MtoM #152: Neuroradiologist Hits a Net Worth of Half a Million Dollars Upon Exiting Training and Finance 101: Schedule A Tax Return

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 152. Neuroradiologist hits a net worth of half a million dollars upon exiting training. Our sponsor for this particular episode is the White Coat Investor. You ever find yourself wishing there was somewhere to go to ask your finance, insurance or investing questions? The White Coat Investor community is a great place to turn. We have a thriving community across all of our social Facebook, Twitter, Instagram, Reddit and our WCI forum. We've been discussing solutions to your money problems since 2011. Join the Conversation with thousands of other White Coat Investors. Follow WCI on your favorite social media platform for financial resources, tips and strategies. Just head to your platform of choice and search for the White Coat Investor. You can do this and the White Coat Investor can help. All right, if you're listening to this podcast, you may or may not be aware of our WCI101. So if you go to whitecoatinvestor.com basics, you can get connected with WCI101. And if you're feeling overwhelmed or uncertain about managing your money, your investments or your insurance, this is a way for you to review and learn the basic principles and concepts of finance for high earners. Right? You've had years of school, finance was not part of the curriculum, and high income alone is not enough to build the life you've envisioned. So you should subscribe to WCI101 and learn how to turn your income into wealth. What is WCI101? This is a free email series that will help you gain the confidence to make informed decisions about your money and start taking steps toward achieving your financial goals. Basically, it's a long series of emails, short emails, each of them on one little topic that you'll get in your email box. Okay, so our mission is to empower you to make well informed financial decisions, avoid getting ripped off, and learn how to transform your high income into lasting wealth. There are two things you need to do to do that. The first one is become financially literate. That's what this series is for, to help you understand the language of finance like you understand the language of medicine or dentistry or law or whatever your profession is. The second thing requires you to become a little bit different person, to become financially disciplined, if you will. But that combination of financial literacy and financial discipline is so rare that it's like a superpower if you have both of them in our society because there are so many people out there. That don't know anything about finance. And even if they did, they can't maintain the discipline to do it. Our guest today on the Milestones podcast has both of these, both financial literacy and financial discipline. He's super nervous to come on the podcast, but volunteered to come on and share your story because he wants to be able to help you. And it is an inspiring story, what he's done, but you'll recognize that he's a little bit nervous on it, and that's okay, right? I mean, what better way than to have somebody that can basically show you that he's just like you and what he did is completely reproducible. There's no reason anybody else can't do it. And so let's take a listen to this podcast and stick around. Afterward, we're going to talk a little bit about a really important part of your tax return schedule. A My guest today on the Milestones to Millionaire podcast is June. Welcome to the podcast.

Thank you. Thank you. Glad to be here.

All right, well, tell everybody what you do for a living and where you're at in your career.

I. I'm a neuroradiologist. I am about one and a half years out of fellowship, and I work overnight as emergency for emergency radiology.

Cool. And we took a little while to get you on here. You applied a while back, and the milestone you applied for, I think, was hitting a net worth of half a million, actually, not very far out of training. Obviously, things continue to grow for most people if they're doing things right. But tell us about this. I mean, this is unusual for somebody to have even a positive net worth coming out of training. So tell us how you managed to do so well, really, during your training.

Yeah. So there was a combination of things. Like, first, I didn't have any school debt. My parents and family paid for my medical school education, so that helped. And learning about wci, about this whole community just before I started internship and then applying the lessons throughout my residency, I have a saving rate of close to 50 to 60% during residency, and that's how I did it. Along with a very cooperative wife.

Very cooperative wife. Does your wife work?

Yes. So she is real estate, property management. And she made about $50,000 every year. So she brought in that sort of income into the family right from the get go.

Okay. Any kids?

One.

All right. And how long was your training? You're a neuroradiologist. Right. So radiology residency plus a neurofellowship. How long? Total?

So total is a six years.

Six years. So for six years you guys made something like $100,000 a year, more or less. Is that right? Or was there a bunch of moonlighting or something?

There's actually a bunch of moonlighting. So our income range from, I think it was from 85k to at my peak was about 166k a year.

For the household?

Yeah, for the household. For the household.

So 85 to $166,000 a year for six years. During training, you say you saved maybe half of it, is that right? Half of the gross, yes. Okay, so that means you were living on something like 40 to $80,000. You were living like a resident.

