sentence first. What do you mean by qualified to advise you? I am not a licensed financial advisor. Right. I am a mortgage agent. I am not a realtor. I'm a doc and a blogger and a podcaster. Right. I just teach people about finance. So if you're looking for formal financial advice. No, I'm not qualified to give you that. You want to go talk to Andrew about your student loans. He's qualified to tell you about your student loans, but not, you know, real estate investing. So what you're talking about, though, is house hacking, right? The idea is you buy a house that you can't actually afford to buy, and then you rent out all the bedrooms to other people and they pay you rent. And with that rent, you make the mortgage payment and you have this investment, right? And hopefully it goes up in value and you pay down the mortgage as you go along. And maybe you get a few tax benefits for it that you probably don't need because you're a student anyway. You're a real estate investor, even though you don't really have much income. This can work out well for you. It has it 10%. That's a winning strategy. The math doesn't lie, okay? At least most of the time. Sometimes it's worked out for doctors in the past, particularly if the house appreciates a lot while you're in it. And that's luck, having to depreciate more than your transaction costs. If you're only owning it for four years, you get closed out if the value of the investments falls and you get a capital margin call or something. But you got to be A little bit careful, particularly with real estate investing, people get ears, but you also pay down some of the mortgage and so hopefully this can work out for you. If you don't have a lot of vacancy and the house appreciates. But those are big ifs. It would not be that hard for you to get in a lot of trouble doing this. Excited about leverage and they just use too much of it. You need to make sure that you can cash flow your debts. So if you buy a property with a bunch of leverage, you better make sure that it's cash flow positive. All of a sudden you got a bunch of vacancies, you can't make the mortgage payments. Now you're getting foreclosed on, you lost the house, you lost a bunch of equity that you put into it or whatever. I don't think as a medical student, this is the time to really get serious about investing. The time you get wealthy as a physician. If you're on the physician career track, the time when you get wealthy is as an attendee. Me, it's not as a resident, certainly not as a medical student. So if you want to do this, you can try it. No, this is a pretty high risk activity. It's not that hard for this to go sideways on you. But it has been done. It has been done successfully. Be very careful and maybe line up the renters before you ever buy the house.

Well, that's too risky in my opinion, but good luck. How do you recommend students get borrow, earn for living expenses.

School expenses aside, even a physician income can't carry very many cash flow negative properties very long. So be careful. Yeah, you borrow it or you earn it or you have the money. It's one or the other. Right? You just got to choose. I mean, these days with PSLF being so generous, lots of people are borrowing for even their living expenses. Even if they don't have to. If they can get the loans, they're taking the loans because they know Joe Taxpayer may be paying them off for them, you know, 10 years from now or 14 years from now, 10 years once you get out of medical school. But you know, you got an option, you're okay to work and use that money to pay your living expenses. You're okay to use money that you have or your family gives you to pay for your living expenses or you can borrow. Those are really the choices. I mean, I guess there's the additional choice. You can sign a contract, you know, MD, PhD contract, or a military HPSP contract, or an Indian Health Service contract. But those are kind of Similar to borrowing money, you're either, you know, committing to pay back money or committing to pay back time, and they're really the same thing in the end. So I don't know that I have any additional advice on that. You got anything else to say on that one, Andrew?

Yeah, I would just say, you know, just, just borrow federally for now. Keep, Keep your options open. You don't need to shut doors when, when you're so early on in the game. Stay in the game. Keep your options open. And, but, but still, still try to live frugally, right? Don't, don't go to, don't go to.

Careful with how much leverage you use throughout your career. Most of you are starting with a gob ton of debt. You know, between your student loans and a mortgage and maybe a practice loan, you've already got more than you probably ought to have in the beginning. Don't go crazy picking up more. Another problem docs have is they have a poorly thought out investing plan. Sometimes they're just not taking enough risk. Right. If you're not willing to invest the majority of your portfolio on that extra.

Money, you know, unless, unless you have some savings to do that, right? I don't know. I just, I probably wouldn't be doing that. I'd still be living frugally. But borrowing what you need, obviously for tuition and your living expenditures. Is it okay to borrow to pay for family health insurance while in medical school?

Oh, this is a good question. There's a lot of nuance to this question that you might not think is there. I mean, when you sign the promissory note on your student loans, your federal student loans says you're using it for education, and that's generally assumed to include living expenses. But does it say anything about your family's living expenses? Clearly your own health insurance would be included in that. But what do you think, Andrew? What about family health insurance? I mean, I know people do it, obviously, and nobody's been audited on this, but is that fraudulent to use a student loan to pay for your family health insurance?

