MtoM #146: Urologist Pays Off $300,000 in 2 Years and Finance 101: Contribution Limits

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 146. Urologist pays off $300,000 in two years. 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've got a great guest on today who's paid off a big fat student loan in just a couple of years. We'll bring him on, but stick around. Afterward, we're going to talk a little bit about retirement account contribution limits for 2024. Our guest today on the Milestones to Millionaire podcast is Scott. Scott, welcome to the podcast.

Thanks for having me.

Tell us about yourself. What part of the country do you live in? How far are you out of training? What do you do for a living?

Yeah, I live in Pennsylvania. I am two years out of training. I'm a urologist in a community practice.

Okay, and what have you accomplished that we're going to celebrate with you today?

I paid off my student loans, which was $300,000 in two years.

Two years. $300,000. Pretty awesome. Pretty awesome. All right, let's do the numbers. What was your income over those two years?

Yeah, so my income was about $450,000 both years.

$450,000 gross, yes.

Correct.

So after tax is what, $300,000? Ish something. $300,000. $350, something like that?

Roughly, yes.

So basically, half your income went toward these student loans for the last two years, is that about right?

Yeah, I was putting probably between $5,000 to $10,000 every month into this. So much of what was left over after house payment? Kind of. I certainly didn't live on rice and beans, but a lot of the money was going towards that before I paid for anything else that I wanted to do.

Okay, so did you invest any money during the last couple of years or did everything you could carve out to build wealth, go toward this debt.

I actually was able to max out all of the investments that you typically recommend on your show. So I read your book. As a medical student, I developed an emergency fund and opened a Roth IRA as a resident, which I maxed out. And then as an attending, over the past two years, I've maxed out a 403B, 457B in HSA, which I invest back into the market, and then actually opened a brokerage account, too, and put a couple thousand dollars a month into that on top of the loans.

Man, have you done anything wrong yet?

I'm sure there's a few things that I probably could have held off purchasing, such as vacations or a home or whatnot. But I was very fortunate to be able to spread things out. For full disclosure, I did get some loan forgiveness from my job. I used geographic arbitrage for that as well. So that helped quite a bit. But ultimately, that only probably covered about 80,000 of my loans. I actually had some money left over from that when I made the last payment a couple weeks ago.

Okay, so if you can't consider that as part of your income, maybe your income was a little higher is basically what it was. But what made you pick up my book in medical school and read it?

You know, I was thinking of that. I honestly don't remember. I think someone told me about it, and I knew nothing of financial literacy. And I read it, and I remember thinking, well, this is actually pretty simple because I was a little bit. I was a little bit intimidated by it. Right. These terms kind of go right over your head. And I read it, and I thought, this actually makes this very clear. I know what I need to do. I wasn't able to focus on a ton in medical school, actually anything. But in residency, I was able to put a little money here and there and then really became aggressive as an attending. And I read all your blogs. I listen to all your podcasts. So you helped me a ton. So thank you.

Our pleasure. Of course. Tell me, when you got accepted to medical school and you looked at that price tag, and clearly there was nobody standing behind you ready to give you hundreds of thousands of dollars to pay for your school. What did you think about borrowing $300,000 to pay for your school?

I didn't feel good about it, but it was the only way I could go to medical school. My parents were teachers, so didn't have the ability to pay for my school, which I think made me take It a little bit more seriously. Not that if someone has school paid for, they don't, but yeah, it was a tough pill to swallow and I'm very debt averse. So that debt has bothered me since I matriculated into medical school, which is why I opted to get rid of it as quickly I could.

Did you ever consider, even for a moment not going to medical school because you're going to have to borrow that much money?

No, I probably should have. I think. I tell people nowadays to really think about those things before they take out the loans. It kind of is like monopoly money at that age though. Right. And I think looking back, although I went to a state school that was not that expensive, relatively speaking, I probably would have even tried to take out a little bit less loans if I could go back and do it again. But it's not like I was living lavishly during that time either.

All right, well, this is pretty cool. So let's say there's somebody out there, they're coming out of medical school, they owe $300,000 or $400,000. What advice do you have for them if this is the first time they've really heard anything about student loans and what to do with them?

