Physician Finance Interview #4

This is Physician Finance Interview #4, which is part of a series of posts is published each Friday. Each person interviewed is either a doctor (or married to one) and the interview allows us an in depth view of their life and financial decisions.  The focus of the interview is to investigate how other doctors have handled their money, income earning potential, assets, debts, and much more.

Tag along as we discuss success, failures, and advice that I hope will prove useful to many!  Please, leave comments below about the answers and your thoughts!

My questions are in bold.  The answers then follow.

Email me if you are interested in being interviewed and sharing your stories and experiences. The questions below are emailed to the person being interviewed and responses are returned, formatted, and published. 

Your Story & Background

TPP Introduction: Today’s post comes from one of my favorite young doctors with a blog. She keeps it real over at Reflections of a Millennial Doctor. Her posts are raw, honest, and worth reading.  Some of my favorite posts of RMD’s so far include her posts on Third Life Crisis and her post on a great doctor patient relationship she developed during training. Take it away, doc!

1. Take a second to tell us about yourself so that others can see if their story relates.  

I am a happily married 32 year old DINK (dual income, no kids) working as a Med-Peds doctor in the Pacific Northwest.  I am originally from the Midwest which is where I did my training, finishing residency 3 years ago.

2.  What is your financial background?  

I grew up middle class, but my father moved to North America with no more than $20 in his pocket and grew his wealth from scratch, putting himself through college while I was a child and stockpiling money away.  I learned about personal finance from my father who has been obsessed with retirement for as long as I can remember, and he’s made sure I know the true value of an education and of a dollar.  I’ve been working since I was 13 years old, and have been budgeting for myself ever since.

When I was in residency, I stumbled upon the White Coat Investor Blog which helped me with figuring out different options for student loan repayment, insurances once I got out of residency, etc.

However, I think my saving and spending habits had already been established prior to that.

3.  Were you given a head start in the financial world in anyway?  Let us know if the opposite is true, too. 

I was very fortunate to have my pre-med studies paid for with a combination of scholarships and my parents’ funds, but that was a time before university became insanely expensive.  I commuted from home to university to save on room and board, and I also taught piano and worked in retail 20-30 hours a week to pay for books, gas, etc, so my undergrad costs were quite low.  Other than that, no other largesse headed my way.

4.  What is your current net worth?  List the assets that compromise your net worth. 

Net worth: $487,500 (Assets) – Debts ($112,620) = $374,880

Hubby’s and my combined assets

401K – $163,000
IRA – $52,000
Roth IRA – $10,500
Taxable investments – $12,000
HSA – $10,000 (invested in TD Ameritrade via Lively)
Cash – $36,000

Mortgage – ($201,000), home valued at $405,000 per Zillow

5.  When you finished training how much student loan debt did you have?

At the end of med school, I finished with $217,000.  My husband and I chose to pay $1,500/month during residency to help stop the hemorrhaging, but at the end of my 4 year residency, it still ballooned up to $250,000.

Dollars & Debt

1.  List your current sources and size of debt. 

Student loans – $112,000
Mortgage – $201,000
Credit card debt – $620 (I’ve always paid this in full every month)

Car loans – NONE!

[TPP: I feel like you are taking a jab at me about the car loans… I’ve gotta admit that you are taking the smarter route even though I get there much faster in my V-8, RWD, manual sedan :-)]

2.  If you had/have student loans, what is your student loan repayment plan?  

I never considered doing the Public Service Loan Forgiveness program – I just didn’t have any faith that it would exist in 10 years.  I did do the income based repayment during residency but paid above the minimum amount at $1,500/month as I previously stated.  After I graduated from residency, I chose to refinance my loans with Earnest as it was the best rate I was offered.  I chose to wait until 4 months after I started my attending job so I could prove my income with those months of pay stubs.

The first rate I was offered was 5% which wasn’t great, but much better than the 6.8% I was paying.  Earnest allows you to refinance after 6 months, but I chose not to do that until after I paid the debt down from $250,000 to under $200,000.  At that point, I was given a rate of 3.55%.  Once I got to under $150,000, I refinanced again via a variable APR and now am sitting at 2.77%.

