MtoM #132: Emergency Medicine Resident Hits $100K in Retirement Accounts and Finance 101: Cash

This is the White Coat Investor podcast, Milestones to Millionaire, celebrating stories of success along the journey to financial freedom.

This is Milestone to Millionaire podcast number 132. Emergency medicine resident hits $100,000 in retirement accounts. As a white coat, you have valuable knowledge. Various companies want that knowledge and they're willing to pay you for it. That's why we put together a list of recommendations for companies that pay you to take surveys. If you're looking for a profitable side gig for not too much effort, getting paid for surveys could be the perfect solution for you. You can make extra money, start a Solo 401 and use your medical knowledge to impact new products. One of the WCI columnists makes an extra $30,000 a year just doing these surveys. Sign up today and use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com mdsurveys you can do this, and the White Coat Investor can help. All right, we got a great guest today that's really accomplished something remarkable. Stay tuned. After this interview with Paul, we're going to talk about cash, what you should do with your cash. So let's get him on the line. Our guest today on the Milestone to Millionaire podcast is Paul. Paul, welcome to the podcast.

Thank you. Thank you for having me.

Tell us what you do for a living and how far you are out of training.

So, I actually just graduated in the end of June, so. And I'm in er, so I've actually yet to start my actual first attending job, but that starts in about a week.

Oh, that's exciting.

Yeah.

So you got a few weeks off. What'd you do with those?

I just came back from Europe, so we went to, like, London, Liverpool, Naples, Amalfi, and Rome. So just got back.

First time over there?

No, I've been over there multiple times.

And what part of the country are you going to be practicing in?

In the Midwest.

In the Midwest. Okay, so your income during residency was.

What, it started off at around, like, 52, I believe. And then of third year, I was moonlighting quite a bit, so I doubled my income to about 110.

110 was the highest you got. All right, so this is all very relevant because next I want you to tell the audience what milestone you recently hit.

So the milestone I reached, I actually ended up saving up $100,000 in retirement account. So it was pretty frugal living throughout residency for sure.

So you started out making like $50,000. You finished making like $100,000. So let's say in total you made, I don't know, 225 before tax, something like that, over the course of three years. And somehow 100,000 of it went into retirement accounts. How did you do that?

It helps living in the Midwest, for sure. Like, low cost of living. I was able to control a lot of people's biggest expenses. Transportation. I lived very close to the hospital and actually biked quite a bit to the hospital. It was only three miles and it took me about 15 minutes to bike there. So that helped a lot. And my rent was pretty low. It started out at like 890 for like a two bedroom, one bath and then the other things like food costs. So I had a pretty low food budget. Like eating out was only like $40 a month and actual groceries was like 150. It helps because I know how to cook pretty well, so I didn't feel like I was lacking anything from that side either.

Is it just you? Are you married with kids or just you?

I just got married too. Just towards the end of second year is when I got married.

Okay, so part of that was with a spouse. And you was your spouse working?

She was, but after we got married, she stopped working.

Okay. So I biked to residency as well. You know, every day to the hospital. It was about a half mile for me to bike down the road to University Hospital there in Tucson. This was in Tucson. Right. I did not have to bike once in snow. What did you do in the winter on your bike?

Oh, I bundled up. You could always put on more clothes. Plus when you're biking, it gets pretty kind of sweaty. So once you get the hospital, you just take everything off. And then I just like pack my scrubs. And I changed.

Yeah, I grew up in Alaska and they don't believe up there that there's such a thing as cold weather. There's just being underdressed.

Yeah, basically.

Okay, so you biked to work for three years, Three year residency, I assume, right?

Yep.

Three years you biked to work and you lived in this apartment that was less than $1,000 a month. You spent 140 or something? 160 on food. How much did you eat at the hospital?

Our hospital actually didn't give food, so I packed my own lunch.

Never ate. A hospital, you had to pack a lunch. So you got some 24 hour shift on a medicine rotation and you had to take the food, huh?

Yeah, I brought a lot of food during those days.

All right, so were you like this in med school too?

No, I wasn't. And in med School. It worked out because I ended up, I went to Midwestern in Chicago, which is pretty expensive, but I'm from around there. So I just drove to school and I lived at home and it was pretty easy because, you know, my parents took care of all those other expenses and I just worried mainly about tuition. It was the biggest thing, but it was still kind of pretty frugal living.

Yeah. How'd you pay for tuition? Do you borrow it?

