MtoM #147: Anesthesiologist Pays Off Student Loans In 2 Years Despite Becoming Disabled and Finance 101: Disability Insurance

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 147. Anesthesiologist pays off student loans in two years despite becoming disabled. If you are 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 the, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this, and White Coat Investor can help.

All right.

We have got a great interview today. I didn't realize how good it was going to be until we started into it. In fact, we actually finished the interview before I realized how good it was going to be, then went back and inserted some additional content into the interview. You'll see what I mean in a second. Let's get Corey on the line. My guest today on the Milestones to Millionaire podcast is Corey. Welcome to the podcast, Corey.

Thank you for having me.

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

I am an anesthesiologist, and I am just over two years out of training, and I'm in the Midwest.

Okay. And you have done something remarkable. Tell us what you've done.

I paid off my student loans.

Okay, you're two years out and the loans are gone. That's pretty awesome. How do you feel about that?

It feels amazing to have them paid off. I feel like a huge weight has been lifted off my shoulders, and now I can focus on other things I'd like to accomplish. Wow.

All right, well, let's talk about the weight. How much did you owe?

$260,000.

$260,000. That's a little more than average.

Yeah. Some of that was from undergrad as well, but most of it was from medical school.

Okay, so you pretty much borrowed your way through medical school, is that right? Or did somebody help you with some of it, or you work a little bit or. It was all loans.

It was all loans.

And when was kind of your. I mean, people don't pay your student loans off in two years unless they're, you know, have become financially awakened. When was your financial awakening?

It was probably in my third year of medical school, actually. Just that's when I discovered your podcast. I started reading, you know, your books and I just realized, okay, I need to tackle this right away and get this paid off.

At that point. You owed 150, 200 already, huh?

Right, right. Yeah. So I just realized I need to put most of my paycheck to the loans once I get started, and it works.

Did your student loan burden affect your specialty choice in any way that you can remember?

Not at all, no. Anesthesia was always kind of my top choice anyways, so that didn't really have any impact.

Yeah, it's fortuitous, right? Some of us fall in love with something that makes a little more money than other things.

Yeah, it was meant to be, so it worked out well.

So tell us about your income over the last couple of years.

Over the past two years, my base salary is $350,000. And then we also get quarterly bonus as well, which range from anywhere from 20 to $40,000.

Okay, so pretty typical anesthesiologist kind of income. And did you pay any of this off during your training or did you just kind of leave it all for the attending years?

When I started paying off my loans in residency, I just started paying a couple hundred dollars each month just to kind of get the habit going. Then once I came into being an attending, I put both my salary toward the student loans. I also use my quarterly bonuses. I put all of that towards my student loans as well. So I try to live as frugally as possible to get that off my back.

Now, as we're recording this, we're right at the end of the student loan holiday. So in this time period when you were putting most of your salary toward loans, you didn't actually have to make any payments and your interest rate was at 0%. What made you decide to pay them off anyway?

I think it was more of a psychological thing for me. I am a pretty debt averse person, so I just wanted to get that off my back and I could focus on other financial goals that I have for myself. I didn't want to have to worry about the public service loan paperwork. I just felt better just getting it off my back as soon as possible, and I had no regrets about that.

Did you do any investing at all in the last couple of years?

Yeah. Yes, I did, just with index Fund calling your advice. And that has paid off as well.

Okay, so you've been, what, contributing to a 401 or a Roth IRA or what have you been doing?

Yep, contributing to backdoor Roth IRA. My work does not have a 401k per se. We actually have a pension system that we contribute to.

Okay, so you're saving for retirement, and you paid off your student loans in less than two years, which tells me you didn't spend that much money.

No.

How did you maintain that kind of spending discipline?

Well, I just. Like you mentioned in your books and the podcast, I just inflated my lifestyle just a tiny bit after my training, and I've just been saving everything else. I don't live an extravagant lifestyle. I'm pretty happy living simply. And I just knew that I wanted to be financially independent as soon as possible.

So is there anybody else involved in your financial life? Do you have a partner, a spouse, or any kids involved?

No, I am single.

Okay. Do you think that would have been harder to do, what you did the last couple of years, if there had been?

I think it would have been a little bit harder to do that if I had other people in my life. I think we would. If I had a partner, I would try to make sure that we were both on the same page financially before I would have tackled my student loans the way that I did.

That's one nice thing about not having one is you can do whatever you want.

Yeah, exactly. Yeah. It was definitely much easier just being on my own, but I think I still would have paid them off in a similar amount of time, even if I did have a partner.

So, Corey, I understand that you had some health difficulties while you were going through this process. Tell us what happened to you.

Yeah, so just over a year ago, I was out running and. And then I was about a mile in. Then all of a sudden, I started having some visual changes, which was obviously not normal. And I looked at my phone and I really couldn't read it. So I called for help and then got to the hospital and did some tests on me. Then they told me that I had had a stroke. I had a vertebral artery dissection. They think the clot formed in there and then shot off into the brain.

