WCI #186: Pilots are High Income Professionals Too

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 White Coat Investor podcast number 186. Pilots are high income professionals too. We're recording this. Let's see, it's the 17th of November. This is going to run on the 26th of November, so just a few days from now. And I hope you are staying safe out there in this pandemic. Still not sure what to do with your student loans? Overwhelmed with how to tackle that giant debt in an ever changing political climate, the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt and the averagestudentloanadvice.com client has saved over $190,000. You will receive a customized student loan plan using the principles of the White Coat Investor. Get answers to all of your student loan questions, gain clarity about your financial future and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this and the White Coat Investor can help. All right. Our quote of the day today comes from Ray Dalio who says he who lives by the crystal ball must get used to eating a lot of broken glass. And I think that is very true. I've tried to set up my portfolio so that I don't have to have a functioning crystal ball in order to reach my financial goals. Thanks for what you do. Things are difficult right now. I don't know about you guys, but we're boarding COVID patients in the er. All the beds are full. It's just a matter of trying to decide who's the least sick. The least sick ICU patient goes to tele. The least sick tele patient goes to the floor. The least sick floor patient ends up in the ER or being discharged home. And the least sick ED patient sits in the waiting room. So if you're backed up like we are, I hope you're surviving these days. Had a difficult experience recently. Had a 4 week old former preemie come in. You know, basically in a, in a cardiac arrest. Interestingly, the medics called and actually wanted to call it in the field. I didn't think that was a very good idea on a four week old. So we made the medics Bring them in and and ran what ended up being a beautiful and very well run code had a lot of help from our nicu. Even our neonatologist came down and assisted with it. And we did spectacular CPR for about 45 minutes on this baby and unfortunately did not get the baby back. And you know, that's hard. It's hard to watch kids die. It's hard to see consequences of the choices parents make affect their children. And all of you also have difficult jobs. And so if nobody's told you, thank you today, I wanted to tell you thank you for what you do. It's not easy work. This is Continuing Financial Education Week. If you don't read the blog or get the newsletters, you may not realize that, but we do this every year. I talk about some of the books I've read recently, recommend some of them to you. I tell people that they need to do some continuing financial education every year. Now that might be following a blog and reading one good financial book a year. It might be going to a conference. It might be taking an online course, whatever it is, for you, where we're trying to facilitate that this week. So we've actually got our online courses on sale. They are 10% off. And if you buy either our CFE 2020 course or if you buy our classic fire your financial advisor course, the one that helps you get in a written financial plan in place, we are offering those at a 10% discount. But wait, there's more. If you buy it, we're also giving you 13 extra hours of content from WC icon Park City. So there's a lot of great stuff in there on Burnout. Jonathan Clements, Bill Bernstein, Mike Piper, all kinds of great people are included in that conference as well. So it's kind of like even better than a two for one deal. It goes through Monday, November 30th at Midnight Mountain time. Then the sale's over. It's still a great deal at regular price, but if you want an even better price, now is the time. If you haven't heard about our upcoming 2021 physician wellness and Financial Literacy conference, this will be a live but virtual conference. Sorry, Covid's. Too bad to have, you know, a thousand of you get together in the same room. But it'll be live and virtual. That is on the early bird sale till the same time till November 30th, midnight mountain time. You get 120 bucks off that conference. So sign up now. It's going to be great. And we're really looking forward to seeing as Many of you there as we can. All right, we got an awesome guest today. As I mentioned, we're going to be talking about pilots and their finances today. So let's get into it. All right, we have a special guest today on the White Coat Investor podcast. We have Jason Depew. Did I pronounce that right? Is it Depew?

That's correct.

Or Emmett, which is his call sign. He is the author of Pilot Math Treasure Bath and major contributor to the Pilot Network. He is a captain with Delta, a veteran as well, flew in the Air Force, and is here to join with us today to talk a little bit about a high income professional category that we don't discuss a lot at the White Coat Investor, which is professional pilots, especially at the majors, a lot of people don't realize they make Dr. Like incomes and actually have a lot of Dr. Like financial challenges. Welcome to the White Coat Investor podcast, Jason.

Thanks, Jim. Great to be here.

All right, so tell us what the upbringing is like of someone who writes a book to help pilots get a fair shake on Wall Street.

Yeah. Kind of pretentious, huh? I grew up kind of solid middle class. We didn't really want for anything. But I never had the name brands. I was never the cool kid at school as far as that stuff goes. Learned hard work and caring about other people and good grades were kind of assumed. It was just expected if you didn't get a good grade, what's going wrong, Right. And as part of that, I learned to write well. I learned to speak and kind of got confidence. And then as I progressed, I went to college, did some flight instructing, and gained a lot of confidence in teaching things to other people. And then as I was applying for airlines, I realized that a lot of people were kind of lost on the process of how to do that. So I would start putting out answers online. Here's how to do this, here's how to do that. And got a lot of good feedback. And eventually, when I discovered the fire movement, personal finance, my wife and I had kind of already been doing good stuff, but I realized that I had the expertise to formulate and communicate an argument really well and communicate that to pilots. And now I could add the personal finance piece to it and help a lot of people out. So I just started writing about it and it ended up a lot of blog articles. And then it ended up being a book too.