Exactly. Yeah. But yeah, it was a combination of like being able to do as much money as I can and then budgeting well and following the budget and also packing lunch and dinner every day.

So you mentioned that you kind of found out about wci, kind of got interested in finance about the time you started training do back then. What was it that made you come into contact with WCI or got you interested in this stuff?

So it was right after the match. My thought process, I've matched. I'm just waiting. So time to start learning about financial education, how I'm going to deal with my financial life going forward. One thing when I started learning, I was learning about stocks, bonds, REITs, all that. And then when I started looking for, well, diversified portfolio, that's where I stumbled on WCI. The 150 portfolio. Better than yours. I think that's.

That was your first contact with wci?

Yeah. And that led into everything. Like from there I just went down the rabbit hole and I've been listening to your podcast ever since.

Cool, cool. And now you're on the podcast. So this is a fun little turn of events.

Yeah.

Okay, so at some point you had a conversation with your W that being a little bit unusual financially was something you wanted to do. How did that conversation go?

So when we first started dating, we were very open with each other and I told her, I'm learning all this and this is the plan going in, that I want to save as much as we can. And then, because if we hit the 50% saving rate, you hit 5 and 10 to 15 years. At least that's what the number's given as long as you don't increase your lifestyle. So with that conversation, she was in agreement with it and I built in some slack into the budget, so I didn't allocate every single dollar. So even though I save 50 to 60%, that's probably like 5 to 10%. Probably. That's not allocated. So that gives them the slack. When you want to have fun, you want to do something out of the ordinary, you can still have the fun. So it doesn't make it a chore when you're trying to save that much money.

What part of the country do you guys live in? Is it an expensive place or. Not really.

So when I was in residency, it was in Connecticut.

Okay, that's not a cheap place.

No, but we make do. We got a regular size apartment for rental. We have both. Well, she has a paid off car. I had a loan for my car for like 15,000 going into residency, but we didn't buy a new car. We didn't buy expensive furniture. I think we just shop at Ikea. So you get regular price furniture instead of like couple thousand dollars furniture things. Small, small things like that help keep us, keeps the budget in check.

Now you mentioned that your parents paid for your medical school. Did that come. You know, clearly that means they had at least a pretty good income or pretty good savings or made massive sacrifices for you. What lessons did you learn from them about managing money?

So my parents were pretty frugal, but at the same time they made sure that as a family we had everything we need. It's not like we don't have enough items around us or enough things that we want. We have everything we need, but not an excessive amount. And that helped model how I think about how I spend money to this day. I would get just the right level of price to come in, but I would never spend the excessive amount to get just slightly higher in quality or slightly more stuff.

Other than them paying for school. That was all you got from them? You haven't had a big inheritance or anything like that?

No, but my wife did bring in. So she saved about $50,000 before coming into the relationship. So her net worth started a lot higher than mine. Mine was about minus 15,000, hers was about 50 something thousand.

Okay, you got married. What about the end of school or what?

No, no, actually somewhere in the middle of residency. So even when we were boyfriend and girlfriends and when she was my fiance, we were pretty open with this. And I was helping her manage her money too, at the same time managing both sides of budgets.

All right, so let's say there's somebody else out there that's just like you were a few years ago. Maybe they have some student loans, maybe they don't. But they're starting their residency and they're like, I don't want to Wait until I'm an attending to start building wealth. I want to start doing this in residency. What kind of tips do you have for them?

So I think the main thing I think about and how I think I was successful in doing this is creating that budget and also having that early conversation with your spouse, because it takes two to make this budget a success. And the other thing that I looked at is without trying to compromise education, I was looking at the right kind of internship, the right kind of residency, and the right kind of fellowship. So for example, I chose a internship in a high, well paid location, but with a relatively lower cost of living. So Staten island was where I did my internship at. While pay was a New York rate, the rental was not New York apartment rentals cost. So that helped. And then for residency, my residency offered internal moonlighting, which I took big advantage of. And that's how I helped supplement the income and able to save that much money.

You're now a year and a half out. I mean, it's December now. What's happened in the last year and a half to your net worth? I assume you haven't dramatically increased your lifestyle, given your philosophy on this stuff. What changed when you became an attending?

So actually I just closed on a house, so my net worth is right now, give or take around 800,000. We did increase our cost of living, but to what I am comfortable with. And given the current inflation rate and all that, I think we're going to be aiming for saving rates of somewhere between 25 and 40%. And that's because I felt that it is appropriate to increase to a certain degree and then keep it at that. But the additional cost nowadays comes from the mortgage, all the insurance that you put into it, and setting aside what I considered fun money for either my wife, for both my wife and me, where there's no question asked, you can spend whatever you want just to keep the Lifestyle Good.

