WCI #32: Passive Income MD

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 Dahli.

This is White Coat Investor podcast number 32, Passive Income MD.

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Now before we get into the podcast today, I wanted to do a few housekeeping items first. If you're registered for the White Coat Investor Conference, good for you. That means you signed up in the first six days that it was available because it filled that quickly. But if you haven't gotten an email in the last few weeks about the conference, you may be having those emails go to your junk folder. So please contact us so we can get that information if you haven't gotten that email. Also, I'm working right now on an online course that's going to be coming up that probably will go live in January, but it's going to be pretty awesome. It will give you the opportunity to basically develop a financial plan without having to hire a financial advisor and so I'm pretty excited about it. I'm putting a ton of work into it and more information on that coming up. Also, if you are not registered for the emails on the website, please do so. Right now we're running the White Coat Investor Financial Boot Camp, which is really a 12 step program to help get your finances in gear for the new year. But that's totally free. All you got to do is sign up for the newsletters and you'll start getting those emails. Our quote of the day today comes from Bill Gross, famous bond manager that used to be at Pimco. He said Jack Bogle's early business model at Vanguard promoting index funds was a mystery to me for at least a few of my beginning years at Pimco. Why would most investors be content with just average performance? I wondered. The answer is certainly now obvious. All right, today we have a special guest on here, Passive Income md. He's our newest addition to the White Coat Investor Network, which is A network of physician and other high income, professional focused blogs that are trying to get this information into your hands so you can find the financial success you deserve. So welcome Passive Income md.

Great. Thanks for having me. I'm excited to be part of the network and excited to be part of this episode.

Sure. It's great to have you here. Why don't we start with having you tell us a little bit about your upbringing, your background and your practice.

Sure. I grew up in a family of physicians. My father's a doctor, he recently retired. My grandfather and my mom's side, she was a physician as well. And I had plenty of uncles and, and actually some aunts that are physicians as well. So it was kind of predestined in a way that I would become one myself. And there definitely was a little bit of that pressure growing up in like a physician heavy family. I'm sure some of your readers care and listeners can relate, but one thing that stands out when I think about my background is there's plenty of medical talk in the house. But we never talked about finances and I really had no interest in it myself.

I actually don't find that surprising given all the doctors I've worked with.

Oh, that's right. Yeah. I mean, I really know interest and I mean, I never learned about it. I mean, I didn't even know how credit cards worked until I signed up for like five of them in college and started getting the bills. So I never really learned about debt, you know, interest, the stock market, all these things. And, you know, I had to learn about these things the hard way, like I guess a lot of physicians do when they accumulate a lot of that debt, especially credit card debt in college. And I, you know, I continue to add to that and carry that over into med school. So in addition to my student loans, I got a good amount, over 20,000, actually closer to $30,000 in credit card debt at pretty high interest rates. Eventually I paid it off and then I just vowed that I would never let myself get into that type of debt again. But, you know, for my medical career, I'm an anesthesiologist in a large practice in a large city. I love what I do, although I'll be honest, I don't enjoy working the nights and weekends. So I've started cutting back on this.

Yeah, that can certainly relate to that. I've already dropped my night shifts and I don't think there's any way I'm ever getting out of weekend shifts, but I'm gradually moving toward working more days than nights. So I can certainly relate to that. So given your background that you didn't have all this interest in finance or investing or business and really weren't even that good at managing debt originally, what was it that led you to start Passive Income md?

Well, at the end of my residency and fellowship, I don't remember exactly how it happened, but, you know, I stumbled onto a few finance related books and websites like yours, and I just couldn't get enough. I mean, I just started absorbing it like crazy, like a whole new world was, you know, open to me at that time. And I definitely have that type of personality where once I start down a path, I just kind of go all in. So I started learning about, you know, the concepts of, you know, what is financial independence, started learning about passive income, and quickly realized this is something I need to focus on. And so even when I first started practicing, I started telling all of my friends about it, all my physician friends in the hospital, just, just seeing who else is interested in this, talking about passive income and practicing medicine on your own terms. And a lot of them started joking, hey, you know, you talk about this so much and you seem passionate about it. You should probably start a blog. And I'd never done that before, but I sat on the idea for a couple months, I think actually six to eight months, and finally I decided, okay, I'm just gonna sit down and try writing a few posts. I mean, I don't think I've written anything since college, right. But I threw it up online and luckily some of these articles and some of these posts got a little bit of early attention and it just took off from there.

Very cool. Now, what you said you felt like you needed to learn about this stuff. What was it that made you feel that need?

