Pilot Pays Off Flight School Loans - MtoM Podcast #178

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 178. Pilot pays off flight school loans. Origin Investments is a private real estate manager specializing in multifamily investments, managing over 3.5 billion in transactions since 2007. They leverage their market experience multi Lytics SM their proprietary machine learning models forecasting rent growth to help them select properties in high growth US markets. Their Income Plus Fund and Qualified Opportunity Zone Fund 3 are designed to offer tax efficiency, yield and growth while minimizing portfolio volatility. Their affiliate partner, Origin Credit Advisors offers the Strategic Credit Fund, a private credit fund for qualified purchasers intended to provide a steady stream of risk adjusted income with capital protection, safeguard and grow your wealth with Origin investments today@whitecoatinvestor.com Origin all right, welcome to the Milestones to Millionaire podcast where we celebrate with you the financial goals you have reached and use them to inspire others to do the same. You can apply to be on this podcast@whitecoatinvestor.com Milestones another URL you ought to be familiar with if you've been in the White Coat Investor community for very long is our recommended list. And you can find all these in one place@whitecoatinvestor.com recommended whether you're looking for someone to help you with insurance, help you with a mortgage, help you with financial advising or a contract review, or you're looking for companies that you can do surveys for for money, credit cards, whatever, all of our recommended lists you can get to@whitecoatinvestor.com recommended we got a great episode today. Stick around after the interview. We're going to talk a little bit about dumb things that you hear about buying homes. Our guest today on the Milestones to Millionaire podcast is a repeat guest. Welcome back to the show, Sam.

Thanks for having me again.

So your initial episode on this was number 79. So this is 178. So this is about two years ago. We had you on the show before. Your milestone then was getting back to broken and this time we're going to be talking about a different milestone. So let's start out. Why don't you remind people what you do for a living, what part of the country you live in and, and let's tell them what what your milestone is. Sure.

I live in the eastern part of the United States. I'm a little bit outside of dc. I work in Boston, so I'm commuting up there. I'm an airline pilot. I now work for a major airline. The last time I talked to you, I got hired on it as a regional, but I've now moved to the major airlines and we are celebrating being totally out of debt, actually, but specifically paying off my flight loans.

Very cool. Very cool. So take me back. How far are you out of your flight school?

I'm out of flight school now. About four and a half years.

Four and a half years out of flight school. And approximately what was the cost of flight school? Not the amount you borrowed for it, but the cost.

The cost was about 80,000.

About 80,000. And how much of that did you borrow?

100%.

So all of it. All of it was student loans. $80,000. And where'd you go to get them? These are federal student loans or what?

No, you cannot get student loans if it's just for flight school. Now if you go to get a four year degree alongside it, you can take student loans, but just for the flight time that is not eligible. So my loans came from a personal loan from my parents and then they subsequently took out a home equity line of credit on their home.

Wow. That was kind of them. What was the plan if something happened to you? They were just going to eat it?

I don't think there really was a plan. And so that would have been the plan. They just would have had to have eaten it.

Yeah. Okay, well, good that you paid them back. As you probably know, Thanksgiving dinner doesn't taste the same when you owe money to somebody else at the table.

Sure doesn't.

Yeah. Okay. So did they charge you interest on any of it?

They did not. Maybe they should have, but no, it was a 0% loan. As far as the amount that I personally owed them, the heloc, of course, did have an interest rate, and that stuff started it really low, 2.53%. And then it got all the way up to about eight to eight and a half. And that's what really kicked me into gear with wanting to get it paid off.

Yeah. What a lot of people may not realize listening to this podcast is a pilot income is very different from a doctor income. Most doctors, I wouldn't say most doctors, but many doctors like emergency docs coming out of residency within a couple of years, you're basically at peak earnings. And often you end up earning less as your career goes on because you work fewer shifts, you work fewer night shifts, holidays, et cetera. For pilots, that's not the case. They tend to start very low and then they can actually have a very good income. This is why. I guess one reason why you got to kick all the pilots out at 65 is they're making all kinds of money at 65. They are making doctor like money by the time they're getting toward the end of their careers. But that's not the case in the beginnings. So tell us about your income progression over the last four and a half years.

Yeah, it's been pretty. Pretty wild swings. The first year was 28,000, and that was pretty tough to live on, but did it and still saved a lot of money during that time. The next year was 92,000.

Wow.

And then went back down to 80 when I took a first officer job at the regional airline. Last year, first officer at a major airline, I made 138. And then this year I'm on track for about 225.

Okay. That's pretty awesome. That's faster than I would have expected it to be.

