WCI #231: How Much Homeowners Insurance Do I Need?

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 is your host, Dr. Jim Dahli. This is White Coat Investor podcast 231. How much homeowners Insurance do I Need? 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 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. You can do this and the White Coat Investor can help. Thanks so much for what you do out there. I don't know what you're doing right now, but if you're like most listeners, you're on your way to work. Maybe you're coming home from work, maybe you're at the gym, maybe you're out getting some exercise. Whatever it is, if nobody's told you, thank you for the hard job that you do today, let me be the first. I'm just coming off a couple of shifts in the emergency department. We're certainly still seeing Covid in our emergency department, but I'm actually really excited about the trends we're seeing with COVID It seems whatever you call this, the second peak, the third peak, whatever of COVID is trending down right now both in Utah and nationwide. And hopefully this is the last peak we'll see, I suppose in the future whether there's more variants that come out. Never know. But it's pretty exciting to not see it going up. Still. It was really interesting. I had a patient this week, I took care of them for Covid related symptoms and they got symptoms on one day. The next day they got their first vaccination and then the day after that they got a COVID test. You know, I think they started worrying. They actually had Covid and were hoping the vaccination would be in time to do something about it. Unfortunately, I had to ensure them that the vaccination was not going to help this particular illness, as they already had the virus by the time they'd gotten the vaccine. But for those of you who haven't, I encourage you to go out and get your vaccine. You're actually required to get it if you're gonna come to WC icon 22, at least in person. I suppose the virtual option you can do without getting vaccinated. But this podcast, let's see, we're recording this September 28th. It's gonna start running October 7th. The deadline for WC Icon to get the early bird pricing is October 19th. So that's a Tuesday coming up. If you want to come in person, I recommend that you register by that day. You'll save yourself some money. Of course, you can register after that day, and you can register all the way to the end of the year, really. But if you want to get the swag bag, which is going to be awesome, right? It's got a book from all of the keynote speakers. One of my books will be in there. Michelle Singletary's book will be in there. There'll be a book from Bill Bernstein. There'll be one from James Lange. It's a pretty good swag bag. You know, I just came from a conference where the swag bag literally consisted of a hat. That's what was handed to you is this big, huge swag bag with a hat with a sponsor's name on it. We don't do that at our conferences. You're going to get a sweet swag bag as long as you sign up for either in person or virtual by December 1st. Has to be by December 1st, because some of those books have to be printed. And of course, if you're coming virtual, we got to mail out the swag bag to you. So we need a little bit of time to do that. The conference itself is the 9th through 12th of February. It's going to be in Phoenix. It's going to be warm and sunny. It's at this pretty awesome resort. There's going to be pickleball golf. You know, we're going to knock off about 4 each afternoon so you have time to get out and actually do some wellness stuff. I mean, it's the Physician Wellness and Financial Literacy Conference. And after the last couple of years, we can all use a little more time for wellness. So if you'd like to sign up for that, WCICON 22 early bird pricing ends October 19th. All right, I got to do a correction. I don't like doing corrections because it means I was wrong. But it's important that we do corrections. And if you ever hear something I'm giving that's bad advice on this podcast, please shoot us an email. Editoritecodeinvestor.com works fine and we will get that corrected if indeed it is wrong. At any rate, this one comes in from one of our recommended insurance agents, Larry Keller said I listened to a recent podcast where he mentioned to an active duty doc that acts of war were not covered under a life insurance policy. As an FYI, this is not the case. The only thing that is not covered is suicide for the first two policy years or something specifically excluded during the underwriting process. If an option in one state, for example private pilot activities, at that point they can accept an exclusion rider or pay a higher premium. So what was I thinking? Well, I was thinking about disability insurance. With disability insurance, acts of war are frequently excluded, but they're generally not excluded from life insurance policies. So take that if it applies to you and know the truth. All right, So I had, after we went through my auto insurance policy on this podcast, I had a bunch of people request, hey, can you do that for homeowners? There was an email that said, think it would be worthwhile to do a podcast in the future like you did recently regarding home insurance details and thoughts regarding coverages available under these types of plans. So let's talk for a few minutes about my homeowner's insurance, and I think first we'll talk about the policy as it used to be before we did our big home renovation. And then we'll talk about some of the changes that happened after doing the renovation. So I've got my policy in hand here from USAA. This was issued