Bonnie Koo
Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired by their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially!
Tell us about yourself:
I am an internist at an academic center doing primary care and hospital work; traditional internal medicine. I am married with a grown step-son; he moved out a few years ago, so we are empty nesters. Hobbies include reading (fiction, and personal finance blogs), learning languages on Duolingo, and traveling. Work has taken over a lot of my free time and I am trying to reclaim some of that time to pick up hobbies I used to do in the past.
I live in what used to be a lower cost of living city. It’s become more expensive, so I might live in a medium cost of living city at this point.
I originally picked Internal Medicine because I wanted the option to specialize, and as one of the fellows I worked with suggested, I was going to be happier in a field with more thinking and opportunities to diagnose. As it turns out, staying in primary care/IM has been great for me. I loved my continuity clinic as a resident because I liked building a relationship with my patients, and I’m happy as an attending to get to know my patients over time. It’s great when they refer friends and family members. I also love having a variety of medical problems to deal with every day: diabetes, and hypertension, and migraines, and birth control, and GI issues. I think I would get bored seeing the same thing every day. I have fun figuring out my patient's problems and am also happy that I have the option to refer out if I hit a wall.
For medical students, I’ll repeat two pieces of advice I heard when I was an anxious, undecided student. One, pick a field with the body fluid that grosses you out the least. Two, you figure out in the OR pretty quickly if you have what it takes to do surgery. This won’t narrow down your choices to just one specialty but it will knock out a lot of specialties for you.
If you are asking for financial advice, I would say that internal medicine/primary care can be lucrative if you are willing to work hard. Nevertheless, you won’t make as much money as some specialties. I was fortunate enough not to graduate with crushing medical school debt. If you have a lot of debt, you’ll have to work hard AND live like a resident AND maybe practice geo-arbitrage or arrange for loan forgiveness for a few years to get ahead.
Did you graduate with student loans?
I did not go straight through to medical school. I had gone to graduate school, and had an NIH grant, which I had to pay back in time or money. That loan had high interest (I think about 8%), and I took forever to pay it off. I was able to discharge most of it (7/8ths) with service (teaching), and finally paid it off my first year as an attending. In the end, I paid only $5800 in cash, which now seems minimal, but was a huge looming burden at the time.
I was lucky enough not to owe money for my medical training, as I had some family support. They paid tuition and I paid my living expenses. I did have some money I had earned between graduate school and medical school, and some stock investments did well.
Financial aspects of kids
When did you have them?
No biological children for me, just the step-son. We actually picked our wedding date so he could attend our wedding before he left for college—he left the next week!
Are you planning to fund their college expenses?
My husband and I didn’t date for a very long time before getting married, so I didn’t have long to prepare for dealing with college expenses. Luckily, other members of my husband’s family pitched in to help with college, but we ended up paying for room and board for four years. After the support I had received from my family, I felt an obligation to pay it forward. My step-son was able to graduate without student loans, which I feel is a huge advantage we were able to give him.
I am putting money in 529s for my nieces and nephews. I don’t expect it will be sufficient to cover college costs, but there will hopefully be enough for a nice “Aunt and Uncle Scholarship.”
Financial aspects of marriage
Are you married? Are you divorced? Remarried?
Married
Did you get a pre-nuptial or post-nuptial agreement?
We did get a pre-nuptial agreement, as we did not date for a very long time before getting married. It was mostly in case the marriage fell apart really quickly. I don’t remember what it says anymore.
Do you and your partner agree on finances?
We feel we mostly agree on finances. When I first discovered the personal finance blogs—especially Mr. Money Moustache and Frugalwoods—I sometimes would ask too many questions about grocery shopping and utility bills and annoy my husband. Ultimately, I want to retire on a higher budget than he does, so I think if you were to ask each of us what our “retirement number” is, we’d give different numbers.
Does your spouse stay at home?
After a few years of marriage, we realized that my husband could save us a lot more money by managing the household than he was earning at his job. He was willing to do this, but he had some issues to work through once he was staying home. It was hard for him not to be bringing in cash every week. Over the years, I think he has been more satisfied with this arrangement—he can really see the financial benefits, and he also has more time available to pursue other projects.
Are you the breadwinner?
I am the breadwinner. It was stressful for me at first to realize I was now responsible for 2 people (3, if you count my step-son when he was in college.) I am afraid that it enforced my bossy personality. Fortunately, my husband has a strong sense of self and doesn’t let me run him over.
Financial mistakes:
Have you made any financial mistakes?
There have been lots of things that I probably could have done better: not buying a house in residency, spending less on clothes and house stuff when I first got my attending salary, saving more (especially while I was single). This was long before blogs, especially doctor-oriented blogs, were a thing. In the end, I would chalk some of it—like the house and the overbuying—as a learning experience, since the overall financial impact wasn’t that much. I wish had had access to modern advice on saving as a new attending, as I was ready to save, but wasn’t sure how much was reasonable.
General Finances
What’s your FI (financial independence) number?
I haven’t yet decided on my final FI number. I’m thinking about 25x expenses, but there’s still a while to go until I get there. I expect that once I get closer, I’ll want more padding and a bigger number before I quit work altogether.
I’m thinking more about slowing down and sliding into retirement, rather than going full force and then quitting suddenly. I had planned to wait until the mortgage was paid off before reducing my hours, but this spring I decided I couldn’t wait that long. I cut my hours by just a tiny bit this year and will see how this goes, both financially and in terms of improving my work-life balance.
Who handles the finances in your relationship? Do you DIY or do you have a financial advisor?
I handle the finances in the relationship for the most part, as I had been doing it for several years as an attending before meeting my husband. Now that I’m married, I do discuss what I’m doing with him. Most things are DIY, though we do have an accountant who does our taxes, and I have a broker for investments. He’s my dad’s broker too—my dad and I often discuss whether we’re getting good advice, but are staying with him until he retires.
What is your net worth?
With the market gymnastics recently, I can’t be quite sure. Including the Zillow estimate of our home’s value (about which I have some reservations), I would estimate our net worth at about 18X our annual spending.
How are you saving for FI/retirement?
Maxing out my 403(b). Back-door Roth IRA for me. Still working on my husband to start a spousal back-door Roth for him. I have a taxable account which mostly has stocks, some of which I have had for decades.
My 403(b) is in a target-date fund. Roth is in individual stocks. I haven’t really bought bonds (except in the target date fund), but have been aggressively paying down the mortgage—which I think as sort of like investing in bonds (not as high returns, but more certain returns than stocks). Once I finish paying off the house, I will have to think about bonds more seriously.
Biggest financial failure/regret:
Had I gone to med school earlier, I imagine I could be a lot further along on my path to financial independence. But I don’t know that I begrudge the time I had to do other things, and mature.
My biggest real regret is not learning to bill properly. Now that I know how to do that, I realize I probably undercoded by $25,000 to $30,000 a year in my first years as an attending.
One thing you wish you knew:
How to read a prospectus critically.
Do you have insurance?
Life insurance through work. Disability through work, and I also have a small policy I continued from residency; it wouldn’t cover all our current monthly needs, but would be a big help. Yes to umbrella insurance.
Do you give to charity?
Absolutely. I give about $3500 a year to various charities—mostly the local food bank, but also to my university, and small amounts to various groups I want to support. I can take tax deductions for some memberships (museums, religious institution), but these don’t really feel like charity since I’m getting something back for that money.
Any parting words of wisdom?
Paying yourself first and automating savings are some of the most important things you can do for your finances. Assuming you make an effort to live on your income without going into debt, putting away 10 to 20% of every paycheck will make you rich, sooner than you think. You’ll get richer faster if you invest that money wisely.
