MtoM #145: Family Doc Gets Back to Broke and Finance 101: Wills

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 145. Family doc gets Back to Broke. If you're finding our podcast informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors, you can find information on how to manage your student loans, fix and avoid common financial mistakes, understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate, and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head over to whitecoatinvestor.com to start learning today. You can do this and the White Coat Investor can help. Welcome back to the podcast. We felt like we needed to put that ad in because so many of you don't know about the website and all the great resources there. So make sure you check that out. You'd be surprised what you can find. That's really the hub of everything at White coat investor is whitecoatinvestor.com this is the Milestones to Millionaire podcast, though. This is driven by you, your experiences, your successes, and we want to highlight those successes to use them to inspire others. We when you're in the trenches of accomplishing things financially, paying off student loans, getting back to broke, figuring out contracts and figuring out retirement accounts and putting an investing plan together and working your way toward being a millionaire and becoming financially independent. When you're in those trenches, sometimes you don't necessarily need more knowledge. You just need more inspiration to keep your nose down, keep working toward them, to stay the course with your financial plan. And that's the point of this podcast, is to realize you're not alone. This is a community of white coat investors. We all have our own individual goals. Yes, it's a single player game. You're not competing against anybody else. But it sure is nice to sometimes hear that other people are struggling with the same stuff you're struggling with. If you'd like to come on the podcast, you can apply whitecoatinvestor.commilestones and we'll celebrate any milestone with you. I don't care what it is. And it's kind of fun to have some of the unique ones from time to time. But let's get our guest on today. Trevor has Come back to broke. And we're going to celebrate with him. Stick around. Afterward, we're going to talk a little bit about wills. Why you need one. Maybe what should be in it, what shouldn't be in it. Our guest today on the Milestones to Millionaire podcast is Trevor. Welcome to the podcast, Trevor.

Thanks for having me.

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

Yeah, so I'm a family medicine outpatient only. I work four days a week just doing general family medicine, mostly adults and older. I'm just past my two years out of residency milestone.

Okay, and you're in Midwest or East Coast? West Coast. Where you at?

Yeah, I'm in the South.

South. Okay, very cool. All right. And what are we celebrating today with you?

I'm back to broke.

Awesome.

I have a positive net worth.

This is one of my favorite milestones because it is so hard to obtain. It's like it's the one that gets you the momentum and gets you moving.

Right.

Okay, well, let's run the numbers. Your net worth when you applied was 37,000. So you just barely passed zero. And tell us about your assets.

Yeah, so it's actually jumped up recently because I got a signing bonus for a new job I'm going to, but I can't really, you know, that's flexible cash, so not really included, but mostly divided up about equal amounts in equity of our home, as well as that large savings account from the signing bonus. Pretty large chunk in my 401k, 15 to 20,000 in our HSA and my wife's old 401k from a previous job. We have somewhere around 10k in each of our Roth IRAs, and then 8,000 in an old SEP IRA from one of my wife's former jobs as well.

Okay. So something around 100,000, $150,000 in investments and savings, and about that same amount in equity on the home. So tell us about the debts. Tell us about the liabilities on the other side of the ledger.

That's the fun part. Luckily, I've got it down to four, you know, four separate debts. I have the mortgage on the home, although that's been paid down quite a bit because we've been living in it for two and a half years. And student loans, I have 170 right now. My wife has 19, a little bit less than 20 on hers. And then we have 24,000 on a car, but the car has a 0% APR, so that's helpful. It's more like a bill than a loan is how I look at it.

Yeah. So let's go back here. You said you're two years out of training. You've been in your house for two and a half years. I assume you stayed where you were training then.

Yeah. So two years out. Well, so we moved towards the end of my training and didn't start working for a few months, if that kind of makes more sense. Yeah.

All right. That helps explain it a little bit. So this is the house you bought when you came out? Yep. So how did you decide how much house to buy and how to pay for it?

