WCI #151: How to Pick a Charity

This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host, Dr. Jim Dali. This is the White Coat Investor podcast 151 how to pick a Charity at some point in our financial lives, it will be time to buy a home. A physician mortgage can be a good vehicle for a young doctor who's just out of school and has a more effective place to use their money than on a big down payment. These loans allow doctors to secure a mortgage with fewer restrictions and a lower down payment than a conventional mortgage. But if you're further advanced in your career or deeper into your journey to financial freedom, buying a home with a conventional mortgage and then later on potentially refinancing that loan to a better rate with a shorter timeframe could be a great move. Wherever you are in your financial journey, make sure you use the mortgage that will be most financially beneficial for you. Hop over to our recommended tab to learn more about all of your mortgage and refinancing options@whitecoatinvestor.com mortgage. You can do this and the White Coat Investor can help. Thanks for what you do. Medicine isn't easy, especially when we have pandemic coming and you're going to be asked at times to put the lives of yourself and even your family at risk taking care of other patients. Thanks for what you do. It is not an easy work. There's a reason you get paid as much as you do. Our quote of the day today comes from Jack Bogle. If you have Trouble imagining a 20% loss in the stock market, you shouldn't be in stocks. And if you didn't learn that lesson in the last month, the market's going to teach it to you. Now. We just finished WC Icon a couple of weeks ago and we've got an E version of the course out. If you come to whitecoatinvestor.com it's very prominently displayed and you can check that out. It gives you all 27 or really 29 hours of the conference and you can watch in the privacy of your own home at your own time that you desire. You can even listen to it in your car just like you would this podcast. So check that out. It's going to be great. You'll love it. You'll feel like you were right there with us and hopefully get you those pearls of wisdom that were dispensed by the many awesome speakers that we had at the conference today, we're going to be answering listener questions off the speak pipe. Now, if you don't know what the speak pipe is, you just need to go to speakpipe.com whitecoatinvestor or whitecoatinvestor.com speakpipe. Either one will take you to the same place and you can record a question there that we'll play on the podcast and I'll answer for you. So go ahead and leave those for us and we'll get your questions on the podcast. So far, we've been able to keep up with them. Anybody that's left any sort of a reasonable question has gotten it answered on the podcast. I don't know how long we'll be able to keep up with that, but so far, so good. Let's take our first question now. This One comes from Dr. Prashant.

Hello, this is Dr. Prashant. I just had a question about international applicability for disability and life insurance. What if I wanted to move back to home country or a different country other than the U.S. are there certain companies or brands for disability insurance or life insurance that I should be considering where, you know, if I get disabled and I decide that I don't want to stay in the US Anymore, will the company continue to pay me while I live outside of the US Are there international policies that I can purchase right now so that it is applicable across nations and similarly for life insurance as well? What if after my death, my family wants to move back to, say, India or Europe or some other country? What's the situation? Thank you so much.

Okay, so basically, does your disability insurance still pay if you leave the United States? Yes, it does. No problem. You just got to buy it while you're in the United States and working in the United States. Even your Social Security disability will pay when you leave the United States. But if you are overseas now trying to buy disability insurance, that's going to be a bigger problem. Most companies require you to spend at least six months per year in the US to get it, but once you have it, you can kind of do what you want. That's not an issue to move away later. All right, let's take our next question.

From Paul Dr. Dali. I am currently investing in my employer, 401K403. For the last five years, I've been maxing out the retirement fund and have about $240,000 in that fund. However, I've only been investing in a Target date fund while I was focusing mainly on paying off my student loans. Now that that is done, I'm ready to follow my investment plan. And I want to invest around 80% stocks with 60% in US funds and 20% in international funds. However, my employer 401k only offers a total stock market fund, a bond fund and a small market cap fund in Vanguard low expense accounts. The only international funds that they offer have expense accounts of 0.9 to 1%. So my question is, should I go ahead and stick to my investment plan with those high expense ratios and invest in their foreign accounts or should I just invest in only the Vanguard funds in that account and build up the international funds in my Roth Vanguard account taxable accounts. Thanks for all that you do. I've been following you since 2011 and you've helped me immensely.