in 2010 when we bought the house for dwelling protection. It was a $422,000 house at that point had $105,000 in coverage for other structures, $211,000 in personal property, unlimited loss of use protection for 12 months, had $300,000 in personal liability and $5,000 in medical payments to others. The deductible was 2%. So it was an $8,440 deductible. And the premium for that coverage was 555.75. That included about $147 in credits and discounts. I do a bunch of stuff with usa. I have several insurance policies there, I bank there, et cetera. So I get some pretty significant discounts for that business. But the most interesting thing about these policies is to actually thumb through what's covered and what's not covered, especially what's not covered. And there's two big things you should be aware of in homeowners insurance that usually is not covered without a separate policy. The first is flood. Okay, Flood insurance is one of those things that is generally not a part of your homeowner's policy. Now, you may live in an area like where we lived in Virginia, where the federal government literally requires you to get flood insurance, at least if you have a mortgage. I think they require your mortgage to require you to have it is actually how it works. So we had flood insurance there, but we were only 12ft above sea level there. It was pretty smart investment, I thought at one point during a hurricane, we had the floodwaters lapping on the front porch. It wasn't a porch, it was a, you know, stone patio, whatever it was. But it was literally, if it got a foot higher, it would have been into the basement floor, into the, not the basement, but the first floor. And so it was a pretty no brainer there to have flood insurance. There are lots of other places in the country where it makes sense to have flood insurance. And it's often, you know, the federal agency that you're buying it through. And the truth is, I just heard this episode on Planet Money. I think it was one of those NPR economics programs that was talking about flood insurance, which is apparently often dramatically underpriced. It's really a good deal for you if you live in a flood area. You're considering the risk that you're facing. So highly recommend that if you're anywhere near a flood area. And in fact, I know someone who had a storm drain back up and flooded their house in our neighborhood, which is not someplace you would think has much flood risk. And it was the flood insurance that actually paid for a whole bunch of stuff be ripped out of their first floor or their basement and get it redone. So flood insurance, you may want it and really consider your risk there and consider buying a flood insurance policy. But as I go through this losses that we cover and that we don't cover in this policy, it's pretty interesting. For example, this policy doesn't cover freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system. But that doesn't apply if you've maintained heat in the building. So if you shut off your heat, you know, it may not cover freezing pipes and damage from that or have shut off the water supply, I guess. Is another way to still have it be covered. Other stuff that my policy does not cover. Freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a swimming pool, hot tub or spa fence, pavement, patio, foundation, retaining wall or bulkhead or pier, wharf or dock. Well, I don't have a pier, wharf or dock up here next to the mountains in Utah. But, you know, freezing of my hot tubs apparently not covered. Theft in a dwelling under construction until it's finished and occupied. Not covered. Vandalism and malicious mischief or breakage of glass if the dwelling has been vacant for more than 180 days. Constant or repeated seepage or leakage of water or steam over a period of 14 days or more from within a plumbing, heating, air conditioner, automatic fire, protective sprinkler, wear and tear, marring, deterioration, mechanical breakdown, smog, rust, electrolysis or other corrosion, smoke from agricultural smudging discharge or escape of pollutants, settling, cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings. So that's a big expense, right? If your foundation settles. Not covered in my policy. Birds, rodents and insects not covered. Animals owned or kept by the insured. So if your dog does the damage, it's not covered. Doesn't cover armadillos, bats, beavers, coyotes, ferrets, opossums, porcupines, raccoons, skunks, squirrels. So lots of, lots of things there that you should be aware of that are not necessarily going to be covered in your policy. The other big one is besides flood is earthquake. Okay? Earthquake is generally not included in a homeowner's policy. So if you want that, you gotta pay extra. And we think about this one all the time because we don't live that far from a fault in the Utah area. And earthquake is a very real possibility for us. Flood, not as much. So it would have to be a pretty serious backup for us to have flood on our property. But earthquakes are realistic thing. The problem with earthquake insurance is it's super expensive. You know, you tend to have high deductibles, and it tends to be pretty high premiums. In fact, we actually put earthquake on this, this house after we renovated it. And two thirds of the premium was the earthquake insurance. So pretty expensive. And the deductible for it was over $200,000. So we got to talking to the contractor that renovated our home of, you know, how much damage are we likely to actually have in an earthquake and how much would it cost to repair? And he thought it could all be done for less than $200,000. And so we decided not to have