The FinancialMD Show

Ep031 - Financial Insights Into Medicareavwdn

Summary:
David's False Start [0:01:09]
What Is Medicare? [0:04:35]
"We Have Been Paying Into The Medicare System" [0:06:27]
Is Medicare Mandatory For Everyone? [0:09:41]
Medicare Advantage Plan – What Exactly Is This? [0:11:48]
Original Medicare Vs Supplement Plan [0:14:49]
HSAs And Medicare [0:19:10]
How Can David Help You With Your Medicare [0:20:12]
Connect With David [0:22:51]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Jon Solitro:  Well, welcome everybody to today's episode. We're super excited because we are going to touch on some topics that will impact everybody. This is definitely one of those things that do, at some point, impact everybody and there are some things that you need to know, and that may be down the road or maybe right now. But at some point, this is something to stick in your back pocket when it comes to your financial planning. I'm your co-host today, Jon Solitro, and with me, my co-host today is David Deaton – the man, the myth, the legend. How are you doing, David?
David Deaton:  Hey Jon; doing great, man. Doing great. Looking forward to doing this podcast more in the future, and you're absolutely right. Medicare fits into people's financial plans one way or another and I'm happy to be here to talk about it.
Jon:  Super! Good. I'm excited because this is again one of those topics that I bet changes all the time and yet everybody needs to know and stay on top of those changes. And can you start just by telling us about yourself, what got you into this, how long have you been doing this, where are you located – any of that kind of stuff?
David's False Start [0:01:09]
David:  Yeah, sure. So I started Mid Michigan Medicare back in 2020 in the middle of the pandemic. Actually, I had been insurance-licensed back in 2015 and kind of had a false start into it. I had a full service Farm Bureau agency and it kind of chewed me up and spit me out. So, went home and got a J-O-B and had kept my insurance license up. When the pandemic came, the J-O-B that I had went away. During that time, like a lot of people, I had a chance to reevaluate my life and I had, thankfully, kept my insurance license up to date. A friend of mine had been encouraging me to get back into insurance and do Medicare, which is actually right before I had that Farm Bureau agency where I started. Medicare fits me. Everything that I've done in my life thus far in like work has been service-oriented. I was in Ministry for 20 years vocationally before this and it was always Ministry and something else but, you know, I believe that work has to say something about who you are.
Jon:  Okay.
David:  And, you know, I've always been like dedicated to serving people. So, you know, looking at the Medicare space, what I saw was a lot of people who were being misguided. You know, T.V. commercials; you know, Jimmy Walker and Joe Namath, and every – you know; all those people. They're kind of, you know, a little bit of bait and switch tactics and this demographic is vulnerable. And so, you know, looking at all that, seeing an opportunity to serve and do something that fits who I am in my character, I took all of that stimulus money and all of the unemployment money that I had and tax return money and everything and bouncing off of the experience that I had before in insurance gave myself some runway to get this thing off the ground. And thank God, it worked.
Jon:  Yeah, okay. So, we're pushing four years now.
David:  Yes.
Jon:  Doing that – fantastic. And what do you like about what you're doing?
David:  Oh boy… I'm an eclectic person and it scratches my itches, you know. Some days, I am still a pastor. Some days, I'm a marketer. Some days, I'm a business person. Some days, I'm a traveler. But what I love is when I get to sit down with somebody, you know, usually their stress level is up to here because they've been inundated. People get information fatigue, you know, and there really is a lot of information out there. In Medicare, I mean, you can't shake a stick and not hit some information about Medicare.
Jon:  Yeah.
David:  But what I found that people need as much as they need information is they need somebody to talk to. Somebody who knows what they're talking to that they can, you know. They've got my phone number. All my clients do. So, everybody knows how to get a hold of me. So my favorite thing is watching some of that stress that was up here just melt away.
Jon:  Okay. So we may have young doctors listening to this podcast. We may have seniors that are already retired listening to this. Give us a – for anybody like who has no idea, tell me about Medicare like I'm eight.
David:  Okay.
Jon:  What's Medicare?
What Is Medicare? [0:04:35]
David:  Yeah. So, Medicare is a federal health insurance program designed for retirees but also people who, if you are under the age 65, you can get Medicare if you've got certain disabilities. If you've been on SSDI for 24 months or, you know, kidney disease, you know. some special circumstances but mainly is for people who are turning 65.
Jon:  Okay.
David:  We've been paying into the Medicare system our whole lives, and so Medicare provides at least a chassis for our health insurance at age 65. It covers hospital and medical services. It doesn't cover everything. There are quite a bit of exposures but, you know, at its core, basically, it's 80-20 insurance. So you pay 20%; Uncle Sam steps in and pays 80 for most medical services. If you go to the hospital, it's, you know, a co-pay of around $1600; maybe a little bit more than 1600 but that number fluctuates every year.
Jon:  Okay, and has it always been 65?
David:  Yup, age 65.
Jon:  Do they ever talk about changing that, pushing that back like they do Social Security?
David:  There's rumors… There's rumors about expanding Medicare for sure and, you know, they've talked about lowering it to 60. You know, they talked about lowering it to 62. They've talked about Medicare for all. We'll cross that bridge when we get there, but the landscape and how things look right now is it looks like, you know, Medicare is going to be like it is for the foreseeable future.
Jon:  You mentioned something that we've all paid into it; what does that mean? So somebody's like what do I have to do with Medicare? How am I paying into Medicare?
"We Have Been Paying Into The Medicare System" [0:06:27]
David: If you look at your paycheck, there will be an area on there that says Medicare. Whether you're self-employed or employed by somebody, we're paying into that system. Now what we get for that when we turn 65 or whenever we get on Medicare is we get our Part A insurance at no cost and part A is our hospital coverage.
Jon:  Okay.
David:  So it comes at no monthly premium is what I mean by no cost. Part B does have a premium associated with it and that number changes every year, but this year it's $174.70 a month.
Jon:  Oh, so everybody, no matter what.
David:  That's the base. There are some people like if you're earning more, you get what's called IRMAA, which is the Income-Related Monthly Adjustment Amount.
Jon:  Oh, that's nice.
David:  Yeah. If you earn more, Uncle Sam thinks you should pay more.
Jon:  Sure, it sounds… I hear him say that a lot.
David:  Right.
Jon: And so Medicare, is this something somebody can just… so really before 65, if they're not disabled. It doesn't necessarily… there's nothing they have to do other than, you know, pay into it which is automatically done if they're an employee. If you're self-employed, again, that's part of something that your CPA is going to tell you, hey, there's so much you need to pay in every quarter… whatever.
David:  Right.
Jon:  Do you know by chance how much people are paying? Is it a straight percentage? Does that change with income as they're working?
David:  I don't know the answer to that.
Jon:  It changes a lot.
David:  Yeah, yeah, that's definitely a question for your CPA.
Jon:  Yeah. Yeah, I don't even know. I know there's FICAS... what? 7.65% for the employee, another 7.65 or about 15.3% if you're self-employed, and I think that's basically Social Security and Medicare all wrapped up in there. So, how much that breaks down I couldn't even tell you but just thought I'd throw you a zinger. So then 65 comes, do people get like notices, hey, you're 65, you can have Medicare but you don't have to... it's like offered if people already have insurance like how do those details work? And I talked to, you know, even my young physicians that we work with and to think about as they're thinking about retirement because I'll sit with a 35-year-old and we'll plan for retirement or make a goal and I say, okay. And I've learned over the years, now I can't just say, "What's your retirement goal?" And they… I don't know. I don't know. What age you want to retire? I don't know. How much income do you need to retire? I don't know. Okay, I get that. So, and a lot of them will say, tomorrow, like, okay. But seriously, but one of the big things that I do say is they'll say, "Okay, well, I know right now, you know, my house will be paid off and student loans will be paid off." That's a big one for our doctors. What could I possibly have for bills? You know, maybe 5,000 a month, 10,000 a month – great, okay. But I do often throw in – hey, you know, health insurance is probably one of the most expensive costs in retirement. Do you find people have private insurance or other stuff besides Medicare so they don't have to get Medicare? Like how does that process go?
Is Medicare Mandatory For Everyone? [0:09:41]
David:  When you turn 65, if you're collecting Social Security already, you're going to be automatically and passively enrolled into Medicare Parts A and B.
Jon:  Ah, okay.
David:  If you're not collecting Social Security, you have to proactively enroll in it at age 65 if you want it. Now there's a couple of reasons why people might not want Medicare when they turn 65. Actually, one reason – the biggest reason – is because they already have insurance through their employer.
Jon:  And they're still… yeah.
David:  Correct. They're still working, or they maybe even through their spouse's employer. You know, I find a lot of people who are spouses are teachers.
Jon:  They got retirement benefits even, right?
David:  They've got retirement, correct. Yes. So, if you're already working, you're getting insurance through your employer, and there's one caveat – your employer has 20 or more employees. It makes it what's called creditable coverage for Medicare. So you don't have to get a Medicare plan then. Or you have an employer-sponsored plan like the teachers' unions or the UAW or something like that. But even with those employer-sponsored plans, you still have to get enrolled in Medicare Parts A and B.
Jon:  So even with those plans, you have to get enrolled.
David:  With the employer-sponsored Medicare plans – yes. Not if it's just regular group coverage through your employer, and there's a difference.
Jon:  So the creditable coverage you're saying are the employer-sponsored Medicare plans.
David:  Creditable coverage would be a group plan through an employer.
Jon:  That you're still working… okay. So when you say employer-sponsored Medicare plan, is that assuming somebody's retired but has or they've just turned 65 and transitioned to this employer-sponsored Medicare plan?
David:  Right. Usually, it's part of their retirement package.
Jon:  Okay.
David:  So take a UAW worker, for instance. You know, they've retired. They've turned 65. They're not working anymore so they're not in the group plan but now they're on an employer-sponsored Medicare. It's basically a Medicare Advantage Plan on steroids.
Jon:  Okay. So explain a Medicare Advantage Plan. What does that mean?
Medicare Advantage Plan – What Exactly Is This? [0:11:48]
David:  So with original Medicare, there's a lot of exposure. You know, like I said, it's 80-20 coverage essentially, but the downside of it is that there's no max out of pocket. So that 20% you could pay to infinity. Not a big deal if all you're doing is going to your primary, right? But that, you know, it covers all, you know, outpatient services – that 20%. So, you know, if somebody's getting chemotherapy treatments or some surgeries that are outpatient surgeries, that 20% can add up.
Jon:  Okay.
David:  And so, there are two ways to mitigate those costs, either with a Medicare Supplement Plan or a Medicare Advantage Plan.
Jon:  Got you.
David:  The difference is a supplement rides along with original Medicare so it's basically an open network like Original Medicare there's no network and it's a self-directed care, right? You go to the doctor when you want to go to the doctor. You don't when you don't, right? And the supplement essentially picks up what Original Medicare doesn't.
Jon:  Got you.
David:  A Medicare Advantage Plan is more of a managed care plan. It works like a traditional HMO or PPO like we've always had with where you go to see your primary and then you get referrals. You can get an HMO network or PPO Network just like, you know, the traditional health insurance that we've always had. It's managed by a private insurance company now.
Jon:  Okay.
David:  Medicare advantages… so instead of, you know, have being on Original Medicare, maybe you have a Priority Health plan or Blue Cross Blue Shield plan.
Jon:  Okay, so there's not one insurance company that manages that for the whole world? It varies?
David:  Correct.
Jon:  Okay.
David:  There's one that wants to I'm sure but no.
Jon:  Maybe, yeah. Then if you have a Medicare Advantage Plan, you don't have to have Medicare. Is that right?
David:  You do have to have Original Medicare. It's just that – they used to call Medicare Advantage Medicare Replacement because what you do essentially is you give a private insurance company the right to manage your Medicare for you.
Jon:  Who are you paying, though, your premiums to?
David:  So – and this is a kind of a rough view of it – you still pay your Medicare premium to Uncle Sam and then Uncle Sam takes that premium and, you know, other funds that they had allocated toward you and pays that to whichever private insurance company that you are enrolled with.
Jon:  And is it the same price, it's that 174 or whatever?
David:  Correct, right.
Jon:  Why wouldn't I do that versus normal Medicare with the Medigap Supplement or whatever you said before?
Original Medicare Vs Supplement Plan [0:14:49]
David:  Yeah, because it's more restrictive than Original Medicare, okay? On Original Medicare, it's open network. Any doctor or hospital in the United States who accepts Original Medicare will also accept your Supplement Plan and really, you know, we know how Uncle Sam spends money so they…
Jon: For the sailor, is that the…?
David:  That's exactly right, yes.
Jon:  Okay.
David:  You know, I was in the Navy so I…
Jon:  Okay, fair enough… yeah.
David:  But the health insurance companies don't. They hold the gate, you know, pretty hard and they're not trying to find out how much money they can spend. And so it can be a little bit more restrictive and also, you know, I see a lot of care providers, doctors, and nurses, they like when people are in a Medicare Supplement Plan with the Original Medicare as well because they don't have to fight so much to get their money to get paid, right?
Jon:  I see.
David:  And, you know, Uncle Sam is a bit more liberal when it comes to services especially when it comes to like convalescent facilities like post-acute care – things like that.
Jon:  Okay, not necessarily A Long-Term Care nursing home sort of but just more…?
David:  Correct. No, yeah, right. Long-term care is not a part of Original Medicare. However, if they are in a care facility, some of the services provided in there would be covered under Medicare.
Jon:  Interesting.
David:  So here's an example, and this is hyperbole, right? But, you know, if you have Original Medicare with a supplement, right?
Jon: Yup.
David:  Let's say you go over to Sparrow Hospital and they're like, well, sorry, you know, whatever you got, that's going to take you out, right? There's nothing you can do about. You know like you want a second opinion, right, and so you want to go down to Cleveland Clinic, right? Well, you just walk down. You go down to Cleveland Clinic. You don't have to ask anybody's permission and you got your, you know, Medicare card. You say, you know, check me out. On a Medicare Advantage Plan, if Cleveland Clinic is not in network, well, they, one, they might not give you a pre-authorization to do that, right? So you need pre-authorizations for services on a Medicare Advantage Plan.
Jon:  Okay.
David:  So those are some of the differences. The upside of a Medicare – so that's the downside of Medicare – and everybody loves to talk about the downsides of Medicare Advantage. There's not a one-size fits-all, right? The upside of a Medicare Advantage Plan is it doesn't cost anything extra a month. It comes with a lot of extras in it. You can get dental coverage; dental, vision, hearing, gym memberships. There's over-the-counter like they give you free money towards stuff that you can buy, you know, in the medical section at Walmart or Walgreens or something like that. So they try to make their plans very attractive and they try to keep their people healthy. Again, these are managed care plans so you see people going to their primary doctor more. You see them getting their annual services more and more on these plans because they're being reminded and encouraged to stay healthy. Whereas, you know, on a Supplement Plan, people sometimes don't go to the doctor until they get sick.
Jon:  Yeah.
David:  It's a lot more self-directed. There's good sides and – there's good and bad need in each.
Jon:  Yeah. So you mentioned it doesn't necessarily cover the long-term care because that is a question that we come up with another one of the biggest or along with that. You know, we talk about healthcare is one of the biggest expenses in retirement – if not the biggest. And so I talk to our young clients about an HSA; get that going even if you don't use it. We can invest it and grow and you'll definitely use it in retirement because healthcare is one of the biggest costs in retirement. How does an HSA come into play? Do you know if somebody has an HSA from working, you know, $100,000 in it sometimes? Can they use that towards anything? Towards premiums, towards cost, still in retirement? What's – you ever see that?
HSAs And Medicare [0:19:10]
David:  Yes. Now I believe those HSA dollars can be used to pay premiums for supplements and services. So, you know, after a certain point or after they get on Medicare, they can't keep contributing to their HSA but now they can use that to pay for premiums and services.
Jon:  What about hospice? I've heard that – does Medicare cover hospice do you know?
David:  Yes. Hospice is a part of Original Medicare and, you know, interestingly, like when somebody is on a Medicare Advantage Plan they go on a hospice, that's one of the only times when Original Medicare steps in to pay when somebody is on a Medicare Advantage Plan.
Jon:  Interesting, okay. And so what would be – you clearly know a lot about this – what would your role be in all this? Why have a David walking around with this kind of knowledge in his head?
How Can David Help You With Your Medicare [0:20:12]
David:  Right, exactly, and that's exactly why because I do have this kind of knowledge in my head. Most people don't know that they can work with somebody who's knowledgeable and local. And if I'm trying to save the world, I'm trying to save the world from the Joe Namaths and Jimmy Walkers and Bill Shatners, you know, who have these Medicare commercials on T.V. and I want to give somebody a local face-to-face person. They can sit down to and sit down with and talk to. What I find is that people's questions come up in real time; not when they're under the gun on the phone trying to be sold a plan.
Jon:  Yeah.
David:  And so we're going to take the time to sit down and talk about somebody's, you know, whole plan – what do you need, what are your goals. And really, when it boils down to it, it's a pretty easy decision. There's one of – you can go one of two ways: either Medicare Advantage or Medicare Supplement Plan, right?
Jon:  Sure, yup.
David:  But beyond that, I offer service to my clients who especially – there's a lot more service with Medicare Advantage for me than there is for a supplement. I have people call me all the time – hey, how much is this service going to cost me, I'm about ready to go in and get a shoulder surgery.
Jon:  Okay.
David:  How much should that cost me? And I look it up for them – oh, that's 250 bucks. It's 100 bucks if you go to a surgery center, you know.
Jon:  Okay, yeah.
David:  So I offer those kinds of services as well. You know, a lot of times people have hiccups with their dental coverage or, you know, whatever it may be. They can call my office and we can get those things resolved usually.
Jon:  And they don't pay out of pocket for this kind of service?
David:  For me, no. No. I get paid when I help somebody enroll in a plan and then the plan pays me and the reason they pay me and every other person who's in this line of business including the T.V. commercials is to give these people service. I'm kind of passionate about this because, you know, if you call into one of these 800-lines or get your plan over the phone, that's the last time you're ever going to speak to that person.
Jon:  Sure.
David:  And we have been paying into this system all of our lives, we deserve good service. So it kind of gets my blood boiling that, you know, that people don't know that they can get good local service and they've got somebody to call when they have questions.
Jon:  Sure, makes sense. So, if somebody listening to this happens to be needing somebody like you, how do they get a hold of you?
Connect With David [0:22:51]
David:  Just give me a call at my office. It's 517-300-2101. I'm right here on the west side of Lansing and if you draw maybe a 25 or 30-mile circle around Lansing, that's about as far as it makes sense for me to go and give service. So say out to Owosso, down to Jackson, out to almost Lowell, say, Ionia, and up to St. Johns. That's kind of like the circle around Lansing that I will go to or it makes sense for people to come to my office as well.
Jon:  Sure. Do you ever have people out of those areas that will talk with Zoom or anything like that that just happen to get referred to or anything?
David:  Yes, I will do phone and Zoom consultations. I've got lots of clients in northern Michigan, western Michigan as well.
Jon:  Yeah, sure.
David:  Yeah, we do a lot of this. We do a lot of Zooming and a lot of talking on the phone.
Jon:  Is this a state-by-state thing then so somebody wants to find somebody in their own state typically?
David:  I think so. I think you should find somebody local. Every Medicare beneficiary deserves to have the help of a knowledgeable local broker. I solidly believe that and so I'm not… I mean, although I'm licensed in a couple other states, the only reason is because some of my clients have moved.
Jon:  Okay.
David:  I am focused on Michigan and specifically right here in Mid-Michigan.
Jon:  Perfect.
David:  There's only one of me so.
Jon:  That helps me and our clients so good there. Well, cool. Man, that was super educational and beneficial. This is a topic that we never get information on but I was just thinking we need to have an episode on this and really get up to speed on this and just prepared even though it may not be something that we have to deal with in the near future. This helps, and even as I was saying when we think ahead of what healthcare costs might be in retirement no matter what age we are, this is a huge financial impact and a cost that really can wipe you about any age; any kind of healthcare event. Anything like that can be catastrophic both physically and financially, and so thinking through the most cost-effective ways to do this, the most efficient ways to do this, and the most comprehensive ways to protect yourself, we talk about that all the time. So, this is good and super glad we had this conversation, David.
David:  Yeah, yeah, me too, Jon. Yeah.
Jon:  Well, good.
David:  I appreciate you have me on and let me talk about Medicare. I do this, you know, all day long and, yeah, it's something I'm really, really passionate about, so thank you.
Jon:  Well, good, and we love having different topics and keeping it interesting and changing it up so we'll talk next time.
David:  Yes, sir.
Jon:  All right, and to everybody else, thanks for listening. Be sure to get on to all of the podcast platforms on which you're listening to this. Rate it and review it and share it. Tell a friend. If you care, you'll share, and we'll definitely put some snippets of this on our TikTok and Instagram as well so if you are… well, if you've made it to the end then you've made it to the end. But if you want to review some of this stuff in real quick two, three-minute pieces, then check us out on Instagram and TikTok as well. We'll see you next time.
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
Mid Michigan Medicare – https://www.midmichiganmedicare.com/
What is Medicare? – https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/whats-medicare
What Part A Covers – https://www.medicare.gov/what-medicare-covers/what-part-a-covers
What Part B Covers – https://www.medicare.gov/what-medicare-covers/what-part-b-covers
What is the Medicare IRMAA for 2024, and when does it Apply? – https://www.nerdwallet.com/article/insurance/medicare/what-is-the-medicare-irmaa
What is FICA? – https://www.ssa.gov/people/materials/pdfs/EN-05-10297.pdf
https://www.ehealthinsurance.com/medicare/parts/what-are-employer-retiree-medicare-advantage-plans/
Understanding Medicare Advantage Plans – https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf
Medicare Supplement Insurance – https://www.medicare.gov/publications/11575-Getting-Started-Medicare-Supplement-Insurance.pdf
What is Original Medicare? – https://www.aarp.org/health/medicare-qa-tool/what-is-original-medicare.html
HMO vs PPO: Things to Consider – https://individual.carefirst.com/individuals-families/health-insurance-basics/how-health-insurance-works/hmo-vs-ppo.page
Health Savings Account (HSA): How HSAs work, contribution rules – https://www.investopedia.com/terms/h/hsa.asp
David A. Deaton's LinkedIn Page – https://www.linkedin.com/in/dadeaton/
David A. Deaton's Office Number – (517) 300-2101
Financial MD Email Address – info@financialmd.com
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 030 - Estate Planning for Physicians