Alright, so Paul's done a great job. I've often said to myself in the past, if I was going to do this all over again, I just use a Target Date fund or a Target Retirement fund, a life cycle fund, whatever you want to call it, until my portfolio hit $100,000. It's a totally reasonable approach to make. It's diversified, it's a one stop shop, it automatically rebalances, it's very convenient. But now he wants to start managing his own asset allocation, which is fine too. That's what I do. He wants to go 80% stocks, 60% of those in the US and 20% of those international and the rest in bonds. But he's stuck in a 401k that doesn't offer a great international option. He's got a high cost option in there like lots of 401ks do. Should he use it or should he do something else? Well, you got a few options. One's just stick with the Target Date fund. It usually includes an international holding and it may even be a cheaper international holding than the one you can buy separately. For example, if you got Vanguard Target retirement funds in the 401k, you're getting a Vanguard cost, so a low cost international fund as part of that Target retirement fund. Another option is just to use the high cost one, understanding that you know the benefits you're getting from the 401k are better than the costs and so go ahead and use it. But what most people would do in this situation is they would pick the best offerings out of the 401k, which is often an S&P 500 index fund and some sort of reasonable cost bond fund, and then put their other holdings that they desire in their asset allocation, whether it's international stocks or small value stocks or real estate investment trusts or whatever it might be, they put those in their Roth IRAs and or taxable accounts and you just build around what's good in the 401k. And so I would probably lean toward that third option in your case, Paul. Alright, our next question comes from alex in Washington D.C. and this is the one we named the podcast for.

Hey, Jim, this is Alex from Washington D.C. thanks for all that you do. I just wanted to say that I really appreciate how you and so many.

Others in the physician financial space promote charitable giving.

We all know that some charities are better than others, however, and I was hoping you'd consider spending some time on.

How to best pick a charity.

What should we look for?

Are there particular metrics, certifications that might.

Be of particular importance?

Any light you could shed on this.

Topic would be greatly appreciated.

Thanks.

Okay, so how do you pick a charity? Well, I think the most important thing is to begin with choosing a cause that you support. Now, in my family, we use a scripture to kind of guide us to what causes we think are worth supporting. That scripture reads, but before you seek for riches, seek ye for the kingdom of God, and after you have obtained a hope in Christ, ye shall obtain riches if ye seek them. And this is the key part. And you will seek them for the intent to do good, to clothe the naked and to feed the hungry, and to liberate the captive and administer relief to the sick and the afflicted. So those are kind of the four causes we try to support with our charitable giving. We support causes that provide shelter, food, medical care, and liberation. And that might include our local homeless shelter, which provides the shelter. Right. Something like Salvation army, which provides clothing, the local food pantry, or the soup kitchen, which obviously feeds the hungry. The homeless clinic is one of our favorite things to support. It administers relief to the sick and the afflicted. You might choose something like Doctors Without Borders. We've given to them in the past, but that would meet that criteria for us. And then of course, the little bit more complicated one is Liberating the captive. And one of our favorite charities that we support that does that is called the Underground Railroad. And basically they go out kind of flying underneath the radar of local law enforcement and try to free people who have been basically sex trafficked into various countries. And they try to free these people, usually young girls who are basically sex slaves in various countries, and they basically try to free them. And so that's one of the charitable side causes we support. But whatever you support, And I'm sure your favorite charitable causes are not going to be the same as ours. You know, whether you want to support an environmental cause or whether you want to support the homeless in your local area or war torn refugees or whatever you want to support. I would start with the cause, what kind of cause do you want to support? And once you have that, then go out and find the best charity to support that particular cause. And in my view, the most important metric, the most important statistic is what percentage of the donated money is used in administration and fundraising. You know, if I'm giving them a dollar, I don't want to find out that 25 cents went toward them trying to raise more money. I want it to be like 5 cents. That would be a really great number if you can get it up into the less than 10 percentile. For example, Doctors Without Borders spends about 10% of its money fundraising, and I'd love to see it be half that. In fact, I hate getting what I call charity porn in my mailbox so much, which is once you donate to a charity, not only do you get something from them every few months, but they then sell your mailing address to a bunch of other charities and they start sending you stuff. Once they know you're charitable, you start just having a mailbox full of this stuff, which is great. The glossy pictures are fun to look at, but that's not where I want my money going. I want my money actually going to the people that the charity is trying to help. And so I pay a lot of attention to that number, and the lower it is, the better, in my view. But there are some rating organizations out there that rate charities, and a lot of it is based on this number and transparency and some other good things that they look at to rate these charities. Some of the big well known ones are Charity Navigator, Charity Watch and the Better Business Bureau, Wise Giving Alliance. So I would recommend you look up the charities you're considering supporting using one or more of those resources and actually find out how good of a charity they are, how good they are at doing what they're saying they're trying to do. And we look at that each year. And we also try to let the kids get involved in this process. We actually sit around the table. In fact, one year, I think we were watching Cindy's kids at the time. So we let them sit around the table with us while we chose what charities we were going to support that year. And everybody got input into where the money went. And it really does what the kids choose to Give money to. That's what we give money to. And I think that's good for them to learn how to give at such an early age. But the bottom line is it takes just as much effort to give well as it does to earn, save, invest, and spend well. All right, our next question comes from an anonymous listener. Let's take a Listen.

