MtoM #158: Hospitalist Pays Off Student Loans in Just Over 2 Years and Finance 101: Emergency Funds

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 158. Hospitalist pays off student loans in just over two years. No more wading through dozens of books at the library, scrolling through hundreds of blog posts on dozens of blogs, or checking in daily with online forms. Trying to gain a financial education the way the hobbyists do, for a fraction of the price of hiring a professional financial planner. The Fire your financial advisor online course will take you from feeling anxious and having no plan to having a written financial plan. You can follow the rest of your investing career as a professional and a retiree. This course is the material that should have been taught to you in college, medical school, or residency, but never was. Fire your financial advisor also has a version eligible for CME credit, so get your financial life in order today. Go to whitecoatinvestor.com courses to sign up. You can do this and the White Coat Investor can help. And on that page you can actually learn about our other courses as well. We have one that's continuing financial education we put together using material from our conference every year. We also have our no hype real estate investing course and several other courses there, so check them out. Are you a student? If you're a student, you should be coming to our webinar. This podcast drops on the 19th. The webinar's the 21st, so you might have already missed it if you didn't listen to this in the first three days after a drop. But if you go to whitecoatinvestor.com studentwebinar you can sign up 6 o' clock, Mountain Time, February 21st. It is live and fun, and we're gonna be there teaching about what students need to know about finance. The truth is, I can't come out and talk to you all in person. Never could. There's too many schools, too many students. Frankly, it's too expensive to go out. Cause schools can almost never have any money to pay me to come out, much less pay me something for my time. So this is what we do instead. We put together this webinar once a year. This is the lecture I would give you if I came to your medical school and talked to your class. You're gonna learn about why your patients need you to be financially literate. We're gonna learn about how to become a financially successful doctor. We're gonna talk, for those of you with a little bit of money or second careers or whatever, how to invest during medical School. We're gonna talk probably the most important subject for you students out there, how to not worry about your student loans. We're gonna talk about how to save money during residency interviews and why buying a house during residency may not be a great idea. Becoming financially literate early in your career can be worth millions of dollars over the course of your career. You can't afford to wait until big attending paychecks roll in to learn this stuff. You need to learn it now. So we'll see you on the 21st. Sign up again. Whitecoatinvestor.com studentwebinar all right, we got a great guest today. Stick around afterward. We're going to talk about emergency funds. All right, let's get our guest on the line. My guest today on the Milestones to Millionaire podcast is Claire. Claire, welcome to the podcast.

Thank you so much for having me. I appreciate it.

Tell us what milestone we're celebrating with you today.

So I paid off all of my student loans a couple of months ago, and that's what we're celebrating. I'm super excited about it.

Awesome. Congratulations. How much did you pay off?

$235,000. After all of the interest and all.

Of that, That's a lot of money.

It is a lot. Yeah. It's definitely a lot of money. Not as much as some of the people in my residency had, but certainly a fair chunk of change.

What do you do for a living? How far are you out of residency?

I'm a hospitalist. I'm working on my third year at the hospital that I work at now. So I am six years out of medical school now.

Wow. I mean, lots of people have more debt than this. How'd you keep your debt that low during medical school?

Yeah, great question. So a thing that really, really helped is having somebody that I lived with. I had a partner at the time that paid for room and board, so I only had to take out the amount for tuition. And then I think I took out an extra, like, maybe 10 or 15,000 towards the end of residence or end of medical school to help pay for, like, residency interviews and things like that. But I definitely didn't spend all of that much on residency interviews, so that helped a lot. It saved me probably $120,000, $140,000 on room and board. So that definitely helped.

Yeah. I find this amazing because I look at the statistics, I look at the exit survey. Every year, the medical students fill out, and the MDs say they come out with about 200,000 on average of those who owe Money. This doesn't include the ones who don't owe anything. The dos, it's like 240. The dentist is like 270.

Goodness.

And there must be an awful lot of people that didn't borrow the entire cost included in that to keep that number so low.

Yeah, absolutely. There were a lot of people in my medical school whose parents were much more well off than I was and that I think they had their parents helping them out. And my parents helped me some, but not a ton, which is fine.