That's faster than historically.

Yeah. What were the first couple jobs? Tell me about those. You're flying puddle jumpers or what are you doing?

Yeah, it was a nine seat, twin engine piston aircraft, and it was essential air service money. So whether passengers were on the planes or not, the company would get paid. And so our paychecks kept coming in. This was during COVID so that was very helpful. And then I moved to a 76 seater jet that was flying regionally, and that was just kind of what. What you would normally expect. Major hub to smaller city. And then now I fly for a major airline and mostly just fly from major hub to major hub.

Yeah. But 225, five years out's pretty awesome. It is, it's.

It's. I'm still picking up a lot of extra trips for it, so that's not really a base pay. That's what I'm just deciding to.

You're working hard. You're working hard. Okay. All right. That probably explains some of it, but there's a lesson there too, right? I mean, hustle is worth something no matter what field you're in. Okay, so tell us about the debt. I mean, obviously your income going up made it much easier to pay off this debt. It's hard to pay off $80,000 making $28,000. It's much easier when you're making 225. So, sure. You had student loans. What other debts did you pay off?

It was just those. I didn't have any sort of college loans from college. Those. I got scholarships and then my parents paid, I think maybe 7 or 8,000. That was left over towards that. So I didn't have any. Any school loan. I paid for my car in cash. So no auto loan, no mortgage. I've never owned a home. I've always rented. So it was just the flight loans that were paid off.

So totally, they started totally debt free. Nothing.

Yeah, I'm totally, totally debt free now.

That's pretty cool. So given that that's probably fairly important to you, given how quickly in life you did that, how did it feel to have to take out debt in the first place? How much did that bother you?

It did bother me. The desire to become a pilot overrode my desire to be always debt free. And I was really wanting to hurry and pay it off. And on the last podcast, last time I was on here, I told you about a conversation my dad and I had, and he said, listen, I know you're starting from zero with your retirement accounts, and I know you have very aggressive plan, so do that. We're in a good enough financial position where we don't have to have the money immediately, but once you're able to max out your retirement accounts, then we'll come up with a plan for you to pay us back. And I said, okay. And that's exactly what I did. And by the end of year two, I think I had enough money where I was maxing everything out, and I said, okay, I'm going to throw everything else at Udad. And he said, okay. And so then I just started making, you know, three $4,000 payments a month to him. And it bothered me so much having the debt. I actually had money in a brokerage account, and I took about 17,000 of that and threw it at him. And then it was gone in very short order after that.

What'd they say when you paid him back?

I mean, I. I remember pretty much every paycheck, I would call him and he would say, is it payday? And I said, yep. He said, all right, you know, and I'd click, you know, send. And he'd get the money the next day. And when I called him that day, he. He, of course, knew that it was the last payment I was ever going to make. And, you know, we just celebrated together on the phone. And later on, I visited them, and, you know, we went out to eat. And I could really sense his pride in me, and I felt a ton of pride in myself for kind of completing it. And like you said, now there's no sort of friction between the two of us. Not that there really ever was, but now there's really Nothing. So I can sit at the Thanksgiving table when I come home to visit them and everything tastes great.

Yeah, I bet he is really proud. There's a lot of parents that loan money to their kids that don't get paid back.

I'm sure.

Happens all the time. Okay, well, this whole time you've been investing, it sounds like, um, you clearly got on board with this stuff early on. I mean, you were on the podcast two years ago and you're only a couple of years out of flight school, you're in your 20s. I assume those on YouTube are probably going to concur with that. And so, I mean, you got this great start in life. Approximately. What's your net worth now?

My net worth is about 275,000 now.

275,000 still in your 20s? All the doctors out there are totally jealous, right? They get to the end of their 20s and they've got this negative net worth still, so.

Well, I have to correct you a little bit, unfortunately. I'm in my mid-30s.

30S, really? You look young. You look young.

Not too far from the 20s, but I had a whole other life before I discovered financial independence.

Very cool. What'd you do before?

Before flying, I was an engineer, before I was an industrial engineer. I didn't, unfortunately, I didn't save anything. I kind of spent whatever came in. I was married. I just had this whole other life and then everything kind of unfortunately fell apart. And so I found myself at 28, 29, being single again. And. And I was actually a stay at home dad after being married and we had a daughter. And so, I mean, it was just a total. I mean, it felt like I got hit by a bus on Tuesday and just everything changed in my life and I just kind of had to figure it out. And I'm thankful that I had the education about financial literacy at that time to at least put me back on the right path.