Hi, Dr. Dali. I'll be firing next month and my husband will be following in a year or two or so after me. That means I've got a little time left to fig some tax optimization calculations I'm struggling with. I'm hoping you can help me out. So once we're both retired, we'll be living off our taxable account that has a fairly high tax basis. I therefore anticipate our federal taxes to be zero. I'm looking for some help to figure out how to best optimize our magi, taking into account ACA subsidies and Roth conversions. So I understand the trade off is, on one hand, a low MAGI would qualify us for better ACA subsidies, whereas on the other hand, doing more Roth conversions would lead to lower ACA subsidies, but also lower taxes later in life. So some more details in case it helps out. We've got about 2.5 million invested. About half of that is in the taxable account, about a quarter in Roth and about a quarter in tax deferred retirement accounts. We're married, filing jointly, have three kids, and we're in our late 30s. Thanks for your help figuring this out.

Okay, this is a little bit of a complicated question. So these guys are going to fire? Well, she's going to fire in a month, or a husband in a year or two. I always find that sort of phrasing kind of funny. Obviously, one member of a couple firing or retiring is a little bit odd, right? I mean, when I was an intern, our oldest daughter was born. At the end of my intern year, Katie had been teaching school and we decided that she was going to be a stay at home mom. But we didn't tell anybody that Katie retired or that she was firing. You know, one of us was still working and supporting the family, and the other one was doing, frankly, more important stuff at that point. So I found that was kind of funny way to phrase it. But whatever, it doesn't really matter. I'm not going to be the Internet retirement police. So the question here really is how to balance Roth conversions against ACA subsidies. Remember, the less money that you have, less income you have, rather, because they don't care about wealth. That's the funny thing about, you know, your taxes, as well as most of these sort of subsidies that are based on your taxes, they don't care how much money you have. They care about how much income you make. And so the way this Obamacare or patient protection, Affordable Care act subsidy works is the more money you make, the less of a subsidy you get. And so it's based on your percent of the federal poverty level and your household size. Now, if that sounds familiar to you, that's probably because that's what your student loan payments are based on as well. So the more people in your household, the lower your student loan payments, the higher your ACA subsidy. But for example, if you're making up to 133% of the federal poverty level for your household size, your expected contribution to your health insurance, to your PPACA health insurance plan is about 2% of your income. And that goes up to almost 10% of your income if you are between 300 and 400% of the federal poverty level. Well, what's the federal poverty level? Well, if your family size is four people, two parents, two kids, the federal poverty level is about 25 grand. So up to an income of about $400,000. And that's a modified adjusted gross income, not a total income or not $400,000, sorry, about $100,000, 400% of that federal poverty level of $25,000, then you can get some sort of a subsidy. Once you get above there, you're not going to get a subsidy. So obviously if you're going to fire on not that much money and you're going to have a pretty low taxable income at that point, you can qualify for these subsidies. And the less income you have, the higher your subsidy. The problem is a lot of people that retire early also want to take advantage of Roth conversions. You're now in a low tax bracket. It's lower than you were during your peak earnings years. It's probably even lower than what you're going to be in retirement once you start receiving Social Security. So it's a good time normally during early retirement to do Roth conversions. The problem with Roth conversions is they generate taxable income and so they increase your modified adjusted gross income and thus decrease your ACA subsidy. So the more Roth conversions you do, the less you are going to be getting from the government to pay for your health insurance. So how do you balance those two factors? Well, quite frankly, if you're down there to the point where you are getting a significant ACA subsidy, I think you ought to just hold off on the Roth conversions, just lower that income as much as you can to maximize the ACA subsidy. Whether that's ethical or not. You can answer that question yourself. It's certainly the way the law is written. So even if you got three or four million dollars saved away, if your taxable income is only $50,000, you're probably getting your health insurance subsidized by the government. And the lower your income, the more it's going to be subsidized. You know, there will likely be time later, especially if you're retiring at 35 or 40. There's probably going to be time later still before you take Social Security at 70 in order to do some Roth conversions. You know, the laws will probably change. The ACA subsidy will probably change. Something else will happen in your life, and maybe you make more money and you don't get the subsidy anymore. Well, then you can start doing Roth conversions and that sort of a thing. But it's really difficult to really run the numbers on this without knowing exactly what tax bracket you're going to be in every year of the rest of your life. And that information is not only unknown, but it's probably unknowable because it just depends on too much other stuff. So I would lean toward getting the bird in the hand now, which is the lower health insurance costs, and put off the two birds in the bush, which is the Roth conversions. All right, our next question comes from Anonymous. Let's take a listen.

