The Arrival Fallacy
Dr. Jim Dahle opened the discussion by asking Lisha about the concept of “arrival fallacy,” especially its prevalence among physicians and high earners. Lisha defined it as the mistaken belief that achieving a particular goal or milestone, such as a higher income, will bring lasting happiness. She noted that many doctors quickly realize that financial milestones don't necessarily lead to the joy they anticipated. For example, earning more money often introduces new financial obligations—such as higher taxes, larger emergency funds, and lifestyle upgrades, which erode the sense of wealth and can feel like added stress.
Reflecting on her own experiences, Lisha shared how, as a medical trainee, she once believed that earning $200,000 as an attending physician would make her feel rich. However, upon reaching that point, the reality was quite different. She and her peers realized they underestimated the diminishing returns of increased income on happiness. Instead, she pointed out that other factors—like work-life balance, supportive colleagues, and control over one's schedule—contribute far more to overall satisfaction.
Jim echoed her sentiment, sharing a story from someone who posted on WCI who has achieved financial independence but struggles with finding purpose and happiness now that that goal has been reached. Jim emphasized that money amplifies a person's existing state—it doesn’t inherently create happiness. While wealth can solve certain problems and make life more convenient, such as paying for services or enjoying luxury travel, its impact on happiness is often overestimated. Money can add to an already happy life, but it cannot create a happy life.
Lisha then recounted a candid conversation with a friend who made her realize that being “rich” is relative. Her friend highlighted how Lisha's financial stability—paying bills effortlessly, saving and investing consistently, and giving to charity—reflects a life of abundance. This shift in perspective helped Lisha recognize her blessings and appreciate her financial position without comparing herself to others who might earn more. Jim added to the topic of feeling “rich,” emphasizing that wealth is more about net worth than income. There are a lot of docs out there making huge amounts of money who have less than $1 million saved as they near retirement. He advised physicians to focus on building true wealth and to resist the natural tendency to compare themselves to others. He also talked about the impact of giving on your psyche. He explained that giving signifies to you that you have enough. If you can give and help others, you already are living in a place of abundance.
The conversation then transitioned to the challenges of finding balance, particularly for doctors and young mothers. Jim shared his own struggles with juggling multiple roles with two jobs, helping at church, doing parental and family duties, and coaching multiple hockey teams. Lisha offered insights from her physician friends navigating “mom guilt” and career fulfillment. She encouraged them to consider flexible schedules and to negotiate their roles at work right out of the gate. She said there is a lot more to negotiating than just figuring out what your salary will be and that it can be helpful to know your priorities and to negotiate them as a package rather than focusing solely on salary or hours.
Lisha shared her personal decision to prioritize schedule flexibility over maximizing income. By negotiating her work hours at an academic institution, she found a balance that allows her to enjoy time off while still earning a comfortable income. She stressed the importance of identifying what truly matters and advocating for it in professional negotiations. Jim concluded with a critical piece of advice: prioritize long-term career sustainability to avoid burnout. He urged doctors to make career adjustments early on to ensure longevity, whether that means reducing hours, taking Fridays off, or decreasing call responsibilities. By pacing yourself and planning for the long haul, you can strike a healthier balance between financial goals and personal well-being.
More information here:
What We Can Learn About Work-Life Balance and Retirement from the French
A Candid Conversation with My Physician Spouse About Burnout, Guilt, and Resentment
FIRE: Is It the Cause or the Remedy of Burnout?
Jim and Lisha explored the topic of FIRE (Financially Independent Retire Early) and its relationship to burnout. Lisha shared her personal journey, acknowledging the tension between pursuing aggressive financial goals and maintaining a fulfilling life. She reflected on how her frugal lifestyle, with a focus on achieving financial freedom, sometimes leaves her feeling deprived and exhausted. She knows many other people who have had a similar experience. Lisha emphasized the importance of doing work she enjoys and having control over her schedule, noting that a lack of autonomy can quickly turn even a beloved profession into a source of dissatisfaction.
To address burnout, Lisha advocated for diversifying your income by having a side gig or two. Instead of relying solely on extra shifts to solve financial problems—an approach that often exacerbates burnout—she suggested finding creative ways to earn money that feel more enjoyable and sustainable. Jim added to the discussion by reinforcing the importance of balancing financial goals with personal well-being. This can be tough for busy physicians with student loan burdens, bills to pay, families to take care of, and retirement accounts to fund. The importance of aligning your financial pursuits with your values and passions is critical to ensure the journey to financial independence remains both achievable and fulfilling. The two then answered the following question.
“Hi, I'm in my final year of residency, and my husband just completed his residency. We have been reviewing our financial plan and making some updates and changes. We, like many other physicians, don't love medicine and would like to become financially free sooner rather than later. With this being said, my question is, where's the best place to put money so that we can access it earlier than the typical retirement age without all of the penalties associated with taking money out early?”
Jim expressed concern about the disillusionment that occurs so early in medical careers and he wondered what could be improved in training to prevent this. Lisha agreed and highlighted the challenges of residency, emphasizing the inefficiencies and grueling hours that can crush optimism. She reassured residents that attending life often comes with better work-life balance, more autonomy, and reduced hours, providing a brighter outlook.
Both Jim and Lisha stressed the importance of not making major career or financial decisions during residency, as the extreme workload can cloud your judgment. It can be a brutal time, and no one can do it long-term. They encouraged this listener to hold on and wait to make judgments about what attending life will feel like until they have started their job. They also recommended new physicians take some time off before starting their attending roles to reset, rediscover their passion for medicine, and avoid immediate burnout. Jim shared how, after his fall in the Grand Tetons, he spent several months away from the ER. It was the longest stretch he had not seen patients in over 20 years. That time away really reminded him how much he loves medicine and how much he missed seeing patients. When he finally got back to the ER, he was more empathetic, kind, and understanding to all of his patients. He was so happy to be there. He said it was a great reminder of the power of taking some intentional breaks when you need one.
The conversation then shifted to financial planning and answering the listener's actual question. They discussed that financial planning is going to look different for those aiming for FIRE or considering early retirement. Jim advised against avoiding retirement accounts out of fear of penalties for early withdrawals, noting numerous exceptions that make these accounts beneficial even for early retirees. He highlighted strategies like utilizing the SEPP rule that says that, basically, as long as you take out the same amount every year from the time you retire until you're 59 1/2, there's no 10% penalty. You can get to your retirement money earlier than you think you can without that penalty. He also discussed understanding the age 55 and 59 1/2 withdrawal provisions to access funds without penalties.
Lisha outlined her own “waterfall” approach to saving, prioritizing employer-sponsored retirement accounts, solo 401(k)s, Backdoor Roth IRAs, HSAs, and 457(b) plans before taxable accounts. She emphasized the importance of maximizing tax-advantaged options while recognizing the flexibility of taxable accounts for early withdrawals. Her strategy reflected a thoughtful balance between current needs and long-term financial goals.
Jim and Lisha also addressed misconceptions about taxable accounts, noting that they can be invested tax-efficiently and that they are a valuable tool for high earners who save beyond retirement account limits. They stressed that achieving early retirement or financial independence involves careful planning and leveraging the right accounts rather than avoiding traditional retirement vehicles altogether.
Throughout the discussion, they both reiterated the need to optimize careers for longevity and fulfillment. They encouraged physicians to reevaluate their schedules, prioritize flexibility, and rediscover the joy in their work to sustain long-term engagement in medicine. By taking proactive steps, residents and early-career physicians can overcome burnout and build satisfying, financially secure lives.
More information here:
Is FIRE Really Just an Empty Goal?
Inheritance for Your Kids While You Are Still Living
Jim introduced the topic of inheritance by sharing this email from a physician in his late 50s:
“I'm a doc in my late 50s, and I'm starting to consider retirement in the not-too-distant future. I have two young adult children, ages 19 and 23, and I'm interested in finding a way to give them an advanced inheritance. I've worked hard and saved and invested wealth throughout my career, and I'm fortunate to have more than enough to retire well when I want to. However, I don't see a lot of value in sitting on all this money until I'm old and dead, hopefully a very long time from now.
Hopefully, my children won't be in a position to need my money in their 50s or 60s, but they're certainly at a period in their life right now where that money would do them so much good. But I don't really know how all of that works, given gift taxes, capital gains taxes on my taxable account, etc. I’m curious if you have any ideas of how to provide an inheritance for my children while I am still alive.”
Jim invited Lisha to share her experiences. She reflected on conversations with her father, who is financially secure but prefers not to give cash to his children, prioritizing other forms of support instead. Lisha shared how her father, despite being financially capable, values the lessons of resilience he gained from his struggles and hesitates to provide direct monetary support. Instead, he opts to provide memorable family experiences, like vacations, which allow the family to create lasting bonds while still encouraging them to work hard for the lives they want. Lisha explained how these vacations—ranging from Alaskan cruises to African safaris—have become a meaningful way for her father to contribute without directly giving money. She said these trips are extremely meaningful to her and her family.
Her father has also created a system where financial help is possible but requires a clear plan, such as an interest-free loan with a repayment schedule. This approach gives Lisha and her siblings a safety net while encouraging responsibility and financial literacy. Lisha admitted that while she appreciates this system, she sometimes wishes for a more direct inheritance approach—especially during life stages when financial support could be transformative, such as paying off student loans, buying homes, or managing childcare expenses.
Jim shared his own strategy for inheritance, emphasizing the importance of timing and balance. He explained his “20s fund” approach, where he saves for his children using a combination of accounts—including UTMA custodial accounts, Roth IRAs, and 529s—providing them with financial resources in their 20s when the money is most useful. This fund can be used for education, travel, weddings, or a home down payment. Beyond this, Jim’s estate plan delays major inheritance distributions until ages 40, 50, and 60, ensuring his children develop careers and financial independence before receiving larger amounts of money. Jim’s phased approach also acts as a safeguard. By observing how his children handle the 20s fund, the estate plan can be adjusted if needed. For example, if a child struggles with financial management, he can implement measures like a spendthrift trust to provide additional oversight. This layered approach balances the desire to help with the need to instill financial responsibility.
They also discussed the technical aspects of gifting, such as gift tax exemptions and strategies to minimize taxes. Jim highlighted that the 2024 gift tax exemption allows individuals to give up to $18,000 per recipient annually without triggering tax implications, and this can be doubled for couples. If you give them more than that, you have to file a gift tax return. What that does is subtract that money from your eventual estate tax exemption. You don't actually have to pay any taxes; you just have to file the return. Gifting appreciated assets like stocks can be another tax-efficient way to transfer wealth, especially if the recipient is in a lower tax bracket.
Lisha acknowledged the value of blending Jim’s structured inheritance plan with her father’s focus on experiences. She appreciated how Jim’s plan allows parents to assess their children’s financial habits early on while still creating opportunities for family bonding and support. She also suggested that physicians explore benefits at their workplaces, such as access to legal services that can help set up trusts and estate plans affordably. The discussion highlighted the universal challenge for parents with substantial wealth: balancing the desire to provide meaningful financial support with the goal of fostering independence and resilience. Jim and Lisha agreed that a thoughtful, tailored approach—whether through advanced inheritance, family experiences, or phased distribution—can help families navigate this delicate balance effectively.
