MtoM #3 - Become a Millionaire with the 1/3 Income Rule

This is the White Coat Investor Podcast Milestones to celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali. This is Milestones to Millionaire episode number three. Welcome back to this. I hope you guys are enjoying these new podcasts we're doing here. If you'd like to be on the show, if you've accomplished something, want to celebrate it with us, go ahead and go to whitecoatinvestor.commilestones to apply to be a guest on this show. Possible things you could be on for getting public service, loan forgiveness, getting back to broke, paying off your student loans, paying off a mortgage, becoming a millionaire, becoming a DECA millionaire, becoming financially independent. Anything where you've become financially successful and want to inspire others to do the same, go ahead and apply and we'll see if we can get you on the show and share your story with with our audience. Do you ever find yourself wishing there was somewhere to go to ask your finance, insurance or investing questions? The White Coat Investor community is a great place to turn. We have a thriving community across all of our social channels, Facebook, Twitter, Instagram, Reddit, and our WCI forum. We have been discussing solutions to your money problems since 2011. Join the Conversation with thousands of other White coat investors. Follow WCI on your favorite social media platform for financial resources, tips, tips and strategies. Just head to your platform of choice and search for the White Coat Investor. You can do this and the White Coat Investor can help. All right, let's get our guest for the show on. All right, we're going to call our guest today. Max. Welcome to the Milestones to Millionaire podcast, Max.

Thank you for having me. I never thought I would be on something like this, but I guess I qualify.

Well, thank you so much for volunteering. What's your specialty and how far are you out of training?

I am a radiologist and I had to calculate this as well as calculating my net worth. And shockingly, I'm 20 years out of training.

Awesome.

But I continuously train, if you know what I mean. As a physician. We're always in training.

Well, thanks for what you do. What is your approximate net worth at this point?

My net worth is a little over 4.2 million.

Okay, and what's that divided up into?

I have a brokerage IRA account which I originally started off with in my practice, which is about 90,000. Another brokerage account that is at 200, so thousand. I have a fixed annuity, which is at $1,300,000. I have another IRA that's at about 500 and I have two homes. My primary residency is about 1.5, and my second home is about a million.

So a fair amount of your net worth in your residences, for sure, right?

Yeah, definitely. Without a doubt. I guess about 2.5 in terms of residencies.

So what's been your range of income throughout your career?

Well, you know, I started working when I was 14 years old. So when I get my Social Security statement, I filed taxes when I was 14. And my range of income has been anything between maybe $3,000 a year, all the way up to about 600,000 a year.

And how long do you think it took you to become a millionaire? First time you hit a million dollars from the time you left your training?

Right. I was about 40 years old, so that was about eight years out of training. Okay.

And what are your secrets to success? How did you become so wealthy?

You know, I never tried to become wealthy. It was not my major objective. My major objective was to be the best physician I could possibly be. And I always thought that if you were really just great at what you did and worked hard, that the money would follow you. So my objective wasn't to become wealthy. My objective was to become successful as a physician. And I think a couple of things went into play that helped me become successful as a physician. First, I had really great training. I had really great teachers that invested a lot of time into me. And second, I remained flexible. I remained flexible in terms of mobility, and I remained flexible in terms of my actual career. So when, for example, I'm technically a neuroradiologist by training, but when I was asked to do breast mri, I said, sure, I'll figure it out. And this helped me, I think, immensely to be flexible and to accept what was being asked of me, as opposed to being dogmatic and saying, oh, no, I'm just doing this or that. Also, I think it's helped being flexible in terms of location for the younger physicians. Everybody wants to live in a specific area, but if you can be flexible, you can become indispensable.

You mean they have to keep you, they have to pay you well because there's nobody else in that area?

That's exactly correct. If you're willing to do what no one else is willing to do, then you do something that is invaluable to your practice, and then things can change. You know, things over time can change. Yeah.

So that certainly explains how you were able to maintain a solid income throughout your career, but it doesn't necessarily explain how you built wealth. At some point, you decided you weren't going to spend all that income and you used some of it to at least buy some assets that were going to go up in value. What happened there? What was the mindset that led you to do that?

