MtoM #198: Financially Recovering From a Divorce and Finance 101: The Importance of Both Spouses Working Towards Financial Goals Together

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 one 98. Financially recovering from a divorce, Mortar Group is a premier real estate investment firm focused on multifamily properties and both ground up and value add projects in the competitive markets of New York City since the early 2000s. With over $300 million in assets under management and over 30 investments since inception, their fully integrated firm model allows Mortar to maximize efficiency and value across their investments in these niche markets. Mortar leverages over two decades of experience in architecture, development and asset management in their projects to build value and minimize risk for investors. Invest in tax efficient high return risk adjusted strategies with mortar group@whitecoatinvestor.com Mortar welcome back to the podcast. It's always good to have you here. We're working with limited ability here. Megan and I both have arms and splints today, so we got two useful hands between the two of us. But we're still putting this together for you as best we can. We got something coming up this week. You're listening to this this week. This is Thanksgiving week and I hope you're thankful for something. But come the day after Thanksgiving there are going to be some things around here that you can be even more thankful for because we've got some plans around here for some stuff you may be interested in. So pay attention this week to the blog and we'll mention on the podcast next week, but we've got some cool stuff coming up this week as far as White Coat Investor goes. All right, we have got a great interview today. It's a milestone we haven't done before, which I think will be pretty interesting to hear and then stick around afterward. We're going to talk about for a few minutes the importance of both spouses working together toward your financial goals. Our guest today on the Milestones podcast is Arup. Welcome to the podcast.

Thank you, Dr. Dali. Great to be here.

Now we're doing a milestone today that I don't think we've ever done on this podcast before. I mean, this is episode 198 and I don't think we've done this one, which is essentially recovering financially from a divorce. So I hate to congratulate you on this milestone because I know it's a terrible milestone to go through, but I do want to congratulate you on the recovery and thank you for coming on to inspire others dealing with this relatively common financial catastrophe to also get through it. So thank you very much for that.

Yeah, no, thank you. I'm glad to be here. And, you know, I've certainly found inspiration in many of the stories I hear from physicians early in training and making tremendously savvy financial decisions and the joy I feel. At the same time, there's a voice in the back of my head saying, not my story. And having friends who are going through what I went through 15 years ago, it's not their current story either. So, again, thanks for having me on and really happy to share my milestone.

Let's start with a little bit of background information. Tell us what you do for a living, what part of the country you live in, how far you are out of training, when you got married in your career, and how long has it been since the divorce.

So live in upstate New York, which for those who are not familiar with New York, not New York City, you know, very pastoral, beautiful agricultural lands, rolling hills about two and a half hours away from New York City. So beautiful area. Unfortunately, New York is also a higher tax area. So there is that. I guess I'll start at the start. I grew up in the Northeast, my whole life. Grew up outside of Boston, went to undergrad at UMass Amherst, went to medical school at UMass Medical School and graduated in 1999. I had a little circuitous path to finding my calling in anesthesiology, but, you know, in 2003, finished my anesthesiology training in Boston and have been in practice since. So initially in private practice for a couple different practices and then for the last 16 or so years at Albany Medical center here in Albany, New York. And then I guess the other questions. Married right out of medical school back in 99 and divorced in 2010.

And tell us a little bit about your financial success, your level of financial success prior to getting divorced. I mean, you were an attending, it sounds like, for about seven years before you got divorced. How are you guys doing financially?

So I would say as long as we kept working, we were doing fine. But in terms of the stories we hear and we share on White Coat Investor, that was not the story. It was much more kind of anticipating higher salaries and money coming in in the future and so almost living off of that future higher earnings, which again, not a great position to be in, but we were living well. We had purchased beautiful house in upstate New York and again for a first house purchase, probably bigger than should have at the time, but financially we were doing okay, but just not significant savings. Putting some money into IRAs and into 403s, but not significant Savings. A lot of it was servicing med school debt and then really servicing debt that we had accumulated along the way. In terms of consumer spending, do you.

