MtoM #195: Radiologist Goes Part Time and Finance 101: Real Estate vs. Stocks

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 195 Radiologist goes part Time One of the most underrated financial moves in medicine is working Locum tenants. It pays significantly more on average, and you can work Locums full time or on the side of your full time. When you work with Comp Health, the number one staffing agency, they cover your housing and travel costs, which on top of higher pay, really adds up. Locums also gives you more control of your career, allowing you to go where you want, when you want, with a schedule that works for you. It's the perfect way to get ahead financially while getting focused on what you love. Whether it's locum tenants or a regular permanent position. Build your career your way with the power of Comp Health. Learn more@comphealth.com all right, welcome back to the Milestones Podcast. We've got some great stuff for you today. Before we get there though, I want to make sure everybody who listens to this podcast knows about our resources@whitecoatinvestor.com okay, we have what we call our recommended list. And you can go to whitecoatinvestor.com recommended and see resources and there are resources there. Or you can just go to the recommended tab. @whitecoatinvestor.com we have all, all kinds of people. We have found that we consider the good guys in the financial services industry that can help you with whatever your needs might be. We got companies there that do student loan refinancing, insurance agents, physician mortgage lenders, conventional mortgage lenders, real estate investments, financial advisors, surveys you can take for extra cash, student loan advice, contract review services, tax preparation and strategizing services, retirement accounts and HSAs. For example, if you need a self directed 401k or you need a customized solo 401k or whatever, you can get that there. Legal services, real estate agents, credit cards, a retirement calculator, even burnout coaching. We've got all that available to you at our Recommended tab or@whitecoatinvestor.com recommended so when you need some help with something, when you need a professional, please start your search there. These are people that have supported the mission of the White Coat Investor, often for many years and that we have experience with. And if we have problems with these folks, we take them off the list, right? If we get a bunch of complaints from White Coat investors, they are not still on our list. And so they are vetted as much as we can by us and continually by white coat investors. Now, obviously, there's no guarantees with any of these people, right. They are paying us to advertise. But we think these are some of the greatest people out there when it comes to actually using any sort of financial services. So check those out. Okay. We are going to do a great interview today. This is pretty awesome, what you're going to hear from this doc. But stick around afterward. We're going to talk for a few minutes about one of the biggest debates out there in investing, which is real estate versus stocks. So let's get into the interview now. Our guest today on the Milestones to Millionaire podcast is William. William, welcome to the podcast.

Good to be here, Jim. Thank you.

Tell us what you do for a living and how far you are out of training.

I am a radiologist and I am about 22 years out of training.

22 years out of training. And what milestone are we celebrating with you today?

Being able to cut back at work and go part time.

Awesome. That is a fun milestone. You know, I don't know that I've ever included that in any of the lists of milestones I've made, but it is certainly a big one in the lives of many physicians. And I don't think we featured it yet in 100 and what have we done? I think we're on episode 196, 195 of this podcast. I don't think we've ever had anybody that reached this milestone come on the podcast yet. So let's talk about this a little bit. First of all, why don't we start kind of at the beginning? As you were coming out of training 22 years ago, what did finances mean to you back then? How financially literate were you? How big of a hole were you in? Where did this all kind of start back then?

Well, I was very fortunate to not have to borrow money to go through school. So that was a huge help. I guess I really have my grandfather to thank for that. He paid for my father's education. And my father tells me that when he went to pay my grandfather back, he told him, he said, well, the best way you can pay me back is to make sure your kids get all the education they want. So I benefited greatly from that. I was, I would say that I was reasonably financial, financially literate. I started kind of paying attention to it when I was in residency and trying to educate myself about just basic investing approaches. And my father had been pretty good influence, too. He, he invested along the way and and really took care of his finances and certainly had a positive impact. So, yeah, I started putting in a little bit into retirement accounts and things during my residency and then really started, you know, amping up the savings when I got into private practice.

Very cool. And is there family involved? Are you married? Any kids?

Yeah, so I'm married. We just celebrated our 20th anniversary, so that was nice. And yeah, we have three kids.