Summary:
Matt's Law School And MBA-Finance Journey [0:02:21]
Embracing Estate Planning: The Turning Point [0:05:37]
The Financial MD's Four-Step Roadmap [0:08:54]
What Is Estate Planning? [0:10:52]
Key Questions To Kickstart Your Estate Planning [0:13:22]
Will Vs Trust: Definition of Terms [0:16:32]
"You're In Control While You're Alive And Well" [0:20:29]
Understanding Trusts: Common Setup And Structure Models [0:25:40]
Common Objections Against Setting Up A Will Or Trust [0:30:04]
Estate Planning Essentials: Quick Tips [0:33:30]
Matt's Book Is Called "Keeping Control"; And Other Resources [0:40:09]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Jon Solitro:  All right. Well, welcome, everybody to today's episode. We're super excited to be focusing today on estate planning. And for me, this is probably the thing that we recommend the most as financial planner, that gets done the least. And we're always looking for good attorneys to collaborate with, because at the end of the day, whatever we do, it's a legal document. Even if that legal document is just an IRA contract with beneficiaries or life insurance, all the way up to trusts and some complex estate planning, there is legal work that goes into it and things to know that can change by state. But I'd say, 85, 90% of things we talk about for sure are going to pretty much be comparable to any state with a few nuances here and there. So, as always, we'll preface this, this is not personal financial advice, this is not legal advice, this is for informational educational purposes only. But I'm thrilled to have a longtime friend, great colleague and guest with us today, Matt Ferri from Ferri Law, our local estate planning expert. Welcome, Matt.
Matt Ferri:  Thank you so much, Jon. I'm happy to be here, happy to be on the show and be able to provide any information that people like to hear about.
Jon: Yeah, awesome. I'm psyched too. We're going to chat and we'll keep it pretty light here and I've got a few questions and then we'll take it wherever we see the conversation going. I think you and I have both worked with young physicians enough to have some idea of the pretty common things they want to talk about, the frequently asked questions, the pitfalls that we see here and there, but I'm excited to dive into this. My hope is that our listeners today are going to be able to pick a few things that they're going to take action on, get some questions answered, maybe clear up some confusion, but let's begin with just introducing yourself, Matt. Tell us your story. What got you into this, what you love about this, what you hate about it – any of that stuff.
Matt's Law School And MBA-Finance Journey [0:02:21]
Matt: Well, that's fantastic. So yeah, again, thank you, Jon. So I have been an attorney since 2008, beginning of 2008, and worked for a small firm. Back when I got my law degree, I also got an MBA, and so my background, even in undergrad was in finance. So I've always liked the business, personal finance side of the law since the beginning. It was one of those cool things to learn about and grow. And there's a lot of attorneys that like to litigate and like to do that and be in the courtroom and stand up in front of judges and juries. And that's something that I quickly learned was not my style, what I like to do. I like working and collaborating with people and families, business owners, that kind of thing, where we really can just sit down in the room, share stories, talk about family, talk about friends, talk about our pets. That's definitely things that we always enjoy. I know like you and I already chat about. And so, really we've started there. And really since 2010, I really focused my practice on estate planning and the nuances there so we really, in our firm, do not practice anything else really than estate planning, some small business planning and elder law. So, you know, it's kind of a big thing in our world, much like in the medical world where you pick a specialty, you know. You don't go to… you go to a certain doctor for a certain thing, and the same thing is mostly true for attorneys as well. So, I've definitely developed and grown, like I said, been doing this for a long time now. Thankfully, I'm not too old yet, but old enough now to have learned a few things.
Jon: So, help us out with your education – the MBA. Where did that come into play? What was your motivation there? And that was before law school I assume?
Matt: Actually, it was concurrent. University of Detroit has a dual degree program and since I had a finance undergrad, they were able to use credits for starting out my first year of MBA school and then the Law and MBA electives crossed each other and so we didn't have to… I just had to get some extra credits. I think I had 24 extra credits. There were some long summers in there. I'm not going to lie.
Jon: Yeah… oh my gosh.
Matt: And some long semesters.
Jon: Yeah… wow. That depends.
Matt: So I went to law school during the day and went to MBA school at night. So there were some long grueling times in the… The MBA is, you know, just like I said, a traditional MBA, no specialty or focus. And that came into play was I was going through law school and, you know, just discussing what do I do, how do I do it. It's another degree that kind of blends together with what I do now as a practicing attorney, right? We deal with the small businesses, the families, the finances. That's, you know, just more of that.
Jon: Yeah, that makes a lot of sense. And so at what point was it that you really felt like estate planning was the way to go? Was it during law school? Was it your experiences after your first firm?
Embracing Estate Planning: The Turning Point [0:05:37]
Matt: I think I had that thought in law school. And again, we have a Wills and Trusts class and that kind of stuff. That was actually one of my best classes as it turned out. But, you know, just as luck may have it, I suppose. And I think in law school, I kind of had that idea. Again, it was the way to use sort of the financial aspect with the legal side. You know, the first jobs, obviously, in the law clerking jobs were getting experience finding a place to work. We're talking back in 2006, 2007, and then into 2008. So that's what… the world was an interesting place, right, as everybody thinks about time and places to how you enter the workforce and start doing things. That was an interesting time for us for sure. So, it's an interesting way and the law firm I worked for was a small firm and it handled a lot more of the commercial, real estate civil litigation world, and that was, you know, at the end of 2008, if people recall, started to think about there's a little bit of a meltdown there for the real estate world. So that made my world interesting.
Jon: A lot of unique experiences that probably a lot of attorneys don't have from practicing real estate law at that time.
Matt: Absolutely. So I've been down the road of construction lien litigation.
Jon: So, and then what brought you to having your own firm?
Matt: Well, you know, essentially, it was at the end of 2008 there, as firms have it. That firm shrunk. There was really no space for me at that point. He was trying to survive. So the newest, lowest person on the totem pole – out you go. And so I was able to luckily find another firm that I had known and I did some extra contract work and was able to just get started and, you know, decided now's the time, be in control of your own self and schedule and go from there.
Jon: Before you got too deep into that next one.
Matt: Yup.
Jon: Okay.
Matt: It's always an interesting story, an interesting climb. You know, you have different things, different stresses, different levels of focus.
Jon: Yeah. Okay. So how old is your firm now?
Matt: So, as I said, we are 16 years in, so we've been around now for hopefully over the hump and keep going.
Jon: Yeah, I would imagine. And so tell us about the makeup of your firm as it stands today.
Matt: Currently, I have another attorney that works in my office, so she's been working with us for over six years now and that's been obviously a huge help and benefit to all our clients. And obviously, we always talk about succession planning no matter how old you are. Something happens to me, there's a person ready that can take over and run with it.
Jon: Excellent.
Matt: We have another client coordinator as well that helps sort of manage all the other day-to-day stuff.
Jon: Yeah.
Matt: And so that's it for right now. We're eyeing a few different things that will continue to expand and grow here in the near future.
The Financial MD's Four-Step Roadmap [0:08:54]
Jon: Okay, yeah, that was great. Sounds like a nice lean operation that you got somebody strong in the client coordination side and then another attorney. It's great. So, a lot of our conversation with our physicians is around some specific areas. You know, with the residents and fellows, we start at the very beginning – and we'll put this upon the screen here – but we have this Four-Step Roadmap. And first we talk about cash flow. Any kind of financial plan has to be based on what's coming in and what's going out and just having a good handle on that. No matter how far in training or practice a doctor is, we feel that they do need to get a handle on that. We've seen way too many attending physicians who just spend because they have it or they don't budget because they don't have to, which is true, but they're not running out of money necessarily. But we always believe that there's kind of leaving money on the table or money is, you know, slipping through the pockets or paying more in taxes than they have to or just, you know, stupid stuff. So that's Step 1. Step 2, we figure out the safety net to get their emergency fund, insurance in place; protect their financial plan. And then Step 3 is navigating their debt strategy and it's interesting because estate planning touches all of those things. And then Step 4 is planning for the future, which is usually where that estate planning comes into play. Although I'd say in our conversations, it doesn't matter where they're at in the process, estate planning touches it somehow, whether it's choosing beneficiaries on their 401(k). And their residency, that's something; just anytime they get stuff and knowing that there's… that stuff's got to go somewhere when they die and they're either going to figure it out or leave that burden to somebody else. I guess if you were to sit down with a couple for the first time, what would be the most basic things that you say to, if somebody asks you the question, why do I need to talk about estate planning or think about that?
What Is Estate Planning? [0:10:52]
Matt: It's funny you made me go right to how we define what estate planning is in general. It's really interesting. You kind of touched on all of those things that, like you said, go hand in hand. So the way we define estate planning in our offices, you know, I want to be in control while I'm alive and well, and then I want to have a plan for myself and loved ones if I become disabled. And then after I'm gone, I want to give what I have to whom I want, when I want, the way that I want.
Jon: Okay, good.
Matt: So you're really covering all phases of life in your estate planning, much like the financial plan is the gas that fuels the car into that plan. So that's, you know, really a way of looking at it.
Jon: Right.
Matt: And so certainly, yeah, in the beginning it's while, you know, like the people are just getting and going and the doctors are just getting and going. They're trying to be in control. And like you're saying, it's just the awareness and knowledge is a huge thing – agreed as to what's coming into my pockets, where's the money going, how do I make sure there's a plan and I'm protected.
Jon: Yeah.
Matt: And then, you know, that protection comes in, what happens with the disability. And I know you've talked about that extensively and we've gone over that as a group as to there's different ways of protection and they're all needed. And that's a huge thing. And then ultimately, what happens at death. So the documents on the estate planning side might change, but the objectives are still the same. So those are just the tools of the trade on our end. But for you, it's where do you want to go and how do you want to get there. And so that's a lot of the conversation we have with clients as they come in initially. And like you said, we're big on to education. We want to know exactly what they're doing and what they want to achieve and we're their guide to get them there.
Jon: Yeah, it makes sense. To all you residents out there, or directors like, you guys know, at Financial MD, we do a lot of lectures. Matt and I've done several lectures together as we talked about either employment contracts or estate planning or just on the legal side of financial planning. So Matt, it sounds like there's three phases of life where estate planning has to be considered – having control when you're alive and well, when you're disabled, and then not necessarily having control, but dictating some direction, making the decisions for what happens after you die with the things that you've worked for, earned, your family has gotten, so it makes sense. So, what are the questions that you ask when a person or a couple sits down with you. Let's say, okay, they get it. I know I need estate planning, where do I start?
Key Questions To Kickstart Your Estate Planning [0:13:22]
Matt: So we start traditionally, like I said, with an overview of our process, and from there, as we get clients that want to go to the next steps, a lot of that is just gathering some basic data from the clients themselves – who they are, are they married, do they have any kids. And then the discovery of – what do you own and how do you own it – because, again, the estate plan can say one thing, but the beneficiary designation at the institution says something different. It won't work the way you intended to go.
Jon: Okay.
Matt: So trying to make sure what we own and how does it impact what happens to it at different stages. If you're disabled, if you're deceased, how do you get… who's in charge of it in one, and they're all big things, so we start to talk about those issues as we design their plans. But initially, we're looking to get… to get that initial set of data.
Jon: So you said something interesting – I don't know if a lot of people will follow -- as you said, what do you have and how do you own it. What do you mean when you say how do you own it?
Matt: Well, how is the piece of property titled? So, right, there's bank accounts, for instance. That's probably the most common thing for most of us, right? We all have a checking account.
Jon: Yeah.
Matt: Yeah, if you have a checking account. Well, there's different ways of having a checking account. It's just an individual account. A lot of times they're joint accounts, so it's you and someone else. And with the joint account, you can have… it's essentially equal ownership. In that way, somebody can… I can take all the money out of it; that other person can take all the money out of it. You know, in spousal situations, that's usually okay. But if we're adding kids or relatives under the account, that might not be okay. And that comes into play in those discussions. Traditionally, if you have, you know, someone else on the account, if they have an accident, that account is exposed to that person's creditors, and so we don't often like doing that. It's a good reason to. And so the ownership of the structured joint account, or maybe that joint account, you just have a beneficiary listed, and again, it goes to that person or people upon you know. So that's when we get into ownership as to how it's titled, and titling means, right, either or the registration on your vehicle. And that's the other thing – we think about titles. Titles to vehicles, titles to houses.
Jon: Yup.
Matt: So that's why we – titling is important. Boring, but important.
Jon: Yeah. Well, it just makes you think. Like I said, I don't think anybody thinks about the fact that, hey, I owned this jointly with my dad or siblings or, you know, whatever the case might be. It's just…it's more convenient that way or whatever. But the liability is a question and good point. Okay, so then figuring out, getting all this data, the question that we get all the time and I'm sure you do as well, is – and this is probably not the right question to ask, but we get it anyway – what's the point where I need a trust versus a will? Or what is the difference? Can you give us a quick rundown of how do you explain the difference between a will and a trust and the sense of each and implications?
Will Vs Trust: Definition of Terms [0:16:32]
Matt: Yeah, so we can give the high level view of that, and again, that's a very common question we talk about in the introduction. And so trusts, wills, powers of attorney – those are all different documents that we use in the estate planning world. And so from the standpoint, matching it up with our definition of estate planning is, we'll start with a will because that's most, you know, living will is a different thing than a last will and testament. So last will, or you know, your will is something that I create and it only becomes effective upon my death. It's something that's just there. And what it is, is it's a set of instructions, a simpler set of instructions, to say what happens to my stuff that I own in my name at death. And it has to go to probate court in order to legally transfer it. That's where the will goes to probate court. The probate court then pretty much puts its stamp on it saying it's okay to move the property from the deceased person to the people listed in the will that who they want to have inherit. The side cut, or the shortcut to that is if you have a 401(k) or IRA or life insurance with the beneficiary on it, that avoids the will. It goes straight to whoever is listed. So a will doesn't work in that instance. And so again, that's why we look at beneficiaries. So a will is just very basic. Then it requires a little bit extra work to get the property where you want it to go. And it's only effective upon death versus in some situations, though, we have it just in case because we're planning with beneficiary designations. We're never planning to use the will because we already know who's going to inherit. And that's okay. We counseled to that decision. And that's very much the case with young couples because they don't own much. They don't have a lot of things. A simple will coupled with what we use as is, you know, powers of attorney to be able to manage your finances if you're disabled or manage your healthcare decisions if you're disabled. And those are important things to do for anyone that's over 18. Otherwise, you end up in front of the probate court for the living with a guardianship or conservatorship.
Jon: Yup.
Matt: And so we want to avoid that yet again because you'd rather want to starting from the control aspect of, "Hey, I want to be the one to say who's going to take care of me, not somebody else." Right? You might have a preference of, "I want this person, not that person, to make these decisions for me."
Jon: And that's a living will?
Matt: And that's… you know, a living will, but in Michigan, that's, you know, the patient advocate.
Jon: Okay.
Matt: So we can do a patient advocate where they will be the ones to make the decision on what type of treatment you would like to receive.
Jon: And so at what point does that become active or usable? When is somebody not able to make those decisions for themselves? And how do they know?
Matt: Well, there's two ways you can design the documents. One, you can make it effective really upon your disability and you can – disability can be defined as, you know, two doctors agree that you're no longer mentally competent or you can make them effective immediately where then the person that you're giving that power to can go and use them tomorrow if need be. They don't have to wait for your disability.
Jon: Okay. What are the pros and cons of either one of those?
Matt: Depends on when you want them to be effective. It depends on your level of trust or need for that.
Jon: Got you.
Matt: And so that becomes, again, another issue that we discuss with the clients as to what makes sense for the particular situation. It all… it varies.
Jon: Yeah. And is that a… am I thinking of that, right, as bringing power of attorney is the one where…
Matt: Correct.
Jon: We'll need some disabled?
Matt: Yup.
Jon: Okay.
Matt: Yeah, so that is exactly the term.
Jon: Okay.
Matt: You're training has worked well, Jon.
Jon: Thank you. I… just like a handful of things, like terms from the CFP that I remember.
"You're In Control While You're Alive And Well" [0:21:00]
Matt: That's exactly it. You've had many hours of this. It's back to remembering what it was… yeah. And then if you want, the last step is the trust. The last step is the trust that sort of encompasses all of this. So again, we create a trust today for someone, it's effective today, and it's merely a big set of instructions to say what happens to our financial assets. You're in control while you're alive and well. You can change it, you can modify it, you can do whatever you want with the plan. But then it says, what happens? It determines how you're declared disabled, who's in charge during your disability, who can get access to the money while you're disabled, and then what happens at your death with the same type of questions. So it's way more flexible and way more comprehensive for someone to be able to plan through more situations and more scenarios than you can otherwise with the will or powers of attorney.
Jon: Sure, okay. So with the… the way I kind of, I guess, look at it from our financial point, like let's take the patient advocate, power of attorney, things like that, the power of attorney to have it be immediately effective regardless of whether you're disabled or not. And correct me if I'm wrong on this, but the thinking that I typically have when we talk for our clients is, you know, if you've got somebody that, you know, you trust well, you've got a good relationship – it might be a spouse, okay, or one of your children or whatever, one of your parents or however that works out – you know pretty well that, you know, you're in a situation where you can make a decision for yourself, which is 99% of the time, they're going to let you, no issues, no getting involved. And then it just makes it a little bit easier that if you are in a situation where you can't make a decision for yourself, then I have to go to those hoops of, you know, getting declared incompetent or, you know, unconscious or whatever the case might be. Is that kind of thinking about that, right?
Matt: Absolutely. I agree with that analysis completely. It's one of those things there. If you already have a high level of trust with the people you're naming, then that's our decision point as to why wait. It makes it easier for you to work with and easier for financial institutions to not look for anything additional. So the reason why we plan in advance is to be prepared and ready, you know. We rather not have to run through additional stress, but certain circumstances dictate, right. We're naming maybe friends or other people that we're not sure of as backups because we don't have anyone else.
Jon: Yeah, and that's where it sounds like the will, you know, would be tougher than the trust in terms of you die and you've got a will; well, that's got to go through probate. They've got to kind of put their stamp of approval on it before everything can really get distributed. Is that right?
Matt: Yes. You know, the process isn't too difficult, but it's just some added layers of complexity, time and cost.
Jon: Yes.
Matt: So, you know, you have to file some paperwork. Usually, you're hiring an attorney to help you with the paperwork because most people don't know how to fill that all in, where to file it, all the different steps. There's fees to file it that you otherwise have to pay. There's an inventory fee. So you got to list what you own, what the value is, and pay a fee to the probate court. So, you know, there's some additional things that need to be done that could be avoided. You know, most people choose to avoid them if they can.
Jon: Yeah. And it sounds like it's more of a consideration for who you leave behind. Obviously, you're not going to care. You're not going to really know what's going on.
Matt: Correct.
Jon: But it's now thinking through, okay, how do I want to make life a little bit easier for the people I leave behind. And I see that a lot. And you probably do with, once a kid goes through estate planning for their parents, it really makes them think twice about their own and think, boy, that was a nightmare; how do I prevent that from happening for my kids.
Matt: We definitely have stories, and that's the same thing with a lot of clients that come see us right there. And when they have experiences like that, they're either really good, like, oh, they did this, that worked; I want to do that too. Or this is really bad, how do I avoid that. And so a lot of emotional side to it. And yeah, certainly so, that's the other interesting thing. And then the other thought process for us that have young kids and young families, being able to plan for those and how they should inherit is a big thing too. So it's the same thing. If we have life insurance, you have assets that we don't have control of yet, but if we died and the kids get a lump sum of money, you want to be able to protect that for them and trusts are a great way to do that. We're able to build very specific, tailored plans for clients and their wishes for their kids, and you know, the kids are different. We can treat them differently within the state plan itself. And so we're able to build in protections and build in some different things that people don't realize necessarily that you can do, but there's flexibility to do it. So that's kind of another fun part to let the kids grow up and not just get a large check when they turn 18.
Jon: So what are some common ways you see people do that or what are typical setups or structures for that?
Understanding Trusts: Common Setup And Structure Models [0:25:40]
Matt: So for us, options are available where we create trusts and inside the trust we lay out the rules for those kids and so kids can be able – someone else is in charge of the money for the child until they turn a certain age and so that other person is called the successor trustee. That successor trustee or successor trustees as it maybe, maybe of two people, they are in charge and they can stay in charge up until whatever point in time you want them to not be in charge. So they can be in charge until the child's 20, 30, 40, 50, 60. You can name the age, whatever age you want to do, and somebody else can be in charge of the money for that person and it just determines in your plan what makes sense for your children and they can be, like I said, that age can be different for each child. One might be super responsible; one might not be responsible at all. And so you can shift ages when this happens. You can also shift how they get access to the money.
Jon: Yeah.
Matt: So there's protections that we can build in and we often leave it behind where if a kid needs something for – they go to the hospital and there's a hospital bill – we want their medical bills paid. They want to go to school and you want to support them going to school, you can give education, money for education. Maybe they need a car; they need a car, but they don't need a Bentley. We can, you know, get them the appropriate amount of money. You know, a place to live – that kind of stuff. It's all built into where we can adjust the plans for the children and protect them.
Jon: So you can be pretty specific and if you want to.
Matt: Absolutely. That's kind of the fun part.
Jon: Yeah, right. Be able to kind of make it tailor-made and customized and pretty open-ended that way.
Matt: Exactly.
Jon: What about somebody to take care of the kids? How is that provided for? If you've got still minor children, where does that get determined and dictated?
Matt: So we create a document that is really a nomination of guardians for the minor children. So if something happens to the parents, you can list who should be in charge of their care and custody while you're not around and so that's something that you're allowed to put together and appoint. And that's another crucial thing with young kids is who's in charge because there can often be a fight among family as to, well, I want to be in charge or I want to be in charge. And the parents of the actual kids go, I don't want either of those people in charge; these are the people I want raising my kids to the standards that I raised them at. And so one we usually create the legal form that nominates a guardian and allows to, you know, names who we would want. And we have an additional kind of – call it a worksheet – where people can then get into the details of how they are currently raising their kids and how they would like someone else to take care of them, right? Some people have all different methods and methodologies. You know, if somebody gets an A, maybe they get, you know, financial bonuses, right?
Jon: Yeah.
Matt: You had A's in your report card, we give you… you can keep on with that. You know, do you practice a particular religion? You'd like the child or children to continue with that faith; you know, all that kind of stuff – sports, vacations, other types of activities. Very much, you know, considerations to think about. Visitation with family; what things are important. So it's all in there. The worksheets are fairly comprehensive. It's not perfect, but it gives us a starting point for us busy parents.
Jon: Yeah. Yeah, definitely.
Matt: That's the battle for us while we're young and working and raising small kids. It's definitely something that we needed. The less we have to think about, the better in certain things. And you can always improve upon it, but at least something is better than nothing.
Jon: Yeah. No, I agree. What are some common objections you see? You know, maybe you make a recommendation, someone says, nah, or whatever the case. I mean, what have you seen?
Common Objections Against Setting Up A Will Or Trust [0:30:04]
Matt: It turns into… I think some people maybe not ready yet. Maybe they feel they don't have anything worth protecting, and I guess, that's usually overcome to a certain degree because if you think about it a little bit going, well, you know, I don't want to be in a jam. And so at the bare minimum, there's some essential planning that everyone can go through. It's just whether or how much extra planning they want to do.
Jon: Yeah.
Matt: Like I said in the beginning, it's the powers of attorney that are necessary for anyone over 18 to give whomever you want legal authority to act on your behalf. But the objections become, well, maybe I don't feel like I need a trust because my beneficiaries will just inherit and I don't need to go through that process. And that might be the case depending on their plan. So you get into those different objections of, "Well, I don't have much, don't need much; it's all covered." But let's just make sure.
Jon: Yeah.
Matt: You know, sometimes people don't… obviously, money is a factor and when it comes into play, they're not always free to do an estate plan. Some people don't want to pay different fees to do it. The fees range. We leave it open-ended. It's not a closed number. It's a pretty open-ended range, depending on particular scenarios. For our office, we do introductions. It doesn't cost anything anyone until we know what we're doing. You'll get a fixed fee quote at that time. So, it's straightforward. Nothing additional, nothing extra. We will tell you what it is and go from there.
Jon: Okay, got you. Makes sense. I think a lot of us have had experiences with hourly attorneys where we hesitate to reach out for calls or emails or something because we're afraid of the hourly rate.
Matt: Absolutely. Funny enough, I was on a call with another client the other day – quick story. And this was a tax attorney. We were doing some advanced tax planning and he charges hourly. He charges hourly and the client was on the call with me and we were all joking. Afterwards, he goes, "I didn't want to tell a joke because I didn't want to pay 10$ for it."
Jon: Great point.
Matt: So, you know, it's kind of funny. And I said, yep, I understand. And, you know, that's how it is. So we encourage – that's why we don't mind the phone calls. That's why we do the fixed fee, you know. If I want to talk about my dogs or something like that, no big deal. You don't get charged for it.
Jon: That is an excellent point. Yeah, and us with, you know, we've got a kind of a counseling approach or background here. Sometimes it can drag on and sometimes we're just listening, and you know, but I think it's the key part of the plan, for sure, because we find things we get to know in our world. We're making recommendations and putting together plans that are tailored very specifically to that person and the more we can get to know them, the better, and that may be from just letting them talk and not feeling that constraint of time. And that's good.
Matt: Absolutely.
Jon: I mean, not be as profitable, but that's what it is.
Matt: Yeah. Like you said, in the long run, I think a lot of what we do in working with these relationships, and so, we like the people we work with, we don't mind the conversations. It's part of how we enjoy what we do.
Matt: It's good. What are some… any tips? If you were to say, you know, you've got five minutes to give a few things to some young physicians or couples or families; will be some kind of bullet points or quick action items?
Estate Planning Essentials: Quick Tips [0:33:30]
Matt: I think some of the basics, again, is just even generally get yourself in order to be organized. I think no matter what you do, it always helps to be organized where if something happens, somebody knows where that emergency file is and know.
Jon: That's a great point.
Matt: What are the important steps to take, you know. If I'm not here, how do you get access to my phone? How do you get access to my electronic stuff?
Jon: Yup.
Matt: And, you know, that's become way more of a thing for the younger generations. And then, you know, how do you get access to the key contacts? You know, who are the important people that know where my financial accounts are? If I have a life insurance policy. Just keeping your basic records in order so you can have it be easily handled in the case of an emergency.
Jon: Okay.
Matt: I think that's a big thing as to who knows where and what it is that they need to get in charge of. You know, those are some real basics there and it's helpful. Like you said, getting organized and getting yourself, like you said, initially, the cash flow.
Jon: Yup.
Matt: You've got your initial pieces of that your puzzle.
Jon: So like a simple net worth page. If somebody couldn't put together a one-page net worth for themselves, that may be a good place to start because that will give you an idea of what do I have, what's everything at, what accounts, what property, etcetera.
Matt: Snapshot of your assets, snapshot of your debts even, to know what's outstanding and what's there. See kind of pulling together your own little balance sheet of what's where and what's happens.
Jon: So a lot of our doctors will ask this question – are there debts that get forgiven, taken away, whatever, after somebody dies and there are debts that would still be there, that get passed on? How should they think about that?
Matt: So that's a good question, and it depends on the type of debt and how it's owned and what it's tied to.
Jon: Okay.
Matt: So, if you're owning a home and you have a mortgage, that debt is secured by your house.
Jon: Okay.
Matt: And so obviously, if something happens to the house, if the person inherits it, that has to go to the next person or get paid off. So that one is… that one's not going away.
Jon: Yup.
Matt: Student debt – that's a whole different story. I think it depends on what type of debt and where it is. And if you have debt in general, a lot of times is, do you have assets that are going to pay it off or are you insolvent essentially? And so we go through that process with probates and certain things, whether or not we should or should not pay it off. A lot of times that's case by case. If you have medical debt, it's the same thing. A lot of times if you're married and you have a, you know, a hospital situation where there's a huge bill, the surviving spouse will be obligated to repay that traditionally. Just because that's one of those things that plays into how that debt's written. But a lot of institutions, credit card debt, big thing, a lot of them will negotiate.
Jon: Okay, good point.
Matt: So it just depends on the amount and where, but we've typically run into that fact where they'll negotiate and get a number just to get it out and off. So that's a tough thing.
Jon: Do you guys typically recommend people get like life insurance for that kind of thing?
Matt: I think life insurance plays a generally good role for people. Certainly, when you're young and healthy, it's the best time to get life insurance.
Jon: Yeah.
Matt: And certainly, if you have a lot of obligations, it's probably worthwhile to protect your family.
Jon: Yeah.
Matt: You know, certainly, if you have a mortgage, it's an easy way to at least lighten the burden on your family.
Jon: Okay, so they can keep the house without really having to worry about that payment.
Matt: Yeah. And that's a big consideration. I know you counsel heavily on that as to how that works and what to think about and how much and where.
Jon: Yeah, exactly. Okay. Any good stories you can share? Any fun, weird stories or anything? Everybody likes to hear stories and listen to the podcast.
Matt: You find many. That's the problem. So it's picking your favorites. You know, you can go down the line of people owning. They have had a lot where people have owned real estate, as families often do, together or intertwined, and when people start dying and then all the probate start opening up and there's… One case I had that had 20 people on it and they're all like cousins.
Jon: And they're all owning like, you know?
Matt: They're all…. they're all heirs, so to speak. They're entitled to a sliver of the estate because they didn't do any plans.
Jon: Uh-huh.
Matt: That was a good, messy one. I think I stopped working on it and somebody else took it over and I felt like it was still ongoing.
Jon: Yeah. Either way, it cost them a lot, didn't it?
Matt: It cost a bunch of money and a bunch of time, and everybody – nobody gets along. Nobody agrees. Nobody wants anything. They go, and it turns into a mess. There's a lot of what not to do. Let's see here. What else can we pick on? You know, there's a lot of times when plans go well, right, when people – parents – leave the money behind and it's well received and it operates the way they've intended it to, where the kids keep going to do what they need to do and protect them. I don't think any other good work stories that come off my top of my head. I've written a book so that, you know, it's available. I put a bunch of horror stories in the book, but we can make it available to those that want on the podcast. We've got a PDF version, free download.
Jon: What's the book called?
Matt's Book Is Called "Keeping Control"; And Other Resources [0:40:09]
Matt: We've titled it… it's called Keeping Control, and so we did it, you know, it's a game plan to protect your estate, your family, and your money.
Jon: Oh, that's awesome.
Matt: So it's a fun thing. I think I've got some more stories in here that I probably have for different scenarios and kind of walk you through what keeps you…
Jon: Yeah, we love resources. So guys, if you're listening to this, you can email us info@financialmd.com and we'll get that to you. We'll connect you with Matt and his office. Anywhere you guys want to message us, whether it's direct message on Instagram or TikTok or anything, we'll get that to you. That's a great resource, Matt. Thanks.
Matt: Yes, no, absolutely happy to share. It was a great time to write that and go through it.
Jon: Yeah.
Matt: We did that right around COVID so that was good.
Jon: Okay. So, people that are coming out of this with questions or if you feel like you need to take action what's the best way to get a hold of you guys?
Matt: So, obviously, you'll be able to get access. We have a phone number. We have a website. We have email. So any of the above will work just fine with us and so we'll just share that with you and the, obviously, information below is probably the easiest way.
Jon: Yeah, we'll get it in the show notes, everybody, and reach out and reach out to us. Either way, we'll make sure we get you connected and if you're listening to this episode and really feeling that gut pull to take action on something then do it. Don't wait. And I hope that we have expressed the urgency or necessity in these things. But certainly, a 45-minute show can't answer everything, so at the end of the day, if there's something that you need to take action on, then to do it. We're not going to beat around the bush with that so. Well, Matt, I think that's our time for today. But man, that was super helpful and enlightening. I learned things. I know our listeners learned things and it was really valuable to have you.
Matt: Absolutely. Thank you so much, Jon. It was a great time being here.
Jon: Yeah, good. All right, well, guys, that was it for today's episode. Remember, you can find out more with all of the videos that we've got going on TikTok, Instagram, YouTube, Facebook, and everywhere else. Be sure to follow one of those things. If you want to get some education just delivered to your devices passively; if you want to kill some time between cases, between patients, and make it beneficial and learn something, then that's the route to do that. We've gotten about a billion little videos that can help you get a little bit smarter with the two or three minutes that you've got between patients. And then, of course, subscribe to this, if this is your first time listening to it. Share it with somebody that you think needs to hear this. And I would venture that every doctor needs to hear this. And even if they're not a doctor, whatever the heck? We talked about some really great stuff today. And lastly, if you would do us a favor and leave a review, that's what helps get this into the hands of more people so they can hold onto more of their stuff, pay less in taxes, and make sure that's what they want to have happen does happen. So, I'm Jon, this was the Financial MD Show. We'll see you guys next time. All right, that's our wrap.
Matt: Oh, thank you.
Jon: Yeah, that was fun. Good job!
Matt: Oh, it's good. No, I appreciate it. Always entertaining.
Jon: Get this off to our editor and let you know and I'll shoot you the link when it gets live, probably the next two weeks.
Matt: Sounds good, pretty quick.
Jon: All right. Well, I'm glad we connected, Matt. It was good to see you again and good catch up and don't be a stranger. We'll keep in touch.
Matt: Sounds good. Thank you, Jon.
Jon: All right, man. Have a good week.
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
Construction Lien – https://www.law.cornell.edu/wex/construction_lien
What is Estate Planning? – https://corporatefinanceinstitute.com/resources/wealth-management/estate-planning/
What is a Joint Account – https://swoopfunding.com/us/business-glossary/joint-account/
Will vs. a Trust: Which one is right for you? – https://www.rbcwealthmanagement.com/en-us/insights/will-vs-a-trust-which-one-is-right-for-you
What is a power of attorney (POA)? – https://www.legalzoom.com/articles/what-is-a-power-of-attorney
Living Will vs Last Will and Testament – https://www.findlaw.com/forms/resources/living-will/living-will-vs-last-will-and-testament.html
What is Probate Court? – https://www.findlaw.com/estate/probate/probate-courts-laws.html
What is a Beneficiary of a Will? – https://www.wilsonbrowne.co.uk/news/what-is-a-beneficiary-of-a-will/
All about beneficiary designations – https://lindsayallenlaw.com/estate-planning/beneficiary-designations/
Guardianship & Conservatorship Basics –
https://www.eldersandcourts.org/guardianship_conservatorship/general-information/basics
Patient Advocate Designation FAQs – https://www.michbar.org/public_resources/probate_pad
Keeping Control: A Game Plan to Protect Your Estate, Your Family, and Your Money –
https://www.amazon.com/Keeping-Control-Protect-Estate-Family/dp/B09GZ7LB6Q
Matthew A. Ferri's Contact Numbers – T (248) 409-0256 / F: (248) 856-3889
Matthew A. Ferri's Office – Law Office of Matthew A. Ferri, PLLC
Matthew A. Ferri's Website – https://lifefocusplanning.com/
Financial MD Email Address – info@financialmd.com
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 029 - Financial Insights from Last Year and Winning Strategies for 2024

Summary:
Looking Back Since The Launching of Financial MD in 2020 [0:01:23]
There Were More Graduating Resident Dinners Last Year! [0:06:45]
It's Coming! The Financial MD Residency Online Course [0:08:15]
Personal Finance In A Nutshell: 2023 Recap [0:10:50]
Set Up Your First Short-Term Goal [0:13:30]
Instill Discipline To Reach Your Goal – Reverse Budgeting Tips [0:17:40]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Well, hello, everyone, and welcome to the Financial MD Show. We are so excited to be coming to you for the first episode of 2024 and a lot's happened. So we're going to bring you up to speed on what's going on at Financial MD – what's going on with Jon, what's going on with Dr. Smith, and what do we see for the future in a lot of ways. So this is going to be a big reflective show but also a big predicting of the future and I'll tell you more about that in just a minute. But first, we're going to start off with bringing you an update into what is happening at Financial MD. With Financial MD which you know as the Number One Trusted Source for Resident Financial Education for young physician financial planning, we are your resource for all things education, and remember, that stuff can be found wherever you're watching this – be it YouTube, Instagram, TikTok, Facebook, the website, podcast – anything like that. Whether you're watching or listening to this, find our other stuff and make sure it's coming to you on a regular basis. But you know that already.
 
Looking Back Since The Launching of Financial MD in 2020 [0:01:23]
 
So we've been doing a lot more of that this year, 2023. As we look back today, what's been happening at Financial MD is we've been stepping it up. COVID changed a lot of things. It was really the launch of Financial MD in 2020 – March 17th to be precise – right about when the pandemic and lockdowns and such started, so real good timing on my part. But it's been an exciting few years. 2021, we started to build; 2022, really nailing down our processes and starting to get back into the swing of getting education. Now if you remember, I've been doing the lectures for the residency programs for about – oh boy, this is our 10th year now – with other companies in the past and when I launched Financial MD, this podcast was really a big driving factor of that because back in our world of financial planning, there's a lot of compliance restrictions. So the broker-dealers and the big, you know, investment firms and all that, they don't want you to do any kind of marketing or grow your business at all and so that's an issue when I'm really big on education. I like to talk and podcasting was going to be a big piece of that and so. Now that we've been able to launch the podcast, we've been able to do the videos, the Didactic Minutes, which you can see on Instagram and TikTok and YouTube shorts, we've been able to get the word out quite a bit more, get a lot of education out there, as many financial tips and how-tos as we can squeeze in a two-minute video. So, be sure to check that out, but that's been super fun. I've been doing that at different locations starting in 2020 so I was excited to do that and we've been doing more. Those are coming out every week. These episodes for the podcast are every two weeks. We've really been nailing down and, in some ways, we kind of had to do some trial and error, figure out our schedule. So myself with the family of four – and if you're watching the video, I'll throw up a family photo here – the kids are 8, 10, 12, and 18. Yeah, my daughter's 18, starting at community college. So to speak, a little to that, we had told her, or maybe planned internally, between Ashley and I that we would cover two years of community college and two years for university. So in our case, let's say, MSU. I didn't really tell her that because even that was kind of a big leap. This is something that we had really just started thinking about in the last four or five years. She was already, you know, 13, 14 at that point. She was thinking she was going to go to some university. As she got to the end of her senior year, she finally decided on Lansing Community College, which is great, because that's something we can pay for out of pocket. We don't have our 529 built up yet so we're kind of figuring that out as we go and she's figuring out how to be a grown-up. She's figuring out paying bills, having a car, going to class when nobody really cares if you go to class, and what it takes to actually succeed in college. And so those are fun and fun kind of navigating the field of how do you be a parent while not really being a parent anymore and how do I be a dad to a young adult and, honestly, it's been going okay. We have talks. We hang out. She's around more. I think all of the lessons that we've been trying to teach her and the character-building conversations have been taking root – at least, I think so. So time will tell. But she's figuring out and getting jobs and doing those things, so she's doing great and we're proud of her. And then Joey is 12, Sam is 10, Daniel's 8… that's a lot of them. They've been enjoying football which I was never really into but they're getting into it so they decided to watch University of Michigan football this year which turned out really well. We went to the Rose Bowl which maybe I'll dive into a little bit later but that was amazing. Then they've been getting into Lions football and my brother-in-law took Joey to his first Lions football game which also turned out pretty well. We made it to the conference finals, I think it was; division, conference…I don't know. But they've been doing great. We watched the last Lions game of the year. It was a playoff game, Conference Finals, the game that would determine who goes to the Super Bowl and the Lions lost which is what we expected. But my boys cried, so I did not expect that to happen. So we kind of had to navigate that but that's okay; that's part of growing up. And everything else is going well here in Michigan.
 
So, life is good here personally. Dr. Trevor Smith, which he'll update you on some more, probably spoke a little too in the last episode if you caught that, but he has finally started his own clinic and it's keeping him very busy and so he's figuring out the ends and outs of a clinic and office space and expenses and building a practice and, you know, with Ophthalmology, it's definitely a lot of going out to beat the streets and meet other clinicians and get your own patients. So it's been interesting to help him out with that and watch him on that. So stay tuned, you'll get some more on that. If you're ever thinking about opening your own practice or getting into business for yourself or have any piece of running the practice or running the clinic, you'll want to be sure to check that out.
 
There Were More Graduating Resident Dinners Last Year! [0:06:45]
 
A couple of other things to look forward to in the future, I will allude to so I'm not going to jump the gun yet. But last year at Financial MD, we had more dinners than we've had in a couple of years. So if you don't know, in the areas that we're serving in physically, we have graduating resident dinners where we go to a decent restaurant – not a super nice one – but really nice. The food is good and it's a decent place. The ones where we've been really active have been in the Detroit area. So we eat in Royal Oak. There's about 15 or 20 graduating residents from the area and we bring in a physician mortgage specialist. We bring in a CPA. Sometimes we'll have an employment contract attorney, and we'll just talk, and it takes a lot of the attendees from our resident lecture programs will come to this to get some very specific information about transitioning into practice, get their questions answered. I love doing those because I get to talk for a while and people supposedly listen to me but maybe it's the free food. We buy them dinner just get to know them. So, those I really enjoy. We've been doing more of those. Well, actually, we're scheduled to do probably 10 to 15 this year. And the residency lectures are ramping up this year as well. So I'm excited about what's going on. We did a few more last year; we're going to do a lot more this year. We're going to get on a regular schedule with the Didactic Minute videos with the podcast episodes.
 
It's Coming! The Financial MD Residency Online Course [0:08:15]
 
And one of the more exciting announcements – this has been two or three years in the making – is the Financial MD Residency, an online course brought to you by myself and a practicing psychiatrist who will remain unnamed currently. I'll probably have him on the show here pretty soon. We've been talking about this for a little while. I met him in residency to one of the residency programs I was giving lectures to and after he went into practice in Alaska, we kind of reconnected and started talking about our common passion for financial education for residents and we decided, you know, I don't think there's a good online course for this. So how hard could it be to make one? Turns out, it's pretty hard. So, that should be launching in the next month or two and we're super psyched about that. So, shoot us a message directly. You can get me at info@financialmd.com if you want to be added to that waitlist. We're going to have things about it on the website at financialmd.com, so get on that waitlist to be a part of the first beta testers. So we're going to give it free to a few to run through and test and work out the bugs and find our typos and do all those kind of things and give us some feedback. So if you want to be on that focus group, part of the beta testers, let us know. We'd love to have you on that group. It's already starting to build that list.
 
That's one of the big things for 2024, we're going to be expanding into a few different areas for our lectures. Our lectures are nationwide, but the dinners will be expanding into a couple of other locations. We've got Chicago on the docket and we're excited, growing our team. A lot of you have met Tanya, who's our business manager here; our paraplanner, Alex. We've got a lot more coming out of that as well. So, that's what's happening here. That's what's been happening.
 
And I want to talk to you for a few minutes about you, about your own personal finance journey. And I'm assuming the reason you're here is because of your personal finances. Yes, I have a sexy voice. Yes, I have the face of a young George Clooney. But besides that – I was trying to figure out who I look like; I don't look like George Clooney. So if you're listening to this in audio, that's not true. Who do I look like? Timothy Olyphant I've gotten before and I don't completely know who he is. I think there's a football player. Somebody has said somebody Greek…I don't know. Anyway, I think the Sicilian in me comes out as Greek sometimes. Brad Pit from time to time. Anyway, if you're not watching the video, you have to check out the video and see if I'm completely joking or if that's accurate. But go ahead and put some in the comments below. I can take it. Anyway, where was I going with that?
 
Personal Finance In A Nutshell: 2023 Recap [0:10:50]
 
So personal finance, our whole goal has been to teach you about personal finance, to bring you financial education that you can apply because our thesis is that there are things you can do during your training that can make a positive impact on your future financial goals. So you don't have to wait until you're in practice. You don't have to wait till you get to the six-figure income. There are things that you can do. So hopefully you've gleaned some things and taken some advice. But how has that advice panned out? So if you're just joining us today for the first time or you've been with us for a few years, let's look back at 2023. Now how do we do that effectively with our financial goals, with our financial progress, and just all of our personal finances? Now you can look back and see what you did. You can use apps like Mint which is phasing out. So you can use apps like Monarch Money, Rocket Money, You Need A Budget, EveryDollar – there's several of them out there. Or your bank; credit card will often categorize things for you: here's how you did…here's your year at a glance – that kind of thing. That will tell you what you did. You'll see what you spent in different areas and if you don't do anything else from today's episode, that is still worth doing because to know where you're going, you have to know where you've been. If knowing is half the battle and all the other clichés that come from Saturday morning G.I. Joe commercials, you have to know what you did. Now how you did is a relative question, isn't it? Because how you did is based on compared to what. If how you did was good or how you did was bad, the same person – two different people could do the same thing but have a different answer to the question – how do you do? So looking back at what you did, find what you made, find what you spent, categorize it to the best of your ability, and just take a look at it. Sit with it. Digest that. See what you think, without comparing it to anything yet. Just what do you think? How do you feel? How does that make you feel? If you got a spouse or a significant other that shares the finances with you, how do they feel? And have that discussion, like I say in the lectures, in a loving and respectful way, and if you need help with that loving and respectful part, hit us a message. My background as a private practice therapist has allowed me to gather a bunch of resources on helping a marriage or just helping in communication. We've got resources for that. We'll get those to you. But looking at what you did, analyzing it, thinking about it, digesting it, feeling it, talking about it, feeling like that's accurate though and up to date is going to take you to the next one of how you did, and to get to the how, you have to know the why. Why are you doing personal finance? Why are you spending the way you are? Why do you want to accomplish the things you want to accomplish?
 
Set Up Your First Short-Term Goal [0:13:30]
 
Now what do you want to accomplish? Now some people will have you start with, you know, retirement goals or any of those kind of things. Those are hard to picture at this age. They just are. It's too far away to really feel like you can understand. Do I want to retire at some point? I guess. What do I want that to look like? I have no idea. What age? I don't know. What income? I don't know. What's my retirement budget going to be? I don't know. Because we don't. Now you'll know as you get closer, then we're going to want to put some rough number together to just know how we're doing in terms of saving and spending and investing and those kind of things. But I want to try to flip the script a little bit and you are welcome to start with the short-term goals first. So take something like, I want to buy a house when I go to practice. Okay, that might be a year or two or you might wait three just to see how you like that first job. But to buy a house, most of the time you need some sort of down payment. Now with physician mortgages, you don't, so be sure to check out our episode on that. If you want connections on that, we've got some. But for physician mortgages, a lot of the time you can put zero down, but a typical conventional mortgage 20% down. Sometimes you can get away with 10, okay. But either way, you need to save up for that, most of you. If you don't, great. Stick that in an account; wait till you're ready to buy that house.
 