Yeah, but still you ended up with more than reportedly what the average is. So you paid off more than above average student loan debt according to, you know, the surveys that we see out there.

Well, yeah.

So what was your income over the last three years to pay all this off?

Well, it kind of varied because I was doing some moonlighting. I was doing some moonlighting at the urgent care in town. I haven't done that in about a year, but my W2 from last year, the last year that I got a W2 was something like 290, which is a fair amount. And then I think my W2 for this year is going to be less than that because I haven't picked up an urgent care shift in the last 12 to 14 months now.

Yeah. So clearly boosting income was part of this live like a resident period for you.

Yeah, yeah. I started working moonlighting as a resident when I was a second year right after kind of the pandemic started. I started working a few urgent care shifts, maybe one a month or something, depending on what rotation I was in. And then I worked maybe 10 shifts over the summer in between graduating and starting my big girl job. And then in the last, the first year of my job, I worked maybe one, maybe two shifts a month when they really needed me. They were pretty short staffed for a while.

So my notes from you say you paid off this $235,000 in two years, one month and eight days. But who's counting?

Yeah, certainly not me.

Yeah. So I mean, I'm doing the math here and I'm thinking, okay, well, so she makes 250. 290. You know, that's 500,000, slightly more than 500,000. You paid off 235,000, you know, with some interest over the last few months. Anyway, a lot of that time, maybe some of it wasn't going up due to interest.

Actually there was a long time where it was not accruing any interest. I paid it off before the interest started to re accrue. That was my whole. That was why I wanted to pay it off then. And also my birthday was coming up and I wanted to be debt free by then.

Well, happy birthday. That's a pretty cool birthday gift.

Thank you.

But I'm doing the math here. Half of your income went to these student loans over the last two years.

That's probably true, yeah.

Half of your gross income. How'd you do that?

Well, I just didn't live any different than I've always lived. I drive a 21 year old car. I didn't buy a house. I have a partner that is on board with this whole thing and is splitting household costs with me. I metaphorically and literally wash my plastic bags, my Ziploc bags. So I just, I don't buy new stuff until I need it. And this is just how I've always lived. You know, my, my parents raised me on a single income for the first 15 years of my life. And so, you know, there's a certain amount of living like this that goes along with that. None of my hobbies are really expensive. I did residency during the pandemic, so I really didn't travel because, you know, who wants to sit on a plane breathing everybody's air? Not me. And so that just, it made it a lot easier because it wasn't a huge imposition on my lifestyle to live like a resident for a couple of years more.

How much did it bother you to borrow this money?

Well, my parents raised me with in near pathologic aversion to debt, but I didn't have a choice. I could either not be a doctor or I could borrow this money and I couldn't not be a doctor. So that's, that's what I had to do. But it definitely bothered me continuing to have the debt and that's why I paid it off so quickly. I just, I couldn't. You know, some people did the PSLF and I just couldn't do that. I couldn't live like that for 10 years.

So when did you decide you were going to take this debt in a corner and drop an anvil on it? Did you decide this in medical school or residency or was it not until you were an attending or. When did you really decide that this is the way you were going to deal with your debt?

Yeah, you know, I knew sort of the prevailing mentality in medical school was just get her done, just borrow it and just deal with it later. Because I wasn't making any money at the time. I tried to sort of like pay off the interest every six Months or so, but that added up pretty quickly, so I had to stop doing that. But then when I was in residency, I never stopped paying the minimum, which for me was like $64. So that doesn't even cover the interest, you know, the daily accruing interest, which is just ridiculous. But so I never stopped paying the interest. And then once the interest stopped re accruing during the pandemic, which was great, that saved me like $10,000 a year, which is crazy. I just kept paying it off. And every so often, if I had a spare $5,000 or something, I would just throw it at the debt. And then my parents technically paid off the government, and then I owed them at 1% interest. And then once I finally got my job, I just said, you know what? I can do this. It's going to take a year or two, but darn it, I just want to get this done. I can't live like this. I don't want to live under debt.