Okay, so you're an attending when you got married. Okay, so what did you do? I mean, you're going part time. That is not insignificant. Many doctors even, you know, 25, 30 years out of their training are not able to go part time. What have you done with your life that has enabled you to do this?

Well, probably the biggest thing we've done is just we've consistently saved and invested ever since, you know, we started working. I think we've tried to be careful spending. I think, you know, we certainly have not lived the life that I would describe as frugal, but we've always tried to be careful about our spending. And, you know, we've just done the low cost investing approach or low cost index investing approach, and pretty much always managed it ourselves. And it's just kind of grown over the years and, you know, we're kind of at a point now where we can, you know, kind of do what we want financially.

So what is the range of your household income been over the last 22 years?

The range has probably been from 250 to 600 and probably an average of about 450 or 500, I would say.

Okay, and how much of that do you think you saved each year?

Well, early on, before we had kids, we had a really high rate of savings. I don't know what the percentage would be, but I would say we were probably saving 50, 60% of our income. And then once kids came along, that probably dropped down to, I'm going to say probably 20 or 30%. And. And now that I'm part time and the kids are a little bit older and we have a little more on the expense side. We're really not saving anything now, but we're not really pulling from our investments either. So we're just. We're kind of treading water and just kind of letting the investments do what they do.

And what's your approximate net worth today?

It's around 11 million.

11 million is quite a sum of money. And was there some addition to this other than your earnings and saving and investing? I mean, was there a huge inheritance at someplace along the way? Did you Win the lottery. Is there anything else here but what you guys earned and saved?

No, no. We had a business sale a few years ago that probably added in the ballpark of probably about 2 million, but yeah, the rest was just savings and earnings.

Okay, well, $11 million would make most physicians financially independent. Do you consider yourself financially independent today?

I do. I guess there's always a part of you that just sort of fears the unknown. But I do feel reasonably confident that we are financially independent.

Okay, so you're basically working because you enjoy it at this point, you enjoy some aspect of your work. Tell us about that, what you still enjoy after 22 years and why it was important to you to keep working.

Yeah, well, interestingly, that was not the intent. I was thinking that I probably would stop working altogether, at least in the medical field, but I wanted to kind of ease into it. So that's why I went part time. And I found that working a part time schedule, I began to enjoy it probably more than I ever had. You know, when you've got plenty of time to do sort of the other things in your life and also stay plugged in at work and you have plenty of time to do your CMEs and things like that, it's. Yes, it's just. It's really much more enjoyable.

I certainly found that myself. I love part time medicine. I preach the. I preach the gospel of part time medicine to everybody I can because it really does allow you to eliminate a lot of what you don't like about work and yet retain a lot of what you do like about work. And so I think it's awesome when doctors are able to do that. Tell us about the conversation with your employer or your group when you came to them and said, you know what, I don't want to be full time.

It went really well. You know, the group still needed the help and they were willing to basically take whatever help I could give them, you know, and it was at significantly reduced rate of income, but it was still what I felt like was fair. And it eliminated sort of the off hours, overnights, weekends, you know, things that can make it difficult. So, you know, I felt like it was, from my standpoint, it was really good.

Yeah, sounds like a win win. Good for them. Good for you. They get cheaper labor, really, than what they likely pay a lot of the other people working evenings and nights, et cetera. And you get to create your own schedule and enjoy your own life. So I think a lot of times that works out very well for people going part time.

Yeah, it's Certainly worked out well for me, and I hope they would say the same.

Yeah. Now it's interesting to think about accumulating that much money on just. Or primarily just on a physician income. And I think people are going, wow, how'd that happen? How'd they save so much? So tell us a little bit about your spending. I mean, are you in a low cost of living area? Did your kids go to private school? What do your vacations look like along the way? Tell us a little bit more about how you've lived your life financially over the last couple decades.

