Intern Saves Up an Emergency Fund - MtoM Podcast #203

This is the White Coat Investor Podcast Milestones to Millionaire celebrating stories of success along the journey to financial freedom.

This is Milestones to Millionaire podcast number 203 intern saves up an Emergency Fund. Resolve is the number one rated physician contract team, reviewing 1000 plus position contracts every year. They empower physicians with location specific compensation data, which leads to unparalleled leverage during the physician contract negotiation process. A physician contract, lawyers included, can negotiate on your behalf, alleviating the stress that can go along with reviewing complex legal terms. Flat rate pricing and flexible schedules are designed for a physician's schedule. Use code WHITECOAT10 for 10% off at whitecoatinvestor.com resolve all right, those of you out there who could use a little more income, here's a way you can get it paid. Surveys. This is for physicians. Really? I know lots of you out there aren't docs and that's okay, but this one's for physicians, all right? If you go to whitecoatinvestor.com Physiciansurveys you will discover a number of companies who are willing to pay you for your opinion. No big commitment. If you don't have time, you don't do any. If you got some time, you're sitting around waiting for a flight or you're vegging on the couch watching TV after a hard shift or whatever, why not get paid to do it right? Fill out a few of these surveys and they send you some money. One of our columnists made $30,000 in a year just doing these surveys. So it's entirely possible now the more some specialties get paid more than others, you know, their opinions are more desired, especially if they tend to prescribe expensive medications or treatments or equipment. You know, as an emergency doc, it's not always been the most lucrative thing for me, but some specialties is very lucrative. So if you've been looking for a little extra income or just enough income to have a side business to Open a solo 401k so you can do a rollover or something, this is a great way to do it. Check it out. Whitecodeinvestor.com Physiciansurveys all right, we got a new milestone today. We've never done this milestone, which I think is awesome, right? A lot of times we have people that have become financially independent or they paid off their mortgage or, or deca millionaires or whatever, right? But I kind of like doing some of the early milestones even more. Right? We talk to people that are back to broke all the time or they pay off their student loans or you know, they made a 401k contribution or they bought a car, you know, whatever. Well, today we're going to talk to someone who has basically saved up an emergency fund. Right. It's early on in your financial career for sure, but this doc is early on in his career, so I think it's a perfect match. Let's get them on the line. Our guest today on the Milestones to Millionaire podcast is Philip. Philip, welcome to the podcast.

Thank you so much for having me. I appreciate it.

Tell us where you're at in your journey today as far as your professional career.

Sure. So I'm an intern in a categorical internal medicine program currently located in the southeast of the US So just finished up medical school earlier this year and graduated in May. Okay.

So we are, as we record this, it's only November. Right. You've only been getting paychecks, like you've had four paychecks in your life here if you're like most doctors. Right?

Yeah.

Okay, so what milestone can we possibly be celebrating at this point with you? What have you accomplished?

That's right. So the milestone that I'm celebrating for today is I finally saved up enough money in my savings account to cover a month of rent, which was financial goal. Yes.

Very cool. So it's a month of rent or a month of all your expenses?

Well, initially it was only a month of rent. Now since there's been a little bit of time since I applied, I can cover almost two months of total expenses now. So moving up there.

So basically, you've established an emergency fund. Maybe it's a little bit small still, but you've established an emergency fund just four months out of. Out of medical school. Very cool. Well, tell us about medical school. How'd you pay for medical school?

Sure. So a combination of things, partly. I did get a scholarship from my school, which was very helpful. Very grateful to have gotten that fairly substantial scholarship, which was good. Did have some family assistance in the form of an inheritance that I got partway through medical school. And then the rest.

I'm sorry to hear that. Right. I mean, inheritance always comes with bad news, unfortunately.

Unfortunately, yes. And then the rest were loans, but I just, you know, ballpark. I still have, you know, over six figures of medical school loans, so just kind of a combination of multiple sources.