Well, I started looking at a lot of my colleagues, even some of my attendings when I was in residency at fellowship, and I don't know, they just didn't seem particularly happy. I also saw them picking up extra shifts, picking up extra nights and that, and talking about, you know, how tough it is financially to do well in the city that, you know, I was living in. And I said, you know what, there's got to be a better way. You know, instead of working more, there has to be something else. And, you know, that kind of fell in line with a lot of the things I was reading. I mean, I was reading things on your side, reading things, you know, in books about, you know, setting yourselves up well financially and ultimately creating some, you know, freedom for yourself.

Great. Can you tell us more about your sources of passive income.

I mean my goal has always been to build as many streams of income as possible. Some are a little more active, some are a little more passive. But the goal is that if something dries up like even medicine, I've got other things to rely on. So my main ones are, I mean I do invest in the stock market, although almost exclusively in tax advantage accounts. I mean I'm not getting any sort of current income from that, but I expect to in the future. And I tend to go heavier into real estate. I mean I own my own rental properties. I have some single and multifamily or apartment buildings that I own outright and then I also co own with some investors. I do some real estate crowdfunding online. I mean I've enjoyed some really nice returns over the last couple of years from that. I also invest in syndications for real estate, which basically means I own shares of apartment buildings but somebody else is running it and operating it. With my wife we also started a business. We run one of these direct selling multi level marketing businesses and we've done that for the last couple years and seen some really nice income from that. I also invested some peer to peer lending. I now have this blog which has actually been a nice surprise. So actually started bringing me some significant income this past year. And I also do some angel investing, which means I'm like an early investor in some companies. You hope one of these companies blows up and becomes like an Uber Instagram, whatever. But they haven't produced anything yet. But I'm hoping they will somewhere down the line. Although I realize that these are pretty much all moonshots and I could lose it all. But yeah, those are my main ones.

Yeah, I'm not sure the angel investing ones count as passive income yet, but hopefully eventually they will.

Yeah, they could. Who knows?

Now you recently became what you called free of your clinical income. Can you explain what that means and how you feel now that you don't have to practice?

Sure. I think that's also called another way, financial independence or financial freedom. I mean I actually like to prefer to use word financial freedom. It just sounds, you know, really special to me. I recently reached this milestone and wrote about it on my blog. And what it simply means to me is that the money that comes in from these other sources of income, they're enough to cover all of our family expenses. So in essence as is, I could stop working as a physician. My wife who's also a physician, she could stop working and we do fine financially, which is Great. And it's. It's totally liberating. I mean, it's a total mindset shift from where, you know, we first started and how I feel. I was kind of almost raised finance. You know, I was raised as well. It's, you know, again, I've seen a lot of my colleagues just grind away. They pick up those extra shifts again. They have to give up some time with their family, really an effort to just bring in a little bit more money. Right. In fact, some. Some of them are living honestly paycheck to paycheck. And again, I didn't want that to be me. So I'm fortunate that I started down this path early on, and my initial goal was to hit it about 15 years out of practice, or, I mean, out of training. And luckily it's now six years out and I've reached this point. So I feel very fortunate to be here. And it's funny, I actually enjoy being a physician more as a result. I found that when you relieve that financial pressure from being a physician, even a little bit, up to, you know, all of it. Yeah. In some ways you can practice more, in a way, purely for love. And it's been great.

You know, I think it's great that you enjoy medicine more once you became independent of it. I feel the same way. I find it much more interesting. I almost feel like I'm volunteering when I go into the hospital to work now. And really, it's changed my mindset and how I practice. What's interesting is I talked to other docs, like Physician on Fire, our partner in the White Coat Investor network. He felt just the opposite when he no longer had to work. It felt like more of a drag when he started. That pager started going off and he felt like he had to work more. So I think it's pretty interesting how that affects different people differently.

Yeah, I feel fortunate that, you know, it's. You know, originally I felt it was just a job, and now it's, like you said, it's become optional. And honestly, I do see it as like a mission and a passion of mine.

That's great. Now, that article where you talked about how you were free of your clinical income, that was picked up by Doximity and shared pretty widely. I noticed a comment on it on Doximity that was left by a psychiatrist who was actually pretty critical about it. The essence of the comment was that doctors shouldn't focus on money. You know, he didn't say it anywhere nearly that nicely, but what do you reply to criticisms like that? That they're saying by you focusing on passive income and this sort of stuff that maybe you're not as good of a doctor.