"Paying yourself first and automating savings are some of the most important things you can do for your finances." Share on XTell readers a fun/random fact about you:
In my 20s, I spent a summer driving across the country and back on my own, before smartphones. With a non-working car stereo. I grew a lot that summer.
Where can people connect with you?
I started a blog this year (inspired by Wealthy Mom MD and several other women bloggers). I’m still learning about blogging, but it’s been fun to write something other than progress notes.
Another FinCon is on the books! I just returned from #FinCon19 in Washington, D.C. What is FinCon? Simply, it’s the annual conference for money nerds. It’s where content creators (bloggers, podcasters, youtubers, course creators), financial advisors, and anyone else in the “industry” converge to exchange ideas, learn, and connect in person!
This was my second FinCon, and I love seeing the number of physician finance bloggers grow and collaborate. Also, we had more than twice the amount of women physicians this year!
This just goes to show the need for women's voices in the personal finance space.
FinCon is also a chance for me to run into and see some of my money celebrity crushes. Like running out of the elevator to chat with Ramit Sethi (author of I Will Teach You to Be Rich).
I also got to meet Rob Berger, the podcaster behind the Dough Roller Podcast –the first money podcast I ever listened to, back in 2014. He was gracious to take a selfie with me.
On top of that, I got to meet Emma Johnson of Single Wealthy Mommy. I love her message for single moms–that they can be wealthy financially, in love, and in life.
So like last year, here are some lessons I learned from #FinCon19:
Creating your team is probably the most challenging part of growing a business
Can I get an amen? You may not be running a business, but I’m betting many of you have had to hire a nanny or perhaps a personal assistant. A pearl I learned at FinCon is to take the stance that you are 100% responsible for their success or failure. It’s too easy to think it’s not your fault if they don’t deliver or meet your expectations since it takes you off the hook.
What if their success was all on you? I think we would all approach and show up for our team very differently. Never assume they know what you want or need. They also can’t read your mind.
Literally ask them to repeat back to you what you asked them to do.
Choose your friends and colleagues wisely
You may have heard the saying, “Your net worth is the average of the 5 people you spend the most time with.” I will take it a step further: you are limited in what you can do, accomplish, and make (money) in life by the people you spend the most time with. What do I mean exactly? If you spend time with negative nellies all the time, then you’re also probably a negative nellie too. You play it safe since that’s what all your friends do, too.
"You are limited in what you can do, accomplish, and make in life by the people you spend the most time with." Share on XOn the flip side, what if your friends all believed that anything was possible? What could be possible if your friends encouraged and supported your growth, whether it is personal or business growth?
This is exactly why folks in business join and continue to participate in masterminds. These are groups of like-minded people committed to growing their business by investing in personal and business development. We get together and openly share our secrets to success to help each other. A few of us got together at FinCon and had a “hot seat” where we each took turns asking for advice on a business problem. A mastermind is part advice, part rah rah, and 100% committed to cultivating a growth mindset.
Let’s get rid of money shaming
Ramit Sethi gave one of the opening keynote talks at FinCon and boldly declared that there is no shame on spending a tremendous amount of money on things you love. I couldn’t agree more. And to take it a step further, though we are beginning to share the message of financial literacy to physicians, we are barely touching the subject of money shaming. There is a lack of money transparency and there is plenty of money judging going on. I’d love to see that end.
There is so much shame about how and on what we spend money. We are judged if we are perceived as having too much money. We celebrate paying off multiple 6 figures of debt, and yet we stay hush hush about reaching multiple 6 or 7 figures of net worth. Why?
There are only 3 answers: Yes, No, and Being Ignored
Cat Alford talked about “failure” in a way I haven’t heard before. In business (and in life), you often put yourself out there, whether it’s asking someone if you can collaborate on something or asking for someone to be a guest on your blog or podcast. Or, on the personal side of things, reaching out to a new friend or asking someone out!
Cat made it really simple: there are only 3 responses: yes, no, and being totally ignored. If you go in knowing that, it’s freeing. It really becomes a numbers game.
So instead of feeling bad when you get a no, or worse, no response, don’t take it personally. You got 1 of the 3 responses, so just keep putting yourself out there and you’ll eventually get the yeses that move the needle.
Final Thoughts:
So that was FinCon 2019! Of course I could go on and on, but those were my major takeaways. I always learn so much when I go there, and if you ever have an opportunity to attend, I highly recommend it! (Drop me a line so I can meet you there!)
In the meantime, if you’re interested in watching the speaker sessions from this year’s FinCon, check out this link and get access to tons of material from the conference at a fraction of the price! If you do take advantage of it, head over to the Wealthy Mom Physicians community and let me know what lessons you learned!
Editor’s Note: This is a guest post from Ethan, my stepson who is currently 12 years old and in 7th grade.
Having Financial IQ is knowing how to handle money responsibly and save according to a plan. As a 12-year-old, I never thought I’d be introduced to this term. It has never been brought up in school and I didn't even know what it meant until my stepmom told me I needed to develop a Financial IQ.
It is never too early to start learning about money. She gave me a copy of Rich Dad, Poor Dad to help me understand more about my Financial IQ and what it could mean.
Robert Kiyosaki, the author of Rich Dad, Poor Dad, started to learn at a young age and why it is crucial to develop your Financial IQ. The benefits of starting at a young age are that you will be able to understand more and more as you grow older. You will recognize opportunities such as:
- Acquiring assets that work and grow with you
- The ability to explore all the opportunities life presents to you. It’s not “I can’t afford it” but “How do I afford it?”
- Retiring early. I never thought about retiring, I mean I’m only 12… but I think if you are able to retire young, at like 40 or 50, then you can live a better, fuller life without the worries of money.
With that in mind, I am hoping (I’m 12, so cut me some slack) to write a series of posts over the next year on this book. Rich Dad says, ”Broke is temporary, poor is eternal.” He means that being rich is a mindset and the greatest asset is your brain.
Simple Lesson One
Robert and Mike (who were best friends, and Mike was also the son of “Rich Dad,”) took jobs working for Mike’s dad at one of his bodegas. After several weeks of growing frustrations with little or no pay, Robert didn’t want to work anymore and was going to quit. Rich Dad said “I will not pay you,” so Mike and Robert had to find a way to make money.
At the comic place in their town, they were throwing out comics. Robert had an idea he asked if he could have the comics, and the store owner said yes as long as he did not sell them. So, he made a library and charged people $1 to read them to read as much as they want, and it is not selling so they did not break the deal.
Rich People Buy Luxuries Last
As a rich person, you have a lot of money, but you should not spend it on clothes. Spend it on assets to grow your money and then you will not have to worry about losing it because you will have a steady income and will not have to have to worry about finding a job or worry about losing your money. The rich know how to invest in assets–that’s why they’re rich. But the poor do not know how to invest in assets, and that's why the rich get richer and the poor get poorer, and the reason for Rich Dad is to educate the non-financially smart people and to get them to understand money.
Rich People Take Risks
Do not be afraid of taking risks when it comes to money. Rich Dad says that money is managed by fear with most people, and if you are scared of losing money than you could miss an opportunity to make even more money and become even more wealthy.
My friend is a bit of an entrepreneur. He buys trendy clothes and resells them for profit. Sometimes he makes no profit or even loses a bit of money. Resale is like the stock market.
What I Learned
My takeaway is that I did not know that money is living and breathing. It grows it shrinks and is sometimes unpredictable, but by teaching yourself about money, you can kind of make it work for you. Having knowledge about money is great because you learn and you make more money.
Do you think it is important to develop a financial IQ?
Why or why not?
Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired by their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially!
