MtoM #124 - Two Doc Couple Splits Their Student Loan Plan and Finance 101: The 5 Money Activities

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 124Two. Couple splits their student loan plan still not sure what to do with your student loans? Overwhelmed with how to tackle that giant debt in an ever changing political climate, the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt. The average studentloanadvice.com client has saved over $190,000. You'll receive a customized student loan plan using the principles of the White Coat Investors. Get answers to all of your student loan questions, gain clarity about your financial future, and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this and the White Coat Investor can help. Good ad to run today, as you will hear in the podcast. Our podcast guest actually is a client of studentloanadvice.com as you'll hear. All right, if you want to be on this podcast, this is the Milestones to Millionaire podcast. These drop every Monday. The regular White Coat Investor podcast, also on this same feed, drops on Thursdays. It's driven by what you want to hear. Guests you requested, questions you call in about, but this podcast is designed to inspire you. We bring you on. We want to celebrate your financial successes, whatever milestone you've reached, and use them to inspire other people to do the same. If you'd like to come on and share your milestone, you can do that@whitecoatinvestor.com milestone and we'll bring you onto the podcast and use your story to inspire others. So thanks for the 123 others who have come on in the past, and I'm sure there's 123 more people out there with great financial successes that we can celebrate. Okay, so let's get the interview and then stay tuned. Afterward, we're going to talk a little bit about what I call the five money activities of your life. Our guest today on the Milestones Millionaire podcast is Caleb. Caleb, welcome to the podcast.

Hey, Jeb, thanks for having me on.

You have accomplished actually a couple of milestones. Let's talk about the debt one first. What have you done?

So we just paid off my wife's loans. She had about $130,000 of student loan debt and we paid that off just a couple of months ago.

Awesome. Congratulations on that. That's awesome. Okay, we need some background information. What do you do for a living? How far are you out of training? What does she do for a living? How far is she out of training?

Sure. Yeah. So I am a pediatric hospitalist. I'm about two and a half years out of training at this point. And then she is an OB gyn. She's about a year and a half. So about a year more of training for her. And we're up in, like, northeast Ohio area. So Midwest.

Okay. And we're talking about her loans today. Why don't you clue us into what's going on with your loans too?

So I have about 255,000 or so I'm working on PSLF. So. Okay. So, you know, paying minimum. Paying nothing right now during the deferment period, but planning on playing minute. Paying minimum until I can get that paid off. Got another about 4 1/2 years until PSLF will hopefully take effect.

Yeah. It wouldn't surprise me if your payments as they start up here in September are still what they were in training.

Yeah. Hopefully.

Because you haven't recertified in a while.

Right, Right. Yeah. I made sure that we were on the right payment plan just since we're doing married filing separately to make sure that her income doesn't affect that for me.

So you're playing all the games. Married filing separately. Are you enrolled in pay?

Yes. Yep. The pay one. Yeah. So Andrew actually helped us out with that to make sure that we were on the right plan for that.

Hey, that's a beautiful advertisement. He's talking about andrew@studentloanadvice.com if you need help, if you have a complicated situation like this, one of you is going for pslf, one of you is and trying to figure out how to file your taxes and which retirement accounts to do and, you know, which plan to be in is a great reason to spend an hour with andrew@studentloanadvice.com it's flat fee. And just make sure you're doing it all right. Because it's worth a lot of money. How much do you expect to have forgiven?

I can't remember. I believe It'll be about 200,000. It'll be a little tricky depending on when the payments actually start up again and where my payments are to begin with, but I believe It'll be about 200,000. We'll be forgiven.

Yeah. 200k plus in after tax money.

Yes.

Even to a 2 doc household, that's a significant amount of money.

It's Huge. It's huge.

How many more years you got?

I believe about four and a half at this point. Yeah.

Okay, so making progress. Well, maybe we'll have you back on the podcast in four and a half more years. But for today, let's talk about wiping out her loans. Why is she paying off her loans where you didn't? Her job's not at the same place as yours or something. What's going on?

