MtoM #267: $500K Net Worth Right After Training

0:00This is the White Coat Investor Podcast, Milestones to Millionaire, celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire Podcast number 267. This podcast is sponsored by Bob Ionia, ProTuity. He's an independent provider of disability insurance, planning solutions to the medical community in every state, and a long time White Coat Investor sponsor. He specializes in working residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or to get this critical insurance in place, contact Bob the Whitecoatinvestor.com slash ProTuity today by email info at ProTuity.com or by calling 973-771-9100. All right, if you're listening to this the day it drops, today's your last day for this promotion. It's for match week, right? We're basically, if you will book a consult with the experts at Student Loan Advice today, we will throw in a free copy of our online fire

1:02your financial advisor, the resident version, for free. After you meet with the Student Loan Advice consultant. The consultation doesn't have to occur today. You just have to book it today. So make sure you do that again, go to StudentLoanAdvice.com. Now it's still worth it, even if you don't get the freebie, but today you get both. So book that if you need some help with your Student Loans and making sure you have the right plan for you. Okay, WC icon is coming up. I think this drops on the 23rd of March. So just a couple of days later, we're gonna be at WC icon, we're in Las Vegas, but you don't have to come to Las Vegas if you don't want to. You can participate virtually. And if you use this code, WC icon 100, you'll get $100 off that virtual conference attendance. So go to wcievents.com, use code WC icon 100, and get that discount and we hope to see you there. Okay, stick around after this interview, we've got a great guest for today's interview.

2:05The stick around afterward, we're gonna talk for a few minutes about money market funds. Our guest today on the milestones to millionaire podcast is Emily. Emily, welcome to the podcast. Thank you. All right, well, you guys have accomplished something pretty awesome. Let's introduce you to the audience a little bit though. Tell us about what part of the country you're in, what you and your spouse do for a living, where you're at in your careers. Yeah, we live in the upper Midwest. I am a nurse. I graduated and started in 2015 being a nurse. My husband is a pathologist and he just finished training in November. Okay, so you've been working as a nurse for the entire training period. Med school, residency, is there a fellowship too? Two fellowships. Okay, you have two fellowships. Yeah, it sounds difficult these days. Okay, so you've been along for the whole ride and you guys just hit a net worth milestone. Tell us what your net worth is. Yeah, so we hit half a million dollar net worth right before he graduated training. Right before graduating from training.

3:07That's pretty awesome. Cause he's just out a few months, right? Yep, he's gotten two plates out so far as it was ending. Okay, so we talked about this before we started recording briefly, but tell us what it was like to look at your bank account after the first one of those attending physician paychecks hit it. It was very astonished. Sometimes they just send you money and you weren't expecting it. So it's been really cool to be able to have these very aggressive goals of paying off our loans and saving and investing and still have money left over after. Yeah, but you guys have been working hard for a long time. Yeah. You know, physicians and in residency and fellowship, they don't make all that much money. Yeah. And nurses don't make all that much money either. It depends on what you do and how hard you work and so on and so forth. But you guys are not only don't have a negative net worth, you've got it a half million, at least you had a half million when you applied for this podcast. It's a little bit more now.

4:08Tell us how you did that. What have you been doing for the last decade? In my school, we didn't know anything at all about finances. We graduated with 6K in our bank account and like 17,000 debt for school. And I didn't know anything. And while I was looking for a job, I just kind of started googling around and I found the bogal heads. And from there, I found white coin investor and jail Collins stock series. And I decided that one of us needed to know about finance. And since my husband was too busy filling his brain with med school, I decided that was something I could do while I looked for a job. So did that until I found a job. And from there, I met with the HR lady on my first day of work. And she said, okay, this is your 401K. Here's what it is. And I said, okay, well, how much money should I put in my 401K? And she said, well, you can put 17,000. And I said, but how much should I put? And she said as much as you can.