More information here:
Wealth Minded MD
Lisha discussed her new venture, Wealth Minded MD, co-founded with Dr. Brittne Halford, to empower women in medicine to improve financial management and increase income. Combining her background in finance and medicine, Lisha emphasized the need to address the gender wage gap and help female physicians achieve financial wellness. Their signature program, Boost, is a 12-week coaching initiative designed to teach women negotiation strategies to increase income at their jobs and to develop profitable side hustles, leveraging tax benefits from 1099 work. In addition to the Boost program, they also offer a free Masterclass and a podcast focused on financial education for physicians.
To learn more, check out wealthmindedmd.com/wci. If you want to work with Dr. Taylor, they are offering all white coat investors $300 off the Boost program. Check it out today!
If you want to learn more from Jim and Lisha's conversation, see the WCI podcast transcript below.
Milestones to Millionaire
#198 — Financially Recovering from a Divorce
Today we are talking with an anesthesiologist who went through an emotionally and financially tough divorce. He came on the podcast to encourage anyone going through a similar situation to hang in there and know it will be better on the other side. This doc had his financial awakening soon after his divorce when he realized he had to turn his finances around. He started working more and got into a few side gigs so he could increase his income. He got out of debt and started saving and building wealth. He is now happily remarried and financially successful.
Finance 101: The Importance of Spouses Working Together Toward Financial Goals
Managing finances as a couple can be done successfully even if both partners are not completely aligned, as long as they share a common understanding and goals. Many couples find it beneficial to combine their finances, which fosters collaboration and simplifies asset management. If personal spending freedom is a concern, creating an “allowance” system can provide each partner with a set amount of personal funds to use freely without having to check in about spending. This approach can help establish mutual trust while keeping the couple focused on shared financial objectives.
In certain situations, keeping finances separate may be more practical. This could include scenarios where one partner brings significantly more assets into the marriage, has concerns about asset protection, or has inherited funds that may be better managed individually. Couples who marry later in life or have experienced a previous marriage might prefer to maintain separate finances to preserve established wealth. But for couples who start with minimal assets, combining finances often makes more sense, as any future earnings or assets will likely be shared in the event of a separation anyway.
Regardless of how finances are managed, maintaining open communication is key. Regular “money meetings” or budget reviews can help couples stay aligned and prepared for life's uncertainties. It’s essential to ensure both partners are familiar with the financial management process, so one can take over if necessary. This includes understanding how to manage investments, access important accounts, or work with a financial advisor if needed. It is common for one partner to be more interested in the finances than the other partner. That is not a problem as long as both partners are in alignment with all goals and strategies, and they both know the financial plan. Planning together and staying adaptable can help couples navigate financial challenges and grow stronger as a team.
To learn more about working with your spouse on financial goals, read the Milestones to Millionaire transcript below.
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WCI Podcast Transcript
INTRODUCTION
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.
Dr. Jim Dahle:
This is White Coat Investor podcast number 395 – Navigating the nuances of career, family, and money with Dr. Altelisha Taylor.
First of all, welcome to the podcast, Dr. Taylor.
Dr. Altelisha Taylor:
Thank you so much for having me. It's really nice to be here and to see your face and to know that you're healing, all of those things, so it's great.
Dr. Jim Dahle:
Thank you. I appreciate your kind words. For those who don't know, Dr. Altalisha Taylor has a new podcast out called The Wealth Minded MD, as well as an associated coaching business. You can get more details about that at wealthmindedmd.com/wci.
Our sponsor for this episode is SoFi, helping medical professionals like us bank, borrow and invest to achieve financial wellness. SoFi offers up to 4.6% APY on their savings accounts, as well as an investment platform, financial planning and student loan refinancing, featuring an exclusive rate discount for med professionals and $100 a month payments for residents. Check out all that SoFi offers at whitecoatinvestor.com/sofi.
Loans are originated by SoFi Bank, N.A. NMLS 696891. Advisory services by SoFi Wealth LLC. The brokerage product is offered by SoFi Securities LLC, member FINRA/SIPC. Investing comes with risk, including risk of loss. Additional terms and conditions may apply.
All right. First of all, thank you everybody out there for what you do. This is not easy work you do. Sometimes we forget this. I was talking to one of our staff members yesterday who has a sibling who is in residency. They're in the first year of a residency and really feeling the heat and wondering, “Is this what I should be doing with my life?” And I'm like, “Well, that's because up until this point, they've just been preparing, and now they're finally doing.”
We forget that medicine is not easy. It's hard. And so, all of you out there who are doing it day to day, whether you've been doing it for a year, whether you've been doing it for 30 years, thank you so much. Those of us who have needed your services recently, and I've needed a lot of your services recently, it's really very much appreciated.
Before we get into your questions, we need to make sure we let you know about our big sale. This is one of our biggest sales of the year. It's our Black Friday sale. It runs the 27th of November through December 2nd, and it's basically 20% off everything at our store and our courses. All you have to do is put in the code, SAVE20. It gets you 20% off. That could be hundreds of dollars off some of these things. And so, make sure you use that. If you've been waiting for a discount to buy a WCI course, or you want to buy some swag for your favorite WCI-er, now's the time. Save 20% off.’
CORRECTION
Okay. Let's get into some questions, shall we? Well, first, I guess we got to do a correction. This is not unusual for us to do corrections on the White Coat Investor, because we screw up a lot. And that's because we talk about complicated stuff. And I would rather get into the complicated stuff and screw up every now and then, and have to issue a correction, than just keep it superficial and never talk about that stuff.
This one's actually not my mistake. I'm just covering for some of the other people who've been hosting lately. This one comes from the episode we had on student loans recently, with Andrew from studentloanadvice.com, as well as Tyler Scott.
Andrew said this about the PSLF buyback program that he talked about in that episode. And the correction is basically that borrowers would be eligible to apply for PSLF buyback once they reach 120 months of qualifying employment, not 120 qualifying payments. So, months during the save legal limbo may count as credit towards PSLF buyback. And they weren't as clear as they wish they would have been. And that caused a little confusion. We got a few emails, etc, afterwards. So, hopefully that is crystal clear now.
THE ARRIVAL FALLACY
Okay. Let's talk today, since we've got Lisha here, let's talk about arrival fallacy, shall we? Can you define that and give us your thoughts on arrival fallacy and why this is so common among docs and other White Coat Investors?
Dr. Altelisha Taylor:
Yeah. When I think the arrival fallacy, I think of this idea that once we get to a certain mark, once we achieve a certain goal, that we're going to experience this exponential level of happiness and that that happiness is going to last indefinitely. And what we've seen time and time again, myself included, is that for a lot of physicians, that just doesn't seem to be the case. A lot of us think that once we start making more money, once our income goes up three, four or five times, that our life is going to be so much better.
And what we experienced, what I know I've experienced is it's almost like once the money gets deposited, it almost gets taken out just as fast because we realize that when we make more money, we now have to pay a higher percentage in taxes. When we make more money, we now need to beef up our emergency funds, or we need to save for a house, or we want to upgrade our car or buy a home or send our kids to private school or whatever. And so, we've got all these uses for cash, and it just doesn't seem like we have enough.
I think for myself, for a lot of my friends, it's surprising. We can think back to when we were interns making $60,000 a year, and you couldn't tell us we weren't going to be rich making $200,000. We would look at our attendings and they would say, “Oh, it's not that much.” And we would go, “They're crazy, they just don't manage money right. They're just doing something wrong. We're going to be the exception to the rule.” And the joke is on us because we now understand what they're talking about.
And so, I think a lot of doctors are feeling that way. If I had to summarize it, I would say a lot of doctors sort of overestimate the amount of happiness that we're going to get from the increase in income. And we underestimate the other factors in our lives that really have the biggest benefit or the biggest impact on our happiness.
Those other factors being the people that we work with, whether or not we have the support that we desire at our job, whether or not we feel like we have control over our time or over our schedule, whether or not we can spend as much time with our kids or our family. I think we overindex on the money part, and we kind of underestimate the impact of the other things.
Dr. Jim Dahle:
Yeah, for sure. Super common. And the timing on this recording is perfect because this morning is 06:14 in the morning. Somebody posted this on the WCI forum. “What's your happiness in life after becoming financially free? For those who achieve financial freedom, what is your source of happiness in life? I'm at a stage where I'm just going through the motions at work. I don't need the money made from working. However, I plan to work intensely for several more years to help out my medical partner and to ensure the department is running smoothly.
By the time I quit, retire, I'll be in my 40s, but I have no clue what to do afterwards. I'm pondering the next step of life. I thought about either finding a good woman and marrying, being a playboy and living a hedonistic lifestyle, or diving deep into religion and living a monastic lifestyle.
I've been talking to various people, watching YouTube videos, reading Ecclesiastes to broaden my perspectives, but I'm still not certain what direction to take. Chasing financial success is a learning experience. There are so many options and possibilities on how to progress when you start with less than nothing.”
It's wild. It's great that you have these choices. It's great that this is your dilemma. I actually love helping people with first world problems. That's most of what we talk about here at the White Coat Investor, for sure.
The truth about money is, like you said, more money just makes you more of what you are already. It doesn't change you. It just makes you more of that thing. If you were unhappy before, having more money isn't going to make you happy. If you were happy before, you're probably still happy when you have more money.
Now, let's be honest, though. More money does solve a lot of problems in life, especially if you know how to spend it. If you hate cleaning your house, guess what? When you have more money, you don't have to clean your house. You can pay somebody else to do it. Does that make you a little happier? Absolutely, it does. Let's not kid ourselves that it doesn't make you any happier at all to have a little more. Is it a little nicer to fly first class than it is to fly in economy? Absolutely, it is. But don't overestimate how much happiness you can add to your life through things like that. It's a little bit, but it's not as much as most people think.
Dr. Altelisha Taylor:
Yeah, I totally agree with you. In fact, it reminds me, I was having brunch with one of my girlfriends. We went to medical school together and I went to fellowship and she didn't. She's been an attending longer than I have. And I remember we were eating and I was like “This feels different than what I thought it would feel like.” And she's like, ‘What do you mean?” And I'm like, “To be honest, I don't feel rich. I thought that attending, the first paycheck, the sign on bonus, I thought I was going to be living large and I don't feel rich.” And she goes, “You don't?” And I go, “No, do you?” And she goes, “Yeah, I think I'm rich.” First, there's a lot of feelings going through my mind right now. A lot of thoughts. She's an emergency medicine physician like you, Jim. And I thought I knew how much she made, but clearly she's doing way better than I thought.
Dr. Jim Dahle:
That's the funny thing about emergency medicine. How much you make is mostly how much you work. It's mostly trading time for money. Some jobs pay a little better than others, obviously. But if people are working a lot, you can make a lot of money in EM.
