MtoM #129:Family Physician Lives Like a Resident and Finance 101: Inflation

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. Family physician lives like a resident. Did you know that the White Coat Investor not only has a podcast and a blog, but several books that will help you on your way to financial independence. These books cover topics such as asset protection and minimizing your taxes to keep more of your hard earned money. They discuss plans for insurance, housing spending, student loan elimination, investing, and estate planning. You can learn how to become a millionaire within five to 10 years of leaving residency and how to invest in a sensible, low cost and effective manner with or without the assistance of a financial advisor. There's even a book geared directly toward medical and dental students so you can start optimizing your finances or early in your professional journey. Find the book that is right for you at the WCI store, at shop.whitecoatinvestor.com or on Amazon. You can do this and the White Coat Investor can help. All right, we've got a family doc on here with a number of milestones that she has accomplished. But stay tuned. After the interview, we're going to talk a little bit about inflation. Our guest today on the Milestones to Millionaire podcast is Cassie. Welcome to the podcast.

Thanks for having me.

Tell us what you do for a living and how far you are out of training and what part of the country you live in.

I'm a family medicine physician. I am nearly four years outside of training and we live in the Midwest.

Okay. And tell us what milestone we're celebrating today.

I have a plethora of milestones.

I've got this image now of the three amigos. Right. Would you say I have a plethora of tinyakis?

Lots of people have paid off loans, so that happened in 22 for us. And then in 2021, we put down cash for part of our mortgage. So that felt good. Then something I was really thrilled about was this past year we maxed out every single tax advantaged account that we could.

That is exciting. Okay, you're talking in the plural. There's a we here. Tell us who else is in the family.

We have me and my partner, so Dan and two children, toddlers, a 4 year old and a 1 year old and then one on the way.

Okay, so between you and Dan, what's, what's your household income been the last few years since you got out of training?

So during training it was about 150 combined and then recently about 350,000 last year.

Okay, so good Income. Certainly not what we hear occasionally on this podcast of people that are just killing it. But this is pretty classic physician household income. All right, well, you've done all kinds of things. What things should we talk about first? Why don't we start with the loans you came out of school with. How much?

$220,000 in debt. And that was my net worth when.

We came up, minus $220,000. When did you get married?

2016.

Okay, so you owed some of this when you got married. What did Dan think about that?

My husband is very debt averse. Cut himself through school, a tiny bit of help. And so when he heard that we had that much money in debt, wanted to pay it off in the 10 year time. So as soon as we got married, we were putting like $3,000 of our income a month.

Wow.

And just made a commitment, you know, when we first got married.

So how many months after you got out of training did you pay off those student loans?

How can we get that? 31 months.

Yeah, 31 months. So about two and a half years or so. And how'd you do that? I mean you weren't making that. You weren't making that much money. This is a big chunk of your income that was going toward these.

Yep. Large commitment to be free of any debt and also free of debt to PSLF time frame. That motivated us to put everything towards the loans during training. And then after training we rented apartment and didn't buy anything big and so had a lot of money to go, just slam it towards loans.

So, you know, a lot of people always say, oh, you should carry your loans and use the money to invest. You know, you're borrowing at whatever rate and hopefully earning at a higher rate. You guys decided what not to do that. Why was that?

Ignorance is bliss. So our financial awakening occurred 2021.

Okay.

And we were very financial. Peace, debt, snowball, kill the debt. Part of our financial advice was coming from my parents financial advisor who was a whole life insurance salesman masquerading as a financial advisor. So those part all of that together.

So did you manage to avoid buying a whole life policy or did you end up with one?

Avoided, we were too poor. He had given us some great advice when we first got married and we kept coming back to him still in debt.

You know, that didn't stop my good friend that sold me one during medical school. The fact that I had no money didn't bother him at all when he sold me a whole life policy.

Yeah, we kept coming, hitting the next step and he'd say, well, no, not yet. Or wait, once you have $25,000, talk to me. And then we just. Something didn't feel right.

Yeah, exactly. All right, so how did it feel when you paid off that last loan payment?