So 2023 is going to be the first year when you were in attending for the full year. What do you think about your new tax bill?

Oh, that new tax bill is heavy. I actually made a mistake. For the first, I want to say, seven months of my being attending, I checked off the wrong box at the W9 and I realized they're taking way too much money for me.

So you're looking at a big refund for this year, huh?

Yes, I am.

Well, I'm sure you'll plow that right back into savings. And instead of 25%, it may be 40%. So how's your Net worth broken down. You provided some of this in your notes, and I think it's kind of an interesting breakdown. Tell us what your net worth is composed of now.

So now, because I did a whole bunch of 401 rollover and convert a lot of the money into Roth. So I have about 400,000 in Roth right now, $120,000 in emergency fund, $65,000 in HSA, about $83,000 in brokerage accounts, and about $90,000 in 401k.

That's a big HSA for somebody a year and a half out. So you had a high deductible plan the whole way through training and maxed out the HSA contribution every year, or how did you get that?

Yeah, I maxed it out. The moment I got access to, which is like the first, actually the starting of second year of residency, it became available and I just been maxing it out ever since, and I have not touched a single penny of it yet. Been saving all the receipts.

Yeah. And you're obviously invest. You're investing it, too. It's invested in mutual funds, right?

Yes, it is.

Well, Jun, you've done awesome. This is really impressive, actually. And at the rate you're building wealth, you are going to be financial independent really quickly, and then you're going to face the same existential dilemma that many of us face of what you want to do with the rest of your life. Have you given any thought to how your ability to accumulate wealth is going to affect your career?

Yes. So right now I am doing the overnight shift where I get a lot of free time. I work one week on, two weeks off. My idea is to allow myself to enjoy the seasons, I think, as they say it, the seasons of life with my family. So right now I have a young one that's about two years old. To me, the greatest joy is being able to spend more time at home. So I think with the financial independence, I would be able to schedule my life as I see fit with my family. So maybe when they go to school, I would probably switch to a day job and work without working the weekend so that I get more time with family.

Well, Dr. Lee, congratulations on your success. Thank you so much for coming onto the Milestones podcast to share it with others and inspire them to do the same.

Thank you. Thank you. Glad to be here. I'm happy to share.