Cool. Now, you went to the academy.

I did, yeah.

Right. Air Force Academy there in Colorado Springs. So it's not an easy school to get into.

No.

And then what did you fly in the Air Force?

I flew a bunch of stuff. I flew the B1 bomber. So it's the big one with the wings that sweep back and forth and it's supersonic. Then I flew a little single engine turboprop called the Pilatus PC12 for special operations as a spy plane. I got to teach pilot training flying the T6, which is the most fun trainer you could possibly imagine. Just aerobatic, upside down, fast, powerful, all of it. And then I got to fly a big business jet called the Global Express. It's Bombardier's biggest business jet and flew that in Afghanistan too.

So 10 years in or how many?

11 years of active duty and I'm still in the reserves working for the Air Force Academy.

Because you pretty much have to spend 10 once they train you as a pilot, right?

That's right. It's a ten year commitment.

Okay. So the financial pathway of a major airline pilot is remarkably similar to that of a doctor. You make little to no income for a decade, then pretty good income for as long as you can go without burning out. And maybe even you have similar debt if you went into the civilian world or even if you went to the military world. Right. You have a time commitment just like a doctor that did the health profession scholarship program like I did to pay for medical school. What other parallels do you see between the financial lives of doctors and pilots?

Yeah, there's a lot. And you know, for background, my wife is also a board certified pediatric dentist. So I'm not a doctor, but I can really kind of understand that world pretty well. And then there really are a lot of parallels. One thing I've noticed is when you have a high income, you get a lot of people offering help and they want to, you know, sell you their services, their advisory services, invest with us, all this kind of stuff. In a lot of ways, you don't need that, right? You can do it all yourself for the most part. That said, I know a lot of your listeners, something like 80% have some kind of financial planner, right?

I don't know. That's 80% of my listeners. I would estimate that's probably 80% of doctors that need one just because they don't bother learning this stuff or don't want to do it. But of my listeners, I'm sure that number is much smaller. It's obviously a selection bias if you're interested in listening to financial podcasts.

There you go. The one thing I've noticed is my wife has a single member LLC for Her dental practice, her work. And our financial planner helped her set up a pension plan, a defined benefit pension plan, which is an awesome benefit. Huge tax advantages, Nobody talks about it. We had no idea it existed. And we wouldn't have found it without them. I think there are some values to getting some expert help sometimes, but in general you can do it all yourself. Same for pilots and doctors. Something I noticed is a lot of pilots are trapped with these golden handcuffs attached to the control yoke in the flight deck. And the money is so good that it's just really tough to pass up opportunities to make more. And sometimes it feels like you're keeping score. How much money did I make this year? Is it more than last year? I know doctors do the same thing. I see it with my wife and with their friends.

One more shift, one more call, here's another couple grand.

Yeah, just one more. It's that much money, right? But there's burnout.

Right?

You mentioned that already. Burnout is an issue for pilots and for doctors and it's something to watch out for. And what are you ultimately going for in life? You kind of have to think about that and take some time to focus on that. And that's kind of why I wrote my book, is to kind of have a positive think through that. And then another thing I see a lot is just like musicians and pro athletes, there's a lot of high income professionals out there, especially pilots who make these unbelievable incomes and they're dirt poor and they get to the end of their careers and they wonder why they have no money and they've got all these fancy toys, but they're really not happy and they're not taken care of and they're worried about the rest of their life. So I like the work that you're doing and that's kind of what I'm going for with pilots too, is give some people some basic financial education and all it takes is a little bit and it can go a long way and help people get set up for the rest of their lives.

Yeah, for sure. With that sort of an income, just basic financial literacy and a little bit of financial discipline goes a long, long way. So this book you wrote, it's a good segue into it. Pilot math, treasure bath. What do you mean by pilot math? And my next question, of course is going to be what do you mean by treasure bath?

Yeah, so pilot math is kind of an inside joke for pilots. It's kind of a plan, words. Pilots have these little rules of thumb that we use all the time. When we're flying, like, if you're 30,000ft, you need to descend for New York. You know, the airplane descends. It needs 3 miles per thousand feet to descent. So you need to start 60 miles outside of New York to start your DES. That's just basic pilot math that everybody knows. So I kind of took that and turned it on its head and said, now, pilot math means the shockingly simple math of early retirement. And I wanted pilots to think through that. So it's a catchphrase that every single pilot recognizes, and that kind of draws them in.

Okay, so you've referenced there a relatively famous post by Pete Adeney at Mr. Money Mustache, the shockingly simple math of early retirement, which basically is that the more you save, the sooner you can retire.

Exactly.

Okay, so what's a treasure bath then?

