MtoM #191: Cash Flowing a Medical and Doctorate Degree and Finance 101: High Yield Savings Accounts

This is the White Coat Investor podcast, Milestones to Millionaire celebrating stories of success along the journey to financial freedom.

Hey everybody, it's Megan, your podcast producer. I'm just here to remind you that Dr. Dali is still resting and recovering from his accident. But don't worry, he will be back soon. He's doing well. Please enjoy this episode.

Welcome to Milestones and the inner episode number 191, cash flowing, a medical and doctorate degree. Our sponsor today is Origin Investments. Origin Investments is a private real estate manager specializing in multifamily investments managing over $3.5 billion in transactions since 2007. They leverage their market experience and Multilytics SM, the proprietary machine learning models forecasting rent growth to help them select properties in high growth US markets. Their income plus fund and qualified opportunities on Fund 3 are designed to offer tax efficiency, yield and growth while minimizing portfolio volatility. Their affiliate partner, Origin Credit Advisors offers the Strategic Credit Fund, a private credit fund for qualified purchasers intended to provide a steady stream of risk adjusted income with capital protection. Safeguard and grow your wealth with Origin investments today@whitecoatinvestor.com origin and make sure to stick around today after the interview for our Finance 101 with Tyler. He's going to be talking about high yield savings accounts today. Okay, let's welcome in today Jacob and Jacqueline to the Milestone Simulator podcast. Thanks guys for being here. It's a pleasure to have both of you. What is the milestone today?

Yes, so our milestone is that my husband Jacob finished medical school and residency debt free and I also completed my family, nurse practitioner, my doctorate program debt free. And we are also positive. A million in assets and cash.

You're positive. A million. And you had. So you cash flowed your schooling basically, is what you're saying?

Yes, all of our schooling. My nurse practitioner and his med school and residency.

Okay, that's amazing. I haven't listened to every Milestone podcast. I've listened to a lot of them and I don't remember somebody cash flowing their med school education. Much less cash flowing in med school education and a doctorate degree. It's crazy when I hear that out loud. It seems bonkers to me. But when you say it and you lived it, what kind of goes through your head?

I honestly have gotten emotional preparing for this podcast because I just think it's miraculous, really.

There have been so many miracles, countless miracles. I think one of the biggest milestones that we haven't accomplished is through that we actually have had technically, I guess, four kids. And those kids are our biggest milestone. And the miracle we've had. But it's through all of the simple things and the millions of blessings, we never did receive financial support from our family, but we did receive so much emotional and physical and support. And of course, we couldn't have done it without them, and we couldn't have done it without God.

Okay, so before we get into kind of how you did this miraculous thing, let's break it down real quick. What exactly do you guys do? What are your professions? How far are you guys out of school? And what part of the country do you guys live?

We just moved back. We. We were in Philadelphia for four years. Excuse me, five years. I am a urologist and just started working in Idaho, my hometown, where I grew up. I'm the first urologist. I joined another practice. I have four other partners. And Jacqueline is. She has her doctorate in nursing practice. She's a family nurse practitioner, and she finished school five years ago.

Okay, so you guys. Were you guys going to school at the same time? Medical school and getting a doctorate?

Yes.

Wow. And then you did. And Jacob was in residency, and Jacqueline was working as an mp. Okay. It still kind of blows my mind, guys, that there is no. You have. That you paid, you cash floated, and that you have a million dollars and you're just kind of starting your care. You said a couple times it was a miracle. It was a miracle. But, I mean, you guys must have had a plan of attack going into it. This didn't just happen by accident, I assume.

It's a very interesting question. Can I take that one, hon? Because I think she was the mastermind behind it. And it was all inspired. We got married, and then a couple weeks later, I started med school. And in my mind, I had always planned on trying to do it debt free, and I procured a plan, and that was by doing it through the government, through the National Rural Health Service Corps. And if I were to do that, Jacqueline mentioned that I would need to do one of five professions, and I would preclude myself from maybe doing anything I wanted. And I'll never forget that night that after we got married, she said, are you sure you want to do this? We. We can still do it debt free. God will provide a way. I'll provide a way. If you want to do anything else besides the National Rural Health Service Corps. And we pray, and we felt strong that we should not do that. And our purpose lied elsewhere. And so we chose to just go for it. And we denied the National Rural Health Service Corps. And Jaclyn went to work Jacqueline, how.