Dr. Altelisha Taylor:
I've learned, I've learned. She's telling me this and then she's like, “But Lisha, you're rich too.” And I was like, “Okay, all right, I don't know how much you think I make. But it's probably not as much as the number you're thinking in your mind.” And she goes, “No, no, no, no, no. You can comfortably pay your rent. Your bills are on auto pay. You don't think about the price of food or groceries. You travel consistently and you have so much money left over that you can save consistently. You tithe. You give 10% to your church and you're investing thousands of dollars each month and you're paying extra towards your student loans.”
She's like, “The reason you don't feel rich is because you're doing all of these other things. But if you weren't doing those things, then you probably would feel as rich as you are.” And so, I think that for me, it was like a change in mindset of saying, “Okay, let me stop comparing myself to other doctors that I know make substantially more than me and try to remember how blessed I really am.”
Obviously there are still things that I'm hoping for and believing for and like trusting God for and those sorts of things. But when I think about, “Okay, I live in a nice place. I'm very healthy. I make more than the average American. I have a decent amount of job security. I've got a family that loves me. I've got friends that add joy and value to my life.”
I'm thinking, “Okay, do I live in a mansion? No. Do I have this luxury car? No.” But a part of this for me and sort of dealing with this arrival fallacy and dealing with this idea that medicine doesn't feel like how I thought it would feel is me remembering how blessed I am and changing my mindset on my own life.
Dr. Jim Dahle:
Yeah. I think mindset is a big piece of it. This is an issue though, among docs and other high earners. This is very common not to feel rich. I wrote a blog post, I think originally in 2017, we trot it out again every few years, but I literally called it 10 Ways to Feel Rich because people, they don't feel rich.
The first thing on there was actually get rich. Because there's a lot of people that think they're rich and aren't. Because they confuse income and wealth. A high income is not actually rich. A doctor might come out of training and be making $300,000 a year, but their net worth is actually minus $400,000 because they got all this student loan debt. They're not rich yet. The first thing I tell people is get rich first, then you can worry about feeling rich.
But a lot of it is simply recognizing anxiety. You're always going to have worries about money. It's natural for us to look up and not look down. We look at people that have more than us and that's the natural thing to do. Sometimes maybe we just need to hang out with a different set of Joneses. We're hanging out with the wrong Joneses.
When I was first attending, we were not living in a very nice neighborhood. We were just off base. And those who have lived near a military base know what just off base means. It was not a nice neighborhood, but we sure felt rich compared to everybody there. Even though I was only making like $120,000 as an attending, just because we were not hanging out with a particularly wealthy set of Joneses.
And another thing I think that helps is what you mentioned. You mentioned that you're a tither. Giving money away is very good for our psyches. You're telling your psyche, your id, whatever you want to call it. I’m not a psychiatrist, obviously, whatever you want to call it. But you're sending this subliminal message that you have enough when you're giving money away. And so, I think giving money away is a great way to feel as rich as you are.
And that blog post, anyway, you can look it up on the website, 10 Ways to Feel Rich. If you're rich and not feeling rich, that's a great blog post to help you reset your mind, your mindset on it.
FINDING BALANCE IN OUR LIVES
Okay, let's talk about balance. This is a big issue for all docs. I'm trying to balance, right now I'm not playing on any hockey teams because I'm still got a hand in the splint, but I'm coaching two hockey teams. I'm balancing two jobs, family, more volunteer work at church, etc.
Balance is hard for all of us, but I think it's particularly challenging for young mothers. Because you throw in what's often referred to as mom guilt. How do we balance this, particularly for young mothers that are struggling with this?
Dr. Altelisha Taylor:
Yes. Let me first say, I am not a mother, but I have lots of friends who are. I'm going to answer this question from maybe their perspective and my conversations with them. Whenever I'm talking to my friends who have just had kids, which is a lot of my friends, I'm in my thirties. A lot of my friends are in their thirties. So, it's this prime time where people are expanding their families. And they talk to me about that all the time.
It's especially interesting talking to my female physician friends, because for them, it's not just, “I want to spend time with my family, or I want to feel fulfilled at work.” There's also this guilt of, “Did I do it all for nothing? I went to medical school. I took out the student loans. I am very highly educated. I went through all this “trouble.” I went through all of this just to now come to the realization that medicine doesn't fulfill me in the same way, but I still feel this obligation to work because I can technically work and I have a skillset that society finds useful. So, am I wasting my skillset?”
There's all of these thoughts. And one of the things that I tend to say to them, one of the things that I tend to coach doctors on or talk to doctors about is maybe it's not an all or nothing. Maybe it's not “I need to quit my job or I need to work more, pay for childcare”, all of those things. Maybe it is about trying to find some more flexibility in your schedule.
One of the things that I was really intentional about when I finished fellowship and I started as an attending is figuring out what things were most important to me. Yes, money is important. I'm someone that used to work in finance. Money is very important to me, but so is schedule flexibility. So is living close to my family.
And so for me, I had to make the hard decision because I'm specialized in sports medicine is do I want to try to make as much money as I can as a subspecialist, or is my priority having the most schedule flexibility? And I was going back and forth on this decision. Make as much money working in an ortho clinic, just crank out patients, make a substantial amount of money each year. Or do I work in an academic institution or maybe work part time, that sort of thing.
And I decided to work at an academic institution. So, I make substantially less than I could. But one of the things that I have that a lot of my colleagues don't have is schedule flexibility. I only see patients 50% of the time. I'm a full-time physician, but I have 50% admin time.
For the academic institution, one of the things that was really important to them is not going over budget as they hired me. And I said, “Okay, well, what we can't come up to in salary, maybe we can make up on the backend in terms of clinical time.” And so, for me, I don't see patients on Fridays. I don't see patients on Wednesdays, I don't see patients on Monday mornings.
Sometimes I look at my friends who are sports medicine physicians, or maybe they're in other specialties. And I go, “Man, it would be nice to make a substantial amount of money.” But then I also look at myself and I go “I'm still making multiple six figures and I have every Friday off and I have every Wednesday off and I can do all of these things.”
I'm saying this to say that maybe it's not all or nothing. Maybe it's about creating more flexibility in your schedule and being really good at negotiating and advocating for your case and figuring out, “Okay, these are the things that are important to me. Let me also see what are the things that are important to my employer.”
One of the things that I'm always helping women on, especially when it comes to negotiating is sometimes we think we got to negotiate one thing at a time. I want a higher salary, so I'm going to try to get that. And then I want Fridays off or more admin time, so I'm going to try to get that.
But sometimes it's better to negotiate it as a package because you don't really know what's most important to your employer versus what's most important to you. And had I not negotiated this whole thing as a package, I might not have come to the same conclusion. I might not have gotten the same package.
And so, for me, when I'm talking to doctors, it's like, “Okay, how can we change your schedule. Let's think about what our ideal life is. Let's think about what we really want in life. And let's say, okay, what tweaks could we make in our current schedule that would make that better? And then let's practice negotiating for that. Let's practice advocating for that. Let's practice putting ourselves in a position to get some of those things that we want.” And so, I think that that really helps is the schedule flexibility part.
Dr. Jim Dahle:
Yeah, for sure. The phrase I often use is “Optimize for longevity.” When you're making a career decision, what is going to allow you to stay in the career longer? Because the biggest financial risk that doctors have is burnout. 50% of doctors are burned out now. That is the risk. You cannot buy burnout insurance. You can buy disability insurance, but you can't buy burnout insurance.
So, make those decisions in a way that if you're looking at this, I only think I can do this three more years, you got to change something. Because three years isn't going to cut it for most of us. Most of us are not only three years away from retirement. You've got to figure out a way to make this career work for you longer than that. And whether that's Fridays off or fewer patients per hour or less call or whatever it is, you need to figure that out and make those changes as early in your career as you can.
And each time this sort of thing comes up, ask yourself, “What's going to make me happier in the long run?” Take a long-term perspective on it. Because in the beginning, you got a million uses for money. You got student loans to pay off. You probably have a credit card you brought out of residency. You still got a car loan or you got a beater car that needs to be replaced. You want to max out your retirement accounts. You want to get into a house and now housing is so expensive. You got to save up some huge down payment. We've all got these great uses for money and we get this short-term mindset and forget that a career is two or three or four decades. Pace yourself a little bit here Pace yourself for crying out loud.
FIRE – IS IT THE CAUSE OR THE REMEDY TO BURNOUT?
Okay. Let's change subjects. Let's talk about FIRE. The acronym is Financially Independent Retire Early. And the question that I think we're going to discuss today is, does pursuing FIRE cause burnout or is it the remedy to burnout?
Dr. Altelisha Taylor:
Yeah. I think this is a good one. I think about this all the time, especially when I'm thinking about my own personal situation, because I'm someone who's, let's just say finance minded. As I've got all these financial goals that I want to hit, and I'm trying to hit them as soon as possible. I want to achieve some level of financial freedom as early as possible, have more control over my time, do all of those things.
But then I've learned that in my pursuit of those things, in my desire to reach financial freedom as soon as possible, I sort of deprived myself of some of the things that I would enjoy. Going back to my conversation with my friend about feeling rich. She's like, “Hey, if you didn't do all of those things, if you didn't have all of those financial goals, then maybe you would feel richer.” Maybe it's that I'm still living like a resident. And so it's like, “Okay, I want to pursue this goal. I want to pursue this financial freedom. I want to have all of these side gigs, but now I'm so tired and I'm so exhausted that I'm thinking about quitting.”
And so for me, it's been all about finding a job that I would enjoy. Having some control over my schedule, because what's that quote? If you do something you like on a schedule that you can't control, it turns it into something that you hate. And so, for me, I've been trying to do something that I like, a.k.a. medicine, on a schedule that I can better control.
And then also for me, it's also been about monetizing my passions. If I could do something that I love, that also helps people, and that also brings in extra income on the side, then it doesn't make me feel like I'm working as much. Because I think for a lot of doctors, we know that we can work more to make more. And our remedy for not feeling like we have enough is just working more shifts.
And although that does solve the problem temporarily, this question was, it can lead to burnout. For me, it's, “Can I find another way to make money?” A way that doesn't feel like work, a way that still allows me to do something that I enjoy. And for me, that's monetizing a passion.
Dr. Jim Dahle:
Let's take a question off the Speak Pipe here that's on this subject. Let's take a listen to this.
HOW TO SAVE FOR AN EARLY RETIREMENT IF YOU ARE BURNED OUT OF MEDICINE?
Speaker:
Hi, I'm in my final year of residency, and my husband just completed his residency. We have been reviewing our financial plan and making some updates and changes. We, like many other physicians, don't love medicine and would like to become financially free sooner rather than later.
With this being said, my question is, where's the best place to put money so that we can access it earlier than the typical retirement age, without all of the penalties associated with taking money out early? Thank you. I appreciate it.
