The FinancialMD Show

Ep 017 - Investing in Real Estate

Summary:
Let’s Talk About Real Estate [0:05:01]
Diversification: Alternate Investments [0:07:48]
Pros And Cons Of REITs [0:10:33]
If You Want To Get Into Real Estate, Start With REITs [0:13:50]
Jon’s Personal Real Estate History [0:16:51]
Trevor’s Preference Regarding Real Estate [0:22:44]
Why Do People Don’t Like Bitcoin [0:26:29]
Jon’s Recent Real Estate Saga (All The Juicy Details Here!) [0:28:15]
They Got The Property; However, Problems Arose (But All Ends Well) [0:35:00]
Government Regulate and Control Things; But It’s Usually For The Benefit Of the Consumers [0:40:41]
 
 
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 everyone to the 20th episode of the Financial MD Show. Today, Trevor and I will get into a topic that we get a lot of questions about and we’ve done a couple of Didactic Minute videos on and those are only 2 or 3 minutes and so we decided to dedicate a podcast episode to it because a lot of our doctors ask us this question specifically about real estate – When is the right time to invest in it? How to invest in it? What’s the right way? – and there are several different ways to do it out there and they all have their pros and cons so we’re going to go into that today from literally buying real estate or rental properties or flip properties all the way to just buying some mutual funds that have real estate in it. So, listen up, take some notes, shoot us any questions if you have them, please leave a review, and here’s the show:
 
Jon: Welcome again to the Financial MD Show. We’re so excited to be continuing and jumping into 2022. How’s it going Trevor??
 
Trevor: It’s going great. Yeah, I’m among the COVID-positive so that’s good. I’m on the other side of it and get to look forward to not worrying about getting other people COVID.
 
Jon: That’s right.
 
Trevor: It’s kind of nice.
 
Jon: Yeah.
 
Trevor: The not knowing is half the terror or the frustration or the whatever. I mean, my whole family has pretty much had it now so it’s like we can just go anywhere and do anything we want now. You know, it’s kind of nice.
 
Jon: That’s a beautiful thing.
 
Trevor: Yeah. The New Year brings gifts and new forms.
 
Jon: Yeah, good. Your holidays were good?
 
Trevor: The holidays were great. I got to do a little Florida trip. That’s not where I got the COVID, contrary to what people would probably guessed. A local brew, but yeah, so I had a good holiday; got to get a little bit of warmth pre-holidays. I got to do a trip to Jamaica, do some surgery done there. It was really good December, and January is kicking off, pretty busy already. How about you?
 
Jon: Yeah. We had a crazy time. On the 21st of December, we flew down to Florida with me and wife and four kids and spent a week in Fort Myers. During that week. we flew up to Orland, just my wife and I, to see some friends for dinner overnight, stayed there, came back in the morning and then we flew from Fort Myers to Austin, Texas and did five days there with some friends and their kids and then flew back to Michigan. In all, I counted it; my wife and I were on six planes over the course of two weeks.
 
Trevor: Wow, that’s a lot of planes.
 
Jon: It was just like had the process down.
 
Trevor: It’s lucky, I guess.
 
Jon: Yeah. So got a lot of miles but used a lot of credits and I did a TikTok video in the airport about using airline miles and doing all that kind of thing. Grand Rapids Airport, by the way, has massage chairs while you wait. They’re like five bucks for 10 or 20 minutes. It was nice; so a little plug for Grand Rapids Airport. I love it.
 
Trevor: I have to check that out. I go through there all the time. I’ve never noticed the massage chairs.
 
Jon: Oh yeah. So when you get to – let’s see. You go through security and you can basically go left to right. So if you go to the left, those gates, you’ll go up the hallway, take a right then you start to get into the gates. Right before you get into the gates section on your left, there’s about four of these massage chairs.
 
Trevor: Yup, all right now.
 
Jon: Well worth it. Check it out.
 
Trevor: Nice.
 
