MtoM #111 - Internal Medicine Doc Becomes a Millionaire

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

This is White Coat Investor podcast number 111, Hospitalist Becomes a Millionaire. I estimate that 80% of doctors need, want and should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you're getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the White Coat Investor can help all right, as you're hearing this, it's the last week of March. We've had an eventful march here at wci. We had our conference and it was fun to go through the feedback for the conference. You know, we asked people what was your favorite part of the conference? Let me give you a couple of the answers we got. Here's one chance to focus on wellness and finance. Tying these two together is key. Here's another I felt like this conference had more impact than the more pure medical type. Conference presenters were outstanding, often included humor, and were interactive. Stacy's choose to Thrive talk was amazing and inspirational and we need more talks like this. I loved the inclusion of various wellness activities such as pickleball, yoga and Fun Run. Appreciated group dinner signups which helped us connect with others. Here's another one. I was very impressed with the organization of this event. It was clear that a lot of thought went into everything from the app to the musical transitions between keynote speakers. Very cool. I was especially impressed with how well everyone stayed on schedule. Great venue, loved the pickleball and the snacks. Very well done. We asked them, why is WC Icon valuable to you and why would you recommend it to others? And people said, this conference has changed my life. As a new attending physician, I had so many conflicting opinions about student loan debt, retirement, contributions, and what I should and shouldn't do with my money and time. After only a few years of practice, I felt overwhelmed with which steps I should take in creating my financial plan. This conference has provided me with the resources and confidence to move forward and take action. Another one this conference was restorative. As an emergency physician, dealing with burnout is hard. This is all I've ever wanted to truly pursue in my life. It has allowed me the freedom to travel and invest and ensure my daughter has an easier path ahead of her financially than I did. I will take what I've learned and the memories of the people I've met and strive to change my current outlook. Mindset is everything. Thank you. Another one I've been following WCI for a long time and have built my portfolio with the assistance of the information I've received. This conference cemented that knowledge and expanded upon the idea of prioritizing self. The wellness component was very beneficial and I plan to implement several of the techniques. Another one though WCI conference found the right balance between wellness finance and social engagement. I've been to a lot of conferences over the years and this is by far the most impressive experience. My wife and I both feel recharged and inspired to make positive changes at home and at work. Great job. So we appreciate all that feedback from those of you who came to the conference. We had a great time. I mean it's a lot of work. It's stressful to put on a party for 600 people, 900 people. When we count the virtual folks as well, there's no doubt about it. There's a lot of planning, a lot of time and effort that goes into it over the course of the year. And we know most white coat investors aren't coming to the conference. This is a tiny percentage of white coat investors that are going to shell out the money and the time to come and stay in a nice resort hotel and have this cool immersive three day experience with other people. Three and a half day experience. I guess it is. But man, it is pretty awesome. So please, if you're not in a position to come right now, I totally get that. I wouldn't have come to this conference as a med student or a resident or even as a brand new attending. But man, as people get closer to mid career and deal with wellness issues, longevity issues, burnout issues, trying to tie that all into their financial plans, I don't know of anything better. No better event out there for that sort of thing. Plus it's just a ton of fun. It's a great conference. Going to Orlando next year. Hope you can make it. If you're interested in partaking in this conference, it'll be out next week in essentially the online course version. You know, you don't get all the cool wellness, pickleball and yoga sort of activities, but you do get the content and the content itself is well worth the price. It's far cheaper to just get it as an online course of course than to Come to the conference. But that'll be out next week, so watch the blog for that. Okay. We have a great episode today. We have someone who is absolutely killing it as an interview. So. So we're going to get him on in a minute, but stick around afterward. I want to talk to you for a few minutes about estate planning. So we're going to add that on afterward. Go over some of the basics of estate planning, maybe some of the more, you know, advanced material about estate planning. But let's start with our interview. So let's get Michael on the line. Our guest on the Milestones podcast today is Michael. Welcome to the podcast, Michael.

Hey, how are you? Thanks for having me.

You're very welcome. It's a pleasure to have you here. I understand you recently became a millionaire. Congratulations.

Thank you.

Let's talk a little bit about your journey because it's a pretty impressive journey. You are not very far out of residency. Just over two and a half years out, correct?

