MtoM #117 - Sleep Doc Pays Off a Mortgage in Two Years

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 117. Sleep Doctor pays off a mortgage in two years. If you're like most doctors, nobody taught you anything about personal finance or investing during your undergrad, professional school, or residency. Even though your family and perhaps even your business rely on you to be the chief financial officer, you have never been given the tools to succeed. Enroll in WCI Financial Bootcamp, a free educational email series, and learn to convert your high income to wealth. You will learn the basics of investing, saving, insurance, and more. Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com financialbootcamp to sign up today. You can do this, and the White Coat Investor can help. All right, we got a great guest today who's reached not one, but two milestones. And stick around afterward. I want to teach you a little bit about 529s and how to use them and what they're good for and when. Maybe you shouldn't bother, but we'll get to that after the interview. First, let's get Chris on the line. Our guest on the Milestones to Millionaire podcast today is Chris. Chris, welcome to the podcast.

Thank you very much for having me, Jim.

All right, well, we're going to celebrate a couple of milestones that you have accomplished today. You want to tell us what those are?

Yes. So I have one, paid off my mortgage, and two, I'm right at the borderline of crossing into being a millionaire.

Awesome. That's pretty awesome. Congratulations to you on that. Those are both of those are impressive feats, and to do them both at once is pretty awesome, too. So tell us a little bit about you. What do you do for a living, how far are you out of training, etc. Sure.

So I now practice just 100% sleep medicine. I originally trained as a psychiatrist and about three and a half years ago just transitioned to just doing sleep. And I've been out of fellowship for around seven years now.

I'm going to reveal my ignorance here. I didn't know that was a career pathway. I thought sleep docs were like pulmonologists or something. What are all the pathways into sleep medicine? Can I do this as an emergency document?

You could not. There's actually seven main specialties that could do it. Psychiatry, neurology, general medicine, family medicine, pediatrics, ent, and anesthesiology are all the ones.

That Pulmonology isn't even one of them. Huh. I didn't even understand an entire subspecialty here.

Well, you used to be able to have to do pulmonology, but then they just made it so that as long as you were general internal medicine, you didn't have to. A lot of pulmonologists still go on and do that, but they just don't have to per se.

Fair enough. So what's your day to day practice like?

So my practice is pretty, pretty nice. I actually work clinic three half days a week and two full days a week for right now. And then the other time is pretty flexible. Just reading sleep studies kind of joke that it's the best part time job I've ever had that doesn't pay like a part time job.

Pretty awesome. How far are you out again?

Seven years.

Seven years. And you've been doing sleep since when.

I've been doing sleep? Actually I started as a sleep technologist before I even decided I wanted to go to medical school. But I've been doing. I'd been doing a mix of psychiatry and sleep when I graduated. And then this job said, hey, would you like to do just sleep? And I'm like, that sounds great. Never taking call again. I'm all for that.

And approximately what have you been making the last few years? Doing sleep medicine while you've accomplished these two goals?

Yeah. Despite Covid, I actually ended up running my hospital's Covid Response ambulatory testing center for the first year of the pandemic. But I've been making around like 380 to 400 pretty consistently with no call.

Sounds pretty nice.

Oh, it's amazing.

Okay, so let's start with the first year goals. Paying off a mortgage. Tell us about your, tell us about your house. Tell us about your mortgage. Tell us about the process of doing this.

Yeah, yeah. So I guess maybe even going back a little further. You know, I graduated with med student debt. By the time I started paying it back after a fellowship, I think I had about 280,000 and you know, started paying that back. I was just kind of like just upset with it. It was like, oh, I'm going to be paying like 2000 bucks a month forever, it feels like. And then something just switched for me and I was like, you know what, I'm just going to get rid of this thing. I'm not going to wait for public service loan forgiveness or any of that. I'm just going to get rid of it. And so I just started putting all my Extra money. First I'd get paid and be like, okay, I'm just really going to like, how much can I put at it? And so at times I was putting like 10 grand a month toward my student loans. So I paid the initial 280,000 off in two, two and a half years. A little less than two and a half years. And then I was like, wow, that feels amazing. You know, I don't have that, you know, weight on my back anymore. What if I just kept going with that? So I did that, saved up a 40% down payment on my house, bought that, and I was like, well, what if I keep going? And so I bought my house for 530 with the 20% or 40% down payment, and then I paid that off in like less than two years.