the earthquake coverage, and we've dropped that. It's always an interesting debate around here. Some people have it, some people don't. One of the properties that I manage here, you know, this is the office building for my physician group. We decided to put earthquake insurance on the property just because we felt like we had a fiduciary duty to all the other investors, all the other docs that own these syndicated shares in the property. But if it was just my office building, I probably wouldn't have it. I'm willing to run that risk. But be aware, your policy probably does not cover that. So it's interesting. When I went to get a policy on the new place, after we renovated it, well, we renovated it pretty nice. It's a really nice home now, and it's got a lot of nice stuff on the inside, aside from the expansion of the square footage. And so it turned out the value was high enough that we had to get a special policy, kind of a premium policy. We actually had to talk to different people that ask a lot more questions when they are issuing you your coverage. And it comes in under a different category, which naturally is going to be more expensive. But anyway, after all the discounts, thankfully we got a lot more discounts to go with this policy. We're paying instead of $555, we're paying $1,274 for insurance. And so it's quite a bit more expensive, mostly just because it's more valuable place to insure. We don't necessarily have any more, you know, coverage on it. The dwellings covered for enough that we could rebuild the entire house. Now, you don't necessarily have to insure the land, right. If the place burns to the ground, you've still got the land that hasn't changed. But you need the whole dwelling coverage covered. Personal belongings. We bumped this up a whole bunch. We decided we didn't have nearly enough money in personal belongings coverage, number one. Number two, they basically require you to have half the value of the dwelling in personal belongings coverage. I don't think we have quite as much personal belongings as we have coverage, but that was what they required. So. So about half the value of the dwelling is what we ended up having in personal belonging coverage. They throw in other structures covered. In this case, we got $150,000 worth of other structures being covered. That's just kind of standard for the policy. We don't actually have any other structures, so that's not doing US any good loss of use, again, unlimited. Our personal liability, again is set at 300,000. Now, bear in mind, the umbrella policy sits on top of this. And the umbrella policy is what dictated that they required us to have $300,000 in coverage on the cars, on the house, on the boat, et cetera. And then the umbrella policy stacks millions on top of that. And then medical payments to others was again set at $5,000. Our deductible is again 2% of the dwelling coverage. And so it's significantly higher than the 8,000 we had before, but it's still that 2%, which we could certainly cover out of our cash. And then we paid a little bit extra to have that higher personal injury liability. I think we're paying 14 bucks a year for that. So overall it's, you know, it's more expensive for us. We got more coverage. It's interesting. You go into the discounts and savings to see what they actually give you discounts for. We got it a discount of 135 bucks because we have auto and home covered. We've got a discount because I have a couple other policies, including the boat that we got through USAA, that's $56 discount, $22 because I bank with them, $22 because I have a life policy with them still. We got $121 discount for the age of the home, $189 discount for being claims free, a $33 loyalty discount, a $65 insurance to value discount. I think because we chose to insure it to the replacement value, we got 22 bucks off a year because we have an alarm and because we got a brand new roof, we got $69 off. So lots of discounts that we qualify for there. Make sure when you get coverage that they understand the quality of the house. Right. So we did all these upgrades. Now we have a really nice house. So we had to change those qualities in there, like the interior finishes and features. Instead of, you know, being relatively basic, we got the premium. Same with the kitchen and bath. Same with the general shape and style. Same with the exterior finishes and features. Right. We got some nice stonework out there. It's premium. And we want the thing covered if the thing burns to the ground or whatever happens to it. We actually want the insurance company to build us a new house like this one. And so we made sure that it is appropriately insured. Don't cheap out on this. Make sure you actually tell them what you have so you're actually covered in the event that something happens to it. All right, enough information about homeowner's insurance. Let's talk for a few minutes about buying a home without a realtor. Tim from San Francisco is now Tim from Salt Lake City. He's apparently moved a whole lot closer to us. Let's listen to his question.

Hi, Jim. This is Tim in Salt Lake City. My question for you today is, what do you think about buying a home without a realtor? I'm trying to understand the value they add. Seems like I could do the negotiation. I could find a house on Zillow. I could have a real estate attorney go over any paperwork. I could obviously get an inspection done. So, 3% buyer fee, buyer agent fee, 3% seller agent fee. Seems like that could potentially be a lot of money saved by doing it yourself. So what do you think? Is buying a house something that's amenable to doing it yourself, like investing is? Thanks.