Yeah, about two and a half years.

Okay, so what do you do? What's your specialty?

So I'm internal medicine. I just do hospitalist work now and do other small things on the side. But primarily hospitalist work.

Okay, so full time hospitalist?

Yep.

And approximately what are you making doing that?

With all my side gigs involved, I'm making about a little over 600,000 a year.

Okay, that includes medicine related side gigs or other side gigs?

Medicine? Well, medicine related for my salary, but not necessarily my net worth. But yeah, from us salary, medicine related things on the side. Okay, very cool.

Okay, so let's get into your net worth. Cause I think that's what the interesting stuff is gonna be in this interview. Because despite being a full time hospitalist, you've done some pretty cool stuff on the side. Tell us about your net worth. Let's break it down. How much debt do you have? How much do you have in assets and what are those assets?

So I have. So for my debt, we can start with that. So I have $214,000 from medical school. I was fortunate enough that my parents paid for undergrad, but they didn't pay for my grad school. So I have that. I have about 500,000 in a home, my first home that I bought that actually I'm renting out now because I don't live in the same city anymore. I've got probably about $2 million of debt from real estate that I bought and as long term rentals. In terms of my assets, I probably have about 3 1/2 million in real Estate right now, give or take. I've got just other assets like a fun car and like art and stuff like that. And watches, probably about 100,000 or a little more. And then investments in terms of 401k, 403b Roth SEP IRA brokerage account. I've got at least half a million, if not a little bit more at this point. So that's kind of the breakdown right now.

So this is pretty incredible. There's a lot of internists out there listening to this podcast and you're like, I'm a millionaire. Two and a half years out of residency. I got half a million dollars just in non real estate assets and currently three and a half million bucks in real estate. I mean, this is no small feat for you to be building this sort of wealth. What was it about you that made you be able to do this?

I think the biggest thing's work ethic and then my upbringing. So, you know, I'll start the work ethic part. I work a ton. I have a permanent hospitalist job where it's one week on, one week off. And typically I do locums on the side of my weeks off. So I, you know, there was a point where I was working like 26 days a month just doing hospitalist works. I'd have like two weekends off a month roughly. So that helped a lot. And then my upbringing, like, you know, I didn't grow up with a bunch of money or anything like that. Like my parents struggled to send my sister and I to college and kind of had always struggled financially. So I think some of that plays into it as well where, you know, I don't want to end, I don't want, I don't necessarily say to end up like that, but I want to be financially comfortable so that I don't have to worry about finances. But it seems like a double edged sword because I have tons of financial anxiety. So I think all that kind of wrapped into one is how I've achieved, achieve that. And I've gotten lucky with real estate investments and things like that and some art investments, which has also helped just with the pandemic and everything.

What does your spending budget look like? How much do you actually live on?

So I don't really have a spending budget, to be honest with you. I mean, if I had to ballpark it, I guess when I had my home, it would probably be at least 6,000amonth, if not a little bit more. But now, like I said, I'm renting out my home and I'm renting an apartment so it's a little bit less. But like, as you know, the older you get, it's like every month there's something big that comes up that you have to pay for. So I feel like it's variable, but on average, like actual life expenses, probably about 6,000amonth or a little less.

You can build a lot of wealth when you're making $600,000 a year and you're spending under 100,000. There's no doubt about that. And you've been doing that and doing that very effectively. A little bit of help from leverage.

Oh yeah.

What are your goals with regards to your finances? What do you hope to accomplish?

So I'll kind of give the story. So initially, you know, coming out of residency I wanted to do GI and didn't match and I tried a couple times, so. And so every year it was a thought process of like, just save as much as I can. Just to like have, you know, an easier fellowship life. And paying off my student loans was also a big goal of mine as well. So that's kind of how it started. And I don't know that I have specific goals. I mean, I want to get a certain number of rental properties. Ideally, I invest where I'm from. So one goal for me is to buy rental properties to really help build the city up and invest in like B.C. class areas that are in the path of progress to kind of help that area with low income housing and stuff. So that's one goal of mine. I mean, obviously to reach financial freedom would be nice, but honestly I don't have a specific goal. And I think that's the hard thing too. It's like when you get in this mode to where you're work, work, work and you just keep investing, it's hard to break out of that. You know, it's kind of the opposite of spending everything you make. I just spend everything I make on assets instead of, you know, fun things all the time, you know.