All right, so for treasure bath, I was at a squadron, and we got a new deputy commander, a new do, and we had both been in spec ops, so we were talking about deployments and sharing war stories and all that. And he mentions he got this good deal deployment one time where he spent 100 days in this really swanky location, and he got $170 per day per diem. And I real quick did the math in my head. Wow, 17 grand. And my eyes got real big, because for a military officer, 17 grand is a lot of money. He just smiled and said treasure bath, just like that. It turns out he's quoting a skit, I think from SNL or something years ago. But for me, it evoked this idea of sitting in a bathtub full of treasure or Scrooge McDuck diving into his three cubic acres of gold and gems. For pilots, we tend to take ourselves pretty seriously. But I think humility is important, and I think it's important to be able to make a little bit of fun about yourself. I don't have a degree in finance. I don't have an mba. And so for me, as just another line pilot, to be able to talk to other pilots about finance, I think it's important for them to know that there's some humor in there, and it's not all just me saying I'm super serious and super expert on this.

So some people might accuse you after they get into your book of just taking the ideas of the fire community and applying them to the lives of pilots. Is that a fair accusation? Absolutely.

I feel like anyone who discovers the fire movement goes on the exact same journey. They say, wow, this is cool. Wow. I want to tell everybody I know about this. Hey, I know, I'll start a blog or a podcast, right? And that's what everybody wants to do. And I was in that exact same place. I discovered Mr. Money Mustache and you and the mad scientist and a bunch of others, and I wanted to tell everybody I knew about it. And then I realized that if I were to start a blog and just start writing generalist financial independence writing, I would be covering things that have been covered over and over again. Could I really do it any better than has already been done before? I don't know. But it would be a lot of work to go through all of that. I ended up stepping back and thinking, well, who am I really trying to help out? Who am I really trying to talk to? My primary audience was all the pilots that I was flying with. Pilots are notoriously bad with money. We make bad decisions and buy fancy toys, and I wanted to be able to help them. So I decided. I realized that by really focusing down my message on an area where I kind of have expertise and a little bit of credibility. I'd already been doing a lot of writing for pilots. I could really speak to them in a way that the average pilot is not going to go listen to Mr. Money Mustache talk about punching them in the face. They're going to say, screw you, dude, and walk away. But if it's another pilot telling it to them, I think it's a lot more approachable for them.

Now, in your book, the first few chapters of the book in particular, you claim multiple times that someone can have a very nice Life on about $50,000 a year. And you base your argument primarily on the fact that the average American spends about $50,000 a year, which is what they make. Do you really think that the average American has a very nice life?

Yeah, I do. So I've been on eight combat deployments. I've spent time in Russia, Afghanistan, Djibouti, really horrible places on this planet. You cannot imagine the poverty and the life that the people live there. And on one level, I have very little sympathy for anyone who says that they cannot be happy spending $50,000 a year living in a country as great as the United States of America. It's just unbelievable. Now, for me, having a nice life and enjoying your life is a decision. It's about finding meaning in life and enjoying what you have versus just pursuing a bunch of other stuff. I think that's the most important message about the financial independence movement is learning to realize, to really appreciate what you have and set priorities in your life and then craft your life so that you can focus on your priorities. One of my favorite FIRE writers is Justin from the blog Root of Good. His family lives. They can't even break $40,000 a year when they try hard. They retired years ago and their net worth has since doubled. And they live this great life and $40,000 a year in spending, so you don't have to have all the flashy toys and cars and houses and everything else to live a great life. I think it's definitely possible.

You know, I have trouble talking doctors into doing it for two to five years after residency. I just tell them to keep living like they were as a resident and tell them you only got to do it for a couple of years. And even so, I can't talk them into doing it for a couple of years, much less an entire career. I think a lot of people have a very hard time believing that. Why do you think that is?

I think there's a lot of peer pressure out there. And you get these older doctors, these more experienced ones, or the airline captains, and they really can't afford to go buy a brand new Tesla or a Porsche or a boat or whatever. Then they come to work and they show it off, and the young doctors think, oh, I should do that. I'm a doctor, I can afford that. The pilot, oh, I need my captain's house. Whatever. It's a lot of peer pressure and it's kind of just all of America in general. You've got to have the newest eye gadget hanging off your belt clip and the newest computer and the newest car and the newest clothes. And do you really need that to be happy? No. But it's hard to overcome just all the messaging that's raining down on us every day.

All right, you also, in the book, readily admit. As do I, as do I. And I'm not innocent of this by any means, that we both spend, well, more than $50,000 in any given year, even with a paid off house. Do you feel hypocritical at all telling people to do something when you're actually doing something else?

A little bit? Yeah, obviously I do. I spend more than that, $57,000 a year figure. And I'm an airline captain, so I allowed myself a little extra there. But I wrote an article that I call Escape Plan Fire. So my wife and I reached financial independence after our military active duty military service. We were good at the end of that. And if all else failed, if we both lost our jobs, she could never practice again, I could never fly again. We could sell our current House. We could pay off a rental house that same day that we haven't. Rapid City, South Dakota. We could move there. It's by a school, it's biking distance to a grocery store. And our nest egg as it is, our treasure bath could support us the rest of our lives and we'd be happy there. It's a place we love. So I feel like a lot of high income professionals get to that point pretty quickly. Right? You can get to the point where you are financially independent and if you had to, you could scale back. So in the meantime, you're making more money. Okay, spend a little more. Something I try to do is I try to go out and do good in the world. I mentor a lot of young people, I teach a lot of pilots, I do a lot of online writing and a lot of basically career consulting for pilots for free. And I try to make a difference in the world because I now have the opportunity and the freedom where I'm not just scraping to get by. So I kind of put that effort to good use.