Yeah, it was more the financial. So her income was higher. So she makes about 300,000 compared to her student loans were only about 130,000. So because of that, if she would have tried to go for pslf, she would have ended up paying it off through the idr, so it wouldn't have worked out. So we just decided we were going to refinance. Hers got a low student or a lower got a low rate on that and we just kicked it in the butt and did everything we could to.

Get rid of it. What rate did you get?

About 3%.

3%. And that was how long ago?

So that would have been about a year and a half ago.

Year and a half ago. Wow.

Yeah.

Nobody's getting 3% today, unfortunately.

Yeah, we initially got a variable rate and that started to climb up. So we actually refinanced again and got a 3%. So it all worked out really well.

It's interesting because the people that got a variable rate a year or two before that, it went down, not up. It was actually a great, great move for them. Funny how interest rates changing change that. But, you know, a lot of people are going to be looking at this in August and September. You know, I'm coming out of the 0% period. Do I refinance? Let's check rates. And what they're going to find is they're going to be able to go from their five and a half, six, 6.578% loans to five and a half, six. You know, maybe you can get 5% now, but that's even. That's going to be tough. So interest rates are higher. You know, those who waited to get maximum time in the 0% plan aren't going to get as good a rates as those who pulled the trigger earlier. Which one works out better? I guess just depends on how long you take to pay them off.

Right. I'm glad we had our plan early and we went for it and it really worked out well for us.

Okay, so how'd you guys do this? I mean, I know it's two docs, it's a hospitalist and it's an OB GYN, but still $130,000 in a year and nine months. You wrote big checks each month. How'd you do that?

Yeah, we. Sure. We sure did. We. I figured out it was over 7,000 every month on average that we paid off. So there was a couple different pieces. I mean, the biggest thing was that right as soon as she got out of training, we really sat down and we wrote down what our financial goals were going to be. And of course, the big one was going to be trying to get rid of her debt as soon as possible. We would budget pretty much every month. And, you know, it wasn't so much, oh, we got to cut back here. But it was just making sure what money is going. Where is this following our goals is everything. Doing what we. Is our money doing what we want it to do. And, you know, like I said, we refinanced. That made a big difference. And just having. Having that plan and sticking to it.

How'd you. How'd you balance investing versus paying debt?

Well, for us, initially, it. It wasn't too tricky of a situation. We just. We wanted that debt gone, and so we certainly maxed out our 403s, did our backdoor Roth, did all of those retirement accounts that were beneficial to us, but pretty much everything else, we just put it towards all those student loans.

Yeah. So when people asked you student loans or invest, you said yes.

Yeah. Right.

Okay. Which explains this other milestone you hit. Tell us what other milestone you hit recently.

Yeah, so we were also back to broke back in October of 2022. So that also felt really good to see.

Yeah. Just two or three years out, depending on which one of you we're talking about. Right. Back to broke, which, you know, this might sound dumb to those of you who aren't doctors listening to this podcast. This is a big deal for a doctor to get back to broke. We started our professional lives. You know, in this case, you guys, it sounds like you started almost $400,000 in the hole. So just getting that net worth up $400,000 even though you still have debt, you know, is pretty significant milestone, and maybe the first one most people hit. So congratulations on that as well.

Thank you.

All right, so paying off this debt easier or harder than you thought it was going to be at the beginning?

I would say it was easier. Once we had that plan in place, it really just kind of took care of itself. And, you know, we. We did our best not to let our lifestyle creep up. You know, I wouldn't Say that we were quite living like a resident for these past couple of years, but we did our best. You know, we went on vacations, but they weren't anything lavish. You know, we did what we needed to do in order to, to get that student loan taken care of. So it ended up being easier for us than I thought.