Wow. I thought we paid our mortgage off fast. We paid ours off in about seven years. Two years is lightning.

Yeah. Yep.

Why? Why did you want to pay it off? I mean, a lot of people feel like mortgage debt, relatively low interest, I'm going to be here for a long time. Deductible debt. Why were you so anxious, fixated, etcetera, on wiping this thing out?

For me, it was just like, you know, if that was gone, you know, and getting into that habit of really kind of like focusing on a goal, like if I just got rid of that, then that would free me to just continue doing that to whatever the next goal was. And it just feels really almost weird. I didn't have a mortgage payment for the last two months now. And it's just like, wow, like I literally have no expenses anymore.

Yeah, it's a pretty good feeling. Don't get me wrong, I love being mortgage free. I just don't know how I could have possibly done it in two years. So tell us what I mean, what the month budget look like you're making $30,000 a month, seven or eight thousand presumably is going to taxes. How'd the rest of it get divided up?

Yeah, so the way I get paid is I actually get, let's say I'd probably make about 12 or 13 depending on when in the year it was take home per month. And then I get a quarterly bonus based on our views. So I'd basically set aside, okay, I'm going to put X amount on the mortgage, still have enough to pay my bills and have some fun, but really do that first. And then when I got my quarterly bonus, I would just like, X percent's going towards extra bonus mortgage payment. X is for having fun and X is for you. Know, fixing up something around the house and things like that. And it just, just kept snowballing and, and as you see, like, the accrued interest amount going down and down, I don't know, it just kind of got me, my inner nerd, jazzed up of like, man, this is just going away. It's going away.

Well, you could see yourself making progress so quickly when you're making those kinds of payments. Oh, yeah, Very motivational. Okay. Okay. So where do you sit now? You mentioned you're about a millionaire now. Tell us about. And I assume you don't have any other debt. You paid off loans, you paid off a mortgage.

Yep.

What are your assets look like?

Sure, I got house.

It's now worth what, you know, who.

Knows what real estate is actually worth nowadays? But I'm estimating that it's probably worth about 620 if I were to sell it. You know, we, we haven't had this much market drop here compared to a lot of other places, but we'll see. But I would say probably my equity in the house is probably about 6, 620, 630 or so. I've got about 40,000 liquid. I've got 225,000 in tax advantage retirement and another 80,000 in a brokerage account and additional 25,000 in ambulatory surgery center shares that our hospital group let us buy into.

So nothing particularly crazy there. Just kind of a standard set of assets that people own.

Yep.

All right, so now what? Now that you don't have. I mean, shoot, doing the math in my head, you might have been putting $150,000 a year or something toward this mortgage. What now with that $150,000, what are you gonna do with that now?

Yeah, so we have a relatively young residency program for internal medicine residents in our, in our hospital. And I'm really looking into buying real estate specifically for, you know, renting to them. You know, I know that they're going to be here for three years. They're pretty reliable. I see them around, and I would love to secretly kind of mentor them in, you know, just going through residency the right way. You know, I have residents and med students that come and do rotations with me, and they always say you're the first, like, preceptor we've had that's actually talked about money and how, how this works. And so really, you know, I think if we can have, you know, more debt free, more financially knowledgeable physicians in our community, the community and the physicians both benefit. So I want to give Back.

So when you buy those, how those houses, apartments, whatever they're going to be, you're going to pay. You pay cash for them, you think, or you think, oh, yeah, mortgage and wipe it out fast. Or what do you think you'll do with them?

No, especially with, with the way interest rates right now, just save up, buy cash when, when there's a good deal and then just snowball it.

Well, let's say there's somebody out there that wants to do what you're doing. They're sitting on a mortgage and they thinking, wow, mortgage free. That'd be awesome. What advice do you have for them?

Well, I think, I think the biggest thing is just, you know, like I said, you know, set aside what your goal is first. I mean, you spend based on your priorities. And if that's really going to be a priority for you, go ahead and set aside that money first. And then, you know, and just honestly, having a budget, you know, I'm not like totally fixated on the budget to where it's like, oh, no, I've absolutely met this cap. I can't go above that. But it's really helpful just to know where your money's going and what you're spending stuff on. There's a lot of stuff where it's like, man, I'm not really using that that much. How much is that really helping me achieve my goals? Yeah, let's turn it off for a couple months and turn down that budget item and just concentrate on whatever your goal is and really working for me.

