MtoM #223: ER Doc Gets His Finances in Order and Finance 101: Donor Advised Funds

This is the White Coat Investor Podcast Milestones to Millionaire celebrating stories of success along the journey to financial freedom. Welcome to the Milestone to Millionaires podcast, episode number 223. I'm Dr. Margaret Curtis. I'm filling in for Dr. Jim Dali. This podcast today is sponsored by Bob Bayani at Pertuity. He's an independent provider of disability insurance planning solutions to the medical community in every state and and a longtime White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or to get this critical insurance in place, contact bob@whitecoatinvestor.com Protuity that's P R O T U I T y by email infoorotuity.com or by calling 973-771-9100 There is a financially empowered women's event tomorrow night at 6pm Mountain Time. Come learn about tax planning with Alexis Galati. You can sign up@whitecoatinvestor.com Few there's also a resident webinar this Thursday, May 22nd at 6:00'. Clock. You can sign up for that@whitecoatinvestor. Com resident. You can learn from Dr. Dali and Andrew Paulson of studentloanadvice.com and they're going to be giving away five free copies of the fire your financial advisor course which is a two Everyone who registers is automatically entered to win. And now let's get started on our interview. Our guest today is Dr. Chris Reiba, an emergency medicine physician who's gonna tell us all about how he got his financial life in order. Welcome to the podcast Chris. Very nice to meet you.

Hi, thanks for having me.

Tell us a little bit about just give us the background of your story. How did you end up in emergency medicine? Tell us more about your story.

Essentially I came from a non medical family. I grew up in the Chicagoland area Midwest. Kind of born and raised like most people didn't really know what I wanted to do but nobody in my family was medical professionals and so I really had no medical guidance, had no interest in medical field. I had some financial my dad was in business, my mom was an accountant. So I was really good with math and I thought that it was kind of the direction that my life was going to take me. But then just kind of by stroke of luck I ended up quite frankly it was because I didn't want to be in high school anymore and I was bored with kind of what I was doing and I ended up in a kind of a tech school half the time my senior year and ended up first in fire science and then doing my EMT and ended up falling in love with kind of the emergency medicine and emergency medical services from there, ended up not going to college initially went off and did. Went and became a paramedic and worked as a paramedic for several years before kind of finding my way back by kind of mentor advising to Loyola University in Chicago to get my bachelor's degree and ended up having a pre med focus at that time, which was never the. Never the plan. Took my mcat, kind of gave med school a shot, but was really looking full time at, you know, Chicago Fire Department, working in EMS for the rest of my life. But luck had it and I was actually accepted to Loyola's medical school, so decided to go to the physician route, which was again, never really the plan and kind of was a major kind of shock on my wife to kind of go from making money, although not as much as a paramedic, but making money and kind of being a fully functioning adult and then suddenly kind of dropping all that to go back to medical school. And so medical school did that. Loyola still ended up loving emergency medicine just from that, just from my background. EMS was always something I loved in the emergency side of things. Ended up at University of Wisconsin for residency and then came out to University of Utah for a fellowship in ems and then ended up staying, kind of worked a little bit more community. So I'm up in Rock Springs because our group, the University of Utah group, covers it. And so I work for the University of Utah, but I kind of found my way in the EMS side of things. And so now I'm one of the associate medical director with Salt Lake City Fire, and I'm currently, I'm a medical director with Event Medicine with the Delta center and then one of the team physicians, the ERT team position for the Utah Mammoth asl. Utah Hockey Club, but Utah Mammoth.

Oh, that's so cool.

Yeah. Yeah. So I. I'm. The NHL requires an ER position for the ice for every game. And so I kind of found my way through relationships that I had formed working the last three years with the Delta center and the Utah Jazz and everything. I found my way in the position of a formal position of kind of the lead ER physician for the Utah Mammoth Now Hockey Club.

That is amazing.

Yeah, it found me. I was not looking for it, but as with most of my story, I kind of just kind of stumbled upon it and it worked out so Currently, I'm a full time ER physician at the University of Utah and then also working EMS in the community in Salt Lake City.

Wow. You know, that NHL doctor is a lot of people's dream job.

I. It would have been my dream job if I knew it existed, but I didn't know it existed until it was suddenly in front of me.

