Two Doc Couple Beats the Seven Year Itch and Becomes Multi Millionaires - MtoM Podcast #204

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 200-42. Couple beats the Seven Year Itch and becomes multimillionaires Are you ready to take control of your financial future through investments that you can personalize to your specific goals? Black Swan Real Estate specializes in helping high income professionals, including physicians, achieve financial freedom through private multifamily real estate investments. With over 13 years of experience, a $375 million portfolio and 1,600 plus units under management, Black Swan offers unique opportunities that put investors first. They operate with no GP level fees ever, a structure virtually unheard of in the industry. Led by physician Dr. Elaine Stageberg and supported by a vertically integrated team, Black Swan ensures hands on management and a proven track record of strong, stable returns. Learn more about their investor aligned approach@whitecoatinvestor.com BlackSwan Be aware that today is the last day of our Buy one Get one sale. Buy any of our courses and get our Continuing Financial Education 23 for free. Now that course is good for CME. It was compiled using material from WCICON in 2023 and it's like 50 hours of material. It's a great course. Comes to you absolutely free. For buying any of our other great courses. You can buy Fire your financial Advisor, the course that helps you to write your own financial plan that you can follow to investment success. You can take no Hype Real Estate Investing, which will help you learn what you need to know to get into this exciting real estate class. You can even buy Continuing Financial Education 24 and we'll throw 23 in for free. All of those courses are available. You can go to whitecoatinvestor.com courses. Some of them you can buy with CME funds. There's a version of Fire your financial Advisor that qualifies for CME as well as continuing financial education because it's packed with wellness content. That one also qualifies for cme. But today's the last day for this Buy one get one sale. So if you've been waiting for a sale to buy a WCI course, now is the time. Whitecoatinvestor.com courses all right, we have a great interview today. I think you're really going to like this one. This is from some White Coat. Investors have been killing it, absolutely killing it. And I've also had some personal success in their marriage. Stick around afterward. This is our first Milestones podcast of the year. We're going to Talk a little bit about beginning of the year stuff and in particular front loading your tax protected or retirement accounts. Our guest today on the Milestones to Millionaire podcast is Steve. Steve, welcome to the podcast.

Thanks for having me. Jim.

Tell us what you do for a living and a little bit about your family situation and what part of the country you're in. Sure.

I'm from the Midwest in a medium cost of living area. I'm a child and adolescent psychiatrist and my wife is a specialty surgeon.

Very cool. And you guys had a recent anniversary recently, I understand.

We did actually. So to give you the full story, I had signed up to do this a year ago for our seventh year wedding anniversary and then I never found any calendar times that worked for me. And then honestly, this all happened with you and I felt like if I can't do this now, when can I do this? So we actually just hit our eighth year wedding anniversary instead of the seventh. But I did just want to thank you first before we get too far into things. I grew up without a dad and so you have been my surrogate financial help throughout. I was very lucky to be introduced to white coat investor kind of at the middle to end of my residency before I started fellowship and then kind of took on stuff from there. It's greatly changed my life and so I wanted to come on after hearing what happened to you, say thanks and be part of the community.

You're very welcome. But I don't know that I can take the pressure of being a surrogate dad. I guess maybe just financial data. All right, is that good?

Financial dad? Yeah, that sounds good.

You have hit a milestone recently. Tell us what milestone. Milestone we're celebrating today.

Yeah. So as part of a two physician, both full time attending household, I think, you know, getting through, you know, seven, eight years of marriage, having, raising a family with a young kid, there's a lot of pressure and stress that goes through that. Finding a way to, you know, make it through the end of the day, take care of everybody's call obligations, family obligations and still be able to celebrate. So there's historically been this thing about divorces spiking at seven years and then again at empty nest time that people talk about and relationships going wonderfully with my wife, so blessed to be married to her and I just really wanted to celebrate that. We actually took a trip to the Maldives to do so and got a chance to see some great dolphins and sharks and things of that nature. So that was a big milestone for us.

Very cool. Congratulations on hitting that. You're Right. It is not insignificant. You know, a lot of people think doctors have this terrible divorce history. Right. And it's not what most people think. I mean, the typical divorce rate in our society is 50%. If one of you is a doctor, drops to 25% and if you're both doctors, it actually drops to 10%. So it's not this bad thing that people, people assume it is for doctors, yes, residency and fellowship, they're hard, but there are a lot of benefits to being married to a doctor, it turns out. But so you're, you've been married seven, eight years now. You're also seven, eight years out of, out of training. Both of you came out close to the same time and hit a recent net worth milestone. Now, I don't know if the one I have in front of me was a year ago. Where are at now with your net worth?