And what about somebody that's interested in, you know, maybe teaching the residents, being an example for the residents or students? What advice do you have for them that you found seems to be helpful, that works. And what have you learned? Maybe doesn't work so well.

Yeah, I think it's a very weird conversation to have because you think about the curriculum, and I'm a big fan of thinking about the hidden curriculum that really, I think residents and med students need to get exposed to, which is like, yeah, you gotta know medicine, you gotta know how to do your job. But what is that for really, you know, and, and making sure that you're. While you're going through this training thing, you're not, you know, putting yourself into a position that when you do graduate, you're going to be miserable because you're just stuck under like this mountain of debt or, you know, you spent in really disadvantaged ways. So I think just talking with them and saying like, hey, you know, do you want to have a conversation about Money. I'm very open with it. I'm happy to pull up some things and say, hey, this is what I've done well. These are things that I didn't do well. Like, I bought a house during medical school, and that was a bad idea. I mean, the private lending guys get it, get a hold of you pretty easy when you don't know what the heck's going on. So I've made mistakes, and I'm just like, hey, do you want to learn from my mistakes? Because I'm happy to talk about everything I've done wrong and the things that at least I think I've done right. And I found that. That both students and residents are really, really hungry for it. You just gotta, you know, pierce through that. That weirdness of, hey, we're supposed to be talking about healing people and being good doctors, but you've really got to talk about this other stuff, too.

Well, you've done an awful lot right. You've paid off your student loans, you've paid off your mortgage. You've become a millionaire. You're still an early career. You're only seven years out. Yeah, you've done incredible. So congratulations to you on your success, and thanks so much for coming on the podcast and inspiring others to do the same.

My pleasure, Jim. Thanks for having me.