That's really cool. Well, I'm sure your background as a, as an EMS has been hugely helpful to your patients and your colleagues as a physician, because a lot of us don't. Most of us don't have that background. I think that's really, really valuable. You said you were. We had a parent who's an accountant. Is that right? And so you're good at math and probably familiar with money when you're growing up.

Yeah, I mean, to the point where she was an accountant. She worked. I don't, I don't think she was a full cpa, but she did. She got her degree in accounting and worked as an accountant, but I think then she chose motherhood over kind of pursuing a full career into it. But she always was very good at teaching me. When I was a kid, I mean, I learned how to balance a checkbook before I think I even had a checking account, which is one of those things that's a weird thing that I look back on and I'm like, why did she do that? But school didn't teach me that, so it was helpful that she did. And even though I'm young, I'm still the old school way. I do a lot of stuff by hand and paper still, just because that's how I was taught. And so it took me a while to even get into online banking because I just did everything by hand. I was so used to kind of balancing a checkbook and making sure that that was all settled. And so that's actually how I learned initially how to do all that was through her.

Do you think you had some financial literacy when you finished residency? Where would you say you were?

I would say, despite all that, I was pretty illiterate. I would. I will say that I did find the White Coat investor when I was a med student. A buddy of mine introduced me to it and was like, hey, I like, I found this book. And so me and him really dove deep into kind of the White Coat. Honestly, the White Coat Investor book. Not to make it a, you know, a sales pitch, but we truly found it and we're reading through it and we're. We're really getting big into it. And so as A med student. I've got a disability. Got disability insurance and life insurance based on what was recommended on the white coat investor. So I would say I was pretty limited in my financial knowledge, but I was very. I read a lot about it to try to figure it out, but even still, I was pretty limited.

And what made you decide to get an advisor?

I knew that I did not know enough about it. I honestly thought the reason to get an advisor was to learn how to invest my money. I did not realize that I was very deficient on just even just the basics. And so I really was like, oh, I need to find somebody to manage my money for me.

That's great. And when you started working with Tyler, did you have specific financial goals or was it just kind of a help me figure this all out?

I think it. Honestly, I think I came into it thinking I was going to have financial goals. And then in the end when he was explaining stuff, I was like, no, I just need help figuring this all out. And it ended up being pretty simple. It was just once it was broken down, it started to really make sense. And I think that was the hardest part was it's just. And we were just talking about this on a meeting just not too long ago about how it's unfortunate that it's so difficult because in the end it actually is pretty simple and straightforward, but you just have to have the. Either the language deciphering or just the knowledge of where to find stuff to be able to break it down. But once you do, it's pretty straightforward.

Yeah, that's great. I think that's so true that once you dig into it, you realize it's not as complicated as what we do all day even. And it's very manageable. It's great to have an advisor or some other trusted source of information, but that's great. Would you say, what would you say were the biggest changes you made or things you learned when you started working with an advisor?

Well, there's several things I learned, but I think one of the biggest things was taking all of what I had and being able to put it away before it even reached me. I think that was the thing that I think I really took home. And what I mean by that is mainly like retirement. You know, I always thought it was so cumbersome to have to try to figure out, like, how I was going to, you know, take my paycheck and invest it into certain things and take this paycheck I had, which I'd worked so hard for, and then to then watch it all go away to different avenues. But then when I started working with him and realizing, like, most of the stuff that we do for our future actually comes before we even see the money, it became a lot easier to not only swallow that pill, but also to manage it, because it kind of was all going away before I even saw it. And so once you kind of stop realizing that, you started just looking at, okay, this is my paycheck. This is what I can live by, and you no longer to worry about everything else. But then when you looked at it in depth, you're like, oh, wow, I can't believe how much money is actually going towards my savings and how much in my retirement and everything like that without even me doing anything. And so I think that was the biggest shock when I started doing what he recommended. And in full disclosure, the University of Utah has a very good match and employee compensation package. So this isn't all 100% on me, but I think when I started making sure I was maximizing all of my retirement accounts and making sure I was kind of getting my finances in order before I even saw the money in my paycheck. And then I was looking at my retirement account, and I was a year into this, and I was already, like, quarter of a million dollars in. And I was like, I can't believe it. Like. And so it made me feel a lot better, too, about some of the expenditures I was doing, being like, well, most people have to worry about saving up for retirement, but I've already done that, and I've already maximized that as best I can. And now a lot of this is just kind of just making sure that I just live comfortably.