Well, I think it's obvious that he doesn't. Hasn't read any of the other articles that I've written. Because if you go on my side, I do talk about money. And I, you know, I have to admit money's important in a way. It's a tool. Right. And it kind of. You do need a certain amount to live the life that you want. So I believe it's important to talk about it. And let's be honest, you know, financial pressures are. It's a big contributor to physician burnout, I believe. Right. But at the end of the day, the things I talk about, it's not really about money itself. It's really about things that are a lot more valuable than that. I mean, I talk about time choices, freedom following passions, family, and these are the things I'm focused on more on my blog. So when somebody, you know, criticizes either me or other financial bloggers, that it's just all about the money, you know, I'd encourage them to dig a little bit deeper and see what we're actually talking about here. I mean, don't you feel that way?

I certainly do. Now, you talk about being free of your clinical income. Are you free of not working at all? Could you just sit back and not do any work at all at this point?

Oh, well, on paper, yes. I mean, there's other things that I want to save up for in the future. I mean, I guess I want to save up for. Of course, I want to save up for educational costs for my kids and these kind of things. And, you know, we've done a good amount of that as well. But when it comes down to it, honestly, if I went a month without working two months, three months, we'd still be able to cover our expenses, which is great.

Yeah, well, that's great. I mean, at this point, we are certainly free of our clinical income, but not quite what I would call fully financially independent, at least not without selling the website. Just because we spend more than our savings could, could generate, even. Even with our sources of passive income. I can't quite consider my website and the White Coat Investor empire in this podcast completely passive. And so I don't really count that as passive income at this point. That's certainly keeping us from being completely free of having to work at all. If you're just tuning in, we're talking to Passive Income md, the newest member of the White Coat Investor Network. You can find his website@ passiveincomemd.com and I encourage you to check that out and learn more about passive income and what it can do for you and your life and your practice. Now, another question for you. Why would a doctor who earns at a very high hourly rate need passive income at all prior to retirement? I mean, he's got his clinical income or her clinical income coming in, right?

I think that's a great question. I mean, one thing that's a recurring theme on my site is that there's a difference between being rich and wealthy. And I think from an income and hourly rate standpoint, I mean, doctors are pretty rich, they do pretty well. I mean, they make good money. But I think we all know that that doesn't really mean that they live the life that they want, that they can practice how they want, that they have the time to spend with their loved ones as much and really not worry about money. And I think that's the biggest difference. And we all know that things are changing in medicine and they're constantly changing. And let's be honest, it's almost never better for the physician, in my opinion. So whether it's like political regulatory changes, I mean, doctors really end up feeling squeezed, I mean, constantly squeezed for time, money, or whatever. And again, I mentioned this before, I think that's a big contributor to physician burnout. So one of the best ways to combat that burnout is really by relieving yourself of that financial pressure from medicine itself. And that really comes from having other sources and multiple sources of income. And the more passive, the better, right? So if you can break that cycle of time in equals money out. Again, time in equals money out. If you can break that, then in my opinion, that leads to freedom and both financially in terms of time. And so I think physicians, they really need to understand that concept, right? I mean, they might feel like they have job security, but we definitely don't have income security. I mean, I can tell you many examples of friends who've, you know, who've been able to keep their jobs, but their incomes have been cut 20 to 30% from the last year because their group got bought out by somebody else. Right? So I think having those side hustles, I think having those other sides, you know, sources of income, that passive income, I think it's extremely important for physicians.

You know, I like how you use the term squeezed. The first chapter in my book, I actually titled the big squeeze, and I was referring with that to the increasing cost of medical education. And the decreasing reimbursement, along with the increase in government compliance issues. And there's no doubt that docs these days certainly feel more and more and more squeezed. I think the last survey I saw on burnout actually was over half of docs have experienced some significant symptoms of burnout, which is really a shame in what I consider the greatest profession.

Yeah, that sounds crazy to me, and I would think that's crazy, but in talking to a lot of my colleagues and, you know, residents and attendees in the hospital, I mean, that just. That seems to be the case.

Yeah, I. A lot of people do think it's crazy, especially if they're outside of medicine. I had an interview with an NPR reporter the other day, and she thought it was crazy that I talked about how doctors felt very, very poor when they came out of residency with these huge student loan burdens. She thought, well, with an income of 150 or 200,000, how big of a deal is it if you owe 400 or 500,000 in student loans? And I really had to walk her through the numbers before she realized that that really was almost incapacitating for a doctor to start her career with. Now, sometimes people get really interested in this sort of stuff early on. I get a lot of emails from medical students and residents and early docs that are pretty interested in finance. What would you recommend for a resident with interest in developing passive income?

