MtoM #68 - Surgeon Builds Wealth By Living Like a Resident

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 68. Surgeon builds wealth by living like a resident. Love what you hear on the podcast. Looking for more great White Coat Investor content? Head over to our YouTube channel where you can watch video recordings of our podcast, short snippets of financial tips explained succinctly by me and others, and deep dives into topics for more in depth learning. You can even learn all about real estate with webinars from our real estate partners. Check out all this and more@YouTube.com thewhitecoatinvestor you can do this and the White Coat Investor can help. All right. We love doing these Milestones podcasts. They're a lot of fun for us and hope you enjoy listening to them. If you want to be featured on the podcast, whatever milestone you've reached, whether it's back back to broke or a net worth of 100,000 or a million or 10 million, or becoming financially independent or paying off your car or your mortgage or whatever, we'd like to celebrate with you and use your experience to inspire others to do the same. So you can apply@whitecoatinvestor.com Milestones. Now let's get today's guest on the podcast. My guest today on the Milestones to millionaire podcast is Dr. David Otten. Welcome to the podcast.

Thank you for having me.

Well, let's talk a little bit about you for a second. What's your profession and how far are you out of training?

I'm a general surgeon and I've been out of training for just under two years now.

Okay, and what part of the country are you in? You in the Northwest or the Southeast or where are you at?

I live in the Northeast, in a lower cost of living area in the Northeast.

Okay. And tell us about the milestone you recently reached that we'll be celebrating with you.

So I got back to broke, which was awesome.

That is awesome. We need to celebrate this more often in our community because it's a big deal. I run into docs all the time that are years and years out of training and their net worth is still zero or below zero. Net worth, of course, is everything you own minus everything you owe. So all of your assets minus all of your liabilities. So when you wrote into us, I've got some notes in front of me, you were just barely beyond broke. Now it's been a few months, I think, since you initially applied. What's your net worth? Sitting at right now.

So I looked at all the numbers yesterday and it's 178,000.

All right, congratulations on that. That's pretty awesome.

Thank you.

And just give us an idea of what these look like approximately. I mean, how much do you have in cash and investments, how much mortgage debt you have, student loan debt, et cetera.

So in cash I have 82,000. We're building a house, so I have a little extra there for expenses with that retirement and 401k, 93,000, 457b, 25,000 Roth IRAs for my wife and myself, 17,000. Then a house. The value is around 300,000, but I have a residual mortgage on that of 158,000, which we broke your rule and bought a house for residency, but it worked out because I took a job about 20 minutes away from my residency. So we've been in that house for seven years.

Yeah, it's amazing how well it works out when you stay there, huh?

Yeah. And then the big debt is my student loans, which are now coming down to a more reasonable level. They're currently only at $184,000.

So you were what, about 18 months out of training when you got back to broke?

Yeah, about that. About that.

All right. And range of income as a general surgeon. You're an employee, you own a practice. Where are you at?

I am an employed general surgeon at a big hospital group. And so my first medical salary as a resident was 60,000 a year, which was pretty good. And it's in a lower cost living area, but, you know, and that slowly increased throughout the five years, of course. But as an attending, My base was 350, and then I made about an extra hundred on top of that with call and everything last year.

Married?

I am married.

Any children?

One little three year old boy.

Okay, so this was a team effort, it sounds like. Tell us about your secrets to success. How did you pull this off? How did you get back to broke so quickly?

Just determination, having an idea as to what we wanted to do, which was maximize retirement, grow into the income a little bit, but not much, and just aggressively pay down loans. Once we pay down the loans, then my goal was to start investing in the excess in a taxable.

Now you have stayed in your residency house. This is by definition living like a resident. You're living the same place you were as a resident?

Yes.

Tell us what that's like. Are people giving you a hard time? Why don't you buy a big fancy house? You're a big doctor now, making Hundreds of thousands of dollars. Tell us what that's been like to stay in your res residency house.

Well, my answer to them whenever they say that is I also have hundred thousand dollars of debt as well. But no, staying in the residency house has been perfectly fine. The only adjustment is I have a longer commute to residency. It was about five minutes each way. Now it's about an hour round trip. So we are moving closer to where I am because the commute will be much better. But I've had no issues staying in my residency house.

Now what was your nadir? How low did your net worth get? Maybe about the time you came out of school. It was probably about the lowest point. How low did it get?

So my debt, I just looked back in October of my PGY1 year was 370,000 of just student loan debt. And then obviously I had my mortgage on top of that with the house being 183,000 when we bought it. You know, it was up there.

Yeah, yeah, for sure. So I'm guessing you paid for school all yourself using loans. You didn't get any help from your parents or some big scholarship or anything?

That's correct. At least medical school was completely based on loans. Undergrad my family did pay for and I had scholarship to pay 100% of the tuition.

Like a lot of docs, I suppose. All right, well, what about, you know, you've wrestled a bit, I'm sure over the last couple of years with the biggest question that every doc wrestles with when they come out of training debt versus investing. How did you decide how much to put toward your debt and how much to invest?