That's amazing. Well done. That's great. And you're. You said the University of Utah match isn't your doing, but it kind of is your doing because you knew about it and you went and signed up for and you're maximizing your accounts and your contributions to your account so you're getting the full match. So good on you.

Just yesterday or two days ago, I was talking to some of the nurses up in Rock Springs because they were getting all their open enrollment and retirement figured out. And I was talking to one of the nurses, and she's like, it's amazing how everybody focuses so heavily on their paycheck and, like, how they're going to divvy up their paycheck. But if you focus on getting all that stuff taken care of before that paycheck even hits your account, how much, like, you can just. You just Adjust your lifestyle. And so you're no longer like, okay, you know, say I have a $5,000 paycheck or something. And I'm like, okay, now a thousand has to go here, a thousand has to go here. Well, all that's happening beforehand. So once you get that paycheck, it's just. It's kind of yours to just be responsible.

Then it's so important to get that early saving in to. At your age, at your stage, and to, like you said, to have it taken out of your paycheck early. And then you can kind of relax and enjoy the rest of it. You can use it for essentials, obviously, like your housing and your insurance, but it's okay to have a section of it that you just spend and enjoy. And you can do that knowing you've put it away where it needs to be.

And that's the thing is, like, then you feel less guilty than if there is like, oh, all of a sudden I, you know, I'm going to take that trip to Mexico and I'm like, well, like, you know, for somebody that's not doing all that, then they're like, well, like that. Sacrifices, you know, do I have to sacrifice something that I'm putting towards retirement or my investment with this? It's like, yeah, you know, I shouldn't do that every day. But I just took a New England trip and I was able to do that because I'm like, well, in the end, I've. I've set up everything else to work. And so now this money, even though I should be being responsible with it, this is also, you know, I worked hard to get here. I can treat myself, and I don't feel as guilty doing so.

Absolutely. Now, did you have student loan debt coming out of residency?

I do. Unfortunately. I had a pretty hefty amount of student loan debt. I went to a private school in Loyola in Chicago, which was not cheap, although I don't think any medical schools are cheap anymore, even if it's private or public. And I had. I had the fortune of having two working. My mom is working now, so two working parents that made it so that I did not get a lot of government assistance. And so I pretty much had to fund most of med school. I did get help by the fact that my parents helped a little bit, but I also had a lot of scholarships for undergrad, having done my paramedic. And so I. I didn't really have a hefty amount of undergrad loans, and so I actually had zero by the time I started Med school, but then med school was pretty much 100% funded by loans. So I did graduate with 300, 320,000 in medical school loans, which is about the average for somebody that doesn't get any sort of assistance. I did get a little bit, but I shouldn't say, like none, but I didn't get much.

Yeah. And did you have you. Where are you paying those off?

Well, during COVID I personally did not think I was ever going to work at an academic institution in which I would be eligible for pslf, but here I am. But during COVID when government rates were at zero, I was able to capitalize on refinancing my loans with. I think it was, it was like Laurel Road maybe. And they gave me a tremendous rate because the rates were so low during COVID because government rates were zero. And so they were desperate, I think, for people to. To refinance. And so I got really low rates with them. And so I refinanced. And I think I'm in year 4 of 10 and paying them off.

That's great. That's a great. Sounds like a great plan and a great timeline.

And that's where I wish I would have had a financial advisor because I kind of just did that on my own. And I look back on it and I'm like, I don't know if that was the right decision. I think it turned out to be okay. But I really kind of shotgunned that one. And I maybe should have thought about it a little bit more. But Covid was a weird time, so I blame it on Covid.

That's very fair. Chris, what are your next financial goals?

So I'm getting married in like three months.

Congratulations.

Thank you. And so we were just trying to come up with kind of our plan for combining. So we were just trying to figure out how to combine our finances, how to maximize kind of our combined retirement savings. Well, it won't be combined, it'll be separate. But how to maximize as a combined, there is a discrepancy in income. And so how to make it so that we're maximizing everything we can while also making it comfortable for my fiance, soon to be wife, to understand that, like the long term goal of finances, about how she may feel heavier on her paycheck because of it, but in the end, the goals that come from it and why it's beneficial to do that. And so we were talking about that and then just, I'm actually in open enrollment now. And so my goal is to actually transfer over to a high deductible account with an HSA and start saving there. I was not able to do that when I initially started with Tyler. This is the first opportunity. So that's my goal right now, is to make sure that I'm maximizing both my backdoor Roth IRA as well as my hsa, which are the last two pieces of the puzzle. I'm maximizing my. I get a 457 and a 403. So I'm maximizing both my 457 and my 403. We've got an ally account set up for high interest savings account that money's going into. And so right now the final step is getting the HSA and the backdoor Roth settled. And then I should be all set on the key things that he wanted me to do. And then now comes the fun of just saving and getting ready and just getting to use my money as I for fun sometimes too. So.