Right around $3 million.

$3 million, seven, eight years out. That's awesome. Congratulations. You guys are killing it.

Thank you.

What do you attribute, I mean, obviously part of your success is it's two doctors, right? It's two big shovels contributing to this mound, this pile of money that you're putting together. But still seven, eight years out. This is impressive. What are your secrets to success? How have you acquired this much wealth that quickly?

Yeah, I think for us we just are very lucky to be on the same page financially the whole way through our spending habits. We don't budget anything, we don't ever really talk about much as far as spending unless it's for big ticket items. And because we both have just, I think intrinsically the way we were raised, learned to have a value for money, it's just come, you know, fairly naturally. We've basically saved her salaries as a surgeon her entire career. I never had to spend any of it outside of like buying a house, things of that nature. And then obviously a big part of it, as I said before, is just kind of knowing what to do, being smart with, you know, low cost index funds, letting the market do the work, not being trapped by any whole life policies or bad decisions that I know other people have had to make. The mistakes of my brother and that I stepped over and so I haven't had to make those mistakes, which has been very fortunate.

Well, we all make mistakes. Hopefully we make them early on with small amounts of money. Right.

That's true. I did do that. Actually. I did make early mistakes as I was alluding to before when I came out of training. So I didn't have any financial help for Med school. I was able to get enough scholarships to cover my undergrad. And so I came out of that without any debt. But med school was all 100% financed by loans, all at 6.8%. So I came out of med school with about $200,000 in loans. This is back in the day, it's a little bit cheaper, but that of course was accumulating and I had no idea what to do. When asked me what to do with the loans, I kind of pretended I was an ostrich. I put my head in the sand. I was in forbearance on those, which is obviously not ideal. Wasn't able to accumulate, you know, any income based subsidies or payments or anything of that nature. So it really was until like the third year I was a resident where I was just figuring out like I actually have to address this. This isn't, you know, monopoly money. And I do have to find a way to go forward.

It's funny how it feels like monopoly money when you're taking it out, isn't it?

It does.

Was your spouse able to. Did she also end up with a bunch of debt coming out of school or was she coming out debt free?

She came out debt free and so it was nice to just have mine. And she was very aware. We had conversations about exactly what that looked like. And at that point it was a quarter million that it was going to take to repay. Took us about two years to do that coming out.

What do you think your net worth was when you guys came out of training?

It was negative. $200,000.

Okay, so definitely in the negative. So you've had quite a swing now. Have you both been working full time the last seven, eight years?

We have been. She took off a little bit of time when she had our child, but other than that. Yeah, full time.

Okay. And what do you think the range of income's been total household income over that time period?

It's been very close to 800,000 throughout. 500 from her and 300 for me, roughly.

Okay, very cool. And what do you think your savings rate has been over the last seven or eight years, if you had to guess?

So I take a look at it usually from a post tax perspective. Even though I know a lot of people look at it pre tax. We try to save about $3 for a dollar. We spend from a post tax basis about 75%.

Wow. Wow. That's quite a savings rate you're building. That explains why you're building wealth so quickly. I mean, the investments help, obviously, especially the last Five years or so. But when you're putting that much money away, you just build wealth very, very quickly. Tell us why this was so important to you to do that. I mean, a lot of people would have said, eh, you know what, let's get a big fancy doctor house, let's get a second home, let's get a wake boat, let's enjoy some of this money. We deferred gratification for so long. Why was it important to you to have a 75% net savings rate?

I think it goes back to that sense of security. I did not grow up with any money, and so just knowing that something was there. And interestingly enough, my wife grew up with some money. Not fabulously wealthy, but definitely came from a upper middle class background. And she maybe feels even more than I did, despite growing up with much less. We just kind of felt like being able to say no, you know, if something happens at a job, if things aren't going the way we wanted to, was kind of the number one priority. And then I know I have no plans on stopping working and maybe things will expand to get in that second house or get in that wakeboat. Those are certainly on the table for spending in the future. But for us, we wanted the kind of foundation and stability first. And then once we felt like it was easy to walk away from work, then we were going to kind of expand out from there.

The classic get rich first, huh?

Yep.

Yeah. Can you recall any disagreement the two of you ever had about money? What's the biggest disagreement you think you've had in how you invest or how you, you know, budget or spend or save or give over the last seven or eight years?