I realize the variable APR is a risk with the rates now rising, but now this is just more incentive to pay it off faster.

I had initially thought I would pay off my loans in 5-7 years, but now I’m racing to the finish line and will hopefully be done by end of 2019, just 4 years from when I started (maybe even sooner!).

3.  If you have a mortgage, do you plan to pay it off early or invest in the market?  Why? If you don’t, why did you decide to rent?

Still undecided, but we will likely do a mixture of both after the student loans are paid off.  I will probably refinance the mortgage to a 15 year term (currently at 30 year) to get the interest rate down and also get down to 80% of the loan to get rid of PMI.  Then, I’ll put the remainder of the money I had put into student loans toward investments.

It really comes down to missed opportunity costs with paying off the mortgage vs investing.  I know you’re not supposed to time the market but by the time I’m ready to really invest, maybe we’ll be in a bear market and I’ll be able to take advantage of it!

Income & Spending

1. What is your household annual income and will it be changing in the near future? 

Combined annual income: $260,000

I am starting the search for a new job which I anticipate will have a substantial salary increase – that is probably the most immediate foreseeable salary change.

However, once the student loans are paid off, my husband and I are talking about one or both of us cutting back on work which will decrease our income.  We look at it as buying our lives back.

2.  Do you use a monthly budget or track your spending?   List your major expense categories for each month in your budget/spending. 

I use Mint to track my spending, and to be honest, I look at it every day which is probably overkill.

Our top expenses are the insane student loan payments, mortgage and food (it’s way higher than it should be, but what can I say – we like to eat and conveniently live by Beer City, USA!).  I am helping send a family member who lives overseas to university, but other than the typical recurring costs such as cell phone, utilities, gas/auto insurance which amount to less than $500/month, everything else is getting shunted into savings/retirement funds.

3.  Does giving to charitable causes you believe in play a part in your financial life?  If so, what percentage of your annual income goes towards this endeavor?

It is important to me to give back and I do volunteer at our local free clinic which I haven’t really put a monetary value to.  Donations and the like probably amount to 3% of our annual income a year, but I expect that to increase once the loans are paid off.

Saving & Investing

1. Do you have an emergency fund? Why or why not? 

Yes, I do have an emergency fund to cover us for 6 months (assuming I put a hold on student loan repayments x 6 months if the situation is really dire and we cut back on non-essential spending), and this is split between our savings account and taxable investments.

I am actually considering decreasing this so I can pay off my student loans faster, especially since we have a pretty high credit line that we could use in a pinch.

2.  What percentage of your income do you save towards retirement/investments each year?  How did you determine this level of saving?

20% of our pre-taxed income goes into retirement/investments – we max out both 401k’s, IRA’s and HSA’s (in taxable accounts).  Then, 45% of our take home pay goes toward student loans.  Mint has a handy pie chart that tells me these percentages.

Once the loans get paid off, they will then be shunted into investments.

3.  You mentioned your assets above.  What is your investing philosophy? 

For my 401k through my current place of employment, I just picked a Vanguard target date fund.  I rolled over all my previous 401k’s into an IRA that is currently managed by Wealthfront, one of the roboadvisors that’s out there.  They do all of the rebalancing and primarily invest in dividend heavy mutual funds.

You can set your risk tolerance when you set up the account, and I set that to 10/10 risk tolerance.  At the time, I figured it would be a while until I retired so I could handle the ups and downs of the market.  Now, I’m considering retiring early so that will likely change in the future.

I’m kind of a “set it and forget it” kind of gal, so I’m not into any day trading, nor do I watch individual stocks or participate in cryptocurrency.  I do like to make sure the fees are on the low end and I check in on everything probably once a month.  I’ve toyed with the idea of real state, or at the very least REIT funds, but since my primary goal is to first pay off the student loans, that has been on the back burner.

4.  If you could tell other doctors about one thing you’ve learned about saving and investing, what would it be?

It all boils down to your saving and spending habits.  If you can’t save, there won’t be anything to invest.  Physicians will make more than enough money in their lifetimes, and yet so many of us don’t actually create wealth because we’re too busy chasing that doctor lifestyle.