Yeah, we are in a low cost of living area, kind of in the southeast. So, yeah, low tax area. And like I said, cost of living is certainly manageable. You know, I mean, like I said, we. I don't feel like we have lived a frugal lifestyle by any means. I mean, we, we take several vacations a year, but we don't go. And, you know, we haven't been to Europe. We don't stay at the Five Seasons when we go. You know, actually we. We did a fair amount of camping along the way. That was something we did when the kids were small, and then they got old enough where they kind of had enough of that. So we're not doing much camping anymore. But yeah, I mean, I feel like, you know, our expense structure is probably in the range of about 200,000 a year, which, you know, to even say that that's somewhat frugal is really. It almost sounds sort of silly, but, you know, it works for us. Even though I'm sure we could cut back, we have plenty of room to cut back if we needed to. I feel like we're just kind of living pretty comfortably.

Yeah, certainly. I don't think anybody can argue that you can't afford to do that. I mean, on a, you know, 4% withdrawal rate would suggest somebody with $10 million could spend about $400,000 a year and expect their money to last a very long time. And so obviously you're still living really below your means and, and still earning money along the way. What role has debt played in your life?

So debt is, I guess I would say the role it has played by design has been absolutely no role at all. We're kind of in Dave Ramsey country here, and I kind of started listening to him, you know, years ago and really just took an aggressive stance toward avoiding debt. Well, I say absolutely no role. That's not entirely true. Kind of thinking through this as we're talk. I did borrow money to buy our first house. And we paid that off as quickly as we could. And then we had to borrow a little bit for our second house and also paid that off. We've never had a car loan or any sort of, I guess, what you would call consumer debt. And then I mentioned about being very fortunate to not have to borrow a lot of money to complete school. So that was a huge head start for us, without a doubt. But other than that, we just have tried to avoid that at all costs.

Is giving an important part of your life? And if so, how do you do it?

Yeah, it's interesting you ask that. If somebody were to ask me just what my financial advice would be for them, for anybody, I think that I would list that as. Make that your number one priority. That's what my wife and I did years ago. And it just. It really has served us well in a lot of different ways. And what was interesting was it felt like early on, you know, especially when you're trying to save and trying to get ahead, people come and say, well, can you give to this cause or that cause or whatever. And I found that it was, you know, there were lots of hands coming from all directions that were wanting contributions for different things. And I wanted to be a giver, but it. It started to sort of wear us down. And what we did was we said, okay, here is the percentage that we're going to give. We're going to give a certain amount to our church, and we're going to set aside a certain amount in addition to that to give to community causes, you know, friends in the family in need. Whatever comes along, the money is going to be sitting there, and it's just. It's not our money at that point, and it's in. It really makes it very easy to give. So basically, we've set up, you know, two separate accounts, you know, one for our tithing and one for our giving. And it just really has been. It's. It's worked really, really well for us. And. And I think that probably the biggest benefit that we have received from that is just understanding that when. When you prioritize or when we prioritized giving, it really changed the way we viewed money. And I think it just kind of helped us live financially differently than we otherwise would have. And I guess the analogy or the phrase I heard used in the previously is that, you know, it sort of transitions you from living with a closed space to living with an open calm. And it, like said, it just really has been a big part of our financial plan. And probably the one thing That I would say has, has served us the best over the course of our investing career.

Other than learning how to give. Well, what advice would you give to a resident or a young attending that wants to do what you did, wants to be, you know, financially free, in their early 50s, maybe wants to be a DECA millionaire, whatever. What advice would you give to someone that wants to accomplish what you've accomplished?

Well, like I said, the first thing I would recommend is to prioritize giving. Like I said, I can't overstate that. It just has been great for us. I guess the other things I would encourage them to do is to make sure that you're investing in things that are much more important than money. Invest in your marriage, invest in your kids, invest in your family, your community, because, you know, obviously those are the things that bring the most enjoyment from life. But there's also a very real and tangible financial payoff for doing those sort of things. You know, if you, if you protect and really nourish your marriage, then you know, that can, that can save you a lot of money down, down the line, in addition to the happiness that it brings, you know. And I would say the same thing about investing in yourself. You know, make sure that you're staying healthy. You know, you don't have to be crazy about it, but making sure you're, you know, eating a reasonable diet, exercising a few times a week, investing time in CME, you're doing some reading, staying out of the 247 news cycle, just, just really, you know, self care, I think is, is, is a big important part of it. And then as far as the investing side of it is concerned, I, I heard you mention this not too long ago, and, and I really like the way you phrased it. You talked about, you know, the most valuable hobby that you can cultivate is learning to manage your investments yourself. And so, you know, we did that early on and you know, I've never added it up, but I think that saved us a tremendous amount of money over the years. You know, 1% annually really starts to add up when your portfolio starts to grow to a certain size. And so, you know, I would certainly give that advice to somebody to, you know, really educate yourself and be prepared to do some basic management. I talk about all those things, I guess the word that I kind of keep coming back to when I think about all these things and you're trying to figure out what to prioritize and how much to put in here in this area and that area. And I guess the biggest thing when you put it all together is just trying to find the right balance in pretty much everything that you do, not letting anything get too far out of whack with your priority list.

