MtoM #153: Emergency Medicine Physician Pays Off $315,000 of Student Loans in One Year and Finance 101: Health Insurance in Early Retirement

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 153. Emergency position. Pays off $315,000 in student loans in one year. If you're like most doctors, nobody taught you anything about personal finance or investing during your undergrad, professional school or residency. And even though your family and perhaps even your business rely on you to be the chief financial officer, you've never been given the tools to succeed. Enroll in WCI Financial Bootcamp, a free educational email series, and learn to convert your high income to wealth. You will learn the basics of investing, saving, insurance and more. Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com financialbootcamp to sign up today. You can do this and the White Coat Investor can help. Okay, this podcast drops on January 15th. We're recording it back in December, actually before Christmas, but it drops on January 15th. So if you are a member of the financially empowered women, aka the Few, there is an event January 17, 2024. We know what time that is in the evening. Six Mountain. It is going to be. On the topic of work, life, balance, we have the Incredible Dawn Baker, Dr. Dawn Baker, who will be speaking at that event. You're going to love her. If you've never heard dawn speak, she's very awesome and she's going to teach you to stop the overwhelm of trying to be all the things to all the people and create your own unique blend of work and life. You can sign up for that@whitecoatinvestor.com Few it's F E W. That's totally free, by the way. If you're not a part of that group, that is a free group to be a part of. It is a free event. No reason not to sign up for it. So it's pretty awesome. In fact, at the conference this year, we're going to have an event for the few. Kind of a women's happy hour, but it's going to be pretty awesome. I say we, and when I say we, I mean not me, but the women of WCI who actually run this entire thing. I actually have nothing to do with it except tell you about it on the podcast. All right, we have a great guest today. This is a pretty awesome accomplishment that these two have done. So we'll get them on the line and talk to them about that, but stick around afterward. We're going to talk about health insurance in early retirement. Our guests today on the Milestones to Millionaire podcast have completed a pretty awesome goal in a pretty short time period. This is a husband and wife who are both. Well, he is an emergency physician and she is a stay at home mom to four children. So single income family, and they have accomplished some awesome stuff. So welcome to the podcast, both of you.

Thank you, thank you for having us.

So who wants to give the big news? Tell us what you did.

Okay, so basically we paid off $315,000 in student loans in one year, and it was a lot of work, but it was definitely paid off. Now we feel free that we can focus on other things in life, and now we're kind of moving on to other things.

So I'm gobsmacked by this, right, Because I'm an emergency doc. I did not make $315,000 last year practicing emergency medicine. Now, granted, I'm part time, but I know what emergency docs make. And when you look at the field, on average, the average emergency physician in the country is making about $375,000. So after paying taxes on that, you're probably left with, you know, 250, $275,000. And yet you somehow managed to pay off $315,000 in a year, which is super impressive to me. So the only logical way you could have done that is by working a whole bunch. So tell us about how much you worked in this last year.

Yeah, that's true. I worked more than I did in residency. So you hear a lot with these financial podcasts and such. Live like a resident and work like a. And essentially I worked harder than a resident and I lived like a resident. So in residency, you know, the hardest I worked was my intern year. I'd average about 18 shifts a month, and first year out of residency, I would average 20 shifts a month and I'd get up to 24 shifts a month. For those that don't work in ER, that's a lot. I'd say the average ER doctor is working somewhere around 12, 13, maybe 14 shifts a month. And I was hanging around 20 shifts a month. So essentially I had a full time job and then I had a part time job. So I was essentially working two jobs.

How long are these shifts? These eights, nines, tens, twelves, what are they?

It's a mix of tens and twelves.

Tens and twelves. So, yeah, I would, you know, I consider full time emergency medicine. 15, 8s. I consider 15 8s full time or 12 12s. That's essentially what a nurse works, right? Is 12 12s. They work three 12s a week for four weeks. Right? 12 12s. And you're talking about doing 20 of these. This is a recipe for burnout. If done long term. What do you think about that? As you work this hard? Could you imagine yourself working this hard for much of your career?