I actually get a good amount of feedback from residents who want to do this very thing. Here's the thing. I think to really develop passive income, you need a couple things. I mean, you either need time, you need to be able to, you know, put in a good amount of effort, or you need money. So, unfortunately, residents are pretty short on the time and money part, so they're really going to have to put in a good amount of effort. And the problem is, without a lot of time, they just got to be really efficient with it. So the best way for them to kind of develop some sort of passive income is by. I mean, they have to start some sort of business. Unfortunately, that's tough to do during residency. There are some that have been quite successful. Some have used social media to build these pretty nice businesses, and some have written books and these kind of things. But I believe, honestly, the best thing most residents can do is just focus on getting through training. But while they're doing that, start educating yourselves by reading, learning, and then ultimately just create really good financial habits, like not getting into debt, like what I did, and saving what they can. That way, when they do become attendings. And you know, you preached on this and there's additional money and it might be some additional time they'll really know how to kind of use that money to really throw into these different income streams.

For sure. I think it's critical for a resident to hit the ground running and actually have some sort of a plan when they come out of residency. For Those, you know, first 12 paychecks they get coming out of residency, that really makes a big difference. But I agree with you. I mean, residency is the time to focus on learning medicine. And that for most doctors is going to be the major stream, the major stream of income they have in their entire career. And so learning how to do that one well, I think is pretty critical. And I would, I would almost caution them against going out and starting businesses and trying to get a bunch of sources of passive income as a resident. I mean, most of them have a great investment just paying down their student loans. You know, if they're not going for public service loan forgiveness or something. What would you say the best passive income sources are for a doctor who doesn't want a second job and doesn't really have any interest in being an entrepreneur?

I mean, I see this question as well all the time on different forums I'm part of and you know, from emails from readers. And I really appreciate those. It might be worded a little differently. I mean, you know, I might see stuff like I want passive income, but I don't have the time or the money right to invest or how can I make the most amount of passive income with the least amount of effort. I get that as well. I really truly believe that passive income, it's more of like an endpoint. I mean, it doesn't always start that way. Most great sources of passive income require some sort of upfront investment. I mentioned it before that either it's like time or energy or effort or money and you've got to have at least one of those three things. So if you don't really have the time or effort, but this time you have the money that hopefully a lot of physicians have, they've been saving. Well, you know, they can get a decent return without too much time in things that don't require active management. Right. So in that scenario, I mean, again, I'm, I'm biased towards real estate. So I might suggest they put their money in places like real estate, crowdfunding or in syndications where, you know, I've been fortunate enough to receive, you know, consistently, consistently receive some double digit returns over the Last couple years now, those have been pretty passive in the sense that someone else manages it. And it's nice to see these monthly or quarterly dividends that just show up or interest payments show up in my bank account. But honestly, it takes a little time to figure out what you're doing because you can't just throw money at something and not know. At least do your homework. Why? I do like real estate in particular, you know, there's, there's, there's leverage there and maybe someone else is using the leverage, but there's also a vast amount of inefficiency that exists in real estate. And so really savvy investors are able to capitalize that on that and find significant returns, but then usually that's somebody else and you can invest with them. So. Yeah, but at the end of the day, I always caution people, it's not going to be completely passive. You know, at the very least, you still have to do your, you know, your reading, you still have to educate yourself so. So you know where your money's going.

Yeah. One of the cool things about real estate, especially with regards to single family homes, is that there's a certain part of the market that is not composed of investors. Like with the stock market, basically everybody that owns a stock is an investor. But in the real estate market, at least the single family home market, that's not the case. There's a lot of people that have just bought homes they want to live in, you know, more as a consumption item than as an investment. And I think that's where a lot of the inefficiency in real estate comes from, at least among single family homes. Now, you mentioned your wife was involved in a multi level marketing business. Can you talk a little bit about the strengths and weaknesses of that and some of the opportunities that are available there?

Sure. I think for us, we wanted to find something like a business for her in particular and then we could work on it together. But that you can do from home. Right. And especially. And hopefully without a lot of overhead. And unfortunately there aren't too many businesses like that. And so we looked into a bunch of different things and we settled on one particular company that didn't require any inventory and had very little overhead. It's something that she could talk about and something that she could use. And so that's what we did. And we started this company a few years ago. She enjoys it. I mean, she really enjoys the process of talking to people about things that she's passionate about. And over time, I mean, it's slowly Grown at this point, it provides a really significant amount of income for us. Yeah. And what it's allowed her to do in particular is cut back on her medicine a little bit to pursue this. And so she's found a really nice balance between, you know, her. Her main medical career and her side business.

