MtoM #187: Pediatrician Pays Off $330,000 in Student Loans in 7 Years and Finance 101: The Basics of Asset Protection

This is the White Coat Investor Podcast Milestones to Millionaire celebrating stories of success along the journey to financial freedom. Hi podcast family, it's Megan, your podcast producer. As I'm sure that many of you have heard by now, Dr. Dali had a pretty serious rock climbing accident a couple of weeks ago. He made an announcement himself on the main podcast last Thursday. If you'd like to go back and listen to that. He's doing very well. He's resting and recovering, but he is going to be taking a couple of weeks off from podcasting. So until then we have some exciting episodes for you. We have a lot of people from the WCI family filling in and helping out and we hope that you still find a lot of value in these episodes over the coming weeks. And don't worry, he will be back soon. We are so grateful for everyone's support through this process and we look forward to having Dr. Dali back soon.

This is Milestones to millionaire podcast number 187. Pediatrician pays off $330,000 in student loans in 7 years step away from the volatility of the markets and put your money back to work with MLG Capital, a series of private real estate investment funds. Over 35 years in the real estate industry, MLG Capital has the experience to provide investors with substantial returns and the track record to back it up, more than doubling every dollar invested through multiple investment cycles. Their series of private investment Funds target an 11 to 15% rate of return net to investors through tax efficient quarterly distributions. The fund structure prioritizes generous returns to investors first before MLG can share in any profits. Demonstrating their culture of absolute integrity. Experience the peace of mind that comes with investing in diversified private real estate with MLG Capital. Learn more about Investing by visiting www.mlgcapital.com Whitecoatinvestor all right, don't forget we're still doing early bird sales. Wcicon, right? We are going to San Antonio. Actually it's Hill country just outside of San Antonio. It's a beautiful resort and we're doing some awesome wellness activities. We have incredible content there. This is eligible for you to use your CME funds or to write off your if you're self employed, write off the cost of this. The ticket sale though ends tomorrow. The day after this podcast drops. Okay, you can still buy tickets, but you can't get the early bird pricing. It's 300 bucks off the regular price. Go to wcievents.com you're going to love this conference. It's my favorite conference. I go to every year. Admittedly, I'm biased, but most people come and tell us it's the best conference they've ever been to. It's all specialties, it's all professions. And if you've been stuck going to the same conference with the same people year after year after year after year, this is a great way to mix it up. Do something different. You'll come back with some great burnout beating techniques. You'll come back relaxed, with a new mindset. You are going to learn how to make your financial plan better and be inspired to continue your financial success. You probably don't have anybody in your life that you can talk to about finances that understands the unique financial challenges that doctors and other high income professionals face. But. But you know what? Everybody there does. So come and find your people, make some new friends, have a great time, learn some great stuff and get out of wherever cold place you're living in the middle of the winter. Come on down to San Antonio, have a great time with us. Sign up@wcievents.com all right, stick around. After today's interview, I think you're going to love it. But if not, stick around anyway. We're going to talk a little bit about the basics of asset protection afterward. Our guest today on the Milestone to Millionaire podcast is Dan. Dan, welcome to the podcast. Thank you for having me tell the audience what you do for a living and how far you are out of your training and what part of the country you're in.

I am a pediatrician, seven years at the same place that I started out of residency. Did residency in Philadelphia but grew up in Wisconsin and I practice in medium sized town in southern Wisconsin.

Okay, very cool. And tell us what we're celebrating today. What have you accomplished?

I was of the great fortune to be able to pay off my med school loans in one big lump check a couple of months ago.

Pretty cool. Pretty cool. Okay, let's go through the process. You came out of med school 10 years ago, right?

Right.

Came out of residency seven years ago. How much did you owe when you came out of med school and Residency?

It was 330k.

About the same when you came out.

Of residency and then. Yeah, about the same. I was working in a low income, food poor zip code so I was able to defer payments and I was set up to do the forgiveness if that were to apply to my future job. So I didn't really make any payments during residency at all.

Okay, and you said it was 3:30?

Yeah.

Wow, that's a lot of Debt to pay off. And what was your average income over the last seven years?

Thankfully, over the last seven years, income's done pretty well. I've been part of two comp redesigns for my employed large health group and they try their best to emphasize and prioritize primary care. But I knew that as a pediatrician it wouldn't be as good as a lot of my other colleagues and that it would take a while. I kind of expected to just have these med school loans for decades. I think last year was probably the best year I'm going to have. I did a little bit of moonlighting additionally at a nearby hospital and I was over 350k last year.

