Latest / Off the Chart: A Business of Medicine Podcast / S1 Ep62: Physician financial mistakes with The White Coat Investor
Transcript
- Speaker 1 00:00:00 Well, I mean, the biggest one. It sounds stupid to even have to say this on the podcast, right, is they just spend all their money. Speaker 2 00:00:13 Welcome to Off the Chart, a Business of Medicine podcast featuring lively and informative conversations with healthcare experts, opinion leaders and practicing physicians about the challenges facing doctors and medical practices. I'm your host, Austin Littrell. This episode features a conversation between medical economics editorial director Chris Mazzolini and Dr. Jim Dahle, founder of The White Coat Investor. They're talking about common financial mistakes and what you can do to avoid them. Speaker 3 00:00:45 Dr. Jim Dahle, thanks so much for joining me today. Speaker 1 00:00:48 It's wonderful to be here with you, Chris. Speaker 3 00:00:50 So I'm sure a lot of the medical economics audience already knows about White Coat Investor. But for those that might not, can you introduce it quickly? You know, what is it? Why did you start it? And what's your mission over there? Speaker 1 00:01:02 Yeah, I think the most important thing I could say in an entire podcast like this is what the vision of the White Coat investor is, and that's to serve as the most trusted, authoritative, and useful resource for financial information and services for doctors and other high earners. Speaker 1 00:01:18 Basically, our goal is to help doctors stop doing dumb stuff with their money. Speaker 3 00:01:24 So obviously the market finances, the economy has been in the news recently between tariffs. You know, kind of starting and stopping the stock market's been very volatile. you know when sort of historic events that that shock the market occur. I'm thinking back to the Covid 19 pandemic as well. I imagine you get a ton of questions from physicians and in your audience about how they should sort of handle their nest egg, you know, how they should approach these things. So I guess I'm wondering, you know, from your own standpoint, how do you think through, handling investments, retirement planning and those things when there are these sort of historic shocks like what we're going through right now? what are what are your thoughts on that? Speaker 1 00:02:10 Yeah. I think the most important thing to do right now is to sell everything you own and use it to buy options on Tesla now. I mean, that's like the response people are looking for when they ask these sorts of questions. Speaker 1 00:02:21 But the problem is everyone thinks this time it's different. And they're right in one way. Right. Every time it is different. Last time it was a pandemic and then it was rates went up 4% in one year. And then it was, you know, a tariffs. And sometimes it's a banking problem, like in 2008 where the banks just got way too liberal with their lending. Or maybe it's a tech bust in 2000, or maybe it's tulip bulbs in 1600 Holland. Right. But those of us who have read enough financial history look at something like this and go. I've seen this movie before and I know how it ends. and in reality, every one of them is a little bit unique. But the truth is, it's not different this time. Markets are very resilient. They will recover. It might be like in a month, like in 2020, or it might be in three years, like it was in 2000 to 2002. Or it might be a decade like it was in the 1930s. Speaker 1 00:03:22 But markets are resilient and they're going to recover. And barring a functional crystal ball, your best bet is to have some sort of reasonable investing plan and stick with it through thick and thin. And this is one of those thin times, right? The markets as we record this and I don't know when it when it'll run and what will happen between now and then. But as we record this the market's down over 13% on the year. And that feels very painful to people to lose 13% of wealth they used to earn. You know this is money that they didn't do a kitchen remodel on and used it to put it into their retirement account instead, and that's really painful. And I acknowledge that that it's painful to lose money. But to be a good investor, a good long term investor, you kind of have to get used to losing money from time to time. That's what you do as an investor. And in the long run, the likelihood of the market not producing solid returns for you over the 30 or 40 or 50 years you need it to do so is very, very low. Speaker 3 00:04:23 So one of the things that we cover all the time at medical economics is physician burnout. And, you know, we there's a whole gamut of reasons as to why, you know, burnout happens some personal, some workplace related, some systemic. but I often I feel like with physicians, we don't necessarily talk about money and finances tied to burnout. Do you think that that that financial stress and, and money issues are a contributing factor to physician burnout. And, you know, how do you kind of think about that in terms of that aspect? Speaker 1 00:04:56 Yes, I do think they make a contribution. You know, when I talk about burnout, I talk about there being really four things that contribute to it. one is just, you know, the stress of the profession. It's a hard job, right? You're dealing with people that are sick and and injured and dying and you gotta, you know, stay credentialed and you got to stay, you