MtoM #272: How to Start Strong as a New Attending Physician

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All right, this is the Milestones to Millionaire Podcast. We feature you. We feature you and your successes. We use them to inspire others to do the same. And some of my favorite episodes on these have been those that tell the rest of the story. And this is one of those episodes. So I hope you enjoy it. Our guest today on the Milestones to Millionaire Podcast is Cody. Cody, welcome to the podcast.

podcast. So Cody, welcome, welcome to the show and introduce yourself a little bit. Tell us what part of the country you're in, what you do for a living, how far you are out of training.

on your first year out of training. Tell us all the awesome stuff you did during your first year and how you prioritized those uh those things.

So as we're approaching this and I'm thinking about what that means, I'm like, well, if I'm gonna have a almost a million dollars passed through my hands, I should not have student loans at the end of that. Um and you know, among other things. So I completely paid off my student loans. I was part of the SAVE program and so it was like on hold for forever.

So I just started stacking cash in a money market mutual fund and got up to the point where I had enough to pay them off in full and in this last August when the government was like, All right, you know, the party's over, it's time to start paying these things again. I got on and made one massive payment and soon loans were gone.

I actually went to dinner at your house because I thought I wanted to be a emergency med doc at the time and my advisor was like there's this emergency med doc doing dinner with doc. He also has like this financial blog. I don't really get it, but you can go talk to him. So I I really regret not talking to you more about finance because I had no idea what the white coat investor was at the time. Fast forward to twenty twenty one, we had our daughter and

I was looking at our bank accounts and they were decreasing, and I'm like, oh man, I need to look. So I actually budgeted out everything, found out we were losing like 700 bucks a month. to, you know, just not keeping track of our finances. So at that point I'm like, oh yeah, there was that guy I met that one time and he had a book that he gave me a copy of when I was at his house. And so I started, you know, thumbing through the white code investor book and then listening to the podcast. Yeah.

So I was able to buy that for a hundred sixty-five thousand, sold it for two hundred fifty thousand, rolled that into kind of a fixer-upper house in New England where I did my residency, and was able to sell that house. Uh so I bought it for like two hundred twenty, sold it for like four hundred forty five or some ridiculous number because between COVID and fixing it up, we built a lot of equity there.

And so then when we sold that we had about two hundred fifty thousand dollars in equity. So that was one of the big chunks. The other big chunks came from getting my job and looking for somewhere that was willing to help pay off student loans. So Uh my current job where I'm at, they gave me a sign-on bonus of about sixty grand, which you know is fantastic, but they also did a a loan repayment program where they paid off another big chunk of my loans.

And that's essentially for given back to me over the course of my contract. They don't have non compete agreements in Montana, and so they make the golden handcuffs pretty thick by doing other stuff like this. So anyway, so between that, between my first year's salary and some moonlighting things, yeah, it was about a it was about a million dollar swing in net worth and

I was able to pay it off. I think by the time I had gone through my bonuses and stuff, it was about a hundred twenty-ish thousand that I actually paid on that student loan payment.

I think I over applied to a lot of different places. I did um I applied to jobs in Colorado, Utah, Idaho, Montana, Washington. And I think I did six in-person interviews where I was basically like flying from place to place seeing all these um places, then I did an additional like four or so like teleinterviews.

What are you actually gonna be doing? It sounds like it's easy, but you have to really dig into the details. So I was really grilling all of these, you know, all these people. They have like their

you know, their main like ringer type person who takes into the room and like, Ah, I'm gonna give you all this nice stuff and we're gonna give you this bonus and we're gonna do this and it's like, Okay, well what am I gonna be doing? Ah, whatever you want, don't worry. You can do whatever you want. I'm like, Well what does that mean? And and you know, then it turns out it's w whatever you want within this very confined box of what we want.

So anyway, I found this wonderful job. It actually wasn't the highest paying job I was offered, but it came with everything I wanted and I'm extremely happy here. I make good money, like I said, I've paid off all my loans and completely debt free except for our mortgage, which is You know, our house is about five hundred thousand. We owe, you know, about two hundred forty something. So we have more than fifty percent equity in a house and we're in a really good spot.

you know, immediately some of the sweat equity we put into it have probably raised it up to be a six six to seven hundred thousand dollar house. You know, in my experience there's just been opportunities to try to maximize real estate a little bit.