Dr. Jim Dahle:
Wow. Before we get to our question, let's talk about the overarching background of this question. This is a doc that hasn't really even started her attending career and already wants out of medicine and is looking for really what's the fastest way out of medicine. If she'd walked in as a coaching client, what topics would you be talking about? Are there other better remedies to burnout than FIRE?
Dr. Altelisha Taylor:
First of all, if she came to me, I would say congratulations. First of all, I think she said her husband is done with training and she's almost done with training. I know that medicine is hard. I know that training can be grueling. The first thing is congratulations.
This is hard work and she's done it, but I will admit it makes me kind of sad. These are two people who haven't yet started their careers as attending physicians and already, like you said, want out of medicine. And it's a gut check for me as somebody who works with a residency program. It's like, “What are we doing so wrong in training that two people that are clearly very intelligent and obviously once were very excited and optimistic about becoming doctors?”
Dr. Jim Dahle:
Imagine reading the essays they put in there on their applications to med school. Imagine what they said the day they matched into residency. And now by the end of training or shortly after training, they don't feel that way anymore. What happened? What happened?
Dr. Altelisha Taylor:
Yeah. This is a gut check for me. Maybe I can add in some more wellness programs. Maybe we can work with the schedule as somebody who works in medical education. But another thing I think is what I tell my residents sometimes when they come to me feeling similar sentiments is that, “Okay, I understand that this may not be what you thought it was going to be. I'm going to acknowledge that because I too was in your shoes. However, being in attending in certain ways is better than being a resident.”
I tell them, your residency clinic is probably very inefficient. Things tend to get more efficient when you become an attending. There are certain things that you're dealing with now that you may not have to deal with when you're in attending. Right now, you have zero control over your schedule. Ideally, you'll have more control over your schedule when you're in attending. Right now, you're probably working 60, 70, 80 hours a week, if not more. You have the ability to not work that much when you're in attending.
So, one of my things is some reassurance that this is hard. Everyone thinks it's hard and it will get better. Now, how much better depends on what specialty you're in and the job that you choose and that sort of thing. But there is a light at the end of the tunnel. I know it looks like it's flickering and sometimes it doesn't look like it's on, but it is there. It will get brighter. And so, giving some reassurance and some sort of hope and optimism.
Dr. Jim Dahle:
Yeah, for sure. For sure, some hope and optimism. The first thing I tell a doc when they come to me and say, “I think I'm burned out”, the first thing I tell them is, “Why don't you cut back to full-time?” A resident is working two full-time jobs. Of course, you're burned out. You're supposed to be burned out. Everybody's burned out working two jobs. That's why you can only do it for three or four or five years or whatever. Residency can't last longer because everybody'd quit.
So, don't make a decision about your career and how you want your career to look and your financial life to look while you're still in training, working 75 hours a week and taking Q3 call or whatever. You're just not in a position where you can make this decision yet. So, don't shape everything else in your life.
I love planning ahead and making financial plans and all that, but don't make that much of a definitive plan while you're still sitting there in residency because you may feel very differently in two or three years, especially if you optimize your career for longevity. I think that's just way too early to really be making big decisions like when you're going to retire. You're still in training, for crying out loud.
But let me give a little personal perspective as well. When we're recording this the day after the election, which is also the day before my podcast dropped a few weeks ago that talked about my fall up on the Grand Teton, the first episode of that. That's dropping tomorrow, the day after we're recording this.
It's 11 weeks today from the date I fell on the Grand Teton, and I just went back to work three days ago. I just saw patients again for the first time three days ago. 11 weeks is the longest I have gone not seeing patients since 2001. What's that? 23 years. I haven't gone that long without seeing a patient in 11 weeks. My partners are now starting to refer to it as my sabbatical this time I took off.
But let me tell you about my shift. I went in there, and I'd been looking forward to it. I'd been missing it for weeks because I hadn't done any medicine for weeks. I went to one conference and sat in a bunch of lectures, but I hadn't actually seen a patient in over two months. And I went in there, and I sat down, and I was the most patient doctor you've ever seen. I was the most empathetic doctor you've ever seen. You couldn't believe it. Every patient was thanking me, and what a great doctor I was, and trying to get me to be their primary doctor.
Because I'd had this chance to step back, to be a patient myself, to miss practicing medicine, to want to get back, to fight and work hard so I could get back. And it was a totally different perspective than when I'd worked six night shifts in a row as a resident, and I was totally burnt out. Because six night shifts in a row suck. It's terrible. You're taking care of crazy, weird medicine in a certain segment of society, and a million people want your attention all at once, and it's burnout-inducing.
So, I think step back for a little bit. Maybe if you're feeling this burned out at the end of training, take a couple months off before you start your attending job. Start out not in some crazy call kind of schedule. Set it up in a way that you're going to have some career longevity.
Dr. Altelisha Taylor:
Yeah, yeah, I agree with that. I agree with that. I definitely took several months off before I started my attending job. I think it made things so much better. Like you said, Jim, I was looking forward to seeing my first patient as an attending. I was patient. I wasn't rushing with the patients. And so, it was really, really nice. Yeah, I encourage all of, almost everyone that I talk to who is ending training, to take some time off for that reason.
Because I don't think that this caller is in the minority. I think a lot of residents, like you said, feel burned out, feel like medicine isn't what they thought it would be and are thinking, “How long do I have to do this again?” And so, taking a couple of months off after training is a good reset.
Oftentimes, one of the reasons why people may not do that or may be apprehensive is they're worried about how they're going to pay for healthcare or having some money during that time. And there are ways that you can get some money. You can do some locums work at an urgent care or something like that to make ends meet once a week, once every two weeks or something like that. You can activate COBRA at your job. There's different things that you can do to make time for this. But like you said, Jim, I think a lot of residents are feeling burned out and should strongly consider taking some time off after training.
Dr. Jim Dahle:
I think it might help to go back and read your admissions essay at med school too. Somewhere deep down inside you, and it's been beat up like crazy the last seven or eight or nine years, somewhere deep down inside you, that optimistic, loving, empathetic person is still in there. You're still in there. And to get them back out might require you not working 65 hours a week. It might require you working 30 hours a week.
But I'll bet you can rediscover the joy of medicine. Most people, maybe not everybody, maybe a few people, you just chose the wrong career and either you got to get out of it and go do something else, or you save up enough money and get out in a few years so you can go do something else or just go do something else. Hopefully you don't have some student loan burden that forces you to practice medicine for a few years if you really, really, truly hate it.
But I would hope that we could get most people feeling this way at the end of their training to a point where they can enjoy a 10 year, 20 year, 30 year plus career in medicine and find the joy they were looking for, the financial success they were hoping to get from it as well and make a huge contribution to society.
Okay, we got to answer the question too. The question is, “How should I save differently thinking about early FIRE?” Well, a lot of people think they should go, “Oh, well, I got to do, I got to save it all in taxable. I got to save it in my taxable account. I don't want to contribute to retirement accounts.”
I would caution you against that. Almost always, you're going to be better off saving for retirement, even early retirement in retirement accounts, in tax protected accounts. These are accounts where the growth is protected from taxes. You don't pay on dividends and capital gains as you get them as you go along. And you may get a tax arbitrage later when you pull the money out, but it's also asset protected.
If heaven forbid you have a very rare above policy limits judgment against you, you got to keep that money in those retirement accounts. In ERISA accounts in all states and IRAs and solo 401(k)s, et cetera, there aren't ERISA accounts in many states. They get at least some protection, if not complete protection like we do here in Utah for our retirement accounts.
And the other thing to keep in mind, if you have a job offering you a 457. There's no age 55 rule. There's no age 59 and a half rule that applies to 457s. You could set up a 457. So it pays out over five years as soon as you separate from the employer. And maybe that's an account that can grow in a tax protected way that offer some asset protection you can touch before age 55 or age 59 and a half.
The other thing to keep in mind is the number of exceptions to these rules are just plethora. There's lots of them. You can pay for health insurance without the 10% penalty applying. If you're disabled at all, you can get it out without 10% penalty applying. You can get it out in death.
There's the SEPP rule, Substantially Equal Periodic Payments rule. Basically, as long as you take out the same amount every year from the time you retire at 45 or whenever until you're 59 and a half, then there's no 10% penalty on that. So you can get to your retirement money earlier than you think you can without that penalty. That's not a reason to just stick everything in taxable and ignore your retirement accounts.
But the truth is those who are saving enough to retire that quickly, they're probably maxing out their retirement accounts and saving up a big taxable account anyway. So, you're going to have a taxable account you can touch and just let those 401(k)s and IRAs ride until age 55 or age 59 and a half.
Do know about that age 55 rule though. At 55, you can get access to your 401(k). If you don't roll it over into an IRA, if you separated from the employer, you quit working, you've retired, you can get that at 55, penalty free. You don't have to wait until 59 and a half for a 401(k) or a 403(b). So keep that rule in mind as well. That'll get you four and a half more years that you might not have thought of.
What do you think? What would you tell somebody that wanted to retire really early and was worried about those 10% penalties of taking money out of retirement accounts early?
Dr. Altelisha Taylor:
Yeah, exactly. Retirement accounts is my number one. I know that this caller said that they wanted to avoid fees and penalties, but as you mentioned, Jim, there are a lot of exceptions to the rule. And so for me, I plan to not work until I'm 65 either. I still utilize retirement accounts.
And for me, that encompasses three main accounts. Number one, my 403(b), that's at my job. I contribute the maximum each year and I get the match at my employer. That also encompasses for me a solo 401(k). If you're one in three physicians that have a side gig, that's what the studies show, one in three physicians has a side gig. If you are one of those physicians that has a side gig, then you have the ability to open up a solo 401(k). And so, that's one of the things that I've done.
With a solo 401(k), I can contribute more money to retirement accounts in addition to what I already contribute at my job's 403(b). So with that solo 401(k), I can contribute pre-tax, 20% of my profit, plus I can set it up to do a mega backdoor Roth and contribute even more money.
For me, it's maxing out my 403(b), it's contributing as much as I can to my solo 401(k), it's doing my backdoor Roth IRA each year. I utilize retirement accounts. That's number one on my list. Another account that you may want to consider or this caller may want to consider is an HSA account. If you've got access to a high deductible health plan at your job, then that means that you can contribute money to an HSA account.
What I think a lot of people may not realize is one of their biggest expenses in early retirement is the cost of healthcare. And so, utilizing that HSA account can be particularly beneficial. I put some money in there.
You mentioned the 457(b) account. A lot of physicians, especially physicians that work at nonprofit institutions have access to that. And like you mentioned, Jim, it's not a retirement account, but it works really similarly to one and that you can put in pre-tax money, allow that money to grow tax free. And then unlike a retirement account, you don't have to utilize all these exceptions to the rules. You can get access to that money as soon as you leave your employer. And so, I like those accounts.