Let’s Talk About Real Estate [0:05:01]
 
Jon: Other than that, nothing too new or noteworthy. Life is good. Today, I thought we’d focus on how we talk about real estate in terms of financial planning and what kind of an allocation or a piece of your financial picture does it take and when is the right time to do that, what kind of ways there are to do that, and we could spend several episodes on this so we’ll just kind of do some quick overview. It may lead to a part two or three, etcetera. In general, I get this question especially when our attendings are getting to that point where they’re doing well. In fact, I just had this conversation with a couple. They’re both anesthesiologists, they’re in Nevada, and they’re killing it in terms of saving. I love this couple because they are making a high six-figure income. One of them is in the military, so a lot of things are cheap. They’re daycare their housing like all that kind of stuff. They’ve got two kids and they’ve kept their life pretty reasonable and have an enormous surplus that they’re saving and we’ve figured all sorts of tax free ways. I mean I think they’re saving a couple of hundred thousand a year pre-tax due to some self-employed business owner type of loopholes and things which is another conversation for another time. All that to say, they are well funding their retirement to when we have these every six-month reviews like we did yesterday, and I said, okay. They’re like, how are we doing towards retirement savings, and I’m like, you guys probably no surprise to you that you’re well over a hundred percent on track for your goal so you can basically retire a lot earlier than you planned on or you can plan on a lot more money in retirement than we had originally planned on but either way, you’re doing kind of all the normal stuff. You’re putting into mutual funds and stocks and IRAs and 401(k)s and defined benefit plans and they’re saving in a regular brokerage account and they’re doing all the stuff. I said this is about the time when we start having the conversation about diversifying more when we’re as diversified as we can be in an investment account. They’re very stable and have checked all the boxes, otherwise, how much should we put into something outside of the normal?
 
Diversification: Alternate Investments [0:07:48]
 
You might call them alternative investments and everybody’s got a different concept of what that means but for our conversation today, I said, have you thought about investing in real estate. And they said, yeah, you know, we’ve kind of thought about that but we didn’t know how and it sounds really complicated of buying property. Again, I think I did a video on this a few weeks ago – maybe a couple of months ago – about the different ways to get involved in real estate. And there’s the ways that everybody expects or knows how as far as you buy a house, you rent it out, you manage it, they call you when the toilet clogs – all that kind of stuff – and that’s “investing in real estate.” Then there’s the other end of the spectrum where you basically just buying real estate funds in your investment accounts, and we do a little bit of that anyway. Then there’s kind of this middle ground where if you’re an accredited investor, which means, basically last I checked, you’re making a couple of hundred thousand a year consistently or you have a net worth of at least a million dollars, then you can invest in these real estate – what would you call them, Trevor, syndications – is one way of thinking about it. It’s a fund but it’s not like a mutual fund. It’s a private fund. It’s a hedge fund. It’s a real estate fund. So you’re actually giving your money and a lot of these minimums are at least 50,000 to 100,000 dollars and this company like Cadre, you may have heard of; Fundrise, CrowdStreet. There’s a bunch of them like this now. We’ll post a list of – I think there’s 15 to 20. I found an article that was listing all of them but you get actual…it’s called a limited partnership essentially and so you get some shares and you can actually pick the actual property or project that you’re investing in. It might be apartment building or commercial and then you get a benefit from the investment growing so the value of it grows which helps you when you go to sell that investment one day. The other benefit is you get monthly rent, so you participate in the monthly rent from the project. And there’s different types of that. Some that are more focused on rent, some more focused on what they call capital appreciation, but those are kind of offhand a few of the ways. Anything to add to that, Trevor?
 
Pros And Cons Of REITs [0:10:33]
 
Trevor: Yeah, no. I mean, real estate is definitely not been something I’ve looked into too much. The only thing that I’ve read a little bit about was REITs, the real estate investment trust, and I’ve read a handful of articles just enough to know that I was not really at the point where I wanted to do that yet but there’s owning and then there’s sort of like somebody else owns it and manages it and it’s almost like just a stock version of real estate.
 