And I can think of somebody in my own family that doing this. Well, when they were in, in medical school. I mean, I guess if, if your, your medical, if your health insurance for your family, maybe your spouse or your partner, your kids, is, is through your medical school and, and you're going there for school? I, I think so. I think this is, is okay at this point in time. What do you, you know, anything else you want to share on that?

I don't know. I mean, People do it. You know, you don't have another source of income, especially if you have a stay at home spouse and a couple of kids, you know, while you're going to medical school, what else are you going to do, right? I mean, not getting health insurance is a bad idea. What else are you going to pay for it with if you don't have any other income? So I would probably borrow it and just recognize that that's the way it is, that health insurance does cover you, which is a totally legitimate expense. And I don't think anybody's really going to question you on it. I've never heard of anybody getting in trouble for doing this. So I don't think there's any real risk here. But it's just kind of a theoretical consideration given the terms of the promissory notes. Now, if you were borrowing money and then going to gamble it in Las Vegas, or you were borrowing the money and buying stocks with it or Bitcoin with it or something, that's pretty clearly against the terms of your promissory note. But I think family health insurance is gray enough that nobody's going to give you a hard time about that.

Maybe your other family members could sign up for Medicaid or something.

Risky assets like stocks and real estate, you have to save a ton of it, like 50% or more of your earnings in order to have enough money to retire on. And most of us just aren't willing to save that much money. And so you gotta take some risk while you're investing. Don't think you can time the market. All right, you are cloudy. Your crystal ball is just as cloudy as the rest of us. Okay? You can't get out before the market goes down. Get back in before it goes up. Just accept that and invest like it's true, even if you're not 100% sure it's true. Trust me when I say invest like it's true.

True. I'm assuming you're probably in an income bracket low enough that maybe, maybe they could.

Yeah, that's a good point, Andrew. I mean, if. If there's no other source of income in this household, you almost surely qualify for Medicaid. Yeah, most of my classmates that had families in medical school, they were. Their kids were on chip and their health insurance was Medicaid. They had babies on Medicaid. So make sure you look into that before you go buying health insurance. You probably qualify.

Maybe it's cheap, maybe it's cheaper to go that way too.

Yeah, you know for sure.

So I have about $4,500 in credit card debt. How should I go about this? Do I use my loans to pay it off? I have no family help and no money of my own. It's kind of that same. It's kind of in that same vein that we were just talking about. When did you get it? Was this, Was this tape?

Was this money? Don't go picking stocks, okay? You'll feel like a genius when you pick an Nvidia that goes up before.

For, you know, you buying groceries or buying, you know, paying for your rent for a little bit. I think that's fine.

That, yeah, that's an education expense. You can borrow student loans. You know, it goes up like crazy and you bought it before it really peaked. But over time, this is an uncompensated risk. You're not getting paid for it because it's a risk that you can diversify away that. But if you brought it into school, technically you're not supposed to use student loans for. So you got a couple options. One, just pay it off with student loans, right? I mean, money's fungible and nobody's going to give you a hard time about this, but it's technically probably fraudulent. Other options, I mean, you could declare bankruptcy, right? I don't know that I'd recommend it for $4500. But credit card debt goes away in bankruptcy. Your student loans won't, but your credit card debt would. And you got a lot of time before you need to buy a house.

I guess it stays on your credit report for like seven years, right. Or something like. And hopefully by that point you can, you know, you're done with medical school and training and you can build it back up.

So, yeah, I don't think I'd do that. I think what I would probably do is I would probably either make the minimum payment and just assume I'm going to pay this off down the road when I have money as a resident, or I would stop paying on it knowing that I'm in default status on the debt. Debt. And what'll happen in six months or a year or two years after you haven't been paying on this is they'll start, you know, it's going to go up a lot with fees and interest and all that kind of stuff added to it. But you might be surprised how little they will settle the debt for. You know, you might be surprised. You might go in there after you haven't paid for 18 months and offer them $500 or $1,000 and they'll take it and they'll wipe out your debt for it. Now, that might have an effect on your credit score, if you care about that, but it's possible. And in general, you do not pick stocks well enough to beat an index fund. You could settle this for dimes on the dollar by doing that. Now, they're not going to settle as long as you're making payments, but that might be another option. So bankruptcy, not awesome. Carrying it for a while and paying 25% interest, maybe not so awesome. Maybe you can jump it to another credit card with 0% for a while or some sort of lower interest rate. And the other option, of course, is to try to negotiate a settlement of it. And you can show the professionals don't pick stocks well enough to beat an index fund. Just invest in the index fund. You have no income, you're unemployed, and that might cause them to settle the debt for you. The alternative, of course, is just swapping one debt for another. Obviously, the rate on your student loans is going to be lower than on your credit cards most, most of the time. But that's technically probably a fraudulent use of your student loans because I'm pretty sure your promissory note says you're going to use it for education, not to pay off your old credit card debts.