That's all borrowed money.

How much do you owe in student loans?

Total is 380 right now.

380. So you got some work ahead of you. Yeah, I have a feeling I know what the next milestone you're going to be on this podcast with is.

Actually my target is actually PSLF because I'm working at a university. So I got three years of residency towards pslf and now just seven more.

Years before you get that though. Yeah, very cool. All right, well, what did you do with this money? I mean, tell us about your retirement accounts you contributed to.

The majority is actually like Roth contributions. We had the option of Roth 401ks, so I did that. Then I maxed out my HSA accounts and matched maxed out Roth IRAs. So the majority is actually almost all of it's like passive index mutual funds.

Your spouse now too, she's got a backdoor Roth ira.

Yeah, doing that for her too.

Very cool. Well, that's exciting. And so how do you feel about that? I mean, I don't know how you grew up. Is $100,000 a lot of money to you?

It is. I feel like it's a big deal. Especially like at my age. I'm only like 33 right now, so if I wanted to coast fire, I could sort of can. Because if you look at 30 year retirements and maybe 9, 10% returns, town bottle, no more contributions. And that grows with compound interest up to like 1.6, $2.1 million, which I could easily live off of.

Well, I can tell you this, I came out of residency at 31 and I definitely did not have $100,000 in retirement accounts at 33. So congratulations to you on that. That is a, that is an accomplishment you should be proud of. I don't. Most people coming out of residency have already saved that much for retirement. I was just talking, I was recording a podcast earlier today. I think it runs after yours, actually. But you know where I was talking about, you know, if residents save anything, I'm happy. You know, just getting in the habit of saving something. And you've done so well. You, you've basically been maxing out retirement accounts as a resident, which is, which is pretty impressive and reflects a lot of discipline. So kudos to you on that. So let's say there's somebody out there who's you know, doing the same thing as you. You know, maybe they got a bunch of student loans, maybe they don't, but they want to get started in residency, they want to save for retirement. And what advice do you have for them?

My advice would be if you can control your expenses as much as possible, that would help save early and save like often as you can like that it'll pay dividends long in the future, you know, when you want to. Either you have one where spend more time with your family, you could have that flexibility, go part time, switch careers. Like it gives you a lot of advantage, like a lot of power in your court compared to the employer. So that helps a lot. Other thing is like if you have hobbies that are like low expenses are free. Cause like I like to run and work out and I could do all that stuff outside, so that helps too. And the other thing is cook if you can because you could eat very healthy if you cook at home. And it does wonders on your budget.

And you're not afraid to get outside and exercise as we've already determined. Even in the winter.

I bike too. I was the only one in my programmed it back to work so.

Well, one of my residency classmates was. He was like a really high level triathlete and his commute was not three miles, it was more like 12. And some days he would run, but he'd be, he'd lose like 8 pounds of water on the way into work. I mean it was impressive in Tucson. That is so that's pretty awesome. So a question for you. You've recently gotten married. What kind of financial discussions did you have with your spouse before and after getting married?

Because I've read a lot of financial stuff and I'm really in tune to it basically. But my wife isn't. So it's kind of just like educating her along the way and just I'm very open about all my numbers even. So like I'm open with my wife. She knows everything and I show her. And then we do have like net worth tracking kind of stuff and then we have like goals and budgets and we're pretty good on that. Everything is like pretty open to everybody. So even throughout residency I end up like giving a lot of financial lectures to my fellow residents and actually help some of my Attendings on their investments because, like, they didn't know some of this stuff, which is shocking, given they've been out for so long.

It might be shocking to you. It's not shocking to me at all. I run into that all the time. And that's a good message out there for you students, for you residents and fellows. New Attendings, don't assume just because that person knows a lot about more about medicine than you that they also know a lot more about finance. That is not the case in many situations. If you've been listening to this podcast regularly for a while, there's a very good chance that you are the smartest person about finances in your residency. So be sure to spread the love around a little bit. All right, what's next for you and your financial goals? PSLF is seven years away. Do you think you'll hit anything else big before then?

I'm hoping to reach like a million net worth. Oh, probably in like three years. It's my target, but three or five years, hopefully by then.

Surprise me, knowing how disciplined you are.

Yeah. Well, I also do like real estate on the side too, so that would, like. Using leverage will help.

Awesome. Well, just be careful with it. Don't get into leverage. It works both ways for sure.

Yeah.