All right. Can it be done? Yeah, it certainly can be done. I bought a house without a realtor before. I just used a real estate attorney to look over the contract and help me make sure I had all the I's dotted and t's crossed. Would I have been better off with a realtor? I think I may have been in that situation. You know, the interesting thing when you buy is the realtor is technically paid by the seller. Right. The actual thing they do is they generally collect a 5 or 6% commission and then they split it between the two realtors. So the only reason you would ever consider not having a realtor when you come to buy is if for some reason the seller will reduce the selling price by 3%. If they're not doing that, well, it's their expense, not yours. So unless you're getting a pretty significant, you know, discount for it, I wouldn't necessarily do that. I get a realtor and just have somebody helping you out. Why not? I think a realtor is a little bit more useful when you're looking at a lot of houses. Right. If you want to look at 25 or 30 houses, like we did before we bought this place, you know, I think that realtor is a little more useful. They're certainly doing a lot more work to earn their commission. But there's no doubt that the realtor industry is ripe for disruption. I mean, that's a lot of money. You take a million dollar house, a 6% commission, 60 grand. Right? It's a lot of money. And so you can see why people are trying to disrupt that with varying levels of success. Right. There's these online companies Et cetera, et cetera. And these have been around for a long time that, you know, they'll not do much other than put your listing up on the MLS and maybe send you a little cheap sign to put in the yard. That might be all they'll do, but they charge you dramatically less than 6%. Likewise, now that you're local to Salt Lake City, you've seen all the billboards up for Homey. Homey is this company that's basically trying to disrupt this industry. And I don't know how successful they're being, but I think they're having a significant amount of success at doing so. And I'm sure they'll have competitors as things go long. So I think this, this industry is going to see lower commissions over time, but it's been remarkably resistant to that. And the reason why is because people tend to only buy or sell a house, you know, two or three times during their lifetimes. So it's not something they're doing all the time. Like with Do It Yourself investing, you can kind of wade in early in your life when the Transactions are only $1,000 and it's no big deal. If you screw something up a little bit, you can fix it. Well, that's not the case when you only do something twice in your life, Right. Imagine that your investing only happened twice in your life and you had to put $1.5 million in each time. Right. Are you going to hire a pro to walk you through that process? You're far more likely to than if you were investing every month for 30 years and got a chance to start when there just wasn't very much money on the line. So I think it's a little bit different in that respect and that you can certainly benefit from having a Realtor on your side. Now you don't want one of these part time Realtors, though. If you're going to hire a realtor, get a really good one. In fact, if you're buying, you might want to consider what I did when I bought this house. I found a Realtor that specialized on the buy side. All they did was buy. They didn't do any selling. And I think they were maybe a little bit better at negotiating for a buyer. Certainly had more experience on the buy side. And so I think there are some benefits to that. But if you're interested in that, I know a great person in Salt Lake City, so shoot me an email Tim, and I'll send you over to him. But for the most part, I think it's probably most People are in this day and age probably still want a realtor both on the buy side and the sell side, but it's not crazy to not use one. Just realize that if you're going to do it, you got to do it well. Just like if you're going to be your own do it yourself investor, you got to do it as well as you would do it if you had an advisory. It doesn't do any good to save the advisory fee and then do a piss poor job of doing it such that you lose more than the advisor would have cost in the first place. And it's the same thing with a realtor. If you screw it up enough, you would have been better off just paying the realtor. All right, next question is about refinancing student loans. Let's take a listen.

My question is about refinancing federal student loans. Currently, payments and interest are temporarily paused. Private interest rates are relatively low, and there remains a possibility of some amount of federal student loan forgiveness. The possible forgiveness amounts commonly discussed are between 10,000 and $50,000. Is it then reasonable to refinance all but up to $50,000 of federal loans to private loans in order to remain eligible for any loan forgiveness? Even if no forgiveness is given, the amount left in the federal loan program could then be aggressively paid off first before moving on to the refinanced loans. Let me know your thoughts and thank you for your help.