Very cool. I mean, not that you had to go through that, but that you've done so well coming out of it. So congratulations to you. That's pretty awesome. Well, what advice do you have for somebody else that's got student loans of some kind? Whether they're flight school loans or med school loans or whatever? What advice do you have for them for getting it paid off?

Well, the last time I mentioned that, I think having a good ground game was the most important to me. And just having a job for every dollar, even before it comes in, making sure that you're educated on how you're going to deploy those dollars and then having the discipline to actually follow through with that. This time I'm going to say living like a resident is incredibly powerful. And really, honestly, living like a med student, I've spent less than $20,000 a year for the last four and a half years. And I have not necessarily deprived myself of things, but I have been very, very intentional about how I spend my money. And now I'm just getting to the point where I'm going to allow a little lifestyle creep to come into my life. And I feel like this is how it should be done. And if you're really focused on keeping transportation, living, food costs as low as possible, you can build wealth very, very fast.

Yeah, for sure. And you're a great example of that, right? You were living just a few years ago on 28,000 and now you're making over 200. So it's exactly a live like a resident kind of scenario. But good on you for recognizing that it's not supposed to go forever. Right. Some people are like, oh, white coat investor says I can never spend any money. No, that is not what we say. And say just front load your financial life, give it a few extra years and then go enjoy some of your money. You know, you still gotta save for retirement, but enjoy it. So what's your next financial goal that we're hear from you on this podcast?

I think it's probably going to be about half a million maybe in a couple of years. And a non financial goal I'm looking forward to is actually living by myself. I have not lived by myself yet. I've always had roommates to keep those, those living costs low. And that's going to be some of the lifestyle creep that I have is looking to have a little bit more privacy and a little bit more freedom.

Yeah, I think you're going to enjoy that. So pretty awesome. Well, congratulations to you and thank you for coming on the Milestones podcast to share that with others.

Thank you.