Now, for somebody else that wanted to go part time, do you feel like you could have done that earlier in your career and do you wish you had given the financial success that you have seen?

Yeah, I definitely could have gone part time earlier. I haven't really thought that through, but I don't know that I would have benefited tremendously from that. I mean, I certainly think that there's an element of being healthy for your kids to see you working full time and, and, you know, being committed to a job and a career, as long as it doesn't, you know, consume all of your time that, that you would otherwise want to spend with your family. And they're old enough now where they sort of, you know, we are cutting back because we have been careful with our finances, so hopefully there's a healthy lesson there too. But. But yeah, without a doubt. If we really wanted to kind of cut back on our spending along the way, we could have easily work part time earlier.

Well, William, congratulations to you on your success and thank you so much for being willing to come on the Milestones podcast to share it with others and inspire them to do the same.

Okay, well, thank you for having me.

All right. You know, we could have done a lot of milestones there. We could have done financial independence. We could have done DECA Millionaire. I thought it was interesting that William chose to highlight the fact that he could go part time now. Obviously he could go zero time now. Right. And I think he recognizes that. But part time is such a big deal in medicine, and I'm a huge fan of it. I didn't think I'd be a huge fan of it. I was kind of forced into part time work. WCI just took too much time. And I'm like, I am not working two full time jobs. Too much other stuff in my life to do that. And so I had to hire help at WCI and I had to cut back on my clinical work, I was kind of forced out of it. But as I dropped nights, which I knew I was going to like that, but as I cut back on shifts, I didn't realize how much more I was going to love practicing medicine. And I think a lot of docs find this when they cut back on their work. When I do surveys of doctors and ask them, what would you do if I wrote you a $10 million check? About 33% would not come into work tomorrow, they're like, I'm done. But 55% of doctors would just cut back in some way. I think there is a huge desire among doctors to go part time. And I think there's good reason for that because we truly do love what we do. We just want to do some other stuff with our life as well sometimes. And so the first thing I tell a burned out doc, of course is why don't you cut back to full time. But if that doesn't work, try cutting back a little bit more than that. And you might be surprised just how many options there are to do part time medicine as well as how much you enjoy it. Certainly toward the end of your career. Give it a try. You might extend your career significantly, which has lots of financial benefits. But also you can keep making a contribution and an important contribution because your work is important to the field and to patients, et cetera. Thanks for what you do, by the way. Given my recent experiences, I'm far more grateful than I was even before for all the work that you folks do out there. It's wonderful. Okay, I promised you we were going to talk about real estate versus stocks. It's a strange thing I see out there. Real estate investors love to denigrate stock investors, right? They're like they're speculators. They buy paper assets that are subject to market crashes and the markets get manipulated. And then the stock investors are always poo pooing on the real estate investors, saying they're just people who want a second job or they're trying to get rich quick and scheming to do it, or people who can't actually calculate a return. And the truth is, with most stereotypes, there's a little truth in there, but it's mostly not true. Both types of investments have their pluses and minuses. You can do either one of them poorly. But if they're done well, they're both likely to lead to wealth. I've found myself on both sides of this argument at times. I found myself defending real estate investing. I've found myself defending stock investing. That's usually a good sign that you're in the right place when you're having defend yourself from both extremes. But let's talk today about a little bit of the advantages of real estate and the advantages of investing in stocks, okay? One of the things to talk about is generating profit from business ownership, right? And this is a problem real estate investors have. They forget what a stock is, right? A stock is not some speculative asset, right? This is not Bitcoin, it's not gold, it's not empty land. It's not Beanie Babies, right? When you own stock, you own a company, a business, probably a profitable business, one of the most profitable businesses in the history of the world. When that business makes money, you make money. It's a wonderful thing. Sometimes that money's paid you as a dividend. Sometimes it's just earnings that are reinvested by the company, and it goes up in price. And so I think it's important to recognize that. And too many real estate fans forget about that part