Tell us about yourself:
I’m a 41-year-old Emergency Medicine Physician and have been practicing for 10 years. I graduated with a liberal arts degree and worked in consulting for a few years before deciding to go to medical school. I think that was the best thing ever because people often go straight through with tunnel vision and then awaken and wonder if the grass is greener on the other side. I took a few years to work in corporate America and actually had a great couple of years traveling between Chicago and Southern California, staying in a corporate apartment in Newport Beach, driving a rented convertible to work and expensing meals while pretending to work. But in my spare time, I was taking lunch breaks to try out for game shows in LA and didn’t find fulfillment in what I was doing day to day and decided to apply to medical school since I happened to take my premed classes to appease my parents during college. I never made it big in Hollywood (I didn’t even make it past round one of any audition) and then the dot-com bubble burst and I got accepted to medical school and traded in my airline miles and heels for books and clogs.
After residency with 2 kids in tow, I decided to move to a big city in Texas temporarily to be near family. It was supposed to be a short stint until the kids were a little older and then we would move to some beautiful city near the beach, maybe out West… But the reality is money goes further in Texas, especially for Emergency Medicine (this is changing now) and it was great to have grandparents nearby to help on the weekend and when our schedules get complicated. Somehow 10 years have passed and I’m still in the muggy, misquote town and now it's hard to uproot the kids and move and not worry about years of therapy later.
Do I like EM? Would I do it again? Well I can’t imagine what else I would do in medicine because I’m constantly interested in something for a short amount of time and thinking of the next big thing. I have attachment issues and don’t want to see the same patient again and I don’t like to work when I’m not at work. I like to stack my shifts and jump on a plane and explore a new country in my spare time and I like most EM docs I’ve met. This probably makes EM a pretty good fit for my style but I think of it as a continuum and I’m always thinking of what may come next. I am working on being a writer but I hate grammar. I wanted to be an actress but I don’t have emotional range. I want to be a rockstar but I don’t have rhythm. But I am always daydreaming of what I’m going to do next with my life and just see EM as a step in the journey. I can’t wait to see what happens next…
Did you graduate with student loans?
I went to an expensive undergraduate (Northwestern) and left with student loans. Not as much as you would think because I got some scholarships and also I’m from a poor family so I got aid. I did work study and worked a few years after and paid some of the loans back, not all.
I rolled the rest of my undergraduate loans into my medical school loans. I got a scholarship that covered some part of my medical school tuition and finished with about 80K in total debt (between undergrad/med/residency) which could have been a lot smaller if I hadn’t deferred payment in residency. I was just a lemming like all the others around me and didn’t take the brain space to question financial decisions at the time, instead, I just did what the mob did and racked up interest. I wish I had the brainpower to spare during med school/residency/early mommy hood to look at my finances and start paying back the loans because I could have saved some money. The interest on my loans is small, something like 2 % so for years I was just paying the monthy payments, spread over 30 years. Then I started making big payments every so often when I would think about finances, then I just decided to pay them off and it feels so good to be without any educational loans. My husband had about 40K of loans from undergrad and paid them off a few years before me so we are both without educational loans. I think we paid them off in about 7 years after residency.
I did med school in Chicago and bought a townhouse when I matched and knew I would be staying for another 3 years for residency. We did an interest-only 5-year loan (not smart) and it could have turned out pretty badly but for us, things worked out.
We moved to Texas right after residency and put our place on the market after we left town. It took about 5 months to sell and it was during a down market (2008) but we actually made money on it even as the real estate market was tumbling.
Financial Aspects of Kids
When did you have them?
I’m married with 3 kids. I had one at the end of medical school, one at the end of residency and the last one 6 years ago. That’s right, I went straight through med school to EM residency to practice while having kids and not taking time off. It sounds crazy but if you don’t know any different it all works out. The key is a really supportive partner and the ability to survive on less sleep.
Are you planning to fund their college expenses?
We have 529s for each of them and put about 1,000/per kid per month each (36k per year) and plan to help them out with college as long as they remain normal kiddos and are doing the right thing. We started out putting in smaller amounts and only decided on our current rate for 529 in the past few years. I wish I had parents that could have helped out with my educational loans and I hope to help mine. The reality is with our income, they won’t be getting any money for college no matter how hard they work.
What are your child expenses?
So where am I hemorrhaging money? My babies -that is my single biggest expense. Feeding them, dressing them, paying for sports and music and birthdays and taking them on vacation. Flying as a family of 5 is insane…You can’t sneak 3 kiddos into a tiny European hotel room made for 2, maybe 3 small people, you get caught and have to get a suite or double room and so on. I admit it, I pay for private school. And I can’t honestly justify it because I’m a poor public school kid and life turned out okay, but suddenly you have your only little beast and you think you need to do more because you have more. And you wonder if there is something special about that private school with an amazing reputation and so you apply. That is the big mistake because once you have seen the difference in private and public it's really hard to go back but I don’t know if that is a decision that makes a difference in the long run. I do know I’m 60-100k poorer every year because of this (tuition from 25-31k per child). I will have to answer that question in another 15+ years and see where my kiddos end up in life.
Financial Aspects of Marriage
Did you get a pre-nuptial or post-nuptial agreement?
No pre-num but if I got remarried I would do that. Just because of where I am in life now, not because I regret not having one. I lucked out so far marrying a ‘nice’ guy with the same values as me and so far it’s been great. Your partner in life can make or break you in so many ways, so if you hear warning bells…RUN!
"Your partner in life can make or break you in so many ways." Share on XDo you and your partner agree on finances?
I worry more about our finances than my husband. I also do more reading and investing than he does. He is a ‘set and forget’ kind of guy. He is pretty chill which works because I worry enough for both of us. No matter how much we make, I always worry about ‘having enough’ and lately I’ve been working hard to let this go and cut back. Being online and seeing the whole FI community has been a great gift in realizing what is “enough”. Also seeing nice young people with terrible diagnosis and having kids really puts life and mortality in perspective and I’ve been working on cutting back big time at work to have time for my life and find myself again.
Does your spouse stay at home?
My husband works in technology. I don’t know what he actually does, we never talk about work. I know he works from home which is amazing because he can get the kids to school before he gets on a conference call and he can work in his pajamas all day and we can still see each other and have lunch dates on my days off. But it also means he travels randomly and sometimes weekly so I put holes in my schedule and trade shifts and we are constantly juggling. I think this is just the reality of life with kids and 2 working parents. We don’t keep a nanny- it’s a luxury because I’m in EM and he works from home when he’s not traveling. We make it a rule that one of us is always home. So, he schedules meetings around school activities and I schedule my shifts around his travel dates. We didn’t plan to live in a lower COLA and I didn’t research competitive pay for my specialty but looking back on it, these 2 accidental steps made a big difference in getting to financial independence and we really lucked out there.
General Finances
What’s your FI (financial independence) number?
My FI number is constantly changing but probably somewhere between 6-8mil. If all 3 kids get into great schools and we help them out that is almost 160-200k per year in kiddo cost not including our own living. So we try to factor that into our FI number. And I want a big cushion and to live without worrying about money so why not think bigger?
Who handles the finances in your relationship? Do you DIY or do you have a financial advisor?
We do not have a financial advisor and both independently manage our finances and meet every 4-5 months and review where we are and make some tweaks.
What is your net worth?
Our net worth is around 3.8 million depending on the market and not including our home (about 4.6 mil including our home). I actually never took the time to look at our net worth until about 1-2 years ago and that was a pleasant surprise. In reality, I know I could stop now and be okay. My husband actually loves his job and no matter how much money we have would always work so I’ve been stepping back to take time for me. I see lots of people way past FI that keep going NOT because they love their life but because they don’t know what else to do. I never want to be that person. I love my life and I’m grateful for my job, but I don’t want to lose myself in that. I don’t like to think of my identity as ‘physician’ or even ‘mom’ and worry I’ll lose parts of me if I keep chugging along with tunnel vision. So I’ve been working less for the past few months and plan to continue to slow down and take the time to tinker and do things outside of my job and family so that I never refuse to retire just for lack of what to do next. I tried to stop cold turkey this year but realized I need to do it slowly. If I hit 10 million suddenly I would stop or maybe work 2-4 days a month at most. I travel a fair amount and would like to do this more, maybe move near the water, maybe do some international work.