Hey Jim, thank you very much for what you do, comma. Your podcasts have been very helpful. My question is pertaining to pllc, which is professional LLC versus llc, and how that could make a difference while working through locum companies. I have a PLLC in North Carolina and it turns out that to work as a locum provider, or rather any healthcare provider in the state of North Carolina, you cannot do it through an LLC company. Now, I wanted to change my PLLC to an LLC so that I could add my wife also to the company, as that helps from tax standpoint. But I cannot do that since she does not have active North Carolina medical license. My question is, do you know what could be done in this situation and do you think this law applies in locum situations where the physician is working through a middle company, which is the locum company, such as Comp Health or Wetherby or MDA locums, etc. Since the physician works for a hospital doing locum shifts through a middle entity, does this restrict being able to change the PLLC? To an llc. I know it's a complicated question and maybe it's pretty specific, but if you can throw any light into this matter, that would be appreciated. Thank you again.

Okay, so we're going to talk about professional limited liability companies versus just a regular old limited liability company. If you're a DOC or an attorney or a similar high income professional, in some states, you're required to be a professional limited liability company, a pllc. So if you have to do that, if your state mandates it, do it. But legally, it's basically the same thing. You should still be able to hire your spouse, but they may not be able to be a PLLC member. But at any rate, if you really want your spouse to be a member of an llc, you could form a second LLC where your spouse is a member and contract with it for the services that your spouse is providing. Just remember, anytime you're hiring your spouse that your spouse has to do real work. You can't just make something up and say they're doing it. And you have to pay them a reasonable wage, right? A reasonable amount of pay in order for them to be employed. And of course, you have to do all the required paperwork. You got to file W2s and W3s and do an i9, you know, prove that your spouse isn't an illegal immigrant. And you got to do all those things that you have to do for any other employee. But a lot of times doctors are doing this, just going, oh, I'm going to put my spouse on my, on my llc. And that way we can have another retirement account. Well, if your spouse isn't actually doing any work, that's not actually legal, it's fraud. So make sure they're actually doing some work and then you're not dramatically overpaying them for what they're doing. The other thing to keep in mind is that assuming your spouse has no other work, whatever you pay them is going to be subject to payroll taxes, particularly Social Security taxes. Which is fine if you're trying to get your spouse their 40 quarters or something, but that often negates the benefit of another retirement account. You got to really run the numbers here. If you're going to pay another $10,000 in Social Security taxes in order to put $20,000 into a retirement account, that might not be an awesome deal for you because those Social Security taxes are gone forever. And especially if your spouse is going to be taking 50% of your benefit instead of their own benefit, you're really not even getting any benefit for all those Social Security taxes that you're paying, much less the Medicare taxes that you're paying. And so you got to really run the numbers there to decide whether it's worth paying additional payroll taxes in order to have the advantage of another retirement account with its tax protection and its asset protection. All right, our next question is also from an anonymous listener.