And this was at what stage you were a resident? You were an attending then?

I was an attending then just about a year in.

Okay, so apparently that didn't stop your ability to earn.

No, no. Fortunately, I took your advice. Had gotten disability insurance when I was in residency. Fortunately, I was able to Use the disability income and still put money toward my savings and paying off student loans.

How big was the benefit you bought during residency?

So as an attending, I got around $8,000 a month, I believe.

Okay, so did you upgrade it when you became an attending?

Yes, I did.

Okay, so you had three or four or 5,000 or something as a resident and then you upgraded it to 8 as an attending, is that right?

I believe so, yes. Plus, my employer also has short and long term disability insurance as well.

Okay, so the total amount of disability insurance you had in place when the.

Stroke happened was what, probably about nine or $10,000 a month.

Okay. And so did you have to use it? Were you disabled?

I was disabled, yes. I couldn't work because one of my deficits was reading. I actually, I had to teach myself how to read again.

Whoa.

Yeah.

So are you still on disability insurance benefits?

No, no, I was out of work for three months doing speech and occupational therapy and then they would clear me back to work.

So just three months that total, you.

Were out three months? Yep.

Wow, that's scary, huh?

It was super scary. Yeah. I actually had to take driver's training again, get recertified in that. And yeah, it was, it was a quite a long process. I had to do a neuropsych evaluation, about 6 hour test to make sure I could still, you know, process everything that could be going on in the operating room. And fortunately that went fine and been able to work again without any sort of restrictions.

Well, I have a pretty good idea how you're going to answer this next question, but I'm going to ask it anyway. What advice do you have to those docs in residency that are putting off buying their disability insurance?

I would say you never know what can happen. I've. I've talked to all of my residents about disability insurance. Now I feel like I'm kind of the poster child of disability insurance. Even though it is expensive, it is so worth it. Like you've said in your podcast, one out of seven physicians end up having to use the disability insurance. So I think it is so important that you need to protect your investment that you've made into. Go into medicine and protect your income. Yeah.

So what, what now? What are your other financial goals? What are you hoping to accomplish in your financial life?

I would like to be financially independent within the next 10 to 15 years or so and eventually I'd like to buy a house as well.

So you're just going to basically take what was going towards student loans and start investing it toward a Down payment and some additional retirement savings. Are you planning to increase your spending at this point? Is this kind of the end of your live like a resident period?

You know, not at this time. I don't really need a lot in the way of stuff, so I just kind of keep on living the way I am, maybe travel a little bit more. But I don't need to live extravagantly. I'm very happy the way I'm living right now.

Okay, so let's say there's somebody that's like you were, you know, five, six years ago. They're a third year medical student or a fourth year medical student and they're really feeling the weight. They've got 200 or 300 or $400,000 sitting on their shoulders. What advice do you have for them?

First thing I would tell them is to read your books. First of all, they were very instrumental in the way that I've been saving and investing over the past several years. And I would also tell them to sit down and try to figure out, okay, how am I going to pay this off? Whether it's going to be through the public service loan forgiveness, or just try to save as much as you can and then try to pay them off.

What about some of these people that are afraid to go to medical school? They're afraid to borrow a quarter million dollars to pay for medical school. Do you think that they should be or they shouldn't be having come out the other side of it?

You know, that really didn't worry me when I was going through training. I think being a physician, you're always going to have a job that is very well paying. So I don't think it's really something to be too concerned about. I think as long as you have good spending and saving habits, you'll be able to manage the loans just fine.

Yeah, I'm guessing you have a budget.

Actually, I don't.

No budget at all. You've just already trained yourself not to spend too much money?

Yeah, I just, I use the Mint mobile app and just kind of look at how much I've been spending and I just kind of go from there.

Figure it's good enough. No reason to turn the screws any harder, huh?

No, no. I've been successful up to this point. I just continue on what I'm doing.

So looking back here, a couple of years ago, you had this plan, right? You hadn't actually gotten an attending paycheck yet, but you had this plan. Looking back now, was it easier or harder than you thought it was? Going to be two years ago.

It was easier than I thought it would be. Like I said, I started paying off the student loans during residency, and it's kind of like the snowball effect. It started a little bit here and there, and then once it became an attending, it just. It kind of. I paid off more and more. And as I started seeing the individual loans getting paid off, I just threw more money at them, and it was. It's just so gratifying to see each loan get paid off. Yeah.

So what was the typical check you'd write in a given month to pay off your loans?

It was probably around $6,000 or more. And then if I. Once I had a quarterly bonus, it could be, you know, anywhere. 20 to $40,000.

Yeah. So the quarterly bonuses made a big chunk of it. It sounds like.

They sure did. Yes.

Because it doesn't feel like that's your real income. Your real income's the other check you're getting.

Exactly. Yeah.

Almost a mental game there. Very cool. Well, this is pretty awesome. I'm totally impressed, Corey. Two years is awesome, especially for somebody with an above average loan burden. So congratulations to you on accomplishing this goal, and thank you so much for coming on the Milestones to Millionaire podcast to inspire others to do the same.