Keeping up with the Jones’, especially when your Jones’ are other high earners, will be the death of your savings/retirement plans.

5.  If you have kids, are you saving for their college education?  Describe where and how. If you have kids, and don’t plan on saving for their college, please tell us why.

I don’t have kids, but if I did, I assume I would take advantage of a 529.

Retirement Goals & Gaffes (Mistakes)

1. What is “your number” and your age that you feel will allow you to retire?  How’d you arrive at this number; give us some details. 

I will likely FIRE.  I’m aiming for 45, but will likely be closer to 48-50.  I’ve read all about the different “safe withdrawal” rules of 4% or less, your current spending x 25, etc, and that’s how I arrived at my number between 3.5 to 4 million for both my husband and I to retire.  I really don’t need much to be happy, and most of my hobbies are very low cost (ie hiking and photography).

I would be quite content living in a van down by the river (a la the Chris Farley SNL skit) if that meant I could retire sooner.  That may just be a millennial thing though, and wouldn’t work for everyone.

2.   How much will you be spending annually in retirement?  Give us some details. 

I haven’t looked at this in very much detail yet.  Right now, my husband and I are living on about $55,000/year when you take away the amount we’re throwing at student loans.  I anticipate once I’m ready to retire, we will have paid off our mortgage by then so we can subtract $18,000/year from our living expenses, but we would likely use that money for travel and other activities.

Even if we increased our annual spending to $80,000, it would be well under the 4% rule if we retired with 3.5 million.  I would draw from my taxable accounts given that I would be retiring early.

This also assumes I wouldn’t pick up locums shifts here like and there for fun or to keep additional cash flowing in.  So many variables to think of!  Right now, I’m hyperfocused on paying off the student loans so I haven’t allowed myself to fantasize about retiring in too much detail yet.

3.  If you have already retired, tell us about it. 

I wish! Alas, I have nothing to share here.

4.  If you plan on retiring early (before age 65), how do you anticipate handling health care costs?

DNR.

In all seriousness though, I’ve been very intentional about my efforts to keep myself healthy with diet and exercise.  I would consider joining a health share or a DPC practice +/- catastrophic insurance coverage instead of paying an arm and a leg for insurance that doesn’t cover anything.  Who knows what healthcare will look like in 10-15 years anyway?  I will hold off on serious planning until I’m closer to retiring.

Advice & Farewell

1.  What advice would you give to The Physician Philosopher readers who may be a younger (or current) version of you?

Don’t imprison yourself with golden handcuffs – I’m talking about the big house, the luxury cars, fancy jewels, etc.  They will trap you into a job you may or may not end up loving, just to finance that lifestyle.  Please consider watching the Minimalism: A Documentary About the Important Things on Netflix.  It may just change your life.

2.  What is the toughest challenge facing physicians who are just finishing training?

Student loans, hands down.  The thought of having to deal with them is suffocating.  I lucked out by “only” having $250,000, but I have friends who ended up with $350,000 all the way up to $750,000 when 2 physician friends coupled up.  You CAN dig yourself out of that hole, but you have to be diligent.

3.  What is the top financial mistake you see your colleagues making that you would advise our younger physicians and trainees to avoid?

Falling into the “I deserve it” mindset, aka YOLO.  I’m not saying you don’t deserve the things your heart desires, but maybe you don’t need it this very instant while you’re dealing with other financial concerns.  Delayed gratification for just a few more years will set you up so much better for your future.

4.  What are the top two-three resources you would recommend to a reader outside of The Physician Philosopher website (book, blog, podcast, etc)?

1) White Coat Investor – I’m sure everyone knows about this one by now.

2) The previously referenced Minimalism: A Documentary About the Important Things on Netflix.  The Minimalists also have a ton of essays on their self titled blog.  It’s just a different way to think about money, time and your life than what is the traditional American consumerism script.

3) Early Retirement Now blog – I specifically recommend the Safe Early Withdrawal Rate Series (there are 27 parts!).  I like the way he breaks things down mathematically and systematically – there are plenty of nitty gritty details for the those who are into that sort of thing.