What do you think was the lowest year you had since you got out of residency?

My first couple of years they gave me like a floor, a basement production. It's an RVU model and on those years I did okay, but it was I think like 280.

280. Okay, so 280 to 350 is pretty good. That's all above the average pediatrician. Yeah, I mean the last time I looked at a salary, I think the average was under 275 as I recall. So you've done well income wise. Do you attribute that to good negotiating or just being in a good area of the country or why do you think you made more than typical pediatrician?

I think a little bit of both. Good area of the company, good organization that, like I said, tries to prioritize primary care with incentive models and then I'll admit working my butt off. It's an RVU based model, so I was always seeing patients above my fte, you know, squeezing in patients, doing my best to bill and code appropriately and yeah, just working really hard.

Okay, so is there a partner or kids in the picture here or is this all a solo effort?

I met my wife about a year into this job and we got married about two years into this job. So we've been living together and growing our family for the last five years.

Okay. And she, she works or doesn't work.

Supported her as well. So when we met, we got pregnant and the timing was right for her to stay home with the baby and go back to school. She'd always wanted to be a clinical mental health counselor, so I supported her in online master's program and was able to help pay for that tuition without any loans. She is now, thankfully, it's a long process to do online masters, starting her own business and has a rented office and building a client base and all that stuff just as of this year.

Very cool, Very cool. But most of the paying off this debt was all based on your income? For the most part, correct?

Yeah.

Okay, so how did you decide how much money was going to go toward the debt? How much you were going to live on, how much you were going to invest? How did you make those decisions?

Yeah, I. I have a friend shout out to Dr. Matt. He's a urologist that I went to med school with. He got me and all my buddies on this big group chain we've been working on for 10 years. Group text chain. He gives us little plugs on white coat investor all the time. And the number one thing that I tried to live by my first couple years out before the necessary expenses of a growing family was to live like a resident. I replaced my beater car with something reasonable. My first home was something reasonable. I traveled domestically when I had vacation and not big international trips outside of maybe one, and got nice clothes for work, but didn't go nuts. The little things, I think, add up over time.

Very cool. All right, so tell us about the debt pay down process. How did you work it? How much did you send in? What'd you do when you went through the student loan holiday? Did you refinance? You know, did you pay it all off in one big lump sum? Tell us about how you did it.

Yeah, so then I refinanced in fall of 2019 to Mohela Laurel Road. Got a good interest rate, and then for five years or so, I was making more than minimum payments. And when the opportunity presented itself, throwing more at it, you know, that third paycheck in a month or the incentive bonus at work or the tax return, I'd try to throw in an extra five or ten thousand dollars here and there when I could. And then what happened next was that I just got really lucky. Our growing family required us to move to be in a bigger home closer to my older daughter's future school, closer to work for commutes. I moved out of a very popular hot market and, you know, paying off a good portion of that home's mortgage and then seeing that home's value increase. A lot of little did I know that moving to a bigger home with a higher mortgage in the future, bigger home, would actually be such a wonderful financial move by me.

So did that free up cash or why was it such a good move?

So then, yeah, the check given to me at closing of my old home was enough to pay off the remainder of the med school debt and then some yeah, it was humongous.

Blessing in disguise. Very cool, Very cool. So that wipes the rest of it out. So that check was, I think I saw in my notes here, 118 or something. Paid off the rest of that.

Yeah. And so I had paid down in those five years over half or about half of the original med school loan. And so I was feeling pretty proud of the fact that I'd done that in seven years, but still, of course, expecting it to be another, you know, another seven plus years. So this was a real big, like sudden weight off my shoulders.

Very cool. So how'd that feel to make that last payment?

It was something else. I mean, first walked into the bank and deposited that check after closing, then got on the phone and made the phone call to Laurel Road and yeah, it was pretty cool feeling.

Yeah. Is that the biggest check you've ever had in your hand by far? Yeah, yeah, very cool. Well, so what's next? You know, I mean, you've paid off your student loans, you built some equity, you're now in your second home. What's your next for financial goals?

Well, you know, the one thing I think I heard this from my dad is the expenses grow to meet the income. Right. So things just change the money. I've come to learn after the last couple months that money does just kind of go other places. We're going to try to do some things, you know, new cars, finally get rid of the 200,000 mile cars. My daughter's tuition is now here that she's in daycare, supporting my wife as she's growing her business, doing some things that we've been wanting to do for a while. We're going to try to go solar and get the solar panels installed on the home. And so there's a couple of little things that we're going to do here and there. And money's just moving other places, essentially.