Is buying a house the right move for you? Does renting make sense? Will you be renting forever? Maybe. People have asked me or assumed, "Obviously, Jon, buying versus renting is a better financial decision, right?" And the answer is: I don't know. I used to be really sure about that and now I'm not so sure. So, that's worth having a conversation over to see if renting or buying makes sense. But if you're sure you want to buy and you know you need a down payment for it, then it's time to set that maybe as your first short-term goal. If getting out of student loan debt is that first short-term goal. If saving your emergency fund is your first short-term goal. All of these things we have prior episodes and resources on to get the answers to that. So check that out. But if that's your first goal, how are you doing for that goal is the question. If you want to cut back and get some surplus and that's your first goal, how are you doing on that? If you committed last year to spending less and saving more, how are you doing? If you're not on track for retirement, if you want to save for kids' college, if you want to pay off other debts, if you want to just grow $100,000, if you want to get a million dollars, if you want to retire early and have financial independence – these are all things that are going to tell you how you're doing. So you look at what you're doing. You look at what your goal is or why and they're connected with the how. How do we do that and how are we doing? So that's how you can properly and effectively look back at last year and see how you did last year because you can send me your budget, your spending, and say, "Jon, how did I do last year?" And I'm going to say, "I don't know." I have to know what you were shooting for, what are you capable of, why did you want to do that, what were you trying to do, and you can give yourself a grade on how well you did. And once you know that, then we can look ahead at 2024 and say, okay, here's what I need to do better at.
 
Now you can call it a New Year's resolution but I do think every year you should be getting better. I think every month, we can be getting better and we can do that with making small, consistent decisions over long periods of time. I've told you before if you've been to our lectures or been to our dinners, wealth is generated, by and large, most of the wealth in this country is from small, boring consistent decisions made over long periods of time, and it's true in your personal finances in a small level. So if you want to start cutting back, you want to start saving more, you want to save for big goals, small goals, whatever it might be, what are the changes and the habits and the behaviors that you have to do because knowing your why isn't going to matter. Knowing how to do it isn't going to matter. What are you going to execute? I've heard it said that we are drowning in ideas, but we're starving for execution. So ideas and goals, that's easy; but what are we actually going to do about it? So don't overwhelm yourself. Don't try to do too much, too fast. But what is one thing you think you can do this month? If it's, "I'm going to spend less on Starbucks." Great, okay. What are you going to do with that surplus? Now if you look at some of the reverse budgeting videos that we've done on how to actually discipline yourself or instill some extra discipline in your life, I'll give you a couple of tips.
 
Instill Discipline To Reach Your Goal – Reverse Budgeting Tips [0:17:40]
 
Number one, start with something automatic. There are automatic savings, automatic transfers; different things you can do to just set it and forget it. And you can start small – 50 bucks a month, 100 bucks a month, whatever the case might be – if building your emergency fund is what you need to do. We don't have the strength inside of us to stick with most things. So don't be afraid to cheat and use the tools. I do it. I don't have the self-discipline to stick to a lot of the goals that I have and the habits that I decide to. So I have to set up in my life things that are going to help me do that, that are going to make it really hard not to. So setting up automatic transfers, do it, and then you're thinking, okay, to stop that, I have to actually log in, go to this, and cancel this. Yeah, great. Make it hard for you to stop doing the right things. Make it easy for you to start doing the right things. So anything you can set up on autopilot – great. And if you can do it as soon as you get paid within a few days – great. So make that step today. Pick something you're going to do and set it up. That's the great thing about finances. So when you make a New Year's resolution about finances, it's easy to stick to when you just set it up automatically with technology. If it was something where you literally had to take money out of your wallet; you literally had to write a check every week, every month – a little tougher. So, don't be afraid to use the technology; make it easier for you.
 
So quick recap: Looking back at 2023, it's easy to look at the whats. It's going to take some time, okay. It might be – I won't say it's easy. It's simple; might not be easy, but it's going to take some time. Might be tedious to categorize everything, but give yourself a snapshot of what you did last year. To figure out the how, you have to know the why. What are your goals? What's one short-term goal? Pick that at least. Might be emergency fund; might be getting out of debt. And then how did you do last year? Give yourself a grade – A, B, C, D, F, and then commit to just bringing that up one grade this year. Maybe go from a C to a C+. Maybe C+ to a B-. And how do you do that? You can set up something automatic, get it going on autopilot, set it and forget it…so much more success to do it that way. So small, manageable habits that you can start. Start with a small goal. I'm telling you, guys, these wins will help you to make a big difference later on.
 
So, I hope that helps. Remember to check out all the Didactic Minute videos on Facebook, YouTube, Instagram, TikTok. We've got the reels. We've got the shorts. Some to just, you know, I'm not a big fan of just scrolling but if you can narrow it down to some good specific educational information, at least that's a little better than mindlessly scrolling on crap and entertainment BS and goofy videos. So, get away from that stuff, guys. Subscribe to this podcast if you haven't and share this with somebody. We'd love to get the word out more. We don't make any money from this podcast. This is just simply an effort to get financial education out there to build awareness of Financial MD and what we're doing. And if you have somebody that you think we should talk to, send them this way. Go to financialmd.com. You can reach out to me directly. My number, 517-82-8085 – that's my cell phone; jsolitro@financialmd.com. So I'd love to talk to you guys. Anytime, get a hold of us. Like I told you, I've got four kids so I won't get back to you right away; got a lot of stuff going on here. But let us know if you want to be a part of the online course, The Financial MD Residency. We are super excited about that. We'll be throwing some more stuff out there, so get on our email list at the very least.
 
Until next time, this is Jon from Financial MD. We'll see you soon.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
Monarch Money: The modern way to manage your money – https://www.monarchmoney.com/
Rocket Money: The Money App That Works For you – https://www.rocketmoney.com/
YNAB: Change Your Relationship With Money – https://www.ynab.com/
EveryDollar: The Simplest Way To Budget for Your Life – https://www.ramseysolutions.com/ramseyplus/everydollar
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
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Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 028 - Setting Up For Success - Essential Checklist for the New Attending

Summary:
Transitioning Into Practice: Focus On The W.I.N. Principle [0:01:23]
Stephen Covey’s Four Quadrant: Important, Not Important, Urgent, Not Urgent [0:02:32]
From Taxable To Tax-Free: The Art Of Roth Conversion [0:04:58]
Plan For The Unexpected: Disability Insurance [0:07:32]
Healthy Financial Habits: Budgeting And Managing Surplus [0:09:02]
Financial MD's Resident Roadmap: Securing Your Future [0:10:44]
We Want To Hear From You! Share Your Two Cents With Us [0:12:22]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Hey everybody and welcome to today's episode of the Financial MD Show. I, as always, am your host, Jon Solitro, CFP. Today is going to be a solo show but I'm excited because Trevor's not going to interrupt me all the time – I'm kidding. We do a great job chatting together. Dr. Trevor Smith is very busy with opening his practice and if you want to know more about that, listen to our last episode. That will be the best place to get a quick synopsis and rundown of what Dr. Smith is up to and what it takes to open your own practice. At least so far as we know, he's right in the thick of it; not quite launched yet – building, putting stuff together, getting financing – all that stuff; so that part is… that was a really great show to do.
 
But today, top of mind for us right now in the finance world and in the doctor world, if I'm talking to you and you are a younger physician just new into your career, you might be wrapping up your training right now. As we record the show, it's October. You may be a couple of months just into your first attending position and I wanted to put out a show to those of you that are the podcast subscribers, and maybe, this is something that you can share with your fellow residents or new attendings to talk about what are some of the things that you should be doing.
 
Transitioning Into Practice: Focus On The W.I.N. Principle [0:01:23]
 
If you had to boil it down to just a few things that you should be doing when you first transition into practice, what are those things? Because you can be bombarded with so many different possibilities and options that it is crucial that you weed that out and focus on the most major on the major. You do the important things first. Because if you look at Stephen Covey's book, The 7 Habits of Highly Effective People, there's a lot of great stuff in there. I do suggest that. We'll post a link in the show notes, but when you see that one of the chapters is going to be about focusing your time. You're going to see a lot thrown at you. You got to make benefits decisions. You got to figure out your money's going and buying a house and budget and all these kind of things. One of the things that Covey talks about in the book is "beginning with the end in mind," so that helps you to focus on what things are important now. I talked to my boys about the W.I.N. principle – W.I.N. (What's Important Next) – because they're not great at focusing on what they should be doing right now, when it's getting ready for school in the morning or getting ready for bed at night – all those things is, hey, buddy, what's important next? Oh, okay. And sometimes that helps and sometimes it doesn't.
 
Stephen Covey’s Four Quadrant: Important, Not Important, Urgent, Not Urgent [0:02:32]
 
But one of the other things that Covey talks about is he puts together this quadrant and I'll put this on the video screen for those of you that you feel like you need to do or could do or anything you possibly do in a day can fit into one of four quadrants, and up at the top, there's two sections. Think of it like a spreadsheet. There's What's Important and What's Not Important, and along the left side, there is the Urgent and Not Urgent. And so every task has some sort of aspect of both of those characteristics. So something may be important, but not urgent. Okay, so maybe you got to do at some point, not right now. Something may be not important but urgent, and that should give you a clue that maybe it's not something that I really should be spending my time on. If I get a notification on my phone that somebody just commented on my Facebook post, is that urgent? Yeah, I kind of feel like it is. Is it important? No. So, if I'm supposed to be doing something right now, if I'm supposed to be talking with the client, if I'm supposed to be helping, if I'm supposed to be prepping for a lecture I'm going to do, what's important right then? Is it getting that badge notification off my phone – probably not. So everything you do can fit in one of those four quadrants and the first step is knowing what is coming up and what quadrant that should fit in.
 
And so when I break down for you today a few things  it's going to be focusing on those important things. I'm going to help you cut out the not important things necessarily and maybe even the things that are important but not urgent. So we're going to focus on the Important and Urgent right now.
 
One of the things and tips that I give – and again, this is not personal financial advice; everybody's situation may be different – but one of the things that we often talk about is trying to minimize taxes; not just now, but for the rest of your life. A CPA, a tax preparer, an enrolled agent (EA) – you might see this different places; what they are doing is helping you to look back at last year and prep taxes for last year and figure out taxes for how do we report what you did pay or what you need to pay in taxes, and what a tax planner or financial planner is going to do – and maybe a good CPA is going to do this as well – is look ahead and make recommendations – here's what you can do to minimize your taxes in the future. And there are decisions that you're going to make when it comes to your benefits, when it comes to your income, when it comes to insurance – all these kinds of things. Investments – what can I do right now to minimize my tax burden later. It may even hurt a little bit right now, but long-term, this is going to be what's best for me.
 
From Taxable To Tax-Free: The Art Of Roth Conversion [0:04:58]
 
One of those things is going to be a Roth conversion. Now why do you say Roth conversion? Well, number one, you have to have money to convert. Most residents I come across have a 401(k) or a 403(b) that they put a little bit of money into… maybe 2 to 5,000 dollars that, over the course of their residency, they set some aside. A lot of hospitals will auto enroll you, so you'll get 1% at least going in every year which, you know, when you're making 50,000 a year, that's 500 bucks a year. You'll have at least 2, maybe 3 or 4000 in there over the course of 3 or 4 years.
 
So what should you do with that money? Now, that doesn't seem like it'll be a lot now but if we talk about the point of compound interest which we've talked about before and we can go into depth in that into another conversation, compound interest says that that 3 or 4,000 dollars could be 20,000, 30, 40, 50,000 someday with the right kind of compound interest and the right rate of return. So, that being the case right now because it's in your 401(k) or 403(b), you went through residency, you're now transitioned into practice. Okay, let's say, it's October right now of your first fall in practice and you've got this old 401(k) or 403(b_ sitting at your old residency program – your old hospital – it's never been taxed. They took it out of your paycheck pre-tax. It's going to grow. It's not going to be taxed. But then when it will be taxed is when you go to retire and if you're good and you had a good financial planner, you're still going to be in a high income bracket after you retired because of how much you've saved and invested and planned. That's great, but then you go to pull that money out, you're going to have to pay taxes on it then and you're going to hate it. So how do we fix that now without it hurting too much?
 
This is where we come up with the Roth conversion. You can take that 401(k) or that 403(b), roll it over into an IRA, but make sure it goes into a Roth IRA. Now the downside is, yeah, you've got to pay taxes on it now, but this year with a half-year resident or fellow salary and a half-year an attending salary, you're going to make less this year than you'll ever make again in your entire life. So when would be the right time to make that kind of taxable transfer? There's no penalties, no cost, other than just the taxes you're then going to have to pay on your tax returns. But now, that money is in a tax-free investment in a Roth and it will stay that way for the rest of your life – that plus the growth it's going to get. So, I think that's an important one and I would say that's an urgent one because that has to be done before the end of this year.
 
So, that's number one. That's kind of one quick tip that I'd say, hey, if I had a checklist of things to pass to a new attending to say get this done before the end of the year, that's one of those things.
 
Plan For The Unexpected: Disability Insurance [0:07:32]
 
The other thing that I would look at is making sure that your Disability Insurance is up to your new income. That's one of the first checklist items that we do with our attending physicians. As we're going through the financial planning process, we'll typically check in when they get out of residency and into practice, say, let's do an in-practice meeting to talk about your new budget and what needs to be changed on your insurances because they'll have life insurance – maybe they didn't get enough; hopefully, they did – but they might need to get a little bit more. That's a little tougher to do because they're going to have to go through underwriting to get more life insurance. The beauty of it is if you set up your disability insurance like we've taught you, you're going to have a Future Increase Rider already on there so that when you go into practice, that disability insurance policy that you got as a resident allows you to increase your income to keep up with your new attending income – it's probably four or five times what you were making in training – that rider allows you to increase that income, no questions asked, no underwriting which is unlike life insurance, and all you have to do is submit to the insurance company your paystub, your employment contract – anything that's going to verify your income – and boom! Your income is now as covered as it's going to be between that and you're most likely going to have some long-term disability at work as well. You use both, so this is, again, me saying to you take what you get at work, it's free or cheap, it's good, get some additional personal – they work together. One is taxable, one's not. We go into that into our disability episode, so check that out.
 
So, that's number two is make sure you get your disability insurance increase going as soon as you can.
 
Healthy Financial Habits: Budgeting And Managing Surplus [0:09:02]
 
Number three that you want to look at is kind of what I touched on when our clients first go into practice and they're in our financial planning program, we're going to sit down and have a brand new budget conversation. A lot of you that we've talked to before, we've said, hey, let's just take 10 minutes, 15 minutes, and go through your cash flow estimate. We know what's coming in; let's get a quick idea, ballpark, what's going out into about 15 or 20 different categories and I will do that with our attending physicians within a month or two when they go into practice; if not sooner. Maybe the month before so that when they get that first paycheck, they know exactly where that's going. It's like Dave Ramsey says, "where every dollar has a name." I believe that, but what I believe actually works is if you take that and you plan it out and you say, okay, here's what I'm going to be making in a few months on an annual basis; here's what I'm going to be spending every month, I think, and then our tool will give you a surplus number at the bottom. So we'll look at that number that say, okay, income minus expenses gives you a surplus – where does that surplus go? You need to know and you need to plan it and you need to deal with that surplus from day one of each month. So as soon as your paychecks come in or first day of the month – whatever works for you; before you start spending, do something smart with that. If you're going to be making 250,000 when you go into practice and, yeah, maybe you bought a new house and you got some other things that'll up it, you will still have a surplus if you did it right. If you don't have a surplus when you're an attending, you did something wrong. I'm just going to say it – possibly offend somebody – but I mean, really, are there unique situations where something really happened in your family? Okay, possibly. But, for the most part, you should have a surplus and you need to do something with that right away and it needs to be happening automatically.
 
Financial MD's Resident Roadmap: Securing Your Future [0:10:44]
 
Now, that may be step two of our Resident Roadmap – our Physician Roadmap – is the Safety Net. Get it in the safety net. Build your emergency fund. Get your insurances proper – your life and disability and home and auto and health and all those things – get those in the proper alignment. Great. If you've still got surplus left over which you should, step three is Debt. Maybe you have debts you need to pay off. Now, student loans and mortgage – not really a conversation right now, but maybe car loans, maybe credit cards; then you should still have surplus left over when we start to talk about what can we do with if that's truly going to help us grow into our future goals. So that's step three is sit down with your financial planner or with your spouse or both and figure out what you can see that's going to be coming in, where it's going to go, and how to set that up on some sort of automated basis that you know it's just going to happen like clockwork because you don't have time for this. I'm guessing that you're listening to this or watching this because you want to get some sort of tips that will help you accomplish your goals without really having to think about it and learn and research and do all this other kind of stuff. If you're researching now, great. Here's where you take action: Take some of those steps.
 
So those are my first, I would say, three steps. There's more for sure, but if I had to pick three just off the top of my head because I didn't prep for this episode, I just thought I would say, what comes off the cuff for me after doing this for 10 years and saying what would I talk to if I had 10 minutes with a new attending physician, they said, hey, what do I do? I'd say, hey, here's at least three things that I think are going to set you up for success long-term. Are there others? For sure. Is this advice right for everybody? I think it usually is, but as our disclosure says, it may not be.
 
We Want To Hear From You! Share Your Two Cents With Us [0:12:22]
 
So, this is obviously some good rules of thumb – not personal advice – talk to your financial planner or other experts about that. But if you want to know more or if you disagree with me, please comment, leave a review, or just message us here. I mean, we've got… our email is always available. Financialmd.com is where you're going to get a hold of us. My email – jsolitro@financialmd.com; will get it if you send it to info@financialmd.com. But check us out on Instagram and Twitter and Facebook and reach out to us and just say, hey, here's my situation, what do you think, and we love to just help and educate, and all of the time that we put into these things – the podcast, the didactic minute videos – are meant to just give you education.
 
Now, does it make my job easier when a resident or a young physician sits down with me for the first time to help them? Sure. They know all this stuff. They watched our stuff. That's great. That helps me, but most of the people that are watching and listening to this, obviously are not going to work with us, but we believe that this is going to help you make some good, smart financial decisions along the way; puts you in a good financial position and puts you ahead of others who are not listening to or watching this stuff.
 
So, again, comment, questions, anywhere in our stuff. We'll get it. We'd love to interact and chat. Leave us a review please for the podcast. Again, this is how – if you think this is good information, this is how it gets out to other physicians that need to hear this and helps to protect physician wealth to leave a legacy to help their community around them and make a difference in their world. Leave us a rating or review. Share this with somebody today that you feel like needs to hear and say – check this guy out. He's obviously goofy-looking and he says some dumb things but there are some pretty smart things that maybe you can learn from. So, reach out to us. If you are a chief resident and you want to see our lecture programs and we do live virtual lectures, which seems weird but it just means a Zoom lecture live; it's not a prerecording. So, we talk about these topics in a financial education setup where we're going to teach the four different topics that we have on our financial roadmap about budgeting, about protection, about investing, and about debt. So if that's you, you can reach out to us that as well or check out… we've got info at financialmd.com.
 
Again, this is Jon from Financial MD, thanks for joining us today. Next time, we'll probably have Trevor back with us or some other guest and if there's someone in particular you want to hear from or some sort of profession or topic, please let us know. We'll see you next time.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
The 7 Habits of Highly Effective People, Stephen Covey – https://www.franklincovey.com/the-7-habits/
I.N. – What's Important Now? – https://coachwheeler.com/win-whats-important-now/
Roth Conversion: Move Your Money To A Roth Account – https://www.forbes.com/advisor/retirement/roth-conversion/
401(k) and 403(b) Plans: What's the difference? – https://www.investopedia.com/ask/answers/100314/what-difference-between-401k-plan-and-403b-plan.asp
What is a Roth IRA? – https://www.schwab.com/ira/roth-ira
Guide To Disability Insurance For Physicians – https://www.guardianlife.com/disability-insurance/physicians
Dave Ramsey: Give every dollar a name when creating a budget – https://www.joplinglobe.com/news/local_news/dave-ramsey-give-every-dollar-a-name-when-creating-a-budget/article_ff88c00f-1f0f-5641-beb1-81592ab24dbe.html
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
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Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
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Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 027 - From Vision To Reality, Launching A Solo Private Practice

Summary:
Update On Trevor's Newest Business Endeavor [0:00:52]
Embarking On A Journey: A Solo Private Practice [0:04:22]
Protect Your Practice: Invest In Disability Insurance [0:06:26]
Leading With Ownership: More Responsibility, More Satisfaction, More Rewards [0:10:44]
The Trigger: Taking The Leap Into Solo Private Practice [0:13:16]
The Perfect Timing For Your Business: Meeting Organic Needs [0:19:56]
To Own Or Not To Own: The Practice Dilemma [0:24:00]
Private Equity Knocking? Standing Strong In Independence [0:27:13]
Best Of Both Worlds: The W-2/1099 Combo [0:29:39]
The Latest Buzz In The Cryptocurrency Universe [0:35:33]
Don't Let Go Of Your Value; It's Your Voice And Power [0:36:51]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Jon: Well, welcome again to the Financial MD Show. We are so honored to have back in the co-host seat, Dr. Trevor Smith, after some time getting busy doing some things. Trevor had a ton of stuff going on and we continued to try to get some content out, but always left his co-host seat open here. So, Trevor, super glad to have you back and sitting in and chatting and making this – I mean, you're the reason that people listen to the Financial MD Show, so our listenership has been dropping drastically and we're so glad to have you back.
 
Trevor: That's hilarious. Appreciate, appreciate that ego boost.
 
Jon: Yup, yup. So, what's going on man? How you've been? What have you been up to for the last – I don't know – this year? Let's say that.
 
Update On Trevor's Newest Business Endeavor [0:00:52]
 
Trevor: Oh man, yeah. So, I'm sitting here in my office. I'm over in Wyoming, Michigan, just opening up a practice. So that has been the primary busy item of the year. Yeah, I was just looking back on my calendar of when things have happened or like even just like when bills were paid for, you know, different projects I've been working on and I couldn't believe some of the things that felt like last year were like three months ago.
 
Jon: Okay, wow.
 
Trevor: It's one of those where I'm like, wow. I didn't know I was… I knew I was busy, but I didn't know – I was like mentally squeezing so much in. So, yeah, I'm here over Wyoming, Michigan. It's just south of Grand Rapids. It's kind of more like Granville, Wyoming, Byron Center. We're all kind of in the same area, just south of Grand Rapids. So, yeah, I decided to launch my own practice, been looking into that for years – two, three years – and finally decided to pull the trigger. So I was evaluating the practice where I still operate. I still do surgery over in Ionia, Michigan with another practice, and so, I'm still doing that and that's supporting me, starting the practice at the same time, so it's nice. I get to talk about it. I don't have to secretly, you know, be like opening a practice.
 
Jon: That's great.
 
Trevor: Even throughout the whole process, I was really transparent with my boss, Dr. Mike Flohr, a great guy. I've been in the Ophthalmology world practicing. He's a solo guy for like 40 years so he gets it, so that was nice.
 
Jon: Yeah.
 
Trevor: Lots of hurdles of like how do I handle this situation, how do I evaluate this, so that was one of the big ones. I was like, you know. I just… the stress of this, I figured, you know, it' be better to do it without trying to make it a secret at the same time.
 
Jon: Yeah.
 
Trevor: Because people do do that and it's understandable, but I'm outside of the territory and it's been kind of weird like, dare I say, I feel like there's kind of like a God component to things. I don't tend to use that too loosely, but I couldn't have made this scenario. It hasn't been simple, but it's been better than I could have made it. The fact that I get to keep operating while…
 
Jon: Yeah, really, that's probably not that common, right?
 
Trevor: No. So I'm like doing two days a week out there. They kind of needed me less because they wanted to hire in an optometrist so they kind of wanted me to be doing more part-time and I wanted to be doing part-time so it's just like win-win and then the timing worked out incredibly well so it was kind of right when I was wanting to launch, they were wanting me to just focus on surgery, so they could control their overhead costs.
 
Jon: Yeah.
 
Trevor: So it's more of an "eat what I kill" scenario now.
 
Jon: Yeah.
 
Trevor: I've never been in that position before. That's kind of fun which is inherently what I'm doing in my practice here, right?
 
Jon: Yeah, right.
 
Trevor: It's kind of like a little pre- like a little taste of when I have a lot of patient flow here, what I can picture. It's just kind of the motivations, I guess, will be very similar. It's like I got to see patients. I got to do surgery to pay the bills and I have to produce for them for them to pay their bills and to pay me. So, it's cool – that's the major update. What else is new? I think I've learned a lot more about what everything costs in my industry and it's expensive.
 
Jon: Yeah, yeah.
 
Embarking On A Journey: A Solo Private Practice [0:04:22]
 
Trevor: So, I chose to work with a group. It's called Independent Practice Partners and I don't mind giving them a nice shameless plug. They just do ophthalmology currently.
 
Jon: Okay.
 
Trevor: So, it's a group of roughly four or five ophthalmologists that have started their own solo practices years ago like 20… I think 2012 to 2018… somewhere in that range most of them started, and they figured out a system for helping other people start their solo ophthalmology. They're philosophically in favor of more solo doctors being around and I am as well. That's one of my motivations. So, they've done… they've helped open, I think, 17 – no. I think now they're up to – I think I was the 20th or the 21st solo ophthalmologist they've helped start and that experience gave me a lot of confidence to pursue this despite knowing, you know, it's going to take time, it's going to be expensive – all that kind of stuff. Owning my own business was a big – my own practice specifically was a big goal for me – and wanting to do that in a way where I knew I would succeed seemed like a smart move.
 
Jon: Yeah.
 
Trevor: So I went with, yeah, having like kind of some consultants on board, but it meant something that they weren't just like consultants can be kind of a dirty word, you know, in some ways like the people that definitely collect fees and don't always provide value. They definitely collect fees, right?
 
Jon: Yup.
 
Trevor: So, you don't want just an extra expense; you want a lot of value added if you're going to work with somebody, you know. So, that's been nice. They provide a lot of value, a lot of experience, and just peace of mind. That's part of what you pay for, for those things.
 
Jon: Yeah, for sure, like insurance, right? Like it's almost… that startup insurance sort of – not a guarantee – but if I want to up my chances, how do I spend some money to up my chances of success and not making some of those big mistakes, so that's huge.
 
Trevor: Yeah. So I paid off my student loans earlier this year. I think we did a pod after that.
 
Jon: Yeah.
 
Protect Your Practice: Invest In Disability Insurance [0:06:26]
 
Trevor: That was key; I felt like I wanted to just get rid of. I wanted to like lower my risk and my downside however I could. I mean, I'm willing to like go bankrupt and lose everything I have at this point in my life.
 
Jon: Yeah.
 
Trevor: Practice.
 
Jon: There's no better time to start a business then, yeah.
 
Trevor: Right, yeah. Like so you have to think like what scenarios would that be. I mean, one would be like you just pick a terrible location or you can't operate like you have a physical issue. That's where I have disability insurance to cover that side of it, you know.
 
Jon: Yeah.
 
Trevor: If you don't ensure your equipment and some of it breaks, that's another downside.
 
Jon: Yeah.
 
Trevor: And then just not having enough runway; so not being well-funded, not having the finances to get through a six-month period of barely seeing anybody. Cover that by working for the other practice.
 
Jon: Yeah.
 
Trevor: That's an extra – I didn't think I was going to have that, honestly. I thought I was just going to have to move on. So having that gives me like a huge level up in terms of financial safety and then I got a great banking situation. My loan is at a competitive rate. Bank of America has an amazing program for doctors starting up practices.
 
Jon: You know, they do, and there is – I've talked to a guy from Bank of America. One of my clients bought his family practice and used Bank of America and so I got to chat with that guy a little bit and it is, yeah, seems a little bit unique for medical practices.
 
Trevor: It's unique. Yeah, I went to Chase for a head-to-head and I bank with Chase. I actually… I really like Chase and I've got a – there's a local guy here in West Michigan who just does a fantastic job. I just talked to him recently. I was like why do you do such a good job like you literally answer my phone calls whenever I call. You solve my problems even if it's like a credit card. Like he doesn't get anything out of it, right. I was like, and what's your deal, like why do you do such a good job. And he's just like, ah, well, I just like what I do and I want people to have a good experience. I was like, hmm, there's no angle here. He just does a good job. I like this, you know?
 
Jon: Interesting.
 
Trevor: So I wanted to go give Chase, you know, a shot, but they don't have a doctor program like that. I think Bank of America is kind of one of the only ones. You know, commercial loans are at like 8 or 9% right now.
 
Jon: Yeah.
 
Trevor: Bank of America was substantially less to my surprise.
 
Jon: Nice.
 
Trevor: So, you know, there's lots of paperwork. You bought a home within the last year and a half… two years. You bought a property.
 
Jon: Yes.
 
Trevor: Like, I mean, your circumstances were different on that one but, you know, the paperwork involved, it's like – oh, just one more piece of paper. You have to go through that, right, but access to capital lowers the risk a lot so we've got that going too and that was a connection through Independent Practice Partners to know about that program. I don't know if I would have ended up finding it, otherwise. It's amazing what you can potentially have missed. It could have been in a scenario where I'm borrowing at 9% like so easily, you know, like I checked with some credit unions. You're like, those are usually the best rates. They want local business. Everybody I talked to said go with credit union local – Lake Michigan Credit Union – whatever.
 
Jon: Sure.
 
Trevor: That's a popular one.
 
Jon: Yeah.
 
Trevor: I heard that from multiple people that was like the best advice and you start to think – okay, I heard it from multiple people, they're doctors, that's how they finance their thing – and that would have been, you know, for the amount of money I'm borrowing over time, it would have been, you know – I don't know – $80,000 difference.
 
Jon: Sure.
 
Trevor: Maybe, probably more. So, it's kind of kind of mind-blowing.
 
Jon: Yeah.
 
Trevor: I don't know. Those are my thoughts. Those are like the risk things I've been thinking about. Just controlling those because, otherwise, you don't do stuff out of fear, right, and you have to jump in a little bit. You don't know, there's a million things, you know, a little problem here and there that pops up along the way. You have to know that you're willing to deal with that kind of stuff to start your own business, but it's usually bigger things that keep people from… and I really do think more doctors should be solo.
 
Jon: Yeah.
 
Leading With Ownership: More Responsibility, More Satisfaction, More Rewards [0:10:44]
 
Trevor: I think it's one of the reasons we're in kind of the lack of medical leadership position we're in right now.
 
Jon: Okay.
 
Trevor: It's because of the clock in/clock out doctor mentality we have, instead of ownership of the patient's experience.
 
Jon: Yeah.
 
Trevor: Not just from a customer standpoint but actually like the quality of care starts to get dictated by non-physicians.
 
Jon: Yeah, that's a great point and it can force the physicians to feel like, I'm just here to do a job, right, yeah.
 
Trevor: And if they don't feel valued like if they don't feel valued because they're equivalent to everybody else in the company and it's not like they need to…they're not better… we're definitely not better.
 
Jon: Yeah.
 
Trevor: But there's an authority there. There's like a leadership component because of the knowledge that you have. Like you're the one who when you run like a risk scenario in a hospital setting like why did this person get, you know, like a UTI, you know, and they keep track of these numbers.
 
Jon: Yup.
 
Trevor: The buck stops with the doctor, right, who gets sued like it's the doctor most situations. In the operating room, you can even have, you know, an anesthesiologist or a CRNA, but really, it really comes down to you as the surgeon even if you're not running the anesthesia.
 
Jon: Yeah, sure.
 
Trevor: Yeah, anyways, if a doctor can kind of know the reasons they're not taking on the responsibility, they can cross off those fear factors that keep people from moving into their owning their own practice and I think if you're willing to shoulder more responsibility you end up with more – what's the right word – you end up with a lot more just job satisfaction.
 
Jon: Yeah. Like you said, ownership.
 
Trevor: Yeah.
 
Jon: Value, yeah. That makes total sense. I can see your point of wanting to see more doctors in solo practice and having that actual fiscal ownership and physical ownership affects ownership and everything else the work you do and that's great. What was it that you feel like made you finally pull the trigger? Because, yeah, we've talked about this for years off and on, just depending what else was going on and… but I know it's kind of always been there, so now you're doing it. What was that tipping point for you do you feel like?
 
The Trigger: Taking The Leap Into Solo Private Practice [0:13:16]
 
Trevor: Yeah. My story was sort of like weirdly back and forth so I thought I was going to maybe buy this other practice I'm still working for doing surgery and I'm not like spilling the tea or sharing any secret. These are like things that like Dr. Flohr and his family like they are super open people as well so it's been like a really nice combination of personalities in a lot of ways actually. So I thought I was going to buy the practice. We couldn't match up on price like just making a deal happen and so then it was like, well, I want to own a practice and I can't own your practice and I can't compete with you because I signed a non-compete which is totally reasonable. I wouldn't want to, you know, go into someone's backyard after they hired me anyways. I just don't… wouldn't feel good about that.
 
Jon: Yeah.
 
Trevor: So they were kind of just like, well, you're going to start your own practice, right, and I'm like, yeah. So I started doing that, thinking, you know, if I don't buy their practice, I got to kind of have some things going because it takes so long to get started just to open your doors.
 
Jon: Right.
 
Trevor: Three months would be incredibly fast. Realistically, you're looking at five to six right where I'm at. I'm at about five from when I got the ball rolling.
 
Jon: Okay.
 
Trevor: So I started doing that and then once I realized I wasn't going to buy their practice for sure, I was like I got to go full steam ahead. I've just been doing that since May basically.
 
Jon: Yeah.
 
Trevor: And it just kind of takes that period of time and then during that period of time, they were kind of like, well, you can stay; be kind of like flip-flop back and forth, and there is just some positive changes on some areas in the clinic that I was asking for that I didn't think would change and then they did. So, there was a moment where I was like, hmm, maybe I should just stay, but I really, really wanted to own my own practice, and Dr. Flohr is great. He could just tell and he was just like you're not going to regret this, you know. So he was encouraging me to do that, too.
 
Jon: Yeah.
 
Trevor: And then he ended up medically retiring from the surgery component just like in the last few weeks and so I'm kind of like meeting a need for the practice there and so, this kind of like happened very organically.
 
Jon: Yeah.
 
Trevor: And just kind of staying open to like I really appreciate my relationship with Dr. Flohr and that practice, so I've wanted to like keep going there and I love working with the staff and I think it's like really good for me to work with staff and just keep practicing like how to manage. Right now, I can practice managing there before I have my own staff here. I can keep my surgical skills up so. It's been like this really… I think that's probably true for everybody like from the outside, it's going to look like – oh, I decided to open a practice – and then boom, like I opened a practice, you know?
 
Jon: Yup.
 
Trevor: And then probably in two years, they'll be like – oh, you got busy so fast; it must have been so easy – and even I'll probably think it was easy, you know. A couple years from now, I'll probably be like – oh, you should open a practice, it's no big deal; if I can do it, you can do it. Like, remind me not to say that later because it's actually extremely hard and tiring and stressful, but it's good like it's definitely worth it. Putting a good team together is the key and, fortunately, for ophthalmologists, I would say, go with IPP. I mean, they're a great group. There's got be other equivalents for other fields.
 
Jon: I'm sure, yeah.
 
Trevor: Like I didn't have to put a team together like I hired this team that already existed and so like join the team but I still own my own practice and they're teaching me how to build my own team.
 