How are you saving for FI/retirement?
My husband has 401ks and IRAs. I have a sep IRA (I know everyone else has a back door Roth) and some old IRA/401K from before. We save the rest in taxable accounts. We do a mix of index funds, cash, and stocks and are a bit aggressive in our allocation. I've not taken the time to see our asset allocation but will try to do that in the next year but I think we are 80+% in the market, which is concerning going into 2019. We don’t rebalance and we keep talking about real estate but have not gotten into that yet. Hopefully, real estate will come in the next 1-2 years. We try to save around 20-25% of our income each year and that money goes into retirement accounts and taxable accounts. We finished paying off our student loans and also our home so this was a big milestone for us about 2 years ago and that was when we started tracking our net worth.
Do you have insurance?
I have disability insurance, which I think I will cancel in the next 2 years. We both have term life policies. We each have a 2 million dollar policy that expires in another 10 years and another 1 mil/each that expires in about 20 years. Our kids are young and if something happens I want finances to be taken out of the worry for them. WE have a 5 million dollar umbrella policy including our home.
Any parting words of wisdom?
For me, the current struggle is learning what is ‘enough’ and how to make the transition from that point. I love my life but I don’t live to work. We spend so much of our life on a planned track… finish college, go to med school, get a job, have a family, etc. But then the track is much more elusive after that point. I don’t want to just keeping going with my head in the sand and I don’t want to be one of those folks that can’t stop working to enjoy living. So many can’t let go because we start to identify and place our worth on our title of physician. There’s so much more to life and I’m at the point where I’m trying to navigate what comes next without a map. I think for most folks, if you live within your means or below your means and save as you go and get out of debt we will all get there as physicians. But recognizing when you are ‘there’ and what comes next is really the next exciting part no one talks about.
This is a guest post by Alpha Investing, a private group of experienced investors with strong relationships with high-quality sponsors. Alpha Investing aggregates investments from its members into a syndicate and invests into sponsor projects – allowing members to access exclusive real estate projects at significantly reduced minimum investments. We have an affiliate partnership and I invest with them. Most of Alpha’s investment opportunities are common equity, but they do provide quarterly access to a commercial debt fund run by one of the oldest real estate families in NYC.
How Real Estate Debt Funds Work
Real estate debt funds help connect borrowers (often developers) with short-term capital for commercial real estate projects like multifamily buildings, shopping centers, construction loans, and many other property types. Real estate debt funds rose to prominence in the wake of the 2008 crash. Today, real estate debt funds occupy a small but profitable niche in the world of commercial real estate lending.
What is a Real Estate Debt Fund?
A real estate debt fund consists of private equity-backed capital that lends money to prospective real estate buyers or current owners of real estate assets. Investors in these funds receive periodic payments for the interest charged against loaned capital, and security charged against property assets, which takes the form of a mortgage. These funds offer loans collateralized by senior real estate assets to borrowers for a wide range of commercial and business real estate needs.
Most debt funds are focused on a particular loan strategy or investment idea. For example, some funds will focus on offering residential construction loans to multifamily apartment builders, while others might concentrate on financing retail and shopping developments. Other common loan types include industrial, construction, hospitality/hotel, and vacant land.
Which Borrowers Turn to Debt Funds for Capital?
Debt funds can offer commercial real estate borrowers loans and terms that traditional lenders cannot, or will not offer. They work with borrowers who have complex financial situations or do not have access to conventional credit for whatever reason. Some of the most common loan types include:
- Bridge Loans/Lease-Up Financing
- Construction Loans
- Property Rehab/Redevelopment Loans
What Sets Real Estate Debt Funds Apart
Real estate debt funds first took off in the wake of the 2008 housing crisis. At the time, traditional lenders like banks were suffering from significant liquidity issues, and commercial real estate credit dried up. Many private lenders, including real estate debt funds, stepped into this gap and began lending to commercial real estate investors and businesses.
Although banks, agency, and Commercial Mortgage-Backed Securities (CMBS) lenders are again lending commercial capital, many traditional lenders have yet to go after borrowers in need of bridge or construction loans, leaving that sector mainly in the hands of debt funds and other private financing. Debt funds offer loans in the sweet spot where borrowers need amounts too large for small lenders and not large enough for non-bank institutional lenders, generally less than $100 million.
"Debt funds offer loans in the sweet spot where borrowers need amounts too large for small lenders and not large enough for non-bank institutional lenders" -Alpha Investing Share on XIf a business requires capital quickly, streamlined processes allow debt funds to meet their needs faster than a traditional lender. This nimbleness can be particularly beneficial in the real estate sphere, where tight closings are common and not securing funding in time can be disastrous. Owners and developers that lack the equity, or the balance sheet required by traditional lenders, or those requiring a higher loan to value (LTV) loan than a bank can offer may also turn to debt funds for financing.
How Real Estate Debt Funds Generate Income
Real estate funds generate most of their income through interest on borrowed capital and in the case of a default, obtaining title to the collateral underlying the loan. The fund charges borrowers interest rates often starting at 9%+, which can fluctuate based on market conditions. Payments on the loan are made monthly, and rates are fixed, or priced at a 30-day LIBOR plus spread, with a floor. Borrower fees for loans may include due diligence, origination, servicing, draw, modification, extension, or exit fees. Depending on the fund types, these non-interest-based fees may be distributed to investors in whole or in part.
Loan amounts can range from $5 million up to $150 million or more. They offer short-term loans, for example, between 1 and 3 years. The LTC (Loan To Cost ratio) or LTV (Loan To Value ratio) for loans is dependent on location, and the specific attributes of a property- for the most part, it is not greater than 80%.
As we mentioned earlier, in the case of default the fund may take possession of the title of the loan collateral. The fund may also look to restructure the terms of the loan with the borrower or sell the underlying note to another investor/lender. In each scenario, the lender's goal is to maximize the loans disposition value – taking into account cost and timing factors related to foreclosures and bankruptcies. With that said, the greatest upside lies in taking possession of properties that collateralize defaulted loans. Methods for increasing value differ but may include stabilizing, improving, or otherwise completing a property with the goal of achieving the highest disposition price in the shortest amount of time.
Summary
Real Estate Debt Funds occupy an important place in the commercial real estate finance markets. The industry has helped facilitate the construction and operations of thousands of properties across the United States and lent billions of dollars to investors and developers. Their ability to move quickly and their more accessible lending criteria make it likely that real estate debt funds will continue to occupy a critical place in the real estate markets.
Think of debt funds like the bonds of real estate vs. buying property (the stocks or equity equivalent). An accredited investor can buy into a debt fund. Keep in mind that debt fund payouts are taxed at ordinary income rates and that commercial real estate debt is not as predictable as corporate or government bonds. A great way to tax shelter this is to place your debt fund investment into a self-directed IRA. This is just a regular IRA that allows you to invest in alternative investments besides the typical stocks and bonds. The popular custodians like Vanguard and Fidelity do not offer these.
Editor’s Note: This is a guest post by a fellow Wealthy Mom MD that goes by the alias Hatton 1 in the online world. This female physician is the blogger behind doctoroffinancemd.com and now part-time GYN who has achieved Financial Independence.
