MtoM #114 - Pathologist and Anesthesiologist Get Back to Broke

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 114. Pathologists and anesthesiologists get back to broke. Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state, or health status. And one in seven doctors get disabled at some point during their career. Because these policies can only be purchased through brokers, we've put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. If you have questions about insurance and what kind of policies would be the best fit for you, check out our insurance recommended list@whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. You can do this, and the White Coat Investor can help. That's whitecoatinvestor.com insurance. All right, we're going to do a couple of things today. First, we're going to bring on a two doc couple and talk with them about their recent milestone that they achieved. I'm very proud of them. They've done a great job. But stay tuned after the interview, we're going to talk for a minute about the most recent SPIVA report. And if you don't know what that is, you should. It is one of the best evidences out there of why you should be investing in the stock market using index funds. Let's get our folks on the line. Our guests on the Milestones to Millionaire podcast today are Sunny and Cindy. Welcome to the podcast.

Thank you for having us. Yeah, thanks.

We're really excited.

Yeah, he's really excited.

Well, I'm excited to have both of you here. It's always great to talk to docs for the listener's benefit. Cindy is a pathologist. Sunny is an anesthesiologist. They both came out of training last summer and they have accomplished a pretty significant milestone, one that I think is one of the hardest ones to reach, even if it's one of the first ones that most people reach. Cindy, what milestone have you guys accomplished?

We're back to broke.

Yes.

That's pretty awesome.

Yeah.

Yeah. Only eight months ish or so out of training. Yeah. So that's pretty cool. So let's talk about where you started. Sunny, how much did you owe when you came out of medical school?

Yeah, so I came out with about 280,000 in student loans. At the time, I was about 15 or so of undergrad, and the rest of it was all medical school. And then I came out a year before you.

Yeah.

And so you came out with about.

I came out about 160 or 65 or something like that.

Yeah.

Any other debt besides the student loans?

No, that was pretty much it at the time.

Not until our car loan.

Yeah, that came later, but.

But if I'm adding correctly, that's about 420,000 in student loans.

Yeah, it was. Yeah. And then with, like, interest and stuff over the years, by the time we actually got married and started our training, our net worth at the time was negative 380. That was like the lowest that we had hit.

Yeah.

That's when you started training?

Yeah. Yeah.

How about when you came out last summer? Where were you at when you came out?

Yeah, it was actually. So when we came out, I was pretty happy we came out. When we came out of the summer, it was negative 200.

So you did something during residency?

I was. Yeah, we.

We. We.

I tried to really make sure we were, like, from day one, we're trying to make all the right moves.

Well, how long have you guys been together? When. When did you get together here?

We started dating, but, like, long time ago.

We got married 2017, and that was right before I started residency. He just finish junior? Yeah.

Okay. You got married right toward the beginning of residency, started working together. You owed three or you were 380 in the hole then. And somehow during those 3ish years during training, you knocked off $180,000 or you gained $180,000 in net worth. How. How did you do that during residency?

We were in training for a lot longer than that.

Yeah, he's.

He did five years worth of six years, six years ago training, four years residency, and then two years fellowship. I did four year residency plus one year fellowship. So we both finished training at the same time.

Yeah, so it was.

But even so, you were still in training. Yes. So you're building wealth pretty well. Yeah. For training. What'd you do? How'd you do that?

Your buck?

Yeah, he found.

He found her book near the end of med school, and that's how he started.

And I think one of our best strategies was, you know, when we were both in training, we both had, you know, resident salaries at the time, but we still managed to kind of just live off of one of our salaries and use the other one to kind of save, invest, you know, put towards loans that we were paying at the time before the payment pause and stuff happened. But I think having that mentality while we were residents really kind of helped start the growth even before we finished training.

Any kids or other family that you had to support during that time?

No kids.

No, just two of us.

Yeah, just our dog. I think that's enough for us right now.

Okay. But even so, I mean, everyone kind of knows about what you were making in training. Was there a lot of moonlighting or anything like that? You guys did a little bit.

I didn't go too crazy with the moonlighting. Just added a little extra each month.

You know, I did, like, a little bit, but this was all, like, towards the end of the training, I made probably, like, you know, a couple thousand. He made maybe what, 10,000, something like that.

Icing on the cake.

Yeah.

So then you come out of training, and clearly you guys have been talking about this. You'd been budgeting. I assume you had a pretty good plan when you came out of training last summer.

Yeah, he. He budgets to, like, the detail. It's like he came out training, he started making the spreadsheet, and he'll keep track of all of our spending on Mint. So every now and then he'd be like, spend blah amount of money. What was this for? And he'll subcategorize it so he keeps a big account. And then he also does all the estimates and be like, we should not spend more than this amount of money in a month, so on and so forth.