Now I found an interesting shift in the book. I don't know, a third of the way into it. Halfway into it, you decided to run some calculations and, and you decided not to use that $57,000 figure you had talked about in the beginning of the book. You actually let them double it. You said, okay, you can, this still works. If you spend $116,000 a year and you felt that was maybe more realistic for a major airplane or major airline captain, why did you decide to make that concession?

I think it was my wife, actually that convinced me. As you know, she was helping read through drafts. Like, we kind of talked about the peer pressure and the consumerism in our culture. There's the classic fire bloggers like early retirement extreme who lived on like seven or eight thousand dollars a year, Mr. Money Mustache. And these guys, the average pilot, or probably doctor, is not going to listen to him. A pilot's default answer to a guy like that is f you, I'm smarter than you. Right? So they're not going to listen to that message. And I really wanted to be able to reach them. So I had to kind of set things at their level and show them that you're not going to have to cut things down to the bone. You just make a few small tweaks. And I think the targets I set out are very attainable. Then again, being a high income earner, when you go from first officer to captain, is where I did that change from $57,000 a year to 116. When you make that upgrade, it's $100,000 a year pay raise. So if you spend most of that extra and extra spending, okay, fine, you're still going to get there. The math still works. Like we keep saying, it's shockingly simple to set your family up forever and really even set up generational wealth that way.

Now, in the book, you talk a little bit about health care and you throw a figure out there of something like $5,000 a year for health care and talk about how that's plenty. And I'm sitting there looking at my $1,200 a month health insurance premium on a high deductible insurance policy, thinking maybe you're a little out of touch on this subject. Without Obamacare, subsidies, Medicaid, Tricare, or an employer paying for health care, how in the world can any family expect to only pay $5,000 per year for health care all in?

That's a great question. I used data from the Bureau of Labor Statistics for the book they actually publish on their website every year. So I took their data and that's straight from them.

Do you think maybe they're not counting the employer paid health care or the Medicaid paid health care?

Yeah, that must be in my health care. I've always thought it's not particularly great health care. At Delta, my premiums out of pocket are 200 bucks a month and it's a high deductible health plan. So we spend a couple grand above that every year, but we've gotten nowhere near 5,000 every year.

Right, but your employer is paying three quarters of that premium.

Yeah, so they probably are. Yeah. And that's probably the big difference. So, yeah, maybe I need to adjust that up and I did. In the book, I talk about if you have somebody with a chronic health condition, that's going to change your math. Right. You may need to plan as part of your personal finances a different level of spending to cover that. And it's going to adjust the timeline of where you reach financial independence. But again, even if you say you're what, 1200 bucks a month? So it's a lot more. But on a doctor's income, is that really going to push you back more than six months or a year on reaching financial independence? Probably not. So just be smart about it and run the numbers for yourself.

Yeah, I think that's a fair point. I agree that doctors can afford it and still reach financial independence. I find it interesting. I talk to people that own businesses or they're physicians or whatever. These people that make too much money to get any sort of subsidy on their health care and they're like, yeah, I'm out $25,000 a year before the insurance company starts paying anything because they got, they get, they got to buy their premiums and then they got to meet the deductible, you know, and that's.

A, I mean, that's a, that's a nationwide problem. That's not limited to us. Right? That's the big debate. And you know, with the new, the new government and everything, how are we going to, what are we going to do about health care? Is there a way to make it better? And you know, that's, that's something really your listeners are uniquely suited to influence. You know, they can probably put out ideas on how to reform or fix or improve healthcare and health insurance and make it affordable, good access, high quality. How do you get all those things? I would love to see more work on that. And there's definitely a long way to go, I think.

Yeah, great segue for my next question. You know, doctors in many countries, I had somebody on from Australia a few weeks ago. They're unionized a bit like major airline pilots. And perhaps if the US Goes to a single payer healthcare system, there could be a scenario where doctors here are unionized. Can you tell us what you see as the benefits and drawbacks of being part of a relatively powerful union?

Yeah, it's strange for me. I'm still getting used to it. In the military, there is no union. The closest thing we have is the Lieutenants Protection association, the lpa. That's more like a militant kind of guerrilla underground group to keep the big brass off our back. But the airlines do have powerful unions. We have alpa, the Airline Pilots association, and it's international. It covers dozens, if not hundreds of airlines. Although each individual airline is somewhat autonomous. We have our own council and it kind of decides stuff for our airline. I can't speak to a full nationwide union, but I will say that it's effective, it's impressive. If you look at an industry like the cruise ship industry, which is similar to aviation, the people that work on cruise ships get treated terribly. The pay is horrible, the work rules are horrible, the conditions are just not good. And it, it could very easily be like that for airline pilots if not for our union. And we have this rock solid contract and it protects us in a lot of situations. We have these great rules like I commute to New York from Tampa. That's how I get to work every time I Go to work. And so I have to ride standby on our jets to get there. And as long as I have a seat reserved on one flight and then a backup at least a couple hours later, if my flights don't work out, I'm not in trouble. Most jobs, you don't show up for work, you could get fired. But my contract protects me and that's huge. It is nice to have. At the same time, unions are slow. They're extremely expensive. I pay 1.85% of my income to the union forever. There's a lot of politics and infighting and it's frustrating to watch. But they can do a lot of good things. I think unionizing, it can be really good. Sometimes you can get above market value for salary and for work rules, but you also have to watch for there are some consequences, I guess.