Miss Bonnie asked me to provide some pearls for achieving financial independence. Who am I? Why am I qualified to give advice? I am a prolific poster on the White Coat Investor forum. If I was saying stupid things I would have been shot down a long time ago. I also run a blog called DoctorofFinanceMd.com. My main qualification is that I have been FI for years. I am OB/GYN. I was able to stop delivering babies about 5 years ago and do GYN part-time.
The younger you have your “AHA MOMENT” and start paying attention to money and finance the easier your journey will be.
The only real difference between finances now and when I went to medical school/residency is the student loan burden. I would add that salaries are inflation-adjusted much higher now immediately out of residency to partially compensate for this. I think learning every detail about your loans and different payback possibilities is incredibly important these days. I also think when you are a resident you need to live like one and minimize living expenses that you are borrowing!
Do not buy a house when you are a medical student, resident, or new attending!
I know you want one. This is one of the biggest mistakes you can make financially. It is really dumb if you have $500k of student loans. You will find in life that there is always someone who will loan you money when you have MD (or DO) after your name. You have to continue to delay gratification if you want to achieve FI. If you are young you may not yet realize that your first job is likely not forever. It really complicates your life when you are contemplating a job change. I know this because I bought a house as a new attending. I was lucky to sell it quickly but it was luck and I made no money on the deal. The rule of thumb is not to buy unless you plan to be there for 5 years.
"You will find in life that there is always someone who will loan you money when you have MD (or DO) after your name. You have to continue to delay gratification if you want to achieve FI." Share on XThe smartest thing that I ever did was front-loading my retirement investments.
What do I mean? I filled up my retirement space early every year then I dumped lots of money into a taxable account. I started doing this at 31. By 45, I was working 3.5 days per week and paid off my house. The key principle is funding your accounts at a young age so you can benefit from compounding. A taxable account is very flexible. You can put anything you want in it. You can access it at any age. You need some level of self-discipline to not raid it, however.
Whatever type of retirement investments are available to you is what you need to learn about. Become an expert on your accounts. Quit worrying about stuff that does not apply to your situation. For example, I know I cannot do a backdoor Roth IRA contribution because I have a large SEP/IRA. I do not want to pay a large amount of pro-rata rule taxes so I do not stress over the steps to do a backdoor Roth.
Choose what you worry about.
Life insurance (if you have dependents), disability insurance, and umbrella insurance all are very important. Quit worrying about losing a malpractice case greater than your policy limits.
Be very careful about associating with Doctor Jones.
Who you associate with can really derail your path to FI. I would recommend reading The Millionaire Next Door series of books and thinking about them. Decide what is important to you. I see a lot of doctors derail their personal finances when they start trying to keep up with other very wealthy families they meet either at a country club or private school. You can do these things but just be careful.
I personally do not invest in crowdfunded real estate, apartment buildings, bitcoin, timber, gold, silver, hard money loans, leveraged ETFs, VIX, or “angel” investments.
I invest in stocks, bonds, REITs, and MMFs. Boring. Investing should be BORING. Over time boring investments will make you kinda rich. Guess what I am doing in about 10 days? I am paying cash for a house. If you follow my advice you can also.
Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired by their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially!
So let’s introduce our next woman physician rockstar – Joy!
Tell us about yourself:
I am Joy Hughes, and I am a recent graduate from general surgery residency with a fellowship in Trauma/Critical Care, living in Rochester, MN. My husband is a neurosurgery chief resident, and he will finish training in June 2019. I have a 2-year-old girl and a newborn. I am currently in a research fellowship and scheduled to start trauma and acute care surgery locums assignments in a few weeks.
My hobbies are hiking with my dog, Ramble, and playing outdoors as much as possible. At this point in life that is usually on the playground, but I like canoeing, kayaking, and biking as well. I read as much as possible, but resort to audiobooks most of the time given the attention needed for my girls.
"Really think about what YOU want and don’t be afraid to put your personal happiness as a priority." Share on XI am from Mississippi, spent some of my childhood in a very rural area with lots of land and animals, and then moved to a suburb of Jackson, MS, where I went to high school. I lived in Mississippi until matching at Mayo in Rochester, MN, where I have lived for the past 6 years. This is a very low-cost of living area.
As far as specialty choice goes, I did a lot of soul-searching during residency to pick my specialty. I started out determined to be a cardiac surgeon, and due to feeling like I was very invested in my mentors and had their expectations of me to pursue that specialty, I had a very hard time admitting that Trauma/Surgical Critical Care was just a whole lot more fun. Once I finally gave myself permission to change rails, I was very happy with the career choice, and I also felt more confident about starting a family. I got pregnant the next year and am so glad I made this change. (I know there are many women who have made the mom+cardiac surgeon combo work, but I don’t believe that I could have). My advice for anyone trying to choose a specialty is to really think about what YOU want and don’t be afraid to put your personal happiness as a priority. I regret trying to live up to some crazy ideal about the invincible smart career woman rather than just admitting I wanted to daydream sometimes and snuggle with my babies, husband, and puppy dog a lot. Life is meant to be savored. Having a meaningful and challenging career is wonderful, but I’ve committed to always make time for the fun stuff, too.
We both ultimately want to do global surgery work. I feel like trauma/critical care is great for that field, and my husband is finding many opportunities to contribute as well. He has never wavered from his specialty choice, but definitely asked many times whether it would be practical in the humanitarian sphere. Ultimately, I think all medical fields are needed and you can find a way to contribute with any set of skills; however, I like that trauma is so connected to current events and to the local community.
Did you graduate with student loans?
I did graduate with about $40,000 in loans from med school and some from college, but my parents had committed to pay those so I didn’t pay much attention to the number. My husband and I went to med school together; I had a full-tuition scholarship and he had full-tuition plus living expenses contingent on a commitment to return to the state after training. I took out about $8000 per year of subsidized loans to give us a little extra to live on and then took out extra our 4th year to pay for the 50 interviews we went on between us (couples matching general surgery + neurosurgery is a bear!) Our medical school was public and very cheap the first year; tuition went up noticeably by our 4th year.
I did not consider the PSLF because my total loan amount was low and I was very skeptical of the program anyway. I kept my loans on the standard 10-year repayment schedule through residency, and recently consolidated with SOFI. I have $48,000 left including my loans from college, which I took off my parents’ hands. Depending on which job I take, my loans will either be paid off by my employer or I will pay them down aggressively after fully funding all tax-advantaged retirement accounts. I have a ~4% interest rate with SOFI, so even if it takes me a few months longer to pay off the amount due to investing, I think that’s the better strategy.
Financial Aspects of Kids
When did you have them?
I had my first baby at the very beginning of my PGY4 year and recently had another shortly following completion of residency and fellowship.
Are you planning to fund their college expenses?
Yes, I do plan on funding some type of college fund; we haven’t started this yet as we are still on resident salaries. I honestly don’t know much about the specifics of the options, but I have a vague knowledge that some states allow pre-paid tuition, which might be an option depending on where we move for jobs. My dad has started a college fund for each of the girls, so at least they have something right now; I’m anxious to get this started as soon as we are on solid ground next year.
What are your child care expenses?
I had my first child after lots of careful consideration, including mapping out the childcare strategy for the rest of residency. We had an au pair plus day care until I graduated residency. Now with my research position, we are down to just daycare. The au pair program was great for us and really allowed me to have a pretty stress-free childcare situation. The au pair was approximately $24k per year and daycare is another $7200, so that’s around $31k.
Financial Aspects of Marriage
Are you married? Are you divorced? Remarried?
I am married, 13 years next month.
Did you get a pre-nuptial or post-nuptial agreement?
Ha, no, we got married my senior year of college. We are pretty evenly matched and have been together so long I honestly can’t imagine divorce; that would be quite the tsunami of personal crises!