Think you had a positive Net Worth by 2010?

Oh, by 2010?

No, it's still a negative net worth at that point.

Oh, yeah, yeah, yeah. So at that point, still probably upwards of 40,000 or $50,000 of student debt for medical school mortgage, a couple car loans in addition to credit card balances. So no, definitely not a positive net worth.

Okay, so you get divorced and what wealth you had just got cut in half. Presumably your income just got cut in half. At what point did you kind of start becoming financially literate?

Pretty immediately thereafter, when I think the financial reality that was laid out in front of me became, you know, it was sort of unsurmountable where you're just kind of like, okay, this is what's coming in, this is what has to come out. This is not sustainable, especially with the debts that I have on the books at that point. So I think at that point it was a very quick introspection and really aggressive exercise to change that balance and figure out how quickly that balance could change. Because again, it was not going to work moving forward. I mean, we're talking month to month things unclear of how we're going to pay for what, just getting by.

So you had this massive budgeting pressure, pressuring you. You have to budget now or the money just doesn't work at all. So what did that inspire you to do? Did you go to the library and get books? Did you, you know, participating on the Internet in forums? Did you start listening to financial podcasts? What were your steps in order to start learning about this money stuff?

So I had just completed an executive mba, which, you know, at that point was kind of theoretical numbers, where it was just like, okay, you know, business a does this, you know, whatever. So that became an immediate exercise of like, okay, here's my actual, you know, cash coming in, here's my actual cash coming out. I think some books that helped along the way. I reread the Millionaire Next Door, which I'd read a decade prior, and then it hit home in a very different way. So I think the forced budgeting was a couple of things, but a little bit of financial literacy online and then just the reality of what I was living of just trying to get to making the next month better than the current one.

Okay, well, let's talk about your financial pathways. Since 2010, you're continuing to work as an anesthesiologist. I think Most of us know anesthesiologists are relatively well paid doctors. But tell us about your financial pathway from 2010 until now.

Yeah, so I think several aspects of the puzzle came together. Well, so from that point forward, I think there wasn't quite the crunch or the limited number of anesthesiologists then that there are now. So salaries were still relatively stable. But having just completed the mba, I was like, all right, as an entrepreneur, what can I do? I'm enormously well trained, clinically, analytically, I need to have more revenue coming in to dig out of this hole. So I came up with short term plan and longer term plans. So the short term was okay. I've got these very marketable skills that at that time, not everybody was fully versed in the things that we were doing. So one of the examples is ultrasound guided regional anesthesia, which now is commonplace. Everyone does it, but at that time, you know, especially the smaller community hospitals, hospitals in a, you know, driving distance from Albany wasn't done. So it was this, this very marketable skill that I started reaching out to hospitals, say, hey, you know, I can help you develop an ultrasound guided nerve block program or regional anesthesia program. I can teach your physicians how to do these blocks. And I'm happy to come out and do that. So that was, I think, one part of it. Another part was non clinical, non outside the homework. So things that I could do after hours after the kids went to bed, but that would still use my abilities, my board certification, all of that. So looking at cases through New York State, through the opmc, the Office of Professional Medical Conduct, and then also doing some medical malpractice work where I would look at review cases and potentially do some plaintiff or defendant work. So those were two of the main ones that opened pathways.

You increased your income. You worked really hard and you increased your income. That was the first step. What else?

Eliminating bad debt. So all of the debt that I had on the books, those were prioritized into saying, okay, this is, you know, like, has to go immediately. These can go down a little bit. So things like credit cards, you know, I had some IRS back taxes that had to be paid. So those were immediate. Where, you know, I said, all right, I'm not paying interest on things from the past. So those aggressively repaid with that additional money coming in. So those are some.

Some other pieces and. And 14 years on. How are you doing? I mean, are you approaching fi. Are you a comfortable millionaire?

Where.

Where are we at? In.