Jon: Right.
 
Trevor: That’s like a REIT, and so there’s more tax benefits on the direct ownership side.
 
Jon: Correct.
 
Trevor: There’s more responsibility. There’s more headache. And then the other end of the REIT is just like the least amount of headache, the least amount of tax benefits, least amount of work but still a decent amount of returns. I don’t know if they’ve been la lot higher but I feel like the returns I tend to hear about for REITs is like 10 to 13 percent, kind of what aggressive stock portfolios used to return and then maybe up into – if you’re getting lucky and you’re picking a really hot one – maybe gets up until like the upper 10s or low 20s. Individual stuff – that’s more like they own tons of stuff so you also get the benefit of the diverse portfolio of real estate versus if you buy the house down the street and you’re the landlord. If your local area tanks, you might get a minus 10 percent. You might get like a loss but if your local area goes crazy then you get like 30 or 40 percent return. You can pay a lot of taxes on it if you want to flip it because you can hold it for a year or whatever. Those are the pros and cons that I like, and those are on the extremes and then there’s like all these different real estate vehicles kind of in between those two.
 
Jon: Yeah.
 
Trevor: I read about them and I was like it sounds fine but I’m good so that’s something of a thing.
 
Jon: Yeah.
 
Trevor: It will be, at some point, my thing. It’s just I really like to know everything about the entire breadth of the spectrum of something so if I understand the pros and cons on the ends and I would probably go more towards a REIT personally because I’m mobile and I’m single and I don’t want to have to stay in an area or give up a substantial percentage of profits to hire somebody else. I’m like a hands-on. I’m that kind of person I like to have the control. I like to be unlimited, so location-wise, real estate has not been something of interest for me but incredibly powerful and I’ve definitely missed out on growing my net worth because of that, but I knew that when I kind of got of it. I’m also missing out on any sort of substantial drawdowns. We haven’t had any. So right now, it just looks like I’m missing out on all the wins and all the profits.
 
Jon: I know.
 
Trevor: I have buddies that have two houses from residency; almost like that military thing where people move around, they buy one and then they rent it out and they kind of build the thing. So when the market’s going vertical, everyone’s a genius, right?
 
Jon: Right.
 
Trevor: Yeah, that’s my two cents on it. That’s what I know – a surface-y level of pros and cons.
 
If You Want To Get Into Real Estate, Start With REITs [0:13:50]
 
Jon: Yeah, and I’d say that’s about right and I think most people if they want to get into real estate should probably start with these REITs and especially these publicly-traded REITs that are exchange traded funds essentially. So real estate investment trust is that you’re buying a share of a real estate company or project and you do often get some monthly income from it but the tax benefits aren’t as much as if you bought directly or directly invested in the project, but that’s good because you don’t want the liability and sometimes the minimum investments to get into the other things. So, the REITs are good. You get to experience that. You can get some monthly income, experience the growth, and just having that diversification in your account so that if you got all stocks and mutual funds here that are pretty much all equities, maybe some bonds and stuff but no real estate, having a little bit, let’s say, 5 to 10 percent real estate, gives you that diversification, and a lot of stuff that I’ve seen, now granted this is from real estate guys, that say real estate has beaten the market over time, maybe, but it’s worth looking into especially when you factor in rent and capital appreciation or the growth and the value of the actual investment. When you add those together, you could definitely make an argument that it could beat the stock market over time. Either way, it’s what you call a non-correlated asset, so something that if the market goes up and down, often you’ll see bonds go the opposite way. Market goes down, bonds go up and vice versa. With real estate, it’s not so correlated, and when you’re doing investment analysis which none of you probably are but when a money manager is doing investment analysis, you’re looking at things like beta which are the number that is or you guys probably know some of this from stats in undergrad – correlation coefficient. You’re looking at R squared to C. If it’s 1, then these two things are perfectly correlated. One goes up, the other goes up by the same amount. If they’re -1, they’re perfectly correlated but in opposite directions. One goes up, the other one goes down in the exact same amount. If they’re zero, then there’s completely no relation. One could go up, the other one could do nothing or could go up or down; it’s just there’s no relation. So the stock market and real estate probably had not exactly zero but closer than bonds or international stocks or other things like that. That’s something to keep in mind, too. That’s just whatever you do, real estate will help you diversify your investments, and again, there’s lots of ways to do that.
 