Do you and your partner agree on finances?
Yes we agree on finances; we both listened to Dave Ramsey a lot in college and did the Total Money Makeover course at our church. Neither of us are into “stuff” like cars, clothes, or jewelry. I’ve gotten into the FIRE literature this year and he hasn’t had time to read up on it, but he listens politely and lets me tweak our budget as long as I don’t cut into his craft beer and taco money. We aren’t on the envelope system per se, but we do have reasonable spending habits that are leftover from living on a shoestring budget in college and med school. Our goal is to do mostly charity work so we make a strong effort to resist lifestyle creep.
Does your spouse stay at home?
Oh man, how often I have been jealous of people who have stay-at-home spouses… As I mentioned above, he’s a neurosurgery resident so we’ve been grinding out the residency workload for 6+ long years. However, I do think there is tremendous value in having a partner who “gets it.” We can gossip about the same work-related topics and bounce ideas and consults off each other. While I get a little melodramatic about it sometimes, it is a pretty great arrangement.
Have you made any financial mistakes?
Our biggest mistake was buying a house in med school. We lived in cheap apartments with thin walls, and I really wanted a dog. When a cute little townhouse came on the market in our neighborhood, I calculated that the mortgage would be about the same as our rent, so we took a “med student mortgage” from our very generous local bank and bought it. As Dave Ramsey would say, “Murphy moved into our spare bedroom,” and we had to pay a ton of money for repairs when it flooded while we were on vacation (due to city drain backup). We couldn’t sell it right away and ended up eating so many costs for various things; it was very stressful to deal with at the beginning of residency. The mental energy expended on that catastrophe was worse than the financial hit. We were so cash-poor due to that house that we didn’t go on group vacations with our friends in residency, which I sincerely regret.
General Finances
What’s your FI (financial independence) number?
Short answer is we don’t really know our FI #. We want to be completely debt-free with fully-funded retirement accounts and are thinking $3.5M would technically be “FI.” However, we are reading quite a bit about optimizing our altruism ability, and it may make more sense for us to continue in high-earning jobs (presuming we like to work), and give more money away (as opposed to giving more time as volunteers). Additionally, we would sincerely consider taking a “mini-retirement” to do volunteer work as surgeons for a couple of years and then re-entering the U.S. workforce to make some money down the road. We will see as the story unfolds!
Who handles the finances in your relationship? Do you DIY or do you have a financial advisor?
Our “handling” of finances has been pretty minimal through residency. Everything was on auto-draft and we lived within our means and managed to save around $15-20k for an emergency fund. During au pair years we dipped into our savings a bit and I kept a close eye on that and forecasted how much we would need before we started the process. I’ve implemented some travel credit card hacking and also have been putting a plan together for investments next year, so I would say that I’m the more proactive one when it comes to finances, but my husband is not really on a strict budget or anything.
What is your net worth?
Cash: ~$16k
Retirement: $20k each =$40k
Home equity: ~$30k
Debt: $7000 (car and medical bills) + $48k (my student loans) +/- $150k (his “scholarship” that we will have to pay back if we don’t return to home state).
Equals somewhere between -$119k to +$31k.
How are you saving for FI/retirement?
We each have a non-matched 401k through work (they exclude residents from matching benefits, grrrr!) that we set up to withdraw 5% of our income during our orientation day 6.5 years ago. I am starting locums next week and will set up a solo-401k and put as much as possible into that. The plan is to utilize tax-advantage retirement accounts including Roth and HSA next year when we start our real jobs.
Biggest financial failure/regret:
That damn townhouse and not starting to save more earlier. I think it’s true that if we had started saving 10% toward retirement, we just wouldn’t have seen that money and wouldn’t have missed it, especially since we get a small raise every year of residency. I also regret not giving more to charity during residency. We have funded a few small projects; I “adopted” an elephant, we gave to compassion int’l, supported a local public radio station, and gave to various charities along the way, but I wish I had a passion project that I gave to in a really meaningful way.
One thing you wish you knew:
I wish I had known about the concept of FI earlier. The principles aren’t just about money; it’s about optimizing your lifestyle and decisions so that you are only spending time and energy (and money) on what truly brings you happiness and purpose. These concepts would have helped me so much as a junior resident, and I’d be in a better place financially.
Do you have insurance?
This stresses me out almost daily. I was on the fence about taking out LTDI at the beginning of this year, but I have some coverage (admittedly insufficient but it’s something) as a benefit from work, so I justified putting it off one more year until we get real salaries. I’m not sure I made the right decision but I have a vague feeling that I can’t afford it. While I’m writing this I’m thinking maybe I should just take out a policy now. We have an umbrella policy through State Farm along with our house and car insurance.
Any parting words of wisdom?
Our financial discussions revolve around how we can get ourselves in a position to do humanitarian work. There are so many different possibilities and strategies that it’s a bit overwhelming. I’m thankful to have found folks like WCI, POF, and Miss Bonnie MD. The information they provide is life-changing, to put it mildly. It’s absolutely liberating to discover these principles and philosophies. I encourage everyone to go down the FIRE rabbit hole, find your “people” on your favorite blogs and forums, and search for your pearls.
Tell readers a fun/random fact about you:
I majored in math and English in college and did an honors thesis in non-Euclidean trigonometry. I wasn’t sure I should be a doctor until my junior year.
Where can people connect with you?
My husband and I have a website with blog and podcast at indiedocs.org. We discuss our plan to pursue humanitarian medicine careers and all relevant topics, including the job search, financial independence, traveling, etc. The podcast features the stories of physicians who are actually doing global health missions, as well as some episodes where we get personal about our journey.
Twitter: @indiedocs1
Instagram: indiedocs
Facebook page: Indie docs
Note: In this post I got a bit behind the scenes here at Wealthy Mom MD. I hope you enjoy it!
Earlier this year I discussed my 5 productivity tips. I’m always up for learning how to be more productive. After FINCON18, I decided I was going to take my business to the next level–while still working close to full time as a dermatologist, being a mom to Jack, and a fiancee to Matt. And I still wanted “me” time, too–seeing friends, working out, etc.
Unfortunately, I don’t have the ability to create time, so I knew I’d have to learn how to juggle all of these things and hope to still feel sane.
First, is it really possible? YES.
I was initially inspired by The Life Coach School’s podcast episode Throw Away Your To-Do List. Brooke Castillo knocked down the all-pervasive notion that you must be busy in order to be successful or “get sh*it done.”
In reality, “busier” people are simply sloppy with their time management and there is no direct correlation with how successful one is and how much time they have available.
Brooke Castillo
I knew this was going to be an amazing episode when she said that. In fact, Brooke “works” 3 x 6hr days and earns a multiple 7-figure income. I’d like for you to challenge the belief that working hard and putting time in equates money or success. It doesn’t.
Soon after, I discovered Michael Hyatt’s new book, Free to Focus. Michael, like Brooke, challenges the idea that productivity is NOT about finding or saving time. Productivity is about working less AND having more free time. Can I get an AMEN?
But wait, you may say. I have LOTS of stuff I need to do. Do you? Michael challenges us further by saying that all things are a choice and you can choose not to do something.
Here are a few things I’ve started implementing in my own life and business in order to work less and have more free time:
Batching
This is a powerful tool I just recently learned.
What is batching?
Batching is when you work on similar tasks or projects in one, long, uninterrupted swatch of time. One popular example is batch cooking on the weekends so you have pre-prepped meals or ingredients for the week. I know some folks batch cook for the month by preparing freezer meals.
