MtoM #12 - Financially Independent by 31

This is the White Coat Investor Podcast. Milestones to celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali.

This is Milestones to Millionaire podcast number.

12, Financially Independent by 31. If you've been enjoying these podcasts and want to participate, we'd love to have you as a guest on the podcast. You can apply@whitecoatinvestor.com Milestones.

It doesn't matter what your milestone is.

I don't care if you just barely got back to broke. We'd love to celebrate with you whether you paid off student loans, paid off a mortgage, become financially independent, become a deca millionaire, whatever it is, we want to celebrate with you. So apply. We'll get you on the podcast, we'll have a great time, and we'll use your story to inspire other White Coat investors to do the same thing.

Love what you hear on the podcast. Looking for more great White Coat Investor content? Head over to our YouTube channel where you can watch video recordings of our podcast, short snippets of financial tips explained succinctly by me and others, and deep dives into topics for more in depth learning. You can even learn all about real estate with webinars from our real estate partners. Check out all this and more@YouTube.com thewhitecoatinvestor you can do this and the White.

Coat Investor can help.

All right, we got a great guest on today that I think is going to fit in well to our Fire week. It's Fire Week here at the White Coat Investor.

Now, I know that I'm celebrating by.

Being in the Grand Canyon. I actually am probably hiking today in the Grand Canyon. We just went through the Granite Gorge the last couple days. If we're on schedule. Obviously I'm recording this before I left, but we've got Lava Falls coming up and are looking forward to it, I'm sure.

And so since I'm not here, the.

White Coat Investor Podcast this week is going to be hosted by the Physician on Fire.

So be sure to tune in for.

That on Thursday and hear him host the White Coat Investor Podcast. He's gonna be our guest host on Thursday, so enjoy that as well.

Let's get our guest and we'll get him on the line now. All right, we have a special guest here on the Milestones to Millionaire podcast today. Our guest is Matt. Matt, welcome to the Milestones to Millionaire podcast.

Thank you. Thanks for having me.

So we're celebrating today that you became financially independent at 31. Now, that's not something that doctors really do. So tell me a little bit about you and it sounds like you have and what you actually do or did for a living.

Yeah, yeah. So I'm a wealth advisor. The dreaded wealth advisor. And my wife is a physician assistant in dermatology. She did a five year program where she graduated early and we just lived very, very frugally for a long period of time. For about the full 10 years, we lived off of roughly anywhere from $25,000 to $35,000. We live in a pretty low cost of living area. And I commuted about initially 30 minutes, and now about an hour, hour and 20 minutes. And now since the pandemic, it's so remote, which is actually really nice.

So you're a wealth Advisor, she's a PA. And what's your approximate net worth now?

It's $1,082,000,000.

$1,082,000. And how much money did you guys spend?

About anywhere from 25 to 35,000 a year. It's been a little bit more recently, about 50,000 a year because we moved into a new home and we went through in vitro fertilization and had a kid. So naturally there's that little bit of a bump, but generally about 25 to 35,000.

Yeah, you can spend about $50,000 a year just on in vitro, it turns out.

Yeah. Thankfully her insurance was really nice. That was. It only ended up costing us seven grand.

Okay. All right. And what's your net worth divided up into how much is home equity, how much is retirement accounts, et cetera?

Home equity is about 150,000. And then the rest is pretty equal. I have. And this was. So this is when I did it at the year end. So it increased fairly substantially since then. But taxable accounts, roughly 620. The Roth account's 550. Tax deferred accounts are about 500 and HSA is about 50. And then 170 and 529.

So I'll mix everything.

It sounds like then our cars are probably worth maybe like three grand.

Yeah, I get that impression.

2005 Corolla. I drive a 2011 Camry.

Okay.

And how far are you guys out of school?

We graduated from. So we're about nine years now out of school.

Nine years out of school and you became financially independent at age 31?

Yeah, yeah, 30, 31. I would say I'm pretty financial. We're both still working. She's going to probably lower her hours to 80%, which is great. I love how the healthcare field allows that. I Wish every field allowed us just to lower expenses, lower our pay, because I definitely would take that. But for my job, that's not really the case. I do pension funds and high net worth families. So it's a pretty demanding job. You can't really just say, hey, I'm just gonna, I'm gonna work 50% on your account. It doesn't work like that.

So over those nine years, what was your average household income?

Yeah, so starting off, I made roughly $45,000. Then she wasn't working for the year because she, you know, I graduated. Her program was five years, and then she had the rotations, and then she started off at 75,000, like two years later. And my income had increased from during that time from 50, roughly 50, 45,000 to 70,000. So I'd gotten a different job as. That's kind of when I started as the wealth advisor, like a junior, junior wealth advisor. And then since that time, we've got so roughly when she started working, we were at 145. And then since that time, we've gone from $145,000 up pretty steadily to now about $280,000.

Okay, so not that much income, but you're not spending very much, which explains how you built wealth so quickly. That's still very unusual among Americans and particularly among my audience. For somebody making $280,000 to be living on 25, 30, even $50,000, what were your secrets to success? How were you able to do that in order to build wealth so quickly and reach financial independence at such an early age?