And then um I actually didn't see our house until well after we had bought it. But back in New England, they were like, Oh, this house came on the market. It we think it's way underpriced. And so I did just a video walkthrough with my real estate agent and then had my dad, who's a contractor, he actually drove up to Montana from Utah to go inspect it and kind of

approve it. And I had done a similar thing when I bought the house in Rhode Island as well. So it was like I guess I I bought a few houses without actually seeing them and it's worked out every time so far.

Uh the difference between selling and and and buying was only three thousand dollars and when you add in the transaction cost we didn't actually make any money on that. You made money on on your med school house, you made money in your residency house. You know, what would you tell somebody else considering taking on those same risks? Do you have a different attitude about it than I did where I lost money buying a house in med school?

Or has you made money? Do you do you think you just got lucky? Do you think it's something that if you, you know, have your contractor dad go look at it, you you got a good chance of coming out okay? What advice would you give to somebody else? considering, you know, o owning houses throughout the training pipeline and right away as an attending.

And then for the financing of the actual house, it was a wrap from a real estate agent who it was on like a four year bubble or something. And very like looking back it was completely insane, but I knew nothing at the time. They were just like, Oh yeah, you can buy this house and Fortunately, it worked out for me. But I will say to the person who's listening to this, who's like thinking, like, oh, should I buy a house? If you've not done that before,

think of like all of the stuff you own in, you know, your current situation. Now imagine times it by like ten. You know, every house you know, you have every appliance, every screw and nail every fleck of paint is constantly degrading and has an expiration date. And if you're not ready to deal with that, because you know, you're in residency or in medical school,

It it it's a lot to, you know, own a piece of property. So really, you know, I w my advice would be don't go in unless you've got a good financing plan, unless you really know what you're getting into. Um now I grew up around contractors. I'm kind of the black sheep in my family'cause I went academic. Everyone else is either a car dealer, uh owns a car dealership or uh is a contractor, so Whenever I go home it's my job to like dig the hole or do like the non skilled contracting work.

So anyway, so to me like looking at like a road island house needed a ton of work and pretty much every room in that house was redone. But to me that was like, okay, well, you know, this is doable, but I'm also willing to, you know, replace a toilet. I'm willing to, you know, go to Home Depot and pick up a fridge and, you know, install it and stuff like that. It's a lot of work if you want to do it cheap. So you either have to have a lot of money or the willingness to put up with that.

What were your priorities for your finances in that first year? If if you had made out a budget for the whole year and how much was it going to go toward retirement and how much toward student loans and how much toward, you know, other stuff? Uh, what were your financial priorities?

Goal number two was to get the student loans out of my life and you know, and that happened pretty quickly. I actually probably had enough money to pay those off. A a bit of time probably before I started as an attending, but it would have meant like liquidating everything. So that's why as the attending I was like, okay, I'm just gonna stack up enough money that I could cover these without having to dip into my other, you know, brokerage investments.

And then the priority after that was to start making a plan for where my money is gonna gonna go after I've, you know, fulfilled those first two things. So I which mutual funds am I going to be invested in? How much of my net worth am I going to invest? And

Um everyone kinda has a different number percent. I think your number's twenty percent for how much you should be investing. Money guys is twenty five, Dave Ramsey's fifteen. So I figured go on the higher end. So I've been saving what, it's like twenty eight percent ish. So that was the next goal was to

start making a framework for all the money to go in. Because for as much as I've focused on money these last few years, my goal is to not have to think about it at all and just have it be in the background. Um, it makes me think of like like Forrest Gump where He gets uh the letter from Lieutenant Dan he's like, He invested my money in some fruit company and he says we don't have to worry about money anymore, you know, one less thing.

And that's kind of what I'm hoping for is just to have a robust financial plan that I can just put it on autopilot, not to worry about money. Seeing patients and not having to worry about like my billing so much, being able to just say, Okay, well what do they actually need and then not worrying about the billing at all until it's actually done, like that's kind of my goal. Is money, I don't want it to be an issue.