Relieving and daunting because the retirement piece had been there, but not as full, certainly freeing. My husband, he cut back from full time FDA to 0.9 as a pharmacist, which doesn't sound like a lot, but between their night shifts and day shifts, it bought us a couple extra days at home together.

Wow. So, you know, that's a good demonstration that it doesn't take complete financial independence before, you know, getting your financial ducks in a row starts making significant improvements in your life. And that's a good example of how it can happen relatively early. All right, well, how about this down payment? When did you save that up? While you were paying off the loans or after you finished off the loans? When did you save up the down payment?

Down payment was saved during loans and bought a house that was well within our means. It's about 1,400 square foot in the Midwest and it does the job. It's not a Dr. House or what one would consider a Dr. House, but it's a lovely house.

And is your plan to stay there? Is your plan that this is kind of a starter house and maybe you swap into the doctor house at some point or what's your plan as far as housing going forward?

We're open. We live close to family that have nice big homes that cost less than our current home. So we just visit family account.

You know, you've obviously, you know, at least the last couple of years put a pretty good focus on becoming financially stable, you know, getting business taken care of here relatively early in your career. Have, is anybody in your family given you a hard time? Like, why aren't you living like a doctor now that you're making the big bucks?

Interestingly, they've been really proud of us, I would say. My parents kicked out their whole life insurance salesman guy right about when we were having our financial awakening. So, like my dad was paying off his credit cards while we were paying down loans. So it was kind of like, good job, high fives.

So you're all doing it together. That's awesome. All right, so this year you maxed out your retirement accounts for the first time. Tell us all the accounts you maxed out.

Got the 403s, opened up a 457 non governmental, maxed out the HSA filing and convinced My husband to read your post on the backdoor Roth, which was, he does all our taxes on TurboTax and he didn't want to mess that up. And I was like, I promise you, it's foolproof. Read this. And then opened up the kids 529s with birthday money they were getting.

Okay.

And then this year opened up a money market fund for a potential taxable account.

Okay, cool. It's exciting. You're playing this rich person game, investing that.

Kind of surreal when all you thought you were just supposed to pay loans, the debt snowball. You're like, oh, there's another world.

Yeah, a whole other world out there. Well, this is awesome. You guys have done fantastic as far as paying off the loans. Did you find it to be harder or easier than you thought it was going to be at the beginning?

Really easier in terms of keeping the lifestyle the same. Harder when it came to actually clicking the button. But like, nothing, nothing changed. We were still making our meals and going on family vacations, and it was just seeing the number and clicking it or seeing the account and opening it and being all right with that change.

Awesome. So you did a few things to kind of not only increase your income, but also to make sure that you had your own wellness being taken care of, primarily through negotiation during the last few years. Tell us about some of the things you were able to negotiate with your contracts that made a difference in your life.

Yeah, so I navigated Covid times. They needed extra help in the icu and I was fresh out of training. So all of a sudden I found myself in the ICU from the outpatient clinic, but still with an outpatient in basket doing end of life discussions all the meanwhile and helping with codes. So in over my head, working more than my 0.8 FTE contract, I reached out to my manager and said, hey, can you guys comp me for full time for the time that I was in the icu? And they agreed to comp me. So I was able to negotiate a bonus during that time. And then another negotiation I was able to make last year on return from maternity leave on a contract balanced with productivity of RVUs and patient facing hours. I was in the 90th percentile for RVUs dying, taking notes home two hours every night. And so I reached out starting in February with SOS emails, then a formal sit down with my medical director, who when she found out it was taking me like a month to get results back to patients, she said, no, we're going to pause. She went up to bat for me, she said, this is how you do 0.8 FTE. And then we negotiated that I would work more on productivity rather than needing to increase patient facing hours, which I know a lot of docs get a lot of pushback from their managers, but just being persistent and finding people that'll be in your corner to help you balance life and salary.