Yeah, I think it's. Well, I think literacy comes first. So, you know, either they hopefully hear about it from someone or maybe they do it on their own and then like you say, developing a plan. I will admit I did not write one down, but I thought about this every day. So I didn't follow your number one tenet, but I constantly thought about this. I had spreadsheets for all of my investments and everything. But I think having a plan and then really kind of like you say, living like a resident. And I didn't live exactly like a resident. Right. But we rented for several years buy cars at 2008 Toyota. So there were some things I splurged on that weren't too terribly expensive. But there was a lot of things that I delayed until I got these loans gone and have a little bit more freedom now to be perfectly transparent as well. My wife is a physician, but we had separate loans and have kept separate bank accounts. So my money was completely paid off by myself. And she has completely paid off her loans as well because we both kind of felt like that was our responsibility because we took it out before we met each other. So I know you always say people write in and we'll talk about the high earning position couple. Right? I am one of those. But we did split our loans separately, so it's almost as if I was doing this on my own.

Alice, you both paid off your loans. Do you have any plans to combine finances, or are you planning to keep them separate?

Yeah, I think we probably will at this point. It's not too hard these days with how easy it is to transfer money just via your phone and whatnot, but we probably will combine it. We do have a combined account for our mortgage, but we have several other bank accounts that are separate. And we both kind of wanted to be responsible for the debt we took out, not leaning on the other one. We both have offered to help the other one with loans, and we both said no.

That's interesting to feel that way about it. Very cool, though. But you've both done it, so, you know, it gives you a sense of pride of having accomplished something hard. You know, it's almost like wearing training wheels for financial independence. You know, if you can knock off student loans in two years, you can hit financial independence relatively early.

Absolutely.

So tell us about the increase in lifestyle you took when you. When you became an attending. You said we didn't live perfectly like a resident, and to be honest, almost nobody does.

Right.

But how much did you inflate your lifestyle when you became an attending?

I would say moderately. So. My wife and I actually waited to get married until we were attending so we could pay for the wedding ourselves because wedding costs have ballooned, and neither of us wanted to put our parents in a financial hole. They're both kind of near retirement, and I think they should enjoy what they've earned, so we were able to pay for that. We did buy a house after about two and a half years of renting, but my wife has been out three years and I've been out two years. So we rented all through residency. Bought a house after about a year that I had started working. Kind of got lucky. Right. Because interest rates are a little bit. We locked in at a lower rate than they are now. Not a crazy house. We actually bought a house where if one of us just completely quit working, we'd be able to afford it. That was kind of something that was important to me. So it's a very nice home, but it's not the standard like Dr. McMansion that people probably think of. We both have our cars paid off, and my car is quite old. We do like to travel, and I'll bet we went on some nice trips. Our friends got married in Jordan, so we went to Jordan and Dubai. We had a very delayed honeymoon, and then we just went to Italy as well. So I would say in the middle, I am not doing it as aggressively as some people are and kudos to them. But we kind of. I mean, I felt like we had a pretty good plan where I knew where our money was going and what we could spend on.

Yeah, you couldn't have spent that much because half your money went towards student loans and you still maxed out retirement accounts.

Right.

So this couldn't have been that much you were spending.

These were all. All the fun stuff we did was after all the money was accounted for, for, both of those, you paid yourself.

First, I think is the phrase that's usually used. Yeah.

Yeah.

So was paying off your student loans in. In two years, did it turn out to be easier or harder than you thought it was going to be two years ago?

I think it was probably easier. You know that once you start throwing that much money at it per month, it really does drop down. And like I said, having some help from my employer certainly made it a lot easier. It was easier. It bothered me, though, still, those numbers. I'm very debt averse, I think financially, like, mathematically, people would say I probably should have put all that money in the market, but the debt bothered me emotionally enough that I just wanted to get rid of it. And getting rid of it was a huge relief and probably one of the things I'm most proud of in my career so far.

Yeah. Okay, so this month you've got five or ten thousand dollars coming in after tax that was previously going to student loans. What are you gonna do with it?

So me and my wife have agreed that we're probably gonna invest about 50% of our income, and that's to ideally put us in a position to be financially independent in maybe 10 to 15 years. And then we only have to work if we want to. And I think the rest of that is honestly probably going to be doing things we enjoy. I need a new vehicle. We'll probably travel a little bit more, although I think some of those bigger trips are not going to be for a few years. Yeah, I think I kind of look at money as creating freedom. And so I want to put us in a position where we are kind of free to make our own decisions and retire early if we want. And if not, then we have extra money to give our family or to give to charity or spend on those kind of silly things that maybe you shouldn't ideally spend on.