All right, lots of people with questions like this and I'm really sorry that you're left with these sorts of dilemmas. This is really the fault of the federal government and the loan servicing companies. They put these policies in place and then they change the policies. And you always are wondering, well, is it going to change again? And it makes for you having to make decisions, important decisions that affect your finances significantly for which you don't have all the information you need to make the decision. For example, what are future policies going to be? Right now the way things are is that your federal student loans are going to start accumulating interest and you're going to have to start making payments as of January 31, 2022. You know, I feel like I almost have to put the date on it anytime I say something like that. Obviously this is at the end of September of 2021, and I think it's probably not, based on the signals we're getting, going to be extended again. So I think at that point, if you are not going for public service loan forgiveness or you're one of those poor souls that's going for IDR forgiveness after 20 or 25 years. At that point, most people are probably going to want to refinance their federal student loans. We have lots of great deals. Cash back we give you. Right now we're giving Fire your Financial Advisor, our flagship online course to anybody who refinances through the links that we have on our site. Those can be found@whitecoatinvestor.com student loan refinancing and we're expecting a big rush come the end of January and February, quite honestly, because people have been holding off refinancing because why refinance when it's 0%? There's a few reasons why people might want to refinance. Aside from the cash back and aside from the free course, a couple of the companies have been given basically the same 0% deal, at least for a few months. Plus a lot of people are worried that interest rates will go up, especially now that inflation has gone up. And by the time they get around to refinancing in February or March or whenever that they'll be refinancing into higher rates than they can get right now. And so some people are refinancing earlier rather than waiting until January 31st. But I think most people are waiting until January 31st. Obviously your private student loans or any student loan you've already refinanced, you can refinance again again and again and again and again as long as you can get a better deal. And if you're switching companies, you generally get more cash back if you're going through are links. And so I'd encourage you to keep an eye on rates. And anytime you can get a lower rate or heck, you can get the same rate and still get a cash bonus, it may be worth the time to take to refinance. I mean, once you've done this, once you've kind of got the paperwork together and it just doesn't take that long to apply again, so why not? But you know, as far as holding something back in hopes that there is a new law out there for giving your student loans, I don't know that I would do that. But if you really think this is a likely possibility for you, then sure, hold on to a little bit. I would not hold on to 50,000 though. The only people that have talked about forgiven $50,000 are the most left wing members of the Senate. There has never been any sort of broad consensus to refinance that much in student loans. The only thing I have heard come out of President Biden's mouth is maybe $10,000. And I suspect if that ever happened, it would probably be, you know, high earners, like doctors, would probably be phased out of that general forgiveness. You know, you see articles every now and then about student loan forgiveness happening. The only forgiveness that's happening that's outside of pslf, which is obviously happening now. You know, if you listen to the Milestones to Millionaire podcast, you've heard several people that have received their PSLF forgiveness and IDR forgiveness that nobody's ever qualified for yet because it hasn't been 20 years since that was put in place, are people that have basically either become permanently disabled or their school scammed them. Right. The school pretended they were putting on an education. They really didn't. Those student loans have been forgiven, but there's been no other student loan forgiveness and there are no plans for any other student loan forgiveness other than what I've already mentioned. It would have to be a new program, a new law, a new regulation that did that. I think it's pretty unlikely, but I've been surprised before. So if you wanted to hold $10,000 out or something like that in hopes that the taxpayer will pay it off for you, I suppose you could do that. But I wouldn't hold 50,000 off, and I certainly wouldn't pay it off first. Why would you pay it off first? If you think it's going to be forgiven, Pay all the other ones off first and then get to this one when you get to it. Yes, it's going to be higher interest rate than what you can refinance to, but that's why you're holding it out, because you think it's going to be forgiven and you're willing to take the risk that you pay more in interest on it to eventually pay it off in order to get it forgiven. I probably wouldn't do that. $10,000 in student loans for a doctor. Come on, you should be able to pay that off in a month. You know, if you're making a typical doctor income. Right. The average doctor income right now is $275,000. Now, obviously there's lots of doctors making less than that, but still, $10,000 ought to be an amount that you ought to be able to carve out of one or two monthly paychecks and pay off that amount of student loans. So not really a game. I think doctors really ought to get into hoping that the rules change and we'll take away their student loans. You know, I'd just pay them off. And then if something like that pops up, you can just say, man, I missed out on that. And guess what? Sometimes that happens in life. You don't get every freebie that comes down the pike. All right, we've got a great question here coming from Adam. Let's take a listen.