Yeah, there's plenty of, plenty of good uses for money. That's why it's so important to kind of front load this financial stuff early on because later on almost everybody wants to spend more money. Yeah.

And we're going to do some fun stuff too. We got, you know, we met right before the pandemic, married during it, never got to go and do our honeymoon. So we're finally doing that, which is going to be really nice. Looking forward to that kind of those kind of opportunities that I intentionally put off for all those years.

Yeah, it's awesome to be able to take advantage of this income you have. So very cool. Well, congratulations to you, well done on this. Any advice you have for somebody else that's maybe in a low to medium paying specialty and has substantial student loan debt and has been at it for a while and is feeling a little discouraged, what encouragement do you have for them?

Yeah, I'll pass along the advice that I received from colleagues both in and out of the medical field. Some people with financial background, they would give me the advice like I had, which is try to make more than minimum income payments, throw a little bit more at it whenever you can. Really great piece of advice I heard is when you get the opportunity to do something like that, celebrate those moments, right? So if you've got an extra 10k that you can finally decide can leave your checking account, go to this like, you know, celebrate with a glass of wine too that night, right? Celebrate those moments. Because it. Because it is a long and hard road and more so than the money, it's the burden of all of it and it feels like it's just never going to end. So celebrating those little things will help with morale. Over the years of all that, I thought that was really good advice too.

Yeah, I agree. I haven't celebrated enough in my life. We should definitely be celebrating every milestone we get. You don't have to go crazy, but do something and reward yourself as you go along because it can be a long, hard road. Just like learning to become a doctor is getting your finances in a row, getting your financial ducks in a row can be a long and hard road. For some people, it comes very easily. We've had people on this podcast that make a gazillion dollars and it seems like they're instantly successful. That's not the way it works for most doctors. Most doctors, this takes some work and sacrifice to be financially successful, right? All right, well, congratulations to you, Dan. Thanks so much for being willing to come on the podcast and inspire others to do what you've accomplished.

I appreciate it. Thank you very much, Kaya.