Yeah, we actually have a fairly large disagreement. She, I think, doesn't have the same kind of background in the markets and personal finance that I do. In addition to consuming every piece of material that the white coat investor has ever produced, I also listen to other finance podcasts and read other forums and other books. And so to me, it's kind of straightforward stuff. To her, there's definitely some skepticism, you know, around broad based, you know, market index funds. There's some idea that maybe, you know, should be having a financial advisor do some of this work. Thus far, it has defaulted to me, but I think there's probably still some, you know, conversation to be had about that in the future. It has certainly helped that things have gone very well financially and not that, you know, a bear market means that you should be picking stocks. I obviously know that, but we haven't had to get to that point with how well things have gone in the market.

You know, it's interesting. One of the benefits of sitting down even for, you know, like a one time consultation is your spouse gets to hear that you actually know what you're doing, you know, and that is beneficial to a lot of couples and to realize, oh, okay, well, you know, maybe my spouse isn't out to lunch because there's a lot of people that are very confident about their finances and they're doing crazy stuff, right? And you know, maybe your spouse worries that you're one of those people, you know. And so for everybody out there, that's something to think about. That is a benefit of, you know, paying a few hundred dollars to have a one hour consultation with a, you know, financial planner of some kind. You know, even if you really don't have any questions, you just want to check up. That is something you can do. There are firms out there that do that sort of a thing. It's hard for them to build a business that way. You know, most financial advisory firms are set up to serve delegators, people that want to come and have them manage all their money indefinitely going forward. But there are some firms out there that will, you know, do hourly rate financial planning and they can do that sort of a service.

And I think that's a great idea. I really want to be doing that. I got to find the people and make the time to do that in between working and taking care of my child. But I think that's a great idea. I have shown her, you know, the Vanguard page and she's looked at it, but I think it looks like, you know, it's in Hebrew or Arabic characters to her or something when she takes a look and she sees the numbers but you know, of the actual ETFs and stuff, just kind of looking like in there in a different language.

Even sometimes just doing the chores, you know, buying, selling, you know, donating, moving money into a daf, whatever, those sorts of things are worth having the less interested spouse do from time to time. Just so, you know, in case you fall off a mountain or something like I did. You know, you want your spouse to be able, able to pick up where you leave off. So there's some benefit to that. Now, you mentioned that your student loans are all gone. What's the breakdown of your net worth look like? I mean, what are your assets? What are your liabilities at this point?

Yeah, so we don't have any debt. It was very important to my wife to not have any debt again. I think going back to that sort of safety net, our net worth would be much better if we didn't own our house in full. But we have a million dollars in our primary residence and then the rest is about 1.5 in taxable and then about half a million between our 401ks and backdoor Roth IRAs.

You know, this is a problem a lot of people have out there that they're like, well, where can I see? Where else can I save for retirement? I don't know where to save for retirement. I already maxed out my 401k and my IRA. You clearly did not have this problem. You've learned that you can always save more in taxable.

Well, actually, I will say I did have this problem going back to everybody making mistakes. We have only been in the markets for, gosh, I think maybe the past three and a half, four years. We did actually have extended periods of time with multiple, multiple six figures sitting, you know, in a, in a money market that was under the auspices of buying, you know, a seven figure house in cash. But you know, things would have obviously, like I said, been much, much different if that was in the market. And we went with a traditional mortgage and did things that way again for family reasons, we decided not to do that. It gave everybody peace of mind. I know it wasn't the optimal thing financially, but I was happy to make that sacrifice and for my wife feeling better about it. And so we did.

So did you pay cash for the house?

We did.

You saved up the whole thing and walked in there and dropped a million dollars on the desk and said we're not going to do a mortgage.

Yep. At the age of 34 or 35. Yep.

That's pretty cool. What'd that feel like?

It was harrowing sending the actual money transfer and they send you all these don't get scammed and all those sorts of things. And so I quintuple checked it and called all the people and yeah, it is. Wiring a million dollars is a really weird feeling. But you know, it's felt great being in the home sense. We picked something that wasn't too big, but also not too small. You know, it's not some super fancy house, but it's obviously not a nothing broker that a lot of people would obviously be very grateful to live in.

So yeah, a million dollars still goes a long way in the Midwest.

It does.

Very cool. Well, congratulations to both of you on your success. You guys are doing great. You should be very proud of yourselves. We're happy with any contribution we made toward your success over the years. And thank you so much for being willing to come on the podcast and share your story and inspire others to do the same.