know, keep your board certification up and stay licensed and do all your seeing. Speaker 1 00:05:19 It's hard. It's a hard job. And so that's part of it. Right. It's always going to be a hard job. That part's not going away. The second part is there's a lot of workplaces out there that are frankly just toxic. It's an employer problem. It's a it's a business setup problem. It's not set up to ensure physician longevity in the career. And those jobs need to be fixed or abandoned, you know. And so that's just, you know, something definitely to work on. There's a personal factor too, though, because you put two docs into that same crappy job, and one of them burns out and one doesn't. So there is some personal resilience kind of stuff that you can do some things about. And there's lots of people out there to teach you how to do that, and online courses and conferences and coaches and books and those sorts of things. And then the last part is the finances, right? Sometimes people just feel like they got to work a whole bunch because they've committed to make all these payments, and they've got student loans to pay and a big fat mortgage to pay, and two Tesla payments to make. Speaker 1 00:06:16 And, you know, and it just feels like they've got, you know, chains on, keeping them from being able to do a lot of the things that would reduce their burnout. But rather than being a contributing cause, I view finances and financial planning as the way out of all of those problems. Right. If your problem is finances, well, doing good financial planning is going to take care of those, obviously, but having your financial ducks in a row allows you to leave a toxic job. It allows you to leave the profession completely. it allows you to do some of the things that increase your own, you know, longevity and resilience. I mean, the truth of the matter is, when I first thing I say when I run into a burned out doc is, I'm like, have you thought about cutting back the full time? Right. Because so many docs are just working so much, and at 40 hours a week, they wouldn't be burned out. Right. And even if you're already only working 40 hours a week, if you cut back to 30, you might be surprised how much better you feel about your job, how much better job you do taking care of your patients. Speaker 1 00:07:17 And so I think cutting back and going part time and seeing fewer patients per hour and doing less of procedures you don't like to do or whatever. These are all things that having your financial ducks in a row allow you to do, and it allows you to make the career lengthening decision when you have these career choices to make. You know you can optimize for career longevity. so I think, financial planning, financial, whatever you want to call it, you know, sophistication or literacy or whatever, is more of a solution to burnout than it is a contributing factor. Speaker 4 00:07:57 Say, Keith, this is all well and good, but what if someone is looking for more clinical information? Oh. Speaker 5 00:08:03 Then they want to check out our sister site, Patient Care Online. Com the leading clinical resource for primary care physicians. Again that's patient care online. Com. Speaker 3 00:08:17 So one of the financial issues that that a lot of young docs are dealing with. And I'm sure this is probably a question and an issue. You're you're you're asked to talk about all the time. Speaker 3 00:08:27 But that's medical student loans. And you know, you get out of, medical school and residency and you're just getting started in your career and you have this huge loan balance, but at the same time, you're getting paid now, and you're trying to, like, start your life. what? How do you generally it advise and tips you give to to younger physicians about how they balance between student loan debt and, you know, sort of building that financial foundation for your future. Speaker 1 00:08:55 Yeah. You know, it's interesting because we still talk about student loans and this being this huge problem. But if you actually look historically in a lot of ways, the student loan situation we're in right now is better than it's been in a long, long time. The average debt that MD students are reporting coming out of school is $200,000. It's a little bit higher for DOS and a little higher than that for dentists, but it's $200,000. That number hasn't changed in five, six, eight years. and if you look at the percentage of students that have any student loan debt coming out, it's dropping. Speaker 1 00:09:32 Not very much. Granted, it's still about 75% of the students. but the other thing that has been very awesome the last five years for for indebted doctors is public service loan forgiveness and and tens of thousands of doctors have received basically a tax free check for 200, 300, $400,000 as part of public service loan forgiveness. You know, when I came out of medical school and in 2003, there was no public service loan forgiveness. You know, and we certainly had student loans. you know, some of the income driven repayment programs have been incredibly generous, this one that the Trump administration is doing their best to stamp out. The Save program is incredible. Your debt wasn't even going up in residency like like it used to. It was very, very generous program. And so in a lot of ways, student loan management has a lot more options than it has for a long time. I mean, for whatever it was 30 months or 36 