Surgeon Gets Back to Broke During Residency - MtoM Podcast #196

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This is Milestones to Millionaire podcast number 196Surgeon Gets Back to Broke during Residency One of the most underrated financial moves in medicine is working locum tenens. It pays significantly more on average and you can work locums full time or on the side of your full time. And when you work with Comp Health, the number one staffing agency, they cover your housing and travel costs, which on top of higher pay really adds up. Locums also gives you more control of your career, allowing you to go where you want, when you want with a schedule that works for you. It's the perfect way to get ahead financially while getting focused on what you love. Whether it's locum tenants or a regular permanent position. Build your career your way with the power of Comp Health. Learn more@comp health.com all right, welcome back to the podcast. We have got a great podcast for you today. You are going to love it. We're going to talk about somebody who's done some great things or it's a relatively early milestone we're talking about today, but I found it really fun to consider this and compare it to what we talked about last week with the DECA millionaire who's now gone to part time work as a radiologist. One other thing I want you to know about is that we are doing a real estate webinar and I say we it's going to be mostly me doing it and this is my opinions about real estate and I'm going to teach you some things that have led to my success as a real estate investor. We're going to do this on the 12th of November, 6pm Mountain so that's 5 Pacific, 8 o' clock Eastern. That's the time that seems to work best for these webinars. I know it doesn't work for everybody. We will record it, we'll make it available to you afterward. But you can sign up for this thing@whitecoatinvestor.com realestatewebinar I'm going to talk about how to boost returns, lower taxes and build wealth using real estate. We're going to talk about how current interest rates are impacting the real estate market. We're going to talk about how real estate can fast track your financial freedom. We're going to talk about the pros and cons of the various real estate investment strategies. There are a lot of ways to invest and you need to choose the right real estate investments for your portfolio and your method of investing in real estate. Then we're going to talk about how to maximize the massive real estate tax deductions that are available. Then we're going to do some Q and A. You can get your questions answered in the Q and A session afterward. So join me live. This is going to be a live webinar. Tuesday, November 12, 6pm Mountain. See you then. The URL again is whitecoinvestor.com realestate webinar. Okay, we're going to do a great interview here. You're really going to love it. But I also want you to stick around afterward. We're going to talk for a few minutes about the basics of real estate investing. So stick around. Our guest today on the Milestones podcast is Neil. Neil, welcome to the podcast.

Thank you, Jim. Appreciate you having me.

Tell us what you do for a living, how far you are out of training, and what part of the country you live in.

All right, so I'm a fifth year general surgery resident in Michigan, getting ready to do a fellowship next year in minimally invasive surgery, bariatrics and foregut surgery. And yeah, excited to be here.

Awesome. Well, tell us what milestone we're celebrating today.

I recently am back to broke. Net worth of zero.

That's awesome to do that while you're still in training. Most docs are not able to do that. Granted, a surgery residency is a little longer than some others, but that's still pretty impressive. So tell us about your net worth. Tell us about your debts. Tell us about your assets.

Okay. Well, I came out of medical school with $170,000 in medical school debt. And over the past four, four and a half years or so have been able to, through my investments through a 403B and Roth IRA as well as an HSA, been able to accumulate assets of positive 170,000.

Awesome. So you still have the medical school debt. It hasn't gone anywhere.

That's right. It stayed the exact same.

Yeah. And what's your plan for managing that?

I'd like to get rid of that as soon as possible. I'm pretty debt adverse was raised on more of the Dave Ramsey plan and so, you know, saw the opportunity during residency to, you know, get started on investing and then but you know, I would like to as soon as I start making a bigger paycheck and as an attending, would like to pay off that debt as soon as possible.

Do you anticipate taking a job that would qualify for public service loan forgiveness or just no idea at this point, because after six years of training, I mean, you've got a lot of years toward public service loan forgiveness if you stayed on as faculty, et cetera.

Yeah, yeah. You know, I've considered that throughout the years. I've ultimately made the decision, more just a personal decision, that I was going to pay off the debt. So that's not as much of an issue. The public student loan forgiveness, I've done some steps along the way. After medical school, I did a pre doctoral fellowship for a year at the medical school that I went to and spent a year there. And they took care of my tuition for the last couple years of medical school. So I've made some steps along the way to really minimize the amount of medical school debt that I have. It's just been kind of a goal of mine to be able to pay off the debt. So that's my plan as soon as I start making an attending paycheck, is to pay off this debt.

Very cool. Now, are you single, married, et cetera? Single, single. Okay. And so all of this progress you've made financially has been due to your income, is that right? Or has there been some lottery win or big inheritance or something along the way, too?