Much were you working when this was happening? How many hours a week were you working?

Well, I would work as an ER nurse, so I could do any shifts during the day and night. And then when I started my education at Washington State, I also taught during the daytime. So I was like, get off a shift. And then I would go teach with students. And then I also got some scholarships, so my doctorate. I made money going and getting my nurse practitioner because I was working kind of around the clock.

Did you have time to sleep some?

Yeah. In between taking care of puppies. Yeah.

This is before we had kids.

Yeah, before we had kids, there was. Once we started medical school, we decided that we wanted to be able to have a small house and didn't want to pay rent. And so we found an old abandoned house, had been abandoned for about a dozen years, figured out who owned it, and offered a deal. The deal was we'd fix it up if we could live for rent free. And of course, it took a lot of work, but I remember her coming back after a shift in the middle of the night and having just a couple hours to sleep. And we were still remodeling it, and so we didn't have any heat in the house. It was wintertime. She slept on the floor. Do you remember that, Jacqueline, with the next. The fireplace for a couple hours to make it through until you had to go teach. So that's when she slept.

That is. That's amazing. What kind of family support did you have? I mean, how did. I don't know if they. If they. Well, I guess they didn't pay for any kind of medical school or anything like that. But what did you guys learn from your family? How did you guys grow up?

My dad is the genius behind that one. He really taught us how to be frugal. And you can either make money or you can save money. And if you can do both, then you really. That's where you can be financially independent. So he taught me at an early age, you know, so I had a little fence painting business, and I bred dogs when I was little and earned things, so he taught me. And then during our schooling and these things, our parents were. They didn't give us handouts, but they definitely were there, you know, to help us. And at a point when Jacob was doing some rotations that were rotating, we stayed with them for a little bit so we could save on rent, too. So they helped us in so many different ways, but mostly helping us be frugal.

Jacob, was there a mindset that you learned from your parents?

I grew up on a potato farm, so, yeah, there's no success can come without working your tail off. Luck comes from working hard.

Okay, so then I'm curious, Jacob, it sounded like you were a little. I don't know. I don't know if tentative is the right word, but you were certainly considering some options. Then Jacqueline was like, no, we're going to do this. We're going to go debt free all the way through. I guess you guys were on the same page for the most part the entire time, or did Jacqueline kind of inspire you, Jacob, to, like, be okay, yeah, we can do this?

She's always inspiring in every way, but I think we were a really good team. She would plant the garden. We'd eat the. The tomatoes and the pumpkins year round, and I would remodel the houses and figure out how to sublease out the houses so that we could make a little extra money on top.

So, yeah, I think you guys are getting emotional. I'm getting a little emotional here. This is good stuff, guys. Okay, so let's. Let's break it down. How you were able to cash flow because you talked about puppies a couple different times. You're talking about a garden, talking about flipping houses and stuff. What did you guys do to be able to cash flow all the way through?

Okay, so we can give you a huge, long list.

I want to hear. I want to hear the list.

You want to hear the list?

Okay, I want to hear the list. Because I'm.

I'm.

I'm looking at it right now, and it's like, it's bonkers. Go ahead, tell me.

Okay, I'll give the list. But also, side note, Jacob's mom and his brothers, too, helped us so much renovate these homes. So the big. A couple of things is, Jacob, he taught me this. He doesn't believe in paying rent to anyone. So like we said, the first home we found, and we convinced someone, they paid for the supplies, and we renovated the house for them. So pretty much our labor paid for our rent. Through that, we gained the skills to. And the courage. So the next home that we needed to live in, we purchased for a very cheap price and renovated for $37,000. We purchased the home for $37,000. Yeah.

And then we.

We renovated it. Yeah, it's worth a lot more now. And we were actually able to obviously sell it with a huge profit. But then also the person who bought it from us, we were able to carry the loan, and they're paying a high interest Rate to us.

So 9% interest right now.