So I've already toned it down a little bit. Now I'm hanging around 16 or 17 shifts a month after. After paying off student loans. I'm like, okay, now I can. Now I can tone it back a bit. And now I'm hanging around, like, 16, 17 shifts a month, you know? But it definitely helps to legitimately enjoy my work. So there's never any time that I've been going into work where I've thought, like, I just don't want to go to work today.

It's.

It's never been a real burden for me because I legitimately enjoy it. And that's most of the reason why I got into it, is because that's just always what I wanted to do, is I always wanted to be an ER doctor. So that's. That definitely helps.

And these are rotating shifts. Yeah. These are evenings and nights and everything, right?

Yeah, yeah, these are everything.

Okay, so this is deliberate. I mean, you did this deliberately to pay off these loans. This was part of the plan. You asked for 20 or 24 shifts a month.

That's right.

Yeah. Yeah. Okay. So did you guys talk about this before the year started? I mean, I'm curious to hear from your good wife. What did you think about this plan for him to work 20 to 24 shifts a month? I mean, you'd been through residency with him. You know what 20 looked like. What did you think about him doing that for another year?

It was a lot to take, but I knew that we had that goal to pay off our loan in a year and a half, and we did it in a year, and I feel like it paid off. And we had a baby during that time, too, so he was working a ton, and I was pregnant, and we just worked together as a team, so we definitely. We read the books. I read them first, and then I introduced him the book or both of your books. And I just, like, was so excited to set these goals and achieve them.

So who was the first person that kind of got on board with this financial literacy stuff?

I actually did.

You did? Okay.

I found the book at the library, or I heard about it, and I rented at the library in residency, and I was just so excited I'd never really read any financial book. And so for me it was like a light bulb went off and I was just so excited to follow everything that you had preached in your books. And I introduced the books to him and he kind of looked at him.

I kind of had tunnel vision through, you know, medical school and residency. I was kind of tunnel visioned in on, you know, okay, this, this is what I'm doing. I'm doing medical school, I'm doing residency. I'm going to put all, put all my energy into medical training. And then she was kind of like, well, we're going to be in an interesting financial situation, so let me educate myself financially.

Yeah. So I was kind of in charge of the finances and he was a workhorse. And then we both, I mean, we came to the same, you know, page.

Interesting is, is an interesting way to describe it. You know, I mean, a lot of people look at the $315,000 in student loans and would that as a desperate financial situation. And to be fair, I don't recall my book ever telling you you had to be out of debt in 18 months, much less 12 months.

But we set ourselves high.

What motivated you to set such an aggressive goal?

I guess kind of laying the groundwork for the rest of our lives. The way I see it is it's the easiest time to do it is right up front. If you think about it. We have four kids. Our expenses are only going to be in a trajectory upwards the rest of our lives until they move out of the house, you know, until they're out of college, essentially. So the way I see it, our costs are going to be the lowest right now, early on, and with the whole Covid pause on student loans, we had our loans at 0% interest. And I also saw that as another opportunity to just pay down the principal instead of kind of putting it off. Instead of being like, oh, it's at 0%, let's just kind of forget about it. The way I saw it was, oh, this is a great opportunity to pay down the principal and get rid of these loans before we start racking up interest.

Did you happen to work on any other financial goals during the, during the last year or was everything going toward this debt?

Not really.

Yeah, we maxed out our 401k.

Yeah, you still maxed out a 401. Did you save up an emergency fund or pay off a car or pay off some credit cards or anything like that?

Yes, we paid off all our credit cards. We've always kept a zero balance on all Our credit cards every month, even through residency. That was a big goal of ours. And save for a house after we.

Paid off loans, both of our.

Both of our cars were paid off in residency. We kind of. So that was nice, you know, and then we did have some help along the way. You know, like right now we're. We've been living in our. My parents next gen living space. That's definitely a huge help.

Is that free rent or reduced rent or what?