No, no, it's just been single income and living purposefully, living frugally, and saving everything that I can.

Yeah. So what have you been paid as a resident? 60, $65,000, something like that? A year?

Yeah, yeah, about that. I think we're at 67 this year, but 60 to 67 has been the range.

Okay. And what percentage of that did you save? I mean, you've accumulated $171,000 in just over four years. Really?

Yeah.

How much of that were you saving?

Yeah, you know, I figured I had a savings rate about 50%. Yeah. Of the, Of. Of gross income. So, yeah, it was. It's been. It's been. It's been a good journey. I think I let go of the reins just a little bit from medical school when I, you know, wasn't making any money. So I. I feel like I'm living comfortably enough for my position in life, but I've been trying to, you know, trying to shovel away as much, as much as I can savings.

There are a whole bunch of residents out there whose jaws just dropped that feel like they're struggling to live on their 60 or 65 or $67,000 a year. They're barely able to save anything. Tell us how you did that. I mean, being in Michigan rather than San Francisco might help a little bit, but Tell us how you do that. I mean, what do you drive? What kind of place do you live in? Do you go on any trips? How often do you eat out? What has your life looked like over the last four years, financially speaking?

Yeah, I think I kind of identified as the big expenses in people's lives as rent and paying for their cars. And so I've really tried to minimize my monthly expenses in that have I feel like I've been able to sacrifice. I'm single. This is a good time in my life where I can live in very cheap housing, do everything I can to save on that side of things. And then car. For the first half of residency, I drove a 2000 Honda Civic, and it was north of 250,000 miles, so I had to. That gave up on me. And then I was able to just go on and find a relatively cheap car. It's not something that I plan on driving forever, but like I said, kind of being raised with Dave Ramsey principles, driving the beater and living that way now so that in the future, when I do have more money, I can spend it however I want. But making the sacrifices now, again, when I'm single and in residency, I think is going to be a whole lot easier than, you know, when I'm making a significantly amount, you know, significantly more amount of money.

Yeah. And there is no doubt that you're going to have a lot more money later given your ability to live on 50% of a resident salary now. Right. I mean, where do these habits come from? When did you become financially literate? When did managing money well become important to you?

Yeah, I think growing up, you know, growing up, my family, my father, I'm one of 11 kids. And so my father taught us financial principles at a young age, you know, and said, hey, if you're wanting to do college or beyond or even expenses beyond, you know, just, you know, the regular food and, you know, of course he. He provided a good place to live and everything, but, you know, that was kind of up, up to us. So at the age of 13, I was delivering newspapers before school and putting that into savings. And that just kind of continued throughout. Throughout high school, you know, delivering newspapers and getting odd jobs. So I think that's where it really was ingrained in me, the importance of saving money. And then it just kind of became fun. I feel like throughout medical school, I actually lived in a van. Throughout medical school.

Was the van parked down by the river by chance?

Yeah, exactly, exactly. So I surrounded myself around good friends as well, people trying to save Money and kind of seeing this as a game, you know, an opportunity to set ourselves up for, you know, later in life and make. And I think, I think, you know, making the sacrifices now, delayed gratification has been, you know, a big motto, something that I've lived by.

Yeah, I mean, you're pretty far out on the bell curve of what people are willing to do lifestyle wise in medical school and residency. But it sounds like it's a comfortable place for you and certainly it's going to work wonders for finances.

Yeah, absolutely. Over the past several years, I've really tried to be mindful of being cheap versus frugal and trying to find a good balance where I'm enjoying life and I'm able to enjoy experiences, celebrate milestones, things like that, but in a way that I'm still preparing myself for the future.

Yeah, I mean, I often talk about the five money activities, right? Earning, saving, investing, spending, giving. At some point, given your habits, you're going to have a lot of money to spend and going to have to spend some time working on learning how to spend well as well, which is an awesome challenge to have, by the way. This is not a bad thing. This is a wonderful problem to have to work on, far different from what most Americans and even most doctors have to work on.

Right.

But, you know, I think you recognize that already and that's a good thing. But this is a fun juxtaposition for me because the interview I did just before this that you all heard last week, you know, we released it a week before this interview, but I recorded it two minutes before. This interview was a discussion with a decimillionaire radiologist. You know, 20 years out. That is the pathway you're on. Right. You're going to be at that point, you know, 20 years from now, you're going to be able to do whatever work you want, part time, full time, you know, foreign, whatever you want to do, no work at all, and be a DECA millionaire at that point. Have you thought about that? What your future financial life is going to look like and what changes you might make at that point?