months during the pandemic, people didn't even have to make payments and their loans were 0%, right? I mean, there are people that got public service loan forgiveness that had spent a number of years in training and then hit that three year period where they didn't have to make payments. Speaker 1 00:10:43 I mean, they paid like $10,000 toward their debts and had 300,000 wiped out. So, you know, let's not be be too, you know, fatalistic that this is a terrible, terrible problem out there, because in a lot of ways, a lot has been done on this and there's a lot of great options. I mean, I think something like a third to half of, of physician jobs probably qualify for public service loan forgiveness. So, the advice I'm actually giving people now that are thinking about taking out student loans for med schools, I'm like, yeah, take them out. 5050 chance you're going to have the government pay for them. You know, why not? but it's still a problem if you're that doc that comes out of school and you're not in a public service loan forgiveness qualifying job, you got to pay them back. And so as soon as you know you're not going into a qualifying job, you might as well refinance them and get a lower interest rate. And then you've got to stamp them out. Speaker 1 00:11:36 Trust me when I say you do not want to have these things at Midcareer. You don't want to be 45 and 50 and 55 years old and still owe six figures in student loans, so the way you get rid of that is refinancing helps a little for sure, but mostly you just keep your lifestyle down. Something similar to what you were living as a resident or a fellow or whatever. I call this the live like a resident period of your life, you know? And maybe that's two years, maybe it's three years or whatever, but you only give yourself a little bit of an increase in your lifestyle, and you send big checks to the lender every month. And if you'll send them a check for 8 or 10 or $12,000 a month, trust me when I say you're 2 or 3 or $400,000 in student loans will go away very quickly, and then you're free. You're finally done with medical school, and now that you've paid for it, and you can choose whatever career path is best for you, whether that's, you know, a part time parent track or whether that's, you know, a, you know, rural practice that maybe doesn't pay as much as you'd like it to or inner city work or whatever you want to do, you're now free of that burden and can build your practice the way you want to. Speaker 3 00:12:42 I want to talk for a bit about primary care. And, you know, one thing we often hear from our primary care physicians is it's, you know, it's more difficult for them to, to save, you know, they they don't make as much as, you know, a higher earning specialist, all that stuff. What what what is what is, I guess your thoughts on how a, you know, a family doc or a pediatrician, you know, how should they approach, you know, like getting towards financial independence, you know, despite maybe, you know, earning a bit less than some other specialties? Speaker 1 00:13:13 Yeah. For sure. On average, a primary doctor makes less than a specialist on average. And everybody's seen those charts, right? I mean, Medscape and Docs do surveys every year. And if you've seen the data or whatever. Yeah, absolutely. Is the case, that those averages are significantly different. But what nobody ever talks about is that the intra specialty pay difference, the delta there is dramatically larger than the delta between those averages. Speaker 1 00:13:46 I have met pediatricians with seven figure incomes. I've met family docs with seven figure incomes. It is possible to make more money despite being in quote unquote, a lower paid specialty. But even so, even if all you managed to pull off is the average income in primary care, which is around $275,000 these days, that's still dramatically more income than the typical average American. The average American household makes $80,000. Right. And we're talking about three plus times that. Now, obviously, you're going to pay more in taxes when you're earning that much money. but it's still a substantial sum of money. And if you will put 20% of it away every year and invest it in some reasonable way, by the end of your career, you will be a multi-millionaire and you will be able to continue your lifestyle you enjoyed during those years in practice throughout retirement, and so it still works. Medicine is still a good deal, you know, even if you got to borrow 2 or $300,000 to go to medical school and come out as a family physician or an internist running clinic or a hospitalist or whatever, it's still a good move, right? You still make enough money to pay off those student loans and become financially independent. Speaker 1 00:14:58 but I would encourage people to, to work on step one, which is, you know, boost your income, make sure you're getting paid fairly. So many doctors out there are being paid less than average, right? Half of them, by definition, are being paid less than average. And unless your job is easier than average, I don't know why you would settle for that. so make sure you know what you're worth. Negotiate what you're worth. If you're running your own practice, make sure you're doing everything you can to make it efficient and have good employees. And, you know, make sure you're using your time only for what only you can do. And those sorts of things to get your