That's free rent, yeah.

Can't beat that. That certainly helps reducing your expenses. So is that the same place you went to residency? Were you living there during residency?

No, we were out of state. We were in another state doing residency, so we paid rent and did all the normal things all through residency.

So you moved home. And I mean, this isn't quite living with mom and dad, but it doesn't sound like it's that different. This is a big sacrifice to get rid of this debt really quickly.

Yeah, we. So we, we do have our own living space, but we are under mom and dad's roof.

Yeah. Have you told them about this goal?

Yeah, they know about it and yeah, we went out and celebrated. You know, I took them out to dinner and.

Awesome.

Yeah, we've.

Yeah, that's pretty cool. Okay, so how'd you end up with $315,000 anyway?

So I went to a fairly cheap medical school, so I think nowadays that's a pretty average or maybe even below average debt, I would probably say. So I went to a cheap medical school and I didn't have any college debt. So undergrad was all paid for and so that's all medical school debt.

Did you feel like you lived it up in medical school or was this like the bare minimum you could borrow to get through?

That was pretty. Pretty bare minimum. We were on a pretty strict budget. We didn't really buy a lot of things. That was pretty bare bones. Yeah.

Did you have kids while you were in medical school?

Yeah.

Yes, we had two in medical school, one in residency, and then one first year out of residency.

Okay. And did either of you work during medical school?

I did graphic design and so I helped out a little bit, but.

But it's hard with two young kids.

Yes. Yeah. I didn't work as much as I would have liked.

Yeah. Very cool. So were you scared during medical school when you started seeing this deck kind of racking up? Do you remember what your emotions were? You know, as this went from 100 to 200 to $300,000?

I don't think I Was ever really scared.

Were you ever scared?

No, I was kind of oblivious to how much money we were actually borrowing. Yeah, didn't really hit us until residency.

Yeah. Yeah, until.

Until residency, when. Yeah, that's. That's when I kind of realized, like, oh, man, like, with our. With our kids in residency, we couldn't really afford to start making payments. So that was kind of like, kind of a shocker. You know, we put our. Our loans and deferment, and then when it came out, that was, you know, Covid hit.

So we had zero percent interest during that time. So that was nice.

Yeah, that's been a nice benefit to a lot of people the last few years.

Yes.

Yeah. Okay, so you pulled this off. What's next for you guys? I mean, I often call paying off your student loans quickly. And by quickly, I mean, you know, less than five years as a trial run for early financial independence. I mean, you keep saving like this. You're fi. In like three years or something, right? I mean, what's your next plan?

So, next plan is to start obtaining rental properties and get into investment properties in real estate and then kind of develop a. Kind of a broad investment portfolio. Get a little bit of investments in stocks and kind of spread out pretty widely. Really?

Do you expect this to be a long term job for you?

We're not sure. We're kind of like playing it by ear.

So maybe not quite ready to buy a house yet then.

Yeah, we're still talking about it. We're not sure. We'll definitely be here another year or two, but after that, it's kind of.

Up in the air. All right, man. So how does it feel? I mean, you worked hard for this for a long time. The student loan monkey is gone. Basically, your net income just went up by $300,000 a year. How does that feel?

It feels great.

Yeah?

Yeah, it really does. It's so nice to be able to put that money towards other things like saving and our future. So it's just nice to have that completely taken care of.

So how much longer does this live, like a resident period last for you guys? Probably.

I mean, we. We're kind of slowly living a little bit better, Living less like residents, you know?

Yeah, we gave ourselves some, like, spending money in our budget, so we didn't feel like we were so restricted. And I think that helped because we had a goal to not make any large purchases during, you know, these first two years out of residency. And I think that helped.

Yeah, I think the not making big purchases part was really, really key. To it. Like, both of our cars are paid off. We didn't buy it. We didn't upgrade our cars. We didn't buy a house. You know, like we said, we're living rent free. Those were the main things, you know. You know, people call it the big three, you know, housing, housing, transportation, and food, really. And we've kind of minimized those, you know.