5:09I mean, we've never had a job before other than like $10 an hour. And so we decided that we would just max it out. And we've just maxed out our 401K and Roth IRAs ever since then. Okay. So you were working the whole way through med school. Yeah. Working full time. Yeah. And you said when you graduated, you had six figures in the bank account and like hardly any debt. Only six grand. Oh, six grand. I heard six figures and I'm like, well, that's pretty awesome. Okay, so you cash flowed med school. We cash flowed living expenses and any textbooks. Okay. We bought a car that was a junker, had a roommate while we were married. That's awkward. All right. Yeah, it was fine. We didn't know any different. We'd always lived with roommates, right? Depends on the roommate, I suppose, right? Yeah. Okay. And only one car. And we did take out $258,000 in his student loans. Okay. So you paid the tuition. It sounds like with student loans mostly.

6:11Correct. Yep. So that was 2015, you came out and he started med school, is that right? Yep. Okay. So where were you sitting in 2019 when you finished school? Yeah. So in 2019, we had negative 160,000. That was your network. Mm-hmm. Okay. So you'd been saving something. So kind of a balanced approach. What made you decide to invest as you went along instead of just going, let's see if we can just not borrow as much? I had read some about PSLF and I also had read a lot about how physicians, when they come out of training, they're really behind in saving. And I was pretty convinced by the compounding interest charts that I found online that probably we should still be investing, even though we were taking out debts. And we really have come out ahead because the market's been gangbusters and we had the COVID interest pauses.

7:12So even though we're not going to do PSLF, we still did come out ahead. And I think we just were kind of lucky. Well, I mean, you take a risk and the risk paid off. There's sorts of sensible risks. Usually, but not always pay off. I don't know that I'd borrow money at 10% and try to out-invest it. But the student loans you were taking out in 2015 to 2019, we're not at 10%. No, they're like 6%. And plus, they were 0% for about three and a half years in there while he was in training. OK, so you come out of training in 2019. You've got substantial student loans. You've got some assets already. Now all of a sudden, he's making some money, too. It's not a lot, but he's making money, too. More or less, double your income. I assume something like that. What did you decide to start doing that? How did things change? He now had access to his 401k. So we maxed that out, too. And then we started paying off his private student loans. He had about 12,000 of those that we wanted to pay off pretty aggressively. And then, you know, COVID happened about nine months later.

8:15So we paid off all the private loans and mostly just invested and did end up buying two cars along the way, just because of car accidents. So we bought three cars in training, but we just kind of lived and tried to be happy day to day. And what did you do with the student loans during the COVID boss? Yeah, we paused them. So you didn't take any payments? No, we were pretty sure that we would do PSLF. And we did not. So now we get to pay them all. You know that now. Now that you have the post-training job, but all those other years counted, the residency and fellowship years counted, right? OK, so you came out. So when did you decide to pay them off? Was this recently or was this a couple of years ago or wouldn't you decide we're not going to do PSLF anymore? He signed for a detaining job about a year and a bit ago. So once he had determined, yep, that's when we decided, yep, we're going to pay him off. OK, so what have you done to pay him off so far? Yeah, so we didn't really pay them in the end of fellowship

9:18because we needed to move twice just because our lease was a little off cycle. And then we just kind of started paying them off as soon as he got his first paycheck. OK, so you're just getting started paying him off. How much is still low in student loans? Yeah, we have 239,000 student loans. OK. 2,000 of that is from undergrad and the rest isn't at school. So we've paid off about 15K so far. Nice work. And what are your other debts? Yeah, our other debt is 19,000 in a car loan. And that's it. And that's it. Currently renting, owning, where yet in housing? We're renting. Renting right now. OK, so you can pay off the cars and something that you're going to pay off the student loans. What's your plan to pay those off? Just be aggressive and pay them off with a big shovel every month. Just write a big check every month. How long do you think it's spent? How long is it going to take you, you think? Well, we're doing 20% retirement, 20% of the student loan, which is like just over 5,200 a month. And then he has bonuses that he's supposed to get