All right. Another great episode. Paid off a mortgage in two years. I don't think we've had that one on the podcast before. It's pretty impressive, but it's true. You know, the training wheels for your financial life are paying off those student loans. You come out of med school, you start dedicating a whole bunch of money to wiping out the student loans quickly. 5, 8, 10, 12, $15,000 a month that are going towards student loans, and then they disappear very quickly. When you do that, they're gone in a year, year and a half, two years, two and a half years, something like that. Then what? Then you've got these $10,000 a month with no name on them, and you can take some of those and spend them and have a fun time. You can take some of it and redirect it toward investments. That's probably what a lot of people do. Or you can do what Chris did. You can just say, you know, I. I really don't like being in debt. I'd like to be able to have the ability to go work at Walmart and support my family if I wanted to by getting rid of all these fixed expenses I have and just take that 5 or 10 or $15,000 a month and put it toward the mortgage. And guess what, the mortgage goes away very quickly too. And a couple of years later you're mortgage free. And lots of options in your life that happen when you don't have any payments at all. Something to think about. All right. I promised you I was going to tell you a little bit about 529s and the truth about 529s is 529s are a tax break for the rich. Poor people don't get a lot of benefit from 529s for a few reasons. One, some states give you a tax deduction and that's helpful. It's true, it is helpful for, you know, even low income people. But it's not worth as much if you're in the 10 or 12 or 22% bracket. That deduction isn't worth as much as it is to me at 37%. But you know, some states give you a credit, so it's fine. That's what happens in our state. It's about the same. And that's helpful. But there's no federal tax deduction on this, right? It's a relatively small deduction. I can put lots and lots of money in there and I get my tax form at the end of the year and it's a few hundred bucks off my state taxes. It's not a huge tax break. The money grows tax protected, right? Just like a 401, just like a Roth IRA. And when it comes out, as long as it's spent, spent on education, it comes out tax free. And that's a benefit. But it's not so much of a benefit compared to a taxable account for a low earner. A low earner is in the 0% long term capital gains bracket. A low earner is in the 0% qualified dividend bracket. Right. So they're not getting a lot of benefit out of this $529,000. But for those of us who are in the higher brackets, this can be very helpful. You're able to save essentially with tax free money. Your money grows a little bit faster, it comes out tax free and helps you pay for college for the kids. The other problem is if you're a low earner, you don't have the money to put into a 529. Usually you're barely saving enough for retirement for yourself. And you do need to prioritize your retirement over paying for your kids college. Worst case scenario, they can choose a cheaper college, they can even borrow something for college. You're not going to be able to borrow for your retirement very effectively. And, and choosing a cheaper retirement has much more drastic consequences than choosing a cheaper college. So keep that in mind. Who these things are for, they really are a tax break for the rich. And I love the model. I'd like to see it more often in other things. But one of the great things about the United States of America is that we have 50 states, 50 states and a few territories. But with 529s those states are competing with each other for dollars. And so over the years that has driven states to provide better and better and better 529s. Lower costs, lower fees, lower expense ratios on the funds, better funds, more index funds. Now there are five or 10 or 15 of these that are spectacular investment accounts. And even the bad ones are, you know, they're much more average than they used to be. So there's lots of great 529s out there. Obviously you want to use the one in your state if you're getting a tax break for it. If you're not, choose, choose one of the really good ones. The really good ones tend to be Utah, Nevada, Ohio, New York. Those tend to show up on the top five list for 529. So you can just use your state one. You can use your state one for the amount equal to your tax break and then put the rest into Utah or Nevada or whatever. Some states even give you the same break whether you use an out of state one or use your own. But you just have to figure that out on a state by state basis. You can do 529 rollovers from one 529 to another. Some states recapture any benefit you got by using their state plan, but many of them don't. A lot of people worry about 529s and well, what if my kid doesn't go to college? What if my kid gets a scholarship? What if it doesn't cost as much as I think? What if I've now saved gazillions in my 529 and they're not going to need that much for college. I thought they were going to go to medical school, but now they're not, et cetera, et cetera. Well, there's lots of options. One of the best ones is to just change the beneficiary to your grandkid. Right now all of a sudden you've got an extra 20 or 30 years of compounding in that tax free account. And now the money that would have paid for one college education is paying for three. And so that's a cool thing to do with it. Another option is to spend it on yourself, right? You're the owner of a 529. The kid is not the owner. And so you can go take a cooking class or you can go get a JD after you retire or whatever. You can spend it on your own stuff. Another option that came about as a result of The Secure Act 2.0 is this 529 to Roth IRA rollover. So your kid saves money, doesn't spend as much in college, and you tell them, well, great, you can have that as $529,000 to Roth IRA rollover money after you leave. And that's going to be a total of $35,000. We're not entirely sure how that's going to work, but the details will be coming out over the next year or so. But basically, instead of them putting 6,500 of their money in, they can put $6,500 from the 529 in as their contribution. I think they still have to have earnings equal to that. But that's another exit plan for a 529 if you happen to get a little bit too much money in there. But these are a great way to save for college for high earners. It essentially allows you to have some tax free earnings in there. And the more aggressively you invest it, the more tax free earnings you get out of it. And so I've taken the perspective with my 529 to invest them very aggressively because I figure what's the downside? So terrible bear market hits when they're 18. You know, like has happened. My oldest, right, she's 18 now and she turned 18 and started college in the middle of the 2022 bear market. And so values were down somewhat. No big deal. Number one, she's ahead of where she would have been had we invested it very conservatively because those great returns in 2020 and 2021. But two, the consequences are not that bad. First of all, she's only taken out a fraction of the money in that $529,000 this year. Right? Most of it's not going to come out until later years. And second, worst case scenario, I could cash flow the expenses she has and save those $529 for a sibling or something like that. And so you have lots of options there. And I think it's a good idea to invest your 529s pretty aggressively. This idea that it's all got to be in cash by the time they're a freshman or sophomore and in high school I think is bunk. I think you can continue to invest the majority of it into long term assets into their college years because some of that money is not even going to be spent until they're a senior or a medical or dental student. That might be five or six years after they start college. So invest it aggressively. Do use it. You do get some asset protection in some states that varies by state. Check out the White Coat Investors Guide to Asset Protection for details on which states protect them, which states don't, but it's worth learning about, worth using if you're like most doctors, nobody taught you anything about personal finance or investing during your undergrad, professional school or residency. Even though your family and perhaps even your business rely on you to be the Chief Financial officer, you have never been given the tools to succeed. Enroll in WCI Financial Bootcamp, a free educational email series, and learn to convert your high income to wealth. You will learn the basics of investing, saving, insurance and more. Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com financialbootcamp to sign up today. You can do this and the White Coat Investor can help. We'd love to have you on the podcast. You can sign up whitecoatinvestor.com Milestones until next time though. Keep your head up, your shoulders back. You've got this and we can help the hosts of the White 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.