What kind of consequences have you seen in the pilot world?

One thing that ALPA likes to do is they don't want a 737 pilot at Delta to get paid a whole lot different than a 737 pilot at Alaska Airlines. They want to keep those pay rates somewhat similar. Now, can we potentially negotiate for much better pay rates? Sure, but they're not going to want to really do that if it makes Alaska look that much worse if they're also an alpha carrier. So as a doctor, maybe you make a great high income and you've got this great practice in a great spot. But if the union starts setting rules on how much you can charge for this or that procedure, kind of like insurance does anyway, but they could potentially limit your income potential there, which would definitely be a drawback.

So maybe good for the people in a bad payer mix kind of area and bad for the people in a good one. Yeah, fair enough. All right, so you're obviously a little biased. You fly for Delta, but what are the best airlines to work for and which are the worst?

Yeah, so the way I see there's. There's kind of three tiers to airlines. There's the majors. They fly big airplanes. They usually have international service. So you got Delta, United, American, and then I lump Southwest in there. They're just a big enough player. And then on the cargo side, FedEx and UPS are also great, great companies. So all those companies are great to work for. Some are better than others, but I have friends at every single one and every one of them is happy. They love their company wherever they're working. The next kind of tier down from that is the smaller carriers, they still fly big 737s or Airbus A320s. It's like Frontier, Spirit, JetBlue, Alaska, Sun Country. And then there's some cargo carriers that even fly big airplanes like Atlas or Southern Air. They work for basically DHL or Amazon. They're the Amazon prime contractor. And they're good companies, but the scope of what they do is a little bit smaller and the work worlds aren't quite as good. And then you have the regional airlines, the small regional jets, the puddle jumpers some people call them, and there's actually like two dozen of those in the country. And the pay isn't as good, the work rules aren't as good. Most people, it's not a forever job. So everybody's always trying to work up to those majors and you're kind of paying your dues in the lower places. Working in a regional might be like a doctor being a resident and an intern for a few years. And after you've done that for a while, then you can move up and be an attending. That's like going to the major airlines.

All right, can you talk about the financial advantages of picking the right place to live as a pilot? You mentioned these several times in your book, although it doesn't seem that you've maybe necessarily chosen to do that in at least some of the recommendations you make to maximize income.

Yeah, so again, the book is about money, but mostly I'm trying to get people in a mindset of figuring out what's important in life and prioritizing that. My wife doesn't love winter, so we live in Florida and it's wonderful. We love Tampa, it's a great place. It does cost me time to commute up to New York before and after every trip. I've got a buddy who lives in la, another Air Force buddy who flies for Delta. He doesn't commute. He can drive to work every day and so he can pick up last minute trips. And at our company those can pay double pay sometimes, which is just amazing. It's really great pay. And we compared numbers one year and he made an extra 50 grand per year just living in base, as we say, not having to ride a jet to commute to work. So it's a big difference. And I think that can get even bigger over time as you start making more money. So I always recommend to people if you can find a place you will love to live where you don't have to commute, that's good. Do it. And for me that's within two hours driving distance of an airport because you're only driving to the airport a couple times a month.

Now you also have the airline pilots have the longest commutes of anybody I've ever heard of. Right. I mean, you're flying to New York. Your commute goes over what, six or seven states, Right. I mean, that seems to give you a lot of opportunities to do geographic arbitrage.

It does.

You know, to live someplace that's relatively cheap. I don't know, do you pay Florida income taxes or New York? So you're in Florida, so you're not paying state income tax.

Yeah, I'm a Florida resident.

So there's, there's one huge advantage of commuting up to New York for your work, right?

Yeah, in a way. Why would you live in a state that charges income tax when you could save 6% on airline pilot pay? Or maybe there's somewhere else in the world that you just really want to live. I have some friends, they're both Air Force pilots now, Delta pilots who live in Salt Lake City. They live downtown Salt Lake. It's a great place. They are a half hour from the ski slopes and they live in base. And so they can make all that extra Delta Bay if they want. When I started at my company, my wife was still in the Air Force. She was assigned at RAF Lakenheath in England. So I commuted from England to New York for work. And it was awesome. It's super easy to do. So anywhere in the world, really, that you want to live, you can. It's wonderful. It's a really nice benefit.

You know, you bring back a lot of memories when you bring up Lake and Heath. I spent a summer in Lake and Heath. It was one of the best things that happened to me while I was in the Air Force was being able to go over there. My wife flew over a few days after I did with two young children. And what we discovered is at the main airport there in London, you can't get a sky cap, you can't get anybody to help you with your luggage or your little kids. So she has a whole summer worth of luggage. Two small kids. The oldest one would have been four and the younger one was two. And she's supposed to, because I'm on shift when she lands, I can't leave. She's supposed to get a bus in a foreign country. Two hours to Lakenheath.