Thank you, Dr. Dali, for your wonderful podcast and your website. I have a question regarding backdoor Roth IRAs. I did my conversion in 2018 after I moved my IRA to my 401k, but then realized in 2019 that I still had another IRA. So at that time I moved that ira to the 401k as well and paid taxes according to the pro rata rule in filing 2018 taxes. Now it's 2019 and I did some more conversion and I'm wondering if I made a mistake because I have moved the IRA with basis into my 401k. Was wondering if you had any thoughts about that or any suggestions on what to do next as to whether or not it matters. I've had one accountant tell me that it doesn't really make a difference in the long run because if anything, you're just going to pay taxes twice on that money and the IRS won't care. And I've had another accountant tell me that I may need to start thinking about doing a partial Rollover from my 401 to remove that basis. Any information would help. Thanks.

Okay, so here's a backdoor Roth IRA screw up. There are so many of these. I'm not sure why people screw this up so badly, but they sure do. Remember the process for a Roth ira, okay? A backdoor Roth ira, you put money in the traditional IRA and then you move it all into the Roth ira. If it makes a buck or two while it's in the traditional ira, move that into the Roth IRA as well. You'll owe taxes on that dollar, but you won't owe taxes on the rest of it because you didn't get a deduction when you put the money into the traditional ira. What trips a lot of people up is that they forget about the pro rata rule, meaning if you have some money sitting around in another traditional ira, tax deferred money or a SEP IRA or a simple ira, you got to get rid of that by the end of the year that you do the conversion step of the backdoor Roth IRA. So you either roll it into your 401 or you convert the whole thing to a Roth IRA and pay the taxes on it. Those are really your Two options. But try to do all that in the same calendar year and your paperwork will be much, much easier. In this case, the screw up is they had an IRA with some basis in it, meaning money they did not get a tax break for when they put it in the ira. That's the money you want to convert to a Roth IRA tax free. Right? That's the whole point of the backdoor Roth ira. But instead in this case it was rolled into a 401k and the 401k didn't notice because they usually don't allow you to do that. They didn't notice that this had basis. And so what you've done is you've told this 401 that this is all pre tax money. And so when you take it out of the 401k, you're going to have to pay taxes on it again and those dollars are going to be double taxed. So that's a big problem, right? You're not really benefiting from using retirement accounts if you're now paying taxes twice on the money you put in there. So the worst case scenario in this situation is you're going to have to pay taxes twice on that basis. I mean, the 401k shouldn't have let you do it. They probably only did it because you lied to them. Not on purpose, but you lied to them on your paperwork and said this was all pre tax money. So I don't know if they're going to let you reverse this. The first call I would make is to the 401 and I'd say, hey, here's what I did. I accidentally rolled money with basis in there. Can you roll it back out? Can we just reverse this transaction? And they may be able to help you fix it. But I wouldn't hold my breath. This is probably not a bad time to get the advice of a real experienced CPA or accountant. If you need help with that, we've got some recommended tax strategists on the White Coat Investor website under the recommended tab. And this is probably a bad enough screw up that it's worth getting some formal professional advice. But I'm pretty sure the first thing to check is going to be see if you can reverse that transaction somehow. And even if it means modifying your taxes for a year or two, it's probably going to be worth it just to save a few thousand dollars in taxes. All right, our next question comes from Jared from Massachusetts. Let's take a listen.

Hey Jim, two quick questions for you about federal student loan repayment. I am seven years into an eight year training program and have around $200,000 of medical school debt. I've been making payments since day one of residency and I'm therefore planning on going for PSLF in a couple of years. My base salary is around $70,000, but I fortunately can supplement my salary significantly with moonlighting and typically end up with a yearly AGI around $200,000. As you know, there are two ways that MyFedLoan calculates monthly IDR payments. One is calculated using yearly taxable income from your previous year's tax return and the other is calculated with a single one month snapshot of your income. I believe the latter was designed for people who have had a significant change in their income warranting a new monthly payment amount. My two questions are as follows. First, is it legally sound to pick up fewer moonlighting shifts in a given month, thus reducing that month's income dramatically for the purposes of applying for a lower IDR loan payment for the following year? And second, even if this is legally sound, I'm curious as to your opinion on the ethics of this strategy. Should I feel obligated to recalculate my monthly payment every month? If my income changes from month to month or increases substantially, you can easily see how this could quickly turn into a slippery slope. Thanks so much for your time and advice on this tricky situation.