Jon: Yeah, fantastic.
 
Trevor: So, it's very much like I'm not trying to do it all on my own. I could not do this all on my own, for sure. They answer questions for me constantly. Every little – there's just so many details, right?
 
Jon: It's great. Yeah, that's huge. I bet there's more in the Family Practice, Primary Care, Pediatrics, like those kind of ones that you see quite often. The ophthalmology is there for sure as far as one that's commonly independent practice but, yeah, I'm sure the other specialties have those as well. How'd you hear about them?
 
Trevor: That was like 2020 right after COVID, I was looking for a new job, I was between jobs, and I was like, okay, I have not a lot of experience. I probably don't want to be starting a practice in the middle of like COVID just kicking off, but I was trying to think what that would look like and reading books about it and I had like all my student loans still so I was just like I don't… I definitely can't do this right now. So I kind of scrambled into another position. But while I was looking, there's this website – I think one of my friends told me about it; one of my friends from residency called the Solo Building Blog. A couple of guys worked on it, but I think it was mostly the brainchild of Ho Sun Choi who started up Independent Practice Partners. So, he graduated residency and he even, as far as I understand it – and a lot of this is from his blog rather than just talking to him directly – but he couldn't find a job he really liked that he found that was favorable where like his skills and thoughts and drive was going to be rewarded.
 
Jon: Okay.
 
Trevor: And he couldn't find a spot where he was going to work for somebody that would reasonably let him buy in or buy them out. So, he ran all the numbers and he was like it's worth it for me to start my own practice. So straight out of residency, he just kind of bootstrapped his way into starting his own practice like without a lot of… what sounds like without a lot of help other than – not like he didn't have help. Like I know his family was part of it. There's a number of components, but like he didn't have a service like what he built.
 
Jon: Right.
 
Trevor: And from that, he blogged about it a lot and then people – other solo doctors – they kind of formed like this little club of like solo doctors and you could pay a one-time fee and then you'd be in this big email group and people talk about what do you buy and where do you get.
 
Jon: Almost like a Mastermind group sort of thing or something.
 
Trevor: Yeah, yeah, yeah, exactly like that.
 
Jon: Okay.
 
The Perfect Timing For Your Business: Meeting Organic Needs [0:19:56]
 
Trevor: So that organically grew and then I think there was probably some organic demand for – hey, I want to do… I want to do a solo practice like you, can you help me do that – and then time they made it more official.
 
Jon: That's great.
 
Trevor: It's very cool. I mean, that's the advantage of if you're just savvy enough to like form a community online and you're meeting an organic need. People are pounding on your door, asking for you to provide a service. That's like the perfect time to start a business, you know.
 
Jon: Yeah, right, exactly.
 
Trevor: Don't worry about creating customers. The customers are asking you to create the service so.
 
Jon: Yeah.
 
Trevor: I'm sure I'm glad he did it because I don't know… I think I would have gotten here eventually, but it could have been – I don't know – two years, four years, 10 years, maybe another practice where I couldn't really have a voice on how things were done. That's really hard to find, you know, like I was looking at one practice where I respected all the ophthalmologists there but I thought, you know, one guy said, I might slow down in five years which is code for I might slow down in 10 to 15 years.
 
Jon: Right, but probably won't, yeah.
 
Trevor: Yeah.
 
Jon: Similar thing in our business. We've got… I got into this business with the – I was kind of sold on the idea – hey, the average advisor is 57, there's going to be a ton retiring, there's going to be all sorts of opportunity to buy, you know, firms and buy books of business and stuff – and it just wasn't the case because when I started, I found out like, you know, you can do this into your 70s if you wanted to and you're healthy and they did.
 
Trevor: Why wouldn't you?
 
Jon: It's not a super intense business, you know. Once you get this kind of select group of clients, you find that these old advisers just kind of, yeah, work two or three days a week, make decent money, and it's like, why would they retire. I get it – they've got the schedule they want, the lifestyle they want, money's good. So I was just like, man, I can't be waiting around anymore for somebody to kick it. I got to start on my own but, yeah, so totally.
 
Trevor: Yeah. So, that was a big motivator for me. It was like wanting to have an influence on how things are done even just like how money is spent and what equipment is purchased and all that kind of stuff and it's funny because like you start to do it yourself and everybody who's been in business for like, you know, 20 years-plus like one generation of time like well totally gets this, but like as soon as I started buying stuff, I was like, oh, now, I kind of get it, you know. Like now, now I understand why they said that. Like before I was like… that doesn't make sense to me. I think we should do it this way. You like start to do it and you're like, oh, I get it, you know.
 
Jon: Yeah.
 
Trevor: It's nice. It's humbling.
 
Jon: Yeah, well, it kind of like my daughter, you know, graduating from high school and getting out into the real world now and she's working a couple of jobs and going to community college and I feel like her and my relationship has gotten better like she seems to be taking my advice sometimes and she's just a little more got some common sense on life. It's pretty great.
 
Trevor: Yeah, there's just nothing like experience.
 
Jon: Yeah, totally. Way to fast track it, man. That's super exciting. I've been excited to watch you and super proud of taking that leap and glad we're able to catch you kind of at the beginning phases of this but, obviously, there's been already some work and planning that's gone into it. I talked to residents from time to time who are like, I'm going to get out of residency and start my own practice and stuff. It's like, I still have yet to see somebody do it, so that's cool you're saying about Dr. Choi and seeing somebody do that and help others.
 
Trevor: Yup.
 
Jon: So, do you feel like there's a certain type of people that should own their own practice and some that shouldn't? Like what do you feel like is that differentiator?
 
To Own Or Not To Own: The Practice Dilemma [0:24:00]
 
Trevor: That's a good question. I think I'm pretty practical about it, I'd say, like if you don't have a lot of equipment, you'd have to buy. I was just... I saw my Internal Medicine doctor today and, man, I wish I was an internal med doctor because like the startup cost would be so much lower like I have friends that are like… I have a friend who's a rheumatologist and another guy who's like a Sleep Medicine doctor. I'm like, man, sleep medicine, you could just make so much money doing a sleep because those book out pretty far. There's only so many in town like you could be one of the Big Sleep Centers without a ton of effort just because of demand and he's like, yeah, there's, you know. It's a big thing like, yeah, right, you don't know you don't know. It'd be a lot of work. It would be… it took me, you know, a year, two, three years and getting a different financial position to pull the trigger but it would be successful, for sure, right, so like should he do it? Like, well, he would have to want to and then it's risk, right. I mean, I think that's what people are always deciding is like, oh, that sounds scary or just the perceived… the effort or the time, but you've got… On the one hand, I've got a friend, rheumatologist; the other one's like a sleep doctor. Like the sleep medicine one, if you did the clinic and everything, that's a lot of capital outlay, right.
 
Jon: Yeah.
 
Trevor: But if you're rheumatologist or internal medicine like you could start up a clinic like just so easily without a lot of money.
 
Jon: Yeah.
 
Trevor: You could read like a couple books on business startup. There's The Medical Entrepreneur is like a pretty easy one. You could start a practice without… I mean, for like under a hundred grand.
 
Jon: Yeah, sure.
 
Trevor: And immediately have all the freedom to be on vacation as much as you want to. It's more responsibility, but it's still… like freedom and responsibility go together. I feel like those can be considered like opposite ends of a spectrum, but they're like, they go together like by taking on responsibility, you get the privilege of more freedom. But, yeah, I don't know. It's hard to say. I think you just have to really want to do it.
 
Jon: Yeah, oh, for sure.
 
Trevor: Or you have to really not want to do the way things are done.
 
Jon: Got you.
 
Trevor: And I feel like the people who start practices now because it's – I don't know why – but perceived to be very difficult to be successful. I don't think that's true. I think it just takes time. I think it just patience. I think if you start your own practice, you like it's almost an inevitability that you'll do well if you're a good doctor.
 
Jon: Yeah.
 
Trevor: Because there's so much demand.
 
Jon: Yeah.
 
Trevor: I was motivated by both like I didn't like the way…
 
Jon: Yeah, it's a good point.
 
Trevor: Like the private equity world is going with ophthalmology and I like the idea of having my own thing.
 
Jon: Now, are you – you talk about private equity. You know, we see that all the time. Private equity is buying up practices. How do you avoid that, you know? If everybody or a lot of other practices are going that way, there must be a reason… there must be something to it, but you don't like that, you know, philosophically like what, when you think down the road, that's obviously going to be a temptation at some point, right?
 
Private Equity Knocking? Standing Strong In Independence [0:27:13]
 
Trevor: I don't think so. I have thought about that like if somebody came in and wanted to write me a check or whatever, what would it have to be and I was like, I just don't think I would want to do it.
 
Jon: Yeah.
 
Trevor: Not like there's no amount of money, but there's no realistic amount of money like.
 
Jon: Right.
 
Trevor: Everything comes at a cost, right. No one's going to give you something for nothing, so there's always a trade-off. It's going to be you're committing to something. Do you want to be an employee or not? I mean, it's like the real question.
 
Jon: Well, yeah.
 
Trevor: I don't mind being an employee but there's just so many better things about not being an employee and owning your own business like you being the one who owns the business gives you all these like tax privileges. Just that alone is why would you give that up?
 
Jon: Yeah.
 
Trevor: Yeah, I don't think I would. That's part of the reason these guys don't want to sell their practices. I mean, it's just you really do kind of have to get a decent chunk of change to want to give up all those benefits.
 
Jon: Right.
 
Trevor: So unless you want to be retired like why would you sell for less than a lot? You wouldn't. So it's not like I don't understand. It's just for me who's someone who's willing to open their own practice and take the time and some losses upfront like my apples to apples of buying the practice versus starting my own. A lot of other people's apple to apples is taking a salary somewhere else or buying this practice – buying themselves a job.
 
Jon: Okay.
 
Trevor: Like why would I buy myself a job when I can borrow myself into owning a company?
 
Jon: Yeah, totally.
 
Trevor: Right? So, it makes a lot more sense where I'm at and with what I know and understand about taxes and business. The numbers are like it's not even close. It's like you want to own your own thing. You want to be able to depreciate. You want to be able to pay yourself in a couple of different ways maybe with an S Corp. People argue about whether that's worth doing or not, but that's just a tiny piece of the pie like you are treated better, you know, owning your own company by the IRS.
 
Best Of Both Worlds: The W-2/1099 Combo [0:29:39]
 
Jon: Yeah, I've had… I actually had a couple of times now where I've had one of our physicians come to me in a meeting and say, hey, I've got this job and they're offering me either W-2 or 1099, which one should I go with. I was like, no, gosh, 100%, you know.
 
Trevor: Yeah.
 
Jon: It's even close, that's… and that's worked out well because, you know, I've talked about this couple before where they worked it out just right. They're both anesthesiologists. One of them was W-2; the other one, I said, let's take the 1099, and basically, if we do this right, we can live off his salary and bank hers pre-tax, you know. So we set up the solo 401(k) and we set up the cash balance plan and the, you know, all that stuff, defined benefit plan, like it was…yeah. I've never had a client put away that much for retirement pre-tax on an annual like over a period of a few years.
 
Trevor: Yeah.
 
Jon: Because of that, now granted they're very disciplined and smart – not all my clients are that way – but it was a good opportunity – what's that?
 
Trevor: That's an amazing combo. I feel like the best thing you can do is like I'm going to have 1099/business ownership. If I could combo up with somebody like a nice like state government employee…
 
Jon: Right.
 
Trevor: Because, you know, like the Michigan State benefits are like insane, right, the state employees like their health insurance is like insane, like the coverage levels are just nuts.
 
Jon: Yup.
 
Trevor: Yeah, like it's nice if you can get the best of both worlds on that.
 
Jon: Like a teacher or something, yeah.
 
Trevor: Right, exactly, yeah. There's a ton of perks that's kind of underrated. Teachers are underpaid, obviously, but their benefits are like…
 
Jon: I've seen… yeah, my wife used to work for the school districts doing health insurance and she was like, I mean, it is the top tier like I've never seen any better benefits.
 
Trevor: They don't pay anything.
 
Jon: No. Like you want a massage every week, go for it. It's covered.
 
Trevor: Right.
 
Jon: Yeah. So, again, they're worth it. We obviously don't pay them enough. Glad they have benefits. But, lesson is marry a teacher.
 
Trevor: That's right.
 
Jon: Especially if you're an independent contractor… and then like this couple, too, you know, because they were able to, you know, meanwhile, the husband's maxing out his 401(k) at work, you know. So it's like all that stuff combined so, yeah, that totally makes sense there. In fact, we had when I was in Grand Rapid this week for our Financial Advisers Association, we have a lobbyist come in every year and just kind of tell us, hey, what's going on. He hears what's up, you know, at the capital and different things that they're talking about and bills that are coming up and one of them like some other states have talked about, I think some have passed, started with Uber and Lyft trying to get these independent contractors, gig workers, to go W-2 because I think we had this giant chunk of the population that thought, oh, they are making so much money, these companies, they should be paying my employment taxes and giving me benefits and all that kind of stuff and it's like, no, what you have as independent contractors, the ability to not work for anybody to both Uber and Lyft like, you know. And then, you basically get to write off so much, you know, just all that kind of thing that they're probably not totally thinking through. But now, one of the laws in Michigan that they're talking about – I don't know how far it's gone – but, you know, trying to do away with the independent contractor concept for many industries and I just don't get it. Unless we're talking strictly a play of getting more revenue into the state, I get that, but other than that, it's like, man, who would be on board for that?
 
Trevor: Yeah, that's a tough… It sounds good to say like people should get more benefits but, unfortunately…
 
Jon: Well, sure, yeah.
 
Trevor: The question is what's better for the individual, for the worker, is not typically what's asked. It's sort of like what sounds good, and it's sounds good to say like let's get these people benefits, that benefits the politicians, so that I think that's where that comes from because if you… as we're just saying, if you run the numbers, they're better off just managing their own finances, but that can be complicated and not everybody wants to do that. Probably, the majority don't want to have to think about how their money is spent. They just want to have access to healthcare and a car and food and shelter and some fun money and they don't want to run their own budget, so that's a flowing concept - the "we'll take care of you" concept of the government.
 
Jon: Yeah, exactly.
 
Trevor: Yeah, which works really great until the government doesn't take care of you anymore.
 
Jon: Absolutely. Yeah, that's another conversation for another episode.
 
Trevor: Yeah.
 
Jon: We'll talk about that. We should go into some political science examples.
 
Trevor: Right, yeah, some economics. Yeah, that's sound good.
 
Jon: Yeah, bring out some Milton Friedman.
 
Trevor: Yeah, some Rothbard. We can get into some Austrian economics, also known as real economics, if you will, for another time.
 
Jon: So, good. So, life is good. You're on track. You're moving along.
 
Trevor: It's good.
 
Jon: Anything else? Any new and exciting? What's happening in the cryptocurrency world? Any commentaries for us?
 
The Latest Buzz In The Cryptocurrency Universe [0:35:33]
 
Trevor: Thankfully nothing. No commentary necessary. Everything is quiet and less people are being scammed which is great.
 
Jon: Yeah.
 
Trevor: So I'll just continue to say Bitcoin is great. It's a real commodity. It's still regulated by the CFTC. There might be a spot ETF approved maybe someday in the next few months or in the next couple of years or nobody really knows and people like to speculate on that, but Bitcoin is a real asset. You can actually store yourself and everything else in that space is pretty, pretty centralized, and it's manipulatable. I mean, what's the point? U.S. dollar is already manipulated and we use that. I feel like that's enough currencies for me that I use that are manipulated. I don't need to do any others.
 
Jon: Yeah, well said.
 
Trevor: Just that one's fine and I'm grateful we have access to U.S. dollar, I know. I'm very grateful for it. So, Bitcoin is better technology, that's all.
 
Jon: Yeah, good.
 
Trevor: There you go… that's the shortest I've ever been on the topic.
 
Jon: It is really, I know. Wow, geez, now I don't… got all this time to kill now.
 
Don't Let Go Of Your Value; It's Your Voice And Power [0:36:51]
 
Trevor: I have one other thought on the practice thing. Because this was a major motivator and it should be the motivator, this is the reason I want a lot of my friends to open their own medical practices, solo or otherwise, because we are the thing, not just doctors and nurse practitioners, I'm not being exclusionary or elitist, all of the providers, anybody who can bill, create value, right, we're the ones who actually like make the service happen. We're the ones that will bill the insurance company or the individual even take them out of it. Like I do an eye surgery. I provided that for the patient, you know. If we were in Mexico, they pay me cash maybe as in the privatized scenario.
 
Jon: Yup.
 
Trevor: It's a transaction, right, and when you work for somebody else you do not get to retain that value so you are giving that value away, and then when you give away your own value, you also give away your voice, so that's like… that's why I was kind of just lightly saying before why I think we should have more doctors being independent is we can't really… we can't really say from a strong standpoint, we can't argue well and with authority if we don't control our own value. So it's totally worth it. I will actually make more money doing it this way. It's more risk, but I can control my overhead like the actual gross revenue, the amount of money that I create as an individual business, as a physician. That money, you know, that pool of money, I can decide how much do I want to spend and how do I want to use it and how many employees do I want to have.
 
Jon: Yup.
 
Trevor: We get like extracted from that if you're employed at a hospital or in other scenarios and I think when you get separated from your own value, you also get separated from your money like people take it and I don't think… I don't think that's right. I don't think that's right in any business scenario. If you're the one creating the value – if you're a manufacturer – you don't want to charge if it cost you $5 to make something and then you're going to sell it to somebody else for 10 and they're going to resell it on Amazon for 100, it's like selling it on Amazon for 100 yourself, you know.
 
Jon: Right, totally.
 
Trevor: I just… I just don't like that. So, that has appealed to me to the degree that I decided to spend a lot of my time and energy on opening my own practice. That was one of the primary drivers.
 
Jon: Sure.
 
Trevor: It just feels like the right thing to do with the gift and knowledge that I've been given and I so want other people to do the same thing. For their own benefit, they can keep all the extra money. They can give it away. They can make a difference in the world like I just think if you're creating value, you should go the extra 5 to 10 percent especially if you can do it all upfront like I am. That extra time, this one or two years, do it all upfront and I will take home a lot more value that I can use to change the world in whatever way I think is best and I want other people to be able to do that. I want to empower other people to do that just like Independent Practice Partners has for me. So, that's… I didn't mention that component, but that's a big motivator so I want to sneak that out.
 
Jon: Yeah, no, that makes total sense and I think that's a good wrap up and to kind of add just a final piece of why that can make sense for a lot of people and some of the just the good like you said. Money, sure, but so many other ancillary factors that come out of that that make it worth considering.
 
Trevor: Exactly.
 
Jon: I'm obviously a big proponent of that as well. This is, you know, you and I are in a similar position of kind of owning our stuff and what we do and having the control over it and it's hard work and there's some risks and decisions to be made and cost to be had, but I don't regret it at all.
 
Trevor: It's worth it… it's worth it.
 
Jon: Yup.
 
Trevor: More gratifying when you take on more responsibility.
 
Jon: And that's… and I don't know if everybody's wired that way, but I think you and I certainly are.
 
Trevor: You're right, you're right.
 
Jon: It seems like a no-brainer, but… well, cool. Well, I think that's all the time we have for today which is great. I love it when you and I start a conversation. We managed to fill enough of an episode to make it worthwhile to publish. So, yeah, well, guys, be sure... we'll be back one way or another in a couple of weeks as we get the next episode and continue rolling on our next topic. We're getting to the end of the year so we're going to have some topics coming out that are timely that you want to make sure you catch. So make sure you're following or subscribing here. Please, I know every podcast I asked this, but certainly leave a review so that, number one, that this show comes up when people search for this because if you feel like this information is valuable, other physicians need to hear this, then your rating and review are going to help spread that word. So, do a good thing for your fellow physician. Share this, leave a rating and a review, and then hop on over to our other social media places and post and share there. We've got our TikToks that are cranking out. We try to just get some out on a regular basis whether it's clips of this or other stuff that I throw up on the camera; Instagram, our Twitter, and Facebook are going on. So, please get there, help spread the word if you like it. If you don't like it, tell us. Somehow, we love to hear what's going on and until next time. Dr. Smith, good to see you, buddy.
 
Trevor: You, too. Thanks, Jon.
 
Jon: Yup. This is Jon Solitro with the Financial MD Show, we will see you next time.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
Independent Practice Partners: Business & Management – https://ipracticepartners.com/
Resource Guide: Insurance for Startups – https://massfoundersnetwork.org/resource-guide-insurance-for-startup/
Disability Insurance for Business Owners – https://www.investopedia.com/articles/personal-finance/061214/disability-insurance-business-owners.asp
Doctor Loans for Licensed and Practicing Medical Professionals – https://www.bankofamerica.com/mortgage/doctor-loan/
Solo Building Blogs – Helping solo practice physicians succeed – https://solobuildingblogs.com/
Private Equity Funds – https://www.investor.gov/introduction-investing/investing-basics/investment-products/private-investment-funds/private-equity
S Corporations – https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
What is a W-2 Form? – https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-a-w-2-form/L6VJbqWl5
1099 Form: Definition – https://www.nerdwallet.com/article/taxes/what-is-1099-tax-form
What is a 401(k) and how does it work? – https://www.investopedia.com/terms/1/401kplan.asp
Cash Balance Plans – https://warrenaverett.com/insights/benefit-plans-101-an-intro-to-cash-balance-plans/
What is a defined benefit plan? – https://www.principal.com/individuals/build-your-knowledge/what-defined-benefit-plan
Commodity Futures Trading Commission (CFTC) – https://www.investor.gov/introduction-investing/investing-basics/glossary/commodity-futures-trading-commission-cftc
What is a spot Bitcoin ETF? – https://bitcoinmagazine.com/guides/spot-bitcoin-etf
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 026 - Tax Tips for Young Docs From A CPA

Summary:
What Does Cory Do? [0:02:08]
The Moment Cory Decided To Become An Accountant [0:04:04]
Critical Key Components: Psychology of Money and Behavioral Finance [0:06:13]
Tip: Take Advantage Of That Lower Interest Rate – Invest! [0:10:59]
All The Things You Need To Know About Being A CPA [0:11:42]
The Start Of The Financial MD "Dinners" [0:14:52]
Most Often Asked Question: What Is The Best Tax Deduction? [0:19:04]
You Can Do A 401(k) And An IRA At The Same Time [0:24:36]
Find Yourself The Right Financial Advisor [0:32:54]
Cory’s Piece Of Advice To Residents [0:35:50]
Do What You Do Best And Delegate The Rest [0:37:56]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Jon: Welcome everybody to today's episode of the Financial MD Show. We're so excited to be back. Dr. Trevor Smith is off, starting his own practice, and I'm sure he'll jump back on and fill us in there. But, today, we've got a special guest/co-host. My good buddy, Cory Lee, a well-established CPA tax expert in the area, is joining us today and I'm super excited. We've got a long history going back that I'm sure we'll dig into a little bit and do some nostalgia recall but, Cory, it's so good to have you today.
 
Cory: Yeah, I'm happy to be here. Thanks for having me.
 
Jon: Yeah, so, guys, I'll tell you a little bit about Cory from my perspective. I think Cory, you and I, were introduced by – I can't believe I'm remembering this now – I bet it was 2015 or 16 and I think – I remember who it is, for confidentiality's sake, but it was an ER physician and his wife. He was just getting out of residency, pretty sure, and Cory was a friendly guy that was really great at helping this couple and we met through just in the financial planning world. At least, at Financial MD, we try to get to know our clients' other professionals and establish a good working relationship to try to coordinate the whole comprehensive picture. And so, along that way, I met Cory and I was just two or three years in the profession and learning a lot and Cory and I have done a ton of stuff together in the last six, seven years. Cory has been probably the CPA to whom I've sent the majority of my clients by far, and even before then, Cory was working a lot with physicians and probably now a little bit more – thanks to us – over the last six, seven years. But, as you guys know, there's a unique financial situation that young physicians are in and residents and those just starting out and attending that you want to work with somebody that you know and you like and you trust and they know your situation. So that's where Cory comes in here and we'll talk about some of the things we've done together and what Cory's been up to. But, yeah, Cory, tell us about where you came from and what brought you to what you're doing today.
 
What Does Cory Do? [0:02:08]
 
Cory: It's like you said, I work a lot with physicians; probably, 70 percent of my businesses is with physicians. I do a lot of tax planning, tax consulting; you know, set up practice-type help; exit strategy planning type of help. I also do business valuation; you know, people who are looking to merge for sell or buy a practice – I help with that. I've just really been CPA for, you know, about 25 years now and just have really enjoyed just helping people out. And to touch on your point, I think we have a good collaboration because we have similar philosophies in that we want to do…we want to help the client…and sometimes that's referring them to other professionals, you know. You have to know your limitations. You have to know what you can do and where you need to be able to refer to somebody else who can help that person out as well.
 
Jon: Yeah, absolutely. Okay, cool. So, Cory, where did you grow up and go to school and how did you learn how to do what you're doing today?
 
Cory: So, the short answer is I grew up all over the place. My dad worked as a computer programmer so we moved around a lot as a kid but I ended up, you know, functionally growing up in Troy, Michigan. I went to high school there. I went to college at Michigan State, you know; got my Bachelor's in Accounting there, and then went to Walsh; got a Master's in Finance and MBA there, and just started working in the Metro Detroit area. I've been working here as a CPA ever since.
 
Jon: And an MBA…okay.
 
Cory: Yeah.
 
Jon: See, I didn't know that. It's good. I'm learning stuff about you, too.
 
Cory: I've got the MBA and the Masters in Finance just to diversify the accounting background just to help people out.
 
Jon: So two Masters.
 
Cory: Two Masters.
 
Jon: Brilliant.
 
Cory: And then I've got my CPA as well as my CVA just to make sure that I could help business owners, you know, make decisions and just got to be a resource for the clients that I was working with.
 
Jon: So CVA is certified valuation…?
 
Cory: Analyst…right.
 
Jon: Analyst…okay, interesting. Very good. So, at what point does someone like you know they want to be an accountant?
 
The Moment Cory Decided To Become An Accountant [0:04:04]
 
Cory: You know, it was high school; in freshman year high school, they did a career counseling, you know, the personality profile testing like career choice kind of testing and the two top ones for me were mortician or accountant.
 
Jon: Excellent!
 
Cory: Those were like the two top career choices, and I’m like, oh no, not too fond of dead people, so I'll try this accounting thing. And there was an Intro to Accounting class that I took sophomore year; got 104 percent the first semester; 106 percent this semester; got every question – every test – right, plus all the extra credit that, you know, anytime the teacher asked me a question in class, I knew the answer. It was just…it was just something that I knew. It's something that clicked. I could read it. I could read it once and just know it, you know. So I took more accounting classes sophomore, or you know, junior and senior year and said, hey, I really like this; let's…you know. Michigan State had a really good accounting school so I went there and did really well there so I just got into public accounting and haven't looked back.
 
Jon: Yeah.
 
Cory: I just really enjoyed it, you know. It's just one of those things where, you know, when you struggle with science and you struggle with all these different topics and something just clicks and you'd be really good at it, you stick to it.
 
Jon: Yeah.
 
Cory: Yeah.
 
Jon: That's beautiful. So few people are like that where it's like, huh, I like it; I'm really good at it; this makes sense.
 
Cory: Yeah, I just kind of found what I was good at early on and just have stuck with it and just still enjoy it and, you know what? I get to work with numbers which I prefer – you know, numbers over words – and I get to help people, so those are two things that I really enjoy doing.
 
Jon: Yeah, very cool, and I think the unique thing that I'll brag about you a little bit on is that you are not the typical accountant in the sense of you have people skills and you know how to talk well and…
 
Cory: Those have taken some development…yeah. I've definitely done some Toastmasters. I've done some other things to bring myself out of my shell.
 
Jon: Okay, nice.
 
Cory: I'm an introvert by nature, of course; you know, to being typical of accounting. You know, there's an accounting stereotype for a reason, but I try and break that mold. I definitely tried and be out of my shell and, you know, talk to people. Because, you know, if you have the information but you're not sharing it, what good is the information?
 
Critical Key Components: Psychology of Money and Behavioral Finance [0:06:13]
 
Jon: Yeah, totally, and that's…yeah, if you have the information, right, but it's not getting to people or you can't communicate it well or whatever the case might be, that's so critical. I mean in our field, when I took the CFP a year and a half ago, they had just started introducing the topic of psychology of money and behavioral finance and all that stuff but that's such a critical key component especially because so many good financial planners are good at numbers and data and planning and figuring out but just not that great at the people side of things.
 
Cory: You have to know the psychology of people to understand what they like, what they don't like, what their risk tolerance is. I mean, there's a lot of different factors to kind of take into consideration.
 
Jon: Yeah, and what they're saying…I've got a client that is an older client. We've been working for many, many years and she's very frustrated because she didn't get the kind of growth this year that she wanted to in her accounts. And I said, well, because we had you fairly conservative. Last year, you were really upset because you had lost so much in these stock investments that you had, so we switched everything to a little more conservative while still, you know, getting some growth. She had 12 percent in the last nine months, she got, but she wasn't happy because the S&P had done whatever. I was like, well, I didn't think you wanted to be in all stocks pretty sure based on our conversations. Well, I don't think that's what we said we wanted what…you know. And so it just became this whole like -- here's what I've been doing this a long time. I understand - you may not have directly said it - here's what I thought was the best portfolio based on how you felt when the account dropped, so my first thought is we can't let your account go down this much again, you know. So those are the kind of things where it comes into play of like, okay, maybe she couldn't even articulate what she wanted, or now looking back, she feels anyway. That's a whole…
 
Cory: And it's also goes to some people don't know what they want until they realize they didn't get it and then they complain about it, right. So you can't always get what you want if you can't express what you need or what you're looking for.
 
Jon: Yes. And that was what she brought to me was, well, my friends all said they got this much this year.
 
Cory: Oh my God.
 
Jon: Their accounts grew this much, and I said, you know, I don't know what to say to that.
 
Cory: I have that same problem. Every year, I get people who say, oh, my friend got a refund; why do I owe? Well, it's a different situation.
 
Jon: Oh my gosh, yeah. And that's where I definitely make that a priority just unconsciously because of my background. I've got bachelors in Psychology and I've got a master's in Counseling and I really try to push. You know, I've talked to MSU and their program about making sure they've got a good emphasis on behavioral coaching and finance and just, yeah, financial coaching, because that's a lot of it as well. I've used so much of my counseling training in financial planning just unconsciously and, you know, marriage counseling. As couples come in, money is one of the most contentious things to talk about…one of the most emotionally-driven things.
 
Cory: Absolutely.
 
Jon: And you and I both see that in our conversations.
 
Cory: Yeah…very much so.
 
Jon: So getting a client to success is more than just getting in the information.
 
Cory: Absolutely.
 
Jon: How do we get them to take action on this stuff, for sure, and a lot of that is building a relationship with folks like you and collaborating with that so.
 
Cory: Even if you get in the most perfect results in your mind, it may not be what they wanted so it doesn't…then they're not happy.
 
Jon: Yeah, that's true as well, and you may think, you know, I have an idea what I think this client needs based on their goals and their values and plans. You know, I had a couple that had just gone into practice and I had suggested they not pay off their house for a while because it was low interest rate days and they had surplus. I said, do it here, get on track for retirement, 401(k) or build all the stuff – the usual things – and I say, this will get you on track for your goals. Yeah, but we'd like to pay off our house early. Okay, we can talk about that. I don't think it's a good idea, here's why, and eventually, I got…
 
Cory: If you have a 3 percent interest rate, you should never pay that off.
 
Jon: Oh, yeah, it was that.
 
Cory: But if they have a desire to pay it off, they're going to want to pay it off, so it's always good.
 
Jon: And that's good. Yeah, they ended up moving on because they just didn't feel like I supported their goal of being debt-free which…you're right, my fault, and that was a learning experience for me. I communicate that to clients now – I think this is going to get you to your goals in the best way possible, but if you want to do this instead or pay off your house early, I can get on board with that and figure out how to help you do that.
 
Cory: Yeah.
 
Jon: I just think it's going to throw away a lot of money or whatever.
 
Tip: Take Advantage Of That Lower Interest Rate – Invest! [0:10:59]
 
Cory: Right, yeah, you're going to be shortchanging yourself in the long run because you're not investing and using that advantage of that lower interest rate but, you know. If you have a high interest rate, then you want to pay that off that debt as soon as possible. It all depends on the circumstances so.
 
Jon: And I get good practice with my wife because she wants to pay off our house and I think my interest rate is 2.875 and I'm like, babe, no, you know.
 
Cory: Never paying that up…never, never, ever.
 
Jon: No. No.
 
Cory: That's a second rag.
 
Jon: Yeah. So, after the schooling, there's a test to become a CPA.
 
Cory: Right.
 
Jon: Is there a prerequisite in terms you have to have a certain type of degree? Like, obviously, you're an accounting bachelor. Is that enough?
 
All The Things You Need To Know About Being A CPA [0:11:42]
 
Cory: Yeah. So currently, for the CPA exam, you have to have 150 credit hours. So you have to have bachelor's plus another 30 hours, so a lot of programs have done like 150-hour combo master's degree.
 
Jon: Got you.
 
Cory: Where you can get the 150 hours you need to sit for the CPA exam in a fifth year. So, you know, you use the four years plus an additional fifth, you get a master's and 150 hours, so then you can sit for the CPA exam.
 
Jon: I see.
 
Cory: Then the CPA exam is a four-part test currently and it's really a lot of work…a lot of studying.
 
Jon: How long does it take as far as the actual test itself?
 
Cory: It's different now. I think it's broken out into about four-hour increments right now, so it's four parts, four hours each.
 
Jon: Two days.
 
Cory: Yeah, basically, two days of testing.
 
Jon: Okay. Back-to-back or are they separate?
 
Cory: No. It's all separate now so you take one part and then wait, you know, six to eight weeks and then take another part. So you can study for each part in between.
 
Jon: Four separate parts, though.
 
Cory: Right, four separate parts.
 
Jon: That's not bad.
 
Cory: All different topics.
 
Jon: Okay. Yeah, our CFP was eight hours one day, I think, all told, the break in the middle.
 
Cory: Right.
 
Jon: Okay, and so work-wise, you got the CPA and then what was work like after that for you?
 
Cory: So, when I started off working, it was just a lot of learning; you know, learning how to do tax returns, learning how to do audits, learning how to do financial statements, learning how to do all the things that, you know, CPA does. You know, most CPA firms do everything from payroll to like, you know, bookkeeping, financial statement preparation, audits, tax returns. There's just a lot to learn, and then as you progress, you know, and as you get into it, you kind of learn what you like and what you don't like. You know, I really stayed more in the tax realm so I don't do any audits anymore that we have other people in the firm that do that. We have people that do the bookkeeping and the payroll taxes so I don't have to do that anymore, fortunately. You know, I stick with doing the tax returns and working with clients on how to get their taxes done and maximize their tax efficiency.
 