Yeah, that's great. That's amazing. It sounds like you're doing great and good for you and your fiance for having these conversations early. So you're on the same page. There's no one right way to do it, but it can be tricky between married couples to match their finances, especially if their backgrounds are very different. So good for you for doing that now. Sounds like things are going really well. And congratulations on all your achievements and what's coming up.

Thank you so much. I do appreciate everything. I mean, yeah, it's not a sales pitch, but like I said, the white coat investor, definitely. I knew about it as a med student, found the book and then just kept. I was reading it and then ended up kind of getting through here. So I, I talked to, I refer a lot of my friends who are in the same boat to me that are just shocked at, like, where I'm at. And they. We have all these conversations and it's like we always laugh because it's like a bunch of ER docs come together and we do a ski trip every year out here in Salt Lake and we sit in the hot tub, have beers and we start talking about financial stuff this past year and we were laughing at where our life's become, but it's like amazing where I'm at compared to, I think, where a lot of my colleagues are at. And so it's awesome to be able to try to help point them in the direction as well.

That's great. Good for you. Wait till you're my age and you're going to sit around and talk about how your Teeth hurt and how much fiber you're eating.

Yeah, well, I'm getting. I have my dentist appointment tomorrow, so I might be told that tomorrow.

Yeah, you might. It doesn't get better. I'm sorry. But no, that's great. And good for you for spreading the word. And congratulations again.

Awesome. Well, thank you so much.

Thanks so much. All right, bye. Thank you, Dr. Raiba. I hope you all enjoyed this interview. We're going to turn this back over to Dr. Dali now. He's going to give us a little finance 101.

