MtoM #134: Primary Care Doc Becomes A Millionaire And Pays Off Student Loans in 4.5 Years And Finance 101: Hitting The Ground Running

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 134. Primary care doc becomes a millionaire and pays off student loans in four and a half years. We estimate that 80% of doctors need want should use a financial advisor and or an investment manager. Some investment gurus, such as Dr. William Bernstein, think my estimate of 80% is way too low. But at any rate, if you want to use an advisor temporarily or for your entire life, there's no reason to feel guilty about it. Just make sure you're getting good advice at a fair price. If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors@whitecoatinvestor.com financial advisors. You can do this and the White Coat Investor can help. By the way, we have a new page where we have all of our recommended services on one page. You can go to whitecoatinvestor.com recommended and check that out. Alright, we got a great interview today. My interview today is someone who found financial nirvana early in his career, basically as a medical student. Read the White Coat Investor book. And that has made all the difference over the next eight years or so and has now had a relatively high amount of financial success. Just knocking off milestones left and right. So let's get them on the line and you'll get to hear the story. But stick around afterward. I'm going to talk a little bit about that most important year in your financial life and how important it is to hit the ground running for that. All right, our guest on the Milestones to Millionaire podcast today is what I call a true believer in the WCI way. This is Dr. Chris Wolf. Dr. Wolf, welcome to the podcast.

Glad to be here.

Congratulations on your recent milestone. Can you tell us what it is?

Yeah, was a trifecta milestone, really. It was earlier this year, probably four and a half years out of residency. About the same time I hit a net worth of $1 million, over half a million dollars in investments in the stock market and I paid off my student loans all at about the same time.

All right, you have accomplished three awesome milestones and we're going to try to cram all of those into one episode. But why don't you start kind of at the beginning when you first became exposed, if you will, to financial literacy, to the White Coat Investor and bring us up to speed. Tell us the story.

Yeah, so it really all started in my fourth year of medical school. I Can't remember how I was introduced to your book, but it was towards the end of the fourth year of med school when someone mentioned your book. And I'd read Dave Ramsey and had some basic fundamental information about investing. But once I read your book. Right. When I started residency, I really started to take personal finance serious because I hadn't made any significant income up to that point. So almost immediately, once I started residency, I opened up my wife and I a Roth IRA and started investing in the Roth ira, knowing that one day I'd probably do a backdoor Roth ira. And that's really when it all got started.

So where were you at in your financial life at this point? I mean, were you, like most medical students, you owed a few hundred thousand dollars?

Yes, I believe when I finished medical school, I had roughly $207,000 of medical school debt. And my wife and I purchased kind of a fixer upper house my last year of medical school before I started residency. And so really, our only debt we had. We had no assets. Our only debt was my student loan and our house we purchased before starting residency.

And what part of the country are you in now?

I'm currently in Western Kentucky, between Louisville and Nashville. A smaller town. It's definitely something that you would consider. We definitely did some geographical arbitrage. It's a smaller town, lower cost of living, still good schools and a good hospital system. The pay is definitely higher than it would be in a smaller or at a larger city. And we're closer to family, too, which has helped with childcare.

So what do you. What do you do? What is your. What does your spouse do?

My. My wife was a teacher up until my first year of residency when she had our first child. And ever since then she's been at home. And we now have three children, and she's at home with them. And I'm an internal medicine physician, five years out of training today.

All right, so you got started with the Roth IRAs, and in residency, she's teaching. You're making a resident income. How much did you invest during residency?

Well, we maxed out both Roths. And actually, when she quit teaching, she had a little bit of a pension that was not going to amount to anything in the long run because she was probably not going to go back to teaching. So I actually took your advice and pulled the pension out and had it taxed and placed inside of a Roth ira, knowing that we were in a lower tax bracket during residency. I actually knew I was going to be coming back to this town. So I Took a stipend from the hospital here, which helped a lot during residency and allowed us to max out those backdoor Roth. Well, at that time, it wasn't a backdoor Roth. It was just investing in the Roth IRAs because our income wasn't high enough to do the backdoor Roth. That was most of it at that time during those three years was just maxing out the Roth IRAs for both of us. Taking that stipend really helped do that during that time of lower income.