I really, again, appreciate everything you've done. It's made a huge difference in my life. So glad that you're still here with us to host this podcast today.

I hope you enjoyed that podcast. It was a fun interview. You know, we talked to so many people on this podcast that are just absolutely killing it. We're so proud of so many of you out there that are doing this well. Right. I was talking to him afterward. You know, when I came out of training, Katie was staying at home with her oldest child, and I was working for the military. Right. We did not come out to an $800,000 pair of shovels to work on our pile. We came out with $120,000. Pile or shovel. That's all we had. That's what we were making, literally, when I was first in attending, that's what the Air Force was paying. It was $120,000 a year. And, yeah, there were a few tax breaks on it, but the truth is, you don't pay that much in taxes when you're only making $120,000 anyway. And so we had to be pretty careful budgeters, right? We still had a high savings rate. We hit the ground running financially and that we were financially literate. We had a written plan, and we started building wealth, and it took us about seven years to become millionaires. Well, in that period of time, this couple were multimillionaires, right? They had $3 million in the time it took us to get. They bought a house for cash, for crying out loud. Right? So many of you have done way better than we ever did, and you should be proud of that. But those of you out there who are not multimillionaires, seven years out of residency, don't think you're unusual or behind everybody else. Okay? I mean, a lot of times on this podcast, we're seeing, you know, the very high percentile people as far as financial literacy goes, as far as savings rates go. I mean, they're saving 75% of their net income. You do not have to do that to be financially successful. You can catch up to that sort of success just by being persistent. Yes. You have to save something. I generally recommend 20% of gross. You have to save something. You do have to have plans for your debts, your mortgages, your student loans, et cetera. You can't just throw caution to the wind and blow everything and expect to be financially successful. But you don't have to be as successful as some of the people we feature on this podcast. Right. They're going to probably have estate tax problems. They're going to have problems where they got to figure out, well, what can they spend money on that will make them happier? They've got problems. And then they got to worry about how can we keep from ruining our kids with all the money we have. They're great problems to have, these first world problems. And we'll continue to talk about them here at the White Coat Investor. But, you know, it's not necessarily some sort of requirement that you save 75% of your income or make $800,000 a year in order to be financially successful. The whole point of this website is that you don't have to do those things. And you can still be financially successful. You do want to make as much money as you can without burning out. You do want to save a good chunk of your income. You do need to invest it wisely, but you don't necessarily need to be fi in the first decade out of practice. It is an option, though, obviously, if you're interested in that. Okay, I mentioned at the beginning, we're going to talk about the beginning of the year. It's the 6th of January when this podcast drops. I mentioned earlier, it's the last day of our buy one, get one sale. This is a good time to pick up, fire your financial advisor or no hype, real estate investing or a continuing financial education course from last year and get our CFE 23 course along with it. You can sign up for that@whitecoatinvestor.com courses. But even if you don't need a course, it's time to pay attention to your finances. It's January, and the amazing thing, when we look at our traffic for the website, it's always really high. January to April, and then you guys go on summer vacation just like we do. And the fall's kind of chill, and then coming in December, it kind of picks back up again. And that's just the way personal finance is, right? We think about it at the beginning of the year. Well, it's the beginning of the year. It's time to think about it, right? If you're not experiencing the success you would like, you need to make some changes in your life. And you can do that. You can save a little bit more money, you can earn a little bit more money, you can invest a little bit smarter. You can take care of those important financial tasks that Maybe you've been putting off like buying disability insurance from one of our recommended agents. You can go to whitecoinvestor.com insurance for that. Or maybe you need to get a will in place, or maybe you need to do some more extensive estate planning or give a thought or two to your asset protection plan. Wherever you're at, please take this as motivation to help you do that. I wanted to talk a little bit about front loading retirement accounts. Right? Investing in tax protected accounts is a good thing. Not only do those accounts get more asset protection in every state, some states even protect your IRAs completely, but in some states protect HSAs and 529s as well. But they grow faster, right? You put the money in these accounts and they don't get taxed as they grow, even if you're buying and selling within them. And so you want to invest as much as you can inside these tax protected and retirement accounts rather than outside of them. So as much as you can, try to frontload your contributions to those things. So for the most part, you're trying to use your earnings in the early part of the year to go into retirement accounts and HSAs, 529s, whatever. And later in the year is when the money goes into your taxable accounts, that gives you a few more months of that extra tax protection. And