Jon: Awesome. Yeah, that's good. So, now, you're working…your office is based out of Ann Arbor.
 
Cory: Correct, yeah.
 
Jon: Okay.
 
Cory: I'm currently working at a firm, Andrews Hooper Pavlik that has nine offices all in Michigan. I'm in the Ann Arbor office. It's nice to have resources, you know. There's a lot of small firms out there, you know, single, maybe two or three partner firms that just don't have the resources because, you know, they're limited to what they have. We're also nice because we're not a big national firm. You're not going to get lost in the shuffle. We try and have nine offices all in Michigan so we can have that, you know, personal contact for people that are nearby; you know, have small local offices to serve the communities that we're in.
 
The Start Of The Financial MD "Dinners" [0:14:52]
 
Jon: Okay, fantastic. So, over the years, our listeners know we like to put out a lot of education, a lot of resources as much as we can. One of the things that probably our listeners don't know is that since 2014, Financial MD, we've been doing dinners at different locations around the Midwest for residents that are on the verge of graduating in their final year – fellows that are in their final year – specifically tailored to the decisions that they're going to make as they transition into practice and it's kind of the capstone on our lecture series. We do lectures for many different residency programs around the Midwest that are focused on four topics – cash flow, protection, investing, and debt, of course, is the other one…student loans and such. So those are done for all the residents in Didactics during Grand Rounds but then we do these dinners and I don't know where the idea first came about – I'd been doing these dinners for a few years and they were successful – and we started doing them in Lansing. We did some in Detroit, Grand Rapids, Ann Arbor, Kalamazoo, Saginaw – gosh, so many different cities – Chicago; did one in Cincinnati a few years ago and then Indianapolis. So about 10 different cities that we've done them in and always been really well received, really fun for us to do, and then somewhere, Cory and I got the idea, we should do these together like give them a more well-rounded experience of hearing from a financial planner and a CPA and then we usually bring in a physician loan or a mortgage expert in there as well. It makes for a great conversation and you get to…it almost becomes like a panel discussion which is kind of cool. We've got these three experts and we're sitting there having dinner with residents from all over different hospitals in the area and they bring their questions and we've kind of got specific topics who might cover but Cory and I have been doing these dinners together for a while and it's just been something we look forward to. They're fun to do, and every time – I think, pretty much – every resident leaves, they're just so grateful for the information, for the time, and I know they walked away with stuff that they wouldn't have known otherwise and they get to ask some fairly personal questions. Obviously, there's questions we'll follow up on things afterwards but, yeah, Cory, I mean...
 
Cory: Right. I think it's…I love the dinners. I love the way that it works out because it's just really a relaxed, casual, you know, like friendly conversation where they get to ask questions and we get to answer questions and I love answering questions and helping educate people because, you know, a lot of this information is free on the internet but you can't make heads or tails of it. It doesn't mean, you know, you can read 20 articles on HSAs and not understand what the heck it's for and how it helps you.
 
Jon: Yeah.
 
Cory: It doesn't mean that you can understand how they function, what the benefit is, and how it's going to affect you, and just a variety of questions. I mean, people come with all kinds of questions but then at that dinner table because we have so many people there, they not only get to ask their questions and hear the answer, but they get to hear other people's questions they didn't even know to ask, then get to hear the answer too.
 
Jon: Totally. Yeah, and how many times did they come in with the question because – hey, I heard this on the Internet or I heard this on Instagram or I had an attending tell me this or another resident or whatever and that's their opportunity for them to help clarify and stuff; so, not that we're super promoting it but if you hear about one of these dinners near you, definitely, try to attend or reach out to us and we'll…
 
Cory: Definitely beneficial, yeah.
 
Jon: Yeah. So, what have you found? If we can kind of fast track our listeners here today to try to get inside scoop like what are some of the questions that we're seeing, Cory, that maybe would be good to point out to some of our listeners that we find or topics that come up that, hey, we'll give you a sneak peek  ‘’’’’’’’’’]\\\\\\\
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=00{_POO_u/jat the dinners and some of the questions that we tend to find happening most often.
 
Most Often Asked Question: What Is The Best Tax Deduction? [0:19:04]
 
Cory: I think the question I get most often is, what is the best tax deduction out there, right. So how do I, you know…what is the way I can lower my taxes the best, the easiest, the fastest, whatever you may want to call it, right. So, everybody has to pay taxes but nobody wants to pay more than their fair share and, in my mind, the best way, the best tax deduction out there, is the HSA.
 
Jon: Nice.
 
Cory: Health Savings Accounts are, you know, if you have an opportunity through your employer or, you know, if you're self-employed to start an HSA, if you have a high deductible plan, you can put in, you know, $3,850 if you're single or $7,750 if you're married in 2023 and just let it grow. It's an investment vehicle which you get a tax deduction for if you don't spend it on medical. It's a savings account so you can just let it grow. You can start investing that generally in mutual funds like the 401(k) and get market rate returns and just let it grow until you need it and everybody's going to need medical expenses at some point.
 
Jon: Yes.
 
Cory: And, you know, with aging population and, you know, all these different factors of life in general, at some point, you're going to need medical expenses. So this is like a way to build a medical slush fund is what I call it for, at some point when you need it, you get a tax deduction when you put the money in, you get tax-free growth, and then as long as you spend it on medical, it comes out tax-free. So, it's the best tax benefit out there. But, unfortunately, it's limited, so it's something you want to do every year for a long time to be able to build that up.
 
Jon: Yeah, agreed. No, that's totally true, and we're on the same page with that. We call it Triple-Tax-Free in a sense it's the only thing like that, right, that goes in tax-free.
 
Cory: It's the only thing out there.
 
Jon: It comes out tax-free, and then worst case scenario, if you're over 60, 65, you can take the money out without a penalty; you just got to pay taxes on it, but, you know, in that case then, it's just like a 401(k).
 
Cory: Exactly, yup. It's an effectively a secondary retirement account.
 
Jon: Yeah, so it's a no-lose situation and we definitely try- and I've even had conversations with many of our especially high-income clients where we talk about, hey, we try to pick their plan at the beginning of their job and pick their benefits and I'll kind of lean towards those HSA plans because that's something to note too. Not every plan, not every health insurance plan, qualifies to have an HSA. It's got to be a high-deductible health plan and that number of what makes it a high deductible changes every year but look for a plan that has an HSA that's a high deductible if you want to have that tax-advantaged account.
 
Cory: Right.
 
Jon: And you briefly mentioned this but that's the other piece is that they can be invested inside most of them. So, a lot of times, you get to pick your own provider whether it's Fidelity or Health Equity or WEX or whatever, Optum Bank. There's so many different providers that will also let you invest it and that's another one of those…you know. A lot of my clients, we've just, you know, put in some index funds the stuff that we know we're not going to use for health expenses real soon. You start to accumulate. A lot of them I've just said, hey, let's leave a couple of thousand in cash for we got to put it off for health expenses, but the other stuff, we're starting to accumulate – let's invest this – and it's really cool to see that piece grow as well.
 
Cory: Yeah, and this is where really talking to your client comes into play because some clients may have high medical expenses and don't want a high deductible plan because they want the insurance to cover, you know, some of it or most of it. So, if you have a lot of medical expenses right now, having an HSA may not be the best benefit for you.
 
Jon: Yeah.
 
Cory: This is, you know, something for people that are relatively healthy, have a high deductible plan and they know they're not going to hit that high deductible cap so you can start putting money away into a high deductible or a health savings account and then just let it grow. If you're going to be using it every year, it's great because you still get the tax deduction but then it doesn't have that long-term opportunity of growth and getting tax-free growth.
 
Jon: Yeah, it's not a bad thing if you've got high medical expenses.
 
Cory: No, it's still good.
 
Jon: As long as your deductible is low enough that it's covering it whatever you put in the HSA but, that is a good point and I'd be curious your thoughts on this. There's a lot of clients who have said, well, we plan to try to have a baby this year, and I may say, yeah, well, then maybe let's do more of a fully-covered, you know, high premium plan this year just to make sure and then once the babies are, you know, you're done having kids or whatever, we could look at an HSA plan.
 
Cory: Absolutely, yeah. I mean, you have to look at it year over year to see if it's still the best benefit for you.
 
Jon: For sure, something you're not locked into, you can change every year.
 
Cory: And then that money's there if you need it, you know. So, I had to have a kid that had braces this year so I used some of my HSA money for braces.
 
Jon: There you go.
 
Cory: So you don't pay for that out of pocket. So, it's there, it's available, just write the check for the braces and you're done. It's nice. It's nice to have available.
 
Jon: Yup. This year, I wanted to get bicep implants and so I've got my HSA.
 
Cory: Got it. Yeah, you could use it. You could use it for almost anything medical nowadays.
 
Jon: Yeah.
 
Cory: I mean, like Tylenol, you can buy with your HSA but I wouldn't recommend it but you can.
 
Jon: Yeah. I mean, yeah, you get a debit card and you can go do that. So, HSA…other topics that you feel like we're coming across that might be people surprised that they didn't know or they thought it was one way and it turns out it's another way. What's some topics you can think of?
 
You Can Do A 401(k) And An IRA At The Same Time [0:24:36]
 
Cory: I think one of the things that most people are surprised by is that you can do a 401(k) and an IRA at the same time.
 
Jon: Okay, interesting.
 
Cory: I think there's a common misconception out there that, you know, if you're covered by a 401(k) that you can't do any an IRA. Well, you can, but it's limited. So there's rules around where, you know, there are two different code sections of the IRS and I hate to get technical but, you know, there's two different code sections in the IRS tax code. One is it for IRAs and one is for 401(k)s. You can do them both independently but they both have their own rules and regulations and stipulations on how much you can put in each year. So, if you're covered by a 401(k) plan and you're making, you know, more than, I think, it's some $180,000 a year, you can't directly do an IRA but you can always put in to a nondeductible IRA and convert that to a Roth or put it in and leave it in as a nondeductible IRA. There's lots of different options you have there. You can always do both.
 
Jon: Yup. That's awesome. Yeah, that's one of those things that we get a ton of questions about backdoor Roth and that's one thing we'd love to talk about.
 
Cory: Right.
 
Jon: In my mind, it's one of those and I think, Cory, you and I have had this conversation like, hey, yeah, while it's go in about…
 
Cory: Many times. Many, many times.
 
Jon: Yeah, out there let's do it.
 
Cory: Yeah.
 
Jon: It's going to be around forever.
 
Cory: It's one of those things that the backdoor Roth, you know. It utilizes two loopholes in the tax code where, you know, the first one being that there's no income limit on a nondeductible IRA contribution. You can make 10 million dollars a year and still put in $6500 this year into a traditional IRA or $7500 if you're over 50. No matter how much money you can make, you can put it into a nondeductible traditional IRA. Then the second loophole is there's no income limit on converting from traditional IRAs to a Roth. You can make 10 million dollars a year and convert any IRA money you have from a traditional to a Roth. It's a backdoor Roth. It's simple, it's easy. You can put it in, you know, $6500 a year and, if you keep doing that every year, you know, for a long time, it built up.
 
Jon: Yup. One of the things that I have found as people ask, well, what makes a nondeductible IRA. I'm like, well, it's not the IRA. It's the way…
 
Cory: Function of deducting it or not, right.
 
Jon: Yeah, you're right. So how do I make a nondeductible contribution? You just don't deduct it.
 
Cory: Right, exactly.
 
Jon: Because people assume just because I put money in an IRA and now it's deductible. No. Now it can be deducted, but you determine that when tax time comes.
 
Cory: Exactly. So, it's just a traditional IRA, right. So there's really two types of IRAs – traditional and Roth. So if you put money into a traditional IRA and don't deduct it, it's a nondeductible traditional IRA. If you deducted it, then it's a deductible traditional IRA, but you have to keep track on that on a separate form in your tax return. So, Form 8606 that you keep track of whether it's, you know, whether you took…if you didn't take the deduction and you keep track of it there as per nondeductible traditional IRA contribution. Once you've converted it to a Roth, then you keep track of it as a Roth contribution.
 
Jon: Okay. So you can have an IRA with some deductible contributions and some none inside the same IRA?
 
Cory: Yes.
 
Jon: Okay.
 
Cory: It gets messy and I don't recommend it because, you know, you're going to drive your tax person nuts doing that.
 
Jon: Yeah.
 
Cory: I like to try and keep it clean where if you're going to do a nondeductible traditional, either keep it nondeductible or convert it to a Roth.
 
Jon: Got you.
 
Cory: There is one, you know, major stipulation out there that, you know, a lot of people don't know about is if you have other traditional IRAs so, say, you take a 401(k) and you convert that to an IRA from your old job, now you have an IRA sitting out there, if you put in a nondeductible traditional IRA contribution, you have to pro- they call it aggregation rules, so you have to prorate the traditional nondeductible and the deducted nondeductible or to deduct deducted IRA in a conversion to the Roth, so try saying that fast.
 
Jon: Yeah.
 
Cory: It's really the aggregation rules that if you have any other IRAs out there, it make the backdoor Roth more complicated.
 
Jon: So what's going to happen? What's the negative if you don't do it right?
 
Cory: You end up having a mix of deductible and nondeductible that you're not taking credit for. So if you don't keep track of the basis – the deductible basis – then you end up… you could end up paying tax when you take the money out on stuff that's nondeductible.
 
Jon: That you've already paid taxes on.
 
Cory: Right, that you already paid tax on, right.
 
Jon: Okay, so it's not a bad idea to do a backdoor Roth if you've got another IRA out there. You just got to be…
 
Cory: Careful about it.
 
Jon: Either convert or be very meticulous about the tracking the numbers.
 
Cory: Yes.
 
Jon: Okay.
 
Cory: Track it really well, or you can convert all of the other traditional IRA out there.
 
Jon: You know, and that's great. That's a good point. That's a lot of recommendations I make. I find that – and this is probably true for you too – there's certain recommendations that is just general like, hey, at least think about this in your last year of residency; one of which being when you go into practice, you got a half-year of a resident salary and then a half-year at an attending salary, give or take, and probably, if you talked to us anytime you're in residency, you probably put some money in your 401(k) or 403(b) in your residency even if it was just a 5 percent.
 
Cory: Right.
 
Jon: And I often – again, this is not necessarily financial advice, everybody's situation is different – but I often tell my graduating residents – let's go ahead and convert that. It's $5000 in your 401(k). Let's just- this is going to be the lowest tax bracket you're going to be in for the rest of your life this year. Let's convert that to a Roth and then we can start the backdoor Roth free and clear…no other pre-tax money.
 
Cory: That's kind of the best reason to do it, you know, and I always say, look, it's only $5000 or whatever it is…even if it's $50,000. You can do it $5000 or $10,000 a year for five years. You can do any amount in any year you want. There's always the ability to convert from a traditional to a Roth.
 
Jon: Yes.
 
Cory: So, if you have $50,000 and you only want to do $10,000 a year, we'll do it for five years in a row and then you're done.
 
Jon: Yeah.
 
Cory: But converting it to a Roth makes more sense tax-wise over your lifetime because, again, a traditional IRA, if you put money in now, you get a tax deduction now. Great, you know. You put in $6000, you get $1000 off in your taxes – great, you saved $1000. But when that $6000 grows to $100,000 when you retire, now, in a traditional IRA, when you take that money out, you have to pay tax on every single penny of that $100,000.
 
Jon: Yes.
 
Cory: You've just created $20,000, $30,000 of taxable income or tax on that income that you've created.
 
Jon: Yup.
 
Cory: When you put it…when you convert it to a Roth, you pay the tax now – okay, great. You pay tax on $6000 – fine. When it grows to $100,000, you can take it out with no taxes at all. You've just saved tax on $94,000 of income.
 
Jon: That's great, yeah.
 
Cory: It's an amazing…
 
Jon: Way to put it.
 
Cory: The Roth IRA and Roth, even 401(k) is just an amazing tool for long-term growth and avoiding taxes; basically getting tax-free growth rather than tax-deferred growth.
 
Jon: Yup.
 
Cory: And a lot of people – and the other misconception out there that I, you know, I don't even know how it happens is, you know, you get these physicians that are making 250, 300, 400, 500,000 a year and for some reason, they've been told along the way – oh, I make too money to be able to put into my Roth so I'm only putting into my traditional 401(k).
 
Jon: Yup.
 
Cory: If your company has a Roth 401(k) plan, it doesn't matter how much money you can make. You can put money into the Roth 401(k) plan.
 
Jon: Yup.
 
Cory: And I get that – oh, I can? Yeah, put money into your Roth, you know, to save the…you're going to pay tax now. Yes, but that, you know; this year, it's 22,500 that you can put into a Roth 401(k). Put that in the Roth, let it grow tax-free. That way, you never have to pay tax on it again.
 
Find Yourself The Right Financial Advisor [0:32:54]
 
Jon: Yeah. There's so many things like that that we find that it just brings us back to that point of finding an expert that you like and you trust and you know has your best interest in mind because you guys as doctors, you know so many things about so few areas and that's true of anybody. We've got specializations; each one of you has a specialty even if that specialty is primary care, you're really good at that, you know a lot about that, and trying to become an expert in something else like personal finance or real estate or any of those things like, can you do it? Yeah, I'm not going to argue with The White Coat Investor and say you can't be your own financial advisor – for sure – but it takes a lot of work and a lot of knowledge that a lot of people just don't have the time or the desire to do or you've got families or you've got just other hobbies or things you want to do that to come in and say, well, I thought 20 years into your career is your fault, like getting misinformation is so much more likely when you're doing your own financial planning on the internet versus finding somebody that knows what they're talking about, that has the experience, that knows your situation, and obviously, I'm preaching here. You guys are listening here and you've heard me say this before and you know this, at least if you're listening to this, you found some good information. But, taking that time however long it takes to find the right person to give you that information and know that this is good information. This person has been doing this a while, they've got the certifications, they've got the knowledge – that thing can save you so much money. Like Cory said, 20 years of putting in a traditional 401(k) versus a Roth like, you can't fix that. There's no way to go back and make that different.
 
Cory: That creates a lot of tax down the road, and you have to find somebody that can explain things simply, right. Anybody can complicate the hell out of plans. I mean, there's lots of attorneys and financial advisors and CPAs out there that will, you know, explain things in ridiculous detail just so you don't understand it. That means they don't understand it. If they can't break it down so you can understand it, that means they don't understand it.
 
Jon: Yeah, it's a very good point, and there's certainly a lot of investment strategies and portfolio managers that have talked to me before and then I try to convey that to a client. I was like – okay, I'm going to be honest. You've got a good track record; I don't know why. Maybe we'll stick with just some little more simple strategies.
 
Cory: Let's figure out something we can understand and explain well and have good returns.
 
Jon: And it'll probably be just as good.
 
Cory: And probably just as good, right, generally, yeah.
 
Jon: Yeah.
 
Cory: Save some money in the long run.
 
Jon: Yeah, well, good. So, if it had to be one piece of advice that you gave to a resident in their final year, what do you think would be one takeaway that you would want them to know?
 
Cory’s Piece Of Advice To Residents [0:35:50]
 
Cory: I think it kind of reiterates what you were just talking about. Focus on what you do best. You've gone through residency. You've gotten your education. Focus on your career and delegate the rest. Delegate the financial advising. Delegate the, you know, legal work. Delegate…you know, find an attorney that can review your contract when you're signing a contract. Work with the CPA that can help you get your taxes done. Delegate the things that you don't know about because it's not worth the time and effort of you learning. You need to be educated enough and understand enough to be able to asking questions, but, you know, delegate the things that you don't want to know how to do. I give the example all the time that my brother showed me how to change the oil in our car when I was 16; he was 18. I did it one time. I will never do it again.
 
Jon: Yeah, yeah, that's an example.
 
Cory. Right, because it's not something that I want to know how to do. Could I figure it out? Yeah, it took me a couple of hours. I'd, you know, figure out may have to go to the store to get more parts and the supplies and I could get it done but I still want to know what to do with the oil when I was done, you know.
 
Jon: Yeah.
 
Cory: The oil that came out…what do I do with it? I could spend hours doing that or I could take it and in 10 minutes at the oil change place, pay somebody to do it. Why wouldn't I do that? It's an example of, you know, it's a simple example but it's an example I use a lot because it's effective. I know what I know because I've been doing it for 25 years. I'm really good at it. I love what I do and I love helping people and answering questions and, you know, for me to go out and learn how to remove my daughter's appendix if she needs that surgery, I'm never going to do it.
 
Jon: Yeah, yeah. If we're in a pinch and I had to do it, like sure, I might have to go to the store and get some other parts and things but, yeah.
 
Cory: I'm not going to throw my daughter on the kitchen table and Google how to, you know, take out her appendix. That's just…yeah.
 
Jon: Oh, that's excellent.
 
Do What You Do Best And Delegate The Rest [0:37:56]
 
Cory: We have people who are educated in this country for a reason, you know. Do what you do best and delegate the rest.
 
Jon: Yeah, no, and certainly, you know, people have been screwed over by insurance agents posing as advisors.
 
Cory: Right.
 
Jon: Or, you know, getting bad advice anywhere but, you know, that's why we always ask the question, you know, a. get a referral, find some testimonials – those are fine – and find out how this person is getting compensated; you know, that can get a piece of it as well, and understand conflicts of interest and all that kind of stuff.
 
Cory: Right.
 
Jon: Be a savvy researcher as you're looking into this but, yeah, and just be smart, you know; understand the recommendations as best you can. Ask questions.
 
Cory: Ask questions, right.
 
Jon: Yeah. Work with someone that makes it a collaborative process; that has no problem educating you and helping you understand as much as possible.
 
Cory: Right, and if somebody, you know, any advisor ever says – oh, it's fine, we'll just do it and don't worry about it – no, that's…they need to be able to explain it.
 
Jon: Yeah, exactly; that means there's something they're not telling you probably.
 
Cory: Right, you got it.
 
Jon: Cool. Well, I think we're at the end of our time today, but this has been great, Cory. I think this is a ton of great information that we've never had in a previous episode and just getting people to get to know you and understanding, seeing behind the curtain of a CPA and how that whole process works. If people want to reach out to you for anything, what's the best way to get a hold of you?
 
Cory: Best way to get a hold of me is my email: cory.lee@ahpplc.com. I'm not sure if you can post that somewhere.
 
Jon: Yeah, we'll put in the show notes for sure.
 
Cory: Yeah, it's easy enough to get a hold of me by email. I'm always happy to help, answer questions, be a resource, and I always enjoy the time and appreciate you having me on. It's been great.
 
Jon: Yeah.
 
Cory: I always love chatting with you whether it's the dinners or just in person over lunch or, you know, just phone calls catching up but I think it's always enjoyable to share information.
 
Jon: Yup, and for the record, full disclosure: Cory does my taxes – there you go. Like that tells you anything. All good. Well, guys, thanks so much for joining us for the Financial MD Show. This has been another great conversation with some good tips. Hope you're taking notes. We've got links to everything we've talked about in the show notes. Be sure to leave a review because that is key for getting this information into the hands of other young physicians that don't necessarily know what they're doing in their personal finances but would like to get better. So, leave a review, share this with somebody, subscribe, and then join the conversation on our social medias – on the Instagram; we've got TikTok blowing up, Facebook, and Twitter. So, join us on all those. We'd love to see those get to the point where it's a well-known resource for young physicians to get good solid financial education so. And, of course, check out financialmd.com for links to all of this, and if you're in the Detroit area, September 27th, come join us for dinner and love to see you. So, we'll talk to you guys soon. This is John from Financial MD, we'll see you next time.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
What is Business Valuation? – https://www.wallstreetmojo.com/business-valuation/
What is a CPA? – https://www.becker.com/cpa-review/what-is-a-cpa
Certified Valuation Analyst (CVA) – https://www.nacva.com/cva
CFP: Certified Financial Planner Definition – https://www.nerdwallet.com/article/investing/certified-financial-planner
What is Risk Tolerance? – https://corporatefinanceinstitute.com/resources/wealth-management/risk-tolerance/
Health Savings Account (HSA) – https://www.healthcare.gov/glossary/health-savings-account-hsa/
Triple-Tax-Free: What it is, How it works – https://www.investopedia.com/terms/t/tripletaxfree.asp#:~:text=What%20is%20Triple%2DTax%2DFree,municipal%2C%20state%20and%20federal%20levels.
Fidelity Investments – https://www.fidelity.com/
HealthEquity – https://www.healthequity.com/
WEX Inc. – https://www.wexinc.com/
Optum Bank – https://www.optumbank.com/
Index Funds – https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-4
What is a 401(k) Plan? – https://www.nerdwallet.com/article/investing/what-is-a-401k
What is an IRA? – https://www.bankrate.com/investing/what-is-an-ira/
What is a nondeductible IRA? – https://smartasset.com/retirement/what-is-a-non-deductible-ira
Roth IRA – https://www.schwab.com/ira/roth-ira
Backdoor Roth IRA: Advantages and Tax Implications Explained – https://www.investopedia.com/terms/b/backdoor-roth-ira.asp
What is Aggregation? – https://corporatefinanceinstitute.com/resources/wealth-management/aggregation/
(403) Tax-sheltered annuity plans – https://www.irs.gov/retirement-plans/irc-403b-tax-sheltered-annuity-plans
The White Coat Investor – https://www.whitecoatinvestor.com/
Cory Lee’s Email Address – lee@ahpplc.com
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
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Ep 025 - Real Estate Investing

Summary:
Dave Hall's Journey Into The Real Estate World [0:03:26]
One Can Make As Much Money Doing Easy Flips [0:07:13]
How And Where To Find Profitable Deals: The Process [0:09:57]
Your Network Is Your Net Worth [0:13:52]
For A Novice Investor, Should You Get Into Flips Or Into Rentals? [0:20:22]
Let's Talk About Tax Benefits [0:24:07]
Things That Dave Wished He Knows Then What He Knows Now [0:29:42]
Here Are The Numbers On Some Of The Deals [0:32:26]
Advice To Would-be Investors [0:35:28]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Jon: Welcome everybody to the Financial MD Show. This episode is a little different. Dr. Trevor Smith is not joining us today. He's a super busy guy with a lot of fun exciting things going on. But today, we have the pleasure of hearing firsthand answers to some questions that a lot of you have – a lot of you asked me directly or through social media or comment or whatever – real estate investing. We see a ton of articles about that from the different bloggers whether it's White Coat Investor or Physician on FIRE or any of those wonderful guys. It's a huge topic when it comes to physicians and financial planning and the reason is physicians are quickly reaching limits on things like 401(k)s or backdoor Roths or any of those things that we typically do recommend and then it becomes the question in two parts: Number one, where else can I put my money that's tax-advantaged and going to grow and be a good investment, and number two, in addition or just on its own, the question of where can I generate passive income; that's again, especially in the FIRE Movement of becoming financially independent and retiring early. Passive income is always the question. So I thought a little treat for you guys would be to bring in someone I know well; somebody I trust that could give us some real answers and firsthand experience and you'll get to peek under the hood, so to speak, and see how is a real estate investment made and not in a huge syndicated end yet as far as like Fundrise or some of those things, but let's look at a local real estate investor that's putting together deals offering to investors. Some of our clients at Financial MD have looked at and you'll be able to maybe get some answers; maybe it creates more questions, but that's okay. That's what we're here for. So, again, full disclosure: This is not a financial recommendation or personal advice. We can talk about that individually, but this is purely informational purposes only but let's jump into it. My guest today is Dave Hall with Achieve Real Estate. How is it going, my man?
 
Dave: Good, thanks for having me.
 
Jon: Yeah, absolutely. Well, I'm excited because this is something I love to talk about…something I'm involved in…and you and I have had several conversations about it and we've known each other for, I mean, really, 20, 25 years anyway; probably, if we were to really go back. But I've seen you grow and I've seen you start from scratch and grow, I think, even though you may not recognize it, a pretty legitimate successful real estate empire. So, you know, as you look back over the last seven or eight years, I'm sure you see that now but along the journey it's not necessarily easy to see, so as opposed to I mean, yesterday, I guess, Dave, tell our listeners what we are, what you do, and kind of a snapshot of your business today.
 
Dave Hall's Journey Into The Real Estate World [0:03:26]
 
Dave: Yeah, so Dave Hall, based in Lansing, Michigan; born and raised here, and I read a book called Rich Dad Poor Dad when I was in high school and it made me decide to go into real estate full time. So this was right around the 2008 crash is when I graduated and wanted to flip houses; not the best time for flipping, so I bought some properties and renovated them but couldn't sell them so I rented them and that was kind of what I was doing for a while part-time, and then over a few years, I had accumulated some rental properties and the market was getting stronger so I decided to get back into flipping and started selling some as well as keeping some. And so pretty much for the last 15 years, that's what I've been doing. I buy properties. I started off using my own money in traditional financing which moved at a much slower pace and so I pivoted to using hard money which is, you know, higher interest loans, more risk to lender, and therefore, you have a higher payout but it allows investors to move quickly in and out of flips or to get loans that they might not otherwise be able to get. And then over the last couple of years, I've been using primarily private funding from individuals; sometimes from their IRA, sometimes just from their savings account and they fund the purchase and the renovations of the properties that I'm doing, and then once they're renovated, I pay to refinance after we have a renter in there and pay the investor off or I sell it and then pay the investor off with the sale and, again, that caused me to pivot again because now I'm realizing that I can't get to where I want to get to by buying, you know, a duplex here or a single family there. So we did 12 flips last year just to kind of talk about numbers, but that is still too slow of a pace and so I'm pivoting now into apartments and multi-family deals. I'm, you know, toying with some other different commercial assets but that's kind of where I'm pivoting to since I've built a bit of a track record using private money to put that money into smaller deals and some of those same investors now to pivot into bigger deals. For example, last Friday, we closed on a 15-unit. I was able to raise the down payment from a private local investor that I met here in Lansing and so we bought the property. We renovated. The investor gets cash flow each month and they're a limited partner so they're not involved in the day-to-day. They just wired their funds at closing. We operate it here with my team and send them their check each month and it seems to be a win-win relationship. So that's kind of where I started and where I'm at and then that's kind of where I think the future of my company is going.
 
Jon: Okay. So you said it was Rich Dad Poor Dad that got you into this and we'll put a link to that in the show notes and probably most of you have heard of this book. I read it; I think I was in high school when I read it as well and probably no coincidence that Dave and I are both business owners now, but you decided real estate was a thing. You got into in 2008. Flips weren't really happening. You got under renting and so would you say that, you know, the growth of your business has not only been in the number but in the size of the deals, the properties, that you're looking at; the investors, the money that you're looking for…all that kind of stuff?
 
Dave: Yeah. I mean with each deal each year, you know, I'm getting sharper and more specific in what I'm looking for. You know, I think a lot of people when they jump into flipping, they've watched a few shows and they think that "let's buy a house and gut it down to the studs and put it all back together," and that's great for, you know, social media or for a T.V. show but not good for reality.
 
One Can Make As Much Money Doing Easy Flips [0:07:13]
 
So I actually started doing the big heavy flips like that and quickly found out that you can make as much money doing an easy flip which is more of a paint and carpet and cabinets rather than gutting the whole thing. So I started off doing the heavy flips and then now I pass on the heavy flips just because I can do…there's enough opportunity out there to not have to do such a heavy flip on each project in order to do the scale that we're trying to do. We try to stick to lighter flips, but yeah, I mean, we've done it all and I just am realizing now there's easier ways to do the same thing.
 
Jon: Yup, okay. Can you give us a breakdown of your business today? Maybe some numbers in terms of properties, deal sizes lately…that kind of thing?
 
Dave: Oh, yeah, so we just tipped over a million dollars of private funds borrowed from private investors so that's kind of a milestone but we have about, let's see, I think 85 rental units that we own in our own portfolio. We have a management company that manages those as well as some properties for other investors, and then we're licensed agents as well so we do a fair share of, you know, helping clients buy and sell as well as invest. If they want to buy a rental property, if they want to buy their own flip or sell their primary, we help with all of those things as well. So over the last maybe three years, I think we've done, let's see, maybe 30 million dollars' worth of real estate transactions on the brokerage side and then over the last year, I think we probably bought and sold 40 units in and out of our portfolio because it's constantly…sometimes a really good deal comes up that we'll buy and we don't want to necessarily hold it but because of circumstances we have to hold it for a little while. Typically, that means we're buying from a tired landlord who has bad tenants so we buy always from sellers that have some sort of motivation or a problem you can fix. So if it's a tenant, for example, we buy the property, we help the tenants relocate if necessary, fix the property up, and then once it's cash flowing positively, we can put it back out on the market and sell it. So, we're constantly evaluating our portfolio and figuring out, you know, which properties we can get rid of and roll the money into something bigger and better and which ones we want to hold as kind of a long-term generational plan for my family and for our business.
 
Jon: So, tell us about how you find these deals. I think everybody wonders…okay, seems like you're finding profitable things. How do you find that and how has that process evolved over the last, you know, 10 years of you when you started to where you are today of how you identify these and gotten more efficient at that?
 
How And Where To Find Profitable Deals: The Process [0:09:57]
 
Dave: Yeah, so that was the tricky part. In 2008, everything was a deal, you know…everything…and there was a lot of opportunity. But through the years, I mean it's kind of difficult; the average person thinks that you start on the MLS which is…I mean, there's good deals on the MLS where I just bought one…I'm closing on one in 10 days that I found on the MLS, so there's still good deals, but the MLS is where all the competition is and so off the MLS and not buy through agents and try to buy off market or go direct to seller – that's a really good option. So for a while, I was doing what's called wholesaling and for anyone that's not familiar with that, that is where you market to find some sort of motivation. So, typically, you buy a list, maybe it's a landlord who's owned a property in a different state or maybe it's…you know. I mean, there's all sorts of…you know. You can send a list to recent divorce couples. You can send letters to recently deceased people to probate. There's lots of different lists you can mail...so that wholesaling is you find a motivated seller, you get the property under contract, and then you sell that property or that contract to someone else. So, you find the deal, let's say, for 25,000 and then you find an investor that wants to flip that house for 30 and buy it from you for 30,000 so the wholesaler makes that 5,000 dollars in between. And so that works; there's a lot of people doing that as a full-time business, but it's very transactional. So as soon as you do all the work, you find the deal, you close it, you get paid, and then you got to start over. So, I'm familiar with wholesaling and we've done it and we still do some marketing to direct to sellers but we've pivoted probably last year and now we buy it from wholesalers instead of being the wholesaler, so we're paying these out to other people to bring us deals. But because of the volume that we do, we're able to sometimes get first dibs on some of those deals because they know that we can close and we can close quickly. So a lot of my deals come from wholesalers. They'll get a deal under contract, they'll send it to me, I can evaluate it, and then if I think it's a good deal, I'll send it out to my investors list to see if anyone wants to fund it, anyone who wants to get it…from the investor goes forward with it…the due diligence process is inspecting it and coming up with our quotes and if everything works out, we've typically can close rather quickly just a couple of weeks after sending it out to our investor list.
 