Yeah, I think so. Again, along with enjoying being frugal and whatnot, I thought a lot about being focused and purposeful with your money, setting goals and, you know, I think, you know, down, down the line, that's absolutely a goal of mine. I, I'm really interested in, you know, the more I've been involved with the white coat investor, you know, picking it up in medical school and really listening to every podcast you put out and reading all of the, all of the articles, I think money has become.

Much.

More than something that I'm saving at this point. I'd really like to get involved in real estate and do different things with my money in the future. So more than just trying to save money, I think I do look forward to the future and getting involved, putting my money to work and exploring that side of things.

You know, certainly the foundation you have laid is going to serve you well. What tips do you have for somebody that's, you know, working toward getting back to broke? They're, they're feeling a little depressed about, you know, their debts being bigger than their assets. They wonder if they're ever going to get back to a net worth of zero. Maybe they're a resident, maybe they're a medical student, maybe they're a few years out of training already. What advice do you have for them about getting back to broken?

No, I think one, the first thing is to set goals. I think looking at, I had $170,000 in debt, but I understand that people may have upwards of three or four or more $100,000. And it's not one event or one thing that you're going to do that's going to change all of that. It's little steps along the way, setting little goals. Again, delayed gratification, I think is the most important thing that I try to talk to people about. And sacrificing today, and it's tough with spending five or ten dollars today doesn't seem like a big deal, especially in the grand scheme of things. But it's all about creating habits and a mindset of saving money. And ultimately, I think you need to have fun things planned for your money as well. Things that when I reach this point, when I reach a million dollars, whether it's what am I going to do with my money to celebrate and enjoy my money. So I think it's being purposeful is probably the most important thing for somebody who's trying to. Who's either just starting residency and has a lot of debt or know someone that's just at the beginning of their financial journey.

Yeah. Awesome. I love the emphasis on intentionality. Well, Neil, congratulations to you on your success. It may feel like a very small milestone, a very early milestone, but it is one of the most important. So congratulations to you and thank you for coming on the podcast to share it and inspire others to do the same.

Thanks, Jim. I appreciate you having me.