You know, if if you include all the stuff that we need to to get through the month, you know, it's the exact same as it was before. But then we have those extra things added on, minus the twenty eight percent or whatever we're investing.

You should you should be very proud of yourself. You've you've crushed it. It's been a great first year as an attending, the most important financial year of your life. And uh and I'm sure there's gonna be some awesome stuff in the future. It won't be long before your biggest problem is figuring out how to spend and give all your money away.

Congratulations on that. We thank you so much for that. What advice do you have for uh for somebody that wants to do what you did? Say they're, you know, a second year resident or whatever, and they're like, oh, I'd love to be where he's at in just a few years. What advice do you have for that person?

can really put you way, way ahead of the bell curve as far as we need. So I'd say don't stress about money so much. Just learn a few of the basics and that's all you need to do. And then you can focus on whatever the heck else you want.

Come over and we talk about emergency medicine, what life's like and et cetera. Uh obviously he changed his mind, went into neurology. But apparently I planted a little seed at during that dinner about finances and he took it and ran with it. So yeah, it's pretty awesome what you can accomplish when you actually know a thing or two. about personal finance and investing. And uh he's crushed his first year. It's so important.

to get started on the right foot makes a huge difference uh down the road. I mean, these guys are are gonna have so many options by mid-career for what they wanna do with their lives, with their careers. with their practice, et cetera. It it's not even funny. It's gonna be really great for them and I'm super happy for'em. Uh I almost want to, you know, schedule a date in in twelve years to bring'em back on the podcast and and tell us

Well what happened? You know, at that point he's probably gonna be financially independent and have that house paid off and Um be working halftime. I mean who knows what he's gonna be doing by then. Um but it's pretty fun to uh to see uh people as they progress through their careers and through their financial progression, uh through the milestones, if you will.

What is an emergency fund? An emergency fund is a pool of money that you can readily access to keep you from having to go into debt in the event that an emergency comes up. Now the tricky part about an emergency fund is How do you define an emergency, right? What is an emergency really? And we can think of some examples that are pretty good emergencies. For example, let's say your air conditioner goes out, right? And you're living in Houston and it's July.

That's an emergency, right? I mean it's it's literally life-threatening to not have AC living in Houston in July. And so that's something that you might pay for using an emergency fund. Likewise, let's say you get a call that grandma's on her deathbed, right? And you need to buy some plane tickets and you gotta get there today. You know, that's not gonna be a cheap plane ticket and you're gonna need some money to buy it. That kind of money can come from an emergency fund.

Now, what's not an emergency? Well, let's say you heard about the latest Taylor Swift concert, and uh the tickets are kind of expensive, and you don't have the money to buy them unless you raid your emergency fund. Well, that probably doesn't qualify, does it? Right. So y you gotta be careful tapping an emergency fund. If you're just using it as your slush fund, it may not be there when you have a real emergency.

Now, classically, an emergency fund is composed of an amount of cash equal to something like three to six months worth of your usual household expenses. So if you're spending five thousand dollars a month, an emergency fund would be something like fifteen to thirty thousand dollars sitting in cash in an account that you can get to very easily. Now, how many months should you have? Well, one month is better than none. And obviously six months is better than four.

But in a lot of ways, the way doctors think about this is they think about their long-term disability policy. Now, a lot of doctors don't have a short-term disability policy, and most of their long-term disability policies have a 90-day waiting period on them. However, those policies don't start paying until a month later. They're paid in arrears after the month is over.

And so it's really four months before you'll start getting payments from your long-term disability insurance. So four months is a pretty reasonable period of time for doctors to make sure their emergency funds will last. But keep in mind when something bad happens, there's often some additional expenses as well, whether they might be medical expenses or other things. So having a little bit more than that is not a bad thing.

Now an emergency fund ought to be a pretty big priority early on in your financial life. Even a resident physician ought to have some sort of an emergency fund. Uh it's obviously going to be smaller because a typical resident is spending less than a typical attending physician.

But uh, you know, when you become a resident and you start making money, this should be a pretty big priority, maybe even the number one priority when it comes to what to do with the money that you don't have to spend this month. Of course, there are a lot of other competing priorities when you're just starting out in life. Maybe you have a credit card that's charging 29% interest. Obviously, that's also a huge priority.