Jon: So you've kind of established these relationships with wholesalers to be able to find ones you trust, ones you know who are good at finding the deals, and that's kind of, in a sense, they're finding the deals for you a lot of the time now.
 
Dave: Yeah, and also intentionally, I established myself as an expert in my mark by leading our local real estate investors group, so we have a Facebook group which about 2500 members and then we have a couple monthly meetings that I lead and so kind of by being the face of that organization, a lot of new wholesalers and new investors will come and they don't know where else to pitch a deal or to, you know, who else to partner with so they come to me and then I can kind of get first dibs on some of those deals that way as well.
 
Jon: Okay. Is the investing group open to anyone or the public?
 
Dave: Yeah, it's free. We meet monthly and there's a Facebook group which is where I share all the events. Yeah, it's free to join. If anyone's interested in real estate, it's a really good spot to get in and just where you can read posts from other people. You can get recommendations for contractors and plumbers and that type of thing as well as, you know, just read through other people's experiences and stories on what's working and what's not.
 
Jon: Yeah, great, okay. Well, we'll put a link to that if that's all right in the show notes and people can follow up and dig deeper into that if they want to. Where do you feel like in addition to experience or School of Hard Knocks, let's say, where have you learned the most and gotten some of your education on doing this and getting better at this?
 
Your Network Is Your Net Worth [0:13:52]
 
Dave: Yeah, so over the last couple of years, everyone's heard, I think, that your network is your net worth and so by leading the group, I started to network a lot and get really good relationships and to be more intentional about that, I joined a couple of national groups over the last couple of years that we meet quarterly all around the country and because we're not necessarily in competition because we're not in the same market, there's a lot of opportunity to share resources and what's working/what's not working. So I go to these groups, I meet these people, and I can come intimate what they're doing, you know, what's working for them in their market, here in my market, so that's been beneficial and so then I joined multiple of those groups and that's where I'm starting to grow and realize how easy it can be to put a deal together that I thought was once complicated. For example, the apartment deal I just bought, it seemed really complicated upfront but once I talked to, you know, my attorney and my bookkeeper and my accountant and everyone was on the same page and we had the team kind of rowing in the right direction, everything kind of fell into place and that deal was an off-market deal as well that I got from my networking group. A private individual connected me with the seller and he was getting ready to sell but hadn't listed yet so I was able to buy that one, put the money together from an investor for my group, and you know, have it all come together. So from these national mastermind groups, I think it has really accelerated my growth over the last couple of years which allowed me to go from, you know, 40 units two years ago to 70 units last year so by the end of this year, we should be over 100.
 
Jon: Okay. So I think this is a good point to point out that someone may look at this individual incident and say, "Oh, you got lucky; good deal they connected you before I put on the market," this and that, but you would probably trace it back and say, "I didn't get lucky…I put the work in to get these connections," took the time to build this network, not knowing what it would produce but knowing it would…it should…and more just a numbers game, I would say, of growing that network and stuff just happens, right?
 
Dave: Yeah, it only took me 10 years to be an overnight success, you know; it's how people see, but yeah. I mean, things are definitely rolling quickly now but just exactly as you said, it took a really long time to get. There are lots of trial and error. I remember the first time I was raising money from a guy I worked with and neither one of us knew what we were doing, you know. Do we call an attorney? Do we call an accountant? Do you just give me the money there? Like how does all of this work? And we just kind of fumbled through it, you know. He trusted me and I trusted the deal and it worked out really well and he's funded five of my deals since then, but I mean, the first couple were really, really rocky and now things seem to be going smoother but it's only because things were so rough in the beginning.
 
Jon: Yeah, that's going to happen. You got to expect that. I think a lot of our listeners are, being that they're physicians, understand that process that there's not an overnight success. You know, they go through four years of undergrad, four years of med school, three plus years of residency before they start making any decent money and tempting for people to look at doctors and be like – dang, must be nice, you know, how to just start making that – and like, well, it certainly takes a good investment of time on their end and money. I mean, our average physician has like 250 to 300,000 dollars in student loan debt. So, everything's an investment, right?
 
Dave: Yeah, absolutely, and it's tempting I think to once you find a little bit of that success to try to, you know, live up to a certain standard or level where people, I think, that really build a generational wealth are probably the people that you're talking to or the people that are being intentional from the beginning about their investments and diversifying and, you know, trying to not get too comfortable in a certain lifestyle too soon without putting, you know, planting some seeds early. Actually, real estate, the houses I bought back in 2008, they have gone up in value, you know; some five or six times what I paid for them and it wasn't because I was a genius and bought at the right time, it's what everyone says – in real estate is that you don't wait and buy real estate, you buy real estate and wait and, you know, over time, it always works out.
 
Jon: That's true, yeah, and I think that's great. I've heard that same thing with real estate, with land, with whatever – always appreciates – and that's exactly a point that our listeners can take too. One of the things that we find with physicians is they get out of training, they get into practice, and they start making the six figures and they want to keep up with the doctors around them that they're not working with and have a decent, you know, nice house and a doctor house and a doctor car and trips and all that stuff and they may make a decent income now but it's getting blown on stuff and they're not doing the smart things with the money that they should. They're not starting to save early. They're not paying off debt. They're not getting into some of these things that long term will make them look successful or do the things that they want to do but you wouldn't believe how many doctors I've met with that are 50, 55 years old and really have nothing to show for it because they've gotten this lifestyle. We call it lifestyle creep where your income goes up and your lifestyle kind of goes up to keep up with it and as your income goes up a little bit, your lifestyle kind of creeps along with it.
 
Dave: Yeah, exactly, and before you know it, you look up and like you said, you don't have much set aside and even if the money you have set aside is substantial, in order to maintain your current lifestyle, what's the current rate of inflation, you know, most people, I think, are not saving enough in which one reason I would say is that it typically rides the wave of inflation and, you know, you can get your debt essentially eliminated by inflation as long as your interest rate is less than the inflation rate, and so by buying property or aligning your interests with inflation and real estate, you kind of ride that wave and it can work out really well.
 
Jon: Yeah. So a lot of novice investors that want to get into real estate are asking the question – should I get into flips or should I get into rentals? I mean, what would you say to somebody?
 
For A Novice Investor, Should You Get Into Flips Or Into Rentals? [0:20:22]
 
Dave: So I get that question sometimes as well and some of my investors are, you know, high-income earners and so I think that there's the appeal of doing a flip because it looks so fun on T.V. and it can't work out.
 
Jon: The numbers say in six months, I can, you know, get 20 percent.
 
Dave: Yeah, exactly, but if you really pencil it out the stress and the hours involved with doing the flip, if that's not, you know, your main skill set, I think that it probably makes more sense to do investments either with a partner that's more experienced with flips or to do rentals because rentals they don't produce a ton of income initially but it's that appreciation where you really see the long-term gains when it comes to real estate. So a lot of the high-income earners I see that jump into flipping are disappointed and, you know, if you're making 200 bucks an hour as a doctor, let's say, and then you get into a flip and you make 20,000 dollars but it took you six months and it took you, you know, hundreds of hours to put all the pieces together, you're making money but you're losing money when it comes to your highest and best use and so if you can double down on, you know, maybe work overtime hours or something if that's really the case at your higher wage…that's your highest and best use…and then roll that extra money into something else whether it's putting it with an experienced operator or just putting 20 percent down on a rental property and hiring a property manager, that's probably going to keep you more sane and make it easier to scale a portfolio rather than be in the nitty-gritty and in the day-to-day operations of running a business on the side.
 
Jon: Yeah, that's good and that's interesting because the question that I ask in any of our financial planning conversations are goals-based questions – when do you want to achieve this…how much do you want...which, you know, long-term, let's say. We always think long-term – sure, that makes sense. They know that. When we ask the questions, you know that this is long-term investment – yep, got it…you know. The stock market might be 10 percent a year, give or take, that's great – that'll get us to our goals if we save this much – but then when it comes down to the nitty-gritty, "Oh, you know, I only made this…it took me this much or this rental I got is only cash flowing this." I'm like, "Hold on, we said long-term" – and that's a lot of what it takes is coming back to that conversation of – we know in our heads this is long-term and it should be but in our gut we don't…you know, we want it to be cash flowing, very profitable short-term, but as you said, that's not the way that wealth is created especially not generational wealth in a long-term legacy. Our example, you know, as we got into it a year and a half ago with getting our first quadplex is, you know, is it profitable right now? Yeah. I mean, we put some stuff into it that we're paying off right now. We're slowly raising the rents that we think is a reasonable rate and that kind of thing, but I'm not looking for it to like pay my personal expenses right now for me and we can talk about this a little bit. For our high-income earners, I was looking for something that was more tax-advantaged investing, you know, Roth IRA, that's nice but you can only do 6500 a year there; 401(k)s…those things...but real estate has so many advantages to it I say and I know you would say. Talk to me about that when you're talking to somebody and in your experience…I know you're not obviously a CPA or financial planner…but when you talk about some of the tax benefits or other benefits of doing real estate investing, what does that look like to you?
 
Let's Talk About Tax Benefits [0:24:07]
 
Dave: Yes, so the tax benefits, so I have a lot of investors that are using their IRA, a self-directed IRA, to interested fields and so that money can continue to grow, you know, tax-free if they lend me out of their IRA and I do a deal and then pay it back into the IRA, so that's one way to get typically above-average returns. You know, I can't promise…nothing certain, but our investors have definitely seen above-average returns on the deals that they've done with us and then same with larger deals and typically for high-income earners, if you can somehow figure out how to become an active real estate professional. So, for a lot of them, it's their spouse gets licensed but I think there's a minimum hour amount that you have to do each year in order to be considered active. By being active, you can take active losses as well, and so on the larger apartment syndication deals, there's a large amount of depreciation that we can take which is just a phantom expense against your income, and so if you can be considered active in a partnership for an apartment syndication, there are some really large tax advantages that you can get that can drastically eliminate what you're paying in taxes from your ordinary income.
 
Jon: Yeah, that's huge. In fact, this year, and the last year too, we've been talking to our clients about bonus depreciation with short-term rentals and a lot of them want to get into that because they want to get their own lake house but they don't have time to use it a lot. They wonder if they can make money on it – sure – but we talked about something called bonus depreciation which we can get into a little bit here, but probably, we've got some more resources on it. Essentially, as Dave said, if you're an active participant which for our clients, again, it's usually a spouse – the non-doctor spouse – in our case, in short-term rentals, they're managing the property. So they're handling any updates, remodel upgrades. They're then handling the marketing, getting people in and out in the turnover, you know, remotely because it's probably an up north property or something but that allows them to take that depreciation that they take and with bonus depreciation in terms of short-term rentals, you can take 60, 70 percent of the depreciable value of that in the first year against their doctor salary as well which is huge. I don't know where else you can find something like that.
 
Dave: Yeah, that is a huge tax-advantaged, but again, you want to align your interests with what the government is wanting you to do, you know, so they get taxes to people to do exactly what they want done and so that, you know, the tax law is not rules. It's kind of guidance on this is how you can save the most money.
 
Jon: Yeah, that's a good way to look at it.
 
Dave: That they point to to say, you know, if you don't want to pay your taxes, we need real estate managed by private individuals so please buy real estate and we'll give you a tax advantage to do so. So, you know, why not take advantage of that.
 
Jon: Yeah, absolutely. Then on that note, solar firms…you want to build solar firms apparently is what the government is saying right now.
 
Dave: Yeah, not everything the government says it makes sense in the long run but by all means…I mean, I see people that are making money on those even in the short-term. It's just a matter of in the way of politics and the economy and trying to figure out where there's an opportunity, you know. So you mentioned some rentals, I think that 2024, you know, whether we're in a recession or not, I think things are going to probably…and I say this because I've been studying the Orlando market pretty heavily because we want to pass some rentals there and bookings have dropped, I think, 30 percent in the Orlando market.
 
Jon: Yeah, we've got to wait for the housing crisis to come down with that, right.
 
Dave: Exactly, yeah. So if someone bought last year a short-term rental based on current income and now there's a drop, there might be some motivation there. So, economists are saying that maybe in 2025 things will get better and so that means there may be opportunity in this season to buy from, again, motivated sellers that might have overpaid or maybe their life changed now...they don't need the property anymore. So it's just a matter of kind of staying aware of the real estate market, and you know, microeconomics and macroeconomics of what's happening and then trying to find opportunities with whatever's happening, you know, and anytime you can buy something whether you overpay or not, I think the market will make that correction for you long-term but you can align yourself with what's happening and try to take advantage of and you're really helping someone else out of their problem, you know. If they overpay for a property or if they need to sell quickly for whatever reason, being able to offer them an opportunity to sell when they need to make sense and then if you can get a discount price for helping them in that area, it can be a win-win situation and then as the economy continues to ebb and flow…as it continues to go up overall…I think that's where, you know, real estate is really profitable.
 
Jon: Yeah, it makes sense. So when you look back at the years you've grown in this as you've grown your business, what are one or two things that you would say to yourself when you were getting started that you know now that you wish you knew then?
 
Things That Dave Wished He Knows Then What He Knows Now [0:29:42]
 
Dave: Probably, some of the lessons that I learned that were harder, I probably could have avoided had I, you know, been more aware or even just followed my gut on some things, I had the idea of doing all the work myself in the beginning and that was a great learning experience but it was probably something I could have leapfrogged by hiring contractors at the beginning. And, yes, you pay more and you make less but the difference at the time was doing, you know, one flip a year and making, let's say, 20,000 compared to doing three flips a year and making 15 each, you know. So I'm making less with each deal but as I'm able to scale, I can make less on each deal and still make more overall. That was a big lesson learned and so now I have crews that do all of my work and I'm not involved…I'm not swinging the hammer, as they say, anymore which allows me to spend more time networking and finding better deals. And then the other thing is just the power of networking and aligning yourself with other individuals. So now that I have some private lenders and that's primarily how I'm using, I'm able to move much faster than my competition. We're able to get in and out of deals and it just makes everything easier when you're dealing with individuals compared to institutions. You know, most people think I'll go to a bank; put down 20 percent. I have to wait for an appraisal…have to wait for a bank committee…and the banks, as we saw the last six months, you know, their interest rates shot up from probably 3 percent to 7 percent. I was just looking at that. Actually, the average mortgage rate for 2022, this says 3.2. I don't know if it's accurate or not, but compared to 2023 which is 3 or 7.5, so they doubled. And so if you were solely banking on a mortgage to have your numbers make sense, you might be in trouble, but now that I'm using private money, I'm able to pay higher interest but because I'm able to move faster and I can avoid some of the appraisals and bank fees and origination fees and other things that go into using an institution, I'm able to, you know, gaining a lot of momentum and able to do more deals and like I said even if we're making less on each deal, because of the volume that we're doing, things are working out, and then as we do deals, more deals tend to flow to us and we're getting sharper and better on that each deal that we do and so I think had I leverage other people's time in the beginning and other people's money from the beginning, I think I'd be a lot farther than I am now. But, you know, I'm learning those lessons every day.
 
Jon: Yeah. So can you give our listeners an idea knowing it's not guaranteed and knowing it's not every deal, what are some numbers someone could expect or that you might be projecting on recent deals?
 
Here Are The Numbers On Some Of The Deals [0:32:26]
 
Dave: Yeah, so typically, the pitches that we have three options for investors that partner with us so they can be in a second position for a smaller loan amount. So, for example, let's say, we're buying a property for 100,000 dollars. We'll raise probably 25,000 for a deal like that. It will be in second position to a hard money lender that's giving us 90 percent of the purchase price as well as the renovation funds, so money from the private investor would cover the down payment, would cover some of the closing costs as well as some of the holding costs while the project is underway, and for those deals, we typically pay out around 12 percent, and then if they want to be in first position, we can do those same picks and flip type of deals. So for the 100,000-dollar deal, we would offer 10 percent and that we can either offer 8 percent cash flow each month with two extra points paid at the end or we can just have it all accumulate. We offer both options. Mainly, if it's an IRA, it becomes kind of a pain to do the monthly payment thing so we offer both options but that's to be in first position. So, it's a slightly lower interest payment but it's because there's less risk because you're in first position compared to being in second position.
 
Jon: Got you.
 
Dave: Then the third option is our apartment syndication deals and that's a 50,000-dollar minimum and that's where we pool people together or people's money together and then use that as a down payment into a larger asset and those who get equity positions typically or a debt position depending on what the investor wants so that position, again, we can offer cash flow or have it accumulate and those are typically 10 to 12 percent deals, or for equity, there's typically less cash flow but a bigger payout at the end since the equity partner gets to take advantage of some of the appreciation as well as the principal pay down, so the apartment deals are a 2- to 7-year hold. I typically write in an extension option to go further if necessary. A lot of syndicators got in trouble over the last year as interest rates shot up faster than they ever have and exit a property and all of a sudden no one wants to buy it because interest rates are high, you're kind of in a bad situation, so we put in the option to extend a couple of years just to try to get, you know, take advantage of the market depending on what's happening, but those are the three options. So a smaller loan in second position at around 12 percent; a bigger loan typically 80 to 150,000 in a 10 percent; or the apartment syndication model which is a 50,000-dollar minimum but those payouts can be, you know, they're projected to be…cash flow anywhere between 6 and 10 percent and then overall internal rate of return is as high as 15 to 20 percent.
 
Jon: Okay, great. Yeah, that helps. Any advice you would give to investors looking to be an investor, take that step…not necessarily be active but to get connected with somebody like you…what advice would you give the investor as they're looking into this?
 
Advice To Would-be Investors [0:35:28]
 
Dave: Yeah, so I would probably say, you know, there's tons of free resources out there. So reading Rich Dad Poor Dad kind of sets the pace for understanding the power of passive income so I would start there. There's a website and a group called BiggerPockets which has a podcast. They have forums online. All your questions can be answered as far as the different types of real estate investing there. And then I would say get involved, you know. Go to your local real estate meeting. Join…there's some BiggerPockets webinars that are free. You can get a lot of free information, and then just evaluate your risk threshold and then invest wherever that lands you. So, for some people, that means you want to start small and buy. you know, a duplex with 20 percent down and hire a manager; that's a really good way to start. I have a lot of clients that do that. Other times, just invest in someone else. I'd be careful with some of the apartment syndicators that are doing larger deals or some well-known people that take really high fees when it comes to apartment syndication so they might buy mediocre deals because they're good at raising money. So they can raise a lot of money and promise a higher return and it ends up not being as good because they took all their fees up front. They don't really care. Just because the person is well-known and I would say that really that syndication and see what the fees and things are going to be, we don't charge any fees currently on any of our apartment deals. We want a win for us to be a win for our investors so I would just read the fine print, but those are things that you start to question and learn more about, the more knowledgeable you are, you know. Knowledge is power.
 
Jon: Okay. Yeah, that's awesome. Anything else you would add that I didn't ask?
 
Dave: Not that I can think about; just that most of the doctors that I've talked to are hands-on type of people and I would say that it's good to be hands-on if you want to maintain control of your investment but at the same time, you don't want to hold on so tight that it is taken away from your highest and best use. Like you said earlier, you spent a lot of money and a lot of time to get to where you are and get the income that you have so don't take a step backwards. I mean, unless you love it and you really want to flip houses for a living or something but I think so many people spending more of their time on a smaller investment thinking it's, you know, somehow going to be a good…it's going to be better than what they're doing…and it turned out to not be and so better baby step, I think, would be to maybe give up some of that control, endorse to someone else that's doing it in the beginning and then once you might figure out that you hate, you know, owning duplexes or that you love flipping or you like just being a limited partner and sitting back and watching cash flow come in on a syndication. But, you know, I would try to maybe dabble in a bunch of different things or research a lot and figure out what fits your personality best because everybody's different.
 
Jon: Yes, and that I found. As a financial planner, I've come across enough physician do-it-yourselfers that I know right offhand like, hey, man, this is probably not something you should be doing yourself but if you're going to stick with it then I can't help you. Like there's a lot of commonality and personalities with a lot of physicians – not all – but a lot of them are kind of a know-it-all when it comes to a lot of things – and ortho surgeons, I'm talking to you. There's a feeling and a little bit of experience that because they do know so much about a particular topic, that contend some of our weaknesses that can bleed over in other things – oh, I'm probably going to be good at real estate and finances too – and – no, not the same thing at all. We're not…you know. Dave and I aren't going into our kitchen and fixing our elbow fracture. We're going to go find a specialist for that who's good at that and trained at that and that's just smart and it'll cost more for sure but the end result is going to be better at the end. So we've experienced the same thing here for sure, Dave. I'm sure lawyers and CPAs have in every industry. So, what Dave is saying in a nice way, I'm going to say it in a straightforward Financial MD way: Guys, don't try to do this yourself. You think you do because you read the articles and you read the books and you watched enough videos or podcasts but it's not. I've met one or two doctors who are doing it themselves and doing well because they came from either construction background or experience like that but, by and large, 99 percent of you, it may be a good idea to get into this but not to do it on your own. You don't know what you're doing and you're going to risk too much and it's going to cost you too much to get good at this. Not saying you can't, but to do it, I will just say it's not worth your time.
 
Dave: Yeah, it's comical the amount of apartments indicators that I network with that say, you know, we got a really good deal. We knew it was good because it was owned by this doctor who didn't know what he was doing, you know.
 
Jon: So many of that.
 
Dave: Yeah, I mean it makes sense. You think you hire a manager and everything's going to go smoothly but the day-to-day stuff that it's what you don't know, you don't know that comes up and when you're dealing with larger assets, like you said, I would definitely partner with somebody.
 
Jon: Yeah. Doing well on one thing doesn't mean you'll do well in every other thing so you guys know I love you but I'm going to speak truth to you here just from our own experience. So ask for help; if you have to learn the hard way, go for it, but I don't recommend it. Well, Dave, how can people get a hold of you if they want to know more or get in on some of these deals?
 
Dave: Oh, yeah, so we're putting a website together. I don't think it's live right now, but hopefully, it will be next week. Investwithdave.com is where we are looking for investors or they can feel free to email me. My email is dave@achievelansing.com.
 
Jon: Okay, fantastic. Well, this has been great. I love talking about this stuff. I love hanging out with you and digging into these ideas and goals and just seeing this stuff happen and it always challenges me to think long-term, to settle down a bit, but also to get up and dream bigger as well, so it's a good balance and I think you're doing great things. So, thanks for taking the time to be on and educating us a little bit more.
 
Dave: Yeah, absolutely. Thanks for having me and I look forward to our future conversation.
 
Jon: Yeah, me too.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
The White Coat Investor – https://www.whitecoatinvestor.com/
Physician on FIRE – https://www.physicianonfire.com/
What Does It Mean to be Pre-Tax or Tax-Advantaged? – https://www.finra.org/investors/insights/tax-advantaged
The Story of Rich Dad Poor Dad – https://www.richdad.com/about/rich-dad
Hard Money Loan – https://www.investopedia.com/terms/h/hard_money_loan.asp
The Importance of Real Estate Limited Partnerships – https://www.colonyhillscapital.com/the-importance-of-real-estate-limited-partnerships/
MLS Listings, Real Estate Property Listings – https://www.mls.com/
Wholesale Real Estate: A Beginner's Guide – https://www.rocketmortgage.com/learn/wholesale-real-estate
Porter Gale: Why Your Connections Are Worth More Than Money – https://www.forbes.com/sites/danschawbel/2013/06/04/porter-gale/?sh=16fc045d155b
What Is Lifestyle Creep? – https://www.ramseysolutions.com/budgeting/lifestyle-creep
Highest And Best Use – https://www.timbertax.org/getstarted/appraisal/bestuse/
Phantom Income: Definition and Risks – https://www.freshbooks.com/glossary/tax/phantom-income
Bonus Depreciation: Overview and FAQs – https://tax.thomsonreuters.com/en/glossary/bonus-depreciation
What Is a Loan Origination Fee And Is It Negotiable? – https://homebuyer.com/learn/what-is-a-loan-origination-fee
Equity Position Definition – https://www.lawinsider.com/dictionary/equity-position
How To Determine The Debt Position Of A Company – https://yochaa.com/how-to-determine-the-debt-position-of-a-company
BiggerPockets: Create and Build Wealth With Real Estate Investing – https://www.biggerpockets.com/
Lansing Real Estate Investors FB Group Page – https://www.facebook.com/groups/949307535162410/
Dave Hall's Investment Website: Invest With Dave – https://investwithdave.com/
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 024 - Employee Benefits

Summary:
The Gist Of Employee Benefits [0:01:30]
Trevor's Thoughts And Opinions [0:03:12]
Low Paycheck/With Benefits Vs High Paycheck/No Benefits [0:06:38]
Basic Things To Know Regarding Employee Benefits [0:10:31]
HSAs Are Awesome! [0:12:12]
Another Option: Flexible Spending Account (FSA) [0:19:38]
Retirement Plans: 401(k) vs 403(b) [0:23:04]
Other Ancillary Benefits: Group Life Insurance [0:34:30]
General Recommendation: Get Enough Life Insurance Outside Of Work [0:36:48]
Disability Insurance: Get It As Soon As You Possibly Can While You're Young And Healthy And It's Cheap [0:39:07]
A Little Tidbit: If You Pay Your Own Personal Disability Insurance, It's Tax-Free Upon Claiming And Collecting Benefits [0:45:13]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
 
Jon: Well, I'm excited to dive into today's show. We're going to get caught up with myself and Dr. Smith and go on a very diversified journey into employee benefits with nothing necessarily pre-planned other than our own experiences and opinions and that will be enough to fill an episode. So, how are you Trevor?
 
Trevor: I'm doing great. I'm excited to learn from you on this topic as well as contribute my biased opinions.
 
Jon: Okay, great and I will learn something from you as well because I know the house, I guess, but we always learn when we hear other perspectives and I think I know what might be good, bad, valuable, pros, cons to some people but I'd love to hear your take on it, and for those of you that are watching this on YouTube or listening to snippets or checking it out on just the audio podcast, this is the time where you can start to pull up the comments and get some interaction. Let us know what you think, what questions you got, what the heck are some of the things we're talking about, so keep that open. This is not a live show, but we are going to respond to comments as soon as we possibly can, and whether we agree with you or not or have the answer or not, we're going to let you know that. So, employee benefits – what are employee benefits? I'll preface with that and then we can start on a little bit, understanding employee benefits.
 
The Gist Of Employee Benefits [0:01:30]
 
So, the gist of it is employee benefits – or you'll also hear the term group benefits, group insurance, group disability, group like whatever all these other kind of things – it basically means an employer has enough people – enough employees – to go and get discount rates on insurance products, get guaranteed insurability on most things, because they have a large enough sample size so they'll get discounts and then they'll also typically pay a portion – not always – and you have to understand throughout this whole conversation that not all employers include any or all the benefits that we talk about. There's no hard and fast rule necessarily until Obamacare and the Affordable Care Act and there were some rules about if you have a certain-sized number of employees, you have to have a certain type of health insurance, etcetera.
 
Trevor: If I could jump in, just from a higher level like as a potential employer – almost employer – looking at starting my own practice here in Ophthalmology, the ones I hear about are retirement and then there's like the insurances; you're talking about the insurances – life insurance, disability insurance. There's lots more down the line from that. Those are the top – and then health insurance, right. So those are the top three. I just wanted to throw that out there. Those are the main ones people talk about; are interested in. Probably the most common ones would be health insurance and retirement like a 401(k) either access with or without a match. Yeah, just wanted to give those categories for folks.
 
Jon: That's exactly it. Those are some of the main examples of things that we see. To give us some context for your thoughts and opinions, Trevor, catch us up on what's going on with you right now and that'll help kind of set the table.
 
Trevor's Thoughts And Opinions [0:03:12]
 
Trevor: Sure, yeah. So I've been a W-2 employee. I'm an associate ophthalmologist at a small private practice. I've been there for the last nine months. It's been great personally, professionally; learned a lot about myself. I mean, it's not just a job for me. Ophthalmology – my mindset on it has shifted quite a bit in the last couple of years like I really do see it more or less. I wouldn't call it like a calling but like it's a greater purpose for me to go to work. It's impacting the lives of the people around me, both my staff and my patients, and this is where I find myself. I'm kind of in a different headspace and wanting to just be more intentional about the people I'm around. It's made a lot more fun. So, I've been enjoying my work. I'm a W-2; I'm working about 35 hours a week on average so it's not the heaviest, most intense medicine job and then I'm doing a little bit of locums, coming up here too. It helps bump up the income a little bit since I'm working a small amount of full-time. So, I'm wearing the hat of like potential future employer and then I'm also an employee and then I popped around at a couple of private practices which I've talked about in the past previous episodes. I've seen a few different options but, yeah, it's usually for docs that are listening. It's usually, you know, 401(k) with matching that starts about a year into employment. It ranges from 1 percent to maybe 8 percent, it seems like. Kaiser Permanente – I looked at a position there a while ago. You know, some of them they'll bump it up quite a bit more. They're really trying to keep you attached. They're trying to give you golden handcuffs.
 
Jon: A lot of that golden handcuffs is they'll put a vesting schedule which we can go into but it basically means you don't get to take your match with you if you leave for anywhere between one to five years on a 401(k).
 
Trevor: And there's nothing inherently wrong with that. It's a great bonus. I mean, you definitely make more per dollar of production, so you're only doing so much work and you get to keep more of the money in that format. If you're like a long-term lifer, you kind of more of a corporate person which you can only find out by experience as a doctor, very few people are like working their way up the ladder and then going to medical school and they're like, 'Oh, I'm a corporate guy.' Maybe some of the military types, that's a nice natural fit. So it's kind of where I'm at. I'm wearing two hats and looking at having at least one employee coming up for at least one of the companies either in Ophthalmology or kind of the Bitcoin business stuff I'm working on. I need more help. I don't have the bandwidth to keep up what I'm doing, if with everything. So, wherever I bring them on, I'm like everybody wants benefits and I want to build a team that wants to stay, right, so I'm not afraid of offering benefits. Not to jump into my hot take too early, but basically, I'm kind of amazed. I think people have read articles online like ask for benefits like benefits are the Holy Grail of employment. I feel like I could offer somebody double what they would actually take home in terms of their benefits and they would turn the job down. Basically, they would take a lower paycheck and the worst benefits versus a higher paycheck and no benefits.
 
Jon: Why do you think that is? Does it give them some sort of sense?
 
Low Paycheck/With Benefits Vs High Paycheck/No Benefits [0:06:38]
 
Trevor: I don't know. I'm curious if you have any thoughts on it because it doesn't make any sense to me but I'm financially literate. I wonder if there's an illiteracy component of they don't know what they don't know and they just kind of heard like you got to get benefits. Benefits is a good job, you know.
 
Jon: I can see that mantra in America especially from the previous generation; our parents growing up and saying get a job with good benefits or whatever.
 
Trevor: Right.
 
Jon: But I think some of the psychology behind it is you get the salary but also when they're doing the recruiting or interviewing, here's this whole list of free stuff that you get, and everybody has free stuff.
 
Trevor: Yeah, I do think so.
 
Jon: I think it's some of that like open up a checking account at our bank and you get a free coffee mug.
 
Trevor: Yeah. So I'm looking at hiring an amazing employee. I'm like super pumped to have heard about him, really well-trained ophthalmology technician who has interests outside of eyes, so I'm really excited and I plan on employing this guy, if possible. He would be better off like I'm going to do the benefits, right. I'm going to give him what he wants because I want to hire him. My goal is having this guy work for me.
 
Jon: That's the great thing about your first employee is you can just say, 'What kind of benefits do you want?'
 
Trevor: Yeah, right, it's totally true. I mean, I think with benefits, you have to match like there's no favoritism allowed. I'm sure there's probably ways around this but I'm not aware of what they are. So you have to have the same benefits for yourself now that you have employees. You can be your own employee, somebody else can be your employee, and I'm learning about this so color me naive on the details but you got to share the same thing. S if I want to have a good healthcare plan and I'm hiring him, he gets a good healthcare plan which makes it a little more expensive. I think that's, you know, where it gets tricky and people want to save on stuff. I don't really care. My attitude is if this person is contributing and I'm productive, I will outearn the front-end cost of giving someone what they want. Especially nowadays, it's hard to hire good people. So if you find a good person, you want to make it worth their while, right.
 
Jon: Yeah, for sure.
 
Trevor: Yeah, so my observation is like I would love to educate him. I'm like, 'You could be 1099 and then a consultant and then you can write off all your stuff,' but that's me. That's my interest; that's me as an employee, you know. That's not my employees. I want to meet them where they're at and I think that'll be like a 401(k), maybe a match, and figuring that out so I'm hiring a consulting group to help me with a lot of this. When I say I don't know exactly what I'm going to do next, that doesn't mean I have no plan. My plan is it's hire smarter people than me as consultants.
 
Jon: There you go. That's it.
 
Trevor: I'll have insights on this that are more detailed in the future but that's my context so far.
 
Jon: Awesome. So that's kind of the employer side and especially at the starting out point, we don't get to hear that very often. We might hear, 'Here's what we offer.' We might hear, 'Here's what I want.' But it's interesting to hear from your end of the startup, 'Okay, I'm just beginning to think about benefits. I know this guy wants benefits. How do I go about finding those?' And we know we don't have a ton of employers listening to this show. You all are mostly employees. I think the show tends to appeal to residents, young physicians, that are just stuck with whatever benefits they get but quick sidebar: for those of you that are employers or want to be or at 1099, you know, some of these things you kind of got to piece together but there are some firms, groups, that will do everything – the health, the 401(k), the group life, the group disability – kind of do a whole benefits package for you. Let us know. I'm sure we can get referrals for you if you're that person but that's our little business owner corner there.
 
Basic Things To Know Regarding Employee Benefits [0:10:31]
 
For most of you getting employee benefits, there's a few basic things to know. Number one, you don't get to decide unless you're so fortunate that you're Trevor's first employee then you do get to pick a little bit but, ultimately, it's up to the business owner, the employer. Let's say, you're at a hospital, it's up to the CEO or the Board or whomever is figuring that out. This is what they have. It applies to pretty much everybody and you have hardly any choice on the matter. Now, they'll give you options sometimes. So, let's take it from the top and the most common being health insurance that might be offered somewhere. There are…often I see two or three – sometimes more – about options of what health insurance you want to take, and without getting too deep into a health insurance segment – we can do that another show – but with health insurance, the first thing you look at is how much does it cost – or the last thing. How much does it cost me? How much is the employer going to cover? The employer may cover some of it or all of it or none of it. Either way, the total cost is going to be cheaper, typically, than if you went out and got it on your own. Of course, there's subsidies and things like that but most of us are not going to qualify for those. Now, you have these options to pick from. They vary in price but they also vary in a couple of things. They vary in deductible, so the amount that you'll have to pay before the insurance kicks in. They vary in copay amount or co-insurance and they vary in out-of-pocket max. So between the deductible and the copay, combine those possibilities together and they give you a worst-case scenario which is called an out-of-pocket max. It's the most that you would have to pay per year no matter what.
 