Right. Well, you know, first off, I tried stocks and bonds and opened my own brokerage account. And I studied them and, you know, I learned how to sell and trade and what have you. But the truth is, is at the end of the day, I don't have the time to manage account like that. And I really don't fully understand some of the complexities about it. I remember I bought. I bought a USAir stock and I watched the USAir stock just drop completely off the stock market and it became zero. And I lost all my money in USAir. And then about six months later it reappeared and I didn't recoup any of that money, but it was back on the stock market. So it was at that point that I realized that I wasn't so great with stocks and bonds and watching the stock market. And I was better with things that I could visualize. And so I knew I would need a home. I knew I liked living in a home. And so I did invest heavily in properties that were more, I guess, visual to me as opposed to conceptual. And I bought places that I liked. I bought places that I thought were really pretty and that I wanted to spend time at. And so that's how I wound up with having properties of value. And then I thought that recognizing that I really don't understand stocks and bonds, I really don't understand the stock market. And I certainly don't have enough time to watch it and hover over it. I put the rest of my money or good portions of my money into really safe investments like annuities that I knew were fixed rate that were well evaluated. And then I felt safe with. And I went back to an axiom that was taught to me by my grandparents, which was that no one will take care of your money as well as you will take care of your money. You cannot expect someone else to take care of your money as well as you will. And so I've always been on top of my accounts and kept a close eye on them. And I use the, the 1 3rd, 1 3rd, 1 3rd rule, which is one third of my Money, I save 1/3, no matter what I'm making. 1/3 I save, 1/3 I spend and enjoy, and 1/3 I use for expenses. And so using that and always paying myself first, I think that has helped accrued some wealth.

Now Is that after tax, those percentages you're talking about, or are the taxes one of those expenses?

No, that is after taxes.

Okay. Do you remember about what your net worth was when you came out of your fellowship?

Yes, my net worth was a bottle of wine and a bicycle. I had a car, but it was stolen. And so it was literally a bottle of wine and a bicycle was my net worth.

But you didn't have a big, huge medical school loan debt?

I did not have debt. I was fortunate that my parents agreed to pay for my medical school school, and so I did not have debt. And I was on scholarship in college, but I certainly did not have assets.

Do you receive any inheritance or anything like that along the way, or is this basically all from your earnings?

No, I have not received an inheritance. It's all from my medical career. I have had no additional side jobs or what have you.

And how much debt do you have? Currently?

I have $300,000 in debt.

Is that on one of the houses, a mortgage, or what is that?

That is a home equity line of credit. When we were having the mortgage crisis, there were home equity lines of credits that were being negotiated. And I negotiated a pretty large line of credit on one of my homes for prime minus a half. And so that is what's on a home equity line of credit.

What advice do you have for those who are a decade or two behind you? They're maybe just coming out of residency or they're a few years out and they want to be where you are in 20 years. What advice do you have for them?

Well, for people who are in residency or coming out of residency, I think to be a wealthy physician, you have to be a successful physician. And so my biggest advice to them is to really get the medicine down, study hard, and become the best physician that you can possibly be. And I think no matter what field you go into, whether it is psychiatry, obgyn at the core, you should be a good IM doctor. You should get the medicine down. And the second thing my advice would be is not to work for money. Work for the passion of medicine, enjoy it, and the money will follow. If you're a good doctor, if you're a solid good doctor and you're passionate, you'll have more money than you know what to do with. And then be smart about your investments. Do not think that you can triage it out to somebody else. It's just like you garden. You can just ask someone to be your gardener, but they're not going to do what you want them to do. So you have to manage your money just like you have to manage everything else. You have to take care of your own money and to try to stay as flexible as possible. If you can stay flexible, I think you become more valuable. And things definitely change in medicine. They definitely change. And sometimes it's just holding on and not quitting. And then all of a sudden the practice does a 180 and it becomes more comfortable for you.

Awesome. Well, Max, thank you so much for coming on the White Coat Investor podcast and congratulations on your success. 4.2 million, 20 years out of training. That's wonderful. And I wish you the best going forward.

Same to you guys. Thank you so much.

Awesome. Well, that was great to have Max on. You know, it's interesting from every one of these interviews, you can learn something different. There are many roads to Dublin. I think a lot of you may have been surprised when you heard about the mix of assets that max had. Right. 2.5 million of his $4,200,000,000 is in his residences, you know, and a good chunk of the rest is in an annuity. That's probably not the typical portfolio we see among White Coat investors, but you can really see that there are more than one way to become wealthy.

So.

So what's the secret to his success? Well, he basically saved a third of his net income, which is what, 20 or 25% of your gross income. And the truth is, if you are willing to do that, you can do almost anything else you want with your investments and with your spending and still be a multimillionaire by mid career. Do you ever find yourself wishing there was somewhere to go to ask your finance, insurance or investing questions? The White Coat Investor community is a great place to turn. We have a thriving community across all of our social, Facebook, Twitter, Instagram, Reddit and our WCI forum. We have been discussing solutions to your money problems since 2011. Join the Conversation with thousands of other White Coat investors. Follow WCI on your favorite social media platform for financial resources, tips and strategies. Just head to your platform of choice and search for the White Coat Investor. You can do this and the White Coat Investor can help. Head up, shoulders back. You've got this and we can help. We'll see you next time on the Milestones to Millionaire podcast.

My dad, your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney, or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.