Very cool. So at what point in this process did you kind of start becoming financially literate? When did that become important to you? I mean, you're only four months out of medical school and you're already on the white coat Investor podcast. Clearly, at some point, finances has become a priority for you. Tell us about that.

Definitely. Definitely. So I guess I was, you know, I always had a little bit of a mind for finances growing up. I tended to be, you know, more inclined towards saving than spending, etc. But I really didn't know anything about, you know, the finances for physicians, about, you know, the strategies for paying back student loans, things of that nature, really, until, I think, the third year of medical school, which is when I really started to take an interest in it. I think I was. I don't know, one day I was. I remember distinctly, actually, I was going to the gym, and I thought, gosh, I actually have no idea what I'm supposed to do for, like, paying off these loans. I was like, I don't know how this works. I'm borrowing, you know, this really huge sum of money. But I know people, you know, they become doctors and they'll have high enough income and they pay it off. I was like, I have no idea how that process works or, like, what I'm supposed to be doing here. So I actually started listening to the White Coat Investor podcast at that point and then bought the book and read it and, yeah, the rest is history. And then just kind of went from there and continued to listen to the podcast and read some of the books suggested by the original White Coat Investor book, and that's what really sparked my interest.

Very cool. Now, you've listened to this podcast. You've heard some people on here. I mean, we've had DECA millionaires on here, right. What made you think that hearing, you know, this milestone that you've accomplished would be helpful to some people?

Sure. Well, I think, yeah, multiple reasons. I think it's important to start with financial literacy, as you've always said, as early as possible. I think that's really beneficial. So, you know, hopefully this will be encouraging to some of the listeners to really start to take an interest in that, you know, really early in training or early in residency. And I think it's important to celebrate those small wins, too. And I think that the way to build up towards that kind of DECA millionaire status, et cetera, is really by having a series of smaller goals that eventually build up over time. So this is kind of one of the very first of those goals.

Very cool. Anybody else involved in your financial life? Married, partners, kids, anything?

No, I'm single. No children.

And did you buy a house? Are you renting a house? What did you decide to do for your housing during residency?

I'm Renting an apartment. Renting an apartment right now.

And how do you feel about that decision now, four months after making it?

I think it was good. I do know some people from my medical school class, not necessarily in the same program, but from my graduating class. I know some of them did buy houses. I think for some people it was actually a pretty good decision. One person was going into a pretty low cost of living area. They kind of looked at the mortgage and were like, you know what, I'm just going to buy a house. Which I think was reasonable. But for me at least internal medicine being a three year program, I think what I've heard is it takes about five years to at least recoup the transaction cost of buying a house. You know, for me, just renting for three years or maybe a little bit longer was worth it. I think it also makes things very simple for me because anytime I have an issue or you know, have a problem with the apartment, I just call, you know, call the management and let them take care of it while I'm at work, while I'm at the hospital. Don't have to look after a lawn, I don't have to worry about like replacing the hot water heater, I don't have to worry about replacing the oven, etc. So it kind of simplifies my life a little bit, which, which I really like.

Have you looked into disability insurance at all?

Yes. So I've been meaning to buy some additional disability insurance. I do have the short and long term through my employer, through my program and I do want to apply down the road for, you know, like the own occupation, you know, separately underwritten policy at some point. I haven't done that yet, but was meaning to earlier in the year and I was trying to, you know, avoid the premiums for a little bit in the beginning of residency, trying to save up a little bit of money. And now I'm, you know, kind of struggling to find the time here and there to find a program, look into it.

But don't feel like I'm giving you a hard time. Right. I mean you're four months out, you're doing awesome, right?

Yeah.

Have you looked, does your employer offer any sort of retirement accounts or anything to you?