Still a 9% interest rate to us. So that helped feed into our next home. We purchased in New Jersey for residency. We purchased for 150,000. We didn't get to see it in person, but we knew it was just a mess. It was a foreclosure. There was no electricity, no plumbing, no H vac, no heating, squirrels in the rafters, mice, asbestos. It was a mess, this house. I wish our podcast could show pictures, but hopefully that gives you a good picture. So we moved in. I had a 2 year old and a 6 month old, and this house was like. We used a floodlight to figure out lighting in the home. And we grilled outside on this, like, janky grill. And this was. So it took five years, Jacob's whole residency. We finally finished renovating this house. And through that process, obviously, we were able to sell it for a lot more than we bought it for. And it had a piece of land on the back, so we had two pigs, over 50 chickens, guinea hens that we ate their eggs. We had a huge garden spot, so we ate out of our garden pretty much year round. And then in New Jersey, they sell deer apples and deer potatoes, you know, because people like to put them out for their deers. But I would eat, I would eat that. We would buy those. And like, if we would pick peaches, we've picked hundreds of pounds of peaches and pears. We got a truckload of onions one time from someone. So we ate our pumpkins even one year during med school because we had a lot of squash and tomatoes. So the houses now we're to the garden provided for the gardens. We had enough room for gardens. And then we were able to do seven litters of chocolate lab AKC hunting puppies. See, they're not just like mutt dogs. They were just incredible dogs that we sold across the nation.

Wait, how do you get into dog breeding? How does that work?

Good question. I mean, I love dogs growing up. And so I did it, and then Jacob had her, his dog. And then we were like, oh, my goodness, these puppies, you know, and they're really like papered championship lines. And seriously, one day, I remember vividly, you know, this wasn't just like, oh, we had this all this money all this time. No, it was like every. Every time when tuition was coming up or every time when we needed, we knew there was a deadline, like we were going to need to make a big payment. Right. And I remember one time I was praying the night before we did all like, wherever. Finances. I was considered doing travel, like, nursing. So I. Because I hadn't finished my nurse practitioner yet. So I was going to do these, like, do 13 weeks and Timbuktu, so we can make a lot of money or something, like, to figure out how we can make it work. And then I woke up that morning and our dog had gone into heat. And so that was like a huge miracle to find. It's silly, but blood on the floor from her because we knew she was in heat, that she could. She was early, but we could breed her. And she has a very happy, wonderful princess crown at our house. Like, we love her, but we're so very grateful for her. That was one of the ways that we got into this and had you.

You know, Jacob said he grew up on a potato farm. Jacqueline, had you kind of lived off the land before? Did you know how to do that?

I hadn't lived off the land like. Like that, no. He's the gardener.

Oh. And then. And then you guys have four kids on top of that. So all this stuff together with the four kids, it's like quite a recipe of something that's going on there. Some kind of strange meal or something that you guys are eating every day. How did you guys raise four kids in the midst of all this stuff?

They were part of our life. We would take them to do things. They learned how to garden. We made them work. We still do. We have four kids, ranges seven to almost two. And they. They were in it, too. We wanted them to experience all of it. There's no reason to wait. Take it all and just pray that it all work out. And as long as you work hard, you work hard enough, it will. One of the things that we haven't mentioned yet, Jacqueline, is the missionaries we had in the back of our house, we rented. We built another house behind it, and we rented that out to the missionaries for five years. So that brought in another source of income.

And you guys are landlords again for more people.

And in med school, we subletted this land. We got approval from who we're renting. But that land, that. That little house that we were renovating for them, you know, for rent. We subletted part of the. For a tiny house to come and rent from us. We were making money, not only paying rent, but making a little money. So that also has been a real blessing. And I think, too, we're kind of going at it backwards. I think, though, our priorities were straight. Like, we. God is number one in our life. We believe in the law of tithing. So it sounds crazy, but we also contributed to our church fully through this whole process. And we always had exactly amount. So for us, and then too, like, biggest milestone for me, like more than the millions that someone can ever see in my bank account, is that I have a marriage that I love, my husband, we're a team and we have our kids. You know, beyond that, like, what else matters, you know? And I think when you put God and those people you love first in your life, then everything else figures itself out. Like it comes with a lot of work and pain and joy, but that's what life is, right? But when you have your priorities straight in every way, then it all comes together.