Jon’s Personal Real Estate History [0:16:51]
 
I have one example I can talk about personally and I’ll give you my real estate history. I first really learned about it when I was in high school, and during my summers, I lived in East Lansing or near East Lansing and my best friend in high school, his dad owned probably 8 to 10 houses in East Lansing in kind of the student ghetto where every house was rented by students. There were families here and there but it was pretty much that was what it was and they were getting great rent from these houses. Now, he took care of them really well – me and my best friend and our other friend would work there during the summers. We’d do kind of the turnovers, and when we weren’t doing the turnovers, we were painting, cleaning, refinishing floors, just doing all that. We saw some really gross stuff. We saw some really cool things that we weren’t allowed to see normally and we saw just how that whole system worked, and I was like, that’s interesting. I didn’t think too much about it at that point. But then he got into college, and then in grad school, I experienced property management again but working for a big company that did a lot in East Lansing with student housing. So I’d worked on the leasing side a little bit, some property management, some marketing but got a good scope of that and then a friend of mine a couple of years later, we did a house flip so this was when in 2010 it was easy to find foreclosures and we found one for 40,000 or 50,000 dollars, maybe; decent little house. We kind of rehabbed it, flipped it, and made a little bit of money. So I experienced it on that side and that was really my last exposure to real estate. I’ve always read about it and wanted to get a little bit involved but I’ve also heard horror stories of just landlords even around Lansing here where they just get in and they want to get out of it, and one case, I mean, you and I both know Reuben had bought a bunch probably back in ’08 or ’09, maybe 2010 and they just never performed the way he wanted them to and he has had a hard time getting rid of them. So I hear those stories too which I vowed never to…you know, I kind of know the area well enough to know which places I don’t want to be investing in.
 
Trevor: It’s kind of like that’s the pro and the con of a hard asset.
 
Jon: Yeah.
 
Trevor: Right now, real estate – just to go back to the correlation thing –pretty much all assets are correlated right now, right. All going up about the amount of money that was added, you know, the amount that was printed roughly. You can compare different assets or even currencies and you can kind of overlap them – what’s a good example – like Bitcoin and U.S. dollar and like U.S. dollar and Euro and you can kind of skip them, right, just like a chemistry equation. You can go from what if A then B, B then C, and you can just do A and C. So you can kind of compare a lot of these different assets and they end up being like if you compare them to the amount of money that was printed, everything’s up just slightly above just like the printing of the money. I think that’s part of the reason; we’ll have to see if that continues or what they’re doing. The Fed is threatening, tapering and increasing rate slowly and they kind of said specific amounts that they kind of changed after a week, didn’t they. They might actually enforce them and the market might not crash if they don’t. There’s a lot of interesting things going on there. With hard assets, you’re stuck with them and they cost you something if they’re not making you money or if you sell them for more than you bought them for. It’s worse than having a liquid asset that you can just sell. Like Tesla stock tanks and you lose 30 percent of your money, you can execute on that and get out before it goes down 20 percent more and then you have lost half. But the benefit is there’s only so many hard assets in the physical world or some sort of digital signature world, which is the whole crypto, Bitcoin.
 
Jon: Blockchain.
 
Trevor: Yeah. so real estate has that pro but I do think people forget how much that’s a con. You can’t sell that house. It’s your house and it’s worth nothing, right. like people don’t want to pay money for it. You still own it and guess what? You get to pay taxes on it.
 
Jon: Yeah. At least if you have a stock that you can’t sell, it doesn’t cost you anything to hold it typically.
 
Trevor: Yeah, it is like if things really, really go south, people are going to remember how much it hurts to have hard assets that people don’t want.
 