Yeah, it's hard to say. Well, I knew my contract, you know, I had roughly how much I would be taking home and then effectively used. My uncle's a realtor and so knew the kind of area and what physician loans were available with lenders and basically just a calculation on what the monthly mortgage would be and could I afford that with what I knew our other budget items to be. I actually bought a house towards the end of second year of residency as well. So I'd already been a homeowner and kind of roughly knew what my mortgage, you know, in percentage wise to what my resident salary was and then what I was moving up to as an attending, because all else equal what our budget line. So I've been reading your stuff for so long. You know, I'm a big budgeter as far as knowing where all my pennies are going, as I describe it to my wife, and I knew I could just scale that up based on what I was going to be making.

So did you sell that other house?

Yeah, I actually sold it to our.

Neighbor, our next door neighbor, I imagine, given the timing. You did okay on that?

Yeah, did just fine.

Yeah. All right, so tell me about your student loan plan. What are you doing with your student loans so far? What's the plan in the future?

Yeah, so I started out on repay throughout residency and that was the plan for a little while, but when I got out, I didn't know if I was going to 100% work for a 501C3. Family medicine, you know, can be in a lot of different environments and I didn't know if that's what I wanted to do forever. So actually right before the pause on payments was extended even further, I guess the first time, I don't know which time we're on by now, I refinanced with a private company, so my timing couldn't have been worse. But luckily I got it Down I have them at in the low 3%, and so I've just been paying that way. My job here does a little bit of loan repayment as well, which is helpful. But so far it's just been another, you know, line item in the budget. And then any sort of big windfalls like bonuses or things like that. A large chunk of that goes to loans.

How long until you think you'll haven't paid off completely?

Probably three years. So probably look at five years out of training, they'll be gone.

You know, I suspect it's going to be sixes as to whether you refinanced or not. Sure, those folks got 0% for a few years, but they're now stuck at 7% and you're at 8%. So over the next few years, you may end up coming out ahead because of that. It's not necessarily a mistake, I wouldn't say. But, you know, it's one of those things that you. Nobody expected that to happen to go on for three years, so. All right, well, let's talk a little bit about kind of your upbringing. Was there anything in your upbringing that affected how you manage money or your parents help pay for anything or give you an inheritance or.

It's hard to say. I grew up very comfortable in my upbringing, but money wasn't really talked about very much, but especially not in specifics. You know, I'd never heard of a Roth IRA or investing in anything or differences in way salaries are paid or anything like that. Growing up, I didn't have any help with school or inheritance, although I did get academic scholarship for undergrad. So I didn't pay for undergrad and then just started loans in med school. But once, you know, once I had loans in medical school, it was like, you know, this is adult time. You know, I have loans to. That'll need to be repaid at some point stuff. So I kind of dove whole hog into reading about it, you know, made it part of my job, especially towards the end of medical school, because like a lot of med students these days, especially the, you know, residency was my first job. My first time I was getting a paycheck was, you know, intern year. So I was very worried about that, especially third year and fourth year of medical school, thinking, okay, I gotta figure out how am I going to get paid? How am I going to pay these loans off soon? So I just really dove into it.

Talk a little bit about the numbers. What was your worst net worth? How negative did you get?

I think I was looking back at what time of my life, I think probably negative 300 at one point.

And what's your household income been on average since you became an attendant?

Average? About 280,000.

Okay, so basically, half of what you've earned has gone toward building wealth.

Yeah, that sounds about right.

Yeah. Look at what's going on. So how did you and your spouse get on the same page as far as putting half your income toward building wealth?

Yeah, yeah. So basically, you know, my wife is very good at budgeting and staying within her means and those kind of things, but she's also very anxious in talking about money. You know, even if we are doing okay in each of our situations that we have been, it's been like we have to sit down and talk about this. You know, just to say that, you know, we're not living in the gutter.

We don't.

We're not going to have no money left. But she's always very open to that and kind of trust me to read about it and then talk with her about, here's what I read, here's what I think we should do. And so we basically had, like, you know, quarterly budget meetings. She would generally, you know, bake cookies to kind of soften the blow that we're about to talk about finances. And then we would eat our cookies and we'd say, here's where all our money is. Here's where it's going, you know, and here's what we're looking at in the future. And so we just kind of stayed like that. Even now, you know, all of our. Basically two years out of residency, where we are. Most of our expenses are set, like, here's what we spend on things. My kids are 3 years old and 1 year old, so they don't have a lot of, like, there's no T ball yet. And things that we have, you know, untold expenses. And so we know, here's what we spend each month, here's what I'm making. And she trusts me to kind of divvy it up into the percentages we talked about. And, you know, we wrote an investor policy statement, too. So a couple of years ago, we wrote it all out. So if I ever have question, what did I say we would do if this happened? You know, I look back, okay, here's when I was of sound mind and body writing this. What did I say we would do? And then we stick to it.