Yeah, that's partly why I ask you. Because you're building wealth so rapidly that whatever your reasonable goal is, you're going to get there relatively quickly and then you're going to struggle with what many of us struggle with later in career. Typically for most of us is the concept of enough and what we want to do with our lives and that sort of thing. Because you've taken this live like a resident thing very literally. Not only are you keeping your spending way down, but. But you're working like you're in residency right now.

Yeah, I Think I work more so I can have a higher than resident life, but yeah, I know what you mean.

Yeah. Okay, so you're clearly a little bit more comfortable with debt than many white coat investors are. What's your attitude about debt, about your student loans, about, you know, mortgages and real estate loans.

So I have kind of a mixed thing. So I have, I didn't say this either, but I have the cash to pay off my student loans too. So I've got like 300,000 in cash right now as well. So things like student loans, like that was always my goal to pay that off. I bought a fun car, bought a 87 Land Cruiser not that long ago and paid cash for it. So for things like that I try to pay cash for it. But with the real estate debt it's different because I make, I'm not necessarily making a profit right now, but I'm making enough to cover mortgages and we're rehabbing a bunch of properties now. So over time, you know, I'm not going to have to worry about that. So I think my mindset with the debt is if it's something like real estate that's making money, I mean in the short term I may not be making that $100 a month cash flow per door or whatever your goal is. But you know, I'm looking long term. So that type of debt doesn't scare me as much as something like student loan debt because I mean for me, student loan debt, you know, since it's income based and all that stuff, like I just don't want to have essentially an extra mortgage payment coming out every month. It's not going into any type of like a specific asset that's going to make me money even though obviously my education makes me money. But I don't want to continue to pay more than I have to on that student loan debt.

Yeah, so I'm impressed with the passion you are demonstrating for providing housing. So many real estate investors I meet when I talk to them about their why it's all about the Benjamins, right? It's about the dollars, it's. I like the return. I like that it's going to make me financially free. And the first thing you talk about is providing workforce housing for a place that you care about very much. How did you become passionate about real estate investing? About landlording essentially?

It's something like people in my family have always done. So I been around it and it's just something that's always fascinated me. And we had a family friend that has a Property management company where I'm from. So he initially got me started, and he hooked me up with one of his friends because I was buying some property from him, and he just didn't want to be biased on what I. The stuff he was selling me. So introduced me to his friend Jerry. And, I mean, he's just been a godsend. Like, I don't know what I would have done without him. But he and his family have been investing in real estate his whole life, and they have property management company and construction company and all that stuff, and they do a lot of section 8, so that was one of the big drivers. And then I also have a college friend that still lives in that area, and he does the same thing. But I think it's just like, you know, I'm from the coast of Alabama originally, and, you know, there's just a lot of. Like, there's just not enough housing for these people. I mean, you can still make good returns helping out people that don't make that much money. I mean, honestly. And the thing is, it's like, these people need a place to live, too. And the other thing is, like, we really pride ourselves on, you know, the housing we provide, because we don't. We're not like slumlords, where we're giving people the bare minimum to live. Like, our houses, build up the neighborhood and make the neighborhood nicer and things like that. I just really pride myself on that. I mean, you know, going where I'm from, I went to college, so I'm from one area, and then across the bay is another area where the city is. And, you know, that cities had reputation for crime and poverty and stuff like that. But it's like, I mean, I just want to do something to help that area grow, you know?

Yeah.

So many people, especially older people in the real estate game have, you know, they may have let their houses deteriorate, and that just brings down the whole city, and it hurts kind of the reputation of the city as well, you know, So, I don't know. I mean, it's just something I've always been passionate about is helping other people. And I think this is a way. But, yeah, I mean, I can make money, but I can also, you know, bring pride to the city and help people that need it as well.

Okay, well, you've obviously done pretty awesome. You know, I think that's the understatement of the year. What advice do you have for somebody that's like, you were five years ago, they want to, you know, be rapidly building wealth as they come out of their training, what would you say to somebody that walked up to you and asked for your advice?