Yeah, yeah, yeah. I definitely have been very judicious on that part. I definitely picked that up from my dad. But I think we had a little bit of a plan when we came out of training, which was nice. And at some point, I think we actually did your course and kind of formalized the plan. I think that actually, like, helped us kind of put it in perspective.

This is the fire your financial advisor course. Very cool. And I think it's interesting you mentioned before we started recording, that one of you took a couple months off after training, and the other one went to work right away to get the health insurance in place. Tell us about that conversation, Sonny. You decided you wanted to take time off.

Yeah, so I took some time off after training, and I think that might have been because I kind of had the plan in place. So I knew, like, financially we'd be okay for. Actually, the plan was initially we'd both take time off. I was like, we have enough money. We can both take time off. We'd still be okay, because I kind of had it all in My mind. And she's like, no. Like, some of us, we need to have some sort of income. We can't just not do anything. And then it was also like, we need health insurance.

Yeah. I mean, he's more about the nitty gritty. I'm kind of about the big picture. I'm a big picture worrier. So we were originally, yeah, let's do this. And then as we got to the point, I got nervous because I was like, oh, if we have one bad medical whatever, we'll be, like, tanked. So I was like, no, we need health insurance and COBRA is not going to work out for us because it's going to be too crazy. So I was like, you know what? I'm just going to start early and I'm going to beg my employer to let me have, like a month off in the beginning so I could still kind of have that vacation.

It was nice to negotiate that we got some time off together.

So tell us about your cool trip that you took.

Oh, yeah. You want to tell?

Yeah, it was really great. I've always wanted to go to Europe. I've never been. So we were like, okay, let's go to Europe. And my favorite place I wanted to go was Paris because I'm a huge baker and I love patisserie and all of that. So I was like, I can't wait to go to the place and try all the real things. And it was amazing. Like, we went to Barcelona for a few days and we went to Paris. And I love Paris. I can't wait to go back.

Yeah, there's nothing quite like sitting on a sidewalk in Paris eating French food.

Yeah. Eating 50 cent croissant.

Yeah, Just delicious. All right, so you guys took a little bit of time off. You're 200,000 in the hole, and eight months later you're back to broke. So obviously you both are working now. Approximately what's your combined income?

Yeah. So together it's about 680.

Okay.

It's about 400, 430 from me and about 250 from her.

Okay. And so how did you decide? I mean, you guys are looking at a pretty good income, but you're in the hole. Right. How did you decide how much of your income to put toward debt, how much toward investments? How did you make that decision?

Yeah, I think, you know, our kind of like using the ladder system where you kind of like filled the buckets as we went along or first priority was like in filling up all our retirement accounts and any sort of match and Stuff we get with that and just kind of going down the line from that. And I think the other big thing was we tried to, you know, we. We inflated our lifestyle a little bit this last couple months, but we tried to maintain that same amount that we had been spending as trainees. You know, the, the live like a resident kind of model.

Well, live like a fellow kind of model.

Yeah, that's how I live like a fellow. Give ourselves a little raise.

I can't live like a fellow.

A little better as a fellow. Right. Apparently you can go to Paris as a fel. So it's not too bad.

Yeah. And then we pretty much just shoveled all of it towards, like savings and towards our loans and towards our investments.

Yeah. So are you paying on your loans even though they're 0% right now?

So actually, no, not yet. So Cindy's at an academic place, so her plan will be to go for pslf. And then my plan initially, I'm not at an academic place. I was originally going to refund finance when the posit ended, but we're in California and there was some buzz about changes to the PSLF rules and how that may affect my situation. So I may become PSLF eligible. So I've been kind of holding out on that.

Yeah.

So it's almost all going in investments then.

Yeah. So we're not directly making any payments. We've started kind of a PSLF side fund for her that's kind of on the side. And then for mine, what I was doing was what I would have been paying towards it had I refinanced right away. I'm just putting that into a high yield savings account right now, seeing how the next couple months play out. Come July, if those changes don't happen or whatever, then I'll probably just refinance and then aggressively pay it down with the money I'd saved.

Cool. So what do you guys owe right now? What's your student loan total?

Yeah.

Close to half a million.

Yeah. So I think our total loans is it's 460, but 15,000 of that is the car loans, about 445 of student loans.

So you've got about that much in assets already saved up, which is pretty incredible. You know, coming out of training less than a year and you've got almost half a million dollars.

Yeah.

That's pretty awesome.

It's kind of crazy when you think about it.

It's shocking. He was like, it's going to take us like a year and a half, two years to be back to broke after training. And then it was earlier this month, he showed me this number on his phone. It was $58. And I was like, okay, what's the big deal? And he was like, this is our net worth.

I was like, oh, wow, this is a big deal. It was. Yeah.

That's awesome. It's fun. So close. Of course, then you had to go out to eat. And it cost more than 58 bucks, right?