What did your parents think when you started sending them huge checks every month?

Oh, they were delighted. Like I said, they raised me with a certain attitude towards money, and they were delighted, and they were encouraging me every step of the way to just get her done, get her done, get her done. And so that's what I did. They ultimately forgave about $15,000 of the debt, which was really helpful. But other than that, I paid them off. And, I mean, really, I was just giving their money back to them, which is, you know, so they. They were just happy to have it back, but it was a pretty safe investment for them.

Yeah. Yeah. Well, they know you, right, but there's still some risk. I mean, you could have become disabled or died or something like that. There is some risk there.

I felt there. Yeah. That is absolutely. I, like, lived in fear that I, like, die, and then they'd have to pay it off and I'd have taken all their money and, you know, I would have. I would have felt terrible if that happened. Not. Not that that was, like, a legitimate fear, but I did think about it.

Yeah, I know early in the pandemic, all of us were thinking about that as we were, you know, walking through the COVID ward, you know, so, yeah.

I'm glad we're not doing that anymore.

Yeah, for sure. So did this turn out to be easier or harder than you thought it was going to be?

You know, I thought it was going to be really hard. And then, you know, I make a fair amount of money, and once you make that much money, it just Accrues really quickly. And it was a lot easier than I thought it would be. It still took a couple of years, which I was a little bummed by. But I mean, that's two years is pretty good.

You're somewhat unusual in that you're driving a 21 year old car while making 250 or $300,000 a year.

Yes.

That's really hard for people not to have a lifestyle explosion when they leave residency. How are you able to not have that? I mean, clearly some of your upbringing played into that. Clearly you wanted your debt gone early, but it's still hard not to have upgraded that car. I mean, it's probably a $2,000 car, you know.

You know, it's, it's, you know, I bought it for $4,000 right before medical school. It has driven me across the country the equivalent of about five times. So it is a good little car and I reward lo.

Very cool. All right, all of you out there who are sending me emails, who are leaving speak pipes about how you must have a $20,000 car. Here's a good example.

$20,000. Who spends $20,000 on a car? Good lord. But I will say my poor little car is due for an upgrade. He started to go into what I call afib, but what the mechanic calls something with the intake valve. So we are shopping for a new car.

All right, very good. You certainly deserve it. And now you have the cash flow to buy a very nice car you can save up for in very few months.

I could pay cash now, so that's great.

Awesome. Well, I hope you treat yourself to that. That'd be a great way to celebrate your birthday and paying off these debts as well. What's next for you after the car?

I don't know. I haven't thought that far ahead yet. You know, at some point it would be nice to have a house so I can finally do the garden stuff that I want to without worrying about upsetting my landlord. But for right now, I, you know, I want to play a little bit of catch up with my 401k and just my savings and whatnot. You know, I've, I've been maxing out my 401k, maxing out the match for my hospital this whole time. And so, you know, something else to focus on is that. But honestly, I don't, I don't have a lot of, you know, huge financial goals other than replacing my car and, you know, maybe getting a house at some point, but that's not coming up anytime soon. The housing Prices here are, you know, honestly, pretty crazy. So I'm hoping they maybe settle down.

Okay, well, there's some people out there among the 30,000 people listening to this that are family practice residents. They are internal medicine residents. They are coming out of residency this summer. They're going to have a job in a clinic or as a hospitalist, and they're sitting on two or three hundred thousand dollars in student loans. What advice do you have for them?

Just pay it off. It feels so good, honestly. It really does. It's so important to have somebody on board with you, like your partner, your family. It's so, so important. That was really important for me. It was also easier for me. I don't have kids. I don't have expensive hobbies. I don't have a lot of overhead. So if you're a single or partnered resident without any kids, go nuts. That debt is just going to keep dragging you back for the next however many years until you either pay it off or the government manages to pay it off for you. There's no substitute for how good it feels to get out from under it and not have to think, I have to be in my job because I have to pay off my student loans. I cannot leave my job. I can't do anything. I have to just pay off my student loans. And now I'm not saying that I would leave my job, but now, like, I could. I could just go do something else, and that's really freeing.