I mean, I think you have to just make the commitment to, like, building wealth. You know, no one's going to hand you this money. You're going to have to work for it. I think, you know, other places talk about building your connections and stuff like that. I mean, all that's important. But I think the biggest part is mindset and work ethic. I mean, if you don't want to worry about money, I mean, as a physician, as any healthcare provider, nurse, any, you know, physical therapist, I mean, you're going to make a good living. And, yeah, you're going to have to sacrifice some. But, you know, if you do it now, while you're young, then it just grows exponentially from there. So that's kind of the mindset I've always taken. It's work as hard as I can until I meet someone and I'm married or whatnot, and then I can start cutting back. But I'm saving for future kids, college funds, just little things like that. Doing it now so that in 10 years or 20 years, it's just I won't have to worry about any of that stuff. I think the biggest piece of advice is just make that commitment.

Good advice. Well, thank you, Michael. Congratulations on your success. You're doing very well, sounds like, in your career and certainly in your finances, and I congratulate you on that. And thank you for coming on the podcast. Inspire others to do the same.

Yeah, thank you so much for having me.

All right, I hope you enjoyed that interview. Every now and then, I meet someone that is just so far ahead of where I was at their stage in life that I'm in awe. I had a partner that joined the group a number of years ago and didn't even realize that he was working with the person whose blog you've been reading for a few years. But it was amazing to get that information right at the beginning of your career. How much further ahead of me he was, you know, despite coming out of residency, like, six years after me, he was about that far ahead of me in reaching, you know, the typical physician financial goals. So it's pretty awesome to see somebody putting all that stuff together. All right, let's talk about estate planning for a few minutes. This is something that I think gets short shrift out there in the financial blogosphere. Nobody likes talking about estate planning because kind of makes you confront your own mortality, but it's something that everybody's Got to do, you know, I guess you don't have to do it. You can just leave a mess for your heirs to clean up. But let's say something that everybody should do. All right? There's really three reasons to do estate plan. The first one is to simply make sure that your stuff and your money goes where you want it to go when you die. And if you have minor children, who takes care of them and who takes care of the money on their behalf should you die early. Those are really important things with estate planning and documents like wills, even a living will and health care, power of attorney and durable power of attorney. Those sorts of documents can help with that goal. The second benefit of estate planning is to avoid probate as much as possible with your assets. The way you do that is primarily by naming beneficiaries. Beneficiaries for insurance policies and other insurance products, beneficiaries for retirement accounts. All that passes outside the probate process. You can also use revocable or living trusts to keep assets from going through probate, because probate is not only public, so everybody gets to know what you owned, but it's a hassle. It takes time, might take a year, and can cost thousands or even tens of thousands of dollars to get through the probate process. So it's good to avoid that with most or even all of your assets as much as possible. And that's one of the purposes of estate planning. Finally, minimizing taxes, primarily estate taxes, but also inheritance taxes and income taxes, is an important aspect of estate planning. For many people, it's a little bit overblown given current estate tax exemption limits in most states. Right. Because this varies by state. Some states have state estate and inheritance taxes, but for most people, they're just dealing with the federal limits. Basically, you can have a lot of assets and not have to pay any estate taxes whatsoever. If you're single, it's 12 million something. If you're married, it's twice that. So most of us just don't accumulate that much wealth during our lifetimes. And so the estate tax is really not that big of a deal at all. If you're in one of the states with a lower estate tax exemption limit, in a few years, unless Congress does something, the estate tax limits are going to be halved. And so that'll affect a few more people. And then, of course, there's plenty of you out there that are wealthy enough that you do have an estate tax problem and need to do some planning about that. But those are the three purposes of estate Planning, right, Making sure your stuff and people get taken care of, avoiding probate and minimizing your tax bill. But everybody really needs to do this before they die. And you're going to need to meet with an estate planning attorney in your state. Okay, yes, you can do some of the basics by yourself online. You can get a basic I love you, will online for 100 bucks or whatever. That's fine if you want all your stuff to go to your spouse if you die, and your kids if your spouse dies. And, you know, you just need to name the person that's going to take care of your minor children. You can get by with pretty skimpy estate planning early on, but eventually, you know, you're