Yep.

And she doesn't make it to the bus. And now she's got to go to the other side of Heathrow. I mean, it was this disaster. After she's been up all night with these two kids on the plane. And she finally showed. It was quite a disaster going to Lake and Heath, but we had a great six weeks there and then spent a week on the continent. So I can certainly get the attraction of being able to do something like that. So that's pretty fun.

Yeah.

All right. So you talk in your book about a really interesting period of time for airline pilots. You call it the dead zone, and maybe everybody in aviation calls it the dead zone, I don't know. But I think a lot of my audience may not be familiar with the history of the dead zone and its lessons, both for pilots and doctors. Really? Can you talk about the dead zone, the lessons that can be learned from it and, and maybe even connected to some of the parallels we're seeing in 2020?

Yeah, absolutely. So early 2000s, you had the dot com bubble burst. You had 9, 11. Then the 2008 downturn, you had more bankruptcies and everything. And the airlines went through a really rough period where there were mergers, there were bankruptcies, there were furloughs where an airline pilot gets told, hey, you're not coming to work and you're not getting paid, and we'll call you back in a few years. These airline pilots used to have a really great pension. They got 60% of final average earnings for the rest of their life, which is just an insane amount of money. And so all these pilots had spent these careers with that promise and hadn't really been saving anything, expecting to have this huge pension. And now, all of a sudden, just overnight, wrap of a judge's gavel that's gone forever. What do you do? Now? Some of these pilots took charge of their life and they cut their spending, they sold some of their fancy toys, they started investing heavily. And those pilots are in a great situation right now. They're at the top of their career. They're loving life, they're super happy. But others just kind of ignored reality. They refused to cut their spending, they kept all the toys because they were entitled to this lifestyle. The peer pressure said airline pilots have this lifestyle, big house, fancy cars, a boat, everything. And by refusing to accept reality, they didn't even start investing seriously because they were going to use the powerful union or some lawsuits to get their pension back, because they're entitled to that. And they're still whining and complaining about that. And they're not happy people. They hate their job, they're out of shape, they're terrified of retirement because they're worried they're going to run out of money and end up starving, living in a van down by the river in a few years. And I feel bad for them. And so a lot of the reason I wrote this book was because I started encountering these guys and I didn't want my buddies, the younger generation, to end up like that because the industry is cyclical. There is going to be another downturn. Covid is a great example right now, right. Things have been tough and it's going to happen again in the future. There would be something else. I always say, I teach people, I tell people, you need to take charge of your life. You need to invest, don't rely on somebody else. It's not just investing in money, it's investing in skills and career progression. I think having a side hustle is a valuable thing to do in case the worst happens and you need something else to do. But just realize that nobody is responsible for you or your well being. It's all on you. Hopefully doctors, there's always going to be sick people. People are always going to need their teeth drilled. So doctors and dentists are probably a little safer than airline pilots, which is a business and travel kind of leisure market. But what if there is a really big economic downturn or maybe you just have a really bad malpractice lawsuit that really hits you really hard. For this year, my wife's dental clinic where she works, it shut down for like two months and she did not go to work and did not get paid a dime. If she'd been the only income earner for her family, we would have been in big trouble. So it's important to have that emergency fund sitting so it's usable and accessible. And it's important to have some backups, whether it's a side hustle or something that you can do just in case something happens like this.

Yeah, it's really interesting. That is not an uncommon scenario among my audience. I would say most of my listeners took a 10 to 40% pay cut this year just because they weren't able to do elective procedures. Even those of us who are, you know, you would have thought would have been on the front lines, you know, I'm in the ER and our volumes dropped up to 40%.

Right.

You know, we're sitting there at the end of March, sitting in the er, looking at each other, twiddling our thumbs, wondering if we were going to go broke. You know, because people were afraid to come in with their strokes and heart attacks because they thought they'd get coveted, even though we weren't seeing Any Covid at the time at all? You know, we only had 100 cases in the state a day at the time, so the likelihood of them actually coming into the ER were pretty low.

Yeah.

So what, what are airline pilots doing this year? A bunch of them been furloughed. Are you just not getting the usual number of flights or what's happened to their incomes this year?

Yeah, it's been really rough. Thousands of pilots and flight attendants and bag loaders and other people in the industry have been furloughed this year. And they're, they're just, you know, sitting around and trying to make ends meet, finding other, other deals. Most of the airlines offered early retirement packages for people, so a lot of people took that. And it's a great deal for them. You get like 50% pay for a few years and you move on with your life and go on to the next thing, which is kind of cool. A lot of people are just not flying as much. I'm on reserve with the airlines, which again, the contract rules. I get paid 72 hours a month whether I fly or not. It's great, it's a lot of money. And so they're welcome to have me not fly and I'll just keep breaking in the money. But it's kind of frustrating not flying. We'd rather be out there taking people places.

So how much are you actually flying? They're paying you for 72, but how much are you actually flying?

Last month I flew four legs for a total of maybe 15 hours.