Yeah, yeah. And we got paid just like this past Monday. So we're now, like, a little higher.

Awesome. Well, at the rate you're going, I mean, you're going to be millionaires in the next couple of years.

Yeah, that's the next goal. Like five years from now, hoping. Or I guess four and a half from now. We're hoping to be a millionaire.

Yeah. That's pretty awesome. Well, cool. Well, it's awesome. You guys have a plan. You know, everybody's plan's a little bit different.

Yeah.

You know, so it's interesting talking to people. You know, some people are just dumping everything on their student loans. They take them in the corner and drop an anvil on them, you know, and. And you're kind of the opposite end, where almost everything's going toward investments and obviously have some other plans for the student loans. You have a plan, which is what I love seeing, and you're being super successful. So this is really awesome. You're living the dream, man. It's awesome.

It's a crazy feeling.

Yeah, it is a crazy feeling, though. I guess if we were in the Bay Area, we probably would have done better.

That's one of those.

Yeah. Yeah. It's a little more expensive out there, for sure. Okay, so what advice do you have for somebody that's like, you were even a year ago, you know, somebody in residency that's like, ah, I just want to get, you know, start getting started and build some wealth and get back to broke. What advice do you have for those folks?

It definitely would be to make up a plan, no matter, like, how crude it is. Be like, I want to at least save this amount of money a month or to be like my husband and detail every. Every, you know, possible thing. We could spend and put a money amount to the limit. But it's also, it's definitely have a plan. And I think the other thing is holding back your attending wish purchases a little later, because for us, we were like, okay, we're going to spend. We're going to get our one. Each person gets one attending wish thing. But we try to limit to no more than like $1,000 kind of thing. Yeah, just a little splurge. And then after that, we kind of just did the same spending pattern that we did as fellows.

Yeah.

I think my two pieces of advice would be to get financially literate as early as possible. I think it's easy when you're a resident to, you know, you're obviously very busy, but your financial education, I think, is just as important as your medical education to set you up for success. So definitely getting financial literature as early as possible. I was really glad I did that. And then the second thing is, you know, if you have another partner in your life, just being on the same page as them for your financial goals and what your priorities are and what money means to you and what value it brings to your life, I think being aligned on those goals also really, really helped us.

Awesome. Well, Cindy and Sunny, congratulations on your success, not only in your career, but with your finances. And thank you so much for coming on the White Coat or not the White Coat Investor podcast. I guess this is the milestones to Millionaire podcast and sharing your story with others to inspire them to do the same. Great.

Thank you so much for having us. Yeah. He's so happy that we're doing this.

I've been really big fan, so I'm really grateful for all you've done and all you've offered.

It's our pleasure.

All right.