Jon: Yup.
 
Trevor: It’s like having a business. Let’s say you sell clothing and you buy just a ton of cloth, whatever, you know, you make it from and you’ve got all these different colors and then two seasons later, you bought purple and nobody wants purple. You can’t beg, so you have to pay somebody to take it to the dump, you know what I mean?
 
Jon: Oh, yeah.
 
Trevor’s Preference Regarding Real Estate [0:22:44]
 
Trevor: That’s the downside of physical good commodity or real estate and that’s like one level larger like just the big picture. It’s why I haven’t gotten involved in real estate. It’s not because I don’t think you can make money and I think I should probably have some real estate but for me, the only kind of real estate I want to have is the kind of specifically useful to me. I want to have me as the owner-occupier of the real estate. So when I diversify my net worth into real estate, it’s going to be me owning a home and that’s in line with my goals, so you got to have your written financial plan. White Coat Investor always says – I totally agree with that – you have your written financial plan and you stick to it, and for me, my written financial plan is going to be my first real estate acquisition is going to be to try to grow my net worth. Like I said, I have lost out by not doing that but I want to be me owning a house in the town that I want to live in for a long time.
 
Jon: Okay.
 
Trevor: That doesn’t mean lifelong, but five years, 10; something where you could have a 1930-level, 1929-level event depression and I’d be 1945 equivalent like I want to live in this house and I don’t mind paying taxes on it because I bought it to live in it.
 
Jon: You’re right and you don’t really care what you paid for it necessarily because it’s a long-term investment.
 
Trevor: Yeah, you essentially don’t – I don’t know. It’s sort of – I don’t know if that’s a millennial take on real estate but it’s a noncommittal take on real estate.
 
Jon: Yeah? That’s okay.
 
Trevor: Yeah, those are – I don’t know. That’s what I’ve been thinking about because I think a house would be cool. Property is nice. I like hard assets that’s why I like Bitcoin, but it’s not mobile. It’s not transferrable. It’s not liquid.
 
Jon: Yup. Liquid, and that’s the word, I wanted to emphasize too was illiquid versus liquid. Stocks are designed to be liquid because there is somebody on a particular stock exchange that no matter what – they’re called market makers – and they’re creating a market to make sure there’s always demand or someone to buy a particular stock. So if something is publicly traded, there’s always going to be somebody to buy it for the most part. But if you hold shares of a privately-owned company, there’s no market for that typically. There’s some real estate too. The market’s got to be there and the market, no one has control over the real estate market.
 
Trevor: Yeah, like Bitcoin can go to zero because it’s liquid, right, you know, can meaning it’s technically possible because there’s demand, just like any stock can go to zero.
 
Jon: Right.
 
Trevor: That’s a benefit, I think, and I’d rather be in a liquid asset than illiquid asset in general or at least a large percentage of my net worth I’d rather be in liquid. But that’s a philosophical decision, you know. When I’m 55, do I want to have most of my net worth being illiquid assets? Not really.
 
Jon: Yeah.
 
Trevor: It’s 65, I guess, I would say. Fifty-five still kind of maybe – it depends on what the world looks like.
 
Jon: Well, and it depends if those assets are providing income for you too like what are they doing for you at the end of the day is the question.
 
Why Do People Don’t Like Bitcoin [0:26:29]
 
Trevor: That’s right. That’s why people don’t like Bitcoin. That’s why traditional investors like Warren Buffet don’t like it.
 
Jon: Because they don’t pay dividends?
 
Trevor: They don’t pay dividends. It doesn’t pay you anything and it “isn’t a business that produces something.”
 
Jon: Yeah.
 
Trevor: Yeah, which is I totally understand that argument.
 
Jon: That’s sticking to a philosophy, right?
 
Trevor: Yeah, it is, and that’s you should do. He’s been very successful and he has been not beaten. I think I kind of like pooh-poohed this at some point in one of our talks but he’s been losing against the S&P for 10 years or longer, I think, but he’s doing it with billions of dollars. It’s really hard to do. The flip side is like easy to critique but if you have tens or hundreds of billions of dollars and you’re still able to grow it at over 10 percent, it’s like kind of insane. That’s really, really, really hard to do.
 