And one of the things I always tell my friends is don't be afraid of a taxable account. You just do that one after you've done the other ones, but there's nothing wrong with having money in a brokerage account. So, that's just calling Fidelity, calling Vanguard, contributing some money into that account, investing it in some reasonable way, index mutual funds, that sort of thing, and letting it grow over time. And then knowing that you have the ultimate flexibility with that account as well.
And so, that's kind of my waterfall, work retirement accounts, solo 401(k), backdoor Roth IRA, HSA, 457(b), and then my brokerage account. That's kind of the waterfall that I would go through.
Dr. Jim Dahle:
Yeah. And even if you clean out that entire brokerage account before you get to age 59 and a half, that's okay. Because after you get to 59 and a half, all that other stuff is accessible with no penalty, very flexible. People forget, you don't have to wait till RMD age. You don't have to only take out your RMD. You can take out whatever you want out of those accounts penalty free. If it's pre-tax, you got to pay taxes on it. If it's a Roth account, you don't even have to pay taxes on it.
I think people worry about this question too much. And I agree, too many people out there worry about using a taxable account. A taxable account can still be invested very tax efficiently. Most of our portfolio currently is in a taxable account. And that's a good thing, because it usually means you're making enough money that you can save more money than you can put into your retirement accounts. It's not a bad thing to have a taxable account.
INHERITANCE FOR YOUR KIDS WHILE YOU ARE STILL LIVING
All right, let's change the subject. Let's talk about inheritance. And to tee this up, I'm going to read an email I got, which I thought was really good that came in from a regular White Coat Investor.
“I'm a doc in my late 50s, and I'm starting to consider retirement in the not too distant future. I have two young adult children, ages 19 and 23, and I'm interested in finding a way to give them an advanced inheritance. I've worked hard and saved and invested wealth throughout my career, and I'm fortunate to have more than enough to retire well when I want to. However, I don't see a lot of value in sitting on all this money until I'm old and dead, hopefully a very long time from now.
Hopefully my children won't be in a position to need my money in their 50s or 60s, but they're certainly at a period in their life right now where that money would do them so much good. But I don't really know how all of that works, giving gift taxes, capital gains taxes on my taxable account, et cetera. I’m curious if you have any ideas of how to provide an inheritance for my children while I am still alive.”
And I think you've had a bit of an experience with this. You want to share your experience?
Dr. Altelisha Taylor:
Yeah, I love this question because it reminds me of a conversation that I've had with my dad. My dad is in his early 60s to mid-60s. I can't remember his exact age. Dad, if you're listening, I'm sorry, but he's somewhere in that range, and he's made several comments to myself and my two older brothers that he could comfortably retire now if he wanted to, but he likes his job. And he says, “Me and your mom will be well taken care of. I don't even know if I could spend all of the money that I have now.” And of course that made me giddy. I'm like, “Okay, I don't have to worry about helping mom and dad out, that's nice.”
Dr. Jim Dahle:
Exactly, that's the number one thing. That's what I love about hearing your parents are doing well. And Katie and I are lucky, both of our parents are okay. And that's number one. I don't have to go and help them. If they have enough for them, forget the inheritance. I just want not to have to help them because there are so many docs out there that it's not just their parents they are helping. It's siblings, it's uncles, it's aunts. They're supporting people moving from another country and it's a big deal.
But I love your first point, which is you don't have to help them, which is great. That's a great gift. Even if parents can give nothing else to their kids, if they can be self-sufficient, that's wonderful.
Dr. Altelisha Taylor:
Dad, that might've come off wrong. I do love you. I wouldn't mind helping you if I needed to. I just need to put that disclaimer out there. But yeah, I was like, “Okay, he doesn't need my help.” The second thing, I was like, “Oh, maybe there's something in it for us.” Me and my two older brothers, we're like, “Oh yeah. Dad's going to come through for us.”
But then to be honest, I got a little sad because similar to this email, I thought to myself, “Well, my parents are really healthy right now, even in their 60s.” And so, there's a really good chance that they're going to live to be in their 80s or 90s or beyond. And so that means by the time they pass away, if they left us an inheritance, we would be in our 50s and 60s.
And no one's going to turn down free money, of course, but that's probably not going to change the quality of our life. My brothers and I have pretty good jobs, are pretty financially sound. But you know what would change our lives? Getting that money now. Because my dad paid for my undergraduate education. I went to Duke University, that was not cheap, but he did not pay for my medical school. He was like, “Nope, nope, nope. You need to invest in your own education.” So I've got student loans that I'm paying off.
My middle brother and my sister-in-law are pregnant with baby number two. And so, my brother is having this dilemma of “Now I've got to pay higher childcare costs. And so, do I switch jobs so that I can make more money, but then in the act of me doing that, maybe I'll see my kids less.” My oldest brother, him and his wife are running out of space in their home. And so, they are actively house hunting. And them getting money now could make a big difference. Maybe they could afford a nicer home, in a safer area, in a better school district.
And so, all of us are like, “Dad, you want to give us an inheritance. Don't you want your kids to live a better life than you did?” But my dad wasn't buying it. He grew up very poor and he felt like the act of him struggling to make ends meet helped him to develop the grit and the resilience that made him who he is today. And so, he's very against giving us cash. And so, we're like, “Okay, dad, can we come to some sort of happy medium here? Don't you want to help us out?”
And so, he decided that he wasn't going to give us money, but he was going to give us experiences. He didn't have the ability to travel when he was younger, he didn't have the money, he didn't have the time off, but now he has both of those things. And so, he's decided that he's going to pay for family vacations. He said, “You guys use your money for your financial priorities. You want to pay off your loans, you want to buy a house, you want to pay for daycare, do those things. But I want to create memories with you all. And so, I'm going to pay for family vacations.”
Last year we went to Alaska, we did this seven day Alaskan cruise, which was incredible. My aunts and uncles were there. Earlier this year, we went to South Africa, we did Cape Town, we did the whole African safari. We flew to Zimbabwe and saw Victoria Falls. We've done Europe. We've gone to London and Paris and Switzerland and Italy and all of these things.
And so, for him, he loves it because he gets to travel and he gets to travel with the people he loves the most, which is us, of course. And we like it because we probably wouldn't be traveling as much like this without his help. And so, my dad's happy medium right now is paying for family vacations.
The other thing that he's done is he said, “Hey, I don't really want to give you cash, but I don't want you to feel like you're struggling to that degree. And so if you need money, you have to come to me with a business plan.” If we have some idea or something within reason, he says, then we have to tell him what we want the money for, tell him the amount. Create some sort of plan. And he says that we create the terms of how we're going to pay him back. And he says it's an interest-free loan, but if we need something, then we can come to him and get it.
And so, for us, it's been really cool because I think my brother wanted to go to China with his business school class. And he couldn't afford the trip. And so he came to my dad and my dad said, “Okay, I'm going to pay for this trip, but you've got to pay me back. You've got to pay me back over X amount of time, X amount of dollars.” For us, it still gave us that feeling of there's not free money, but it also gave us that security of knowing like dad's got our back.
That's sort of how my dad has done it. I wish that he would do it the way you're doing your kids, Jim, because I really could use that 20s or 30s fund, but you know what? I'm going to choose to be grateful for what I have.
Dr. Jim Dahle:
Yeah, for those who haven't heard about our plan, this is the dilemma. You want to give them money when the money is actually useful. And money is not that useful when you inherit it in your 60s. So, that's the one dilemma. The second one is you don't want to ruin them. You don't want to keep them from developing grit, from developing a career, from learning how to save money and invest and becoming financially literate and financially disciplined and all that.
And so, the way we've decided to balance this in our plan is what we call the 20s fund. We start saving up for them a UTMA account, which is basically a taxable account that's a custodial account. In Utah, it becomes theirs at age 21. And we got our first kid becoming 21 in about six months. This is not that far away.
That is the mainstay of it, but it's also a 529 and it's a Roth IRA. If they earn any money as teenagers, they'll let them basically spend their money and put my money into the Roth IRA. It's actually the opposite. They're spending my money and putting their money in the Roth IRA, but that's their 20s fund. It's a Roth IRA and a 529 and UTMA.
And the idea is it's just a whole lot more useful to get money in your 20s than it is in your 60s. So they can use that money for a summer in Europe or missionary work or a wedding or a honeymoon or a car or a down payment on a house or to supplement an education. Although I think our 529s are going to cover that just fine. That's the idea behind the 20s fund.
And then even if we keel over tomorrow, they don't get squat until they're 40. So they got to have a career. For 20 years, you got to go fend for yourself. Yes, you're getting this head start, but for 20 years, you got to fend for yourself before you're getting anything. And even after that, they don't get it all at 40. They get a third of it at 40, a third of it at 50 and a third of it at 60.
And my theory behind that is just the three strikes rule. If you blow it three times, that's on you. But if you blow it once, we got you covered. You're going to get some more money when you're 50. And so, hopefully at 40, when they get that money, they pay off mortgages or become financially independent or whatever. And at 50, they can be done working if they want to be. And 60, mostly they're just investing that portion for the next generation.
That's the way we kind of thought about our estate plan. And who knows, maybe we change it down the road. But that's how we balance these two things of giving them money when the money's actually useful along with not ruining them. I think every doc probably has, with children anyway, has that dilemma they're struggling with.
Dr. Altelisha Taylor:
Yeah, I need to make sure my dad listens to this episode so that he can replay it.
Dr. Jim Dahle:
It's great for your 20s fund, but you're already established in your career. You're doing great.
Dr. Altelisha Taylor:
You know what? We can easily name it the 30s fund. I have no problem with that at all. So dad, if you're listening, Jim's real good with money.
Dr. Jim Dahle:
We've probably had to talk about some of the technical aspects of it here too. The questioner wanted to know, how do the gift taxes work? Well, remember what gift taxes are. Gift tax is just using up your estate tax exemption. Anytime you give more than the gift amount, which is $18,000 a year in 2024. $18,000 a year, you can give each person in your life that you want. And your spouse can give them $18,000 too. So if it's a married kid, you can give them each $18,000 and your spouse can give them each $18,000. So that's what, $72,000 a year you can give them without filing a gift tax return.
But if you give them more than that, you have to file a gift tax return. And what that does is it just subtracts that money from your eventual estate tax exemption. You don't actually have to pay any taxes. You just have to file the return. So, no big deal to give them gifts in that respect. If it's less than 72, you don't have to do squat. If it's more than that, you just got to file a gift tax return.
As far as capital gains taxes work you can actually give them your appreciated shares if you want. And they can sell them and pay taxes in their capital gains bracket, which might be 0% depending on how much money they make. Like giving to charity, that you can flush capital gains out of your taxable account.
And so, that can be a smart way to give to kids as well as far as the technical aspects go. But I think the far more interesting question is how much do you give to them? When do you give it? What are the conditions under which is given? And I think every family is going to solve that a little bit differently.