They do and they also offer a guaranteed standard issue policy as well, which I looked at. But yeah, I think I'm just going to go for my own underwritten policy. I know one of my co interns got his own underwritten policy and he said the premiums actually weren't that much, which is Nice. But in terms of retirement accounts, yeah, we do have a 401k, so I'm making just enough Roth contributions to meet my employer match. Otherwise the rest fits mostly, you know, either going towards expenses or just going to the emergency fund.

Well, you're doing awesome, man. This is all the big priority stuff for residents, right? And you're knocking it out of the park. You're only four months in, you're becoming financially illiterate, you got some savings, you're putting something away for retirement, you got some sort of disability coverage in place and you're still sorting that out somewhat. But I mean, you're doing everything right. And I suspect if we brought you back in, you know, three or four years and interviewed you, you would be doing everything right as an attending as well. I have no doubt that you're going to hit the ground running when you become an attending.

So I just kind of went down the list of financial priorities for residents in the white coat investor. And I was like, okay, well, I'll just off all of those and go from there.

Very cool. Have you given any thought toward long term goals, toward your why and what you think you may care about later in your career? Or is it just too early? Right now you're figuring out how to practice medicine and take care of living?

Definitely, yeah, that's definitely the first goal is to, is to be good at internal medicine. And that's, you know, that that's challenging. Certainly been challenging, but definitely enjoying it, I guess career wise. Thinking about probably planning on fellowship. I think I'm thinking nephrology at this point.

Maybe.

I'm also interested in critical care. So there's some combined nephrology and critical care programs I might look into. That would be interesting.

Yeah.

In terms of, I guess, longer term financial goals, I think the next big one would be to pay off my student loans. I think that would be the priority for me. I'm very debt adverse, so I don't like the idea of having that big student loan sitting there. It kind of bugs me to owe people money. So I think that'll be the next big goal, is to try to pay that off quickly as an attending.

Very cool. Somewhere out there there's an MS.4. Listening to this and it's like, oh, that's where I want to be in a year. What advice do you have for them?

Yeah, definitely. Well, definitely try to read some financial books, some financial blogs. Good quality financial books and good quality financial blogs. Sometimes it's a little bit hard to parse out what's more entertainment and what's actually good data backed information. But definitely learn kind of and I would say figure out what your priorities and your short term goals are. I think that's really the key and partly why I submitted my application to the podcast is to really determine what your short term goal is and then to set a budget and then be able to work towards that short term goal and then build up to the next one. But for Ms. 4s, yeah, definitely work on financial literacy. There's a little bit more free time in M4 year to, to do that and just kind of get yourself a good baseline of knowledge before you go into intern year because there'll be obviously less time to, to learn about finances. I think some of the mistakes I made M4 year, I should have taken out more student loans actually. People told me like, oh, you need to do that. It's going to cost a lot to relocate and, and everything. And I was like, nah, you know, the interest rate for me for the PLUS loans was like 8%. I was like, no, I'm not going to, I'm not going to do it. I'm not going to borrow anymore. At 8%, that's too much. But then I basically ran out of money and had to put a little bit on my credit card. I had to ask my parents for some help too. I was like, oh gosh, I should have just borrowed like an extra 10,000 or something just to give myself a big.

Turns out 8% is lower than 29%.

Well, I got lucky. I have a credit union card that I was able to pay off quickly and I think it's only at 12%. But it's, you know, yes, it's. The repayment terms are a lot better for federal student loans than they are for a credit card.

When did you get your first paycheck? Do you remember when it arrived?

I think I got it maybe at the beginning of August. So it was a little bit of time too because we start July 1st is when I started. But yeah, that first paycheck doesn't come until even a month after that start date, which was.

And you gotta pay first month, last month's rent, you know, deposit and moving expenses, not to mention all those interview expenses, you know. So a little bit extra in hand when you walk out of medical school is not a bad thing. You're absolutely right about that.

I was looking at some low numbers in my checking account. I was like, oh gosh, it would have been nice to have a little bit more of a buffer Just for, you know, at least for the feeling of security. Nothing else.