Okay. There's a lot of, you know, pre med early medical students that are, that are worried about the debt. They're like, I don't know if I want to go to medical school because it's really expensive and I'm going to have to borrow it all. Yet here you are, two to three years out of residency. Hers are gone. You've got a solid plan in place for yours, which sounds like it's going to work out great. What do you say to that person that's like, I don't know if I can be a doctor. You know, there's no family help coming for me. I'm going to an expensive school, I'm going to have to borrow it all. Maybe I'm going to owe $400,000. What do you say to that person?

It certainly seems daunting. And when I was applying for med school, I don't think it was anything I really considered that strongly. But once you're in it and it starts to pile up, it does seem quite daunting. But I think that pretty much every doc is going to be making more than enough to take care of that. All you have to do is just like I said, having that plan in place for us was definitely the biggest thing, and we had it all ready. And as long as you stick to it and make sure you're living within your means, it really ended up being pretty easy to take care of.

Still think it's a good financial investment to go to medical school then?

Absolutely.

All right. Both of you enjoying your practices?

Oh, man, we sure are. We have a couple of really nice jobs. We feel like very stereotypical millennials. As a hospitalist, I work 24, so I only work about six shifts a month, which is full time. And then she has an OB gyn. She is on call about every other day, but it's home call. And her service isn't that busy right now, hasn't been since she started. So it's working out really well and hopefully it'll keep working well now that we have a baby. Just had one couple weeks ago now, so hoping that schedule works out well for us. For the him too.

Yeah, yeah. Certainly, certainly that's going to cause some complications. In a two dock couple. And sometimes, you know, the, you know, the lesson I think two dock couples have to take there is that that's a cost of doing business. You know, whether it's a housekeeper or someone doing the lawn or a nanny or somebody coming in and preparing some meals during the week or whatever is just a cost of being a two dock couple. What advice do you have for two doc couples out there with complicated student loan situation like yours?

Well, like I said, talking to Andrew, talking to him. And I actually, before we met with him, I had sat down and tried to go through every situation to figure out what was best. And then the couple hundred dollars we spent talking to him was more than worth it for him to confirm that the plan that I had in place was the right one. It felt very good to have that knowledge that what we were doing was the right thing. So that was definitely a huge help.

Cool. Well, other than you getting PSLF in four and a half more years, what other financial goals are you working toward now?

Well, now that we're not focusing too much on that debt, I've been able to automate some more investing, so putting more into a brokerage. We increased our payments on our house, so planning to pay that off in at least 15 years at most. And now that we have our kiddo putting some money into a 529 and I actually ran into a small business opportunity as well, so I actually might be considering going back to school to get a dietitian license as well.

So that's interesting.

Yeah, yeah, it could have a huge benefit. We're working on the details to see how that might work out, but could be really interesting.

So no Tesla or European vacation coming up soon?

Not right now, no. Yeah, especially not with the baby, but, you know, we'll see. You know, now that we had that deck gone, feeling that relief on our shoulders, maybe we'll, you know, have a little bit nicer something every once in a while.

Awesome. Well, congratulations to you. You've done fantastic. I hope your story inspires somebody else to do the same. And I wish you all the success in your career and your finances that you can have.

Thank you. And thanks again for having me on.