Dr. Altelisha Taylor:
Yeah, I agree with you. I don't have kids, but I think for me, I'd probably do a blend of what you're doing and what my dad's doing. I like the family vacations. My brothers and I are really busy. And it's not just our immediate family. Both of my brothers are married. And so, their spouses or my sister-in-laws come too. And so it's really nice. I don't remember the last time I spent 10 straight days with my brothers aside from when we all lived in the same house as kids. It was really nice to create those memories. These trips and these vacations are things I will never forget.
And so I really do like that aspect, but similar to how you're thinking, I think my brothers and I are also like, “Come on dad, come on dad, just a little bit would be great.” I think a blend of both of those things would be great. I love the 529 accounts. I think a lot of physicians are doing that sort of help with college costs or higher education costs for their kids. I think that's good.
I've thought about a UTMA account, even for my nieces and nephews. I think for me, I'm a little nervous about the fact that they could spend it on whatever they want. Jim, you have to report back to us. Do you regret it or not?
Dr. Jim Dahle:
Well, here's the beautiful thing about it. This 20s fund is tiny compared to what they should get at 40. We get to see how they manage money. And if they suck at money, guess what? That estate plan is probably changing and at 40 maybe they're getting like a spendthrift trust instead of a trust they'll have access to.
And so, I love the idea of being able to watch them, and this assumes we live of course, which given some of my hobbies is not necessarily a given, but to be able to watch how they manage that money, that relatively small amount of money in their 20s, I think tells us a lot about what they're going to do when they get a bigger sum of money at 40 and 50 and 60. And that's another thing I really like about how we've set it up.
Dr. Altelisha Taylor:
Yeah, yeah, I like that. And I want to give a plug here because I think for a lot of physicians, especially those of us who work at academic institutions, oftentimes one of our benefits at our job is these law packages. Jim, I don't know if you've heard of them, but it's like you pay like $15 or $20 or so a month and you get access to lawyers and you can utilize these lawyers to set up a trust fund for your kids or a living will or whatever it is. And so, this oftentimes is a really good solution. If you're someone who's listening to this and you're thinking, “Hey, I like Jim's idea”, then you might want to look at the benefits at your job and just see if that is available to you.
WEALTH MINDED MD
Dr. Jim Dahle:
All right, speaking of a plug, let's hear a little bit more about what you're doing lately with this company you've started, this Wealth Minded MD company.
Dr. Altelisha Taylor:
Yeah, I'm so excited. It is a company that I started with my friend and fellow physician, Dr. Brittne Halford. Our mission is really to help women in medicine, not only better manage their money, but also to increase their income. I worked in finance before I went to medical school and everybody thought I was crazy to leave a job in private equity, to go to medical school and take out six figures in student loans. They thought it was insane.
I don't regret my choice at all. I love being a doctor, I love working in medicine, but I've always been looking for a way to sort of blend these two worlds together. My love for finance along with my love for medicine. And one of the ways that I've been able to do that is to help doctors get better with money, help doctors live a life of financial wellness, especially female physicians.
We know that there's a gender wage gap. We know that women over the course of their careers make substantially less than their male counterparts. Obviously, there are a lot of factors at play there, but I really want to help rectify that. And one of the ways that Brittne and I are working to do that is through our new group coaching program called Boost.
Boost is a 12 week program that helps women in medicine increase their income inside of their jobs and outside of their jobs. The “make more money at your job” part helps women with negotiation strategies so that they can increase their compensation and get more control over their time. The second part, which is make more money outside of your job helps women learn how to monetize a passion and start a profitable side hustle while also leveraging some of those 1099 tax benefits.
And so, we're really excited about this. If you're a woman in medicine who feels like you don't make as much as you should, and maybe you don't feel as confident when you come to the negotiating table, Boost is for you. If you're someone who does make a large amount of money, but you're looking for ways to transition out of medicine and want to transition into a new career or have a new side hustle, then Boost is for you.
And so, we're really excited about this. We've also got a free masterclass to help you get started and you can go to wealthmindedmd.com/wci to access that. Again, it's wealthmindedmd.com/wci. You can get access to that free masterclass. You can also sign up for Boost right there on the site. Of course, we've got a discount for all our WCI community. And so, if you use code WCI300, you can get $300 off that coaching program.
And so, that's one of the things that I'm really excited about. Of course, we've got our Wealth Minded MD podcast. I’m just really excited for all the things that we can do to help doctors, especially female physicians get a lot better with money.
Dr. Jim Dahle:
Awesome. Now I know some of you are out for a run or walking the dog or you're driving to work as you listen to this. And it's really hard to remember URLs. So, we're going to make this as easy as we can for you. whitecoatinvestor.com/boost will take you to the same place.
RETIREMENT ACCOUNTS WHEN YOU HAVE MORE THAN ONE JOB
Dr. Jim Dahle:
Okay, now you wanted to ask me a question while we were on here, kind of a complex retirement account situation. Let's talk about that for a minute before we let you go.
Dr. Altelisha Taylor:
Yeah. You know what, Jim? You're my go-to source. It's so crazy because my dad is a tax professional. I kind of think he gets a little jealous that sometimes I like go to you for a question. I'm like, “I'm going to email Jim.” And so, I'm coming to you to say you're my resource on this.
I have a question about whether or not we really get penalized if we contribute more than the $23,000 to retirement accounts. Let me give you this scenario. So, let's say you got a doctor who has two jobs. They work at an academic institution for job A, and then let's say they work some locums or whatever, or not locums, maybe they just work in private practice for job B. They've got access to a 403(b) and a 401(k) or something like that.
Could they theoretically contribute $23,000 free tax to job A, and then contribute another $23,000 as a Roth contribution to job B? Obviously we're only supposed to have only one employee contribution, but what happens if we contribute more? Do we get thrown in jail? Is there some crazy penalty or does the government kind of just look the other way? And so, I would love to hear Jim's advice for me on how I can maximize having access to two retirement accounts.
Dr. Jim Dahle:
All right. Well, there's actually a lot that goes into play on this particular question. The first thing to keep in mind is sometimes you win audit roulette. You just don't get audited and you get away with something. And this happens to a lot of docs out there that I think are taking bogus deductions for their cars and home offices and all kinds of stuff. They're just playing audit roulette and they didn't get audited.
That doesn't make it legal. And there's a lot of things that you might get away with. And I think particularly around retirement accounts, I don't think anybody's looking all that closely, let's be honest. And so, I think a lot of people get away with stuff they're not supposed to.
But let's go over the rules so you know what the rules are. The first rule to keep in mind is that no matter how many retirement accounts you have, you only get one. In 2024, if you're under 50, it's a $23,000 deferral. Whether that's tax deferred or whether that is Roth, you only get one of them. Even if you have access to eight different retirement accounts at eight different unrelated employers, you only get one of those. It's $23,000. You can split it between multiple people, but it's $23,000, that's it.
The other rule to keep in mind is that every unrelated employer has a different 415(c) limit. So if you're under 50 in 2024, that's $69,000. And that's the total of employee and employer contributions. If you're maxing out your employee deferral at your regular gig, which is probably what most docs do, and they get a little bit of a match there, then when they go over to their solo 401(k) for their 1099 gig, they can only make employer contributions. And that's about 20% of your net profit from that job. And so, that's what most people are doing.
Now, if you get a customized plan and you can make after tax contributions to it and do an in-plan conversion, this is known as the mega backdoor Roth IRA process, you can get a lot in there without making necessarily that much money at the 1099 gig. If you only made $80,000, you could probably put $69,000 of after-tax employee contributions and convert it to a Roth IRA. So, that's one way you get a whole bunch of Roth IRA money.
There's one other rule, one little complexity there, if your main gig account is a 403(b) and not a 401(k). And this is very unfortunate, but it's just the way the law is. If it's a 403(b) and you have a solo 401(k) on the side, those two accounts actually share the same 415(c) limit, the same $69,000 limit. So, you can't put more than $69,000 in if that's your work situation. Whereas if it was a 401(k) and a solo 401(k), you'd get two limits. So, that's really unfortunate.
But we had a blog post not long ago on the blog of this fellow, this doc who had four jobs and a 403(b) at each of them that was offering him matching dollars. And he was trying to figure out how much money to put into each one to maximize the match. And it turned out he could not get all the matching dollars he was being offered without contributing more than $23,000.
And it turns out the way the rule is actually written is you can contribute more than $23,000. You just can't deduct it. And so, he could put in $28,000, get all of his matching dollars, and then theoretically pull that money out if he wanted to, if he got to keep the matching dollars and nobody noticed, or just leave it in there and recognize that he's not going to get the deduction for that money. And it was worth it because he got so much money in matching money that it made it worth it.
And then the question came up, “Well, what about Roth money?” Because that's already post-tax money anyway. And the conclusion we basically came to was that nobody really knows. It's not really outlined there. If that's Roth money, what happens exactly? Surely you're not going to get thrown in jail though, but the IRS may audit you and say, “You got to pull this money back out of the account with its earnings and maybe pay a little bit of an interest or penalty or something on that money.”
When you get into these really complicated situations, it's not always entirely clear. And like I said, I don't think this is being watched very carefully, to be honest with you. I think most people that make a mistake, they win audit roulette. I'm not going to advise you to play audit roulette, but I think a lot of people do win when they do play.
I think it's usually accidentally quite honest, but those are the main rules that are clear that everybody understands that this is the way it works. Don't expect your accountant necessarily to understand that because you might be their only client using two 401(k)s. But those are the rules for how to use multiple 401(k)s. Does that answer your question, Altelisha?
Dr. Altelisha Taylor:
I think it does. What I'm hearing you say, Jim, is that I'm not supposed to do it, but I probably could get away with it. But I don't like the idea of doing something that's illegal. I would try to make the correct contributions. I just was curious because people ask me this all the time. And I was like, “I don't know. Maybe you could over-contribute and nothing happens.” So I'll stick to following the rules, Jim. That's what you said. I'll stick to it.
Dr. Jim Dahle:
You're talking about putting $23,000 in your 403(b) and then turn around and putting $23,000 as a Roth employee contribution in your solo 401(k).
Dr. Altelisha Taylor:
Yeah, yeah.
Dr. Jim Dahle:
That's clearly not permitted. So, you may get away with it. You may get away with it for many years, but it's pretty clear you can't do that by the rules.
Dr. Altelisha Taylor:
Noted. Okay. Because I work sometimes at the urgent care and I wanted to be 1099, but they wanted me to be employed. It was a battle that I lost. And so, I'm technically an employee at two places. And so, I was like, “Man, that place gives me a match. My main job gives me a match. Is there some way that I could maximize this opportunity, if you will?”
And so, very similar to it seems like the blog post that you wrote with the fellow where we're trying to figure out the best way to do this. And I don't think I'm the only physician in this position that has access to a lot of different 401(k)s. I have taken your advice on. I've set up a solo 401(k). I do the mega backdoor Roth each year. And so, that's great. Let me not be greedy, I guess. And follow the rules.
Dr. Jim Dahle:
You can always invest more in taxable.
Dr. Altelisha Taylor:
Thanks.