Jon: Yeah, totally. I love those conversations of people like, well, my advisor’s doing pretty well, I mean I got about 15 percent, 20 percent last year, and it’s just I kind of rolled my eyes like well, you’d have to be an idiot to not get 20 percent last year where you just got to stick in some index funds and good to go, and obviously, that has no bearing in the future. So that’s kind of the pros and cons of real estate. My latest experience with real estate is…
 
Trevor: This is the part you got to talk about.
 
Jon: Yeah. All right, I’ll tell them everything. I learned a lot in a short period of time so far.
 
Trevor: Give them the full story.
 
Jon’s Recent Real Estate Saga (All The Juicy Details Here!) [0:28:15]
 
Jon: So, I listen to Grant Cardone sometimes who does a real estate podcast. I’ve just always thought, you know, I could get into real estate. I’ve learned enough from other people’s mistakes in it that I think I could do okay.
 
Trevor: Yeah, classic.
 
Jon: Classic, and so it wasn’t something I was actively looking for but something came along. By came along, I mean a push notification from Zillow popped up on my phone and it was like, hey, there’s this five-unit building for cheap, like 225,000 dollars. So I was like, and the other thing was again, I would say, if you’re buying real estate as a rental or flipper, whatever, the number one important priority is you got to know the market and so I knew if I was going to get something, I was going to buy it local where I knew the market. This one was about 5 minutes away from my house so I was like, yeah, I know that market. So I went and checked it out like as soon as it hit the market. My realtor and I went and saw it. So the other realtor – the listing agent was there – and the owner of the building was there which was kind of odd but I guess, well, I guess it made sense. They had to have a property manager there to let us in, I guess. It was my first time looking at “apartment building” and so it was five units. It was this house built in 1920 that had four units in the one house and then a small one-bedroom unit by itself bungalow-style. So I checked it out and walked through really just two of the units and bathrooms were nice, updated. Kitchens were good. like things were taken care of pretty well. My realtor was like, yeah, you’re probably going to need a roof on that single building there. I was like, okay, and we went in the basement and it was an old, unfinished basement that had some water in it which was fine. Nobody was really doing anything down there but he’s like, yeah, you may want to look into waterproofing that. All right, so I said, and it had five units that were all rented, averaging about 500 a month each, some one bedroom, some two bedrooms and so at 225,000 with 2500 a month coming in, that’s pretty good, okay.
 
Trevor: Yeah.
 