But even if you'd been paying rent for your basement apartment, because this is what I always get people like, oh, yeah, they did it, but they. But they were able to live in their parents basement apartment for free. Even if you had been paying Ren, you still would have paid it off in 13 months. You know, I mean, you guys crushed it. You absolutely crushed it, which is pretty awesome. All right, what advice do you have for somebody else that, you know, maybe their spouse is in residency and, you know, they're starting to get those residency paychecks and they just kind of realized what a big hole they're in and are feeling maybe a little bit of despair about being three or four hundred thousand dollars in the hole. What advice do you have for them?

I would say listen to your podcast, because that gave me a lot of hope. Read the books and just, like, write down those goals that you have. Because I look back at, like, everything I'd written down, like, all my goals during that time where I was just, like, so excited to, like, start paying off loans. And I think, like, that helped me. Well, every month after residency, we would color in on our, like, a thermometer we had on the wall. We'd printed a throw or we'd drawn a thermometer, and with the kids, we colored in how much we paid off every month. And so it got them excited, it got me excited, and it just helped us, you know, pay those off. But in residency, it was discouraging to not be able to pay anything right away. But because we had those goals and we had agreed to those goals to pay off our loans so quickly. I mean, we would tell people in residency, like, we want to pay off our loans in a year or two years. And they would laugh at us. And I was like, hey, that's why he's laughing now.

Clowns, right?

Exactly. I told my husband, I'm like, if we pay off our loans, like, I want to go on the podcast. Because that is what made me, like, want to pay off our loans so quickly is because I wanted to show people that were in my position that you can do it, even though it looks like a huge, huge burden. Like, you don't think you can. You actually can do it if you set the goals and you stick to it.

Preach it. Awesome. You guys should be super proud of yourselves. You've really done something remarkable.

We really are.

And I think there will be other people who take a lot of inspiration from what you've done. Right. Because it sounds all theoretical. When I write a blog post about it, when I talk to someone who actually did it, that makes it real. So thank you so much for volunteering to be on the podcast. Congratulations on your success, and we look forward to hearing more from you over the years as you accomplish more financial goals.

Yeah. Thank you so much.

Yeah, thanks for having us. And thanks for everything that you do.