HSAs Are Awesome! [0:12:12]
 
So you look at that number and some of them maybe a PPO which is your pretty standard health insurance or/and within those, you can have an HSA or a high deductible health plan which means you can have a health savings account. What you need to know about that is if you've got a deductible that's over, I think, 1500 dollars – may have changed this year – but you have what's literally technically known as a high deductible health plan which means you can get an HSA with it which, here at Financial MD, we think HSAs are awesome. They're, for all intents and purposes, triple-tax free. They're tax deductible going in so you can tell your company, 'Out of my paycheck, I want a certain amount going into an HSA.' As of this year, the max you can put into an HSA is like 7300 dollars a year, I think.
 
Trevor: Yeah, for two of you.
 
Jon: Yeah, for family, and singles like half that. You get that taken out of your paycheck before taxes so it's pre-taxed then what's cool is if you get over 1500, 2000 dollars maybe or something, you can get, for most HSAs, they allow you to pick investments inside of it so then it becomes kind of like this retirement account. So if you really stock that thing full and you don't use much of it, whatever's left over rolls over each year. It's just like an investment account and it grows like a 401(k) and we've helped a lot of our clients pick the investments in their HSA hoping that there'll be money left over in there at the end of the year and grows every year tax-deferred like a 401(k) or an IRA – we've talked about these tax-deferred bucket before – but then as long as you use it for health expenses, your medical expenses, it is tax-free. I talk to our clients about the option of, ʺhey, let's max out this HSA and hope there's money left over and growing every year,ʺ because when you get to retirement – now, you can use it along the way obviously for health care expenses what it's meant for, but if we grow extra in there as well throughout the years, you could have 100,000, 200,000 dollars in here of tax-free money for your healthcare and retirement and we're all going to have a lot of healthcare expenses in retirement, so that gets me excited.
 
Trevor: The HSA is a fun…it feels like a hack, you know, like a financial hack. It's like a little secret.
 
Jon: Yeah, I'll be like, ʺhey, do you have access to an HSAʺ, and I've even had some of my high-income surgeons switch their health plan to the HSA option. They pay less monthly premium but the deductible is higher, but the tax savings on that when you're in the 35 percent tax bracket, it's really nice.
 
Trevor: Yeah, it's awesome. I just switched to an HSA a month ago.
 
Jon: And you probably got bitcoin, don't you?
 
Trevor: Yeah, I have Grayscale Bitcoin Trust. That's true, I do. That's always just like arguably the worst investment vehicle of all time.
 
Jon: Grayscale?
 
Trevor: I do not even remotely recommend it.
 
Jon: No? That was my first foray into helping clients into getting some kind of Bitcoin exposure.
 
Trevor: It's probably better than nothing but, yeah, it's been painful. That's a whole aside but it's a very mismanaged, closed-end trust; rife with controversy as well, so it's not my favorite. But I do own a little tiny, tiny bit.
 
Jon: Yeah, it's like the easy button and I own some too because I just can't bear to sell it with as much as I've lost over the last two years.
 
Trevor: That's exactly…I know. It's not my shining example of my investment abilities.
 
Jon: No, and I mean you've got so many options for doing Bitcoin in an IRA now.
 
Trevor: Yeah, there's so many companies – Swan Bitcoin which I love; great company, ethical group. They really help people to be educated on Bitcoin even before buying it. I mean, they're not trying to just like make a buck off you and they have an IRA option now too. GBTC, if you Google it, it's a ticker symbol, Grayscale Bitcoin Trust. Really, there's just a lot of articles. They're one of the companies that…with Gemini is owned by the Winklevoss…the Winklevi.
 
Jon: The Winklevi.
 
Trevor: It's a pretty well-regulated exchange.
 
Jon: I agree.
 
Trevor: I think they disclosed it fairly but like people lent out their digital assets for a yield return.
 
Jon: Guilty.
 
Trevor: Oh, yeah. I did temporarily. I pulled mine out. They did a great job. They said like this is being lent out like this is not in our control. I felt like there was full disclosure just like when I put my money in a bank. I'm probably more educated than the average individual for sure just out of my own curiosity but if I did, which I don't, but if I had over 300,000 dollars in the bank in a checking account, I wouldn't expect the FDIC or anybody to cover me for more than 250; that's the rule. So I know that the bank is like a hedge fund that just plays with people's money. I understand I could lose that money if I put it in there which is why I don't. The same thing goes for Gemini. But, anyways, they lent out that money to Genesis Group which they own Grayscale – I don't exactly remember which ones above which one but they're all together. There's a lot of lending that went on and they're the reason lots of things blew up last year; lots of company changes. And FTX, they went to them and it's real sketchy, so I don't love Grayscale but it's hard to get. MicroStrategy is another nice one if you're a stock person or if you're in an HSA. like I use Lively and they connect the TV yeah from my HSA. I use Lively.
 
Jon: For the HSA?
 
Trevor: Yeah, from my HSA. I use Lively as the account. Depending on what one you have like it doesn't have to be with your health insurance or with whatever bank they default to, so I use Lively because of ease of transfer to TD Ameritrade to trade within that account. I don't really trade. I just like buy a few things. That's why I'm in Grayscale. I'm basically like just really wanting to make excuses and defend myself for why I own a Grayscale because it's kind of embarrassing.
 
Jon: That's totally fine. That's what the show is all about. We'll explain what we do and the mistakes we made and we'll try to have links to all this stuff in the show notes too with the disclaimer: Obviously, none of this is financial advice. We're just telling you what we're doing.
 
Trevor: Yeah, and I'm not a financial advisor so I can't give any anyway. Yeah, basically.
 
Jon: So that's the HSA; really cool option if you can get it and it makes sense for your tax-bracket income level but I think, you know, when you're looking at health insurance as well, if you've got the option to pick within your employee benefits, you may have preexisting conditions that you'll want to see what's covered and some of the options you've got may cover this and some don't and this particular doctor you like and those are the kind of questions you want to look into. So that's kind of the gist of the health insurance side of things. You got anything to add?
 
Another Option: Flexible Spending Account (FSA) [0:19:38]
 
Trevor: No. I think there's the FSA as well which is another spending account. Some accounts have that. It's either or; I don't think there's such thing as an account. I'm not an expert on health insurance by any means but in looking for myself, I don't think they ever occur together. It's FSA or HSA. FSA has to be spent by the end of the year as it currently stands and has been in the past. So that's different than an HSA and I don't think either's in the investment vehicles for that reason with an FSA. Similarly, sometimes with an FSA, you actually get a stipend though like you might get 1000 dollars or something in an FSA account with a certain company. There's no such thing as like a rule where HSA is always the best. The deductible is too high and if you need to use your health insurance a lot, you know, if your employer offers a 6000-dollar deductible or a PPO with just payment as you go – why am I forgetting the term – when you go in and you just pay the doctor a fixed amount…
 
Jon: A copay?
 
Trevor: Yes, thank you. I'm a doctor; I should know my copays. I'm just blanking them the term copay. Yeah, so copays can be nice with different plans and then, you know, you don't have as high a deductible and all that kind of stuff. There's different thoughts on that. It's a tough decision because the person who's advising you is often if you're in a small practice, it's just your in-house person that just coordinates with the plan provider. This is where a financial advisor can actually be very helpful if they want to look over your health plans and your utilization of the health plan in the past help you make an informed decision because, maybe, if you're a urologist, it doesn't matter. You're making 700k. If it's 2000 a year or 10,000 a year, you might not really care if you're that guy but if you're making regular doctor money like 220, 250, it can be a huge difference in how much you're putting away into retirement per year.
 
Jon: Yeah, no, for sure, and if you're asking a financial advisor – I mean, this is general advice – but get a CFP because they're going to be at least educated and trained in insurance and benefits so you should be able to…especially if you're paying them a fee. Take it to them and say, advise me on this as well, assuming they're doing financial planning.
 
Trevor: Yeah, that's a really good point because like you might have a financial advisor assigned to you or available to you because you work at the hospital and they partner with Northwestern Mutual or something and they're just like assigned to your account like they don't care if they're going to save you some money, you know.
 
Jon: So that's health insurance. I'll say one last thing on the HSA. The employers sometimes will do – not a match – but they'll put a stipend or a direct contribution into your HSA every year as well, so something to ask, maybe something to negotiate…I don't know. All this comes back to us trying to get you guys to take advantage of free money that's on the table or understand, let's say, you're coming out of residency or fellowship and you're looking at two different job offers that the dollar amounts, the salary, might be the same but the benefits are very different, understand there's value in those benefits and it's all part of the compensation package and so if you are unaware of that, you might be kicking yourself thinking, ʺshoot,ʺ you know, or ʺI thought I took a little bit higher pay in this one,ʺ but it turns out the benefits were so good at the other one they outweighed it. So keep that in mind.
 
Retirement Plans: 401(k) vs 403(b) [0:23:04]
 
All right, on the retirement plan side, I'll kind of cut to the chase of what I hear questions either from clients or in lectures or dinners that we do just all across the board. There's 401(k)s and there's 403(b)s. Now, there's also 457s and 401As in those. I'm not going to dive too deeply into that. If you have something, you're going to at least have a 401(k) or a 403(b). The main difference is a 403(b) is typically government or non-profit; 401(k) is typically for-profit, usually. There's no difference to you as the employee. For all intents and purposes, same rules, same tax implications, same investment options, same limits, annual limits…all that kind of stuff. We'll just get that out of the way. But between different companies, different providers, different platforms, they can vary greatly in the investment options you have whether a company matches at all. When you're eligible to start, you could start day one sometimes. Sometimes they make you wait a year; usually they make you wait a year if they match, or if they do a straight-defined contribution. Defined contribution means it's not a match; they're just going to do, let's say, 4 percent a year for you, and then like sometimes they'll match on top of that. So a defined contribution is not contingent on what you put in but a match is. They're only going to put a match in if you put some in. And there's different formulas for that; there's no rule, so get up to speed on what that is. Again, the match and the defined contribution like Trevor was saying, those are real dollars so consider that part of your salary. So when you're comparing some different job offers, if there's a match or defined contribution into your 401(k), that's money. You don't have options on where you can hold your 401k typically. They say it's going to be here at Vanguard or Fidelity or Transamerica or wherever, which is fine, and your employer will also pick the investment lineup options that you have to pick from. By default, you're typically going to be putting what's called a target-date fund. It's based on your age assuming you retire at 65. Let's say, I'm 39. It's 2023 now, so I'll be 65 in 2048. So then my target-date fund…they usually go every five years, so it might be 2045 or 2050...it'll say on the name of that target-date fund which means the manager inside that fund way back in New York City is managing it to be aggressive now when they know you're 25 years away from retirement to conservative as you get closer to try to hold on to your money and we've kind of talked about that in the past of aggressive versus conservative, risky versus stable, etcetera, but just want you to know that's what they're going to put you into by default unless you pick something else. My encouragement to you – if you're young and listening to this which you probably are – pick something else, and just last night, I was sitting with one of my clients and realized we hadn't changed their 401(k) investments. Him and his wife were both in a target-date fund. One was Vanguard, one was Transamerica, and they were fine. Sometimes, they're low fees. Typically, they're higher fees because they're actively managed, and so what I did for both of them is we just went in and picked an S&P 500 Index Fund because they're like 35 or 36 and they got 30 years until retirement and it's cheap and that's one thing I know. That's one thing we could control was the fees. So we picked that or VTI or something and I said, just leave it here for a few years, 10 years whatever, and then we'll reassess. Plus, the target-date funds are never all equity. They're always going to have – no matter how young you are – some like bond and fixed income exposure. These guys at age 35, they had 10 percent in bonds which, personally, I don't think there's a reason to have any bond exposure unless you're within 5 to 10 years of retirement, but that's just my general opinion.
 
Trevor: That's interesting. How do you read that? Is this like specific to them? With this couple, they just seem like more traditional investors. They want to set it and forget it. That's that.
 
Jon: Yeah, and they're 401(k). They were kind of…and I've done some where we'll spread it out a little bit if I see some good cheap indexes and options. For them, they didn't have a ton. I'll say, ʺwell, we've got a good Vanguard 500 Index Fund.ʺ But, honestly, so I'll tell you, here's what I can give you – it's not advice – but here's how I advise myself: I'm kind of trying to shoot for the moon still at this point so I'm in like small-capped international emerging markets like stuff that does well over the long-term. Now there's some extreme fluctuation; I could be down 30 percent one year. I don't care.
 
Trevor: You'll trade volatility for long-term performance.
 
Jon: Yes, absolutely.
 
Trevor: Because you know you won't sell.
 
Jon: Yeah, right. Sometimes, I've made mistakes and sold too soon on some stuff and maybe that'll be a fun show we can kind of peel back the onion on our own investments, and that'll be kind of weird. Wouldn't that be interesting? Feel kind of exposed?
 
Trevor: Yeah, that'd be interesting for sure. I'm willing to listen to you go through that, if you want to.
 
Jon: Yeah. Sometimes, I'll be honest, there's not a real rhyme or reason to it other than it'll be…yeah. I've got some individual holdings so I have a SEP IRA because I'm a business owner and I don't make enough to do a solo 401(k) but that's another conversation. But as I think through it, I've got some interesting holdings like I've got one pharmaceutical company that I know a little bit about and I'm just kind of riding that one. I've got an exchange-traded note that's covered calls on U.S. Oil Index which is, again, super random stuff I would never advise anybody on, but if you're curious, I'll show you with the preface this is not financial advice.
 
Trevor: Interesting.
 
Jon: It is fun being an advisor and knowing more than most and then playing around in your own accounts.
 
Trevor: Yeah, you just deal with small amounts, I imagine.
 
Jon: Yeah.
 
Trevor: At that point, you're like hobbying and you want to…I mean, people can do what they want with their money, but if you're trying to build wealth, it has to be very, very small quantities and equated depending on what your level of experience is. If it's minimal like most people trading for fun on Robinhood, that falls pretty…it's not considered by the government gambling but it becomes it pretty fast. If you're trying to build a wealth over the long-term, you know, protecting your capital is rule number one. You learn to protect your capital by practicing and by making mistakes so when you're young, it's the best time to be losing money or thinking you have a higher risk tolerance like you just mentioned, 30 percent drawdowns. I think the average person can handle like 15 percent maybe. I don't know if they've done studies on this but just ballparking it, I'd say most people can handle 15 percent drawdowns, and like maybe once a decade, their pooled portfolio that maybe they can handle 30 percent drawdowns. But, you know, we're hitting 30-plus percent in 2008 and 2009 and I know not an insignificant number of doctors specifically who pulled out everything and, you know, ʺgot out of the marketʺ and then we had the biggest bull run in history for 12 years in a row. And then some of them got into, say, silver or gold or precious metals and now those are going on a run so it's like, were they wrong? It's super interesting because it's always just like what's your time horizon? Performance is always start date and end date and you got to compare apples to apples and so you can be a genius one year and you can be the greatest fool the next year, just depending on how you look at your time horizon then.
 
Jon: It's all on paper until you see it, right.
 
Trevor: Yeah.
 
Jon: Your losses are only on paper.
 
Trevor: You're right. The volatility is such an individual thing which is what makes financial advising still interesting as a profession which you're in and I'm not, so I get to be, Monday morning, quarterbacking 24/7…that's great. So, but…yeah, go ahead.
 
Jon: I'll tell you, right…obviously, we're digressing on this so we'll come back to it…but to help with myself, I set up…you got to understand the psychology and know yourself well enough to know to not get into it, not get overconfident for one, and when I buy something, I kind of have in mind where I wanted to hit when I'm comfortable selling it and that kind of stuff and I love…like once a year, I dump in some money at tax time for my SEP IRA because my CPA says, 'here, if you don't want to pay a huge amount in taxes, you need to put this much in a SEP IRA.' So, it's okay. If I do that and then I'll have a bunch of cash sitting in the IRA and that's when I can play with stuff or find something that I think is low and buy it and see how it goes over the next 6 to 12 months or something. But if not, and this is a 39-year-old talking, I've got a good chunk of money sitting in Schwab's money market that's paying 4.65 percent right now. It's like its fine.
 
Trevor: Yeah, you and everybody else, I think.
 
Jon: Yeah, because that's okay too. But, anyway, 401(k) or 403(b), you might get a match, you might get defined contribution. These same thing; it's tax-deductible or pre-tax going in unless you're doing a Roth 401(k) option which may be a good option for you – that's up to you – and there's also after-tax contributions which I'm not going to get super into that but it's kind of the middle ground between pre-tax and Roth dollars so you can put after-tax contributions. So those are tax-free forever, but then the growth on those will be taxed. Anyway, some plans may offer that option, some may not, but the rules on a 401(k), you can take out a loan on your 401(k) – that can be nice if the plan allows it – and you can't take the money out without paying taxes plus a 10 percent penalty before you're 59-1/2. Those are a huge piece of your financial plan and can give you a huge boost because that defined contribution the employer may make, the match that they may offer, the low fees that they may have…all those things can make or break a retirement plan. If you're planning for retirement looking at what if I put in a 401(k) with no match or contribution and what if I put money into a 401(k) with a match and contribution, how does that look over 30 or 35 years? It could be really good, so you got to evaluate that and figure that out for yourself.
 
Other Ancillary Benefits: Group Life Insurance [0:34:30]
 
So, besides retirement plans and health insurance, there are several other ancillary benefits you might call them. Group life insurance is one. Again, pretty basic; you'll get life insurance as long as you're at the employer. They typically cover a multiple of salary. The reason they say that is because everybody's got a different salary and everybody's got a different benefit amount based on their salary. Instead of offering everybody 100,000 dollars, they may say…well, we know as we've told you here at Financial MD, you should have 8 to 10 times your income in life insurance so when it comes to employee benefits then you're able to kind of gauge that because they'll offer one-time salary to – I've seen four or five times salary in life insurance – and there may be a cost to it; there may not be. Usually, they've got like basic – they call it basic life insurance – and then they've got supplemental that you may have to pay a little bit for but it's not much and so I don't think I would be out of line I'm recommending that you get as much life insurance as they'll offer you even if you have to pay a few bucks because it's going to be typically cheaper than you'll find it anywhere else. Now, every once in a while, an employer will offer a life insurance policy like a whole life or a universal life that you can take with you. I don't know if that's a good idea or not for you but I don't see it very often. I did have one client at Ochsner in New Orleans Hospital System down there. They offer a group variable universal life insurance policy which was interesting. That's a policy that can build up cash value and be invested in the market inside of it but other than that, I don't see that kind of stuff very often. You may also see child and spouse life insurance and that can be nice again – just stuff that's free or cheap that is part of most financial plans. You need life insurance for the most part especially if you've got dependents or people that depend on you for finances. There's really not much other flexibility when it comes to group life insurance or employer-provided life insurance. I will tell you it's typically, again, a piece of your life insurance.
 
General Recommendation: Get Enough Life Insurance Outside Of Work [0:36:48]
 
My general recommendation is get enough life insurance outside of work so just term life insurance so that if work took those away or you lost your job which they can, you've still gotten enough life insurance outside of that.
 
Trevor: What do you think about locking in your health on life insurance before you have dependents?
 
Jon: I typically think it's a good idea.
 
Trevor: I haven't done it personally but I feel kind of silly for not having done that.
 
Jon: Well, there you go. This is financial advice for Trevor then.
 
Trevor: I haven't done it because I don't have dependents and I've got enough money set aside that my family could bury me. It wouldn't cost them, you know. Like I'm definitely not ʺself-insuredʺ life insurance-wise because some people they get to like net worth of a few million bucks and they're like, 'okay, do we need another million bucks,' when I die.
 
Jon: Just extra.
 
Trevor: It's still it's only like what, maybe, 1000 dollars a year or something and you get more however you manage your million.
 
Jon: Yeah. I mean, let's say you've got a million bucks of 20-year term, it might be 70, 80 bucks a month, yeah; 1000 bucks a year so.
 
Trevor: Yeah, so it's 20 grand over your lifetime to cover your partner for a million, you know, at whatever point…I don't know. That's in the personal category, I guess, like all this but it's interesting to think about. If I ever have a million dollars, then maybe I can think about it. In the meantime, I should probably lock in my health and get some term.
 
Jon: That's what I'm saying. Even 500,000 or a million will make a difference if you end up needing it one day.
 
Trevor: Yeah, pay off a house or something.
 
Jon: Right, yup.
 
Trevor: Yeah, it's a good idea.
 
Jon: For most people, like I said, 8 to 10 times your income is what you want to shoot for total; the vast majority of that in individual term that you went and got out on your own and then the perks you have at work are just that; they're perks, they're nice, and they're extra and you'll be glad you have them if you're dead.
 
Trevor: Your family will be glad. You'll be glad.
 
Jon: Your family will be glad. You'll be dead. I don't know how you're going to feel. That's another episode for another time on philosophy…religion.
 
Trevor: Yeah, that's right.
 
Jon: Lastly we're going to touch on disability insurance. You know how we feel about disability insurance here at Financial MD. We're both passionate about it.
 
Trevor: We're for it.
 
Disability Insurance: Get It As Soon As You Possibly Can While You're Young And Healthy And It's Cheap [0:39:07]
 
Jon: We're for it. Thumbs up. Get it as soon as you possibly can. I'm talking to you, med students and first-year residents. Here's one of the dumber things that I often hear: well, I've got disability insurance through my residency program. Yeah, you do and this isn't dumb; it's just ignorant, because you just don't know. I get it. That goes away when you leave residency and you've got 100 percent chance you're going to leave residency so you got to get something while you're young and healthy and cheap. I think we've sent that message enough. If it's your first time listening, get disability insurance. Shoot us a message and ask us about it, either Trevor or I. We love talking about it and it's super important and you'll hear that everywhere from us to the White Coat Investor to The Physician Philosopher to anybody. So, get it.
 
Trevor: Yeah, it is the most no-brainer purchase of your life that everyone puts off for no good reason. Like we all put off lots of other important things because you're insuring your car right now in case it dies. It's probably if you're in med school that your car, it's probably only worth 10 to 15,000 dollars max and you're paying like 1200 dollars a year if you've got cheap insurance on that and this is like in med school, it's going to be maybe 50 to 100 dollars a month – something like that – and then in residency, it might be probably similar and then you get out and in practice, it's typically 1 to 2 percent of whatever you're making at the time so. It's super cheap. It's not going to have a long-term financial impact just like if you wouldn't have worked a summer job when you were 16 years old and you made like maybe 1000 dollars in the summer. You traded your whole summer for 1000 bucks. Well, in residency, you can trade 500 to 800 dollars a year and lock in your health and make sure you're protecting your income which is probably worth 15 to 20 million dollars over your lifetime.
 
Jon: Pretty good numbers, yup.
 
Trevor: It is the best trade. If you're on Robinhood and you don't have disability insurance and you're a resident or a med student, you are making the worst trade. I mean, the best trade of your life is locking in your career and I've said this before, it should be called income insurance. It should be called income Insurance. You're insuring your income. It's the trade of a lifetime. I mean, you will never out trade that on Robinhood or with Bitcoin or anything.
 
Jon: What's interesting is even in the last month, I've seen an article from The Physician Philosopher about the not getting disability insurance is one of the worst financial decisions and then I just did a lecture for McLaren's OB program in Lansing and during my Q&A at the end, they said what's the most common financial mistake you see which is really interesting question that I don't get that much.
 
Trevor: Interesting question.
 
Jon: I said, you know, this may seem odd but it's probably not getting disability insurance because I've been doing this long enough that I've seen enough residents or attendings wait and then they go to get it and they either can't get it or it's got exclusions on certain body parts or things that they're screwed honestly.
 
Trevor: Yeah.
 
Jon: I've had multiple residents try to get it – I'll wait until I go into practice and I've got some money, I can't afford it right now – okay. So we do and then they get a decline letter and then they're f*cked for lack of a better word because now their income is exposed because once you're declined, that goes on your record.
 
Trevor: It's very hard to get it again in the future.
 
Jon: Yes.
 
Trevor: Yeah, I mean you got COVID. Everybody's depressed, anxious, and then substance abuse rates are like through the moon or through the roof – maybe they're through the moon; they're through the roof. I mean, it's affected healthcare workers probably more than the average individual. It's like you got to think about life is hard, I mean, and things happen outside your control. What you can control is getting insurance.
 
Jon: Yup.
 
Trevor: I mean your anxiety level will go down I guarantee if you get disability insurance because you are setting yourself up to have a safety net. Your family might not be your safety net. Your own abilities which have carried you so far are unlikely for 100 percent of the population to be their safety net. A lot of people struggle with health issues and just to know that you're covered is it's peace of mind. I highly, highly recommend it. I have had friends thank me for helping them take this step because they put it off and they just feel like stable and rock solid for their family's future because of just this simple step. It's not tough to get it. The longer you wait, definitely, the harder it is to get.
 
Jon: Change my mind.
 
Trevor: Change my mind, that's right.
 
Jon: So when it comes to group disability insurance, you'll see LTD and STD – not sexually transmitted disease but short-term disability. That means typically anywhere from 12 weeks to 24 weeks, they'll offer short-term disability which is usually measured on a per week basis and is often…sometimes it's 100 percent of your income for 12 weeks or 90 days, and that's why we recommend on your personal disability income insurance, you get an elimination period of 90 days because typically your short-term disability will cover that if you've got it. Then group long-term disability kicks in and, again, this is often free or cheap and they measure how much coverage you have based on a percentage of salary. Most common is 60 to 65 percent of your monthly income – gross income – and sometimes you can buy up extra and, again, consult with your financial planner if you should do that but take the base of whatever they give you and the extra might be for you cheap, and again, you'll be glad you did. You can't customize these things – group life, group disability…all these things. You don't get to customize it. You get what you get and you don't throw a fit. But it's a perk, it's a benefit. We've talked about the value of that.
 
A Little Tidbit: If You Pay Your Own Personal Disability Insurance, It's Tax-Free Upon Claiming And Collecting Benefits [0:45:13]
 
Now disability insurance should you go on claim and pay out, if it's group employer-provided disability insurance, if they pay, you pay the taxes on the benefit if you go on claim. If you pay for your own personal disability insurance, it's tax-free if you were to go on claim and collect the benefits. So that's a little tidbit to know. We get that question a lot. Now, something to know the group disability plan may be shitty and so you've got to try to get as much on a good personal policy through Principal or Ameritas or Guardian that you can get there. Sometimes they're nice but half the time they're not even true on occupations so you got to be aware of that as well.
 
Trevor: If you can't take the policy with you, you're not going to have that peace of mind. For me, the product you should get is something that you own. You can take with you anywhere. I mean, otherwise, you're just always tied to your job and the whims of Human Resources. So, if your goal is ensuring your income and protecting your family and your future, you got to control as many components as you can so you got to get your own policy.
 
Jon: Yeah, and they'll both pay out if you go on claim so you can get a small cheap policy if you've got a really good group LTD at work and then if you go to another job that doesn't have great benefits, you can increase the benefit on your personal one. That's called a future increase option or a benefit update. So that's the other critical piece you've got to make sure it's on there but if it is then you can expand and contract it depending on what your jobs offer throughout the year.
 
Trevor: That's right. Examples can be helpful so let's say you're taking home 20,000 dollars a month and your group disability covers and it's never going to cover everything that you're taking home because you're not going to need it all and they're just not going to cover 100 percent. Exactly, right, so they don't want to incentivize that. So let's say they cover like six grand a month, okay, with a group disability policy. You could cover yourself with your own policy for 1000 to 2000 and there are limits to how much they'll do, again, because the combo amount is what they don't want to overinsure you. So, that's just a good example. Say, it's like 6000 group disability. Well, you might be able to tack on like 2000 more or something like that and then you go somewhere else and you lose that. You get a new job. You move into a different state. You can take that 2000. You can probably bump it back up to like 8000 because that's what they were willing to like totally, you know, total insure as up to 8000. Well, great. Hey, thanks John. I've got to run here and that's good catching up and talking some shop. Hopefully, it's helpful to some folks. We're always open for questions. I am available at trevorsmithmd@gmail.com – that's my forever email – and feel free to shoot me any questions.
 
Jon: Yeah, and guys, give us a review and a rating as well please on this podcast. That helps a ton. Comment, like. Get the message out and get the word about financial education for young physicians. Let's continue to help stop physicians making dumb financial decisions.
 
Trevor: That's right.
 
Jon: This was The Financial MD Show. Thanks for joining us. We will see you next time.
 
Trevor: See you Jon. Thank you.
 
Jon: See you later, bud.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
Employee benefits definition – https://www.questionpro.com/blog/employee-benefits/
Understanding Obamacare – https://www.ehealthinsurance.com/resources/affordable-care-act/understanding-obamacare
Life insurance retirement plans (LIRPs) – https://www.bankrate.com/insurance/life-insurance/life-insurance-retirement-plans/
Disability Retirement – https://www.dgs.ca.gov/OHR/Resources/Page-Content/Office-of-Human-Resources-Resources-List-Folder/Personnel-Operations-Manual/Disability-Retirement
What Is 401(k) and How Does It Work – https://www.investopedia.com/terms/1/401kplan.asp
What is a W2 Employee – https://www.checkcity.com/taxes-101/what-is-a-w2-employee#:~:text=A%20W2%20employee%20is%20a,name%2C%20%22W2%20employee.%22
What is a vesting schedule? – https://www.capitalone.com/learn-grow/life-events/vesting-schedule/
Preferred Provider Organization (PPO): Definition and Benefits – https://www.investopedia.com/terms/p/preferred-provider-organization.asp
High Deductible Health Plans (HDHPs) & Health Savings Accounts (HSAs) – https://www.healthcare.gov/high-deductible-health-plan/
Grayscale Bitcoin Trust – https://grayscale.com/products/grayscale-bitcoin-trust/
What is Swan Bitcoin and how does it work – https://cointelegraph.com/news/what-is-swan-bitcoin-and-how-does-it-work
What does FTX stand for? The Collapse of FTX – https://bitkan.com/learn/what-does-ftx-stand-for-the-collapse-of-ftx-9171
MicroStrategy news – https://decrypt.co/125511/microstrategy-buys-more-bitcoin-break-even-price
Using a Flexible Spending Account – https://www.healthcare.gov/have-job-based-coverage/flexible-spending-accounts/
What is a 403(b) plan? Retirement – https://www.forbes.com/advisor/retirement/403b-plan/
What is a 457 Plan? – https://www.investopedia.com/terms/1/457plan.asp
What are 401(a) Plans – https://smartasset.com/retirement/what-is-401a
Target-Date Funds – https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-6
Simplified Employee Pension (SEP) IRA: What it is, How it works – https://www.investopedia.com/terms/s/sep.asp
Exchange-traded notes: The facts and the risks – https://www.schwab.com/learn/story/exchange-traded-notes-facts-and-risks
What is a covered call? – https://www.bankrate.com/investing/covered-call-options-strategy/
What is a Roth 401(k)? – https://www.bankrate.com/retirement/roth-401k/
Whole Life vs Universal Life Insurance – https://www.progressive.com/answers/whole-life-vs-universal-life-insurance/
What are the main differences between STD and LTD benefits? – https://www.awaxmanlaw.ca/disability/comparison-ltd-std
Disability Insurance Future Increase Option – https://www.steadfastagents.com/disability-insurance-future-increase-option/
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 023 - How Things Are Going In Your Finances

Summary:
What Happened To The Silicon Valley Bank? [0:02:13]
FDIC: Where Do They Come In? [0:05:33]
Other News: Stocks Are Holding Steady [0:07:10]
As A Resident, What Does This Mean To You And Your Personal Finances? [0:08:05]
Should You Buy A House? Student Loan Status During These Times [0:11:21]
Interest Rates Keep Rising – A Good Time To Put Your Money In A High-Yield Savings Account [0:14:25]
Download The Financial MD App – Its Free! [0:16:49]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
Welcome to the Financial MD show. Today, your host is me, Jon Solitro. Today, we will be without Dr. Smith. He's a busy guy and I think just the effort to put something out because it has been way too long, we're going to go ahead and get something out. So, welcome to today's episode. Today, we're going to talk about how things are going in the market today, how things are going in your finances, and how things are just going. We need an update; a lot has happened in the world of finances. Some changes in personal finance, some changes in the economy as a whole, but updates are always good. So, let's dive in.
 
First, we're going to touch on some of the more pressing things in terms of banking industry right now so if you're listening to this – I don't know what the date is in your time – so, hello future you. Hopefully, things are going better when you're hearing this, but they're not going terrible right now.
 
What Happened To The Silicon Valley Bank? [0:02:13]
 
But the most news in the last couple of weeks has been Silicon Valley Bank essentially going belly up. First Republic Bank – same thing – but a little bit different thing happened. So, the gist of it is in terms of Silicon Valley Bank, the regulators came in and essentially bailed them out. The FDIC insurance, which is the Federal Deposit Insurance Corporation, which is sort of a government agency; that's where all of your cash is insured at the banks. Ever since the Great Depression essentially, you've had insurance on cash in the bank, so if the bank had gone out of business and your account balance said zero, you'd get reimbursed up to 250,000 per account type per account holder. So, we won't go super in-depth on that but if you had a joint account, you had a single account then you had an IRA and then you had a bunch of other things at this bank, that's how it would be protected. So, the FDIC came in and did that but there were a lot of other issues with Silicon Valley Bank that weren't necessarily as public but they all contributed to what happened to the bank. The bank was mainly involved with startup companies and venture capital as their clients so they had a lot of cash sitting; they had cash moving in and out at any given point in time; and so that being the case, banks are required to have a certain amount of cash on hand or some sort of assets to stay liquid because what they do with most of your cash – which, if you don't know this, you should – when you put cash at a bank, that bank is able to lend out that cash. They'll show you in your account that they have it and they can get to it but they're in the business of lending out money, and Silicon Valley Bank is no exception. And so they were a little upside down – a lot upside down, let's be honest – in the assets that they had to cover a lot of those liabilities. So when people started pulling money out, a lot of the assets they had to back up that cash was in U.S. government bonds which normally would be fine but in an economy like we have today where interest rates have gone up, they have bought a lot of these bonds a year ago with cash deposits that they had, so the bonds they owned were paying, let's say, 1 percent or 2 percent when interest rates were really low. So then new bonds come out this year paying 4 percent on the two-year – 4.5 percent sometimes – which means the value of all the other bonds out there goes down. So if they had to go sell this on the open market, the old bonds that they had, they wouldn't be able to get what they needed to get or what they thought they had. So, as new bonds are coming out, the value of their old bonds is dropping down, down, down, down so their balance sheet to their books are getting lower and lower and lower and they reach the liquidity ratio that was unacceptable, and it just became this domino effect. People started pulling money out to the point where they couldn't give them their money.
 