Jon: So I made an offer. I borrowed some money from a family member to make a cash offer just to get it. So did that, offer was accepted so we’re moving forward. A week later, we scheduled the inspection and I started learning things. I learned that five units and above is considered commercial so commercial loan, commercial insurance, commercial inspection. I had to add a sewer inspection because of that which was another 500 bucks. The inspection itself – the normal inspection – was 400 dollars. So we did all that and then I had a guy that does property management come with me and take a look at it too. So we had all these people doing this inspection, and during this inspection – the owner’s never there at a house when you do this – but in this case he was and he was this old Greek guy in his 70s and I found that he’d owned the place for 50 years – not exaggerating – and he looks at me and he goes, what are all these people doing here, and I was like, this guy’s a sewer inspector, this guy’s the housing inspector, this guy’s a property manager. He’s like, what do you need all these people? He’s like, you don’t need any inspection. He’s like every building I bought I didn’t have an inspection. I just trusted my own gut and he’s like, are you Greek, and I was like, oh, I’m Italian. He’s like, okay, close enough. He’s like, you’ll do fine. You don’t need to have all these inspectors. I’m like, well, okay, this is what we’re doing though and he just like he wanted us to spend 30 seconds in each unit. He was just concerned about pissing off his tenants. So inspection went fine. There were a couple outside exterior spots and we patched up, getting a new roof like we thought. Then the sewer inspection came back and was like, yeah, you’re going to need to run a new sewer line through the house and then about 10 feet out from the house. So I was like, all right. Then a few days later, a four-unit, maybe two or three blocks away, again pops up on my phone and I was like, hey let’s go look at this. I’ve learned a lot so far about this process. I also learned that a commercial loan to get this five-unit place was going to be 25 percent down and 15-, maybe, 20-year term is the most that you would see and higher interest. So all this stuff just started adding up to where a lot of things are going to cost me more than I thought. So I go to see this four-unit one which was appealing to me because I learned in the process a four-unit is completely different than a five-unit. Four-unit is much cheaper insurance. You can get a normal mortgage. You can get like all the stuff. So we go to see this four-unit one. a bunch of people had already saw it. It just hit the market. It was listed at 250,000. So higher a little bit than the other one, but it was nice. There was no basement. It was built on a slab. It was a lot newer, built in the 80s instead of the 20s, and there were four 2-bedroom units, cookie-cutter, like mirror images of each other; had a wash and dryer in them, like just nice. Good shape. Three of the four rented. Good long-term tenants. So even just with three rented, it was fairly profitable. So my realtor was like we got to make an offer by 7 p.m. today and it was like 5 o’clock. So we go through, think about it and I was like, yeah, let’s do it. We offered a little bit over asking. I knew there was some other offers on the table and I think offered 260,000 and they called us the next day and they said, could you do 263,000 and I was like, yeah, fine. So we got it, and then I cancelled my offer on the other one basically saying, okay, inspection not up to par, we’re going to withdraw our offer.
 
Trevor: Yeah, for sure.
 
Jon: I actually found out a couple of days ago, that one is still in the market.
 
Trevor: Do you have a referral code for that?
 
They Got The Property; However, Problems Arose (But All Ends Well) [0:35:00]
 
Jon: Yeah. No, I would not do that to anybody. So we go to the closing process, inspection goes fine. We go to close and we closed quickly because we used cash and I was going to then refinance and pay back this family member once the house is purchased. I just like to make a cash offer because you can usually either beat out other offers at the same dollar amount or pay less or whatever. So we get to closing, everything goes fine pretty much. That was the Tuesday before Thanksgiving. Wednesday comes and we get the keys on Wednesday and I go into see the empty unit and this one, they all did their own electricity but we paid for water as the landlords. So we’re going to this thinking, my wife and I are like we don’t need a property manager, it’s only four units, close enough, they seem pretty easy, we can take care of this ourselves. So we wrote this nice letter, introduced ourselves to the tenants. We bought them some pie. We dropped off a pie to each of them and then I go this empty unit and it’s freezing. The electricity was already shut off. So I had to call Consumers Energy. I call them on this Wednesday 5 o’clock – they’re closed. I called first thing in the morning but it’s Thanksgiving. They’re still closed. They’re not going to open for another two days. I’m like, oh my gosh, and it’s here in Michigan and the nights are starting to get below freezing and for those of you not in the Midwest or up in the north, when stuff gets freezing, your water pipes can freeze especially if there’s no water moving through the pipes. When standing water freezes, it expands. Pipes burst – you guys know this. So I’m freaking out thinking, I don’t know what to do. I’ve got Thanksgiving and the Black Friday with no electricity in this unit but water’s on. So I go over there, turned on all the faucets and all the bathtubs just to get water running through the pipes and I go back two or three times a day and I was losing sleep and then halfway through that day, I realized, I forgot to get insurance. So I had no insurance and I can’t believe I’m admitting this as a financial planner but I forgot to get insurance. Because it’s like every other house I bought I had a mortgage and they make you get insurance. It’s just part of the process, right.
 
Trevor: Yeah, exactly, because of the cash offer.
 