Dr. Jim Dahle:
You don't have to break the rules just to be able to invest more money. But it's true. Lots of docs are getting $100,000, $200,000, even $300,000 into retirement accounts in a year, especially if you've got access to a cash balance plan and you're in your 50s or 60s. It's amazing how much tax protected money you can contribute in a given year with the right setup. So, good question.
Dr. Altelisha Taylor:
Thanks.
Dr. Jim Dahle:
Well, I think we're getting close to the end of our podcast. I want to thank you so much for being so willing to come on and be a friend of WCI and help us have more voices on this podcast. Help provide additional perspectives to White Coat Investors out there because there's plenty of people out there that are older than me or younger than me or in different part of the country than me or in different specialty than me. And sometimes it's good just to hear from another doc or even another professional who is not a doc and learn from a different perspective. So, thank you so much for being willing to come on, Dr. Taylor.
Dr. Altelisha Taylor:
Thanks for having me. I appreciate it.
SPONSOR
Dr. Jim Dahle:
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Thanks for those of you leaving us a five-star review. A recent one came in saying, “Truly life-changing. To have all this knowledge available to me is life-changing. My life, financial and social, will never be the same now that I have this knowledge. It will be a major player in my financial success. All this inspired myself and a few others to start a finance interest group in medical school. Got us published in academia, and now I'm grant-funded developing personal finance curricula for my medical school. Thank you so very much.” Five stars.
Well, Rod, thank you for what you're doing. If we had somebody in every medical school out there, every residency out there, giving lectures, developing a financial curricula, I could quit doing this and just spend all my time climbing and canyoneering, mountain biking, and skiing. But I'll keep going for a while because I do enjoy helping people, and we do not yet have somebody developing this sort of a curriculum in every residency, every medical school across the country.
If you need help doing that, you're welcome to use some of my slides that I've developed. I've got a set developed for both attendings, residents, and students. You can find that under the WCI Plus portion of our menu at whitecoatinvestor.com. Just scroll down to the Financial Educator Award. We give an award out to a financial educator that's a doc every year. But on that page that announces that financial educator award, that's where you can find those sets of slides that can get you started. You can modify them as you need it. Use what you like. Use what you don't like. Don't use what you don't like. Whatever. I don't care. It's just to help you give a lecture.
And you will be surprised. It's intimidating, I know, to get up in front of docs and talk to them about their money. But the truth is, and you'll realize this when you get to the end of your presentation, when people start asking questions, the level of knowledge out there is abysmal. Most of the questions you're going to get are going to be so easy that you can't believe somebody's even asking you that question.
So please, get out there, give these lectures, share your personal experiences. You don't have to know everything in order to help somebody. It's just like in medical school or residency. Who gave you the best advice? It's usually the person who was a year ahead of you. An MS3 giving advice to an MS2 about what rotations to take. A third-year resident giving advice to a second-year resident about what kind of jobs to take. It's how it works. You only have to know a little bit more than somebody else to be helpful to them. So, thank you for those of you out there doing that work.
For everybody else, we'll see you next week. Keep your head up and shoulders back. You've got this. We'll see you next time on the White Coat Investor podcast.
DISCLAIMER
The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.
Milestones to Millionaire Transcript
INTRODUCTION
This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.
Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 198 – Financially recovering from a divorce.
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Welcome back to the podcast. It's always good to have you here. We're working with limited ability here. Megan and I both have arms in splints today, so we got two useful hands between the two of us, but we're still putting this together for you as best we can.
We got something coming up this week. If you're listening to this this week, this is Thanksgiving week, and I hope you're thankful for something, but come the day after Thanksgiving, there are going to be some things around here that you can be even more thankful for because we've got some plans around here for some stuff you may be interested in. Pay attention this week to the blog, and we'll mention it on the podcast next week, but we've got some cool stuff coming up this week as far as White Coat Investor goes.
INTERVIEW
All right. We have got a great interview today. It's a milestone we haven't done before, which I think will be pretty interesting to hear. Then stick around afterward. We're going to talk about for a few minutes the importance of both spouses working together toward your financial goals.
Our guest today on the Milestones podcast is Arup. Welcome to the podcast.
Arup:
Thank you, Dr. Dahle. Great to be here.
Dr. Jim Dahle:
Now, we're doing a milestone today that I don't think we've ever done on this podcast before. This is episode 198, and I don't think we've done this one, which is essentially recovering financially from a divorce. I hate to congratulate you on this milestone because I know it's a terrible milestone to go through, but I do want to congratulate you on the recovery. Thank you for coming on to inspire others dealing with this relatively common financial catastrophe to also get through it. Thank you very much for that.
Arup:
Yeah. No, thank you. I'm glad to be here. I've certainly found inspiration in many of the stories I hear from physicians early in training and making tremendously savvy financial decisions. The joy I feel, at the same time, there's a voice in the back of my head saying, not my story. And having friends who are going through what I went through 15 years ago, it's not their current story either. Again, thanks for having me on and I’m really happy to share my milestone.
Dr. Jim Dahle:
Well, let's start with a little bit of background information. Tell us what you do for a living, what part of the country you live in, how far you are at a training, when you got married in your career, and how long it's been since the divorce.
Arup:
I live in upstate New York, which for those who are not familiar with New York, not New York City, very pastoral, beautiful agricultural lands, rolling hills, about two and a half hours away from New York City. Beautiful area. Unfortunately, New York is also a higher tax area. So there is that.
I guess I'll start at the start. I grew up in the Northeast my whole life, grew up outside of Boston, went to undergrad at UMass Amherst, went to medical school at UMass Medical School, and graduated in 1999. I had a little circuitous path to finding my calling in anesthesiology, but in 2003, finished my anesthesiology training in Boston, and have been in practice since. Initially in private practice for a couple different practices, and then for the last 16 or so years at Albany Medical Center here in Albany, New York. And then I guess the other questions, married right out of medical school back in 1999, and divorced in 2010.
Dr. Jim Dahle:
And tell us a little bit about your financial success, your level of financial success prior to getting divorced. You were in attending, it sounds like, for about seven years before you got divorced. How were you guys doing financially?
Arup:
I would say, as long as we kept working, we were doing fine. But in terms of the stories we hear and we share on White Coat Investor, that was not the story. It was much more anticipating higher salaries and money coming in in the future. And so, almost living off that future higher earnings, which again, not a great position to be in. But we were living well. We had purchased a beautiful house in upstate New York. And again, for a first house purchase, probably bigger than should have at the time.
But financially, we were doing okay. But just not significant savings, putting some money into IRAs and into 403(b)s, but not significant savings. A lot of it was servicing med school debt, and then really servicing debt that we had accumulated along the way in terms of consumer spending.
Dr. Jim Dahle:
Do you think you had a positive net worth by 2010?
Arup:
Oh, by 2010? No.
Dr. Jim Dahle:
You are still a negative net worth at that point.
Arup:
Oh, yeah. Yeah. At that point, still probably upwards of $40,000 or $50,000 of student debt for medical school, mortgage, a couple car loans, in addition to credit card balances. So no, definitely not a positive net worth.
Dr. Jim Dahle:
Okay. You get divorced and what wealth you had just got cut in half. Presumably, your income just got cut in half. At what point did you kind of start becoming financially literate?
Arup:
Pretty immediately thereafter, when I think the financial reality that was laid out in front of me became… It was sort of unsurmountable, where you're just kind of like, “Okay, this is what's coming in, this is what has to come out. This is not sustainable, especially with the debts that I have on the books at that point.”
I think at that point, it was a very quick introspection and really aggressive exercise to change that balance and figure out how quickly that balance could change. Because again, it was not going to work moving forward. We're talking month to month, things unclear of how we're going to pay for just getting by.
Dr. Jim Dahle:
Yeah. You had this massive budgeting pressure, pressure and you have to budget now or the money just doesn't work at all.
Arup:
Right.
Dr. Jim Dahle:
What did that inspire you to do? Did you go to the library and get books? Did you start participating on the internet and forums? Did you start listening to financial podcasts? What were your steps in order to start learning about this money stuff?
Arup:
I had just completed an executive MBA, which at that point was kind of theoretical numbers where it was just like, okay, business A does this, whatever. That became an immediate exercise of, “Okay, here's my actual cash coming in, here's my actual cash coming out.”
I think some books that helped along the way, I reread The Millionaire Next Door, which I'd read a decade prior and then it hit home in a very different way. I think the forced budgeting was a couple of things, but a little bit of financial literacy online, and then just the reality of what I was living of just trying to get to making the next month better than the current one.
Dr. Jim Dahle:
Okay. Well, let's talk about your financial pathways since 2010. You're continuing to work as an anesthesiologist. I think most of us know anesthesiologists are relatively well-paid doctors, but tell us about your final financial pathway from 2010 until now.
Arup:
Yeah. I think several aspects of the puzzle came together well. From that point forward I think there wasn't quite the crunch or the limited number of anesthesiologists then that there are now. Salaries were still relatively stable, but having just completed the MBA, I was like, “All right, as an entrepreneur, what can I do? I'm enormously well-trained clinically and analytically. I need to have more revenue coming in to dig out of this hole.”
I came up with short-term plan and longer-term plans. The short-term was, okay, I've got these very marketable skills that at that time, not everybody was fully versed in the things that we were doing. One of the examples is ultrasound guided regional anesthesia, which now is commonplace. Everyone does it. But at that time especially the smaller community hospitals, hospitals driving distance from Albany wasn't done.
So it was this very marketable skill that I started reaching out to hospitals, say, “Hey, I can help you develop an ultrasound guided nerve block program or regional anesthesia program. I can teach your physicians how to do these blocks. And I'm happy to come out and do that.” That was, I think, one part of it.
Another part was nonclinical, non-outside the homework. Things that I could do after hours after the kids went to bed, but that would still use my abilities, my board certification, all of that. So, looking at cases through New York state through the OPMC, the office of professional medical conduct, and then also doing some medical malpractice work where I would look at review cases and potentially do some plaintiff or defendant work. Those were two of the main ones that open pathways.
Dr. Jim Dahle:
You increased your income. You worked really hard and you increased your income. That was the first step, right? What else?
Arup:
Eliminating bad debt. All of the debt that I had on the books. Those were prioritized into saying, “Okay, this has to go immediately. These can go down a little bit.” Things like credit cards. I had some IRS back taxes that had to be paid. Those were immediate where I said, “All right, I'm not paying interest on things from the past.” Those were aggressively repaid with that additional money coming in. So those are some other pieces.
Dr. Jim Dahle:
And 14 years on, how are you doing? Are you approaching FI? Are you a comfortable millionaire? Where are we at in your life now?
Arup:
I would say, I don't know about comfortable. I think to me, the notion of comfortable means I can step away from working and be done and hang out and cycle and do other stuff for most of the time. And I think also upbringing wise as a first generation immigrant being able to walk away.