What's the biggest disagreement you guys had in one of those family financial meetings?

Sometimes it comes down to spending on, like, small things. It took A while for us to both be okay with spending on things that we just enjoy. You know, for a while we were like, oh, we can't, we can't spend a dime on anything other than like survival. And especially during residency, she was the main breadwinner, She's a physical therapist. So she had a full time job. And I'm sitting here with my, you know, 50K, 80 hour work weeks. And so it was really important for us to stick to the plan. And now that we've gotten out, we've had to really talk about, hey, it's okay to spend these kind of things and we don't have to necessarily talk about everything we want to buy at this point, unless it's something.

Which one of you is the bigger cheapskate?

I don't know about cheapskate. I would say she's less likely to spend than I am.

All right, well, let's say there's somebody else out there. You know, they're coming out of school, they owe 300 grand or 400 grand or whatever. They want to do what you did. They want to be back to broke and en route, paying off these student loans and, and building wealth, you know, on track to become millionaires. And I think you estimated five years or something. What, what advice do you give that person?

So basically two types. I have more broad advice overall for finance, especially with those in the medical profession, and that's to treat it like studying. You know, one thing, regardless of specialty or environment that you're in, by the time you get through residency and as an attending, you're good at studying something, sticking to a plan, nailing down information, even if it's just cramming for something, you're good at retaining information and using it in your, in your life. And if you can just send a small portion of your energy towards personal finance, you can reap major benefits. Something like, you know, you know, 10 to 15% of what you need to know, and then you're set for the other 80 to 90. And so that's what, that's kind of how I approached it. I said, you know, I had to study about different diabetes medications. I had to study about how to, you know, whatever guidelines I'm looking at, I need to also look at, like, what are the evidence based guidelines for setting yourself up in your investing future or paying off your student loans. And I would write it out. You know, I'd write out, okay, here's the income based repayment programs, here's how they work. You know, write it down, just Like I would when I'm learning anything else. And so I've tried to do that when I have residents with me or medical students, I say, you know, medicine is all. You're all encompassing. Your whole life, always will be learning medicine. But you need to put some percentage into how do I make money so I can continue to live and set myself up in the future. That's my more broad advice. Then my more specific advice is, if you're paid by RVUs, track your own RVUs.

Do you have bad experience where. Where the tracking did not match your tracking?

Yeah, you could say that. And it hasn't been that bad. I wouldn't call it bad, but I've tracked mine since, you know, the first time I ever stepped foot in this clinic. And it has led to a lot less headaches than some of the other physicians and MPs that work with, that I work with. Because not only is it good for you to know exactly what you're doing so you can use it. Say you interviewed another job, say you're talking about one in the future, you can say, here's my numbers. Exactly. It also helps to keep administrative pressure off of you some. Once your admins learn, at least in my experience, that you're tracking everything down to the dollars and cents, then they leave you alone. Generally, you know, they, you know, the.

Truth is that which is measured tends to increase.

Yeah, that's right.

You're learning. Oh, well. That, you know, has this many RVUs, and by doing things this way, I was able to get this many RVUs. Yep.

It's very important.

I suspect that's probably had a significant effect on your income, too.

Big time.

Yeah. Awesome. Well, good advice. Well, Trevor, you have done awesome. You should be very proud. You and your wife should be very proud of what you've accomplished. This is no small feat to get back to broke. Just a couple of years out of training. You will soon be out of student loan debt. You will soon be millionaires and just snowballs from there. And your financial success is going to help you to be a better partner to your wife, a better practitioner to your patients, and it's going to help you accomplish amazing things. So congratulations to you and thank you so much for coming on the Milestones to Millionaire podcast to share your story with others.

Thank you, sir. I appreciate it.