I hope you enjoyed that interview. Lots of lessons learned there. Most important one, I think is the one they pointed out that you need to have a financial plan. Having a plan, a written plan for those first 12 paychecks when you walk out of training is super powerful. Now these guys are doing great things with their financial life despite living in a high cost of living area. Yes, they're a two dock couple and they're making good money. But you know what? They also had a pretty big sum of loans, and so they've got a lot of things working against them too. And all of us are like that in our lives. We have some things that are in our favor, some things that aren't in our favor, and we just do the best we can in our individual situation. Financial planning is a single player game. It's you against your goals. You don't have to beat anybody else. It's not about having better investment returns than your neighbor or about being richer than your brother in law. It's about what are your goals and what direction are you moving? Are you moving toward them? Are you moving away from them? And if you don't have goals, you need to get some goals, you need a financial plan. If you feel qualified, you can write it yourself. If you need a little bit of help, consider taking our fire your financial advisor class. If you need a lot of help, you might want to hire a professional to help you draft up your financial plan. We can help with that, too. We've got a recommended tab for financial advisors. Whatever's right for you, we want to help and help you be successful. But there's a few other things there. For example, their student loan plan. You know, there's a lot of variability there. Some people decide they're going to wipe them out in eight months. Other people decide, you know what? I'm going to go for public service loan forgiveness. And that's what she's doing. Sounds like he's probably going to end up refinancing and starting to pay on those here in the next few months once the 0% student loan holiday goes away. And I think that's probably going to be the case for lots of you guys. By the way, we can help with that too. The best deals on student loan refinancing, you can get under that recommended tab as well. I think a lot of you are sitting on 0% student loans waiting a few more months before you'll refinance your loans. Don't forget that you get cash back when you go through the WCI links. If you go directly to the companies, you do not get cash back. All right, I promised you at the beginning we were going to talk about the SPIVA report. Spiva, S P I V A. This is basically the S and P and Dow Jones index people. And they do a report each year, actually they do it twice a year that talks about how mutual funds have done against their respective index. Okay, so an index like the s and P500 index is the returns of the. Essentially, it's not exactly this, but essentially the 500 biggest companies in the United States. So it's a large cap stock index. Large cap means the big companies, the ones you've heard of, the apples and the Exxons and those sorts of companies. So that's the s and P500 index. And if you take a mutual fund that invests in large cap stocks, it would be appropriate to compare it to the s and P500 index. And so that's an index. Right? And you know, the surprising thing to a lot of people if they've never looked at this sort of data before, is that the professionals, the people who do this all day long, who are Experts who have degrees in finance and have an army of analysts that go out and analyze companies that the professionals on average do not beat the indices. The return lags the index on average by about the amount of their expenses. Multiple studies, you know, the one I'm most familiar with was over 32 years, found that the average mutual fund trailed its index by 1.8% per year. And so it's a little bit depressing that way to realize you can't beat the market, especially when it's so easy to get the market return just by buying a low cost, broadly diversified index fund. But anyway, the most recent data is out and when you look at all US Funds, you will see that last year only about half of them beat the index. Well, that's pretty good. Half of them beat the index. That's great. 50, 50 proposition last year if you look at all US funds. However, as time goes on, it turns out there's very little persistence in which actively managed funds beat the index. So after three years, 79%, not 50%, 79% of the actively managed funds underperformed the index. After five years it's 88%. After 10 years it's 93%. After 15 years it's 94%. And at 20 years it's 92%. So you can take a chance over your investment horizon that you're going to be able to pick that 8 out of 100 mutual funds, that 1 out of 10 essentially that's going to beat the index. Or you can take the sure thing and just buy the index fund that essentially guarantees you the market return. I mean, that's not a bet. I'm willing to take, you know, a 10% chance of beating the index. And this is all before tax. If you're investing in a taxable account, it's even worse once you apply taxes because index funds are so tax efficient. And it's not really a different story for any of the other asset classes. If you go down their 20 year column, you'll see for large cap funds, 95% underperform the index. For mid caps, it's 94 small caps. 94 large cap growth 98 large cap value 87 mid cap growth 92 mid cap value 92% small cap growth funds, 97% underperformed an index fund. Small cap value 92%. Right. Real estate funds, it's 87%. It just goes on and on and on and on and on. It's really depressing to see how, what a poor job these mutual fund managers are doing. And you know, when you look on the bond side as well, it's not as impressive of data. But the story's the same, you know, as the time period goes out longer and longer, the index funds outperform. So the message you should take from that is that. Not that stocks are bad investments, stocks are a great investment. These are the world's most profitable companies. In the history of the world, no companies have made profits like the companies in the publicly traded stock market are making today. It's like Elon Musk likes to say. You know, people accuse him of not paying taxes and he points out, I paid more taxes than anybody else ever has in the history of the world. And it's true, because these companies are the most profitable things there have ever been. So investing in them is a good thing. However, how you invest matters. Going out and just buying a few individual stocks is a mistake. You're taking on uncompensated risk. If a risk can be diversified away, you should not expect to be compensated for taking it. And when it comes to individual stock risk, that risk is easily diversified away by using mutual funds. Another risk people run is manager risk. And that's the risk that your manager underperforms the index. And as the SPIVA report demonstrates quite well, that risk is very high. You've got a 90% chance over a 20 year time period that your selected mutual fund is going to underperform an index fund. And so you don't have to do that. You can just invest in index funds. It's beautiful. No manager risk, no uncompensated stock risk. You can just disappear for a couple of years and not even look at your returns and know that you're still going to be getting the market return. Now, the market return might be negative one year. It's negative on average about one out of three years. So it's not unusual to lose money in index funds. But in comparison to picking your own stocks, in comparison to picking your own mutual fund managers, you're generally going to do better with index funds. And over the long term, the market is going to provide not only positive but solid returns that are going to help your money to grow, to help your money do some of the heavy lifting of reaching your goals. So invest in stocks, use index funds to do it. That's the bottom line. All right. Don't forget I've been harping on disability insurance a lot this spring. But that's because I keep running to docs that don't have it. Getting quality disability and life insurance should be the first financial chore for a doctor to complete. That's why it's Chapter one in my Financial Boot Camp book. Most docs don't have the ideal policy for their gender, specialty, state or health status, and one in seven doctors get disabled at some point during their career. Because these policies can only be purchased through brokers, we put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. If you have questions about insurance and what kind of policies would be the best fit for you, check out our insurance recommended list@whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. If you need a policy, go there and buy it. If you're just not sure you have the right policy and you need a review, they do that too. No problem. You can do this. The White Coat Investor can help. Go to whitecoatinvestor.com insurance to see that list of agents. Keep your head up, shoulders back. You've got this and we can help. We'll see you next week on the Milestones to Millionaire podcast.

The hosts of the White Coat 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.