Why is batching this effective? It minimizes task switching. Every time you switch tasks–aka multitask–you lose up to 40% productivity. It gets worse. It’s been proven to increase stress and anxiety, kill creativity, drain your brain of precious resources, and effectively reduce your IQ to that of an 8-year-old.
You may think you’re good at multitasking–checking emails, responding to texts, and working on a paper all at the same time–but no one is.
I’ve implemented the batching method in my business by batch-writing content (blog posts), my weekly emails, and my social media. Instead of scrambling the night before to write something for my blog, it’s been planned and batch-written at least a month ahead of time. I hope to increase that to 3 months ahead of time soon.
Schedule Checking Your Email (and Other Forms of Distraction)
How many notifications and beeps come from your phone everyday? Or your computer? (Every website now seems to want the ability to notify you…) You may think it’s no big deal when your phone beeps or vibrates. However, it’s been proven to increase your anxiety and the only way to relieve it is to check your phone.
High performers are not at the mercy of their devices. They schedule specific times to check email and may even minimize checking their phone for text messages.
Batching is powerful if you stay focused on the tasks at hand. You may have to turn off internet access while doing your work. The classic “let me check what’s happening on Facebook” scenario where, one hour later, you forgot what you’re working on. We’ve all been there.
Ideally, I’ll check my email twice a day and address them to reach Inbox 0. I turn my phone to silent and put it out of sight when I’m in batch mode.
In reality, “busier” people are simply sloppy with their time management and there is no direct correlation with how successful one is and how much time they have available. @BrookeCastillo Share on XOutsource
I’ve always been a huge fan of outsourcing. As the content creator of my business, it is not a good use of my time to do things like approving members to my Facebook group, edit and upload blog posts to Wordpress, or schedule social media content. I know how to do all of these things and did all of this for a long time, but a time comes when it is no longer a good use of your time and will hinder your business.
It’s just like how you don’t room your patients or check them into your office. What other things in your life (or business) should you no longer do? Learning how to delegate tasks and ensure quality are skills you can learn.
Schedule YOUR Time First
Most people schedule their days or weeks by scheduling their work or other “must do” items before scheduling “fun” time or family time, or whatever their personal priority is. Then they wonder why they never make it to the gym or see their friends.
Schedule these things FIRST! And protect this time! Just like you’d never schedule a friend date in the middle of your clinic, (you wouldn’t even entertain that, right?) you need to schedule and protect your time as well.
Mondays to Fridays 5pm-8pm is my protected family time. Jack goes to bed at 8pm. During those hours, I do my best to put my phone aside and be with my family.
Just Say No
“The difference between successful people and really successful people is that really successful people say no to almost everything.”
Warren Buffet
You don’t have to say yes to everything you’re asked to do. In fact, if you want to be more productive and have more free time, you need to learn how to say no. If you’re a really nice and helpful person, this can be difficult to do. But saying yes to everything you’re asked can lead to you overbooking yourself and stressing out, which will hurt your productivity overall.
Learn how to say no, especially when the things you’re asked to do cut into your family time, personal time, or time you planned to spend batching. That way, when you are able to help someone, it won’t be stressful or counterproductive.
I love attending conferences! And not just CME conferences for dermatology (love those too.) They foster personal development and growth and I get to meet like-minded people and make new friends.
Earlier this year I attended two conferences:
Maui Derm – January 26-30, 2019
Grand Wailea, Maui, Hawaii
If I’m going to get some CME I may as well do it in Hawaii! This was a great excuse to get some old derm girlfriends together without our spouses and kids! I’ve now officially attended all three Hawaii Dermatology conferences (the others are Winter Clinical and Hawaii Derm).
Of course, any CME trip is tax-deductible or eligible for reimbursement from your employer (if they do that). I like combining these trips with vacation to minimize my vacation spending. After Maui, I went to Honolulu for a few days to see some friends. I used Chase Sapphire Reserve points for my flights to Hawaii. And most of the rest of the trip (besides Honolulu) is a business expense.
Impact Summit by Kajabi – April 5-7, 2019
Irvine, California
Impact Summit is a conference for online entrepreneurs. This was the inaugural conference by Kajabi and to say it was FUN is an understatement. I think sometimes as physicians, we forget what else, and who else is out there – we are often in a bubble of other physicians. Here I met a few hundred online entrepreneurs and got to see some of the top online entrepreneurs speak such as Amy Porterfield, Rachel Hollis, Jasmine Star, James Wedmore and Brendon Bouchard.
In case you’re not familiar, Kajabi is an “all-in-one” online platform where you can host and create your website, email list, run your online course, membership sites and more. What I love about Kajabi is that they continually update and improve their product and provide excellent customer support. I use Kajabi for my opt-ins, sales pages, online course, future membership site and email list.
And here are the conferences I will be attending or speaking at through Spring 2020. I love meeting new people, so let me know if you’ll be there too!
FinCon – September 4-7, 2019
Washington, D.C.
FinCon is a conference for financial bloggers, financial advisors and industry to connect and exchange ideas. There’s been a growing group of physician finance bloggers and we tend to meet at FinCon. Although there are numerous sessions on how to improve your outreach as a blogger, most of us attend to network and meet others in the industry. Like I said earlier, I love meeting people and it’s pretty awesome to meet others who love the topic of money as much as I do!
Like last year there will be a dinner for physician finance bloggers, so get in touch if you’d like to attend!
Brave Enough Conference – September 12-15, 2019
Scottsdale, Arizona
BE19 is the third annual conference by woman physician Sasha Shilcutt, MD. Many women physicians find themselves isolated, especially after they become mothers. It’s all too easy to lose connection let alone make time for ourselves. BE is all about reconnecting with ourselves and empowering women physicians.
Here, you can show up whoever and however, you are. Come and meet your fellow women physicians from all specialties! I am thrilled to be a speaker at BE19 where I will discuss “The Keys to Wealth.”
The Entrepreneur Experience – October 17-19, 2019
Coronado, San Diego, California
Have I mentioned how much I love Amy Porterfield? She’s an online entrepreneur who teaches other online entrepreneurs how to create and sell their online courses. I’ve learned a lot from her and she was a huge part in helping me launch my first online course earlier this year.
She hosts an annual conference for her course takers and I can’t wait to hopefully meet her and get inspired by meeting other online entrepreneurs. Matt will be attending with me.
Passive Income MD Real Estate Conference – October 26, 2019
Los Angeles, California
You heard it here first! Get ready for the first real estate conference geared towards physicians with Peter Kim, MD aka Passive Income MD. I’m excited to learn more about real estate from Dr. Kim and the duo behind SemiRetiredMD.com.
Empowering Women Physicians Retreat – December 2-7, 2019
How about some CME, life coaching AND amazing bucket list destination? Yup, a CME retreat for women physicians in Bora Bora!
Four Seasons, Bora Bora, French Polynesia
Dr. Sunny Smith is a life coach and physician who coaches women physicians. She’s also my coach. I’ve had my best year yet so far and a large part is due to having her as my coach. For those of you that are not familiar with what a life coach does – in short – their job is to help you get yourself out of the way so that you can get the results you want. They help you become the best version of yourself!
Women Physicians Wellness Conference – February 25-27, 2020
Grand Cayman, Cayman Islands
Dr. Erica Howe created this conference out of a love for helping and educating women physicians and the Cayman Islands. I’m honored to be a speaker at her conference along with some amazing women physician leaders of our time… in Grand Cayman. Not too shabby! We plan to take the whole family with us to this one!
I can get used to these beach destinations that also offer CME!
Physician Wellness and Financial Literacy Conference – March 12-14, 2020
Paris Hotel, Las Vegas, Nevada
Aka WCICON20 this is the second White Coat Investor conference. The first one in 2018 sold out very quickly and was in Park City, Utah during ski season. In order to accommodate a larger group, the conference is now in Las Vegas! I’ll admit Vegas is not my favorite conference destination.