So you came out of residency with what, 30, 40, $50,000 worth of retirement savings? Something like that?

Yeah, yeah, I think that's fair to say.

Okay, and what was your student loan plan during residency? What were you doing with those?

Well, I refinanced and got a really low interest rate during residency. I made pretty small payments on those during residency, but I had a very low interest rate. And that was about 2018, 2019 when I finished. I kept refinancing them to lower and lower variable rates and made minimum payments during residency. And then as I became an attending, you know, I got a sign on bonus. I put all of that towards student loans. I would put a big chunk of my paycheck into paying off those student loans. Every time I would receive a bonus at work, a good chunk of that would go towards the student loans. They were a lower interest rate. At one point they were below 1%. And then I wouldn't be in such a hurry to pay them off. But then as the interest rate started to creep up, I had more of an urgency to pay them off, which is why they coasted for some period because rates were so low it didn't make sense to pay them off. But inflation was higher than the 0.9% or I think they even get down to 0.4% at one point variable rate. But yeah, as the rates went up over the last year, I aggressively started to pay them off more as they crept up to 4 and 5%.

Well, clearly paying off debt, building wealth is important to you, but you are married. There are two people in this decision. Tell us about your conversations and how you work together as spouses to become so financially successful.

We have a lot of conversations about finances and she trusts me, I trust her, and she kind of lets me do my own thing with the investing. It's obviously pretty expensive to have three kids and there's a lot of, a lot of our income goes towards paying for child expenses. But when I tell her that, hey, we're going to max out this or that retirement account and she kind of gives me full reign to make those decisions. I'm maxing out her backdoor Roth IRA every year and maxing out my retirement accounts every year and paying off debt. And we kind of have an agreement that we trust each other with all those things.

So let's talk a little bit about what you're invested in. Tell us about your asset allocation, what your investments are.

Yeah. So obviously every year I max out Every Available Retirement Account 403 with my current employer, the HSA, the backdoor Roth IRAs. I even have a. I'm contracted as the medical director for a local nursing home and that allows me to open up a individual 401k and invest a little bit into that. You can probably explain this better than I can, but even if you max out your 403 or 401k, if your primary employer you're still able to put in is it 20% of your income as a contractor into the individual 401.

That that's certainly usually what it about works out to.

Yeah, that's I'm doing that. Which isn't a whole lot of money, but every little bit helps. I have a taxable account and actually in the end of residency I started listening to bigger pockets and I like we bought a fixer upper house and residency, flipped it during residency, medical school and walked away with a nice chunk of tax free income from selling that property. So that, that kind of gave me the itch to buy some local rental properties. And in 2019, 20, 20, 21 and 22, every year we've purchased one rental property and go in and fix it up. I manage it myself and rent it out. And so far that's given us quite a bit of equity in those properties over the years as the home values have increased over the last few years.

Yeah, sounds like you got about half your money in kind of stocks, bonds, et cetera, retirement accounts. And half your money in real estate is all right.

Yeah, that's a fair statement. If you look at the value of these homes and the loans we have on them, it's hundreds of thousands of dollars. And then we've got over with the market doing so well the last few months now, over half a million in stocks.

Cool. And you know there's a lot of people out there that say real estate, it's too much hassle. I don't want people calling me when the toilet's clogged up. And then you got all the real estate folks going, eh, don't invest in paper assets, you know, Those retirement accounts are a scam. Yeah. You've decided to do both. What would be your response to those people who say you should only do one or the other?

I think all things in moderation in general. I have friends that would never actively manage these places. They just don't want to deal with anything. And I respect that. And as our net worth grows, I'm leaning more towards that. So when you're just starting out to learn, it wouldn't hurt to manage them yourself for a little bit, to learn the ins and outs of what's important. And screening tenants, and this is a generalization, but, you know, we purchased a class properties in nice neighborhoods with good schools and we fixed them up and, you know, put new flooring, painted and screened our tenants really well so that we do not get called. I don't want to jinx myself, but I might get called once or text once every few months about a minor issue. We knock on wood had nothing major happened. But as our network grows, it does sound nicer to offload the management to someone else. So that's something we're looking into just because it's, you know, you'd like it to come, to become more passive in the long run.

But in your experience, the 3am toilet call is a myth.