All right. I love that interview. It's pretty powerful in that it shows you what can happen if you apply these principles and don't have student loans. Right. 75% of medical students come out with student loans, right? And the average is 200,000. There's plenty of people with 300 or 400,000. And we encourage them, hey, you know, try to get these student loans paid off within two to five years of coming out of training. And that tends to be a big piece of your financial life for those first few years as an attendee. But what if you didn't have those? What if you're in that 25% whose parents paid for school, or you had some other method of paying for school? Then what could happen, especially if you really get started as soon as you start earning as an intern, I mean, he's accumulated, what'd you say, $60,000 or something in an HSA, basically in training, right? That's pretty awesome. And it just goes to show you that the earlier you start, the higher your savings rate, the fewer mistakes you make, the better off you're going to be. Now, I don't want someone that's 45 and just starting to learn this stuff to feel like they're way behind the curb because they've heard Jun Lee and his success. I mean, the truth is, most of us have a high enough income that even with a late start, we can still do just fine. But it is pretty powerful to see what happens when you start that early. Right? You've seen all those compound interest charts of what it means to have an extra five or 10 years to compound your wealth throughout your career. It's just pretty incredible what can happen. So whether you have student loans or you don't have student loans, become financially literate, become financially disciplined, and you'll be surprised how quickly you can get your financial ducks in a row, how quickly you can build wealth, and how quickly you can get into a position of strength where you can help those around you, where you can help your kids not have student loans, or you can help your family members when they can't afford something and it's easily affordable for you or whatever the case might be. All right, I promised you we were going to talk a little bit about Schedule A. Schedule A is your itemized deductions. All right? So every year when you do your tax return, you have a choice between itemized deductions and the standard deduction. For 2024, the standard deduction if you are filing single is $14,600. That means you can earn $14,600 and not pay any federal income taxes. If you are married filing jointly, that amount is $29,200. So anybody with an income of under $29,200 does not pay income tax, at least federal income tax. That's what the standard deduction means. However, if you have enough itemized deductions that it is more than that $14,600 or $29,200, you can fill out Schedule A and take that higher itemized deduction instead. So what are itemized deductions? Well, all you got to do is go to Schedule A and you will see. Okay, the first category is medical and dental expenses, and this is limited to the amount above 7.5% of your income. So if you're making $300,000, only the amount above $21,000 that you spent on medical and dental expenses or $22,500 that you spent on medical and dental expenses can go on Schedule A as an itemized deduction. So for most high earners, they usually don't get much here. But you know who might? People who are paying for, like in vitro fertilization. You know, you might drop 30 or 40 or $50,000 in a year on in vitro, and that'll get you into the category where you can deduct some of that as a medical and dental expense on your Schedule A. All right, the next category is taxes. And so that is state and local taxes, and that can be sales taxes as well and real estate taxes. The problem here is this is limited to $10,000, and many of you pay far more than $10,000 in state and local taxes. There are some workarounds in some states. If you pay your state taxes through your business. A lot of times you can get around this $10,000 limit. It becomes a deduction to your business. And of course, your business then passes less income on to you. Then you get a credit on your personal taxes for that. That's the way it works now in Utah, and I don't know, it might be 30 states or something. Now, that will allow you to deduct more taxes than that $10,000, but on Schedule A, it's $10,000. The next category is interest paid, and the main type of interest on here is mortgage interest. You've heard buying a house is a tax break, right? It's a tax deduction. Well, what's deductible? The property taxes are deductible under the tax section, and the mortgage interest is deductible. There is a limitation on how large of a mortgage you can get and still have it be deductible. Don't quote me on this. I think it's $750,000. Once the mortgage is bigger than that, the interest is not deductible. Well, the interest on the first $750,000 is, but not above and beyond that. But these days, if you got a new mortgage and you got an interest rate of 7 or 8%, that's a lot of money, right? The interest on a $700,000 mortgage at 8% is $56,000 a year. That's a big old tax deduction. Now, it doesn't necessarily mean you're coming out ahead because it's deductible. You still got to pay the $56,000, but at least you can do it with pre tax money. The next category on Schedule A is gifts to charity. You've heard that gifts to charity are tax deductible. That is not true unless you itemize. If you're not itemizing, you can give hundreds or even thousands of dollars to charity, and it's not helping your tax situation at all. It's helping the charity. It's probably helping your soul, but it's not helping your tax bill. There's no real limit on that. That's not entirely true. I think there is a limit that it's different. For cash and securities. I want to say it's 30% of your gross income for cash. I want to say no for securities and 60% for cash or something like that. It's a pretty big number, right? If you're making two or three or $400,000 and you're giving away even tens of thousands of dollars to charity each year, it's all going to be deductible. But if for some reason you gave away like a million dollars to charity, it might not all be deductible that year. I think you can carry it forward and use it in future years. But the point is, there is a limitation on that. It's just pretty high. It's not like the tax limitation casualty and theft losses go on there. If you had your bicycle stolen, you can add that onto your Schedule A and a few other minor things, but that's basically Schedule a. It's mostly $10,000 in taxes, your mortg and gifts to charity. If that amount is more than $14,600 or $29,200, then you itemize. If not, you take the standard deduction and consider it a nice little gift from the IRS. Either way, those deductions plug in on line 12, which is near the bottom of the first page on your 1040 and are subtracted from your adjustable gross income and then you get your taxable income and that's what your tax bill is calculated on, is your taxable income. Hope that's helpful for those who don't really understand how that itemized deduction thing actually works. All right, again, our sponsor for this episode is the White Coat Investor. Social media platforms. If you ever find yourself wishing there was somewhere to go to ask your finance, insurance or investing questions, check out our communities. We've got four communities. We've got the WCIForum at forum.whitecoatinvestor.com We've got our subreddit White Coat Investor on Reddit. We've got our Facebook group, White Coat Investors, right? That one is relatively private compared to the other ones, but there's 100,000 people in there, so it's not that private. We also have the few financially empowered women. They have their own Facebook group as well as frequent events where they get together and have speakers and and small subgroups where they chat, so on and so forth. So there's those four communities. But we also have every social media platform, right? We've got Facebook and Twitter and Instagram. We've even got Pinterest and TikTok and YouTube and those sorts of things. 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It's not you competing with anybody else in the community. It's you reaching your goals. And we want to help you to get there. 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.