Guys, this is the most wholesome episode I've ever heard. This is amazing. You guys are great. Okay, so let's real quick the range of salaries. I mean, you guys already have a million dollars. Basically, what do you got? What's salary like now? And then, what are the plans in the future? Where do you want to go with this?

We landed into such a great, great position and it was procured to a certain extent and we made it happen. We feel very grateful. I have a base salary, guaranteed income of half a million for the first year. That doesn't include another 150,000 in rent call and other ancillary things and hopefully that will grow. I am part of a physician owned hospital, actually, so I hope I'll have opportunities to buy into that as well as other ancillary services, so hopefully that income can grow. We're. We've already met with our accountant and tax advisor to try to find out other ways to shelter our money and find places to put it. So we're really excited and we're grateful for all the white coat investor podcasts and things along the way that we've listened to. And then beyond that, our kids are our highest priority. Jacqueline, she loves working and she's. I don't know, what are your plans, honey?

Well, also the other miracle thing for me is I've been able to be with my kids. I did blessing through Covid. I did a lot of telehealth visits and I taught courses through a college long distance. So I was able to be with my kids when I was with. And that too is a miracle for me. So right now I'm honestly not running off to the clinic. My focus right now is at home. I think eventually I'd love to have a holistic clinic where we kind of pull in everything, all the pieces together, but also the blessing of this financial situation that we've had is that we've been able to. I'm home with my kids right now, which I really appreciate.

Yeah, that's so important. And so it's such a. You're right. It's such a blessing for you guys, for anybody who can do that. Okay, one last question. What bit of advice do you guys have for somebody who's 10 years behind you? Maybe somebody's going into the NP field or going to be an RN or something. The other person is going to maybe go to medical school. What kind of advice do you have for a couple who doesn't want to be saddled with hundreds of thousands of dollars of debt?

So make sure you have your priorities straight, set goals together and keep them. And remember that God and your marriage, nothing's more important than that. So if you're taking an extra shift, if you're moonlighting, remember though, if your marriage is kind of falling apart or something's rocky, that's what matters most. And then. So don't push, don't push that off till residency. Don't think that you're going to figure things out later. So number one, put God first and your relationships. And then number two is get creative. Like you can, you can eat a pumpkin. They're actually really tasty. You can. I mean, we heated our house with wood. It was extremely expensive to heat this house that we had in New Jersey because it just the walls and everything. And so we heated our house with wood. We did dog breeding. Like there's so many. You can either save money or make money. So if you're doing one of those, you're. You're becoming more financially independent. And don't be afraid to set high goals. And if you make them with God and with your partner, you can do it.

We must be married, hon, because I agree with everything you just said. That's the same advice that I was going to offer. Priorities and finagling. There's always a way, if you just sit down together and work through the numbers and try to think outside the box. And I would hope that this can sort of be a paradigm shift. We didn't get any handouts. We got a lot of help from family. We didn't get necessarily cheap tuition. I went to a for profit school. It was over 50,000 a year. She got her doctorate of nursing and she figured out how to pay for it. And I figured out how to save a lot of money during that time. And then things flipped and she figured out how to save a lot of money through residency, and I made a little bit of money. But being a partner and making goals and then having faith that you can achieve those goals and don't lose sight of it are the keys to at least our success with. With God's help.

That's. That's amazing. Jacob and Jacqueline, thanks so much for being here. Real pleasure to have you on and very inspirational. Thanks, guys.

It's an honor.

Thank you.

Okay. I don't think I've ever heard an interview like that before on this podcast. What an amazing couple Jacqueline and Jacob are. What an amazing, amazing family they've created. The amount of side gigs they've done and been creative about was astounding. I was reading over it before the show started, and I couldn't wait to talk to them about breeding puppies and growing pumpkin in a garden. And they really delivered. It was an amazing interview and just an amazing job. And, you know, I'm sure we're going to have them back at some point soon when they have millions and millions and millions of dollars and can cash flow their kids college and medical school and everything else the kids do. That's what they do. It just goes to show you can be creative in how you pay for things. Just amazing stuff.