Well, it was easy in one sense that I just maxed out the tax protected accounts and then I put everything else towards debt. And that's a simple way of looking at it. Mathematically it probably doesn't make sense, but the psychological aspect of it, which I know you've talked about a number of times on the podcast, is I don't think you can put a price on that. I'm hopefully going to be debt free by the end of the year and so I can't even imagine having that weight off of my shoulders and then just everything else just goes towards building wealth.

What percentage of your income do you think is going toward building wealth? The last couple of years either paying off debt or being invested or being saved up to buy this house or whatever.

I would think it's probably 60 or 70% of gross. Yeah.

Wow. It's pretty impressive. That means after you pay taxes, you're only living on 10 or 15% of your income?

Yeah, I mean, that's about what I was making as a resident. And we haven't changed our lifestyle again. We've grown into it very slightly.

So it works to live like a resident. You actually do become wealthy if you'll do that for a little while.

Yes. And I did not feel deprived at all.

How long do you plan to do that for? How long do you. Do you think your live like a resident period will be?

Well, we are building a house now, and so we'll probably grow into our income a little bit, but we're very comfortable. I, you know, I don't feel deprived in the slightest. As our son grows, I'm sure we'll have more expenses that come up, but, you know, I don't really see a reason to spend more than we currently do. So my guess is we'll just end up saving a lot more. And that's my ultimate next goal after paying off loans would be to reach financial independence. So hopefully that just allows us to get there more quickly.

Yeah, I'm sure you will. How have you and your spouse managed to work together? How did you get onto the same financial page?

She has no interest in finances, and so I try to talk to her about it and explain what I'm doing and. But she has absolutely no interest in it. But as long as I explain what we're doing and why we're doing it, and I set up a Roth IRA for her and all that kind of stuff, she understands it, but she just does not care. She doesn't want to know about it. As long as everything's going fine, then we're good. But it is very important to communicate with your spouse in regards to that because not everyone is like that. Some they want to be much more involved and make joint decisions and everything. But communication is very important, just like in a relationship in general.

But she's also been okay with living on 10 or 15% of what you're making. I assume she actually knows what you're making, right?

She does.

All right, how about your upbringing? How did that affect how you manage money?

You know, I grew up probably upper middle class. My dad was an oral maxillofacial surgeon. My mom was an attorney. Although she didn't work most of my growing up, she went back to work when I went back to college. And so we were well off. We didn't want for anything, but I did get allowances and learned to save up for things and budget. And I had jobs in high school. And just making extra money that way. And so I think that instilled learning about the value of a dollar and budgeting and trying to save up for things and that you can't just have everything that you want.

Now, let's imagine there's somebody that's like you were when you walked out of medical school. They are coming out of school now. They owe $370,000 plus in student loans. What advice do you have for them?

Well, it might seem like an insurmountable amount of money to pay back, which I specifically remember myself in medical school thinking, well, this is just monopoly money. It's not real. But you have to learn about finances. And as you learn about finances, you realize as long as you live within your means and have plans and stick to those plans, aggressively pay down debt. High interest debt first, low interest debt second. It's very doable. Obviously, my salary being a little bit larger than some other professions helps. I think some of the lower paying specialties in medicine would struggle a little bit, but even that, it's still very doable. It just might be on a longer timeframe.

Awesome. Well, Dr. Otten, you're a great, great doctor. It's been great to have you on here. You've been very successful in the beginning part of your career financially, and I'm sure with the habits you guys have developed, you're going to continue to be very successful and reach all of your financial dreams and goals. So congratulations to you and thank you for coming on the Milestones to Millionaire podcast to inspire somebody else to do the same.

Thank you very much. It was really nice talking to you today.

All right, I hope you enjoyed that interview. You know, it's always fun to hear about people being successful in the beginning because when you are having that much success in your first couple of years and you go out 15 years, 20 years, you're doing whatever you want with your life. You're practicing exactly the way you want. You're going on every trip you want to go on. You're buying everything you possibly want. You're supporting all kinds of great causes, whether it's family or friends or charities or whatever. And it's just exciting because I seen where he will end up because of these decisions that he's made early in his career by paying attention to his finances. So it's really exciting. Yes, it's wealth and embryo at this point, but it's going to build so quickly that he's going to have so many awesome opportunities in his life because he put his financial ducks in a row early on in the process, so follow that example. Living like a resident actually does work and you can be successful doing that. Love what you hear on the podcast. Looking for more great White Coat Investor content? Head over to our YouTube channel where you can watch video recordings of our podcast, short snippets of financial tips explained succinctly by me and others, and deep dives into topics for more in depth learning. You can even learn all about real estate with webinars from our real estate partners. Check out all this and more@YouTube.com thewhitecodeinvestor you can do this and the White Coat Investor can help. Thanks for listening to the Milestones to Millionaire podcast. If you'd like to apply to be on it, you can do so@WhiteCodeInvestor.com Milestones and we'd love to have you on. Till then, keep your head up, shoulders back. You've got this and we can help.

The hosts of the White Code Investor Podcasts are not licensed accountants, attorneys or financial advisors. This podcast is free 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.