Yeah. And a lot of times when you start into those negotiations, you realize that you are the limited commodity, you are the valuable commodity. And sometimes they don't make you feel that way when you're negotiating, but it's true. If you're. If you're willing to play a little bit of hardball and start talking about leaving, it's amazing what concessions you can get sometimes.

Most certainly. So definitely negotiate, network, and stick up for yourself, your family.

Cool. Good tips. Well, let's say there's somebody out there that's like you were a few years ago, maybe not so financially literate, hasn't yet had this financial awakening. What advice do you have for that person?

Certainly take a deep breath. It's okay to find information later and to just persevere. Don't feel paralyzed by what you don't know or might not know. Because as healthcare professionals, we diagnose and treat and give plans all the time. It's not that much different. So kind of seeing yourself like your own patient and looking up what to do. Your website, your book. I love your bootcamp book. It's very algorithmic, so I'll share that with friends and family. It's a low financial commitment on their part, and so I think that's a really nice, easy step just to go box by box and keep going through it.

That's definitely the way it was written. That was the whole point, was to give it to people that just need to be told what to do. So. Awesome. I like your idea of. It's not all that different from a treatment plan. Physician, heal thyself, heal thy finances. Right. Very cool. Awesome. Well, it has been wonderful to have you on. Congratulations on your success. I mean, this is like the perfect live like a resident example. I tell people to do it all the time. They'll be able to pay off their student loans and save up a down payment and max out their retirement accounts. And you have shown that, indeed, it works if you actually do it, so. So congratulations and thank you for coming on to inspire others to do the same.

Thanks.

All right, well, thank you so much.

All right.