Awesome. Well, Paul, congratulations to you on your success. It's wonderful. Thank you for coming on the podcast and sharing it with our audience. So hopefully you can inspire somebody else to do the same.

Yeah, thank you to you too. I definitely couldn't done this without, like, the material you put out. It's been extremely helpful. Just been like, I think you were like, the first one that actually exposed me to, like, finance from your blogs and then I read your book.

Well, it's our pleasure. We work hard to. To try to have that effect on people, and it's wonderful to hear that we have on you. Yeah.

Thank you. All right.

I hope you enjoyed that interview with Paul. I wouldn't be surprised if Paul becomes one of our financial educator award winners down the line with as much as he's doing in his own life and as much as he's helping his peers and even attendings in residency. So if you've been, you know, if you're lucky enough to be near Paul and be around him, you may benefit from his expertise in coming years. But it really is interesting to see just how well you can do even as a resident when you optimize everything. He's in a low cost of living area. He lives on a tight budget. He knows how investing works. He's already got real estate investing and retirement account and index fund investing all going in his life. He's got a spouse on the same page. You can really do some pretty awesome stuff. He's talking about being a millionaire three years out of residency. That's about four years faster than I was. It just goes to show what can be done when you start early and really optimize. All right, as I promised you at the beginning of the podcast, we're going to talk about cash today. Everybody likes cash, right? Of course, more money mo problems. But you know, more cash is generally better than having less cash. What do I mean when I'm talking about cash? I'm talking about a safe investment. Cash is an investment in which you don't lose principal, at least on a nominal basis. Remember, nominal means just regular, not inflation adjusted. Real means you've adjusted it for inflation. And of course you can lose the value of your cash to inflation. But if it's a cash investment, you don't actually lose on a nominal basis. What are we talking about here? We're talking about checking accounts, we're talking about savings accounts, we're talking about money market funds. There are some other investments out there if you have access to the tsp. The G fund is a cash investment. You can't lose principal on that. Certificates of deposit, same thing, right? You can lose interest if you cancel out of the thing early, but you're not going to lose principal. Savings bonds, type EE and type I Treasury bills are essentially cash as well. Very short term investment grade treasury, corporate and municipal bonds could also be considered cash investments. So the main thing with cash is it's guaranteed. And when there's a guarantee, you need to understand who is providing it. Because a guarantee is only as useful as the entity that's providing the guarantee. Right? So when we're talking about something at a bank, CDs, savings accounts, checking accounts, the banks providing the guarantee. When you have a money market fund, right, the entity that's borrowing that money, which is as a corporation or a government, typically is the entity providing the guarantee with savings bonds and treasury bonds, tips, the TSPG funds, the US Government providing guarantee with very short term corporate bonds like you might find in a prime money market fund. That would be an individual corporation. Same thing with very short term muni bonds. Those are state and local governments. So it's all about the guarantee and who's providing it. But there's also often insurance on cash investments. You've been to a bank, you walk in, they got the letters FDIC on the side of the door, what does that mean? That's the Federal Deposit Insurance Corporation. And this is a federal agency. Essentially, it was started during the Great Depression to prevent runs on banks. If you've seen old movies about the 1930s, everybody hears the banks failing, runs down there and tries to get their money out before it fails. Well, what the FDIC does is it provides an orderly transition when banks fail. And typically it does this on Friday afternoons. Friday afternoon, 5 o', clock, rolls around in about five minutes to five, the FDIC walks in the door, shuts down the bank. And then over the weekend, they restructure it. They ensure that all of those who had insured money in the bank can get their money. And Monday morning when they open, nobody panics because everything's all taken care of. And so that's the role of the FDIC. Now, the way FDIC insurance works is that they cover up to $250,000 in deposits. That's your checking, that's your Savings, that's your CDs, per depositor. Okay, so they're per depositor, per bank, per ownership category. So if you're married, you have a joint checking account at the bank, up to $500,000 in that account is going to be insured. If you have more money than that, you better take it to another FDIC insured bank or it's not going to be insured. They also have these ownership categories. That doesn't mean type of deposit products. You don't get $250,000 in your checking account and $250,000 in your savings account, and $250,000 in your money market account, and $250,000 IN CDs. Those are deposit products. Ownership categories are single accounts, joint accounts, trust accounts, business accounts, et cetera. So you could have $250,000 in your business account, $250,000 in a trust account. You and your spouse could have $500,000 in your joint account. And you could each have another $250,000 in single accounts. And that would all be covered by the