5.  What questions do you have that TPP readers might be able to answer?

Are there any other recent residency grads out there who are itching to retire early, and how are they tackling their student loans?

Also, how do you handle the guilt of leaving the profession early?

Thanks for taking part in the interview series!

TPP: The DNR comment got me.  My mouth literally opened and I laughed a loud laugh when I figured out you were joking.  I, too, love the Big ERN safe withdrawal rate series and tagged my favorite one of them above.  I love Big ERN’s analogy about flying in a plane.  Barely getting there with what you have wouldn’t likely be what most people are looking for.  

As for the guilt of leaving medicine early, I’ll let others answer, though I certainly have opinions of my own.

10 thoughts on “Physician Finance Interview #4

  1. Hi, Reflections of a Millennial Doctor! Great interview. I’m a millennial doctor too!

    You should never have any feelings of guilt about leaving the profession early. You have to do what is best for you, and not for others. You do you!

    I have no intention of retiring super early. But I do plan to retire early than the traditional 65 years old. My plan is to retire at 55.

    The Minimalism documentary is a good one. My wife and I changed our life after watching the movie as well as a few other documentaries. Now we are frugal, vegan, zerowaste, minimalists! LOL!!! 😀

  2. Don’t let anyone tell you how to live your life. You owe no one an obligation to remain in medicine. It make a great hobby job but only if it is interesting and not exhausting. You are well on your way. Congratulations

  3. I too find M’s writing enchanting. She is a great storyteller and I’m always excited to see her next post.

    M, I think you are over estimating your FIRE number especially if part time locums is part of your plan. I think you could go very part time at the $2 to 2.5million mark and see how it goes. You could always go back if it isn’t working out.

    I’m also a millennial doc. Graduated right around the same time she did and my wife and I are also fighting the loan battle. We were indentured for $450k after we graduated. I am going PSLF and she refinanced a couple of times to get a decent rate. We have a giant pile of cash that could wisk away her loans tomorrow. Gone. Can’t convince her to pull the trigger though. She really wants to move out of this big city and own a home.

    We will hit a net worth of zero pretty soon though. That is exciting!

    • Net worth of zero is a huge day! We definitely celebrated that, for sure.

      I have a buddy who has wanted his wife (the doc) to decrease her cash pile and put it towards debt. She finally is letting him and they are ecstatic about it. No sense losing money to inflation, much less guaranteed losses to your student loans. Keep 6 months for emergency fund, and pummel your loans with the rest.

  4. A little late to the comment party! I blame the PST time zone and primary care. How do you anesthesiologists find all this time during the work day to comment?!

    At any rate, thank you again TPP for the opportunity to do this interview. Once upon a time, I fathomed to do a finance blog geared toward us lowly primary care docs but instead I somehow became the self-declared queen of burnout. I’ll leave the fancy finance talk to the rest of you 🙂

    @Dr. McFrugal, I appreciate the minimalist approach! In an ideal world, I would love to have a Tesla but currently I’m content with pushing the boundaries on how long I can keep my rusting people mover alive. I’m close to 153,000 miles which is exciting. I’m hoping to get to 180,000 miles before the bottom rusts out, and then I’ll probably eek out another 20,000 utilizing duct tape 🙂

    @Mom MD, I am currently in the process of finding another job which will hopefully be more intellectually interesting. We shall see if this keeps me in the game longer! Thanks for the words of encouragement.

    @Kpeds – I agree, I’m probably overestimating my number significantly. But while I like to take my pictures over the edge of cliffs, I can’t let go of my need to have a huge safety buffer zone for retirement. Perhaps as I get more desperate to get out of medicine, that number will go down. Congrats on almost getting down to net zero! I must admit, I don’t know when that actually happened for us so we never really celebrated it – perhaps we’ll celebrate it now!

    • If it makes ya feel any better, M, I had the day off 🙂 I never comment on anything during my work day. Don’t want the conflict there! Hence my early morning comments and later evening comments.

      The pleasure was all mine! Thanks for taking part.

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