income up. It's just way easier to pay off debt and save for retirement and and live that life you're looking for if you're making, you know, 350 instead of 220, for instance. And and I think that's within reach for the vast majority of primary physicians out there. Speaker 3 00:15:51 What about, you know, like, I'm sure you encounter a lot of stories about how physicians, you know, manage their finances. Speaker 3 00:15:58 And I'm sure, you know, you hear some good ones, but I'm sure you hear a ton of, like, stuff that makes you want to, like, pull your hair out and be like, oh, why are you doing that? what? So what are some of the common pet peeves and pitfalls that you see that physicians are doing with their money? And, and what should they do to, to to not do those things? Speaker 1 00:16:15 Well, I mean, the biggest one, it sounds stupid to even have to say this on the podcast, right, is they just spend all their money, right? I mean, if you look at net worth statistics, right. Net worth is is the the measure of wealth, right. Because rich people are wealthy, they don't have high income necessarily. They have a lot. And the measure of that is net worth. It's everything you own, minus everything you owe. So they ask doctors, what's your net worth? And. And when they ask that to doctors in their 60s who presumably have been working for 20 or 20 5 or 30 plus years as a doc, the answer is sometimes surprising. Speaker 1 00:16:48 About 25% of them are not millionaires. And 11 to 12% of them have a net worth of less than half $1 million. This is after having earned, you know, whatever, $200,000 times, 30 years. you know, they've earned a lot of money at that point. Maybe they've earned $6 million and they don't even have a million of it left, even with all the compound interest helping along the way. So the biggest problem is people just don't put enough money into their investing accounts. They're not saving enough. And so I recommend 20%, 20% of your gross income toward retirement. And if you'll do that, you can screw up just about everything else. Let's be honest. other mistakes that people commonly make, they mistake a salesperson for a financial advisor. And there's lots of salespeople out there that call themselves financial advisors and try to take advantage of doctors. In reality, they're selling you annuities you don't need or whole life insurance you don't need, or particularly expensive, poorly performing loaded mutual funds you don't need. Speaker 1 00:17:45 and so you got to, you know, make peace with the financial services industry. Either figure out how to do this stuff yourself, or find someone that's given good advice for a fair price and use their advice. Another thing people do is they they get into crazy investing strategies, right? They start picking their own stocks, even though the academic data out there suggests this is a terrible idea for you to pretend you're a hedge fund or a mutual fund manager and pick your own stocks, you should just be buying them all with an ultra low cost index fund. sometimes people try to time the market and they end up buying high and selling low repeatedly over and over and over and just, you know, erasing a whole bunch of their wealth. And then, of course, there's the big risk for lots of people, although actually a lower risk for doctors than others. And that's divorce, right? When you get divorced, you cut your assets in half and you cut your income in half for a number of years. Speaker 1 00:18:36 And it's hard to build wealth once you've done that 2 or 3 times. and so it turns out the best asset protection move isn't, you know, trying to keep your patients from suing you. It's to, you know, go out on date night with your spouse. Speaker 3 00:18:48 So you had mentioned a financial planners and sort of, you know, all the characters that that are out there, you know, looking to to work with doctors and other high earners. so what what are like what are some of the qualities that that physicians should look for, you know, if they're shopping for, for a financial advisor? Speaker 1 00:19:06 Yeah. I mean, this is a big dilemma for docs. This is hard for people because once you know enough to really recognize what good financial advice looks like, you may know enough to do it yourself. And that's the best paid hobby out there is to be your only own, you know, financial planner and asset manager. Because even if you get a fair price on this, a fair price is 5 to $15,000 a year. Speaker 1 00:19:29 That's a lot of money to a primary care doc making $250,000 a year, right? That's a substantial sum that they could be putting toward their own retirement instead of their own financial advisers retirement. And so it is a dilemma. And over the years I've tried to maintain a recommended list. At least I can get people into the hands of the good guys. Yeah, you're going to pay 5 to $15,000 a year, but at least you're not going to be ripped off. You're going to get good advice for that, and nobody's going to be charging you, you know, $50,000 a year as your assets grow using some sort of assets under management fee. What do you look for? You look for somebody with some experience actually doing what you want, right? If you're looking for a financial planner for a doctor, well, you want someone who's done a bunch of financial planning for doctors. You want them to have a fiduciary duty to you. Meaning they are legally