All right, Jim, I think that's. Should we, should we do one more and then call it.

Yeah, let's do one more. I think we've been answering questions for over an hour now. So let's take this one. Does being the head of household affect in any way my income tax? I'm currently not married, but will, if I can, can save money on taxes. Okay, lots of options here. Well, you can file your taxes in lots of different ways. You can file your taxes as single. If you're single, you can do that. It's a little bit better if you have like a kit to file head of household, rather long term. They're diversified, they're tax efficient, and they work then single, you get some additional tax breaks there. If you're married, you're almost always better off filing married filing jointly. But there are some situations where you do married filing single that can work out better for you. You can use tax software to run the numbers both ways and check that out. But one of the times people do that is when they're playing games with their student loans, trying to keep the IDR payments low so that they can do that. But head of household can reduce that a bit little. Now, you say you're currently not married, but will, if I can save money on taxes. Well, that's romantic. I'll marry you, but only if I can get a tax break for it. I don't know that I recommend marriage primarily for financial reasons. There are financial benefits of getting married. There are also some financial costs of getting married, particularly if the marriage doesn't last. So I don't know that I would get married just to save money on taxes. But if this is somebody you want to be with the rest of your life, then sure, get married. And that'll probably help your taxes, especially if that person isn't working. So there's no real marriage tax penalty. Could you file as head of household with a domestic partner? That's a good question. I don't think so. I think it has to be like your kit to file as head of household or you have to have some sort of a dependent. Now, maybe your domestic partner could qualify as your dependent. I don't know. I would have to look that one up. But it's worth a try, I suppose. But if you really want to save money on your taxes, married filing jointly don't put all your eggs into one basket. That's a real problem if you end up gambling in what I call speculative assets. These are assets that don't pay you anything. Right? There's no earnings like a stock. There are no interest like a bond. There's no rents like real estate. It's just you're hoping somebody else is going to pay you more for it later. Then it's definitely better than head of household filings. So why don't you ask yourself if you really want to be with that person the rest of your life and talk with them about maybe getting married and having the tax savings just be a side benefit to that. All right, I think that we've hit a whole bunch of questions. We've covered all the topics I wanted to cover today. I know we haven't gotten to all of your questions today, but it's late. We want to let you get back to your evenings, your families, your studies, whatever you may be doing. So we're going to stop answering the questions at this point. If you still have a burning question, you can email me editorwhitecoatinvestor.com and I will get back to you with an answer to your question. It might be a link to a blog post that answers your question, but we'll answer all of your questions. But I'm not going to keep Andrew away from his little kids tonight any longer. And we're going to let you Guys, get back to your evenings. Thanks so much for your attention. Don't forget about our student course that we just put together this year at a price point that actually works for students. Don't forget about the Champions program. If you're not a first year, of course, you will need to buy the White Coat Investors Guide for Students. It's not an expensive book. It's well worth your money, I assure you. But if you're a first year, sign up to be a champion. Not only get a free book for yourself, but for your entire class. Don't forget about our boot camp. This is an email course, totally free. We'll email you and tell you in 12 emails how to manage your money like a rock star as a doc. That's sign up for that@whitecoatinvestor.com financialbootcamp and of course, check out the blog and the podcast and the YouTube channel. We're trying to package up this important financial information in whatever way you prefer to consume it and get it to you because we want you to be financially successful. We are convinced that financially successful, financially comfortable doctors are better doctors. They're better physicians, they're better partners, they're better parents. They don't have to worry about money and they can take care of those things that you've paid for. We're talking about crypto assets, we're talking about precious metals, we're talking about empty land. You know, those sorts of things if you have to invest in them. And yes, I know Bitcoin went up like 100% really matter in life. So thank you so much for your attention today and we'll 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.

Last year. But if you have to invest in them, limit it to a small percentage of your portfolio. Maybe like 5%, okay? Another problem is not paying attention to your investing costs. If you're paying even what seems like a low percentage, just 2.5% a year after 30 years, it turns out that 60% or more of the earnings, the money your money earned over that 30 years, has gone to the financial services industry in fees. It's okay to use a financial advisor if you need advice, but make sure you're getting good advice at a fair price and recognize that this is the best paid hobby out there. If you can learn to be your own financial planner and investment manager. It's worth.