I hope you enjoyed that podcast at Interview. It's always good to have repeat customers on here, right? Repeat visitors, repeat whatever you want to call them, guests, I guess because you get to see people's progression, you can go back, read the first episode, look at all the progress that's been made since then. Two years, he's gone from a net worth of zero to a net worth of what did you say, 275. I mean, in two years, that's great. If you stay on that trajectory, it doesn't take that long to get to financial independence. The first 100,000 is the hardest. The first million is the hardest because so much of it is brute force saving. But after that, your money's working as hard as you are and you get to a certain point where your money's contributing more to your accounts every year than you are. And it's pretty awesome to see compound interest working that way. Well, I promised you at the top of the hour, top of the podcast, we would talk a little bit about dumb things people say about home buying. There's a few of these out there that I think are worth talking about. Here's one. My mortgage is cheaper than rent. This is what people use to justify buying a home, which makes no sense whatsoever, right? You got to remember that a mortgage is the minimum amount that you're going to spend on housing every month. Rent is the maximum amount that you're going to spend on housing every month. There are a lot of expenses associated with owning a home beyond a mortgage, right? I mean, the mortgage includes the principal and interest. There is also insurance. There are property taxes. Now, those are sometimes included in your mortgage payment that goes out once a month because your lender is doing an escrow account for you and paying those bills for you. But they are additional expenses. But beyond that, there's other things you have to do. When you buy a house, often you have a yard for the first time. You got to buy the stuff to take care of that yard. You have a driveway for the first time. Guess what? Now you need a shovel, or worse, a snowblower. If you live in Minnesota or Wisconsin or something, you've got to maintain the home, right? There's utilities, there is upgrades. You got to replace flooring every now and then. Guess what? Roofing is expensive and it doesn't last forever. There are all these other costs associated with homeownership. For example, I saw on the White Coat Investor subreddit the other day, somebody posted this to all the people buying houses because your mortgage is cheaper than rent in your area. Don't forget about Murphy's Law. I'm having to pay $7,000 for a new AC unit just a couple days before residency starts. I've owned the place since Ms. 2, so I'll still do well on it and don't regret it. Just an important perspective to keep in mind. Yeah, $7,000, right? How many months of rent does that cover? Covers a lot, right? That's maybe three months of rent. So keep that in mind that just having the mortgage be less than rent is not a reason to buy a home. It takes a much more in depth analysis when you're making this decision than that. Okay. Another thing you hear out there is throwing money away. And I think this is kind of silly because you're never throwing money away when you're spending it on housing. You write a rent payment, right? You're not throwing the money away. You're exchanging it to have a roof over your head for a month. If you go on vacation, you're not throwing the money away. You're using it to pay for an airline ticket and some nights in a hotel and some meals and some entertainment. You're not throwing the money away. So that's just silly. To say that renting is throwing money away and a mortgage isn't related to that is another thing people say, right? They say that a big chunk of this monthly payment you're making, this mortgage payment, is going toward principal, that you're actually. It's like savings. It's like you're getting the money back. You're not actually losing the money. Well, you got to look at the amortization schedule, and particularly with a little bit higher interest rates people are dealing with today, you might be surprised how little of that payment is going toward principal. For example, let's run out a mortgage that's 7%, which is what a lot of people are getting right now. Let's say it's a $200,000 mortgage. So your monthly payment is $1,330.61. This obviously doesn't include insurance or property taxes. Right. That stuff's all throwing money away just as much as paying rent is. Right. But that's your payment just over $1,300 a month. So how much of that $1,300 a month is going toward principal? Well, the first month it's $164. That's how much went to principal. So all the rest of that is going toward interest. So if interest is throwing money away, I guess it's deductible. But maybe you can adjust it for taxes if you're able to deduct it. But for the most part, you're throwing away $1,200 in order to save $164. Right. That doesn't make any sense. You get to the end of the year and basically on that $200,000, 7% mortgage, $2,000 has gone toward your principal. Let's say you stay in that home for three years. After three years, you have put a total of $6,546 toward principal. Right? So imagine this is a three year residency, you put 6,500 toward principal. That's it. What are the transaction costs? Well, this home is probably a 200,000, $250,000 home. Right. The transaction costs are about 15% of that. So the transaction costs are 40 grand. Right. And all you paid down on the principal is 6,500. So it's going to have to appreciate quite a bit for you just to break even in that sort of a time period. So anyway, don't listen to these dumb things people say about home buying. You know, your mortgage being cheaper than rent is not a reason to buy a home rent. The fact that renting is throwing money away is not a reason to buy a home when it's otherwise inappropriate. And it's not a big chunk of your payments that are going into your pocket. Most of it is going for mortgage interest and property taxes and insurance and other things that are throwing your money away. So keep that in mind. That said, I'm a big fan of ownership. I think people ought to own their homes most of the time for the big chunk of their life. And the reason why is that it pays you these dividends. Dividends of saved rent. Right. You don't have to pay rent when you own the home. We own our home. We no longer have a mortgage on it. But whether we have the mortgage or not, we still get that same saved rent dividend. But the thing about rent that's really bad in the long term is it goes up. This is one cool thing about at least the principal and interest payment on a fixed interest rate mortgage. That payment doesn't go up over time. Yeah, the property taxes and the insurance does. And so that escrow money does go up over time, but the principal and interest doesn't. Assume you didn't do some variable rate loan or took out a HELOC or whatever using your home as an atm, it goes down. And that's not the case when you're a renter. In the first two or three years, that doesn't matter much. But if you're renting for 15 or 20 years, that's a pretty significant difference in your housing costs. And so I'm a big fan of ownership. I want you to own a home for long term. I don't want you buying a home the second you get to a new city. You're not even sure if you like the job. I don't want you owning a home when you're in a three year residency. Yes. Last few years appreciation has been so high that a lot of people have still come out ahead, but you can't bet that way. Most of the time that does not work out. You got about a 5050 shot at five years and so you know, if you're in a five year residency, maybe it's worth the gamble. But there's so many other hassles of owning a home during residency. I don't even know that I'd do it then. I certainly wouldn't go back and buy a home in med school or residency. What I know now you'll have plenty of time to build home equity as an attending physician or other professional. You don't have to rush it. Our sponsor for this episode is Origin Investments, a private real estate manager specializing in multifamily investments, managing over 3 and a half billion in transactions since 07. They leverage their market experience and Multiletics SM their proprietary machine learning models forecasting rent growth to help them select properties in high growth US markets. Their Income Plus Fund and Qualified Opportunity Zone Fund 3 are designed to offer tax efficiency, yield and growth while minimizing portfolio volatility. Their affiliate partner, Origin Credit Advisors offers the Strategic Credit Fund, a private credit fund for qualified purchasers intended to provide a steady stream of risk adjusted income with capital protection. Safeguard and grow your wealth with Origin investments today@whitecoatinvestor.com orge all right, hope you enjoyed this episode of Milestones to Millionaire podcast. Come back next week. We'll have another great episode for you. Until then, keep your head up, shoulders back. You can do this. The whole White Coat Investor community is here to help you, whether you're a doctor, a pilot or something else. So stick around and we'll do all we can for you. See you next time. 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.