Okay, so here's a complex question, right? You're trying to minimize your payments during residency while you're in these income driven repayment programs by minimizing your income. The lower your income, the lower your payments, the more that's left to be forgiven under Public Service Loan Forgiveness forgiveness. So apparently there is a way in which you can update them during the year when you don't have your taxes back yet as to your income changes. And the idea behind this was if somebody loses their job or they are forced to go quarter time or something and their income is dramatically reduced, that they can reduce their payments. This is a mercy rule from the government program. That's the idea behind it. But of course like with any rule, there are unintended consequences and people start wondering, is there a loophole that I can work here, something I can use to get my income lower, something I can use to get my, you know, subsidy higher if you're in revised pay as you earn or just get my payments lower and maybe get more money forgiven in the end. So you can see why people are starting to scheme and look at these sorts of things. So question number one, is this legal? Is it Legal to reduce your income this way, use one month where you had really low income and tell them that's what your income is. You know, whether that's stopping moonlighting to get your income down or whatever. Well, here's the guidance that comes from the program. It says if your income hasn't changed much since you filed your last federal tax return, your monthly payments will be calculated using your adjusted gross income. But if you had a significant change in income that is not reflected in your most recent tax return, that is you lost your job or got a large raise, you will be asked to provide documentation of your current income, and your monthly payment will be calculated based on that amount. So as you can see, the intention here is pretty clear. The idea is that if you lose your job, you can show that your income's gone down and you can lower this payment. Yes, they kind of want you to do it if you get a large raise, too. But let's be honest, most people probably aren't doing that. But what it's asking is, it's asking if you had a significant change in income that is not reflected in your most recent tax return. Now, just because you moonlight a little bit less one month and you moonlight more the next month, that's not really a significant change in your income that's reported on your taxes, meaning your annual income. And so I think maybe it's a little bit gray, but I think this probably is not super legal to do. I think you're pretty close to fraud here. And so obviously the second question is it ethical? Well, if you're that close to fraud, it's probably not ethical. You know, this is not a bad time to get advice from student loan experts. And I recommend some student loan experts@thewhitecoatinvestor.com Again, go to the recommended tab, go down there to student loan advice, and they'll talk to you about this. Now, a lot of them are more willing to tread into the gray area than I am on student loans. And so I wouldn't be surprised to see one or two of them actually recommending this strategy. But I'm not sure I would feel right about it. I mean, if you're making $200,000 as a trainee and you only have $200,000 in student loans and it's almost all going to be forgiven anyway, do you really need to squeak out a little more forgiveness out of that? Maybe not. So I've got some ethical problems with that one. Is it legal? It may very well be. Okay, our next question comes from A financial planner. Matt the planner. Let's take a Listen.

Hi, Dr. Dalby. My name is Matt. I'm a fee only financial planner and really appreciate all the work that you do and recommend that my clients or prospects take advantage of a lot of the resources you have available. That being said, one thing that I have found a lot of younger physicians struggle with is getting a budget or spending plan together. And so my question to you is, one, how much would you expect a financial planner to dive into a budget with a client? And then two, what resources do you recommend or have had success with as far as budgeting goes? Thank you.

Okay, so what he's asking is how much would you expect a financial planner to dive into a budget with a client? Well, what does the client need? If the client is not bringing you money each month to invest and save? If they're not paying down their student loans rapidly, if they're just spinning up the wazoo, then this is what they need. And as their financial advisors or financial planner, you got to meet them where they're at. And so, yeah, I think it's totally appropriate for a financial planner to get into the nitty gritty of your budget if they need to. On the other hand, if you walk in there and you got a 20% savings rate and you're like, well, here's the money, I need to figure out what to do with it each month, well, maybe that financial advisor doesn't need to get into your budget at all. Clearly you've learned how to budget. You're living on less than you earn. And so I think it depends on the client. But I suspect that is a real value add for many financial advisors, even for high income professionals like doctors. If you're having trouble controlling your spending on your own, but you can do it with the help of an advisor, they're adding value to your life. So I think it depends on the client to answer the question. The second question is what are the best resources to use? Well, it just depends on the person. You know, some people do just fine with a paper and pencil and an envelope system for their budgeting. You know, they write it, all their expenses down at the beginning of the month on a piece of paper they put, withdraw cash from the bank account, put it in envelopes, list this for rent and this for utility, and this for food and this for restaurants or whatever, and live out of those budgets. And when the, when the envelope's empty, you can no longer buy that stuff until the end of the month. You know, maybe that's all the help you need. I think most people at least use a spreadsheet, you know, a Google Sheets or a Microsoft Excel and kind of have a budget they can copy paste to the next month. It makes it a little bit easier because it'll do the math for you and you can just copy it into the next month. That's how Katie and I have always budgeted. But there are some fancy new apps out there that you can use to help you with your budget. You've probably heard of Mint. You've probably heard of Dave Ramsey's everydollar. That's free. You need a budget charges just a few bucks a month, but it's also a very popular one among my readers and listeners. So whatever works well for you. But the bottom line is if you are not saving enough money to reach your goals, you need to budget. And whatever it takes for you to budget, whether it's getting an advisor to help you, or whether it's using a an app, or whether it's just scheduling a meeting every month with your significant other, whatever it is, you got to do it. Otherwise you're going to wake up in 20 years, you're not going to have anything saved for retirement. You're still going to have student loans, and you're going to be in a world of hurt. So figure it out. Start budgeting. Unless you're already an expert budgeter. And then you can probably take off the training wheels and just track your spending. Or just take money off the top every month and save that. Okay, our next question comes from Casey the periodontist.