fdic. If you have retirement accounts at the bank, which you shouldn't, by the way, don't have those at a bank. Generally a bad idea. You want them. Places like Vanguard and Schwab and Fidelity, those sorts of places. Not a bank. But if you had them at a bank, those would be another $250,000. So you can have a whole lot more than $250,000 protected at a single bank. When you run out of those Limits, you could go to another bank. But the point is that there are limits to the insurance. And you should be aware of what those are if you have a lot of money sitting around in cash. Of course, if you got millions of dollars sitting around in cash, you might want to wonder if maybe you should be investing some of that for the long run. Okay, there's also an entity called the ncua, National Credit Union Administration. Think of this as FDIC for credit unions. It's almost exactly the same thing. And so your money at a credit union is protected in the same way that it is at a bank. At brokerages accounts. There is another entity out there called a securities Investor Protection Corp. Corporation, or the SIPC, that was formed in 1970 in response to a bunch of broker dealers that were merging and being acquired and going out of business in some really turbulent markets at the end of the 60s. Basically, they couldn't meet their obligations to customers when they were going bankrupt. And so they lost public confidence in the securities markets. And so the Congress helped form the sipc. The way the SIPC works, it doesn't protect your investments from investment loss. The market goes down, it doesn't insure the value of your investments, but it includes up to $500,000, including up to $250,000 in cash. What's it protecting you from, though? Basically, it's protecting you from failure of your brokerage. So it oversees the liquidation of their member firms that close when the firm is bankrupt or in financial trouble and customer assets are missing. So if there's a liquidation under the sipc, they work to get you your securities and your cash as quickly as possible. And it's an important part of our investor protection in the United States. But their role is basically to get you your money. Right. They're not doing fractional banking at your brokerage. It's not like they don't have the money or the securities. They have the money or the securities. It's in there. They. They just need to get it out of a firm that's not really working well. And so that's the role of the sipc. It's not exactly like the fdic, but it's nice to have anyway. Okay, so that's how cash works. So what is the best cash investment today, as we're recording this for most of you is probably a money market fund. One of the excellent ones is at Vanguard. It's the Federal Fund, Money Market Fund. And that's generally your sweep account at Vanguard, if you have a brokerage account there. But it's paying, I think, as I record this, something like 5.2%. So if your money is sitting at some podunk bank down the street from you and you're making 0.25% on your savings, you need to move. That money needs to go somewhere where you're making 3, 4, 5% something. There's a lot of high yield savings accounts out there, usually these online banks. Ours is at Ally. I don't have any money in it right now. My money's all in that federal money market fund at Vanguard. But Ally has one, Discover has one. A bunch of these online banks have these, and they'll pay something similar to what you can get with a money market fund. Sometimes a little bit less, sometimes a little bit more. Though a couple of years ago, you'd get more in a high yield savings account than you could in a money market fund. But basically, if your money's all sitting and checking, your money's all sitting in some terrible savings account, you, you need to move it. If you got hundreds of thousands of dollars in cash, you need to be earning something on that money. If you can make 5% on $100,000, that's $5,000 a year. How long you got to go to work for $5,000 a year? Probably a little while. Most of us do. So even if you only have $10,000 in cash, would you rather get $500 this year from it or $10 this year from matters? So pay attention to where your cash is. Remember that as a doc, you have valuable knowledge. And guess what? Other companies want that knowledge and they're willing to pay you for it. In order to put these two parties together, we made a list of recommendations for survey companies. You take the survey, they pay you. This can be a profitable side gig. Doesn't take too much effort. You can do it while you're commuting, you can do it while you're vegging, watching TV after a long shift. But if you can get paid for surveys, that could be a great solution for you. You can make extra money. You can Open a solo 401k. You can use your medical knowledge to impact new products. In fact, one of our columnists, Ricky Rosella, said in a recent post that he made $30,000 in less than a year just doing these surveys. So sign up today. Use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com mdsurveys you can do this, and the white coat investor can help. All right, this is the milestones to Millionaire Podcast. It features you and your inspirational stories to inspire others to do the same and to accomplish those financial milestones that we all have set before us. If you'd like to come on the podcast, you can apply whitecodeinvestor.commilestones and we would love to celebrate your milestone with you. No matter how trivial it might be or how incredible it might be, we'd like to use it to help others to do the same. All right, that's it for today's episode. Keep your head up, shoulders back. You've got this. We'll see you next time on Milestones to Millionaire 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.