Yeah, I'd say we just kind of really focused on cutting out the major expenses that a lot of Americans have. We lived in a townhouse that was 1100 square feet. When I took out a loan for that, the mortgage plus the insurance ended up being $400 a month. The townhouse was only $65,000. Relatively new build, but it's just a low cost of living area. And then, you know, we drove, you know, the same. She's been driving the same car since she started college. And I pretty much driven the same car. I bought it for like nine grand in cash. And, you know, we just. I fixed the brakes myself, changed struts myself, changed the oil myself. So, you know, there's not really any major car maintenance, home maintenance. You know, it's just a. It was a townhouse. So, you know, we didn't really have to fix the roof. There wasn't, you know, we weren't really renovating it, just kind of living in it. And then, you know, we didn't, we didn't eat out as much. We cooked a lot of. Go to the grocery store and just cook a lot of different foods together. That's how we had fun, was doing different meals. We're exploring different cuisines. Let me go through some of the other. I mean, we didn't have kids until recently. So that's another, you know, big expense that hits. People were relatively healthy, had a high deductible healthcare plan. You know, just really didn't have any healthcare expenses, which was nice.

Health insurance paid by an employer or.

Employer helped out with it. I mean we had the, there's still. That includes roughly about like $3,000 a year in healthcare premiums that we paid. The other thing that I would say is for our vacations, which we did vacation a lot every year in Europe, you know, a lot of people pay that out of pocket. We use credit card signup bonuses and trade lines.

Lots of travel hack in there.

Yeah, our vacations were, were essentially free with the trade line income. We use that for like all of our restaurants and then the points we paid for all the hotels and the flights. So that was, you know, vacations were pretty much free.

I think a lot of listeners might not know what tradeline income is. Can you explain that?

Yeah. So basically I, you know, every credit card has an authorized user you can put on. And a lot of times people will put on their kids to help them get better credit scores. I have a broker who will go find Americans that have very poor credit scores who are trying to apply for a loan. And as you know, if you have a higher credit score, you have a lower interest rate on your loan. And that interest expense adds up to thousands and thousands of dollars over American's lifetime. So the broker will, I will add them to as an authorized user for my card. I will get the card, their card in the mail, I'll chop it up and throw it in the garbage. They give me their information, their social, all that kind of stuff. I enter them in as the authorized user and then my broker is the middleman. He collects the payment, takes a cut and then pays me like anywhere from $60 to $200 for the line and then they're on for a month as they get approved for the mortgage. Then they get taken off for the month and we repeat. And there's, you know, I have about 11 credit cards. So it adds up to roughly $12,000 a year in additional income. I just treat it like a deduction to offset my Vacation stuff. So technically, you could probably add $12,000 more of income. Add, subtract 12,000 of expenses, essentially.

Any sense of how the insurance or not the insurance companies, the mortgage companies, and the credit card companies feel about that? It feels a little bit like some may feel that it's a little dishonest or unethical to give somebody a better credit score than they otherwise deserve.

The way I look at it is I help people that are down on their luck, you know, maybe having difficulty with their financial situation. And who I'm helping is the people who's probably disadvantaged by that situation or the corporations. But the corporations are free to remove that feature anytime from their credit cards. They're the ones that offer it. So the fact that they're relying on a very poorly constructed credit system, that's their issue, not mine. And it's certainly not. I don't see why I shouldn't help out other people and get paid to do it.

All right, so let's go back to the beginning. And you came out of school. What was your net worth back then? Did you guys have a bunch of student loans? Did you get help from your parents paying for school?

How'd that happen?

It was kind of a mix of both. So our net worth starting off year one was roughly negative. 23,000. Roughly. That includes like $10,000 worth of cars. She got a, you know, her car was gifted to her because she had a bunch of scholarships, a full academic scholarship. And then mine, I was just given a car. So I estimate that was. They were both used and old, so I guess they were about 10,000. And then I had money in a Roth, about $22,000 that I had from a computer business that I started when I was in high school and then a book used book business while in college. So I had. And then I had a taxable account of about $15,000. So I had roughly $36,000. And then she had $70,000 worth of student loan debt. So that's kind of how we tie that negative number.

Okay, and how about this wealth you built? Any of that come from parents or as an inheritance or anything like that?

We had a small inheritance last year of about $50,000, but that's the only money we've ever received.

The rest you earned and saved yourselves?

Yep.

And what role has debt played in this?

How much debt do you have currently?

Currently we don't have any debt. I'm not a debt averse person. We took out debt originally for our townhouse. When it came to our Ranch home that we bought now for like 100 and I think it was 150,000. We bought that in cash mainly just because it was a really hot market and being a cash buyer helped us out. I plan on eventually stripping out the equity with a home equity line and investing that, but just kind of waiting until there's a significant pullback or a major correction in the markets to do something like that.

All right, so let's go back eight or nine years. Let's say there's somebody that is where you were at a decade ago.

What advice do you have for them?