Hi Dr. Dali, my name is Casey and I'm a periodontist in the Air Force. My question relates to donor advised funds and I can't seem to find the answer to my question online. I'm trying to see if I'm understanding this correctly. With a donor advised fund. If I have, say, $10,000 to donate to my church, could I transfer $10,000 in appreciated shares from my taxable account at Vanguard into a new donor advised fund, thus flushing out the capital gains and receiving the charitable donation tax write off and then also on the Same day, purchase $10,000 in new identical funds in the same taxable account at the new higher cost basis? In essence, I'd end with roughly the same overall investments in my taxable account with the new portion at the higher cost basis, and then I'd still get the tax write off for the donation. I'd then cap it all off by transferring the funds from the donor advised fund to my church Am I looking at this correctly? Is that how it works? Thanks so much for the help, Dr. Dali.

Okay, so this is a real easy question, and it gets people confused because sometimes they confuse donating to charity with tax loss harvesting. And it's probably my fault because I talk about them together all the time. This makes my taxable account very, very tax efficient because I tax loss, harvest all the losses, and I donated all the appreciated shares to charity because we donate substantial amounts to charity each year. And so this is really a pretty slick way to have a very, very tax efficient taxable investing account. But in tax loss harvesting, there's such a thing as a wash sale, meaning after you sell some shares, you can't buy them back for 30 days. You got to wait a month, and in fact, you can't buy them the day before you sell them and then sell them. Does that make sense? So you can't do this in reverse either. So basically, you can't buy shares within 30 days either way, before or after of selling those shares and still count that tax loss, your taxes. And that's a good rule. It's a fair rule, but that's the way it's written. But don't get confused with charity, because that does not apply to a charitable donation. If you donate money to a charity, you can buy back those shares on the exact same day at the exact same time. There is no waiting period. There is no wash sale. You have basically flushed out the appreciated shares to the charity, which is awesome because they don't have to pay taxes on it. You don't have to pay taxes on it, and you get the full deduction assuming you itemized for the complete charitable contribution. Meanwhile, you have the exact same portfolio, right? Because you basically just swapped cash for stocks and stocks for cash in two different accounts that way. So that's a great way to do it. I might not do it the exact same day. I might wait one day. So nobody gets confused about what I'm actually doing, what I'm actually donating. But yeah, legally you can. You could do it at the exact same time. There is no wash sale on donations to charity. And it doesn't matter if you're using a donor advised fund or if you're giving directly to the charity. Same thing, same situation. All right, next question is from an anonymous listener. Let's take a listen.