Well, you've done pretty awesome, Scott. I mean, you've clearly developed financial discipline, you've clearly developed financial literacy. You have accomplished accomplished a major financial goal that takes some docs 20 or 30 years to accomplish. You've done it in two. You're going to be able to accomplish anything you want to financially in your life, I have no doubt. So congratulations to you. Thank you so much for coming on the White Coat or the Milestones to Millionaire podcast to share your experience with others and to hopefully inspire them to do the same.

Thank you. And I really do want to thank you and your team have far been the most instrumental source I've used, and I don't think I would have known any of this if I hadn't stumbled across your book. So it really does help a lot of people. And I actually started like, you know, telling people about it and have actually lectured the medical students on finance now, because I enjoy it that much. So.

Well, thank you so much for doing that. That. That goes a long way. And of course, it's our pleasure. And I'll pass your kind words on to the team.

Thank you.

All right. You know, I was talking with Scott after we stopped recording, and we both agreed this stuff really isn't that complicated. It's not that hard. You still have to do it, but it's not that hard. People have done it before you. We've showed you how to do it. You, too, can be financially successful. It just takes a little bit of financial literacy and a little bit of financial discipline. And amazing things happen when you apply a doctor or doctor, like income to personal finance and you maintain that discipline over two or three or four or five years, amazing things can happen in your financial life and give you all kinds of options going forward. All right, as I mentioned at the top of the podcast, we're going to talk a little bit about contribution limits. Okay. Most contribution limits are indexed in some way to inflation. And so they go up each year based on these inflation numbers that come from the federal government. And so no surprise, given inflation's been a little higher than typical over the last couple of years. These limits are going up this year. So your 401 and 403 employee contribution limit for 2024, if you're under 50, is going to go up from $22,500 to $23,000. Not quite the increase we had the prior year, but it's still a $500 increase. Better than a kick in the teeth catch up. Contributions are going to stay at 7,500 this year. So if you're 50 plus, your total contribution limit for 2024 is going to be $30,500. Bear in mind, that's not the total contribution into the plan. That amount is going up from $66,000 to $68,000 in 2024. So it goes up by a couple thousand dollars for those under $50,000. Obviously if you're 50,000 plus that goes up to $75,500. That's the total of your employee contributions. Any after tax contributions you're allowed to make in the plan and any employer contributions whether they are match or profit sharing or penalty. That's the total amount that can go into a plan. $68,000 for 2024. All right. 457B's also going up from $22,500 to $23,000 in 2024. They have unique catch up rules as well, so you'll want to read about the catch up rules in your plan documents. IRA contributions are going to increase pretty big. Increase $6,500 to $7,000 in 2024. Add $1,000 if you're 50 plus SEP IRA contributions also up to $68,000 this year. Same as the 401 and total plan contribution limit. Simple IRA and simple 401 contribution limits up from $15,500 to $16,000 in 2024. HSA contribution limits if you're single it's going to go from $3,850 to $4,150. If you have family coverage, you and a kid, you and a spouse goes up from $7,750 to $8,300. FSA if you have a flexible spending account, flexible savings account, whatever you want to call it, that goes up from $3,050 in 2023 to $3,200 in 2024. What else can I tell you? The 401A compensation limit. That's the amount of earned income that can be used to calculate your retirement contribution. That goes up from $330,000 to $340,000 this year. That's always basically 5x the maximum 401 plan total contribution limit. The Roth IRA direct contribution limit phase out is going to increase from $138,000 to starting at $146,000 this year. Phases out completely by $161,000 for those who are single and at $228,000 for those who are married filing jointly. So lots of increases. Obviously make sure you know what the amounts are. You might have to adjust the dollar amount going in with each paycheck. Max them out. Don't forget too inflation's going up. If you're an employee, it's a good excuse to ask for a raise. You know, cost of living raise. Your argument is, hey, you're just paying me the same as last year. Dollars are worth less, but make sure that you're getting raises from time to time if you're an employee. Otherwise, you're going to be getting paid less and less and less on a real basis over time. 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've 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'll see you on the next podcast. Until then, keep your head up, shoulders back. You've got this. 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.