Let's talk about donor advised funds, or DAFs. What is a DAF? This is a vehicle where you can take money and put it in the vehicle. And the moving of the money from your brokerage account to this donor advised fund is permanent, right? You can't take the money back out of the donor advised fund and spend it on whatever you want. But it's also considered a charitable contribution. So if you're taking charitable contribution deductions on your taxes, just putting the money into this vehicle gives you that same deduction whether you actually give it to a charity or not. You basically committed to give it to a charity eventually, so you get the deduction. Now that's a donor advised fund. While it's within the donor advised fund, the money can be invested because it's a charitable thing. You don't pay any taxes. And neither does the DAF or the future charities pay any taxes on the earnings while it's in that account. And then whenever you want to take it out of that account, you can recommend a distribution, a grant to the manager of the daf. You know, please give this to the United Way or some other charity. And they generally follow your instructions. As long as it's a legitimate charity, they'll just give whatever money you say out of the DAF to your favorite charity. Now, you don't get another tax deduction when it's distributed from the daf, but you get the original one. Now, like any donation to charity, the best thing to donate is appreciated shares you've owned for at least a year. And the reason why is because when you donate it to charity, including a daf, you don't pay taxes on the capital gains. And when it's sold by the charity or the daft, neither does the charity or the daf. Nobody pays the capital gains. The government just doesn't get them. So there's no capital gains taxes. Plus you get the entire value of the contribution as a charitable deduction. This is really powerful, tax wise. Now should you do this just to lower your taxes? Absolutely not. Right? You do not. Almost always it's possible to come out slightly ahead depending on how much you're going to end up paying in capital gains. But you generally don't come out ahead donating to charity. Right. If you give $100 to charity, you might get a tax deduction that ends up being worth $35 off on your taxes. You're not coming out ahead that way. So don't do this just to lower your taxes. You've got to actually have some sort of charitable desire to donate to charity. If you don't want to support the mission of a charity, don't give money to a charity, including via a daf. But if you do, a DAF is a super convenient way to do it for several reasons. The first one is you don't have to distribute it to the charity at the same time you get the charitable deduction. Right? I've called this the jerk move in the past. Right? You get all the benefit of donating to charity. The charity gets no benefit. Hopefully you don't leave it in the daft too long before the charity starts getting that benefit. But that is one thing that people really like about DAFs that can be really useful, right? If you're in a super high tax bracket this year and you're going into retirement or you just sold a big business or something, super high tax bracket, you can get your deduction while you're in the high tax bracket even though the charity gets the money later. So that's a real benefit there. The bigger benefits. I see. And why pretty much all of our charitable giving is done through a DAF now is convenience, right? All I have to keep track of, tax wise, is usually one donation a year to one charity. That's it. That's all I have to keep track of for my tax paperwork. That's way easier than what we used to do when we donated money to multiple charities. And especially if we're donating appreciated securities in kind donations, we would have to keep track of those. And every one of them was a little bit different how they worked with them. Some small charities couldn't handle that sort of a donation. Well, your daft can handle that donation, right? And they can handle the small charities as well. So that's a real benefit. The other benefit is anonymity. And until you've given a lot of money to a lot of charities, you don't realize what a benefit this is. But if you give money to somebody, say Doctors Without Borders, for the next 10 years, four or five times a year, you get a glossy pamphlet in your mailbox from Doctors Without Borders trying to get you to give more money to them. And you know, I'm not going to give any opinion on this particular charity and its mission, but I do know it spends a lot of money on marketing to get more donations, and I don't want to do that. If I'm giving it money to support, you know, medical care for people in war zones, I want the money to go to medical care for people in war zones. I don't want it to go to marketing to me. I know about the charity. If I want to give more money to them, I'm going to give more money to them. With a daf, you can give anonymously. They don't know I gave the money. I don't get on their charity porn list and they don't fill my mailbox with these glossy $5 pamphlets five times a year. And so that's a real great benefit of a donor advised fund. More convenient, simpler paperwork, anonymity, potential delay between getting your charitable deduction and giving the money to the charity. Those are the main benefits. So obviously if you're not itemizing your deductions, if you don't use Schedule A, if you just take the standard deduction, donating to charity is not helping your tax situation. And donating to a DAF isn't going to help your tax situation either in that sort of a situation. But if you are itemizing, you're going to get a tax break just like you would if you give it directly to the charity and probably a lot less hassle. What DAF should you use? Well, we've used the Vanguard Charitable, which is Vanguard's daf. It's relatively low cost. I think they charge something like 0.6 or 0.7% for the first few hundred thousand dollars worth of assets. So it's an AUM fee. But the truth is that's probably lower than what you'd be paying on taxes if that money was sitting in your taxable account. So even if the money's sitting there for a while, you shouldn't feel like you're getting ripped off. Plus, if you do what I do and just leave it in cash while it's in the daf, at least you're making good interest on it. Vanguards money market funds are typically paying higher interest than anybody else's. A higher interest rate. And so you might be paying a 0.6 or 0.7% expense ratio, but you're also earning 4.5%, 5%, et cetera, and you're definitely coming out ahead in that sort of a situation. The downside of using Vanguard is very convenient if you have a Vanguard account already. The downside is it's got a high minimum initial contribution, it's $25,000. If you're not ready to give $25,000 to charity, this is not an option for you. It also has a relatively high donation minimum, which is $500. So you can't give less than $500 as a grant out of the DAF to your favorite charity. So if you like giving, you know, $20, $50, $100, this might not be the DAF for you. Okay? It's for big contributions, big grants, you know, and it's really convenient. Some people find they like the Fidelity DAF a little bit more and it does have lower initial investment. I think it's $5,000 and I think it has lower grant amounts. I think they're $50. So much better if you're using smaller amounts of money. Another new one on the scene is called dafi and we've had that CEO on the White Coat Investor podcast and talked about it and it seems like another great option. Relatively low fees, relatively convenient and I've heard good things about them. So I think you can probably find a DAF that's going to work for you between one of those three Vanguard, Fidelity or dafi. I would check those out. Hope that's been helpful to you to learn the importance of donor advised funds and help you decide whether you want to use one and which one.

This podcast was sponsored by Bob Bayani at Pertuity. One listener sent us this review. Bob has been absolutely terrific to work with. Bob has always quickly and clearly communicated with me by both email and or telephone, with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications and underwriting process in a clear and professional manner. Contact bob@whitecoatinvestor.com Protuity by email, infoprotuity.com or by calling 973-771-9100 to get disability insurance in place today. Thank you so much for joining us. I hope you enjoyed this interview and we'll see you again next week on Milestones to Millionaire. 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.