Hi, Dr. Dali. Thanks for everything you do. I'm a huge fan. I had a question regarding student loans. I'll be graduating from fellowship in June, and I'm fortunate not to have any student loans? I'll be making around half a million dollars per year as an attending. My wife is currently a first year med student at an expensive medical school. If she continues taking out the maximum amount of student loans, she'll have close to half a million dollars in loans by the time she graduates. She is considering family medicine and is open to the idea of student loan forgiveness. We are considering three different options regarding her student loans and would love to hear your thoughts. Option number one, she will continue taking out that maximum amount of student loans while she is in medical school. This would allow us to save a huge half million dollar student loan forgiveness side fund by the time she graduates. If she receives student loan forgiveness, this money would be ours to keep. Of course if we were to pursue this option, we would pull out all the stops to maximize student loan forgiveness such as enrolling in pay, filing taxes separately while she's in residency and also amending the tax return to filing married after the fact and maximizing her pre tax retirement contributions. Option number two, I simply pay off all her student loans and her tuition so she graduates debt free. Option number three is to do something in between. Maybe she only takes out enough student loans to cover the cost of tuition. This would decrease her student loan burden when she graduates, but it would also reduce the amount that would be forgiven. I would definitely be open to hiring a student loan advisor, but I want to hear your thoughts first. Thank you very much.

What a great situation to be in. How many of us wish as an Ms. One that we were married to a doc making half a million dollars a year? That sure would have made medical school a lot easier financially. But you got a few options here and it's reasonable to ask these questions. The first option, do you pay for it all out of loans and go for public service loan forgiveness? Meaning that that whole time you're going to be filing during residency and after residency you're going to be filing as married, filing separately on a pay as you earn plan in order to minimize your taxable income, to minimize those payments, to try to maximize how much is forgiven under pslf. Option number two is to just cash flow it. You're making half a million dollars a year, you can certainly afford to pay tuition. And then of course the third option is do something in between. Well, I'll tell you what, if I was in this situation, I would not be monkeying around with income driven repayment programs or with public service loan forgiveness. I would just cash flow this thing. I really would. I think one of the best Investments you can make is in yourself and your future earnings potential. And so I would take some of that half million dollar income and use it to pay medical school tuition and expenses. This is a great example of the moral hazard that shows up with our current system. The fact that anybody would even ask this question shows that, you know, there's a lot of loopholes in the system that people could potentially take advantage of. But this is not one that I would go looking for for a few reasons. One's the ethical ramifications of using taxpayer money when you don't really need it. Alright, suffice to say people are going to feel different ways about that. But I don't really feel good about that. If I don't need the money, I'm not going to take the loan. But there's other issues here. For example, there's some risk. Maybe public service loan forgiveness changes somehow. You borrowed all this money at 6 or 7% and now you're not even going to get it forgiven that you were planning on doing. So you paid a whole bunch of interest that you didn't really need to pay. But most importantly, when you cash flow something, you get freedom. Now, for example, if your spouse wants to drop out of medicine, if she doesn't match at all, she quits school, she decides to go part time right out of residency, she decides not to work for a 501. She doesn't have the pressure to do this because this is a 14 year scheme, right? You borrow money for 4 years in Med school and then you got to make 10 years of payments, including those in residency and fellowship in order for public service loan forgiveness to pay off. And that's, that's 14 years where you're giving up at least some flexibility, you're giving up some of your financial freedom, which seems really silly for a family that's making at least $500,000 a year. And then of course the last factor is when you file married, filing jointly, you generally save a lot of taxes, particularly when your spouse is in medical school and not making any money. When you start filing married filing separately, you end up paying more in tax. Yes, maybe you get more money forgiven, but the fact that you're paying more in tax reduces the benefit of and so not a great option. I don't think if you have the money, just pay for medical school. Don't start trying to game the government programs, you're likely to get burned. And I don't think there's a big free lunch there. Hope those questions were helpful to you. If you want to get your questions on the White Coat Investor podcast, go to speakpipe.com whitecoatinvestor and leave them for us. At some point in our financial lives, it will be time to buy a home. A physician mortgage can be a good vehicle for a young doctor who's just out of school and has a more effective place to use their money than on a big downtown down payment. These loans allow doctors to secure a mortgage with fewer restrictions and a lower down payment than a conventional mortgage. But if you're further advanced in your career or deeper into your journey to financial freedom, buying a home with a conventional mortgage and then later on potentially refinancing that loan to a better rate with a shorter time frame could be a great move. Wherever you are in your financial journey, make sure you use the mortgage that will be most financially beneficial for you. Hop over to our recommended tab to learn more about all of your mortgage and refinancing options@whitecoatinvestor.com mortgage mortgage. You can do this and the White Coat Investor can help. 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My dad, your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor, so this podcast is for your entertainment and information only and should not be considered official personalized financial advice.