10:19at the end of the year. And I'm not exactly sure how much, but like 90% of the bonus we're going to put in. And so I think it'll take us about three years. Yeah. So this is really cool because you got a half million plus net worth. Well, still, a quarter million dollars in student loans and other debt, because you've been so good about saving and investing along the way. And it sounds like most of this is inside retirement accounts. Yeah, all of it. We've like 20K cash in the rest of this retirement accounts. So what have you guys invested in? Yeah, we have our three fund portfolio. So just index ones. Very cool. Keep it nice and simple. Yep. OK. All right. There's people out there like you were a decade ago. And they're like, oh, man, my spouse wants to go to med school and wants to do something that's going to take forever to learn how to do it. How can we still meet our financial goals? What advice do you have for that person? I think the biggest thing is, like, realize that we're not poor.

11:19Like, my grandpa was a day labor. And my dad was the first person in this family to go to college. So like through training, we made between 73,000 and almost 200K last year. And that is like more than most people can dream of. So I think it's important to realize that most normal people are not making this much money and be realistic about the fact that, yes, you can do it. You can learn and have a growth mindset and feel kind of silly while you're learning. And that's what I did. But you can do it. OK. Now, your income in the last couple of months has gone up dramatically. Your tax bill, as you'll soon learn, will also go up dramatically with taking it to realize this and go a year from April. But it's about to go up quite a bit. What are your plans for this additional income? Pay off student loans. That should take about four years. We will be millionaires by 35, even at the current rate that we're investing, which is pretty cool.

12:21I was able to drop my FTE to I'm a point 75 now, which is amazing. I've only ever worked full-time as a nurse. We want to give more generously, because I think that's a very good way to make sure that you don't feel like you lack stuff, right? If you're giving, then you know that you have enough for yourself and you have extra even. I want to travel with my husband. Now that he has all this time off, and then I have a kid probably in the next couple of months. Very cool. It's a lot of exciting plans. Yeah. I look talking to brand new attending families, because it's like the world is the roister, and they find me out of that training, and they're making more money, and they've learned how to manage it. It's just wonderful. Okay, well, take us back to some of these conversations you and your husband had about money over the last 10 years, and how you arrange to get yourselves, if not on the same page, at least reading the same book, tell us about how you were able to manage money together

13:23over some very different situations, right? Attending hood and residency and during school, and give us a little insight into how you manage to do that successfully. Yeah, so we got married like a month before Michael started at school, and we were like 22 years old, and did not have a lot of practice with this. So it has been a little bit of growth of learning how to engage and not come across as aggressive or junky, right? So I think over time, just learning how to say, hey, honey, let's have a productive conversation. That's more about what are we doing well, what are we expecting to come up in the next few months, what are things that are important to us? We have always had 100% combined income, because it wouldn't have been fair to him to have zero income while he was in med school, and it wouldn't be fair to me to have way less later, so it is working together, and saying, okay, here's where we're at,

14:24what are your thoughts for this year? I think he probably would have been perfectly happy to let me just do all of it. So I kind of just had to say, hey, honey, just so you know, you have disability insurance now. I need you to scan this paper. But he, I think really trusts me a lot with it, and he has been much more willing to engage, especially as I've wanted to be more positive in the way that I've had conversations. Well, clearly you are trustworthy. I mean, obviously, you just don't manage money together, even if you're trustworthy. How did you become trustworthy when it comes to finances? I listened to like every single podcast, I think. I've listened to all of the white queer investor podcasts. I read a lot of books. I just, anytime I didn't know what was being spoken about, I would like toss and I'd just go look it off and read a quick little blurb of it, and then I could understand more as I went. And that's just part of my daily practice of, I like to listen to things. Well, Emily, you two have been super successful.