FDIC: Where Do They Come In? [0:05:33]
 
So FDIC government comes in, and normally, what we all knew was that 250,000 would be insured; anything over that was your SOL. But the government went ahead and you could say they overstepped or they didn't, but they said – yeah, every depositor will be covered; we've got money here somewhere that we've found. But let's face it – this is a podcast so I'm just going to give you my opinion – I think they overstepped. They have essentially effectively raised the FDIC insurance limit because of precedent. So like an illegal case when they say – well, the law may say this but this court ruled on this five years ago – so that's a precedent that says we should get this. So now should this ever happen again, you can go back to the FDIC and say – well, I know you say 250,000 dollars on paper is protected but I lost a million and you covered this guy at Silicon Valley Bank that had a million that he lost – so there you go. So you could say with precedent, they've effectively raised the FDIC limit to who knows what, and I think they overstepped. They just did whatever they wanted to do with money from somewhere and, of course, said it's not going to affect taxpayers but I don't see how it could unless the government has some other source of revenue that they started in the business of – I don't know. So, that's what's going on.
 
Other News: Stocks Are Holding Steady [0:07:10]
 
There other lesser news: stocks are kind of holding steady; typical ups and downs that's been going on for the last year or so. It was about this time when things started to really tank last year, going down in 10, 15, 20 percent depending on what you had and we're starting to see some recovery this year but it's not drastic but that's usually how recoveries go. Markets go down faster, then they go up but they have always come up since the beginning of time at least in terms of the S&P and the Dow Jones and the Nasdaq and those kind of things. So, we're going to talk a little bit about what you should be doing with that and how it affects you personally because again this isn't a show about the economy, it's not a show about investing per se, but it all comes back to what does this mean to you as a resident, as a young physician, and your personal finances.
 
As A Resident, What Does This Mean To You And Your Personal Finances? [0:08:05]
 
So, markets kind of doing okay. Housing market is starting to level a little bit. You're not seeing the bidding wars and the crazy high offers and all that kind of stuff like we used to a few months ago. Last year was nuts; year before was nuts. We are seeing some numbers with the CAPE Shiller Index with some other housing price indexes that we can see across that are starting to look a lot more normal. Now, the supply certainly isn't there and that's going to be dictating prices as a whole so the supply of houses available – new houses being built, houses on the market – is not what it needs to be to have things come back down to where they need to be and I get asked the question all the time: When will housing prices go back down to where they were? Should I buy a house now? Should I wait until housing prices come down? I don't know. There's really no way to know. All I know is the supply and demand is the same or is not what it means to be to get the prices back down there and the prices may never go back down to where they were. So, we have to be aware of that and just be ready for that, that may be the case, and this may be where prices are going to be. They're going up slower, but we all know that real estate goes up over time. It just depends how fast or how slow that goes up. There have been cycles where it's gone down, but should you bank on that when it comes to buying a house? I don't know. Rents are slowing down as well. Those rose quickly. They're pretty correlated so you can say, you know, because it gets expensive to buy a house, people decide to rent, so the more people renting so then rent goes up so the more people want to buy a house so it's this vicious cycle – housing and housing – which brings us to interest rates; essentially because housing prices have gone up so much because unemployment is so low; there's so many jobs out there because prices are going up on eggs, groceries, electricity, gas, what have you – all those things necessary to live; that's inflation. We've talked about that before; check out the Didactic Minute videos that we've done to see more information on that. But because of that, the Fed over the last year has been raising interest rates and a lot of people in the housing industry have hoped that that raising of interest rates would curb housing prices, and again, it slowed it a little bit but I can't say that it has curbed it to any great extent.
 
So, if you're transitioning from residency into attending or fellowship into an attending and you want to buy that house, should you wait? I don't know that the housing prices will drop. Should you wait until interest rates go down to get a more affordable mortgage? Maybe, but we don't know when that's going to go down either. If we look back in the 1970s and 1980s, there was a period of 10 years when interest rates were over 10 percent, and right now, they're around 7, 7.5 percent depending if your credit's decent and you get a 30-year mortgage.
 
Should You Buy A House? Student Loan Status During These Times [0:11:21]
 
So, here's the one thing that we could do. If you buy a house and rates go down, you can refinance later. Now, the issue becomes the cost of refinancing, the fees when you do that but, you know, if you got a million-dollar house or a 500,000 house becomes a lot more advantageous to refinance and get a lower interest rate. So, interest rates have dropped which makes refinancing student loans also difficult because if you have a 6.5 percent federal student loan which most of you do as you're waiting on Public Service Loan Forgiveness or you're just waiting for payments to start, there's been hardly any refinancing in the last two and a half years since they put a permanent or a universal deferment on federal student loan payments and interest accumulation. But as soon as that starts back up again – I don't know when at this recording of this podcast episode – but whenever they do, that's going to be the time when refinancing starts, but those refinance rates with SoFi and DRB and Laurel Road and Common Bond and Earnest and all these companies are based on that SOFR which is called the something overnight button rate – I don't know – but the Fed's interest rate, the Wall Street prime rate, all those things; what is prime – that's another conversation – but that's what mortgages are based off of and the Fed Funds overnight rate is what the Federal Reserve raises when they raise rates. That's what mortgages are based on and that's what private student loans are based on. So, two years ago, you could refinance all day long at 2 percent, 3 percent, 4 percent which is great when you're refinancing 300,000 dollars that's now at 6.5 percent – that's a no-brainer – especially when there was no cost to do the refinance. So right now, I haven't seen in a couple years but I have to imagine that student loan refinancing rates are up near 5 or 6 percent which makes it, you know, again, really no point in refinancing, but still a case-by-case basis of whether that makes sense. If you're going to be eligible for Public Service Loan Forgiveness which we started to see, we were just talking to a physician couple yesterday that was on the verge of getting their student loans forgiven. So I've been seeing several now of our clients getting their Public Service Loan Forgiveness, which is fantastic and a glorious day, and we've been waiting for that for a long time. So, that is a thing that's been happening and it's been real exciting to see. So that's the status of the student loan world, the mortgage world, housing prices, stock markets, banking – that pretty much covers it, would you say?
 
Interest Rates Keep Rising – A Good Time To Put Your Money In A High-Yield Savings Account [0:14:25]
 
Another thing just to keep in mind, though, interest rates are rising which we've said affects student loans, affects mortgages, but it also affects your credit cards. It affects your purse. It affects any debt. So if you've got credit card debt, they may not tell you because all they have to do is give you a range. When you first get that credit card, it'll tell you our interest rates will range from 70 percent to 29 percent and so if that falls anywhere in there, they may not tell you when that rate's going up. So if you're holding money on a credit card, maybe a good time to go ahead and pay that off which, on the bright side of interest rates going up, maybe a good time to take some of your cash and instead of keeping in a savings account – emergency funds too – move it into a money market account like at Charles Schwab or TD Ameritrade where you could get 4.5 percent per year interest on your cash all day long and it's available today or tomorrow just like cash is. So, be looking into that. You've probably seen advertisements for high-yield savings accounts like American Express or Marcus or Chase and those can be good as well. They're not going to be quite as high as the money markets – more like 3.5, 3.75, maybe 4, depending on where you go – but you're going to want to look into those as well if you've got some cash sitting. So if you've got some cash sitting, one, good for you; two, make sure it's getting the best rate possible. Again, it's March 31st today. You've still got 15 days – 17 days, I guess; tax day is April 17th this year – to get your Roth IRA maxed out for last year; for your backdoor Roth for last year. So, reminder to do that whether you're at Betterment or Vanguard or Fidelity or wherever you are, get that done. if you've got some cash and you've got over and above your emergency fund, you're three to six months of your fixed expenses like we talked about, then, by all means.
 
Other news: We had a graduate resident dinner in Royal Oak last Wednesday that went great; went to D'Amato's in downtown Royal Oak and spent a couple of hours just talking about the transition between residency and graduating into an attending and what to do with some of the personal finance decisions that come up. So, if you're in that area, let us know. We do two or three of those a year to try to educate as many graduating residents as we can.
 
Download The Financial MD App – Its Free! [0:16:49]
 
What else is news? I'd say that's the bulk of it. So, that's our update. Hope that helped. I would say be sure to do a couple of things. Number one, download the Financial MD app – that's a good place just to get started to help you making smart financial decisions. The personal finance app helps you budget, puts a quick little financial plan together for you. It's free right now, so why not. Get us on TikTok, Instagram, Facebook. Join the Financial MD community which is doctors only; trading financial thoughts, suggestions, tips. We post resources all the time there so get on that Facebook group. It's private and for doctors only. So that's a good place to make sure you're getting some good information and ask some questions. And always check out financialmd.com for our blogs and our updates. Subscribe to the YouTube channel here for this podcast and if you're on Apple or Spotify or Amazon or wherever you get podcasts, please leave us a review and give us the 5 stars and just, hey, shoot me a message. Let me know what you like, what you want to hear, any topics in the future. Comment on this video. Please like and subscribe. Be a part of getting the word out to young physicians to avoid doctors making dumb mistakes with their money.
 
This is John from Financial MD, we'll see you next time.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
About the FDIC – https://www.fdic.gov/
What is liquidity ratio? – https://corporatefinanceinstitute.com/resources/accounting/liquidity-ratio/#:~:text=A%20liquidity%20ratio%20is%20a,to%20cover%20its%20current%20liabilities.
S&P Global Ratings – https://www.spglobal.com/ratings/en/
Dow Jones – Business & Financial News, Analysis & Insight – https://www.dowjones.com/
Nasdaq: Stock Market, Data Updates, Reports & News – https://www.nasdaq.com/
CAPE Shiller Index meaning – https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio#:~:text=The%20cyclically%20adjusted%20price%2Dto,average)%2C%20adjusted%20for%20inflation.
Public Service Loan Forgiveness (PSLF) – https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service
SoFi | Refinance Student Loans – https://www.sofi.com/refinance-student-loan/
Laurel Road | Student Loan Refinancing – https://www.laurelroad.com/
CommonBond | Student Loan Refinancing and Consolidation – https://www.commonbond.co/refinance-student-loan
Earnest | Low-Interest Loans Designed For You – https://www.earnest.com/
Secured Overnight Financing Rate (SOFR) Definition and History – https://www.investopedia.com/secured-overnight-financing-rate-sofr-4683954
Prime Rate definition – https://www.investopedia.com/terms/p/primerate.asp
Overnight Bank Funding Rate – https://www.newyorkfed.org/markets/reference-rates/obfr
Charles Schwab | A modern approach to investing & retirement – https://www.schwab.com/
TD Ameritrade: Online Stock Trading, Investing, Brokerage – https://www.tdameritrade.com/
What are high-yield savings accounts? – https://www.cnbc.com/select/high-yield-savings-account/
Betterment: A better way to invest – https://www.betterment.com/
Vanguard: Mutual funds, IRAs, ETFs, 401(k) plans, and more – https://investor.vanguard.com/corporate-portal/
Fidelity Investments: Retirement Plans, Investing, Brokerage – https://www.fidelity.com/
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast –
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586

Ep 022 - The Benefits of 1099

Summary:
Pros And Cons Of Doing 1099 Work (Being An Independent Contractor Or Business Owner) [0:08:17]
Get Started On That 401(k) [0:11:01]
Super Roth – A Third Contribution To Your 401(k) [0:13:25]
Another Big Benefit [0:18:06]
By Being A 1099, You Can Buy The Insurance You Want (Plus Others!) [0:20:27]
Be Sure To Get A Financial Planner Who Always Touch Base With You Regularly [0:24:20]
If You’re Doing 1099, Don’t Forget To Pay Your Taxes! [0:27:55]
 
 
Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.
 
Pros And Cons Of Doing 1099 Work (Being An Independent Contractor Or Business Owner) [0:08:17]
 
Jon: Well that speaks to, I think, our topic today. We’re going to talk about alternatives like being an independent contractor or a business owner and the pros and cons of that and one of the big ones is you control your schedule a lot better – for the most part. Now, there’s certain like ER jobs where they give your schedule. You got to do it, but it’s still a 1099 pay but a lot of times if you’re doing shift work or locums or even self-employed, you’re kind of starting a little small practice, you got more flexibility on the schedule then.
 
Trevor: Yeah, there’s a lot of different ways to do 1099 work. Some people, it’s just picking up extra shifts and if it’s totally ad hoc, you get full freedom to just not do it for a month or two. Some places require a minimum and then they have a schedule, seniority of who gets to choose first and also and your stuck, not going out of vacation, six months down the road, just because you want to pick up some extra shifts here and there and you’re contractually obligated. All those like everything comes down to contracts and making sure you know what you get yourself into, but there’s a lot of money out there for a little bit of extra work on the side. You were just talking about how. We were talking about tax stuff. There are tax things you can do. That’s really, really getting into the weeds, I think, and even though or S corp and different things, you can read articles on that because it is pretty highly specific and even some of those benefits have changed over the years. They’ve changed enough like you have to talk to your CPA and find out if that’s even a benefit but the real one we were just chatting about that everybody loves is being able to do a solo 401(k). If you’re main gig is 1099, meaning, you’re an independent contractor, you run your own business and someone is paying you as a consultant to come in and do some work – medical work or otherwise – that is definitely a nice thing to be able to put money into your retirement account. It’s a super powered way of putting money away. If it’s at all possible basically to be 1099 or W-2, for me, I always want to be 1099 especially like last year, I didn’t have a W-2. I was just doing contract work, locums.
 
Jon: Okay.
 
Trevor: And that let me put away most of my salary other than what I lived on into my retirement account because you can put in like almost $60,000 between your own personal then you’re your own employer so then you can put in another almost 40,000 so 20,000 and then 40,000 roughly. These numbers vary by year and it doesn’t matter too much but it’s in the range of 20 yourself – that’s called an employee contribution – and then an employer contribution. For solo 401(k) can be another 40,000 as long as you haven’t put money into any other retirement. That’s like the total max amount you can do.
 
Jon: Yup.
 
Get Started On That 401(k) [0:11:01]
 
Trevor: And that’s one of the best perks and starting your own 401(k) is like $1,000, $1500 – something like that. It’s not too expensive. It’s a one-time thing. Some companies will do recurring fees to process paperwork and stuff but you can just do that typically on your own; has to get, I think, over 150k to have to file anything anyways. Maybe, it’s 250.
 
Jon: I think it’s 250, anyway, yup.
 
Trevor: So it’s just like some paperwork. We’re talking about like basic IRS documentations, very easy to do. Your CPA, your accountant, can do that for you. I didn’t think it was too tough. There’s a decent industry around solo stuff now like there’s also some scams, some scammy stuff out there, so you’d certainly want to do research on, making sure whatever company you use is a real place, but they end up contracting with the bank to kind of coordinate a lot of the stuff, so they end up doing a little bit of legal work on the front end to establish your plan and then you end up kind of just sending them some money and they put it in the bank. It’s not too bad. There definitely are some scammy things in that area who promise more than they legally can deliver. Personally, I don’t mind saying I used IRA Financial. I like them. They’re out of Florida. They’re out of Miami. Adam Neumann is the guy from WeWork. This guy’s name is Adam Kaufman.
 
Jon: Okay, yeah.
 
Trevor: So, I wanted to say, Adam Neumann, he’s the guy who did WeWork at the big publicly-traded company massive fiasco, you know, the whole thing. I just heard a podcast about him. Adam Kaufman is the guy who does IRA Financial. They’re great. He puts out a lot of free educational content on his YouTube page.
 
Jon: And they do a self-directed IRA or self-directed 401(k)?
 
Trevor: Yeah, they do all of the above. They kind of do all the self-directed stuff.
 
Jon: Okay.
 
Trevor: They do self-directed IRA, Roth IRA, solo 401(k). Solo 401(k) with them and what most people, you can have a traditional arm which is pretax contributions and post-tax contributions. You can do either one. Again, your max ends up being that like 60k. I believe that’s the vehicle with the maximum amount of Roth contribution is the solo 401(k). In terms of directly contributing, there’s ways of creating an account and then converting it – stuff like that – but you can do a true Roth contribution directly.
 
Super Roth – A Third Contribution To Your 401(k) [0:13:25]
 
Jon: And if they don’t get rid of it in any legislation, there’s this super Roth; it’s been called different things but basically, there’s a third contribution you can make in 401(k). It’s called just basic post-tax contributions or after-tax contributions that aren’t Roth so it’s kind of a hybrid where they would go in after tax but then the growth they get would be tax-deferred and tax-later. So you won’t be taxed on the principal when you take it out but you will be taxed on the growth or the gains. You could max out your 20,500 into a Roth contribution and then you could do the rest of it – so another 40,000 – in after-tax employee contributions which then you convert into the Roth bucket in your 401(k).
 
Trevor: Got it.
 
Jon: So there’s ways to get 60,000 and again, this has been on the table to be cut in legislation before but for now it’s possible. I have anesthesiologists doing that and a couple of reasons. They’ve got a unique situation. They’re husband and wife anesthesiologists, both 1099, and who, without going too deep in the weeds, they started a solo 401(k), maxing that out, both employee-employer and then they started a cash balance plan and doing that as well and then the husband is doing some moonlighting with a company that has a 401(k) so he’s doing that with some after-tax contribution, so they’re truly maximizing their income in that sense and it’s pretty cool. That warms my heart to see take advantage of all those different benefits of being a business owner, self-employed.
 
Trevor: Right.
 
Jon: Like Trevor said, there’s some paperwork to it and things, but I think once you get over the IRA limit of $6,000, it doesn’t take too much more to make the math work. If it costs you $1,000 or $2,000 a year to administer this 401(k), you know, at 30 percent tax rate, you have to put in another $6,000 to make that worthwhile to save that much of taxes, and so anything beyond that is just pure savings. Makes a ton of sense, and Trevor, you’re able to with self-directed ones. You could invest those in a lot of different things whether it’s real estate or other alternative investments, right?
 
Trevor: Yeah, you can basically do whatever you want with it as long as it doesn’t violate some pretty specific rules. There’s a number of them and they’ll be in your plan documents. If you got a good company like you’re working with IRA Financial, I can email them just their Compliance Department to say, hey, can I put money in this and if I do, how does that work? There’s some pretty creative ways of deploying money and then if you’re in a Roth, you know, like whatever you do with it, anything you make on, you never ever, ever, ever have to pay anything extra on that.
 
Jon: Yup.
 
Trevor: That’s a nice just piece of mind when I’m working with that portion.
 
Jon: Now the trick is the earnings have to stay in that self-directed, right?
 
Trevor: It’s all got to be. It’s like it’s sitting on an island. You can’t mix it with anything else and you can’t mix it with family stuff and you can’t mix it with your own businesses but you can do pretty much anything else you want with it. You can go into other people’s businesses which would be like buying a stock, I mean it’s like most, right, but it could be a privately traded company.
 
Jon: So you couldn’t invest it in something you own – real estate, something like that.
 
Trevor: No. There’s certain things you can do with real estate. I don’t mess with real estate. As you know, that’s just the territory that I don’t know well enough to be able to outcompete other very, very smart people. Winner take all to a degree in local real estate markets. I don’t mess with that but it does let you do alternatives. So if you want to get gold which is certainly being talked about right now, if you want to find inflation-hedging assets that are non-custody, meaning, like the bank doesn’t just hold the money on your behalf or like with stocks or basically certificates held two or three parties away. If you want other things like that like hard assets then you can use the money to buy the hard assets and then it’s just, yes, it’s part of your Roth IRA. So, if you make money off of them, that money has to stay in there. You can’t withdraw, you know. You get penalties for that kind of thing. That’s why you can’t be buying stuff in your own business and other things like that. But you can buy gold – physical, literal gold – silver. You have some freedom that you otherwise wouldn’t have when your 401(k) with your company. I tried to sacrifice and live like a resident so that I can put as much to my early career away into that knowing that I probably would be W-2 later and not really be able to put anything into that, not be self-directed necessarily for a long period of time. It’s probably my only funds I can do whatever I want with for a while, potentially.
 
Another Big Benefit [0:18:06]
 
Jon: Yeah, so that’s one of the big benefits obviously that comes to mind for us. I think equal to that depending on how you use it is just the ability to have business expenses and deduct more of your income typically than a W-2 can. It’s just so much more available to you. They greatly limit the tax deductions that a W-2 can make. There are a few things you can itemize and now with the standard deduction, it’s even less. So if you are a business owner and you have what’s called Scheduled C Income which is synonymous pretty much with 1099 income then you’re able to have a lot of leeway on business expenses, portion of your house or rent or utilities you can deduct or travel – all those kind of things – and last I checked with, say, travel, the mileage was at least 55 cents a mile – I don’t know what is now – but that’s a big thing. Maybe it makes more sense today if they haven’t caught up with it to deduct actual fuel prices but that can be huge. So those are the big things that at the end of the day even if you maybe end up making less as a W-2 or more as a W-2, you got to factor in all these other benefits that you’re getting long-term like Trevor was saying.
 
Trevor: Yeah.
 
Jon: Yeah, you’re putting away now more in your 401(k). You’re not keeping as much to bend on your things today but you’ll be glad you did later and then the things that you can deduct now is huge. I think most of the people that we talked to want to keep more money versus getting it to the government if they don’t have to.
 
Trevor: Yeah, I was just thinking about the benefits. It’s one of those – it’s easy to want to think that it’s simple so it’s like, oh, I got a W-2, these benefits are great, wow, like, man, you know. People like the safety of that. Okay, now I’ve got a job and it’s secure and now I’ve got these benefits. We’ll, I think very few people have or maybe even ever will sit down and do an apples-to-apples. If you’re a curious individual, make a chart and write down all the things you get from work and then all the things you have to pay. If you’re doing like locums and doing some travel and all that and then look at where your locums job would cover. So they covered pretty much everything except for food. If you do that apples-to-apples comparison, you’ll find like health insurance is “expensive,” right, but have you ever looked? Have you ever looked to see how expensive it is? Because for a doctor, it’s pretty unlikely that you’re going to look at it and go, oh my gosh, this is so expensive, I have to take this job.
 
Jon: Yeah.
 
By Being A 1099, You Can Buy The Insurance You Want (Plus Others!) [0:20:27]
 
Trevor: Because there’s a percentage of your income, you buy your own insurance as some on your 30s or 40s is substantially less than you probably would guess it is. It can be $350 a month and that’s kind of maybe an old school car payment. Car payments now are a little higher but $350 a month? Okay, let’s say it’s $500. Let’s say it’s $700 and you’re doing locums somewhere. If you’re a radiologist, you’re making $2500 a day and you’re worried about a $750 a month health insurance payment. I mean, you get the best health insurance that money can buy for probably $1,000, maybe $2,000 max deductible A to Z plan. So I think about these benefits. I think people just assume they’re good like a lot of things we assumed like oh, it must be, it’s benefits and I’m a doctor and I’m in a hospital so they must be good and that’s not usually the case.
 
Jon: No. I see a lot of benefits for our physician clients so I’ve seen enough examples.
 
Trevor: Are they good?
 
Jon: No. A lot of them they’ll take their spouses’ that are working somewhere else because it’s not great.
 
Trevor: That’s right. Yeah, the hospitals don’t usually provide that great of benefits unless you work somewhere like Mayo Clinic, certain like really well-known institutions that are known for treating their physicians well. They have ridiculous benefits that would take your breath away. I mean, it’s pretty wild. They might have two or three retirement plans or two retirement options and pension and all that kind of stuff. That’s a kind of a different scenario but your typical, just private practice or hospital, you’re getting the same insurance as the technician in your office that, you know, has a high school education and some credentials and they’re great. I’m not saying they’re not smart. They’re smart and you’re glad they’re there, but you have the same benefits as them because that’s what your company is required to do. It has to be equal distribution of benefits. By being a 1099, you can actually buy the good insurance that you want, for example. So let’s go through a couple other categories. Malpractice, you might think that’s really expensive. Well, it might be like $800 a month. That’s like a typical kind of early career amount. It’s more as you get through your career and they kind of balance it out but $800, it’s like not that crazy. They might have a promo then you first get out of residency.
 
Jon: Or always look at your associations for stuff like that too. You might find some decent discounts with joining associations.
 
Trevor: The doctors can always through shopping around because now you’re the only buyer, right. Even groups, they don’t switch very often but if you shop around, you can get a massive discount and sometimes they’ll even cover your tail coverage, you know, seal that previous malpractice.
 
Jon: Yeah.
 
Trevor: There’s all sorts of things you can do by just kind of shopping around a little bit. All that to say, that’s not that expensive either. Those are probably the top two things people would say like, oh, I’m so glad they cover my malpractice and my health and you’re talking about $1500 a month. It’s kind of silly and then you could for how much you’re going to save and what you can put away in your own solo 401(k) and if they have minimum matching, a lot of doctors get like 1, 3, 5 percent matching. Some places are generous. You know you might get 10+ but not that common. So I think people are often making this decision based on qualitative feeling of benefits rather than a quantitative apples-to-apples on how do I make my money, how do I want to keep my money, and what I spend the better than my company would spend it or my potential company, and that’s the real question. I don’t think people knew that. I don’t know why that is. It’s the same thing I always say like people will work their butts off to get their money and then they like almost don’t care what happens with after that. They just want to put it in the bank and they don’t want to think about it or they hire somebody to do it who just doesn’t have the same incentive to keep track so if you have somebody to help you set it up, you know, that’s kind of what you do. You set it up. You give a lot of great input. You check in periodically, but people don’t often prompt themselves to do those same things.
 
Be Sure To Get A Financial Planner Who Always Touch Base With You Regularly [0:24:20]
 
Jon: No, they don’t and that’s, I think, like you said, where a financial planner comes into play. Whoever you are using, make sure it’s somebody that’s going to touch base regularly and is reviewing everything. It should be comprehensive financial planning and you’re probably going to pay more as a business owner or self-employed because there’s more to it but you’re going to get more service. You’re going to have somebody who’s going to say, hey, we’re going to be doing some tax planning and looking ahead, taking advantage of some of the benefits of being a self-employed or business owner and we’re making sure you’re shopping this around. Even with our employee W-2 clients here, we’re making sure every couple of years, they’re shopping out their home and auto insurance, and so if you’re working with a comprehensive financial planner then if they’re doing what they’re supposed to do, they’re reminding you those timely things to say, hey, it’s been a couple of years, or even on a yearly basis and they will have contacts and people that they know to help you shop out these things or resources or places to go to. So, I think that also comes back to the idea of finding a specialist in terms of helping you with your financial planning; finding someone that you can sleep better at night knowing you’ve delegated this stuff, they’re keeping an eye on these things, they’re asking the right questions, they’re going through the right checklist every year. So, we’re not making this out to be an easy, simple thing, for sure. The W-2 is the dummy-proof turnkey way to just get paid and have a job but if you want to take a little bit more organization and thinking through and a little effort on the side, that can be financially better in the long run. But do that apples-to-apples like Trevor was talking about. Add up everything you get in your benefits – your employer matched the portion, the health insurance they paid for in malpractice – all those things, plus your salary. Compare it to a similar 1099 where they’re not covering anything. You’ll find it will be close and even if it’s close than the other ancillary benefits you get from being able to have more in a 401(k) or more tax deductions, whatever the case might be, it may be worth it.
 
Trevor: Right, yeah, absolutely. And if you’re running – if you have like a little booty practice, and you run it small, you may actually also get a lot more of your time back and be breaking even or making more.
 
Jon: Yeah. You at least have control over that for sure.
 
Trevor: Yeah, which is not everybody in a 1099 situation. I’d say probably most docs in a 1099 situation still kind of have more of an employer.
 
Jon: They’re working for somebody else, right.
 
Trevor: Relationship.
 
Jon: Paid under the table, so to speak, because they’re going to report it.
 
Trevor: Yeah, it’s very above the table, you know, on a 1099, but it’s definitely direct. It’s direct payment and you figure out your own expenses.
 
Jon: They’re not withholding, remember that.
 
Trevor: Right, yeah, so you work a week somewhere and they give you, you know, 12 grand or something. I guess, maybe even more probably for most 12 grand, 14 grand, and then yeah, you got to take taxes out on that yourself right away.
 
Jon: That’s not all your money, right.
 
Trevor: Yeah.
 
Jon: Oh boy, if I could tell you. A couple of years out of business, I met a guy who was an ER doc in Ohio, have been in practice two or three years and he said, yeah, I really can’t do anything right now. I’ve got to pay off this debt to the IRS. I owe them like $150,000 because I forgot to pay my taxes the last few years. I’m like, okay. You just thought this was all your money? Like okay, but that happens.
 
Trevor: So that’s easy to do especially if you’re making big money in 1099, I think, that can happen to people pretty quick.
 
Jon: Yeah.
 
Trevor: They’ll figure it out later like, wait a minute. That was a lot of weeks of work. You have a lot of multi-thousand dollar checks and I owe a decent chunk of that to somebody else.
 
If You’re Doing 1099, Don’t Forget To Pay Your Taxes! [0:27:55]
 
Jon: Well, and quite frankly, if you don’t start paying quarterly after a year or two of that, then the IRS does have an issue with that because they don’t want that to happen. They don’t want you owing them boatloads of money so they’re going to say, okay, you need to start paying quarterly and if you don’t, there’s going to be some penalties there. So the paying quarterly helps but still every paycheck, set aside whatever your CPA is going to recommend there. A lot of things to be aware of. It’s not turnkey but it’s not hard either and you’ll get the hang of it and it may be worthwhile for some of you. So ask us questions if you’re considering it; if you want to know if it’s right for you. We’d love to talk about it more. If you’re considering some opportunities that you want to shoot our way, Trevor and I are both happy to look at it and give you some of our advice and just experience but we’re out here to eradicate physician financial illiteracy so hopefully this made you a little bit smarter today and maybe gave you an edge somewhere down the road and you’ll come back or just give us a five-star review.
 
Trevor: Yeah, I was going to plug a book, too, the Medical Entrepreneur.
 
Jon: Oh, cool.
 
Trevor: The Medical Entrepreneur – a plastic surgeon wrote it. He’s started and sold multiple companies and had practice the whole time and he does a good once-over. If you’re just thinking about starting your own private practice or your little side gig business or whatever it is, it’s very broadly applicable to just starting any business but from a doctor’s perspective so that kind of helps the doctors where they’re at. I found that one really helpful. It’s sort of like reading a lot of articles, just putting them all together into a book. Very topical, but he pulls in expert opinions like CPAs and lawyers on different components so I recommend that one. I enjoyed it and I’ve even bought it for a couple of people that are non-doctors and they found it like a nice, helpful, basic starting-your-own-business book for their non-medical businesses. It’s a good one.
 
Jon: Awesome. All right, we’ll have a link to that in the show notes. Lastly, I want to remind you please share these shows. If you’re finding any benefit in these, then somebody else is going to as well. So please help us to eradicate physician financial illiteracy and share these shows. It’s easy to do in your apps. Leave us a review, that helps, again, more physicians find out about these shows. Any other things that are out there, so if this is the only place you’re hearing about us, get on at social media. Our Instagram and TikTok are updated all the time. These videos, we do a weekly Didactic Minute video with some financial tips, so links to these cool articles. We have a Financial MD Community which is a Facebook group just for physicians where were talking and giving and getting tips there as well. So plenty of places to follow us. Last, but not least, go to financialmd.com if you’re not catching anything that I just said. It’s all there and we’d love to chat more. With that, we’ll be saying adieu. This is Jon Solitro and my pal, Trevor Smith.
 
Trevor: Thank you, Sir.
 
Jon: We’ll see you next time.
 
Trevor: Later Jon.
 
Jon: Bye everybody.
 
Thanks for joining us for another Financial MD Show. Be sure to head over to financialmd.com to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.
 
The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.
 
 
Resources and Links:
10 Things You Should Know About 1099s – https://www.investopedia.com/financial-edge/0110/10-things-you-should-know-about-1099s.aspx
S Corporation – https://www.investopedia.com/terms/s/subchapters.asp
What is Solo 401(k)? – https://www.nerdwallet.com/article/investing/what-is-a-solo-401k
What is a W-2 Form? – https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-a-w-2-form/L6VJbqWl5
What is employee contribution and employer contribution? – https://www.simpliance.in/provident-fund/contributions
IRA Financial Group: Self-Direct Your Retirement website – https://www.irafinancialgroup.com/
A Guide to Self-Directed IRAs – https://money.usnews.com/money/retirement/iras/articles/a-guide-to-self-directed-iras
Self-Directed 401(k) – https://www.shrm.org/hr-today/news/hr-magazine/pages/0300hoffman.aspx
Pretax Versus Post-tax Contributions? – https://www.ameriprise.com/financial-goals-priorities/taxes/how-to-minimize-taxes
Roth IRA Basics – https://www.investopedia.com/terms/r/rothira.asp
The Super Roth IRA – For Regular Guys (and Gals) – https://www.jdsupra.com/legalnews/the-super-roth-ira1-for-regular-guys-08219/
What is tax deferral? – https://www.bankrate.com/glossary/t/tax-deferral/
Tax Now, Tax Later, Tax Never: Understanding Tax Efficiency – https://www.teampinnacle.net/blog/tax-now-tax-later-tax-never-understanding-tax-efficiency#:~:text=Comprised%20of%20IRAs%2C%20401(k,paid%20upon%20funds%20being%20withdrawn.
Fact Sheet: Cash Balance Pension Plans – https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/cash-balance-pension-plans
What is Schedule C Tax Form (Form 1040)? – https://www.freshbooks.com/hub/taxes/schedule-c-form
Tail Coverage Definition – https://www.thehartford.com/business-insurance/tail-coverage
The Medical Entrepreneur: Pearls, Pitfalls and Practical Business Advice for Doctors (Third Edition) – https://www.amazon.com/Medical-Entrepreneur-Pitfalls-Practical-Business/dp/0615407137
Financial MD Website – https://www.financialmd.co/
Financial MD YouTube page – https://www.youtube.com/channel/UC6qEAQxK8L8JM7joy3wvdkA
Financial MD Facebook community – https://www.facebook.com/FinancialMD/
Financial MD TikTok – https://www.tiktok.com/@financialmd
Financial MD Instagram – https://www.instagram.com/financial.md/
Financial MD Twitter – https://twitter.com/financialmd2
Financial MD LinkedIn – https://www.linkedin.com/company/financial-md/?viewAsMember=true
Financial MD App – https://apps.apple.com/us/app/financialmd/id1507757039
Financial MD Apple Podcast – 
https://podcasts.apple.com/us/podcast/the-financialmd-show/id1548024586