required to do what's right for your pocketbook, even if it's not right for their pocketbook. Speaker 1 00:20:19 You want them to be fee only. You don't want them to be earning commissions on selling your crummy investments or crummy insurance products. You want to fee only advisor that you're paying for the advice for the service. They're giving you not to be hawking products at you. And you know, and you want them to be talking about the same sorts of investments that the good academic studies show. We should be investing in, which is primarily, you know, index mutual funds. And so if you're running into an advisor that's talking about, you know, trying to beat the market for you or using a bunch of expensive, actively managed funds or hedge funds or doing something crazy, well, you want to run away from that as well. but it's not always the first advisor you pick. It's worth it's worth doing some interviewing and asking some questions and talking to the people you know that are really good with money, not necessarily the people you know that really need a financial advisor to get advice. Speaker 5 00:21:17 Oh, you say you're a practice leader or administrator. Speaker 5 00:21:20 We've got just the thing. Our sister site, Physician's Practice. Com your one stop shop for all the expert tips and tricks that will get your practice really humming again. That's physicians practice. Speaker 3 00:21:34 One thing I wanted to ask you about that I've been seeing more and more on, on the internet and and just social media and stuff is there's there's been a trend to sort of treat the stock market almost like gambling a bit. Right? Like, you had mentioned, you know, people are trying to time the bottom and do all these things. And then, you know, there's the rise of cryptocurrencies and stuff. And, and I guess I was just wanting to get your thoughts on obviously none of this is sound financial advice, but like there does seem to be a trend. And I imagine this is something that will also creep in with, with younger physicians to, to sort of, you know, it's almost like the stock markets like sports gambling. And then there's crypto and, you know, there's all this sort of like loosey goosey way of, of like throwing money around. Speaker 3 00:22:17 And I'm just wondering your thoughts on that. Speaker 1 00:22:20 I don't remember if it was Warren Buffett or his mentor, Benjamin Graham who said this. He basically said in the short run, the Wall Street or the stock market is a voting machine, but in the long run, it's a weighing machine. And when you invest in stocks, what you are buying is their future stream of income. These are the most profitable corporations in the history of the world. And if you take my advice, my approach of investing in them and just buy them all via a low cost index fund, you're going to take advantage of owning the most profitable corporations in the history of the world over the next 20 or 30 or 40 or 50 years, and over that time period. The market is a weighing machine. You know, you're going to get what those companies are worth, what they make in profit. You're going to get your fair share. Yes. It's going to go up like crazy in 23 and 24. It's going to go down like crazy when there's tariffs in 2025. Speaker 1 00:23:18 But in the long run you're going to get what those businesses earn. It's not a casino you are buying. Legitimate businesses that make legitimate products and provide legitimate services and have thousands of people that go work for them every day and add value to the company. And that's what you're investing in. When those companies make money. You make money. So I think it's really important to distinguish that from the fact that prices go up and down every day. And the short term mentality that, you know, you'll day trade these and, and buy them when they're low and sell them when they're high and somehow come out ahead. That's not what investing is. You know, Warren Buffett likes to say my favorite holding period is forever. And he's got a bunch of companies that aren't even publicly traded in his company, Berkshire Hathaway, that he's never bought. He's like, or that he's never sold. That don't really make sense for them to really even go public. But they make good money every year and you just hold on to them forever. Speaker 1 00:24:14 And And that's really the mentality you need as a long term stock investor. Now as you talk about other things, as you talk about, you know, whether it's any sort of speculative investment might be empty land, might be precious metals, might be art, might be some sort of crypto asset. Anything that doesn't produce something right, it doesn't produce any interest. It doesn't produce any earnings or pay any dividends. It doesn't produce any rents. That's a speculative asset. You're relying on somebody else down the road paying you more for that than you're paying for it today. And that's a much harder game to play than buying a business that's already profitable. I am not going to say you can't make money, you know, buying crypto assets if you bought Bitcoin in 2009 and held on to it until today, you'd be way ahead, no doubt about it. If you have a functional time machine, I highly recommend going back and buying bitcoin, but I have no idea what it's worth. A year from now, or five years from now, or ten years from now. Speaker 1 00:25:09 And, and that's the dilemma. And so that makes it very