15 hours and paid for 72. I guess that's the power of a union right there, huh?

It is. That's the power of a union. So there are some big benefits for sure.

Yeah. All right, well, let's turn to some questions I collected from my friend the pilot.

Okay.

I was mentioning before we started recording that I have a friend in my neighborhood, he's a pilot, he has a few questions for you. He says, it seems all of my highest earning years will be between the ages of 40 and 65. How should that. And how does that affect my planning for retirement?

Okay, good question. Yeah, airline pilot pay does get a lot better as time goes on. So for me as a pilot, the most important thing and any high income earner. There's a great book by Simon Sinek called Start with why. And I tell people, you need to ask yourself that question. What is the driving why in your life? What are you trying to get out of life? And then do you need five days a week worth of income to reach that goal all the way till age 65 or whatever. I think in my book, I've shown with math that you don't, you can set yourself up for financial freedom forever and probably generational wealth in a very short amount of time. Personally, I love my job. I love flying. When I discovered the fire movement and the mad scientist wrote an article about what is your ideal life like? So I kind of thought through that. What would it look like? Well, I'd get up in the morning, I'd go out to my hangar and fly an airplane and come back and eat lunch and go and fly another airplane. So flying is part of my life no matter what. Right now, if I'm going to be retired, I could pay $100 an hour to fly my own airplane, or I could get paid hundreds of dollars an hour to fly these really fancy jets for Delta. And oh, by the way, when I get where I'm going, they're going to put me up in a swanky hotel and I get to go eat some good food somewhere cool in the world. So for me, I don't see myself necessarily retiring before age 65. But I'm not going to be like the guys who are desperate. There's pilots who are working 20, 25 days a month and just running themselves ragged trying to bring in enough money to survive retirement. And I don't have to be like that because just a little bit of planning, a little bit of intentionality early in your career, and instead I'll go fly a trip a month. I'll go fly in four days, bounce around the world, go to Paris and London and New York and back and go enjoy that and some good food and hang out. And that will still give me a huge income, more than enough to live on. But I'm not going to be working myself ragged. So really think about what you're going for in life. What do you want to put all your time toward and set yourself up so you can put the time toward that you don't need to be working full time through age 65. You don't need to do it now.

Let's say you get to this 40, 45 years old, you really don't have much put away. You basically just have to save more. You know, you're making more now and you can save more, right? To get to the same place, right?

Yeah. So. So, you know, like I said, when you upgrade to captain, it's $100,000 a year pay raise. If you're behind the power curve, if you haven't saved up enough yet? Okay, upgrade to captain. There's $100,000 a year to dump into investments. If you're 45, you've got 20 years. That's $2 million over the next 20 years to dump into investments. You know, worst case, 10 years into that, you're going to realize you have enough money.

All right. His next question was a little bit about a subject that we've talked about, not only on this podcast, but already. We talked about it just a few minutes ago about a side hustle or a passive or second income. And he asked, how important is it to have a passive or second income with a career that forces you to retire at 65, or medicals you out even earlier? And I've noticed that lots of doctors have this question as well, especially this year when they saw their pay go down. Do you really need a side hustle when your main hustle is making $200,000 plus?

Yeah. Personally, I think as long as you're intentional with your saving investing early on, you don't. You don't need a side hustle. And as long as you get that nest egg, that treasure bath to the right level, you're good and you can just keep working. And worst case, you just fall back on what you have already and you're fine. That said, I know a lot of pilots and doctors who really get tied up. Their identity, their existence is this job someday that's going to go away. You've got to have something to live for after that point. And there's lots of articles every once in a while that pop up that say, if you retire early, your life expectancy is long, but if you retire at age 65, your life expectancy is like three years. And I think it's because these people have these. It's nothing but the job. And they're there 12 hours a day, five days a week for 40 years. And when that's gone, what do they have left? So for me, I talk a lot about side hustles with pilots, but for me, the term side hustle is interchangeable with the term hobby. For me, a side hustle is a lot of work to get going, so it really needs to be something you enjoy, and it's really nothing more than a hobby that pays some money. What are your hobbies? Anybody, any person, doctor, pilot, whatever. No matter what your income, you need some hobbies in life that are not work. If I go to a dentist party with my wife and try to talk to her friends, if I just show up and talk, nothing but airline pilot, they don't care. They're not that interested in that. We might have some conversation for a second, but there needs to be something else in my life to talk about to enjoy. And so I've got other things that I like to do and I encourage people to pursue that. Find other things in life that you love.

All right. His last question is a little more complex. He wants to know if you can talk about strategies for Veba 501 accounts. I don't even know what these are, but apparently some pilots front load their 401 contributions because once they hit the limit, the company match starts going into these VEBA accounts tax free. It sounds like some kind of a health savings account or something. Can you talk a little bit about these accounts and the strategy to using them?