of what stocks are. Real estate, when it's run well, is also a profitable business. It has a fundamental return that's derived primarily from rents. If you can increase the rents, it makes the property more valuable. And so that's what you're doing, whether it's stocks or whether it's real estate. You are owning businesses that make money, and that's a good thing for you. Passive income is this catchphrase out there. Everybody wants some passive income. And the funny thing is that people that want passive income sometimes go running toward real estate. And it's true that more of the return in real estate comes from income than it does from capital gains. But the truth is that the income from stocks is actually way more passive than the income from real estate. It just takes more to invest in real estate to do well. Barring an investment that's solely in publicly traded REITs like the Vanguard Real Estate Index Fund, it's just going to take more work. You got to do more vetting. You may have to do significant management of the property, et cetera, but that's the way it is. It's more passive when you're getting it from stocks or bonds or mutual funds, REITs, et cetera, than it is from most ways in which you invest in real estate. But you can get more income from a real estate investment if income's really something you want. Now, you better ask yourself whether that's something you really want, because more income is not necessarily a good thing, especially during your peak earnings years. Sometimes it would be better to have your investments grow without actually generating taxable income. Okay, so speaking of income investing, it can be a trap. Now, people fall into this dividend stock investors are the classic example. Real estate investors are sometimes even worse with this. Focusing too much on income is not good, especially when you don't need the income. Right. What you need to focus on is the total return of the investment. The nice thing about both stocks and real estate is some of the return comes from appreciation, the value of the investment going up. And some of it comes from income on both sides. So just don't get too focused on income. When you focus too much on income, you start making mistakes. Like a classic example is junk bonds. These are bonds where the company is more likely to default, go bankrupt, et cetera, than a typical company. And so it has to pay a higher yield, a higher income on its bonds. So you might go, oh, instead of earning 4%, I can earn 6%. Well, yeah, but your return might not be any higher because the default rate is higher. And so you actually lose more principal even if you're getting more income. And that's the way a lot of income, income focused investments can be. So don't fall into that trap. Always look at the total return, even if income is a good thing in your view. Okay? Tax advantages. Now there are lots of tax advantages for investors. Uncle Sam definitely wants you to invest. Oftentimes you're investing inside tax protected accounts. You know, 401s, backdoor Roth IRAs, HSAs, 529s, able accounts, whatever. These are all great ways to invest. It's way easier to invest in stocks inside these tax protected accounts than it is real estate, right? I mean, almost every one of them will at least offer an S&P 500 index fund, right? Low cost, basically free. You get the 500, you know, not quite the largest stocks, but 500 large stocks in the U.S. if you can get a good total stock market fund, total international stock market fund, you can buy all the stocks in the world in 30 seconds and forget about it. And, and it's very tax advantaged because it's inside one of these tax protected accounts. But even when you're investing in a taxable account, right? Stocks benefit from a few things, right? They benefit from a lower qualified dividend rate, they benefit from a lower long term capital gain rate. They benefit from a step up in basis of death. On the other side, real estate also has some advantages. All those same advantages other than the qualified dividends. When you're getting rents from real estate, those are taxed at ordinary income. But it has two really cool tax advantages. The biggest one is depreciation. You depreciate the building, not the land. But that can shield this income that's normally taxed to ordinary income tax rates such that you don't have to pay any tax on it. So many real estate investors are getting significant income from their properties and paying no taxes on it because it's all sheltered by depreciation and when that depreciation gets recaptured at sale, it's only recaptured it up to 25%. So there's a tax arbitrage there. Kind of like when you contribute to a tax deferred account at your peak earnings rate and then you pull the money out later in retirement when you're in a lower tax rate. There's an arbitrage there when you recapture depreciation, but you don't actually have to recapture the depreciation. You can hold that property until you're dead and then get the same step up in basis that a stock investor would. Even better, you can exchange it for another property, usually a bigger property or more expensive property, and not recapture that depreciation you've already taken, but then get