Like the first one there will be a wide range of speakers and panels including one for Women Physicians that I will be moderating. I’ll be hosting a reception for women attendees as well. Date and location TBD.
Registration opened earlier this week so be sure to register if you want to attend!
Will you be attending any amazing conferences this coming year? Drop me a line!
This is a guest post by fellow physician blogger known as Crispy Doc. He is a financially independent emergency physician, married with kids, and lives in coastal California. He blogs about financial literacy and burnout at www.crispydoc.com. He tweets, too: @crispydocblog.
A recent conversation with a financially brilliant friend led to the revelation that in addition to the usual suspects (health insurance before Medicare kicks in, Sequence Of Returns Risk), inflation remains a very real worry for those considering early retirement.
Inflation is the erosion of purchasing power over time. It's averaged 2-3% per year in recent history, although there have been notable years (1974 and 1980) where it exceeded 12%.
While the risk that inflation poses is far less than that posed by Sequence of Returns Risk (SORR). SORR is the risk that investment returns from your portfolio in the early years will be so low you run out of money before you have died. More about that later on…
Mattresses possess two major risks: conception and inflation
Conceiving an unplanned child on a mattress can undermine one's retirement plans as surely as inflation, but I'll conveniently exclude that topic from today's discussion to focus on the second mattress risk.
Keep a dollar in your wallet to spend later that evening, and your dollar does the job nicely. Keep that same dollar under your mattress for years and when you take it out, it buys less.
In a highly recommended series written by bloggers Big ERN and Actuary on FIRE, they describe how $1 million that remains un-invested (under the mattress) subjected to 2% annual inflation for 25 years will have the purchasing power of $600k at the end of that period.
This is understandably scary for an early retiree counting on that stash but equally fearful of market volatility.
Cash under your mattress will not suffice. You need to invest your dollar where it can keep pace with inflation or beat it. [Editor’s note: I like to call this – make your money work for you! Don’t let your green employees be lazy!]
Take home point: Cash is great in the short-term, lousy over the long run.
Cash is great in the short-term, lousy over the long run. @crispydocblog Share on XSh*t's about to get real: a note on terminology
When considering portfolio returns, it's important to understand the difference between real and nominal returns.
The amount your portfolio earns above and beyond inflation is termed your real return.
In contrast, nominal returns do not subtract inflation.
This is a critically important difference. During the great recession of 2007, investors seeking safety purchased government treasury bonds with nominal returns below inflation. These treasuries had negative real returns – investors actually lost money on these investments!
What investment tools can we deploy in our inflation-fighting toolkit?
Our investment toolkit includes equity (stocks) and fixed income (bonds, treasuries).
Stocks represent an ownership stake in a company, with the potential to gain or lose value as the company grows or fails.
Bonds are loans to a company repaid at a fixed interest rate.
Treasuries are loans to the government.
Equity
Stocks are higher risk, higher reward. Bonds are lower risk, lower reward.
Stocks historically beat inflation in the long term, but at the risk of greater volatility in the short term. Throw a dollar in stocks for 30 years and you are extremely likely to come out ahead of inflation at the end of the time period.
Throw a dollar in stocks for 30 months and it's anyone's guess if you'll win or lose. The loss could be half the value your dollar.
Take home point: Only dollars that you can ignore for decades ought to go in stocks, but the expected growth should exceed inflation over the long haul.
Fixed Income
Fixed income investments like bonds offer a slow and steady return on investment that keeps pace with or just beats inflation. Money you'll need in the next several years belongs in fixed income.
In fact, many investors create bond ladders – for example, they may invest in bonds that mature sequentially one year apart staggered over a decade. This keeps their investments liquid to ensure the money becomes available just in time to meet their spending needs, or alternately, can ensure they don't tie up all their money in a less remunerative bond if rates rise over that decade.
Fixed income investments are not, however, risk-free. The credit risk of a bond is that the issuer will go bankrupt before you are paid.
Interest rate risk is the risk that when interest rates go up, the bond you own will decrease in value because investors can obtain a higher rate of return elsewhere.
Take home point: Bonds tend to beat inflation, with lower risk than stocks. They not only reduce the volatility of your investment portfolio, but are a safer place to park money you are counting on in the coming decade.
Treasuries
The United States has created a solution to credit risk by issuing Treasuries (government-issued bonds). Since the government can always print money, it is felt not to be at risk of bankruptcy (This works well in the U.S.; not so much in Zimbabwe and other unstable countries where no one assumes the government will survive the year).
Take home point: Treasuries are considered to be completely free of credit risk but remain subject to interest rate risk.
Feeling TIPSy?
Uncle Sam has deep pockets, and you are his favorite niece. For this reason, the government has created a flavor of treasuries called Treasury Inflation-Protected Securities (TIPS), whose value increase is proportional to inflation.
Returning to the example from Big ERN and Actuary on FIRE, if you were to invest $1 million in TIPS subjected to 2% annual inflation for 25 years, you will withdraw an amount that preserves the full purchasing power of your $1 million at the end of that period.
But Uncle Sam is also a tough love uncle. If deflation occurs, the value of your investment drops proportionally.
Take home point: Invest in TIPS to protect against a jump in the inflation rate, so a dollar invested will retain full purchasing power at the time of withdrawal. The flip side is they can lose value in times of deflation.
How You Can Use These Tools To Protect Yourself At Retirement
In retirement, you are dealing with a new reality. Earned income from work has ceased, and you are living on a fixed income going forward that comes from your investment portfolio. Your goals are:
- Guarantee we have enough to cover the initial years of retirement in a worst-case scenario such as poor sequence of returns.
- Reduce the risk we take by increasing our bond allocation and reducing our stock allocation at the time of retirement.
- Minimize the risk inflation poses to our portfolio.
- Maintain a safe withdrawal rate low enough to last you until death.
One reasonable plan that incorporates these goals might be:
Maintain cash equivalents for the first 3 years of retirement. Year one should be cash in a money market account that gets transferred monthly into your checking account, years two and three can be invested in short-term CDs until you need to tap them for expenses.
Gradually shift asset allocation at retirement to increase fixed income since you can no longer risk the volatility of stocks. Let's say you are currently 70/30 stocks to bonds – a great recession striking the year after you retire could result in a loss of 35% of your portfolio, exactly when you lack the long time horizon to patiently wait for it to recover since you'll be living off of that portfolio. This is the dreaded SORR.
At retirement, you might go 50/50 (limiting your potential stock losses to 25%). Once past that critical first decade after retirement, you can consider upping your stock allocation gradually because you've made it beyond the most potentially devastating period when a sequence of returns risk could sink your retirement ship.
Another response to SORR is to remain flexible. If you can reduce your expenses when annual returns are low, you remain in a position of power.
Consider splitting your fixed-income investments evenly between bonds and TIPS, as TIPS will help you hedge against inflation risk. (The Vanguard Target Retirement Funds tend to split fixed income roughly 1/3 TIPS, 2/3 bonds at the time of retirement, for comparison.)
Finally, despite the FIRE community's general adoption of the 4% safe withdrawal rate, a more conservative 3-3.5% withdrawal rate will inevitably provide a buffer of safety that lets you sleep more soundly at night. This is doubly important for the early retiree, since the 4% safe withdrawal rate in the original Trinity Study was designed to survive a 30 year time horizon and many seeking FIRE will need their portfolios to last decades longer.
As Dr. William Bernstein has so eloquently put it, “The purpose of investing is not to simply optimize returns and make yourself rich. The purpose is not to die poor.”
With a better understanding of the investing tools in your tool belt, you will be less likely to need to tighten that belt in retirement!
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