15:25You should be very proud of what you've done. We're very proud of you, and we're so appreciative of you being willing to come on and share your story so that others can do what you've accomplished and inspire them to do that. So thank you so much for being willing to come on. Thank you. It's really nice to meet you, and I really appreciate all the work that you guys have put out. It's helped us a lot. It's our pleasure. That was a great interview. It's a lot of fun to see people having success, and they're so excited, you know, they're getting their first couple of physician level paychecks, and now they feel like there's money coming out of their ears. But the beautiful thing about this situation is that high income hit prepared hands, right? They've already been financially successful. And now their income just, you know, doubled tripled quadrupled, whatever it is. I don't know exactly what pathologists are making these days. I haven't asked her what his new salary is, but my point is they already know how to manage money. And now there's a whole lot more money to manage. And so they're going to be super successful going forward. And, you know, the wonderful thing

16:26those they've already got that giving attitude and recognized that, you know, they may not quite have it yet, but they will soon have more than they need. They will have more than enough. And to recognize that's an opportunity to affect the world around you is a pretty cool thing. All right, I mentioned in the beginning, we're going to talk a little bit about money market funds. So let's do that. A money market fund is a very low risk way to invest. The best thing to really compare it to is a savings account. It's a similar amount of risk you're taking on when you invest in a money market fund. It's a cash investment. And the thing about a cash investment is the yield on it. The amount of income you're paid with it can vary over time as interest rates fluctuate, but your principal doesn't vary. You know, like with a bond, the value of the bond can go down with the stock, the value of the stock can go down. That really doesn't happen with a cash investment like a savings account or a money market fund.

17:28A money market fund is a mutual fund, kind of like a bond mutual fund or a stock mutual fund, but it's a cash mutual fund. So it's lots of investors pulling their money together to get some economies of scale, daily liquidity and professional management. What is that fund investing? It invests in very short term bonds. You know, these bonds are often just a few weeks long or a few months long, but because they're so short term, their value doesn't fluctuate much, and that allows them to basically offer you, you know, stability of principal. Meaning you're not going to lose money in these things. There are various different kinds, right? The manager can invest into commercial or prime, sometimes it's called types of bonds. These are very short term corporate bonds, for instance, that are a few weeks or a few months long. And that's typically called a prime money market fund.

18:29Vanguard used to have one of these. They have an offered in a number of years. Another type is a, you know, government or agency money market fund in which it only invests in short term securities from the government or agencies of the government. There can also be treasury money market funds. A treasury one would only invest in very short term treasuries. So you get some various tax advantages, right? If you're only investing in treasuries, that state income tax free. So you got to compare the yield on a prime or some other type of money market fund to the after tax benefit of investing in a treasury money market fund. The treasury ones generally considered slightly less risky. I mean, all of these are not risky investments at all, but the treasury ones even less risky than you might get from a prime money market fund. The other type that people think about, especially white code investors in high tax brackets

19:30is a municipal money market fund. And in that case, the manager is buying very short term municipal bonds that are weeks to months long. And so that income is generally federal income tax free. So the yield's gonna be lower, right? Instead of making 4%, you might make two and a half percent. But if you're in a big, in a high tax bracket, your after tax yield might be higher. I mean, that municipal money market fund. So there's lots of different types here. But in essence, it works like a savings account. You put your money in. When you want the money, you get it right back out, right? You can take your money out of the thing. Any day, the markets are open, just like you can, any publicly traded investment. And typically you'll link your bank account to it. You can do an ACH transfer back. You have your money in one or two days. It's very safe. It's very liquid. This is a good place for an emergency fund. This is a good place for the tax money you're gonna have to pay on your next quarterly estimated tax payment in a month or three months.