Yep, absolutely. All right. Well, Philip, you've done fantastic work. Thank you so much. Congratulations on your success. We really appreciate you coming on and showing people that, you know, milestones start early, but getting yourself on the right track early on can make a huge difference later. So thank you so much for being willing to come on.

Well, thank you so much for having me. I've been a big fan for, I guess, a few years now of the podcast, so I think it's so cool that I can actually, like, be on the podcast myself as a guest. I think that's. I think that's so neat. I think that's really great. So thank you so much.

Well, that. That's one of the best parts about this podcast is it's really all about the audience. It's not about me or us or it's, let's celebrate your wins and use it to inspire someone else to do this.

Well, thank you very much. I really appreciate it.

Okay. Hope that was helpful. It's always enjoyable to have somebody with an early milestone and, you know, just getting started. Right. People that are accomplishing this sort of a thing as an intern are going to have no trouble managing their finances as physicians. As you'll recall, when they do surveys of physician net worths, right? And they ask docs in their 60s what their net worth is, 25% of them are not millionaires. Now, this is after 30 years of physician level paychecks. Maybe they've been paid $10 million and they have less than a million dollars of left. In fact, 11 to 12% of those docs have a net worth of less than half a million dollars. This is net worth. It's everything you own minus everything you owe. It's your house, it's your retirement accounts, it's your investments, it's your car, it's your clothes, it's your pet. It's everything, right? It's everything you own. And less than half a million dollars at the end of a career, it's just a real shame. And getting your ducks in a row early is the way you prevent that, right? Save something from the beginning and keep saving. And you're not going to have this issue when you get to the end of your career. All right, today we're going to talk for a minute. This podcast drops. I think it's the last Monday of the year when this thing drops. So by the time some of you are listening to this, it's already the new year. I wanted to Talk about some of the things I do at the end of every year that you might want to do some of them as well. One of which is, is a calculation. Calculate my net worth once a year, everything I own minus everything I owe. We put it in a spreadsheet and compare it to the year before. Right? I think you ought to do that about once a year. That is the measurement of wealth. It's not your income, despite what the media will tell you, despite what the IRS sometimes seems to think. Right? Income is not wealth. Income is what you make. Wealth is what you have. And the measurement of wealth is net worth. I think it's worth measuring once a year. You don't need to calculate it every week, for crying out loud. Right? That's the whole point of this, is to be able to automate some of this and, you know, have a great life and still have your finances taken care of. You don't want to spend your whole life on your finances. But once a year is probably a good idea to calculate your net worth. You might be surprised the first time you do this. It might take a stiff drink to add up all those debt debts. Because for most docs and many other professionals, the first time you calculate your net worth, it's going to be negative. You might be $200,000 in the hole. You might be $500,000 in the hole. That's pretty sobering to realize that you're actually less wealthy, more broke than the person living under the aqueduct. Right? But the key is not necessarily where you start, but what direction you're heading in and how fast you're going. Right? So start calculating that. Something else worth calculating every year, I think, is your savings rate. This is just everything you put away toward retirement usually is what it's calculated as divided by your gross income. Right. I generally recommend for attending physicians and similar professionals that they save 20% of their gross income for retirement every year. You know, if you need to pay off student loans, that's in addition to that. If you need to save for your kids college, that's in addition to that. If you want to save up for a second house, that's in addition to that. About 20% is what needs to go toward retirement savings. So calculate it every year. See how you're doing. If you calculate it and you're like, oh, 18% this year. Well, that's pretty good, right? You're in the ballpark. You're 32%. You should go, wow, we did really well. Do we really need to be saving this much? What Are our financial goals. But if you calculate it and you find out it's 4%, that's a problem. 