I've never had, never had that in the, I guess, four years now that we've owned a property. But again, I would just stress the importance of screening your tenants very well because it's a lot harder just from listening to bigger pockets, other podcasts. It's a lot harder to get somebody out once they're in there. If you can screen and do a really good job, get somebody solid tenant in there. We've had people there for three or four years and we've not had anyone miss payment. Again, knock on wood.

Yeah. All right. Well, let's say there's somebody that's just like you were a few years ago. You know, maybe they started figuring this stuff out in medical school or residency or fellowship, and they're getting ready to get out and they want to do what you've done. They want to be a millionaire in four or five years. They want to invest in real estate. They want to, you know, max out their retirement accounts. They want to pay off your student. Their student loans. What advice do you have for that person that wants to have this kind of success?

Well, most importantly is absorb everything that you can read. Read your book, read other books, listen to podcasts. I've listened. I was reading your book in med school. I'VE been listening to the podcast since it was first released. I've learned a lot through your channel and work hard up front. When I finished residency, I was doing the traditional model. I was rounding at the hospital, admitting patients in the office, following up in the afternoons back to the hospital to readmit on call over the weekends. And that helped me get a head start and a jump start on paying off debt, investing and that's really helped jumpstart things. That would be my biggest, those would be my biggest recommendations is read, read, read, absorb everything you can. Surround yourself with like minded people and work hard up front.

Awesome. Well, Chris, you've done a fantastic job. You're now a millionaire. It's pretty awesome. And obviously on track to have far more than that in the future, reach relatively early financial independence and just have all kinds of options in your life. So congratulations to you and thank you so much for coming on the podcast to inspire the next generation to do the same.

Well, thank you very much. It was an honor to be on here.