20:32This is a good place for short term savings. If you're saving up a down payment, you're gonna need an eight months or a year, a year and a half, a money market fund can be a good place for that. But that's what we're talking about. The alternative is generally a high yield savings account. Not the savings account you get when you go down the street to the local credit union or bank, and they pay you 0.1% a year. That's not a high yield savings account. There are online banks that tend to offer high yield savings accounts. But most of the time you get a little bit higher yield from a money market fund than you do from a high yield savings account. That's not always the case. There's some periods of time when interest rates were 0% or you could get 1% out of a high yield savings account. And you might only get 0.25% out of a money market fund. So there are times when a high yield savings account does have an offer a higher yield than a money market fund. But most of the time, a money market fund gets a little bit of a higher yield. Now, it does have a little bit more risk in one respect,

21:32which is FDIC insurance, the Federal Deposit Insurance Corporation, that basically stands behind up to $250,000 invested in a bank. Money market funds do not get that insurance. Yes, there's a similar brokerage insurance that's called SIPC insurance, but it doesn't work the same way. Now, just because it doesn't have that, doesn't mean money market funds are risky. They're not risky because you got these very short-term bonds in the fund that can be turned into cash very easily. So they're not dramatically more risky, but you don't have FDIC insurance. If that matters to you, stick with the high yield savings account. The main benefit, though, of that money market fund is liquidity and safety, right, and convenience, right? It's just really easy to use, especially if you already have a brokerage account or you already have a Roth IRA account at Vanguard or Fidelity or Schwab, they all have money market funds available there. At the same place, you already have a whole bunch of your money.

22:35Typically, you'll usually see Vanguard's yields being slightly higher than you can get at Fidelity or Schwab. And that's just mostly a function of how Vanguard runs a lot of the business at basically F cost. And so the yields tend to be slightly higher. But the fact remains, if you're at Fidelity or Schwab, you can get a very good money market fund there that will give you a nice yield that is better than you're going to get anywhere locally at your credit union or bank. Is it possible to lose money in a money market fund? Yes, it's possible. Nobody has ever actually done it. But it is theoretically possible. There was some worry about that in the global financial crisis, there have been some money market funds that lost a very small amount of money. Like one or two percent, they were not aimed at retail investors. They served businesses. It is possible to lose money in a money market fund. But the likelihood of you losing money is very, very low.

23:38And certainly, the likelihood of you losing a significant amount of money is very, very low. The bigger risk when you're investing in very safe investments like CDs and savings accounts and money market funds is that your money won't keep up with inflation or won't grow as fast as you need it to. Because it's a safe investment. The return's long term don't tend to be that good, but it's a very safe place to invest. The way you open it is you just go and open account. It's Schwab or Fidelity or Vanguard or wherever. You just go online, you open an account online, you link it to your bank account, and you choose as your investment the money market fund. Now, a lot of times the default investment, like you go to Vanguard, they're default investment, is they're treasury money market fund. If you transfer money to Vanguard, that's where it goes. It goes into a money market fund until you decide to invest it somewhere else. But it's gonna be a lot better place for you to have money if you're actually trying to earn a yield on it. If you're trying to get a return on your cash, this is a great place to have it. It's not quite as convenient to use

24:39as you're checking account probably is. Most people aren't using it to have the direct deposit of their paycheck into there. They're not using it to write checks all the time, all month long out of their account. They're probably not linking their Venmo and their PayPal account to it. It's useful to have a checking account for those sorts of things. But for money that you don't need this week, next week, this month, but still want to keep in very safe cash and money market fund is a perfect place to put that. This podcast was sponsored by Bob Ionia, a ProTuity. One listener sent us this review. Bob has been absolutely terrific to work with. Bob is always quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have someone to be in 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 whitecodeinvestor.com slash bretuity. You can email info at bretuity.com or you can just call 973-771-9100 to get your disability insurance in place today.

25:41This has been an episode of The Milestones Millionaire Podcast. The podcast where we feature you and your stories to inspire others to also be financially successful so they can concentrate on what really matters in life. If you'd like to be a guest, go to whitecodeinvestor.com slash milestones. Until then, keep your head up, shoulders back, you've got this. We'll see you next time on the podcast. The whitecode investor podcast is for your entertainment and information only and should not be considered financial, legal, tax or investment advice. Investing involves risk, including the possible loss of principle. You should consult the appropriate professional for specific advice relating to your situation.