So I would say I don't know about comfortable in that. I think to me, the notion of comfortable means I can step away from working and be done and hang out and cycle and do other stuff for most of the time. So I would say, and I think also upbringing wise as a first generation immigrant, being able to walk away. I mean, it's not something that I have ever thought about, but I would say very different net worth. So over seven figures, which is a very different place from where I was 15 years ago. I think a couple of things we've done. I've subsequently gotten remarried, found an amazing anesthesiologist who I've spent the last decade with, the last decade plus with. And so we finally, just last year, I think we met with a financial planner. We'd been looking at all of our accounts and balances ourselves. But then I think to spend a little money just to make sure that the assumptions we had were true, were borne out and made sense to someone else. So that was, I think, very helpful and gratifying to say that, okay, you guys are on track to really have a lot of choices here in the near future, both in terms of how much you're working, are you working full time, how long you're working for, where do you want to stop working? Which were honestly questions I hadn't really considered with the kids. I'd always kind of been thinking that, all right, well, I'm going to work till I can't work anymore. Whereas the ability to have that conversation and think like, wow, I could really not work in the same way that I am in seven years, in 10 years and whatever. But it's now our decision of when we want to call that. So we're still playing with that a little bit. I mean, I think the current horizon is about we'll continue working for about 10 years and then see where we are whether we go part time. Because again, it's work that I enjoy tremendously still. I mean, I love taking care of the patients I take care of. I love interacting with surgeons and nurses. I mean, you know, the OR is an incredible environment. So. But again, to have that choice is very different.

Now. You, you had to pay alimony, I assume. Did you have to pay alimony and how many years do you have to pay it for?

Yeah, so not alimony. So I'm paying child support, which continues for another couple years.

Okay. Because your ex was employed and has income as well. Is that the reason you didn't end up with alimony? Okay.

Yeah.

And I imagine, you know, getting married again, you know, Given your financial history, you probably discussed finances a little bit more, you know, before getting married and early in the marriage. Tell us about some of those conversations you had with. With your new spouse.

Yeah, I think the conversations are very different, and I think our lifestyle is very different. I mean, I think we really focus on saving, you know, a lot, as much as we can. You know, our majority of our expenses around our kids, I mean, so they play, you know, tennis. So a lot of that is tennis, coaching, travel, court time, and then really an aggressive focus on retirement goals and where we're going and what that timeline looks like. So the conversations are different. Our finances are separate, so that's different as well, where we have kind of clear delineation of who's paying what and how things are going, as opposed to everything kind of going into a common pot and just going out.

Did you decide, I mean, that's relatively rare among financially successful people, to divide your finances. Did you decide to do that as a result of the prior divorce, do you think?

I think it was partially inertia, because, I mean, I think at that point we were both, you know, she had been in practice for several years. I'd been, you know, through this financial calamity. And so we didn't ever discuss really putting them together. And it. And it seemed to work pretty well and has kept working very well. So, you know, any major expenses, you know, car, solar panels, whatever, we'll just figure out, you know, who's paying what share, and, you know, we make those decisions together.

Yeah. Now there's somebody out there that's going through a divorce now or just got divorced, watched their income get cut in half, watched their assets get cut in half. What hope can you give that person about their financial future?

Yeah. You know, Dr. Dali, I've got a friend right now in practice who's going through a very tough time, doesn't know the next step or isn't sure of what he should do. And I think of the mental state I was in and mental health and where I was. I mean, it was a bleak time where you're kind of stuck, you're not happy, and you just, you know, the unknown is very scary. And that's exactly what you think it's like, all right, well, everything I've worked for is going to be gone. I'm going to have no say. But I think of where I was at that time, and. And again, it was a very tough, bleak time. I had completely shut out my friends, didn't tell them really anything, maintained appearances like Things are fine. And so I had become a very different person. So when I see friends of mine who are in that state, it really compels me to share my story and say, hey, look, you got a lot of living left to do and you're still relatively young. I mean, I'm, you know, 51 now, so friends of mine, you know, you still have hopefully 30 plus years of, you know, how long can you fathom staying like this? And so I think the happiness piece is key where, you know, I think you have to weigh, you know, taking that next step, those next steps, even though they may be very tough financially, they may be very challenging emotionally, the other side gets you to a place where you're, you know, you'll be okay and you can work through it and, you know, maintain that happiness and keep a very positive perspective on life. So I think it's a tough, tough position and it's a very difficult personal choice with family, you know, involvement in it. But I think for, you know, just happiness, success, really not even financial, but just emotional and having the best life you can live, it's important to get through to that other side.