All right, thanks, Josh. And hello, everyone. My name is Tyler Scott. I am a former dentist and current financial planner and General friend of WCI, here today to handle Finance 101 while Jim continues to recover. Today's topic is high yield savings accounts. A high yield savings account is exactly what it sounds like. It is a savings account at a bank or a brokerage that offers a higher interest rate on your cash than a savings account at your average local or national bank. When I graduated dental school and knew nothing about personal finance, I had our checking and savings account at Chase bank because they were everywhere. And I got some kind of bonus to sign up with them. As I started building my emergency fund in my savings account like Jim told me to, I noticed one year I got a statement from Chase showing I made $1.09 in interest during the year. A closer examination of the statement showed the savings account paid an interest rate of 0.02%. 2. 100 of a percent. This is your classic low yield savings account that the vast majority of Americans are using, presuming they even have a savings account at all. Today we are here to make sure you don't fall victim to this unfortunate hole in our financial literacy. We want you to be earning a reasonable rate on your cash to do that. Don't let your cash sit in a savings account at the local credit union or some enormous national bank paying you no interest. Make sure you're keeping your cash in a high yield savings account. To find a good high yield savings account, you can always Google it and a list of banks will come up. Some common ones I see clients use are Ally Bank, Sofi, Wealthfront, Capital One, Discover, Marcus, there's others. What makes for a good high yield savings account? Well, the first and most important quality is a reasonable interest rate. Right now in late September 2024. That means 4 to 5%. Don't worry too much about finding the highest rate. The difference between 4.2 and 4.9 is not what we are worried about. What we're worried about is the difference between 0.02% and 4.5%. Just to drive that point home, let me quantify why you don't need to stress about getting the best interest rate. Let's say we're talking about where to keep your $60,000 emergency fund. Getting an extra 1% earns an extra $600 a year. Before considering taxes, remember that interest paid from a financial institution is subject to ordinary income tax rates. At your highest or marginal tax rate, assuming a 40% marginal rate, which is common for many high earners, this $600 extra you earned on your extra 1% really becomes $360. Now I'm not here to scoff at $360. I just don't think 300 to 400 bucks this year is going to make or break any of your short or long term financial goals. But the difference between getting functionally 0% and 4.5% is $2,700 pre tax and 1,600 bucks after tax. Assuming that same 40% marginal tax rate. Again, I'm not saying you will get rich with an extra 1,600 to $2,000 a year, but that buys some quality holiday gifts, a nice weekend away, and it's more than my clients pay me for their annual checkup each year. So it's definitely worth getting the 4.5%, but not worth bouncing your money from bank to bank to get a few extra tenths of a percent here and there. So a reasonable interest rate is the first quality we're interested in. The second is organizational opportunities. What I mean by that is some banks allow you to create buckets within your high yield savings account. I'm not talking about different accounts with different account numbers. These are sub accounts within the High Yield savings account that are earmarked for future Expenses that we know will happen, we just don't know exactly when they'll occur. For example, we know we need to replace our cars, our home will need updating and repairs, we'll go on bigger vacations at some point, and we'll have some large out of pocket health care expenses. To prepare for these episodic expenses, we recommend clients set up what we call squirrel funds, where you squirrel away a little bit of cash every month into your high yield savings account via automatic monthly transfers. I personally use Ally bank for this in my life. Our high yield savings account has different buckets within the account that we deposit specific dollar amounts to every month via automatic transfer from our checking account. You may be wondering how we pick the amounts to squirrel away each month. For travel, we pick an amount that is some combination of currently true and reasonably aspirational. For us, that's $20,000 a year. We don't spend $20,000 every year on travel, but the Squirrel funds roll over year to year and give us a guiding light for an average annual spending target. For out of pocket healthcare expenses, we pick the amount of our high deductible health plan individual deductible. Again, some years we use less, some years we use more. But this is a decent rubric for our healthy family of five. For home related cost, we save 1.5% of the value of our home each year. This is meant to cover big repairs, upgrades and sizable furnishings. Obviously, this amount doesn't get spent every year. It rolls over each year. And when Megan asks me if we can get such and such done on the house, I just open up my Ally app, show her the home bucket on my phone, and that gives us a ceiling on what we can spend and ensures we aren't undermining our other goals with the insidious and corrosive