Hi Dr. Dali. I've been a big fan following your blog off and on since graduating high school in 2011. I am a second year family medicine resident, maxing out my 403, my HSA and my Roth IRA. I have about $180,000 in student loans made possible by living with my parents throughout college, med school and residency. I plan to refinance at graduation and aggressively pay it off within two years of an attending salary. I do not have disability or term life insurance outside of what my contract provides, but I plan to get it before graduating. I feel like I'm in a good spot financially, but nearly all my money is accounted for. My girlfriend is an anesthesia assistant making about $170,000. We've been together for about a year and I plan to propose within the next year or two. We will both be 30 when I graduate, planning to have two to four kids where she will transition to working part time. My question is, how much should I spend on a ring, a wedding and a honeymoon? And how can I budget my time and money to not feel overwhelmed? Am I saving too aggressively? Should I reduce my retirement contributions, moonlight more, or ask family for financial help? Any insight is appreciated. Thanks for all that you do, Adam.

You might be my only listener, my only reader that started reading both in 2011 and while still in high school. This is pretty incredible. You are a serious planner. I mean, I'm a planner by nature, right? I plan lots of stuff. But I can't hold a candle to you. I mean, you got your life seriously planned out here just from your questions. So very impressive. Obviously, you are doing very well and you need somebody to tell you that you're doing great. You're going to have your student loans paid off within a couple years. Coming out, you're marrying another high earner. You're going to have a great income yourself. You've already got tons of money being saved. I mean, you're maxing out a 403 and a Roth IRA as a resident that's head and shoulders above everybody, including me when I was in residence. You're doing great. So you need to be told that. What that usually means when I have a listener or a reader that's doing as well as you is that you're too Cheap. And I give this advice not in general to everybody, but to people that need it. And it's a small percentage of my readership and listenership, for sure. But there is, there are plenty of other people in this category that simply need to spend more money. Okay. You are going to do very well in your life financially, I can tell. You're going to hit financial independence very early, probably within 10 years of getting out of training. You're going to have an estate tax problem by the time all is said and done. So in your case, I think you can spend a little more than what I would tell the typical white coat investor. If you're not getting married for a little bit yet, you know, and between the two of you, you're going to have at least a $200,000 plus in income, if not a $400,000 plus income, you can have a pretty nice wedding, buy a pretty nice ring, and have a pretty nice honeymoon. So how much should you spend? Well, you know, this depends. Depends on what y' all want. You know, if a nice ring is really something that's important to a certain member of this couple, then I would get a really nice ring. You could probably afford a $20,000 ring, and that buys a pretty nice ring these days. You know, there are ways to save money on it. I think they're making diamonds in factories now. You don't have to mine them anymore. And I think the manufactured ones actually look nicer and are cheaper, but it's not the traditional one that was mined out of the ground. So that might be a way to have a, you know, just as nice of a ring that saves a little bit of money. I can tell you this. When I got married back in 1999, I was broke and I think I spent like 2,500 bucks on a ring. You know, if you adjust that for inflation, it's probably 5,000 now. Okay. Was this the world's nicest ring that's ever been on a doctor's wife's finger? Absolutely not. But I just graduated from college. I didn't even started medical school yet. And so I think we were in a very different situation than you're in now. So if you want to get a nice ring, get a nice ring. Realize it's a consumption item and it's okay to consume some of your money. You're doing a really great job saving it, and so I think it's fine to go consume some. But I don't know, you can get a pretty nice ring these days for 10,000 to $20,000 seems very reasonable to me. Now, if you go looking at $100,000 rings, I might have to ask what's going on with you? What are you thinking? You know, maybe that's a little too much. Same thing with the wedding. When it comes time for the wedding, you know, traditionally the bride's family pays a significant