Now, tell us a little bit about that balance, both for you and your practice. And you have children as well, as I recall.

Yeah, I do. I have two children.

So tell us about how you find that balance and how your wife finds that balance and how together you're able to balance all these multiple businesses and two practices and raising a bunch of kids.

Yeah, I think that's. It's always a. It's a work in progress. Yeah, I think we're learning as we go. But one thing we knew we didn't want is to totally grind it out every day in terms of medicine and being stuck at the hospital, not being able to spend time together as a couple and work on our relationship, but also spend time with our children. And we wanted to be there for really important times in their lives. I mean, they're young, so. Yes. I mean, there's some school recitals and these kind of things, but we also wanted to set ourselves up in the future for. For other, bigger events that we just didn't want to miss these things. You know, I. I definitely come to the realization that life is short. Right. And so I don't want to miss, you know, I don't want to spend a lot of it just working and being unhappy. So what we started to do is, instead of thinking that, oh, we're just going to retire outright, we decided to kind of slowly cut back, especially on medicine, to find, like, a happy place. Now, I think my wife has found that she works only a couple days a week, and I think she's very happy where she's at, where she feels that, you know, it's enough to keep her skills sharp. And she gets some really great interaction outside the house, and she just enjoys what she does, and she's able to see, you know, her patients over time and keep a consistent relationship with them. And for me, I'm still trying to get there. I don't think I'm fully there yet, but I've been slowly cutting back, giving up some shifts again, getting rid of some of those nights and weekends to a place where I feel like, okay, this is the perfect balance between, again, keeping my skills sharp, enjoying it, but also being free to do the other things that I want to do.

You know, it's funny, when doctors talk about cutting back, the first thing they cut back to is a full time job. Usually, you know, because most docs are working far more than, you know, the classic 40 hour work week. And when I talk to a lot of doctors and ask them, well, what do you want to cut back to? And the life they describe is literally a full time job, they think that would be awesome. And I agree. You know, if we can get doctors down to working just full time, that would go a long way.

That's true. I said that I was going to cut that back 20%. And then when I cut back to 20%, I was talking to my friend, he said, how many hours is that? I calculated it and I was like, that's about 36 hours.

Which is basically a full time job anywhere else. Well, if someone wants to get a flavor for your blog, what three articles should she read first?

Sure. I picked these three articles. The first one is why I'm beginning my retirement today in my 30s. That's a blog post I wrote several months back, not even thinking that I'd be where I am today, which is great. Explains that concept of kind of gradually cutting back. Another one is five reasons why Doctors should have a Side hustle Again. I believe that's extremely important. You don't have to leave your current job, but who knows what this thing will become in the future. And the last one is I post on financial independence. I am financially free from medicine.

Yeah, that's quite a, that's quite a milestone. So in blogging, you know, I mean, you've got this focus on passive income. Did blogging turn out to be as passive as you thought it would be?

Definitely not. It's definitely more. Been more of an active venture. However, I've been lucky that I've been able to monetize the site pretty quickly. And there are times where I wake up and, you know, I get some notifications and I've made some money in my sleep, so that's nice. But to get to this point, it's taken a lot of work. I mean, there were months and months and I still do this every so often. I wake up an hour or two hours before anyone else wakes them up in my house, just so it's quiet, so I can get some things written right for the, for the blog. And it's always on my mind. I'm thinking about it quite a bit. I've even, you know, we spent some time at the same conferences, but we go to, I go to conferences to learn how to Create better site for the readers, create better content and run it better as a business. So really it's not been passive per se up to this point, but I feel it has that potential to become more and more so.

Yeah, it's interesting you mentioned that because I feel the same way. I can't believe the percentage of my time that I spend thinking about this business, literally, because, you know, I'm basically thinking about it all the time. And I think that's common to a lot of entrepreneurs. Is you really putting in quite a bit of time and it's not nearly as passive as anyone thought it would be in the beginning? Rewarding, yes. Passive, maybe not so much. What else would you like readers to know about you and your website?

Well, I think we've already mentioned it before, but I can't emphasize this enough. The site is not all about money, about making money for the pure sake of, you know, being rich. Again, money is. Money's a tool and you've got to think about it like that. It, you know, it hopefully buys you time and gives you the opportunity to live the life you want. And so that's why I talk about it. I talk about it quite a bit. But again, please know that at the end of the day, the site is really about those other things that are more, way more important. And that's about following your passions, about having time and freedom of time. And most importantly, it's about being with family.

That's great. Well, we sure appreciate you being on here today.

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