All right, hope you enjoyed that interview. It's great to hear that this stuff works. You know, if you live like a resident, you become financially literate, you work hard, you save a bunch of money, you invest it smartly. Yes. You become successful, you pay off your student loans, you become a millionaire, you max out your retirement accounts, you build a real estate empire. All this stuff works. I promise it works. You just have to do it. The combination of financial literacy and financial discipline is so rare in our country that if you have them both, it's like having a superpower. But look what happens when you do. He's four and a half years out. He's not financially independent yet. How long is that going to take for him? Less than five more years. He's going to be financially independent. He'll be able to do whatever he wants with his career. Stop admitting, stop taking call, work part time, you know, go on a medical mission, trip, whatever. You have options and it's wonderful to have options by mid career. All right, I mentioned at the beginning we're going to talk about that most important year of your financial life. What is the most important year of your financial life? It is the first year out of your training. Okay, you do your medical school or whatever, you know, if you're a lawyer, an engineer, whatever the equivalent. And then you go to residency, you go to fellowship and then you're out making the real paycheck. That's the most important financial year. And if you will get that year right, you can screw up almost everything else for the rest of your financial career, right? Just by getting that first year right, everything falls into place. And I can assure you the wolves got everything right that first year. And the way you do that is by having a written plan for your first 12 monthly paychecks. This allows you to hit the ground running. Okay? That first attending paycheck comes in, it's 15, 20, $30,000, whatever it is, most money you've ever made in a month in your life. You've already got a plan for where that money's going. Now, your plan might be different from my plan, might be different from someone else's plan. The problem with being a brand new attendant is you have so many great uses for money and not enough money to do them all. But think about these things that you probably want to be considering in that first year out beefing up your emergency fund, right? Maybe you had a little piddly emergency fund as a resident. Maybe you're spending a little bit more money now or you just want more months of emergency fund. You might want to beef that up with a few thousand dollars more. Or if you never had one, establish an emergency fund. A surprising number of docs graduate with credit card debt, right? 15 to 30% guaranteed return from paying off your credit cards. This is a good thing to do. It's probably your best investment out there. If you've got any credit card debt that's been hanging out for whatever reason, take it in a corner, drop an anvil on it with that first paycheck, or to get rid of it, have it be gone. You maybe have a car loan or two, get those paid off too, right? This is something that from now on you're going to be paying cash for. So once you have a car paid off, keep making those payments to yourself so you can pay cash for the next car. Maybe you need a new car. You've been driving a beater now since you were a second year sophomore in college. And that 2003 Corolla's got 240,000 miles on it and the check engine lights on and the tires are bald and it's starting to smoke. You know it's okay to get a new car, right? If you need it, get a new car. How about a down payment, right? Once you know the job likes you and you like the job, you might want to save up for a down payment. Now you might want to use your money for something else and buy a house with a doctor mortgage loan. That's okay. Check out our recommended list for People who offer that, but that might be on your list just to save up a down payment. Getting your student loan plan right? Maybe it's time to get some student loan advice from our affiliate studentloanadvice.com maybe it's time to refinance your student loans, but just make sure you have a plan in place. And if the plan is to pay them off, well, shoot. Start making those big extra payments. Student loans do not last very long when you send $10,000 a month to the lender. They just don't last that long. Okay, let's say you have $200,000 in student loans. That's about the average for an MD student. How many months does that last if you send them $10,000 a month less than two years. Even if you're a dentist with twice the average amount of debt, which would put you in the $500,000 range. A little more maybe. How long does it last if you're sending $10,000 a month less than five years, you can pay off those student loans, but you got to have a plan to do so. Maxing out retirement accounts. Another great thing to do. That first year out, you might not be eligible for your new 401, and you might not have the income as a resident or fellow to max those out. But look at what options you have. Remember, you have till April to do your backdoor Roth ira. You have time. Yes, the paperwork will be a little more complicated, but you have until tax day to make the contribution. If you had tax deferred dollars from residency or fellowship, you might want to do a Roth conversion on those. You got to make sure you have the money to pay the taxes. This is probably the lowest bracket you're going to be in for a long, long time and a pretty good use for money right out of the gate. Now, the only way to do. I mean, you're not going to be able to do all of these probably in that first year, but you can do a lot of them. The only way to do a lot of them, though, is to keep living something like a resident. Live like a resident. Boy, you wouldn't believe how much blowback I get for those four words. People think I'm crazy to tell them that living like the average American household for a year or two or three is insane, right? But it's amazing how well it works, right? Let's say you've been making $60,000 a year. Maybe you're living on $50,000 a year. Now you're making. Who knows? Let's say 300, you're making 300. If you were willing to still spend 50, maybe you're paying 75 in taxes now. But that leaves you a lot of money, $175,000 in the next year that you can use to build wealth, right? If you can send $10,000 a month to your student loans and still be able to save another $55,000 toward retirement or toward a down payment or toward an emergency fund, right? That's just the first year. Then every month of your financial life gets better and better and better. Less debt, more wealth, maybe even more income. Month after month after month, it just gets better and easier. And so while it feels like you can't do it all at once and you want to be a little bit patient, realize that this starts really steamrolling, really snowballing as time goes on. Within five or ten years, if you're doing things right, you're going to have a pretty awesome financial life, be living in your dream home, have your dream job, and be able to buy anything you want that makes you happier, as well as be able to help those that you care about most. This really does work, I promise. We bring people on the Milestones podcast all the time who are doing this. They're in the process somewhere or they've already accomplished it and you can too. If you need some help. As we mentioned at the beginning, we estimate that something like 80% of doctors need, want and should use a financial advisor. Dr. Bernstein tells me that number should be 99%. I think that's a little high since I've met so many of you who are very good at do it yourselfy. But if you want to use a financial planner, if you want to use an investment manager temporarily or even for your entire life, that's okay. My mantra is get good advice at a fair price. So if you need help writing a financial plan, updating a financial plan, managing your investments, getting a plan in place, check out our list. These are recommended financial advisors, carefully vetted whitecoatinvestor.com financial advisors. Or just go to the main page, whitecoatinvestor.com recommended and find someone that's a perfect fit for you. You can do this. White Coat Investor can help. If you want to come on the Milestones podcast, you can apply@whitecoatinvestor.com Milestones. Thanks. For those of you who are leaving great 5 star reviews of the podcast, we do appreciate that it helps us to get the word out. We are anxious for you to be successful. We want to produce high quality content that you find useful, please send us feedback. If we're not doing that, let us know what's working well, what isn't working well, and know that even if no one else told you. Thank you today for whatever you did. I appreciate what you're doing out there. Thanks so much. 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.