All right. I hope you enjoyed that interview. Sometimes a white coat investor and white coat Investor community and those of you on the Facebook group or the forum or the subreddit, you get this reputation or you make fun of people that are a little bit extreme in their financial habits. They drive a really old or really inexpensive car, or they save a huge percentage of their income, et cetera. But I'll tell you what, there's great power in being an extremist for a little while, right? The beautiful thing about living in what many doctors will consider an extreme way is that you now know exactly what you value and you can spend money later on what you value. For example, I used to drive really inexpensive cars before I was wealthy. I bought a car once for $1850. This is as an attending physician, and I drove it for four years. The next car I bought after that was $4,000, and I drove that also for several more years as an attending physician. Now, the car I drive is not inexpensive. It's kind of ridiculous, actually. But it has every possible safety feature that could possibly be put on a car in 20, 20, 23, as well as massive towing capacity and all kinds of other cool stuff I love about it. The point of being super frugal is not necessarily to be super frugal your whole life is to get yourself into a position where you can live your life in the way you want to do. So when I tell people to live like a resident, that's for a period of time of like two to five years, not forever. I don't necessarily want you to be living like a resident when you're 58, okay? That's probably not a balanced way to live your life. Likewise, I tell people to, you know, be frugal in what you spend on a car, right? But I don't think a 48 year old attending buying a car should be looking at the same cars as a 32 year old attending buying a car, right? You're in a different place financially, I hope, and looking at different cars. I'm a big fan of driving a beater for a while, but I am not a fan of driving a beater for your entire career, right? You're doing it wrong if you feel like you have to drive a beater when you're 55 years old. That's not the way this is supposed to work. So I think it's pretty awesome to look at the two people we had the last couple of weeks on the podcast, right? We've got a Deca millionaire who feels like he's spending a lot, spending a couple hundred thousand dollars a year we've got a resident that is spending half of a resident salary. What may not be entirely clear are these are really the same person or the same type of person 22 years apart. One of these things leads to the other. Being very, very frugal and very mindful with how you spend and save and invest and earn your money early on leads to being a deca millionaire 20 years later. It's a very interesting connection, I thought, between two people who've been very successful in different ways. But when all is said and done, we'll both be very financially successful. So find some balance in your life. You do not have to drive a 25 year old car to be financially successful as a doctor. Okay? You do not have to save 50% of your income, especially as a resident, to be financially successful as a doctor. You do not have to be a DECA millionaire to be financially successful as a doctor. Figure out what you want in your life, figure out what's important to you and find a balance between spending money now on current you and saving a little bit of money for future you to also have a nice life. I promised you at the beginning that we were going to talk about the basics of real estate. So let's do that. Real estate investing. Why do I like real estate? I like real estate for two main reasons. You know, when you boil it all down, these are the two main reasons I invest in real estate. And it's not because I got to feel like I can put my hands on my investment, is not because all the tax breaks are so awesome. You know, it's not for passive income. Right. There's two main reasons I invest in real estate. One is high returns. Real estate returns are high, like stock returns. And so that's a good thing in your portfolio. In fact, with a little bit of leverage added to them, they can be a little bit higher than stock returns because stock returns typically aren't leveraged. Obviously if you leverage those, you'd expect to have a little higher return too. And the second reason is relatively low, low to moderate correlation with the stocks and bonds in your portfolio. I think it's the best of the alternative asset classes out there. So when I. I don't know that I even think of it as an alternative anymore. When I think about a reasonable portfolio, I think about stocks, bonds and real estate. Yeah, you can add some other stuff to it if you want. You want to add a little gold or something, or some bitcoin or some other niche asset class, fine. But in general, you keep those to Relatively small percentages of your portfolio. When we're talking about stocks and bonds and real estate, I think most people are okay with those being pretty good chunks of your portfolio. But those are the reasons why I invest in real estate now. The trickiest part about investing in real estate is that you have to learn more than you do to invest in stocks. Let's be honest, stock investing is super, super, super easy. Because the right way to invest is very clear from the data, is to go get low cost, broadly diversified index funds, basically buy all the stocks and hold them forever. And that's how you invest in stocks profitably. It's not hard, it's not complicated. You can buy all the stocks in the world in 30 seconds. You don't have to know a thing about one of the individual companies and you're going to get the market return over the two or three decades or whatever you're saving for retirement. And that's going to be enough. That's going to be enough for you to reach your goals. Stock investing, super easy. Real estate investing, not as easy. It's going to take more effort and I'm sorry, I mean, there is one similar way to invest in real estate that's relatively easy. And that's for people at one end of the spectrum that want maximum diversification, minimal hassle, maximum liquidity. And that's to go buy an index fund of the real estate companies in the stock market. So you already have those if you own a total stock market fund. But this would give you a chance to put a little bit more of your portfolio into real estate. My favorite holding there is just the Vanguard real estate index fund. The ETF version is vnq. It's almost free like most Vanguard index funds. And I think there's 120 or something real estate investment trusts that you buy when you buy that, and that's cool, you can invest in real estate that way. That's often the way people start with real estate investing is just tilting their portfolio a little bit by adding that fund into it. Super easy, no big deal. You do miss out on some of the benefits of real estate investing that you can get by investing another way. But the important part when you decide to invest in real estate is to figure out where on the spectrum you belong. Some people belong on the part where they're building houses and other properties from the ground up. Others are doing fix and flips. There's long term rentals, there's short term rentals, there's. You can get off the direct side of real Estate investing. You can invest passively in these sorts of projects, but still privately with syndications, funds that are basically 8 or 10 or 12 or 15 syndications. And then finally on the publicly traded side with REIT index fund like bnq. The important part is that you match. Those are all reasonable ways to invest. Right? You can have a turnkey property and