I would say the biggest advice is to work during college. If you can use that income to fund your Roths, if you're able to realize that debt is a tool. And if you have subsidized, especially if you have subsidized student loans and they're relatively low interest rate or you can refinance them later when you have a better income to consider, really taking advantage of those tax advantaged accounts. I mean, the Roth contribution limits are one time, you can't go back and contribute for when you were in college. So that's the quicker you can start contributing to those tax advantaged vehicles. And then the other thing I would just say is a lot of Americans really spend a lot of money on a lot of superfluous things. They try to get the biggest house they can afford, try to get the smallest house you need. It's a lot easier to clean, it's a lot less maintenance, makes your life simpler. I have never had a problem inviting friends over. Just having a small family room. It's just even now the townhouse we are in, it's 1200 square feet. It's not something that people don't need a lot of space. The more space you have, the more just crap you accumulate to fill up the space. I'd say the same thing with cars I get. Some people are into cars, some people like the flash. But I mean, you know, everyone has their thing, I guess. But to me, I just didn't understand why people need to spend that much money on cars. You know, you can get a perfectly fine, you know, Toyota that will last you a long time. You just regularly change the oil, change the brakes and learn how to do some stuff yourself. And it makes you, I would say, learn to do things that are out of your wheelhouse. A lot of people get in this niche where they're, hi, I'm, you know, in medical, I'm in finance. That's all I can do. I can't fix cars, I can't do plumbing, I can't do electric. I mean, I do all my electric plumbing, all of that. I learned it myself, read code books. It's something that makes you a more interesting person. If not to anyone else, it makes you a more interesting person to yourself. When you can do things that previously you told yourself, no, that's not me. So I would just encourage people to try to become a jack of all trades in a lot of different areas because those expenses are. And that's a great. If you're considering going to college, I would say if college doesn't seem to be your thing, really think about whether that's the right way to go. I mean, it was the right thing for me. But man, a lot of people in the trades make a lot of good money, especially now when they're in really short demand. If you're an honest, upright person, you show up on time, you're punctual, you're really going to out compete a lot of the trades people that are out there right now and they make a lot of money. So if it's something you enjoy, you know, don't discount it. I would say because college can be a really big expense and really at its face, I mean, yeah, you mature while you're in college, you learn things while you're in college. And especially for medical professionals, a bit different. Obviously you're using that every day. But in the business world is what I'm talking about, which is, you know, the classes, yeah, they're relative, they make sense. There's a lot of academic backing to what you're doing and there's a foundation that you build off of. But I mean, you look at two years of gen ed credits, I mean, you know, do you really, really getting anything out of that? I mean, I don't remember half of the things from those gen Ed classes. I mean they were interesting, I enjoyed them, they made me a slightly more interesting person. But with YouTube and everything nowadays, I mean if I really wanted to learn that, I could learn it anytime. It's just, you know, the amount of money that people we spend on college is just incredible. So, you know, I, even though I went to college for four years, I would just encourage people to really make sure that that's what they want to do. Be efficient while you're in college. I would say a lot of people will go in college and just screw around while you're in college. Buckle down. If there's any time to really, really buckle down and get serious, it's in college is to try to knock out get 4.0s every semester. I tried to get as high a GPA as possible because it really sets you up with job offers later.

Yeah, I think you're preaching to the choir with our crowd here. Certainly a lot of people have put a lot of time and effort into college, but I appreciate your advice. It's very inspiring what you're able to accomplish. I think a lot of people are convinced they have to spend more to be happy, but your example shows that you really can spend very little money. So congratulations on that.

I would say I found stoicism to be a very interesting philosophy to look into because it really is kind of something that's really helped me in my life deal with different problems and realize that it's more about your desire than it is so much about needing things to fill up your happiness. There's really, really. If you think about just the history of humanity and the third rule today, are those people unhappy? For sure. If they're hungry or don't have shelter or good medical care, absolutely. They're probably unhappy. But people don't. Humans don't need a lot to be happy is what I'm trying to say. You can live off of very, very, very little and be extraordinarily happy. And a lot of it has to do with your attitude, your desire to be happy. So I would encourage people take time and look into things that make other people happy, like meditation, spending time with family, spending time with friends, because that's really where I think you get a lot of value.

All right, well, thank you so much for your time. Thank you for coming on the Milestones to Millionaire podcast. And I'm sure others will find your story very insp. And be able to apply at least parts of it in their own lives. So thank you very much.

Yep. Thank you.

Okay, that's a little bit more of our classic fire person, right? Retiring in the early 30s. Some of us weren't even out of.

Training by our early 30s.

Very, very low level of spending, very frugal approach, low cost of living area. But it does demonstrate what's possible, right? Even if you doubled all those figures, that still you could retire very quickly as a physician. And so a lot of lessons there to be learned. Apply what you and leave the rest like anything else in the personal finance space.

Love what you hear on the podcast. Looking for more great white coat investor content? Head over to our YouTube channel where you can watch video recordings of our podcast. Short snippets of financial tips explained succinctly by me and others and deep dives into topics for more in depth learning. You can even learn all about real estate with webinars from our real estate partners. Check out all this and more@YouTube.com TheWhiteCoatinVestor.

You can do this and the White Coat Investor can help. Keep your head up, shoulders back. You've got this and we can help. We'll see you next time on the Milestones to Millionaire podcast.

My dad your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.

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