But I'd still encourage you to save up some tiny sort of emergency fund, maybe a thousand dollars, even before you go after debts like that. It's kind of silly to take your thousand dollars and put it toward a twenty-nine percent debt only to go out and take on another. So theoretically, even a tiny emergency fund can help you as you adjust those major, major priorities as your financial life gets started.

How long do you have to really put it together? Well, the sooner the better. And the less you spend and the more you make, the sooner you'll have your emergency fund. But I certainly think it's appropriate to try to get this emergency fund in place in less than a year. Less than a year after you come out of med school, and probably your new larger emergency fund within a year of finishing your training.

So try to put that together. You don't want to be saving up forever. If it takes you seven years to save up an emergency fund, I'm sorry. You're just not saving enough money. Because when you're done with the emergency fund, you're gonna move on to other savings goals like saving for retirement or college. And and if it takes you years to save up an emergency fund.

Uh, you're just not going to be saving enough to reach those other goals. You need to find ways to boost income and decrease spending so you can get this in place. Where do you keep your emergency fund? Well, some people keep it in multiple places, right? Maybe some of it's in your checking account. Maybe some of it's cash. You actually keep it home. But the bulk of it is typically kept at some sort of institution that's actually gonna pay you some interest.

on your emergency fund. A really popular place is a high interest savings account or a high yield savings account. And all that is is a bank. And there's a number of them out there, allies of popular one, for instance, that'll pay you, you know, uh the going rate on money, whether that's three percent or four percent or five percent, they'll pay you something close to that.

You don't want it sitting in a savings account at your credit union paying you 0.1% though. You want it somewhere where it's going to pay you some. Obviously the return of your principal is more important than the return on your principal when it comes to an emergency fund, but at least get paid some simple interest while you're doing it. Some people might also keep it in a bank CD.

Maybe they have it in a one-year CD. And if you really have to rate it, yes, there's a penalty for that. You might lose a few months of interest. So maybe that keeps you from rating it. for silly reasons and you earn a little bit more money on it than you would in a high interest savings account. But I think one of the best places to keep your emergency fund is the money market fund.

available at Vanguard or Fidelity or Schwab or someplace like that. Vanguard's funds usually have the highest yields and that's where I have a brokerage account. And so that's where we keep our emergency fund most of the time. The sit-in cash. at a money market fund. And you can rate that pretty easily, right? Within a day or two, it's back in your bank account and you can spend it.

Um yeah, it's good to have a little bit of cash on hand at the house, but usually within a day or two, that's plenty to be able to get to your emergency funds, especially if this is money you need to live on for one, two, three months. Having to wait two days to get to it is not going to cause you any problems. Some people feel bad about the fact that they're only earning cash interest rates on their emergency funds.

And the truth is you shouldn't, right? Because it's all about the return of your principal when it comes to your emergency funds. Don't get tempted to start investing this money into bonds or, you know, even into stocks. You don't want to be finding you need your emergency money right after a a forty percent drop in the stock market, this terrible bear market, and you need to raid your emergency funds at the same time. You don't want that to happen.

Leave it in cash. That'll allow you to invest the rest of your money more aggressively and you'll make up for it in the long run. Just remember that the return of your investment is more important than the return on your investment. Hope that's helpful. It's worth keeping an emergency fund for just about everybody. I mean, if you're a retiree and you already have millions sitting in your taxable account, that does function in some ways as an emergency fund.

But even retirees typically keep a fair amount of money in cash that they can access readily without having to worry about market fluctuations. And that's what an emergency fund is.

This podcast was sponsored by Bob Bayani at Protuity One Listener sent us this review. Bob has been absolutely terrific to work with. He always quickly and clearly communicated with me by both email and or telephone, with the responses to my inquiries usually coming the same day. I have somewhat of a unique situation, and Bob has been able to help explain the implications and underwriting process in a clear and professional manner. Contact Bob at Whitecoat Investor.com slash Protuity.

You can also email info at protuity dot com or call nine seven three seven seven one nine one zero zero to get disability insurance in place today. All right, keep your head up, shoulders back. You've got this. We'll see you next time on the Milestones to Millionaire Pod.