Well, congratulations to you on your financial recovery from this, and thank you for being so willing to come on and be vulnerable and talk about this pathway you've been down, and hopefully it can be used to provide a little bit of inspiration to somebody else dealing with similar issues. So thank you very much for being willing to come on the podcast.

Look happy to do so. And again, if my story, someone else driving down the highway, getting to work at 5 in the morning, and they're like, oh, my gosh, that's where I am. It would be worth it.

Okay. I hope you found that interview interesting and useful to you, particularly those of you who have been through a divorce or going through a divorce right now. It is a financial catastrophe. It's a terrible thing to go through. It's not just financial either. It's incredibly hard emotionally and physically and all kinds of things. So we empathize with you if you're dealing with a divorce or if you've ever had to. There's a few things that Roop had going for him right now. They weren't managing money very well. They were kind of typical doctors prior to the divorce. But the fact that he was married to somebody that was high income and married somebody that's also high income certainly blunted a lot of how hard that could have been. Right. A lot of doctors out there are married to non earners or low earners. And you really do cut your income and your assets in half when you get divorced. And so that can be very, very hard. It's illustrative that even two high earners seven years out of training, you can blow it all. You can spend all of your income. Trust me, it's entirely possible, especially if you live in a high cost of living area high, you know, you buy some things you haven't yet saved up for and so you're paying a bunch of interest on it. It's not that hard to blow through a doctor income. It's not that hard to blow through two doctor incomes. It happens all the time. When you look at Medscape surveys, you'll see that of Doctors in their 60s, about a quarter of them are not millionaires. A few years ago they used to break that out for those with a net worth of less than half a million and it was 11 to 12% of doctors in their 60s. It's a shocking statistic, right? It's amazing. You think about somebody that's presumably had 20, 25, 30, 35 years of physician level incomes, right? You know, that might be $10 million and they have less than half a million dollars of it left. And a lot of times the story is one of tragedy. It involves disability or somebody dying or a divorce or something like that. But much more often it's just blowing the money. It's just not paying attention. It's just zero budgeting whatsoever. And you know, and a lot of people aren't just spending everything they make, they're spending more, right? I remember being shocked in medical school. We had like one finance talk in medical school. It was actually a really good one. It was a husband of a doc who came in and talked to us and gave an example. I think it was, I think it was an ophthalmologist. The example that was making $325,000 a year and spending $350,000 a year. And I thought, how can that possibly happen? But clearly it happens all the time. So don't ever assume you can't spend your entire income residents out there. I know this seems crazy, but I assure you it happens all the time. Alright? I promised you I was going to talk a little bit about spouses, okay? And we've had a good example in this podcast about spouses. But you and your spouse don't actually have to be on the exact same financial page to be successful. But you probably do need to be reading from the same book. Okay? You got to be more or less moving in the Same direction. Most people, as I mentioned in the podcast, when they get married, they combine their finances, and I think that's usually pretty wise. There's some real benefits to doing that. One, you're just more likely to work together. Everything goes into the same pot. You view your entire asset allocation together. If you need your own individual money that you can spend without being accountable to your partner, you can take that back out as an allowance, essentially. And Katie and I did that for a number of years in our lives. I can remember back in the early days in med school, I think our allowance was 20 bucks a month. It wasn't a lot, but it was money we could spend without having to account to our partner for. And we kept that going for a number of years until it just became a silly exercise and it just didn't matter to us anymore. But if you need to do that, do that now. Are there a few reasons to keep finances separate? There can be. It does work for some people. For some people, it works pretty well. And so to deny that nobody can ever be successful while doing it would just be wrong. Even though I think most people ought to combine finances, some reasons I can think of where you might want to keep them separate