be a good real estate investor. You can be a fix and flipper and be a good real estate investor. You can be investing in syndications to be a good real estate investor, but you've got to match what you choose with you. That's the important part. If you're somebody that does not want to get your hands dirty, you don't want any tenant calls, you don't want to have to, you know, mess with evaluating syndication operators. Well, you're probably going to be dealing with mostly publicly traded real estate, maybe a few private funds. On the other hand, if you're the type of person that you're like, well, what's the greatest tax benefit I can get out of this real estate? How high can I get my returns? I want to be able to drive by my investments and show them off to my family. Well, maybe you're going to be somewhere else on the spectrum. Maybe you'll be a turnkey investor, maybe you'll be in short term rentals, but you've got to match yourself. And so that's a really important aspect of real estate investing because if you don't, you're going to be unhappy. If you're really a very passive person and you've built some empire of short term rentals, you're not going to be happy. On the other hand, if you're like, I don't trust anybody else and I don't, you know, I think stocks are paper assets. Well, you're probably going to be a lot more on the left side of that spectrum of that continuum of different types of real estate investing. But none of it's wrong, right? It just needs to match you. Okay, a few other things I think you ought to know about real estate investing. It's important to understand what's called the capital stack. What is the capital stack? Well, at the bottom of it is the debt. So you go buy a property and typically this is leveraged in some way. There's some borrowed money. It's bought partially with other people's money. Right. Alone. And so the bottom of that capital stack is the loan and the debt, the mortgage, whatever you want to call it. And typically that mortgage has first position, meaning if Something bad happens with this investment. The lender is the person who gets their money first. And that's the least risky place to invest in real estate. You can be the lender, right? And obviously, if you only lend on one property, that's still pretty risky because you're not very diversified. But if you're lending on a whole bunch of properties like a real estate debt fund, that's a pretty safe place to invest, right? Because when things go bad, that debt fund can foreclose and sell the property. If you're only loaning 60% of the value of that property and they're doing a terrible job managing it, they're not paying you what they're supposed to be paying you, and you foreclose, well, you can probably still sell the property for 60% of what it's worth, no matter how badly they've been running it. And so you're pretty protected there. Of course, your returns are limited, right? You're not going to get more than the interest rate you agreed to. And that can be pretty good when you're lending money to developers sometimes because they're only borrowing money short term, they'll pay 12% and 2 points to borrow money for six months or nine months. And so you can often have a pretty good return. A lot of these debt funds have returns in the 7 to 11% range. Now you can move up the step capital stack. The next place on it is typically mezzanine debt, sometimes called preferred equity. There's slight differences between those two. That's kind of the next place in the capital stack. You're not in first lien position when you're investing in those types of investments, right? The first people to get their money is the primary lender, right? They get all their money first and all the interest they're owed. And then, and only then, if there's any money left over, does the mezzanine debtor, preferred equity people get their money, but they get their money next, right? So if it really went a little bit bad, but not terribly bad, you may still get all of your principal back and all of the interest you expected. At the top of the capital stack are the equity investors. These are the people that want the great returns. They're hoping everything goes awesome and they make 25% on this investment, but they get paid last. And so it's a riskier investment. And the more leverage that's on this property, the more the riskier that position becomes. When deals go bad, when properties do not do what they were expected to do, when the vacancy rate goes way up when it costs way more to rehabilitate a property than anybody expected. When interest rates go through the roof, you know, when an area becomes depressed for whatever reason economically, those are the people that get hurt. You know, they're at the top of the capital stack, and so they're the last ones to get paid. So gauge your risk in how you invest in the capital stack. Understand who's ahead of you, what the terms are on that debt. Especially if you're the equity investor, know what debt is there, how much, and what the terms on it are. Because a lot of times that's going to make a difference of whether you get a solid return or even get your principal back. All right, I think those are some of the basics to really understand about real estate investing. If you'd like to learn more, we do have a real estate course you can check out. We call it no Hype Real Estate Investing. We actually have a webinar on the 12th that you should check out if you want to learn more about real estate. I'll be teaching that webinar and we're going to go into a lot more detail than we did in this podcast. But if you're interested in getting into real estate, that's a great free resource you ought to check out. The webinar's free, the course is not, but it does come as usual with our money back guarantee, like all of our online courses. So thanks for checking that stuff out if you're interested in doing more as real estate. If not, remember this stuff's all totally optional. It's possible to become financially independent, never investing in anything but stocks and bonds. You do not have to invest in real estate, but if you're going to go outside the stock and bond universe, I think it's probably your first stop. Our sponsor for this episode is Comp Health. I mentioned at the top of the podcast working Locums with Comp Health, the number one staffing agency. But Comp Health isn't just a locums agency. Comp Health staffs regular, permanent positions across the nation as well. They also offer telehealth, medical missions and more, and that's what makes them unique. They can look at your situation and offer multiple solutions to build your career the way you want it and meet your financial goals. And they know their stuff, especially when it comes time to negotiate contracts, which they're willing to do for you. So whatever career move you're looking for, use the power of Comp Health to build your career your way. Learn more@comphealth.com thanks for being with us today. I enjoy doing these interviews with you guys. I know you guys that come on enjoy talking with me for a few minutes before or after the interview. If you're interested in applying to be on the Milestones podcast, you can do so whitecoatinvestor.com Milestones is where you apply, and we don't care what the milestone is. You know, you might be a penta millionaire. You might be, you know, having just paid off the first thousand dollars of your student loans. I don't care. We'll celebrate it with you. We'll use it to inspire others to do the same. Keep your head up and your shoulders back. You've got this. We'll see you next time on the podcast. The hosts of the White Coat Investor.

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