I hope you enjoyed that interview as much as I did. It demonstrates a lot of things. But mostly it demonstrates that this actually works. If you actually keep living about like you did during training for a little while after you finish, you can save up a down payment and pay off your student loans and max out your retirement accounts. You can do it all. You don't have to choose between them as long as you don't let your spending, your lifestyle grow just as quickly as your income does. It's all about the difference between those two. And there's no better time than the very beginning to really make that difference large. All right, as I promised you at the beginning of this episode, I want to talk a little bit about inflation. Inflation, it's been in the news a lot the last few years, but honestly, it's something that investors ought to be thinking about all the time. Time neurologist and financial guru Bill Bernstein talks about the four deep risks when it comes to your finances. And these are inflation, deflation, confiscation and devastation. Deflation's like the Great Depression, right? Confiscation is like when Russia came in, became communist and took everything. Devastation is like World War II and every city in Germany had the snot bombed out of it, right? But of all these deep risks, the most common one to show up in world financial history is inflation. It's pretty common, happens all the time. Both just kind of regular high inflation like we've had the last year or two, as well as Zimbabwean style hyper inflation. And so inflation is something you want to be thinking about a lot when it comes to portfolio design and when it comes to everything. In fact, you should get used to thinking in terms of real. And when I say real, what that means is after inflation numbers and figures. So when you're thinking I need this much money to retire on in a few years, you need to be thinking about that in terms of today's dollars. I need $3 million in $2023 is what I need. Now by the time you get to that point, that's going to be more than $3 million. Maybe it's 3.6, maybe it's 4.2, whatever, right? But the point is you got to get used to thinking in terms of after inflation numbers. Same thing when you're think investment returns. It's wonderful. You made 9% this year, but if inflation was 4%, you really only made 5. Now I wish the IRS would think this way. They do not. They make you pay taxes on that inflation. And that's an unfortunate thing about our tax system, such as it is. But you need to learn to Think in terms of inflation adjusted numbers with everything, whether that's returns, assets or et cetera. My favorite place to go for inflation data is a website called inflationdata.com and the nice thing about it is as soon as the federal government comes out with its inflation figures, they're published here. And you can look back historically at what inflation has been. And you can also look at the current inflation data. The one you see in the news most of the time is the year over year inflation figure. And the current inflation rate is what they often call it. And as I record this on June 16, 2023, that rate is 4.05%. So over the last 12 months in general, as measured by the government using their consumer price index for urban consumers, prices have gone up 4.05% over the last 12 months. And that's a lot better than it's been for the last couple of years. I mean, inflation peaked from all the liquidity and low interest rates that have been going on with our economy. To try to save it from the COVID pandemic, they probably overshot the mark. Obviously in retrospect, that peaked at over 9%. And you can see that when you look at this current inflation table that they have there. If you go back, you can see In June of 2022 it hit 9.06%. That's over the prior 12 months. If you go back to 2020, you can see at one point that rate was almost 0%. In May of 2020, the prior year's inflation was basically flat. There was no inflation. And then from that point on it climbed and climbed and climbed. By the end of 2020, it was 1 point. By the end of 2021 it was 7.04%. And then it peaked in June of 2022 at 9.06%. By the end of 2022, it was down to 6.45%. And with the most recent data, it's 4.05%. Historically, inflation has been about 3% over the decades. Obviously sometimes it's higher like it has been the last couple of years, and sometimes it's lower than that 3%. You should be aware that the Feds part of their mandate is to keep inflation under control. And they are actually aiming for about 2% inflation. That's where they've decided the economy seems to grow best at about 2%. That number is actually kind of just pulled out of random air. It's really all about the expectation that probably could have been set at 1% or 2.5% or whatever. But the point is to have people expect something and then deliver that. That's what seems to allow the economy to. The economy doesn't like uncertainty. And so that's what you would expect. That's what the Fed's trying to do. They have pretty good tools to keep this under control in the long run and you ought to expect them to use them. And that's why when inflation got out of control, boy, you started seeing them hiking interest rates like crazy. I think for three months in a row it went up three quarters of a point, their short term interest rates and they started reining in all the liquidity that had been pumping into the system. More interesting chart on this inflationdata.com site and they've got some cool calculators there too. But my favorite chart is under a tab they call it the monthly inflation data. And rather than summing everything over the prior year, this actually tells you what it was over the prior month. And if you look back, you can see that of course inflation is going to be lower now than it was a year ago because there's actually been negative inflation for four of the last 12 months. Last July and August and November and December, it was actually negative. We had deflation, not just disinflation, which is a lower rate of inflation, but deflation for four of the last 12 months. And then you can also see, it's also interesting to see the pattern that inflation is generally higher in the first few months of the year. January, February, March is when people tend to raise prices and get raises at work. And so inflation's often higher in the first few months of the year than it is later in the year. But it's very interesting to look at that month to month data as well. And that was very reassuring last year, even though the one being published was really high. To look and see that going month to month, inflation has already been coming down quite a bit. So that's good. Inflation is bad for investors. It is not a good thing. It makes your money that you have worth less. And so getting this back down to a low rate is important to keep the economy growing and to keep your nest egg growing. But my point is start learning to think in after inflation terms. Did you know that the White Coat Investor not only has a podcast and a blog, but several books that will help you on your way to financial independence? These books cover topics such as asset protection and minimizing your taxes to keep more of your hard earned money. They discuss plans for insurance, housing spending, student loan elimination, investing and estate planning. You can learn how to become a millionaire within five to 10 years of leaving residency and how to invest in a sensible, low cost and effective manner with or without the assistance of a financial advisor. There's even a book geared directly toward medical and dental students so you can start optimizing your finances early in your professional journey. Find the book that is right for you at the WCI store, at shop.whitecoatinvestor.com or on Amazon. You can do this and the White Coat Investor can help all right, thanks for being with us for another episode of the Milestone to Millionaire podcast. Our regular White Coat Investor podcast will drop in three more days. Those drop on Thursdays, these drop on Mondays. I hope you enjoy the variety between them. We appreciate your contributions to the podcast. This really is a community. We really want to provide the content that you're looking for and have your participation. If you would like to share the milestone you've accomplished most recently, we'd like to bring you on whitecoatinvestor.com Milestones is where you apply and we will take your experience and use it to inspire others to do the same. In the meantime, please thanks for what you do. Be optimistic you can do this. We're here to help, so keep your head up and your shoulders back. We'll see you next time on the podcast.

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.