It is. It's very similar to an hsa. And yeah, airline pilots make enough, and I'm sure most doctors do too, where as long as your company match and whatever you put in your 401, you're going to max out that 57, $58,000 a year. And now is the company going to continue matching that money for you? In a lot of jobs, no. But in the airlines, they do. The company has to keep paying. We get a 16% company contribution of the 401k no matter what. And some airlines, like mine, it just comes to us as cash. And some it goes into that Veba. Veba and it's like just a big giant HSA. Now, potentially that could be 50 or 100 grand a year going to this Veba. That's a lot of money for an HSA. Do you really need that? I don't know. Maybe our earlier conversation about the cost of healthcare, maybe you do need that kind of money lying around, right?

Probably not 100,000 a year anyway.

Right? Not 100,000 a year for sure.

I mean, even Fidelity that thinks you're going to spend hundreds of thousands of dollars on healthcare and retirement wouldn't tell you to put $100,000 in there. What happens to it when you leave the airline? Do you roll it over into an hsa? Does it just sit in that account?

It depends on each airline. Each one has different rules. But as far as I know, it's your money at those airlines. And so yeah, you either get to just keep the money and it stays in this VEBA and you just spend out of there. And I suspect the IRS has provisions where you can roll it into. I don't know if an hsa, but you might even be able to roll it into Some kind of an IRA later.

Definitely worth looking into though. That's a pretty interesting account.

It is, yeah. It's an interesting strategy. We actually, they offered us one a couple of years ago at my company and we voted it down thankfully, because it was not optional. All that extra money had to go in there and I felt like I had my finances figured out. I can take care of myself. I've already got an hsa. I don't necessarily need that. Another strategy I have heard though is there's a lot of doctors who can justify a lot of things. Medical marijuana was a thing long before it was recreationally legal in a lot of places. Or maybe you're a pilot, you've been sitting in these bad airline seats for a long time and you have back issues. Maybe some swimming would be therapeutic. Maybe putting a pool in at your house for therapy is a valid way to spend this healthcare, this veva money. There are some things that pilot's been able to do like that. So kind of, kind of spend that money.

Interesting. So does it have less strict requirements than an HSA would? Because I'm not sure you could, you could swing that for HSA money even, even with a doctor's prescription. I'm not sure you could put in a pool.

I've heard of, I've heard stories of pilots making that work. I would definitely look into the get. Get some professional advice on that. But I've heard of that happen.

Yeah, it's interesting. Okay, now we need to wrap up here soon, but you've got the year of 30 or 40,000 high income professionals. Now granted most of them are doctors, not pilots, but what else should they know that we haven't talked about in today's interview?

I would say really focus on that question of what's your why in life? And if you're intentional, you can really achieve that a lot earlier in life than you think. A lot of people think you have to wait till you're 60 or 65 and then you retire and then you get started on the things you really want to do in life. It doesn't have to be that way. I average 12 days of work per month total and I make amazing money. My wife works two or three days per week and she makes even better money. You don't have to work continuously getting all this money if it's just the work and that you're just churning through it. If you can find other things in life that you enjoy, consider paring back your schedule a little bit. Consider going to a two or three days of work per week schedule. You'll still be making in the top 1% of income for all Americans. But spend time with your family, go on trips, find a hobby, mentor young people, go teach at a college, whatever you want to do. Find some other things in life that you really love, you're really passionate about, and you can still have that gratification of using your skills, all your study, your profession, your practice. You can keep doing that. It doesn't have to be this super full time thing that you do every day.

Awesome. Jason depew, author of Pilot Math Treasure Bath, editor in chief at the Pilot Network, and Delta Captain thank you so much for coming on the White Coat Investor podcast and talking to us about Pilot finances.

Thanks Jim. It was great to talk to you.

All right. I hope you enjoyed that interview. I've been talking to pilots for some time and they always are saying you should reach out to pilots more. You should reach out to pilots more. So today I thought I would and introduce you to that resource as well, which is obviously going to be a little more pilot specific than I can ever be given that I don't work in the industry like I do in medicine. But I hope you enjoyed that. Still not sure what to do with your student loans? Overwhelmed with how to tackle that giant debt in an ever changing political climate, the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt and the average studentloanavice.com client has saved over $190,000. You will receive a customized student loan plan using the principles of the White Coat Investor. Get answers to all of your student loan questions, gain clarity about your financial future, and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this and the White Coat Investor can help. In case you missed it when I talked about it at the beginning, there is a sale right now on our online courses. It's Continuing Financial Education Week. Okay. If you buy our online courses right now, you get 10% off and we throw in 13 hours of additional content from Wcicon Park City. So check that out. It lasts until Monday the 30th at midnight and then that special offer goes away. But get your continuing financial education in this week. Obviously, if you haven't heard about the conference we're having in March, that is also on Early Bird Special until Monday at midnight again. So. So if you want to come to this virtual but live WC ICON Conference, the Physician Wellness and Financial Literacy conference that offers continuing medical education and dental continuing education credit that is on early bird special. It's 120 bucks off from now until Monday night at midnight Mountain time. All right, thanks. For those of you who've left us a five star review and told your friends all about the podcast, our latest review, or actually this one's been on there a while, this One comes from TradeMyren, who said stoked. Just what we needed. My fiance will be finished with residency in June. We have asked all about these questions. Love your insight. Helps out a lot. I already can't wait to hear more. Thank you. Five stars. So thank you for that review. Keep your head up, your shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor Podcast.

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.