some more value that you can then continue to depreciate. So it's a very, very tax efficient way to invest, to depreciate, depreciate, depreciate, exchange, depreciate, depreciate, depreciate, exchange, depreciate, depreciate, depreciate, die super tax efficient. A very cool benefit of real estate investing. Okay, leverage. You can leverage these investments. It's a little bit easier to leverage real estate most of the time just because people expect you to buy real estate with debt. And the loans are often fixed and pretty long term. Whereas when you use a lot of leverage with stocks, I mean, you can borrow against your real estate to invest in stocks. You can do that, but what a lot of people do is they use a margin account. And the problem with a margin account is you can only borrow so much, usually up to about 50% of its value. Obviously you can borrow more against real estate if you want, but there are margin calls and those can be bad if you don't have the cash to meet them. One big advantage of stocks over real estate is liquidity stocks, or hopefully you're investing in them via low cost, broadly diversified index funds. They're totally liquid. You can buy more any day the market's open. You can sell them any day the market's open. You know, if it's an etf, you can sell it every minute the market's open, they're super liquid, whereas lots of real estate investments are not liquid. You know, you might have to own them for five or 10 or 20 years. It just depends on how the investment is set up. So certainly an advantage for stocks there to make up for some of the other advantages that real estate may have. Both of these investments can be efficient. What do I Mean by efficient? Well, the publicly traded stock market is highly efficient. It's not perfectly efficient, but compared to the real estate market, it might as well be right. There are many opportunities to outperform and underperform in real estate, depending on your skill level. Now, that's not necessarily a good thing or a bad thing, but the nice thing about investing in stocks is you can just buy index funds and you know you're going to do pretty darn well over the long run. You're going to outperform almost all actively managed investors. But if you want to add value to your investments, probably picking stocks isn't the way to do it. You're much better off spending that time on the real estate side. Now, it's way easier to underperform on the real estate side because you can't just go buy the index fund that owns all the private real estate in the US it doesn't exist. But there's also the opportunity to outperform because real estate is very local, and if you're good at it, you really can add value there. Volatility is something to consider between these two investments. And stocks seem more volatile, but how much of that is just because they're marked to market every day? You know, that's probably one aspect of it, but certainly your investment in stocks can drop dramatically. That applies to publicly traded real estate as well. I remember in 2008, I think stocks dropped something like 45%, 48%, something like that. Publicly traded REITs, you know, the Vanguard real estate index fund, from peak to trough, dropped 78% in value. I mean, anything that's traded on the markets, it really can be very volatile. Whereas, you know, a private real estate investment that you own that isn't marked to market every day, nobody's out there doing an appraisal, every single day feels a lot less volatile and might be a little bit easier for you to stay the course. The bottom line, both stocks and real estate are great investments. Real estate's a little bit more work, but it has a few cool advantages to go along with it. Both have high returns and they have relatively low to moderate correlation with each other. And so I think there's a lot of advantage to having both in your portfolio. You do not have to choose between these. You can have both if you want, but you do not have to have both. It's possible you'd be successful just with real estate, and this possibility is successful. Never touching real estate at all. It is an optional asset class. Hope that's helpful to you earlier we mentioned working locums with Comp Health, the number one staffing agency. But Comp Health isn't just a locums agency. Comp Health staffs regular permanent positions across the nation as well. They also offer telehealth, medical missions and more, and that's what makes them unique. They can look at your situation and offer multiple solutions to build your career the way you want it and meet your financial goals. And they know their stuff, especially when it comes time to negotiate contracts, which they're willing to do for you. So whatever career move you're looking for, use the power of Comp Health to build your career your way. Learn more@comphealth.com if you're interested in coming on this podcast, we'd love to have you. We want to celebrate your milestones, no matter how big or how small they are. You can sign up@whitecoatinvestor.com Milestones until next week. Keep your head up, shoulders back. You've got this. The whole White Coat Investor community is here to help you. 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.