so the first thing that we fund every year is our hsa, right? HSA is triple tax free. And so every year for like the last, what, 14, 15 years, we have put the maximum contribution into an HSA, say basically the first week of January. And we have invested in equities the entire time. And obviously, in fact, US equities basically just put it all into total stock market fund just for simplicity. And obviously over the last 15 years that has done very well. I think our HSA is pushing a quarter million dollars and a good chunk of that is because we front loaded it every year. And that's what happens when you start front loading. These sorts of accounts we also fund very early are backdoor Roth IRAs. You can do one of these for yourself, one of these for your spouse, right? It usually takes a few more days than the HSA. The HSA you can usually dump in January 2nd or whatever. What often happens with the backdoor Roth is the money's got to sit there for a few days or a week or as much as three weeks. I've heard before, before they let you do a Roth conversion on it. Two step process. Contribution to a traditional ira, then a conversion to a Roth ira? Yes. If you got some extra money in there from the growth in between those two steps, you ought to convert that as, and you'll owe taxes on the $16 or whatever earned in between contribution and conversion. But otherwise it's generally a tax free conversion because you didn't get a tax deduction for making the contribution to the traditional IRA because you make too much and you have a plan at work you can do more, though that's not the only things you can put in in January. Many of us have control over our individual 401s, and the IRS does not care when you make the money as long as you make it during that year. You don't have to like earn it before you can put it into the 401. Now you have to have some money put into the 401, but you don't have to earn it. You have to earn it by the end of the year to justify the contribution. But if you know you're going to make enough money to max the thing out, you can max the thing out right away. What I end up doing in my physician partnership where I make my employee contribution, is I send them a check in January for last year it was $23,000. I think this year is $23,500. I send him a check and I say, put this in my 401. Now I wait until like April of the next year to make the profit sharing or employer contribution to that 401 because I just don't know how much I'm going to make and how much they let me contribute to it. I don't practice medicine enough to be able to max that account out. So I got to wait a while to put in the employer contribution. But you know what Katie and I do with our first paychecks from WCI of the year, we max out our WCI 401ks. We happen to do mega backdoor Roth contributions in that, but we do it early in the year. And we've always done this in early in the year, as early in the year as we could. Now in the beginning we didn't have enough money to like max everything out in January, right? We couldn't do it. But every year we tried to move it up, right? Maybe the first year you come out of training, you can't even, don't even have any money to do your backdoor Roth IRAs. And you end up doing it like April of the next year. Well then you move it up to January or up to December the year after that, and maybe October the year after that. And eventually you get to the point where you're doing it early in the year, January, February, March, et cetera. And you can gradually move everything up, right? Maybe it takes you four or five months to max out that 401. That's okay. Better to get it in there in the first four months of the year than spread it out over all 12 months of the year. You get a little bit of extra tax protected growth from front loading your accounts as much as you can. Now, this is obviously the maximizer approach, right? And satisficer works for most of us in all things we do. But if you're trying to get the maximum benefits out of those accounts, front load them. You can do it with your HSA, you can do it with 529s, you can do it with your 401s. You know, a lot of times your cash balance plans won't let you do it like mine won't let me front load it at all. We have to spread our contributions out throughout the year and that's okay. Whatever they want to make me do is okay. But as a general rule, your savings early in the year ought to go toward the tax protected accounts and savings toward the end of the year, if any, can go toward your taxable accounts. Or maybe that's when you spend more money or give more money or whatever, right? But that front loading effect does have an effect on how quickly your accounts can grow. Today's sponsor, Black Swan Real Estate offers accredited investors access to private multifamily real estate investments with an investor first model. Unlike most firms, Black Swan collects no GP level fees and takes no profit until investors receive a full return of capital. Their position led team brings a hands on approach to managing their $375 million portfolio, ensuring every asset is optimized for cash flow, appreciation and tax advantages. With a track record of meeting and exceeding return targets, Black Swan Real Estate provides stability and growth for long term wealth building. Discover more@whitecoatinvestor.com BlackSwan all right, we've come to the end of another great podcast. This is the Milestones podcast. The regular podcast drops Thursdays, the Milestone podcast drops Mondays. You can apply to be on this podcast. We'd love to feature your milestone, congratulate you on your accomplishment and use it to inspire others to do the same. You can apply@whitecoatinvestor.com Milestones all right, keep your head up, shoulders back. We'll see you this Thursday for the next podcast and next week for the next milestone.

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.