All right. Was that awesome or what? Totally impressed, right? $315,000 in one year. One year. That's incredible. I mean, the rate of paying that off is just spectacular, right? I mean, yeah, they had a little bit of help, but it's not like they won the lottery. It's not like some family member died and left them 100 grand. Right? Their parents just let them stay in the basement for a few months. But it's not like that's not a sacrifice. Which of us wants to go back and live in our parents basement in order to pay off our student loans? Right? Not very many of us. But you know what? These two were motivated, they had a goal. And you know what? They can accomplish anything they want to financially in their lives. You know, it wouldn't surprise me at all if they have crafted the most incredible financial life possible within the next five or 10 years and just have a wonderful opportunity to enjoy some luxuries and just be incredibly generous and be able to concentrate on those things that really matter in their lives. You know, his practice, raising their kids, et cetera. Okay, I told you I was going to talk to you a little bit about health insurance and early retirement. And this is a funny thing because it's a common question I see on the forum, the Facebook group, the Reddit, in my email box, it's like, oh, what should I do for health insurance between the time I retire early and age 65 when I become eligible for Medicare, you buy it, right? This cracks me up because there are so many people in America who have never bought health insurance. Yeah, you can buy it just like you buy car insurance just by. Like you buy life insurance just like you buy groceries, just like you pay rent, you can go out and buy health insurance. There's nothing special about health insurance, right? Other than our convoluted system where so often it's purchased, you know, in conjunction with your employer. You know, a typical employer plan like the one we have here at the White Coat Investors, the employer pays 80% and the employees pay 20%. But what happens is people assume that health insurance only costs 20% of what health insurance actually costs. Health insurance is expensive stuff. The first thing you will do if you go out to buy health insurance on the open market, if you call up a health insurance broker in your area and you can just Google health insurance broker in your town and find a bunch of them, is that it's expensive stuff. It might cost you. If you got a family like these folks on the podcast, you're a married couple with a family of four, you're doing pretty good. You can get health insurance for $1,200 a month. It wouldn't be terribly unusual for you to be paying twice that. Health insurance is expensive stuff. And the reason why is because we use it, number one. Number two, healthcare is really expensive. And number three, there's all kinds of inefficiencies built into our stupid healthcare system. You know, all this fighting back and forth between hospitals and docs and insurance companies and pre authorizations and all this stupid stuff that's built into the system, you add it all together and it's just really expensive. So yeah, that's what you do, you buy health insurance. Now what a lot of people can do if they're really into this fire thing, is they are living on what kind of income during those years in their 50s or early 60s. Well, they're often living off some pretty tax preferred income, things like qualified dividends, things like long term capital gains, or better yet, just the principal. If you sell high basis shares of your mutual funds, you might only be paying gains on 10% of it or so. And so you can end up having a pretty low actual taxable income. And what that allows you to do is to quantify, qualify for the subsidies inherent in the Affordable Care Act. You can actually spend a lot of money and still get a big fat ACA subsidy because it's all based on your income, your actual taxable income, not how much you're spending. So if you're spending a bunch of principal or money from your savings or whatever, you may not actually have much taxable income. You may get a big huge ACA subsidy on buying health insurance through the exchange. So if you're in that sort of a situation where your income is really, you know, less than six figures, you will get an ACA subsidy. So consider buying it through the ACA marketplace. But in general, when you have all kinds of choices for health insurance, you just got to decide which end of the spectrum you're on. You know, some people know they have health problems, they're on expensive, you know, rheumatologic medications or neurologic medications or whatever. They know they're going to hit their out of pocket max every year. So these are the people that go for maybe a little bit higher premiums, but they have lower co pays, they have lower coinsurance, they have a better panel of docs and hospitals to choose from. Whereas people who are in a really healthy family where they hardly spend anything on healthcare, they're looking for the low premiums, high deductibles, high insurance, high co pays or high coinsurance, high co pays, maybe not that big of a panel, but they're less likely to use their health insurance. It's more of a catastrophic coverage kind of thing. So you can get a lower premium plan. Those lower premium plans are also often HSA eligible. And so that's pretty awesome if you can put some money away and then pay for those co pays and coinsurance and those sorts of things using pre tax dollars. So if the right plan for you is a high deductible health plan, be sure to use the HSA that comes along with it. But anyway, the main thing is when you go to buy this stuff, you're going to get sticker shock. It's super expensive, right? You thought disability insurance was expensive? Wait till you're actually paying full freight for health insurance. But if you can't afford to pay for your health care, for your health insurance as an early retiree, news flash, you can't afford to retire early. Keep working until you have a bigger nest egg or until you get closer to where Medicare will at least help out. But don't forget that it's not like Medicare is free, right? Medicare is not free. People think their health costs end at 65. Not even close. You know, despite the fact that 2.9 to 