18% might be enough. You know, who knows what your number's really going to be? Is it 18% or 22% or whatever? It's not 4%, though. I promise you. If you're only putting 4% toward your retirement and you're not, you know, a resident or a fellow or something, there's a problem. You've got to be saving more money than that toward retirement. You're just not going to get there. Okay. The way you have big retirement accounts is by putting a lot of money into them. You can hope that your investments will do a lot of the heavy lifting. They will do some of the heavy lifting, but you have to do quite a bit of it, too, right? Especially in the beginning. I think when we realized we were millionaires and it took us about seven years out of residency to become millionaires. I looked at our portfolio and 80% of our first million dollars was just brute force savings. It was money we didn't spend. Now everyone says they want to be a millionaire. It's not actually true. What most people want to do is spend a million dollars. That is not the same thing. In fact, it is the polar opposite of being a millionaire. You become a millionaire by not spending a million dollars that you could have spent. That's how you become a millionaire. So if you want to be a millionaire, you got to save some money. All right, what else do I do at the end of the year? Well, I usually update my investment spreadsheet. Right? We track our investments. And so I update that spreadsheet and see where we're at. You know, some people rebalance at the end of every year. Obviously at the end of the year. By the end of the year, if you are of RMD required minimum distribution age, which is now highly variable. It used to be, you know, 70, now it's 72. For some, it's going to be 75 eventually. For most people, I think if you're of that age, you got to take your rmd. Not taking an RMD before the end of the year has a big penalty. It's like half of what you were supposed to take is the penalty. It's huge. The only other penalties I know of that are really big in life are like, not filing your Form 5500EZ when you close a Solo 401K or when it has more than $250,000 in it at the end of the prior year. You basically have seven months to file that. Okay? So it's due the end of July. In a year in which you had $250,000 or more in there, it's due seven months after you close it. Whenever you close your 401k, there's a big fat penalty associated with that you don't want to deal with. Now most people are usually able to get out of that penalty, but you still want to be aware of it. If you had a company in place before January 1, 2024, you've got to an LLC or a corporation, you've got to register that with FinCEN, right? Is a requirement this year, right? They're trying to crack down on money launderers or whatever. So you got to register the beneficial ownership information of your LLCs and corporations. That's supposed to be done by the end of the year as well. So blog post on all this stuff. If you go to whitecoatinvestor.com and go to the search bar search fincen or beneficial ownership Information or Financial Transparency act, you'll find that if you search 5500EZ, you'll find that. If you search savings rate, you'll find that if you search how to calculate my return, you'll find that. Right? I've been writing blog posts now for 13 years, almost 14 years. Every question that doctors have that I can come up with that I can answer with a blog post, there's a blog post on and if you come up with a new one, I'll write a new blog post just for you and run it out on the blog as well. Because this is a resource for you and your financial life. And the end of the year is kind of a time where most of us step back for a second, see how we're going, you know, see what progress we're making toward our goals, do a few calculations, update some spreadsheets and I hope you'll take some time this week to do that. Resolve is the number one rated physician contract team reviewing 1000 plus physician contracts every year. They empower physicians with location specific compensation data which leads to unparalleled leverage during the physician contract negotiation process. A physician contract, lawyers included and can negotiate on your behalf, alleviating the stress that can go along with reviewing complex legal terms. Flat rate pricing and flexible schedules are designed for a physician's schedule use code WHITECOAT10 for 10% off at whitecoatinvestor.com resolve please get your contracts reviewed. I run into docs every now and then to have some crazy term in their contract and then they try to leave the employer and cost them a bunch of money and a bunch of hassle. Don't do that. Know what's in your contract. If there's anything you don't understand in it, please, please, please get it reviewed. It only costs a few hundred dollars. It's not that expensive. Don't be penny wise and pound foolish. All right? Hope you enjoyed this episode of the podcast. We love having you on. This podcast is about you, your successes, your challenges and we thank you for what you do out there. Keep your head up and shoulders back. You've got this. We're here to help you. See you next time on the Milestones to Millionaire podcast.

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.