is, especially if you're bringing a ton more money into the marriage, there's some asset protection concerns there. Obviously, it's very rare to lose money to your patients, right? Above policy limits. Judgments that aren't reduced on appeal are extraordinarily rare. It's not unusual to lose money to your spouse in a divorce at all, though. And so if your parents have left you some huge trust fund, maybe that's a reason why it makes sense to actually have separate finances. If you've already been in a marriage before, or you get married when you're 55 or something and you've already built a lifetime of wealth, maybe it makes sense to keep those things separate, because when you mingle things together, it's now exposed in a potential future divorce. So there are some reasons why people keep separate finances that actually make quite a bit of sense. But for those of us who got married when we were poor and we didn't have squat and our spouse was poor and didn't have a squat, you know you're going to be splitting anything in a divorce anyway, right? You're going to be splitting your income, you're going to be splitting your assets, and there's very little reason to keep separate finances in those sorts of situations. However you manage the finances, you do need to make sure you're on the same financial page. And I think the best way to do that is what we call a monthly budget meeting. Now, you can call it whatever you want. I don't know. You can call it money date night. I don't know. Does it even have to be every month? I guess it doesn't. But I'd start with every month in the beginning. And the truth is, after a year or two or three of doing this, and after doing a couple of them, after big financial changes in your life, it gets more or less on autopilot, right? Because you're on the same page or at least reading from the same book. You're on one the page the other person just got done reading, maybe, but you're close. You're more or less doing the same thing. And keeping yourselves aligned as you go through your financial lives is very, very powerful. The other day, from time to time, I mostly move the investments around. We're kind of a traditional situation that way. Katie mostly tracks the spending in our budget process. I mostly track the investments and move the investments around. But from time to time, we switch it up a little bit and I have her buy an investment or I have her pull money out of the 529 for her nieces and nephews. I make sure she can do all the necessary steps so that in the event that I fell off a mountain, smashed my head, she could take over. Now, obviously that's a very real situation in our lives, but, you know, maybe you just haven't thought about those sorts of things happening in your life. Can your spouse take over? What is the plan if something happens to your spouse? Have you designated a financial planner for them to go work with? You know, those sorts of things ought to be discussed from time to time in your monthly money date, meeting, whatever you want to call it. Hope that's helpful to you. Condolences to everybody out there who's been through a divorce or is going through a divorce now. I know it's not easy. I hope this podcast was helpful to you. It provides you some inspiration. There is light at the end of the tunnel. It is not an oncoming drain. This too shall pass. Mortar Group is a premier real estate investment firm focused on multifamily properties in both ground up and value add projects in the competitive markets of New York City since the early 2000s. With over $300 million in assets under management and over 30 investments since inception, their fully integrated firm model allows Mortar to maximize efficiency and value across their investments in these niche markets. Mortar leverages over two decades of experience in architecture, development and asset management in their projects to build value and minimize risk for investors. Invest in tax efficient high return risk adjusted strategies with mortar group@whitecoatinvestor.com Mortar all right, we've come to the end of another Milestone to Millionaire podcast. We're grateful to have you here. Thank you for being part of the audience. Without an audience, the podcast is pointless. There is 0.5. We want you to be successful in your lives, both professionally, emotionally, in your relationships, and also financially. We think that financially successful, financially comfortable doctors can be better Doctors can be better partners and better parents. They can focus on that which matters most in life. So we want to help get you there. If you've accomplished a milestone, no matter big or how small it might be, we'd like to celebrate it with you and use it to inspire others to do the same. You can apply to come on the podcast@whitecoatinvestor.com Milestones keep your head up, shoulders back. We'll see you next week.

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.