Thank you, Dr. Dalle.

All right, well, that was a pretty impressive accomplishment. I was impressed. Just to see someone pay off their student loans in two years, that's no joke. I mean, $260,000 by the time you're two years out of training is awesome. If you can do that, you should totally give yourself a pat on the back. If you can do it and save for retirement, that's even better. And if you can do all that, despite becoming disabled in the middle of it and having to teach yourself how to read and drive again, you're practically Superman. So I hope you find that as inspiring as I do. But we ought to talk about something here, and that is disability insurance. We've talked about it before on this podcast, and obviously we talk about it all the time at the White Coat Investor. It is chapter one of the White Coat Investors Financial Boot Camp. It's chapter one for a reason. Because if you don't have disability insurance and something happens to you, like happened to Corey, it can torpedo your entire plan. Right. Nobody cares that you just invested a decade and a half into your ability to trade your time for money at a high rate. Nobody cares if you haven't insured that huge asset that you now own. It's not going to be Worth anything. Nobody's going to pay you for having gone to medical school, Right. Except a disability insurance policy. So that is how you insure that asset that you have. Now, his benefit wasn't huge, right? It was 8000 or $10,000 total between the two policies. But 8000 or $10,000 is far better than nothing. And honestly, I don't even know if a brand new attending has worked for long enough to actually get Social Security disability benefit. You have to put in a certain number of quarters. The younger you are, the fewer the quarters it is. I think it can be as few as six quarters, but I don't know that that's necessarily the case for someone in their 30s. I'd have to look at the numbers. Exactly. But the point is, it's hard. It takes a long time. You often have to get a lawyer to get Social Security disability, and you have to be disabled from being able to do anything in order to qualify for that. Most of these good policies that you buy from our recommended agents from the big five or six companies don't require you to not be able to do anything. They just require you to not be able to do your specialty. And you know what, if you can't read, you probably can't do anesthesia. That's enough to pay out the entire benefit. And so that's why it's important to buy this stuff. And I hope hearing a real life example of someone who had to use it is helpful to you. Now, he didn't have to use it for long and that happens a lot, right? He said it was only like three months. And so I don't even know if he got into the long term disability policies that he had or in them for very long. Sounds like he had a short term disability policy as well. And that's a decision you have to make. Short term disability, it's bad, but it's not necessarily a financial catastrophe if you can't earn for three months or so. It's not the end of the world. If you've got a three month emergency fund, you've got the money to live on for those three months. In actuality, when you talk to people who have been disabled, it's really four months though, because they tend to not actually pay you that benefit until a month after the elimination period ends.

A little bit of a. I don't.

Know if it's a scam there, but that's the way it works. So keep in mind it's maybe a four month emergency fund is the right way to go, but that's the deal with short term disability, right, that people use it sometimes it gets used a lot for maternity kind of related stuff is where I see it. Get used a lot. Some policies will consider just like a regular uncomplicated pregnancy disability for a few months and actually pay you for that. So that's worth looking into if you're planning on having a baby. But anyway, the big financial catastrophe, though, is a long term disability. I mean, as you guys know, at least those of you who take care of strokes, not all strokes get better. Even in a young person that's doing rehab like crazy, it doesn't always get better. There is really no guarantee that he regained his ability to practice anesthesia. Not to mention there's no guarantee that this sort of thing can happen to him again. And so the real financial catastrophe is not being able to earn for the rest of your 30s, your 40s, your 50s, and your 60s, right? But at least if that had happened to him, he'd be getting $10,000 a month for the next 30, 35 years and hopefully adjusted to inflation as it goes. So important, important, important stuff to buy. I can't emphasize that enough now. I no longer have disability insurance, but I'm also financially independent. You don't have to keep this stuff forever. I know it's expensive. Some of you are paying 4%, 5%, 6% of your disability insurance benefit, right? So if you're getting a $10,000 a month benefit, you might be paying $500 a month to get that. And if you have a $20,000 benefit, it might be twice that much. I understand it's expensive. So when you get financially independent, maybe give yourself a little cushion another year or two, maybe go ahead and cancel your policy. It's okay, right? You don't need it forever. You only need it when you need to protect against a financial catastrophe. Keep in mind there are some policies that have like a graduated payment where you pay less in the first few years and you end up paying more later. But that's okay. If you're going for early financial independence, you actually come out ahead with those sorts of policies. So you can look for those if that's really your financial goal. If you only expect to be paying these Premiums until you're 40 or 45, you may want to look into a policy that does that. If you are finding our podcasts 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 the and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and White Coat Investor can help. All right, this has been another episode of the Milestones to Millionaire podcast where we feature you and your stories to inspire others to accomplish the milestones that you have already accomplished. You can apply to come on at whitecoatinvestor.com milestones till next week. Keep your head up, shoulders back. Use you've got this. We'll see you next time. 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.