threat that is perpetual home renovations and updates. Same idea for cars. We take the number of cars in the family, the number of years we intend to keep each car, and the expected cost to replace those cars to up with an annual savings target. We have two cars, plan to keep them at least 15 years and plan to spend about $25,000 to replace them. That math produces a monthly Savings transfer of $278 to our car bucket. Then down the road, when it's time to buy a new car, we're prepared to pay for it in cash. Other squirrel funds that have been useful for other clients include saving up each year for your Future BackDoor Roth IRA contributions. So you've got $14,000 on January 2nd. To do you and your spouse's backdoor roth, you can save up for your annual disability insurance premiums. You often get a discount if you pay annually instead of monthly. People save up for weddings, big, expensive cultural celebrations like bar mitzvahs or quinceaneras. A down payment on a home, what some people call a 20s fund to gift to your young adult kids one day so that they can start their life and leave the nest. Or a squirrel fund that I call surprises and demises intended for aging parents, pets, or other loved ones whose present uncertainty may result in a large cash demand in your future. The way squirrel funds work mechanically is that we pay for the expense on our credit card so you can get your 2% cash back or your miles or whatever makes you happy with your credit card. Then we reimburse ourself from the squirrel fund back to our checking account. Then we pay the credit card bill from the checking account. The squirrel fund then begins to fill up again. Because of the automatic monthly transfers. Our emergency fund sits in its own separate bucket. Squirrel funds and emergency funds are distinct and separate ideas. Squirrel funds are for inevitable future expenses that we know will happen. We just don't know when or how much. An emergency fund is the safety net that sits underneath the squirrel funds in case an expense arises sooner or larger than our squirrel funds can handle. Having these squirrel funds allows us to automate the rest of our financial life and to be reasonably assured that any future expense will not disrupt our normal monthly cash flow. They are a great way to make additional use of your high yield savings account because you're earning interest on all these buckets along the way. Okay, so now you have a good interest rate and some meaningful organization. If you're using a bank, you also have FDIC insurance. FDIC stands for the Federal Deposit Insurance Corporation. This government entity guarantees that you can get your money back if your bank fails and bank failures happen. This is not just a problem. In the 1920s. We've had some large bank failures in the last couple of years. And if that happens to your bank, the FDIC will return up to $250,000 for an account held by just one person and up to $500,000 for a jointly held account. In some cases, these financial institutions partner with other banks to ramp up their FDIC insurance to 1 to 2 million, depending on the account. You probably don't have a financial plan that calls for seven figures in cash, so this is probably not applicable to most people. For some people, though, FDIC insurance provides meaningful peace of mind for large sums of cash. For other people like Jim, they don't care about this insurance or these squirrel funds. They just care about simplicity and interest rate. So often they don't use a bank at all for their High Yield savings account. They use a brokerage like Vanguard or Fidelity. Jim is especially fond of Vanguard because the settlement fund in a taxable brokerage account there is defaulted to the Federal Money Market Fund and that is currently paying just under 5%. Now these money market funds are incredibly safe and incredibly liquid. They do not have formal FDIC insurance however, but in exchange you often get a slightly higher rate than the banks. Not always, but often. Where you set up a High Yield savings account and what the exact rate is at the time is not really important. What is important is just using one of them instead of these crappy savings accounts most people are using and not even realizing there's a better way. I hope that was helpful. If you have any questions, go to the blog and search High Yield Savings Account or send a Speak Pipe question into the podcast. Thanks for listening and have a wonderful day.

Our sponsor today is Origin Investments. Origin Investments is a private real estate manager specializing in multifamily Investments managing over $3.5 billion in transactions since 2007. They leverage their market experience and Multilix SM their proprietary machine learning models forecasting rent growth to help them select properties in high growth US markets. Their Income Plus Fund and Qualified Opportunity Zone Fund 3 are designed to offer tax efficiency, yield and growth while minimizing portfolio volatility. Their affiliate partner Origin Credit Advisors offers this Strategic Credit Fund, a private credit fund for qualified purchasers intended to provide a steady stream of risk adjusted income with capital protection, safeguard and grow your wealth with Origin investments today@whitecoatinvestor.com origin and we will see you next week on the Milestones to Millionaire podcast. Thanks for tuning in.

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