chunk of this. Now you mentioned that your potential bride is an anesthesiology assistant making pretty good money, but you didn't mention anything about her family. And so if the family's really well to do, they may put on a pretty nice wedding and pay for a big chunk of it. On the other hand, it might be up to just the two of you. But either way, you guys make a lot of money. You can have a pretty nice wedding, right? If you look at what the average wedding costs these days, I think the last figure I saw was about $30,000. I live in Utah. Nobody spends $30,000 on a wedding here. I can tell you that most weddings here are like five or ten thousand dollars. But that's kind of a little unique, you know, It's a little unique like the fact that our colleges are really cheap too. Most of our colleges are six to $10,000 a year too. And I fully understand that in other parts of the country people are used to spending more. And I would think that you guys could afford to spend more. Now, how much can you afford to spend? Well, look at your bank account. That's how much you can afford to spend. I would not go into debt for a wedding. I just sat through a presentation at the FinCon conference. This is a conference for financial creators. And it was from the founder of Maru. And what Maru is, is a buy now, pay later company for weddings, right? So their whole spiel is that, hey, we're cheaper than a high interest credit card. But I don't think you should be buying now, paying later for a wedding. Whether you're using a credit card or whether you're using mar. You know, I'm not going to bring them on as an advertiser, I can tell you that right now. I think when you're buying something, whether it's a wedding or whether it's a car, whether it's a ring, you ought to buy it with cash, right? Not borrow for it. So look at how much cash you have. If you can come up with $50,000 or $100,000 and you want to invite a gazillion people to a really great day, then go ahead and spend that. But if you've only got $15,000. I think you ought to have a $15,000 wedding. Same principle with the honeymoon. Although these days the honeymoon can be a whole lot cheaper than the wedding. So that's probably not the big point here. Traditionally the bride and the bride's family has paid for the wedding and the groom and or the groom's family, usually the groom pays for the honeymoon. That's the way it was when I got married. And so it comes down to, you know, how much money you have to spend on that. But I certainly wouldn't think twice about spending $10,000 on a honeymoon in your financial situation. That seems very reasonable. You know, I guess if you want to travel the world for a month, it's going to cost you more than that. But you know, if you want to go spend a week in the Caribbean, you ought to be able to do it for that, no problem. And have a very nice week and be able to stay wherever you want and drink whatever you want and do whatever activities you want. You know, that's. You can pay for a pretty nice vacation these days with 10,000 bucks. So maybe not if you fly first class there and back, I don't know. But you know, I would not. Given your financial decision making and where you are at this point, I think it's very unlikely that you're going to overspend on your ring, wedding and honeymoon. So I think you can go ahead and probably spend a little more than what you're, you know, super comfortable with, knowing that you're doing great and there's going to be plenty of money for you down the road. So make sure obviously you get that insurance in place. That's probably the most important thing I heard that you said. But I wouldn't worry too much about what you're spending on your wedding and honeymoon. Okay, Our quote of the day today comes from Rick Ferri who said I find that newly enlightened self managed investors can spend a considerable amount of time and energy trying to figure out a perfect portfolio by seeking a perfect asset allocation, perfect products, perfect tax efficiency and a perfect maintenance methodology. Don't bother. And I agree perfect is definitely or the dream of a perfect plan is definitely the enemy of a good plan. All right, our last question today comes in from Chad said what to do with $50,000 and let's listen to his question on the speak pipe.

Hi there. I just became a PGY2. I have around $50,000 just sitting in my bank account not doing anything. I'm doing public service loan forgiveness at Least during residency. So I'm trying not to throw any money towards that just in case I do pursue that after residency. My hospital doesn't offer a 401k, so, you know, I'm not haven't been contributing to that. I'm trying to determine what's the best use of that money so it's not just sitting there. Any advice would be awesome.