3.8% of all the earned income you ever made, which for a high earner is a lot of income, has been taken from you by the government to pay for Medicare, you have to be eligible for Medicare, right? So that means you have to be 65 plus, have worked for at least 40 quarters, be a US citizen or permanent resident for at least five years, or be disabled. Okay, so most of you qualify for that. But that's Medicare Part A, right? Medicare Part A just covers hospitalization. It doesn't Cover doctor visits, it doesn't cover medications. Doctor visits are part B and you have to pay for that. And part D, it covers prescriptions and you have to pay for that. So there's also, you know, all this other stuff, Medicare Part C and Med Advantage plans and all that sort of stuff if you want it. But my point is it's not like it's totally free. When you turn 65, you're going to have to pay something still. So you know, what are your options really for those early retirement years? Well, the first one is you just roll the dice. I don't recommend this. You could, you could go bigger. You know, about 17% of my patients have chosen this option and do not have health insurance despite the fact that many times the government would pay for almost all, all of it through the ACA or if they would just apply for Medicaid. But that's one option is you can go bare. Another one is to just go to a broker and buy health insurance. I've done this myself for a number of years. I know what it costs. It's expensive. If you're self employed you can deduct it, but it's expensive stuff. Another thing you can do is you can keep the health coverage you had from your employer. You just COBRA it, meaning you take over the premium that your employer was paying. You might have only been paying 20% before, now you're paying 100%. But you can keep that plan if it's a particularly great plan or you really like it or you just don't want the hassle of changing. You could do that. You could COBRA your employer's health insurance. I mentioned the aca. Go check it out. Right. Run the numbers, see what your subsidy would be. It's probably significant. If you have less than $100,000 in earned income. I think it actually you can get something up to 120,000 or $130,000. I think these days it's probably family size dependent, but run the numbers and see what you actually get. Another thing you could do is you could get a job. Yeah, lots of people do that in early retirement. It turns out that, you know, they didn't want to retire to nothing after all. They didn't just want to spend all their time golfing so they get an encore job. Maybe it's being a rafting guide. Who knows what it is? But that job might come with health insurance. You might also consider a health sharing organization. These are often Christian based ministries and the equivalent of premiums. I believe they usually call Them shares can be half the price. So it can be dramatically cheaper than health insurance. What you need to remember is that it's not health insurance. There are a number of things that they do not cover that you might see think are covered because they're often covered by health insurance. So you need to really read what's excluded, what is not, and make sure you're okay with that. But these programs do tend to self select a healthier population. If you come down with something that requires expensive neurologic or rheumatologic or oncologic medications, you can always, in the next open enrollment period, just go back into regular health insurance because there's no exclusions now for pre existing conditions. Couple of other options. The Trump administration passed a law, and I believe it's still in effect that allows you just buy a bare bones health insurance plan for up to one year. That sort of a plan can exclude medications and maternity and mental health expenses and have high deductibles and have a really low premium. It's only for one year. So it's a little bit like cobra ing your insurance. It's usually only done short term, but it might be an option for you. It's a little bit like health insurance used to be that plan, but can be a lot less expensive. You can also do medical tourism, you know, for stuff that's a little bit elective. No, it's just cheaper in Thailand. It's cheaper in Mexico. Now you might argue there's reasons for that, but it is an option to help reduce the cost of some things. But you know, health insurance is expensive. It tends to inflate at a rate faster than the general rate of inflation for various reasons. But this is not something that's going to keep you from retiring early if you otherwise have enough money to retire early. Yes, it's a big expense, but there are lots of other big expenses you paid for in your life, like your housing, your groceries and stuff. What you need to realize though is the cost of medical care is much more similar to the cost of your food than it is to the cost of your cell phone. So it's expensive stuff. Expect to pay something for it. All right? Our sponsor is the WCI Financial Boot Camp. And if you're like most doctors, nobody taught you anything about personal finance or investing during your undergrad, professional school or residency. And even though your family and perhaps even your business rely on you to be the Chief financial officer, you've never been given the tools to succeed. So enroll in WCI Financial Bootcamp a free educational email series, and learn to convert your high income to wealth. You will learn the basics of investing, saving, insurance and more. Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com financialbootcamp to sign up today. All right, we've come to the end of another great episode of the Milestones to Millionaire podcast. If you'd like to come on this, you can apply. Just go to whitecoatinvestor.com Milestones, by the way, our sister podcast, the White Coat Investor Podcast. You can also leave your questions on that. If you have questions that you'd like to get answered on the podcast, you can leave those@whitecoatinvestor.com speakpipe and we'll get your questions on. All right, it's been great to be with you. You can do this. I hope you found this episode inspiring. I know I did, and I hope to see a lot of other White Coat investors accomplish the same goal. 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.