It's not something that I have ever thought about, but I would say a very different net worth. Over seven figures, which is a very different place from where I was 15 years ago. I think a couple of things we've done. I've subsequently gotten remarried, found an amazing anesthesiologist who I've spent the last decade plus with. And so, finally just last year, I think we met with a financial planner. We'd been looking at all of our accounts and balances ourselves.
But then I think to spend a little money and just to make sure that the assumptions we had were true were borne out and made sense to someone else. That was, I think, very helpful and gratifying to say that, “Okay, you guys are on track to really have a lot of choices here in the near future, both in terms of how much you're working, are you working full time? How long you're working for? Where do you want to stop working?
Which were honestly questions I hadn't really considered. With the kids, I had always kind of been thinking that, “All right, well, I'm going to work till I can't work anymore.” Whereas the ability to have that conversation and things like, “Wow, I could really not work in the same way that I am in seven years and 10 years and whatever, but it's now our decision of when we want to call that.”
We're still playing with that a little bit. I think the current horizon is about, we'll continue working for about 10 years and then see where we are, whether we go part-time, because again, it's work that I enjoy tremendously. I love taking care of the patients I take care of. I love interacting with surgeons, the nurses. The OR is an incredible environment. But again, to have that choice is very different.
Dr. Jim Dahle:
Now you had to pay alimony, I assume. Did you have to pay alimony and how many years do you have to pay it for?
Arup:
Yeah. Not alimony. I'm paying child support, which continues for another couple of years.
Dr. Jim Dahle:
Okay. Because your ex was employed and has income as well. Is that the reason you didn't end up with alimony?
Arup:
Yeah.
Dr. Jim Dahle:
Okay. I imagine getting married again given your financial history, you probably discussed finances a little bit more before getting married and early in the marriage. Tell us about some of those conversations you had with your new spouse.
Arup:
Yeah. I think the conversations are very different and I think our lifestyle is very different. I think we really focus on saving a lot as much as we can. Majority of our expenses around our kids. They play tennis. A lot of that is tennis, coaching, travel, court time, and then really an aggressive focus on retirement goals and where we're going and what that timeline looks like. So, the conversations are different.
Our finances are separate. That's different as well, where we have clear delineation of who's paying what and, and how things are going as opposed to everything going into a common pot and just going out.
Dr. Jim Dahle:
That's relatively rare among financially successful people to divide your finances. Did you decide to do that as a result of the prior divorce? Do you think?
Arup:
I think it was partially inertia. Because I think at that point we were both… She had been in practice for several years. I've been through this financial calamity. And so, we didn't never discuss really putting them together and it seemed to work pretty well and has kept working very well. Any major expenses, car, solar panels, whatever, we'll just figure out who's paying what share. And we make those decisions together.
Dr. Jim Dahle:
Yeah. Now there's somebody out there that's going through a divorce now, or just got divorced, watch their income get cut in half, watch their assets get cut in half. What hope can you give that person about their financial future?
Arup:
Yeah. Dr. Dahle, I've got a friend right now in practice, who's going through a very tough time. Doesn't know the next step or isn't sure of what he should do. And I think of the mental state I was in and mental health and where I was, it was a bleak time where you're kind of stuck. You're not happy. The unknown is very scary. And that's exactly what you think. “All right, well, everything I've worked for is going to be gone. I'm going to have no say.”
But I think of where I was at that time, and again, it was a very tough, bleak time. I had completely shut out. My friends didn't tell them really anything, maintained appearances, like things are fine. And so, I had become a very different person. So when I see friends of mine who are in that state, it really compels me to share my story and say, “Hey, look, you got a lot of living left to do.” And you're still relatively young. I'm 51 now. Friends of mine, you still have hopefully 30 plus years of how long can you fathom staying like this? And so, I think the happiness piece is key where I think you have to weigh taking that next step, those next steps, even though they may be very tough financially, they may be very challenging emotionally.
The other side gets you to a place where you'll be okay and you can work through it and maintain that happiness and keep a very positive perspective on life. It's a tough position and it's a very difficult personal choice with family involvement in it. But I think just happiness, success, really not even financial, but just emotional and having the best life you can live, it's important to get through to that other side.
Dr. Jim Dahle:
Yeah. Well, congratulations to you on your financial recovery from this. And thank you for being so willing to come on and be vulnerable and talk about this pathway you've been down and hopefully it can be used to provide a little bit of inspiration to somebody else dealing with similar issues. Thank you very much for being willing to come on the podcast.
Arup:
Look, happy to do so. And again, if someone else is driving down the highway, getting to work at 05:00 in the morning and they're like, “Oh my gosh, that's where I am”, it would be worth it.
Dr. Jim Dahle:
Okay. I hope you found that interview interesting and useful to you, particularly those of you who have been through a divorce or going through a divorce right now. It is a financial catastrophe. It's a terrible thing to go through. It's not just financial either. It's incredibly hard emotionally and physically and all kinds of things. We empathize with you if you're dealing with a divorce or if you've ever had to.
There's a few things that Arup had going for him. Now they weren't managing money very well. They were kind of typical doctors prior to the divorce, but the fact that he was married to somebody that was high income and married somebody that's also high income certainly blunted a lot of how hard that could have been. A lot of doctors out there are married to non-earners or low earners, and you really do cut your income and your assets in half when you get divorced. And so, that can be very, very hard.
It's illustrative that even two high earners, seven years out of training, you can blow it all. You can spend all of your income. Trust me, it's entirely possible, especially if you live in a high cost of living area, high taxes. You buy some things you haven't yet saved up for, and so you're paying a bunch of interest on it. It's not that hard to blow through a doctor income. It's not that hard to blow through two doctor incomes. It happens all the time.
When you look at Medscape surveys, you'll see that of doctors in their 60s, about a quarter of them are not millionaires. A few years ago, they used to break that out for those with a net worth of less than half a million, and it was 11 to 12% of doctors in their 60s. It's a shocking statistic. It's amazing. You think about somebody that's presumably had 20, 25, 30, 35 years of physician-level incomes. That might be $10 million, and they have less than half a million dollars of it left. And a lot of times, the story is one of tragedy. It involves disability or somebody dying or a divorce or something like that.
But much more often, it's just blowing the money. It's just not paying attention. It's just zero budgeting whatsoever. And a lot of people aren't just spending everything they make, they're spending more.
I remember being shocked in medical school. We had one finance talk in medical school. It was actually a really good one. It was a husband of a doc who came in and talked to us and gave an example. I think it was an ophthalmologist, the example, that was making $325,000 a year and spending $350,000 a year. And I thought, “How can that possibly happen?” But clearly it happens all the time. So don't ever assume you can't spend your entire income. Residents out there, I know this seems crazy, but I assure you it happens all the time.
FINANCE 101: THE IMPORTANCE OF SPOUSES WORKING TOGETHER TOWARDS FINANCIAL GOALS
All right, I promised you I was going to talk a little bit about spouses. And we've had a good example in this podcast about spouses, but you and your spouse don't actually have to be on the exact same financial page to be successful, but you probably do need to be reading from the same book. You got to be more or less moving in the same direction.
Most people, as I mentioned in the podcast, when they get married, they combine their finances. And I think that's usually pretty wise. There's some real benefits to doing that. One, you're just more likely to work together. Everything goes into the same pot. You view your entire asset allocation together. If you need your own individual money that you can spend without being accountable to your partner, you can take that back out as an allowance, essentially.
Katie and I did that for a number of years in our lives. I can remember back in the early days in med school, I think our allowance was $20 a month. It wasn't a lot, but it was money we could spend without having to account to our partner for. And we kept that going for a number of years until it just became a silly exercise and just didn't matter to us anymore. But if you need to do that, do that.
Now, are there a few reasons to keep finances separate? There can be. It does work for some people. For some people, it works pretty well. And so, to deny that nobody can ever be successful while doing it would just be wrong, even though I think most people ought to combine finances.
Some reasons I can think of where you might want to keep them separate is especially if you're bringing a ton more money into the marriage. There's some asset protection concerns there. Obviously, it's very rare to lose money to your patients. Above policy limits, judgments that aren't reduced on appeal are extraordinarily rare. It's not unusual to lose money to your spouse in a divorce at all, though.
And so, if your parents have left you some huge trust fund, maybe that's a reason why it makes sense to actually have separate finances. If you've already been in marriage before or you get married when you're 55 or something, right, and you've already built a lifetime of wealth, maybe it makes sense to keep those things separate. Because when you mingle things together, it's now exposed in a potential future divorce. So, there are some reasons why people keep separate finances that actually make quite a bit of sense.
But for those who got married when we were poor and we didn't have a squat, and our spouse was poor and didn't have a squat, you're going to be splitting anything in a divorce anyway. You're going to be splitting your income, you're going to be splitting your assets. And there's very little reason to keep separate finances in those sorts of situations.
However you manage the finances, you do need to make sure you're on the same financial page. And I think the best way to do that is what we call a monthly budget meeting. Now, you can call it whatever you want. I don't know. You can call it money date night. I don't know. Does it even have to be every month? I guess it doesn't. But I'd start with every month in the beginning.
And the truth is after a year or two or three of doing this, and after doing a couple of them after big financial changes in your life, it gets more or less on autopilot. Because you're on the same page, or at least reading from the same book. You're on one page the other person just got done reading, maybe. But you're close. You're more or less doing the same thing. And keeping yourselves aligned as you go through your financial lives is very, very powerful.
The other day, from time to time, I mostly move the investments around. We're kind of a traditional situation that way. Katie mostly tracks the spending in our budget process. I mostly track the investments and move the investments around. But from time to time, we switch it up a little bit. And I have her buy an investment, or I have her pull money out of the 529 for our nieces and nephews. I make sure she can do all the necessary steps so that in the event that I fell off a mountain and smashed my head, she could take over.
Now, obviously, that's a very real situation in our lives. But maybe you just haven't thought about those sorts of things happening in your life. Can your spouse take over? What is the plan if something happens to your spouse? Have you designated a financial planner for them to go work with? Those sorts of things ought to be discussed from time to time in your monthly money date meeting, whatever you want to call it.
I hope that's helpful to you. Condolences to everybody out there who's been through a divorce or is going through a divorce now. I know it's not easy. I hope this podcast was helpful to you, provides you some inspiration. There is light at the end of the tunnel. It is not an oncoming train. This too shall pass.
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All right, we've come to the end of another Milestone to Millionaire podcast. We're grateful to have you here. Thank you for being part of the audience. Without an audience, the podcast is pointless. There is zero point. We want you to be successful in your lives, both professionally, emotionally, in your relationships, and also financially. We think that financially successful, financially comfortable doctors can be better doctors, can be better partners, and better parents. They can focus on that which matters most in life. So, we want to help get you there.
If you've accomplished a milestone, no matter how big or how small it might be, we'd like to celebrate it with you and use it to inspire others to do the same. You can apply to come on the podcast at whitecoatinvestor.com/milestones.
Keep your head up, shoulders back. We'll see you next week.
DISCLAIMER
The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.
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