going to be wanting to put in place some revocable trusts, and you're going to want to, you know, get some of the formal documentation in place and that sort of stuff. And you're going to want to review that as laws change over the years. So you're eventually going to want to spend a few thousand dollars and meet with an estate planning attorney in your state. What else can I tell you about estate planning? Here's the main thing. If you do have an estate tax problem, essentially the main strategy to minimize it is to give your stuff away. If you leave it to charity, you don't pay estate tax on it. So if you would rather your favorite charity got 100% of the money rather than your heirs got, you know, whatever it might be, 60% of the money, then you can always leave money to charity. But the key to passing as much as you can to your heirs or children, whoever they might be, is to give it away. Give it away before it appreciates. So if you've got a really valuable business, if you've got really valuable portfolio, you try to get that into an irrevocable trust of some type. And maybe it's what they call an intentionally deficient grantor trust. So you're still paying the taxes on it while you're alive, but then it's essentially an irrevocable trust that's outside your estate when you die. And so any appreciation between the time you put it in the trust and the time when you die is outside your estate. So that doesn't count toward the amount of your estate on which the estate will pay estate taxes. So you can give away $17,000 a year to anybody you like, and your spouse can give away $17,000 a year to anybody they like. So if you give 17 each to your kid and 17 each to your kid's spouse and 17 each to each of your kid's children. You know, you can get a lot of money out of your estate in a hurry, especially if you have multiple kids. And so that helps keep you under the estate tax limit as well. But those are the main strategies to minimize estate tax. So take advantage of those. There's a few other interesting things you can do with charitable trusts and that sort of thing if you want to split your inheritance between charity and your heirs. But all of that is going to require you to go talk to an estate planning attorney in your state. One of the things a lot of people don't realize, though, is that some of your accounts are better to leave to heirs, and some are better to either leave to charity or spend yourself. For instance, if you were an heir, Roth accounts are great to inherit, right? Not only can you stretch them out over 10 years, but they come to you tax free, right? Just like if you get a death benefit, right? Totally tax free. If you inherit a house or a bunch of mutual funds in a taxable account that's totally tax free, those are great assets to inherit. On the other hand, if you inherit a traditional ira, well, someone's still going to have to pay the taxes on that. So that's one of those assets. Maybe that's a little bit better to leave to charity, right? Because the charity gets the whole thing. They don't have to pay the taxes. Same thing with a health savings account. In fact, a health savings account's like the worst thing to inherit ever because it's fully taxable to the heir in the year that they receive it. And they may be paying taxes on that at a relatively high tax rate due to the way the tax brackets work. So your HSA is a great thing to leave behind to charity. If you're planning to leave anything to charity, leave that. I mean, better to spend it yourself on healthcare during your life. But, you know, the next best plan is probably to leave it behind to charity if you have any charitable desires whatsoever. So I hope that's helpful to you as you work on your estate plan. Know even if you don't have one yet, that this is something you need to do eventually. And, you know, don't. Don't be one of those people that puts it off and puts it off and puts it off until it's too late. Sometimes we get sick very quickly. Sometimes trauma happens. You know, I met with a very beloved neighbor I have that I've known for many years who's in the process of dying. This week. By the time you hear this podcast, he may be dead and got a chance to sit down and talk with him yesterday. And you know none of us are getting out off this planet alive. We will all face our own mortality eventually. You might as well do a little bit of planning about it. I estimate that 80% of doctors need, want and should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you're getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the White Coat Investor can help all right, that's enough of this episode. I don't know if you guys like these new Longer Milestones episodes with a little extra information in them beyond the interview. Let us know by email. You can always email editorwhitecodeinvestor.com we'll have a survey at the end of the year. Watch for that as well. But in the meantime, enjoy them. I hope they're helpful. Our goal here is always to help you to be successful in your career, with your finances and in your life. We care about you. We want to help you. That's the whole point of this. And we wish you the best. So keep your head up, shoulders back. You've got this. We're here to help. We'll see you next time on the Milestones to Millionaire podcast.

The hosts of the Y Code Investor Podcast are not licensed accountants, attorneys or financial advisors. This podcast is free 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.

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