It's fun to hear Dan's story, right? I mean, we get people on here that have become millionaires a year out of training, right. Or three years out. They're multi millionaires and they pay off all their student loans in one year. Let's be honest though, that's not the pathway for most doctors. For most doctors, the pathway is far more like Dan's right? You muddle through, you eventually get back to broke. Your student loans paid off in four or five or seven years. You have to budget carefully, you have to make sacrifices. You've got to balance your different financial goals. And it takes a lot of work and sacrifice. And so I love bringing people on here that are very real in that regard and that I think many, many of you can relate to. So I hope you enjoyed that. I mentioned at the beginning we were going to talk about asset protection, and there is all kinds of stuff that can be done in asset protection that is complicated, that is expensive, that may or may not work. But the basics are super simple. They're extremely reliable in their effectiveness, and they're cheap. So let's talk about what the basics of asset protection are. First of all, what is asset protection? Well, asset protection is not losing everything you have, usually to a lawsuit. Mostly doctors listening to this podcast, the main liability they think about is malpractice. Right? Malpractice is always personal. You can't just incorporate your practice and somehow get rid of your malpractice risk. It's always personal. So that means that your personal assets are at risk. If you hurt somebody from malpractice, you got to pay for the damage, the damage in their pain and suffering, the damage in their lost earnings, those sorts of things, the additional medical expenses they have. So what do you do to help protect against that? Well, the first line of defense in liability is insurance for malpractice. That's professional liability insurance for personal stuff. That is personal liability insurance. And there is a component of your homeowner's or renter's insurance that is liability coverage. There is a component of your auto insurance that is liability coverage. What you should do in addition to that, though, is is stack an umbrella policy on top of those. So this is an additional personal liability policy. It's not very expensive. You can buy $1 million or $2 million or $5 million of additional liability coverage that sits on top of your homeowners and your auto policy and can be used in the event that you hurt somebody. And it's really expensive to make them whole. And that's the whole point of insurance coverage. Not only does it make them whole, so it's not just good for you, it's good for whoever you hurt, but also pays for your defense. So the insurance company's on the hook to pay lawyers to defend you for some ridiculous claim you might have against you. And in the event that they do have a claim against you and you need to settle or you go to court and lose, the insurance covers the payout so you're not losing personal assets. First line of depends. If that fails and it's not reduced on appeal, you have some above policy limits judgment that's not reduced on appeal and indeed you are liable. You got a few options. One, you can pay them, right? You can pay the judgment. And it turns out if you look historically at the very few above policy limit judgments that are out there, most of them are actually not that much money. It's like a little bit of a zinger given to the doctor to say, hey, you really need to be more careful with your patients here. You're going to have to pay $100,000 out of pocket. Well, that's often doable. You can do that. And so you pay them if that's just impossible, right? You got some crazy huge judgments against you. It's $5 million. You don't have it. Even if you had it, you don't really want to pay it. You feel like you got hosed. Well, you do have another option. You can declare bankruptcy in this country. And most asset protection rules and techniques and law is what happens when you declare bankruptcy, what do you get to keep? And these laws are all state specific. So you want to understand your state laws, right? So if the first line of defense is to buy insurance, the second line of defense is to know what your state laws are, because that's going to matter what you do next. But in every state, maxing out your employer provided ERASA retirement accounts is a great asset protection move because you, you declare bankruptcy. But guess what? You get to keep, in every state, you get to keep your 401. So all the more reason to max that thing out, you get to keep it. And in most states, you get to keep your solo 401 and your IRA, right? So maxing out these retirement accounts is an extremely effective asset protection technique. Not only does it reduce your taxes, boost your investing returns, make your estate planning easier, it gives you these great asset protection benefits. So that's kind of a no brainer. First move asset protection technique. Another thing you want to do is you want to make sure you're titling your property properly. In many states, you can title your property as tenants by the entirety. This is for a married couple, right? If it's titled tenants by the entirety, that means both of you own the entire house, for instance. So if you just, you get sued and you have big judgments against you, they can't take your house because your spouse owns the entire house. Okay, it's kind of a cool trick. Doesn't work in Utah, but it works in many states. In fact, in some states you can apply it to your brokerage account too, right? This doesn't protect you if they sue both of you because they slipped on your sidewalk and got hurt out there. Buy the umbrella insurance for that. But it's very effective against malpractice in the states where it takes place. Obviously some states have different rules about how much of your homestead, your home equity you get to keep. It's not much in many states. In some states it's your entire home. You know, every state has these unique laws. You know, you gotta keep two shotguns and 12 cattle and 120 sheep. And you know, there's all kinds of weird rules all over the country as far as what you get to keep in a bankruptcy kind of situation. But those are the mainstays, right? Mainstays are buy insurance, max out your retirement accounts, title properties, tenants by the entirety if you're allowed to. When you get beyond that. Now we're starting to talk about spending significant time, significant money losing out on benefits of what you'd rather do with your money and your assets. And it becomes less and less likely to actually work. So sometimes people buy annuities in some states, annuities, some of your annuity is protected from creditors, cash value life insurance, like whole life insurance, in some states it's protected from creditors, you get to keep it if you declare bankruptcy. And then we start talking about different types of trusts. There are asset protection trusts, there are overseas trusts, there's obviously irrevocable trusts. If you just give the money away to somebody else long before there's any claim against you, it's no longer your money, they can't get it. And so a lot of asset protection techniques deal with ways you can give the money away and yet still somehow get some sort of benefit from it. And these are more complex techniques when the ones we've already talked about aren't adequate for your situation. But for many, many docs, just buying insurance, maxing out your retirement accounts, understanding your state specific laws and titling property properly is going to be the mainstay of your asset protection plan. All right, our sponsor has been MLG Capital. Step away from the volatility of the markets and put your money back to work with MLG Capital series of private real estate investment funds. With over 35 years in the real estate industry, MLG Capital has the experience to provide investors with substantial returns and the track record to back it up. More than doubling every dollar invested through multiple investment cycles. Their series of private investment Funds target an 11 to 15% rate of return net to investors through tax efficient quarterly distributions. The fund structure prioritizes generous returns to investors first before MLG can share in any profits, demonstrating their culture of absolute integrity, experience the peace of mind that comes with investing in diversified private real estate with MLG Capital. Learn more about Investing by visiting www.mlgcapital.com whitecoatinvestor all right, thanks so much for listening to the podcast. Without you, there is no podcast. You must have a host. Yes, you must have guests, but you must have an audience. So thanks for playing your part in this role. If you'd like to change your role and like to be a guest on the podcast, you can sign up whitecoatinvestor.com Milestones we'd love to celebrate your milestones with you, no matter how insignificant they seem to you or how awesome they seem to you, and use your wonderful accomplishment to inspire somebody else to do the same. Thanks so much for being here. We'll 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.