All right. What a great position to be in to have money that you haven't assigned a name to yet. Now, ideally, in our portfolios and our budgets, we've assigned a name to every dollar, right? It's a retirement dollar, it's an education dollar, it's a health care dollar. Right. Depending on whether it's in your 401 or a 529 or an HSA or whatever, right. Or maybe you're saving it for something short term, so it's a Tesla dollar or it's a second home dollar or it's a boat dollar or whatever you're saving up for right. Early in your career. This is a particular problem for brand new attendings, but also for residents that are doing a great job saving like you. You got lots of things you can use money for, but not that much money to do it with. And so you've got to prioritize. You got to decide what's most important to you. So here are some things that are frequently important to a resident doc in your position, maybe you have some credit card debt, you got some high interest credit card debt, pay it off, that's a great use of some or all of your $50,000. Maybe you have a car loan. Owning that car free and clear improves your cash flow and gives you more money each month to invest or spend or do whatever you want with. So paying off car loan is a great thing to do with it. Many doctors at this stage don't have much of an emergency fund. You don't need a $50,000 emergency fund as a resident, but a $15,000 emergency fund would be very reasonable. So maybe 15,000 of it gets put toward an emergency fund and you just keep it in cash. Maybe you invest it in something like a money market fund which pays almost nothing right now, or a high yield savings account where it makes 0.7% or something, maybe even put it into something, maybe a little bit of it into something like an I bond, right? But the idea is this is your emergency fund. It's something that you can get to relatively easily and, and spend if you need to for something. So that would be a reasonable thing to do. Paying down student loans is usually a good idea. Now you say you might be going for public Service Loan forgiveness. If you have private student loans, you could pay those off, but otherwise, you know, I would probably hold it out of the student loan bucket. If that is your goal. Now you can start investing it on the side and call it your Public Service Loan Forgiveness side fund in case something happens to either your career or, or the Public Service Loan Forgiveness program. And then you'll have some money you can put towards your student loans. If that happens, you can also put it into other priorities you might have. Maybe you have a kid and you're starting a 529 for their education. Maybe you are using an HSA. You know, probably not typical for residents. Most residents have pretty good health insurance. It's not a high deductible plan, so maybe that's not an option for you. But you can always save it for retirement, right? Even if your job doesn't offer a 401, even if you already maxed out your Roth IRA for the year, you can always invest it in a taxable account for retirement. Now, if our resident investing in a taxable account for retirement, I'd be investing pretty aggressively. It pretty much be all in stocks at this point. You know, a Total Stock Market Index Fund, Total International Stock Market Index Fund, those sorts of investments, but all kinds of things to do with it. You could also put it toward a home, right? If you're going to buy a home and you become an attending, you know, you can start saving up for that down payment. Now that's not a bad use of your funds. The truth is, in the next five years, you're going to have more need for cash than you're going to have cash. And so any or all of those are good things. It just depends on what your priorities are and only you can decide that. So good luck deciding. Hope that gives you some guidance there. All right, so breaking news. I just heard Vanguard has lowered its expense ratio on its target retirement funds. It's gone down from 0.15 or 15 basis points to 0.08% a year or 8 basis points. It's not quite as low, I think, as you can probably roll yourself using the Total Stock Market Fund, Total International Stock Market Fund, Total Bond Market Fund, because those tend to be pretty inexpensive funds at Vanguard using the Admiral Shares or the ETF share classes, but that's a whole lot closer to it. At any rate, once you get below about 10 basis points, it's pretty much free, right? At this point, there's no big difference between 6 basis points and 7 basis points, or 7 basis points and 9 basis points. Right? They're all basically giving you the management for free at this point, so don't fixate too much on your expense ratios. But it's nice to see Vanguard passing on any savings to the owners of the company who are the investors in the mutual funds. And the way they usually do that is by constantly lowering their expense ratios on their mutual funds. So I'm excited to see that it's not unusual. Vanguard comes out with a press release on this sort of thing every couple of years as they gradually lower the expense ratios on mutual funds. And if you go back 20 years, even at Vanguard, the average mutual fund was significantly more expensive than it is now. So it's good to see that trend happening. 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. Don't forget about WCICON 22. You can register for that@whitecoatinvestor.com WCICON 22 early bird pricing ends October 19th. The last day to get a swag bag is February 1st. Thanks. For those of you who have left us a five star review and told your friends about the podcast, our most recent one comes from Dee Upton who said, excellent resource. Dr. Dali has created a fantastic financial resource for the high income professional. Easy to listen to during a commute or workout. Dr. Dali has even taken the time to respond to my financial questions by email, which demonstrates his generosity and commitment to educating others on the world of personal finance. On that note, you can email me editorwhitecodeinvestor.com we love hearing your feedback about the podcast. I do answer questions by email. I can't be your financial advisor, you come back with 30 different replies. I'm probably not going to be able to answer them all, but thus far I've been at this over 10 years and I've responded personally to every personal email I've gotten. Hopefully I'll be able to keep that up in the long run. We'll do the best we can. In the meantime, there's a fantastic resource@whitecoatinvestor.com Be sure to check it out. Use the search bar. Chances are good somebody else has had the question you have, and I've written a blog post about it. And if you type the subject into that search bar, you're probably going to find it. But 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. Dalle, 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.