Yeah. You're really not done with medical school until you paid for it?

No, no.

Pretty awesome. Well, you should be very proud of yourself. You've done something remarkable, and we're certainly proud of you. Thank you so much for coming on the Milestones to Millionaire podcast to share it with others and inspire them to do the same.

Yeah. Thank you so much. I'm glad that I could meet with you. I've been following you on Instagram for a while and taking advantage of some of your tips, and I really appreciate being able to be on the podcast. Thanks so much for having me.

It's our pleasure. All right. I hope you enjoyed that interview as much as I did. Claire's great. I Love her comment. $20,000 on a car? That's crazy. It's true, though. It's all about mindset. And when you realize that you can live like the average person in this country, yet earn like a physician, it's amazing what you can accomplish financially, whether that's saving up a big, huge down payment, whether it's paying off your student loans. Whether it's getting to fire super early in your career, whether it's saving up and buying some fancy Tesla because you're sick of driving your $4,000 car, whatever it might be, you can do it, but only by having some discipline, some financial literacy. Don't forget about our fire your financial advisor online course. You do not have to do this the same way I did. You don't have to read dozens of books. You don't have to read every blog you can find out there. You don't have to check in daily on the forums. You can take a course that will help you lay out a financial plan for a fraction of the cost of what hiring a financial planner will be. It's called fire your financial advisor. There's another version eligible for CME. You can check them all out. Whitecoatinvestor.com courses okay, now I promised you that I was going to tell you about emergency funds. So what is an emergency fund? Classically, an emergency fund is a pot of money that you can dip into in the event of an emergency that doesn't require you to borrow money. Okay, so it is cash. Almost always it's cash. It's sitting in your safe at home, in your drawer, under your bed. It's in a checking account. It's in a high yield savings account. It's in a money market fund. Maybe some of it's in something like I bonds or something that you've had for at least a year and can sell on a moment's notice. But this is money that you can use instead of borrowing. You can use it in the event that you get a call that grandma's dying and you need to come see her before she dies and come to the funeral. It's money you can use when the washer and dryer conk out. It's money you can use when your transmission dies or your $4,000 car dies. You know, you can probably replace that out of emergency fund, but it's classically three to six months worth of expenses, not income. So if you're making $10,000 a month, you don't have to have a $30,000 emergency fund. If you're only spending $5,000 a month, you only have to have a $15,000 emergency fund. Right? So it's all about your expenses. And the more stable your financial life, the less you can get away with. If you're pretty unstable in how your financial life goes, maybe you need six months of expenses. I like to keep mine somewhere where it earns a little bit of Interest, but it's still very liquid. That means either a high yield savings account or these days you can more in a good money market fund such as the Vanguard Federal Money Market Fund. So that's probably where most people have most of their emergency fund. I do think it's important to have some in a local institution, someplace you can walk in and get cash out in an hour. And I think it's important actually to have a little bit of cash at home. I think that's part of an emergency fund as well. So make sure you get that in place. Don't go chasing yield with it. It's about the return of your principal, not the return on your principal, but it needs to be kept fairly safe. Now, does there come a time when maybe you don't need an emergency fund? Sure, sure. If you're retiring and part of your retirement asset allocation is 5% of your money in cash, and that adds up to be, I don't know, $300,000, you don't need an emergency fund, too. Your entire portfolio is your emergency fund. So there comes a time when maybe an emergency fund isn't so important, but that time is certainly not in the first five or 10 years of your career. Okay, all right. I think we told you everything we're going to tell you today. That's all we got, man. If you guys want to be on this podcast, you can come on. You can apply whitecoatinvestor.com milestones if you listen to our sister podcast, the White Coat Investor Podcast. You can leave your questions for that@whitecoatinvestor.com speak pipe. All right, you can do this. White Coat Investor is here to help you. We're proud of what you're doing. Accomplish these milestones, tick them off one by one, share them with friends, family, the White Coat Investor community, and we will cheer you on and use your experience to inspire others to do the same. 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.