hard to put any significant portion of your assets into those types of speculative investments. So you want to put 5% of your money in bitcoin or gold or something. Knock yourself out. Right. Stick with that. In the long term, you'll probably be fine. But if you're putting 50% in there, I think that's probably a mistake. Speaker 3 00:25:29 Many physicians get approached for investment in business opportunities. Everything from, you know, stuff in their local community, you know, invest in this restaurant, this new development all the way up to, you know, things that involve, you know, their medical knowledge. And I'm just wondering, you know, what what are some of what are some of the ways that that physicians should assess, what's a good opportunity and what's not. Speaker 1 00:25:56 Yeah. Well, a few comments on this topic. Yes. Physicians get approached because they it's assumed they have money. They don't always have money. and so it's not always the right move to go to the physicians for this. Speaker 1 00:26:06 But every one of these private investing opportunities is unique and has to be evaluated on its own merits. Most of the time these are only sellable to an accredited investor, right? Which means you have to have an income of at least a couple hundred thousand dollars for the last two years, or at least $1 million in investable assets. And that's great, I guess. But what I really mean when I use the term accredited investor is one you're smart enough that you can evaluate it as an investment without the assistance of an advisor and an accountant or an attorney. And number two, you can afford to lose all the money you put into this investment without it actually affecting how you live your financial life. And if those two things aren't true, you probably shouldn't be investing it. Now, that said, some private investments do very well. And in fact, for many physicians, if you ask them what their best investment ever was, it will be some business they were involved in. You know, if they're an emergency doc, maybe it's an urgent care or a freestanding E.R. if they're a nephrologist, maybe it's a dialysis center, a radiologist, it's a radiology center. Speaker 1 00:27:12 Or for a surgeon or anesthesiologist, it's a, you know, ambulatory surgical center or a GI center or whatever. Right. These are often physician's best investments. So I wouldn't necessarily say I'm not going to do this, but I would sure do a lot of due diligence on it. I would look under every rock and go through the books and make sure this makes sense for you before doing it. Speaker 3 00:27:34 Doctor Dolly, before we wrap up, is there anything we didn't discuss that you think it's important to mention to physicians on just general financial topics and issues? Speaker 1 00:27:44 You know, we haven't talked much about insurance, and I keep running into a lot of doctors that don't have the insurance they actually need. Oftentimes they ensure their iPhones, they end up buying some crummy whole life policy, and they don't have disability insurance in place or a good, solid term life insurance policy in place to protect their spouse or kids. That's kind of at the beginning of the financial planning process if you don't have those insurances in place, you probably ought to look into them and maybe add a policy and keep it in place until you get to financial independence. Speaker 3 00:28:15 Last thing, for those that don't know where to find white code investor, where should they go to take a look at at at your your content and your brand? Speaker 1 00:28:24 Well, it's really all about how you like to consume content. You know, because we're available as a podcast and as a blog and a website, an online courses, in-person conference, YouTube channel, online communities, you name it. But to keep it easy, we just name it all white code investors. So if you'll search White Coat Investor on your favorite platform or the internet, you'll get there. And there's links from white Code investor.com to everything. Speaker 3 00:28:48 Doctor Jim Dahl, thanks so much for joining me today and sharing your insights. I really appreciate it. Speaker 1 00:28:52 It's wonderful to be here. Speaker 2 00:28:59 Again, that was a conversation between Medical Economics editorial director Chris Mazzolini and Dr. Jim Dahle, founder of the White Coat Investor. My name is Austin Littrell, and on behalf of the whole medical economics and physicians practice teams, I'd like to thank you for listening to the show and ask that you please subscribe on Apple Podcasts, Spotify, or wherever you get your podcasts so you don't miss the next episode. Speaker 2 00:29:18 Also, if you'd like the best stories that Medical Economics and physicians practice publish delivered straight to your email six days of the week, subscribe to our newsletters at Medical Economics and Physicians Practice. Com oh, and be sure to check out Medical Economics Pulse, a quick hitting news podcast that offers concise updates on the most important developments affecting your practice, your bottom line, and the broader health care landscape delivered by the editorial team at Medical Economics. Off the chart business and medicine. The podcast is executive produced by Chris Mazzolini and produced by Keith Reynolds and Austin Littrell. Medical economics, Physicians Practice, and Patient Care Online are all members of the MJH Life Sciences family. Thank you.