Okay. Hope you enjoyed that interview. What I loved about that is it demonstrates the complexity of our financial lives as doctors. We're going to be talking in a few weeks. I just recorded a podcast that runs in about a month about the Dave Ramsey baby steps and how they work. But maybe they're not ideal for the very complex financial lives that we have as doctors, and particularly as two doctor couples, but in this situation, we got docs that are doing, you know, they're each doing a different thing with their student loans, and meanwhile, they're trying to balance all these retirement accounts and they're trying to get started in their life. They're having babies and all this stuff. Right. It's just complex. There's a lot of moving parts. Sometimes you need advice, sometimes you become a hobbyist and you become your own financial planner and investment manager. Either approach is fine, but you got to pay attention to this stuff. Your life is just too complex, and there's no guarantee. You are not guaranteed to become wealthy, to be financially successful just because of your high income. Yes, you've done 90% of the work, but without that other 10%, you can have surprisingly poor financial outcomes. When they survey doctors in their 60s and ask them, what's your net worth? 11 to 12% will tell you that their net worth, everything they own minus everything they owe, is less than half a million dollars. This is doctors who have been making 150, 200, 250, 300, $400,000 a year for the last 25 or 30 years, and they're worth less than half a million dollars. That's everything. That's their house, their cars, their retirement accounts, their investments, everything. And that's a real tragedy. I hate to see that happen. But that's what can happen if you just let what happens automatically happen. So don't do what's automatic. Get out there, live your life deliberately, take care of your financial business, and don't end up like some of those docs do. It's interesting because there's another 11 or 12 or 13%, a total of 25% of doctors don't even become millionaires by the time they're in their 60s. So it's a good segment of docs, if you look around your med school class, of 125of those doctors are going to get into their 60s with a net worth less than a million dollars. And that puts some financial pressure on the last 20, 30, 40 years of your life that you don't really need to have. And there's really very few reasons that somebody ought to be in that situation. Most of the time it's just because they didn't pay attention to their finances. Okay, let's talk about the five money activities. And what are these? Well, earning, saving, investing, spending and giving. These are the five big things we do in our life. And if you're like most People, you're naturally good at one or two of these and you're okay at one or two more. And you're really not that good at one or two more. And so what I want to encourage you to do is to look at your weaknesses and maybe work on those. Some people have an earnings problem. Frankly, most Americans have an earning problem. They don't earn as much money as they would like to be earning as they would, you know, as the lifestyle they would like to be living. And a lot of people too, just overestimate the difficulty of doubling their income. It is not as hard as you might think it is to increase your income. Now are there sacrifices involved? Yes, there are sacrifices involved. Look what you did to get a physician income to start with. Four years of undergrad, four years of med school, three to six years of residency or fellowship. It's not easy, but it's doable. And even once you're done with your training, there are things you can do that increase your income. Other doctors have done it before you. You know, I'm always more impressed with the intra specialty pay variation than I am the inter specialty pay variation that you see on salary surveys. I've met pediatricians making $80,000 a year. I've met pediatricians making seven figures. You know, I have met plastic surgeons that are struggling to just live to make the payments on their, on their rental apartment, you know, making less than $100,000 a year. And I've met plastic surgeons that are making two and a half million dollars. So it's not all about specialty, it's not all about where you live. There are variations. There are doctors out there making more money than you. You ought to at least know what they're doing. To do that. You may choose not to do that, you may choose not to practice that way, and that's perfectly fine. But at least know what the options are and be aware and choose where you want to set that ability to earn at. And it's something that's always worth looking at from time to time, seeing how you can optimize your earning. Of course, once you earn the money, you've got to save some of it. My recommendation is 20% for retirement. If you want to save for other stuff, you want to save for a Tesla or a European vacation or your kids college or whatever else that's above and beyond the 20%. 20% is for retirement. And this is where a lot of doctors struggle. They don't struggle to earn, they struggle to save. And they get so many payments that all Their money's going toward interest and it's going toward their mortgage and the mortgage on their second home and two or three car payments and maybe some credit cards. And they've still got student loans. 