All right, another great interview. I love having these interviews with people early in their financial careers. A year or two out, they paid off student loans or they become back to broke or they hit $100,000 net worth or they bought their first car with cash or whatever it might be, these kind of early milestones because they really set you up. They really give you momentum as you move later in life. Yeah, we'll celebrate your deca millionaire hood when you hit that, too. But it's cool to see people getting started, and I think those are really inspirational for people. All right. I promised you at the beginning we were going to talk a little bit about wills. And for a lot of you, the only estate planning you need to do is a will. If you have any significant amount of assets or if you have minor children, especially if you have minor children, you need a will. And wills aren't that hard to do. You don't actually even need a lawyer to. To do a will. There's plenty of online resources you can do it with, and you could even, you know, in a lot of states, you can write a will on a napkin, but you need to understand your state requirements. Right. Handwritten wills aren't legal in every state. You know, like Georgia, for instance, they're not legal there. They often also have to be signed in the presence of at least two witnesses. Right. There's no point in doing a will if it's not going to be valid. So make sure you understand your state rules if you try to get super creative about this. But I think it's worth at least spending a couple hundred bucks on an online wheel creating software to do this if not going to see an attorney spending a little bit more and having someone you can ask questions to and to draft up the most professional looking wheel you can. But here's the deal. Here's what needs to be included in there. You need an executor. That's the person who's going to carry out what the will says you need to do. You need the beneficiaries, the people that are going to get stuff in the will. And you need to describe how you actually want your assets to be distributed. But perhaps the most important part of the will is to name the guardian, the person that's going to take care of your minor children. And that does not have to be the same person that manages the money on their behalf. In fact, there's a lot of benefit to not having it be the same person. We elected to have it be different people. We chose someone that we thought could manage the money well to manage the money and somebody we thought could raise the kids well to manage the kids. But I think by having two people involved there, we keep, you know, a little bit of checks and balances in the system. You may or may not choose to do that. I'm sure it would be a little bit more complicated for our guardian if they didn't have direct access to the money, but we think that's not necessarily a bad thing. A lot of people will keep a list of their main assets and liabilities in the will as well. But keep in mind that may need to be pretty general or the will is going to need to be updated more than you may want to do. Here's some things maybe you don't want to put in your will. One is conditional gifts. If you are only going to give an inheritance based on certain conditions, you probably need a trust. And if you need someone to have like a spendthrift trust because you can't trust them with a lump sum of cash, that's better done with a trust than through a will. Don't put anything in there that's owned, like property that has a right of survivorship. If that's automatically going to somebody else, it doesn't need to be in the will. Same thing with all kinds of other things that have beneficiaries, like retirement accounts. Your Roth IRA doesn't need to be in your will. Your 401 doesn't need to be in your will. You just list beneficiaries with those accounts. Same thing with annuities. Same thing with life insurance policies. They don't need to be in the will. They are not going to go through probate anyway. And so you can leave those out completely. All right. You also don't need to put your funeral arrangements or any personal wishes in the will. That can be like an attached letter to the will. It doesn't have to be, you know, in the will itself. You can just have kind of a letter of instruction of what song you'd like sung at your funeral, you know, or whether you want to be cremated or buried. You know, that sort of stuff can be in a letter of instruction. It doesn't have to be in the will itself. But if you got minor kids, you need a will. Don't neglect this. It can be messy if you don't do this. And once you start accumulating assets, you ought to have a will as well. You know, by the time you die, you're probably going to want at least a revocable trust. And you'll need some more complicated estate planning done at some point. But, man, if you've had a kid and you don't have a will in place, you are definitely behind the eight ball. Go get that done today. All right. Don't forget, if you like the podcast, check out the website. There's not just a blog there. There's a lot of other stuff there, a lot of resources. It's the HU of White Coat Investor. Since 2011, we've been working hard to provide valuable personal finance and investing information through thousands, literally thousands of blog posts written by an array of authors on every possible financial topic you could think of that would apply to White Coat investors. You can find information on managing student loans, fixing common financial mistakes, understanding your retirement accounts, optimizing your investments, getting professional help at a fair price, getting started, invested in real estate, and so much more, all totally free. 98 or 99% of the content we produce, like this podcast and the blog and the newsletters, is free to you. 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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.