Physician Finance Interview #11

Financial Planning for Doctors

This is Physician Finance Interview #11.  You can find all of the other PFI posts here.

As the interview has progressed, we have broadened the category of people being interviewed. Each person interviewed is either a medical professional of some kind (or married to one).  Sometimes that’s a physician. Other times its a dentist, PA, CRNA, or another health care professional.

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.

My questions are in bold.  The answers then follow.

If you are a health care professional of any kind, 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

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

I’m a 47 year old pediatrician, married to a urologist, with 3 kids.  We live in Maine.  I work part-time (2 days a week, sometimes I pick up extra days).  I have been out of training for 5 years and have done both hospitalist and outpatient medicine – currently I am outpatient only, and I don’t anticipate going back.

2.  What is your financial background?  

I had a good role model in personal finance: my mother.  She came from a well-off but not incredibly wealthy family, worked hard her whole life, saved carefully, and taught me to be frugal and to balance a budget.  Between her retirement savings and a pension she retired from her job at a large insurance company with over a million in assets.

She also had long-term care insurance that paid for her care when she became disabled at the end of her life.  I learned how to work, be careful with money and some basic skills that everyone should have: how to balance a checkbook, buy insurance, etc.

Living on a shoestring between college and medical school was good practice.  I started a Roth IRA in my mid-twenties but had no other savings to speak of when I started medical school.  I started getting serious about personal finance when my husband  and I had three kids, two doctor jobs, and were still living paycheck to paycheck.

We had the dreaded “lifestyle creep” in the form of private school tuition and two houses.  So I started educating myself, turned a lot of our finances around, and have really enjoyed the whole process!

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 in many ways: my grandparents were wealthy enough, and generous enough, to pay for my private college and medical school.

I also consider myself lucky in that I didn’t grow up with their very opulent lifestyle – I have seen a lot of people, including close relatives, that did, and they were worse off because of it.  Growing up with a lot of money makes it hard for people to live with “less”, to find a purpose and to have a work ethic.

So I had a huge head start, and I’m very grateful.

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

Around $1.6 million

Our assets include:
457b: $41K
IRA: $250K
Roth IRA:  $13K
Simple IRA: $25K
401K: $45K
457: $156K
trad IRA: $600k
401k: $232k
cash $80k
529 plans (3):  $180k total
Home value: about $600k total, but if I only include the house that we will sell one day, about $250K.

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

$10k, which we paid off within a few months of graduating.  Husband was in the army reserve during residency which helped him get onto a good footing, and he was already an attending when I was in med school.

Dollars & Debt

1.  List your current sources and size of debt.  

Mortgage debt only: approximately $580k total.

2.  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?

We plan to sell one home in the next few years, and invest the proceeds. We will continue to pay the other on the regular schedule until husband goes to part-time in about five years – it’s at 3% interest so we are better off investing the cash than paying off the mortgage early.

Income & Spending

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

Husband: $395k

Me: $100k

I don’t foresee any increases in future.  Neither of us have partnership opportunities at our current jobs.

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

I track our spending using an excel spreadsheet.  The values come from reviewing our credit card and bank statements, once or twice a year.  I have used budget programs (Mint) for this, and I find them helpful for the real-time feedback, but for the big picture I like using my own format.

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

Yes!  We give both time and money.  I’m embarrassed to say we only give about 1% right now – would like to do more!

Saving & Investing

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

Yes, about four months of expenses.  We keep it in a money market account. We use it for big ticket items like a new car or a home repair.

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

About 20%.

We max all the retirement accounts available to us, plus the 529 plans.  That comes to about 20%.  I don’t count savings into our taxable emergency/big item fund, because it isn’t long-term savings.

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

We don’t currently have rental property – we have been landlords in the past and won’t do it again!  In future I could see investing in real estate but only in a very passive way – through an real estate investment company or REITs.

We are largely (90%) in passively managed, low-expense index funds.  We own a few individual stocks.

My first exposure to personal finance was learning about Warren Buffet and value investing, and although I don’t foresee becoming a serious stock-picker I find it fascinating.

The individual stocks we own have done really well, and we plan to own them for the long-term.  I am completely opposed to any kind of speculation, day-trading, etc.  In fact, my father lost his entire fortune (literally millions that he inherited) by trying to time the stock market so I have seen up-close how foolish that is.

I have a pretty plain-vanilla investing plan and asset allocation (60/40 stocks and bonds) and I rebalance once or twice a year. The kids 529 plans are in target date for the sake of simplicity.

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

The perfect is the enemy of the good.  Just doing a few simple things, like automating your investments in retirement plans and index funds, will put you way ahead of the game.

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.

We have 529 plans for all three kids.  We actually have two for each kid – one in Ohio, which has low fees, and one in our state plan which is slightly more expensive but offers a match.

I put in enough to get the match each year, and then put the rest into the Ohio plan.  This actually goes against my “simple is better” philosophy but I like the free money 🙂

Advice & Farewell

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

Value yourself and your training, and don’t settle for less than an equitable and supportive work environment.  Physicians are so work-hardened and so accustomed to putting others before themselves (a good thing in patient care!) that they often don’t advocate for themselves at work.

You can be an excellent physician AND be smart about money!  In fact, I think being smart about money will make you a better doctor, because you will be less stressed.  Don’t take a job that no one else will take, and don’t settle.

Personal finance and negotiation skills are learnable.  You have to put in some time, but it gets easier.

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

Student debt and productivity pressures as attendings.

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

Expensive lifestyles.

It is so easy to spend too much on houses, cars, clothes, vacations – especially when you are stressed and overworked.  Saving can seem like deprivation, until you realize that spending actually adds to your stress instead of reducing it – then saving starts to be enjoyable.

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

Bogleheads :  great information and advice on index investing.

The Millionaire Next Door“: should be required reading for all physicians.

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

No questions, but an offer: I am more than happy to speak with any students or residents who have questions about career or finance, especially around: primary care, being a woman in medicine, life/family stuff.

Thanks for taking The Physician Finance Interview!

TPP: Some really solid advice in this one!  In fact, it is a ton of the stuff I preach.  Value yourself.  Don’t settle. Save your money by avoiding unnecessary and unintentional lifestyle inflation.  While this PFI interviewee had some help getting started, she and her spouse have definitely made the most of it! 

Leave some comments below!

3 thoughts on “Physician Finance Interview #11”

  1. Great interview again.

    If I am to infer with the data provided, it sounded like you had a late start into medicine (5 years out, age 47, pediatric residency puts you finishing medical school at 39). If that is indeed the case kudos for taking on a demanding career at a much later stage. I personally am not sure I can survive the rigors of residency in my 40s.

    Student loan debt is probably the one problem that future docs will have to find a way to address or something drastically has to change. You were very fortunate to escape that without incurring additional debt.

    The room for a financial mistake these days is so slim if you are graduating with $300-600k of debt. There are other potential landmines like divorce (like what I had to go through) etc. It almost means you have to live an absolute perfect life as a doc now to be able to overcome the late start and debt

    • Thanks, TPP. I’ll let the good doctor answer for herself, if she feels so inclined.

      I agree that the room for financial mistakes is getting slimmer and slimmer as the debt burden increases. it makes preventing these mistakes before they happen more and more important.

  2. Another excellent interview.

    I’m quite impressed that you started a Roth IRA in your twenties when Roth IRA’s were very new (since its establishment in 1997 twenty years ago).

    Kudos to you for having the foresight to understand that post-tax money is the most valuable form of money in the future. It’s too bad that you only have $13k in it though. 🙁

    Is there any reason why you didn’t max your Roth IRA account like you did with the pretax retirement accounts?

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.