15 years out of training and they're just struggling to save money. They're spending it all whether it's going toward payments or going toward their current lifestyle. So you've got to get good at saving. It's impossible to be a good investor if you don't have anything saved. You just need something to invest and where that comes from, for most of us, that comes from our earnings and carving it out of our earnings. So work on becoming a better saver. Now, some of you are awesome savers, right? And you're at risk of becoming Scrooge McDuck. You're at risk of becoming the original Scrooge from Charles Dickens. And maybe you need to loosen the purse strings and spend a little bit more money. And you're already good at saving. But the truth is most doctors aren't that good at saving. So get that retirement up to at least 20%. If you want to retire early, it's probably got to be higher than that. But 20% will get you where you need to go. If you start early in your career and you don't invest like a crazy fool, you know, 20% is enough. It's going to get you there. Okay, the next activity, investing. Okay. And frankly, investing, once you kind of figure it out, it's the easiest of these five money activities. Now, we wrote up an investment plan in 2004, 2005, we're still following it. It's not that complicated, right? Especially when you're using a handful of broadly diversified low cost index funds. What do I invest my money in this month? Well, what does my plan say I'm going to invest in? And I go back and I can look at the plan. The plan's memorized at this point, obviously, but I can go back and look at the plan and that's what I invest in. I don't have to think every month. Is this money going to go into Tesla st? Is it going to go into Bitcoin? Should I be shorting the market? Should I pull all my money out? No, I just follow the plan. And a lot of people struggle with investing. It's hard to not try to time the market or pick stocks or you get into these short term mentalities when you realize that investing over the long run is surprisingly simple. It's just not that complicated. Stop performance chasing. Stop panic Selling and just put in a little bit of time. Get a plan in place. If you don't have a plan, get one. If you don't feel qualified to write it yourself, consider taking our fire your financial advisor online course. Consider hiring a financial planner to help you draw it up. We've got a list of recommended people on the main website, but get a plan in place and become a good investor. Not that hard. Surprisingly simple. Okay, the fourth money activity is spending. Now, those of you who are good savers often struggle with spending. And there are things that you can spend money on that will make you and your family, your friends happier. So see if you can figure out what those are. Go buy some of those things. Those of you who are spendthrifts, maybe what you ought to do when you're working on this category, maybe you ought to think, am I really getting the most bang for my buck out of this? Am I spending my money on the things that actually make me happier? It may be that you're just doing retail therapy, that it feels good to buy some. Well, you need to find a therapist instead of a retail therapist if that's the case. And maybe you're spending all your money on cars when what you really would be happier doing is traveling, or you're spending on traveling when what you'd be happier with is a renovated home. Just make sure you're spending your money on what actually brings you happiness and joy. Okay? The fifth money activity, assuming you've become successful at the other four, is giving. And most white coat investors that find this website, this philosophy in the first half of their career are going to have this problem at some point. Giving refers not only to leaving money behind when you die, but to giving money to your heirs, children, nieces, nephews, friends, et cetera, while you're alive, as well as supporting charities while you're alive. And you'd think giving money away would be super easy. It's not. It takes work. You want to make sure your money's going as far as it can. You want to make sure you're not ruining anybody's life by giving your money. And so that takes some effort as well. And it's worth spending some time making sure you're good at giving. All right, those are the five money activities. Earning, saving, investing, spending, and giving. Figure out which one of those you're good at. Figure which one you need maybe a little bit of work on, and commit to work on that a little bit harder this week and this month. All right, we talked at the beginning about studentloanadvice.com if you're not sure what to do with your student loans, this is well worth a few hundred dollars. To get some advice@studentloanadvice.com they'll help guide you through the best options to manage your loans. They've consulted on over a quarter million dollars, not a quarter million dollars, sorry, $250 million quarter of $1 billion in student loan debt and the average client has saved over $190,000. Obviously, a lot of that's optimizing public service loan forgiveness. But you'll receive no matter what your plan ends up being. You'll receive a customized student loan plan using the principles we teach here at the White Coat Investor. You'll get all your student loan questions answered. You'll get clarity about your financial future. You'll start down the right path toward financial freedom so you can book a consult there. Student loan Advice all right. It's been another great episode. Hope you enjoyed it. Enjoyed making it for you. I'm thankful for what you're doing out there. I know your job's not easy. I know your family life's not easy. It's stressful and life's hard these days. Life's complicated. Let's get the financial part of it out of the way and then you can concentrate on the other challenges and struggles that are in life. You can do this. White Code Investor can help. We'll be here with whatever you need, financial wise, whenever you're ready for it. So whether that's education, whether that's referrals to trusted resources, whether that's just a little bit of inspiration like maybe you got today from today's podcast, we're going to be here. We're here to help. Thank you so much for your time. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.