Jon: Yeah, because of the cash offer. Nobody said get insurance. So I feel naked, exposed, liable; anything could happen in this property and I could be financially screwed for the rest of my life. I was like this is the day that somebody’s going to slip and fall and die and I’m going to get sued for 2 million dollars. So I’m over there taking salt and salting the sidewalks and just making sure everything’s fine and it just happened to be freezing rain that day too. So I called my insurance agent. He’s like sorry, I can’t help you until Monday. So I’m googling everywhere in the internet. There’s got to be some insurance company that does business on even Friday like every store in the world is open on Black Friday but no insurance agencies. It was finally Saturday morning 9 a.m. I get a hold of Consumers Energy. They turned the electricity on. Some insurance company calls me back. I’m able to buy coverage that day and I could rest a lot easier and then picked up the phone and called the property management company and said, yeah, I’d like to hire a property manager. I decided not to do this myself. Everything ended up fine but I overestimated a lot of things and didn’t take it super seriously in terms of like, my realtor said, make sure you call the utilities and get those switched today, and I was like, okay, but tomorrow’s probably fine too and it was not; just the wrong day. It’s the worst because it was a four-day weekend with Thanksgiving. It’s the worst time to do that. But now we’ve got them and the tenants are paying rent on time and we pay a property manager 10 percent to manage everything and they do the leasing and record keeping and books and accounting and service and all that stuff. There you go.
 
Trevor: Nice. That’s what I would do if it was me but everybody’s different.
 
Jon: Yup.
 
Trevor: I think you said too when you were telling me about it initially like right after Thanksgiving, you said there’s different – I mean, I know that there are too. There’s different rates that people charge. Didn’t somebody try to charge you a deal where they got a percentage of the sale or something?
 
Jon: Yes, they wanted 3 percent of the sale price if I ever sold it.
 
Trevor: Crazy.
 
Jon: And they’re like, well, it’s because, you know, we have to do a lot to get ready to sell and we help you sell it and show it.
 
Trevor: Three percent? That’s what a real estate agent makes after all their training and work and showing people.
 
Jon: Yeah, if I sold it for 300,000, that’s 9,000 dollars.
 
Trevor: That is the clause that keeps them in business if I was to guess.
 
Jon: Well, they didn’t get my business so I went to a different property manager.
 
Trevor: Amazing. Read the fine print with everything. It’s very annoying but very true.
 
Jon: Yeah. There you go, kids, so hope that helps.
 
Government Regulate and Control Things; But It’s Usually For The Benefit Of the Consumers [0:40:41]
 
Trevor: The cash offer that really got you, it’s interesting how, you know, it’s just funny because I would have never thought of that, and we do get handheld a lot like in the U.S. especially. We’re really fortunate to be here because things are so regulated and controlled. It’s kind of annoying in some businesses and we don’t like to be controlled by the government but there are a ton of things in place to protect the consumer.
 
Jon: Sure. As an advisor like I have to get errors and omissions insurance and I have to get a surety bond. That’s all stuff I have to get and it’s to my benefit but it’s also the consumers benefit, so it’s fine.
 
Trevor: It is, and I’m somebody I don’t like that kind of stuff but it’s often there for a reason.
 
Jon: Yeah, like you as a doctor, employers won’t hire you a lot of times unless you have tail coverage if you had a claims-based or policy and all that kind of stuff. That kind of thing.
 
Trevor: That reminds me, I need to get a paper copy of the tail that was paid because I put that in my last contract; made sure I negotiated that the tail would be paid by the practice that had me there.
 
Jon: There you go.
 
Trevor: It’s not too expensive. That’s one of those things that gets expensive if you’ve been working for 5 to 10 years.
 
Jon: Yeah, for sure.
 
Trevor: For shorter periods of time like I basically I did a locum’s position with an optionality to change to permanent and then I elected not to do that, being pretty short period of time for locums and that goes into account, but it was a good reminder because I need to get that in paper and put up my files.
 
Jon: Yup, there you go. I’m glad – see these little things a good reminder.
 
Trevor: Yeah, insurance. There’s always more things to insure. It seems like there’s more things to be thorough on no matter what.
 
Jon: Absolutely but I’m a big believer in that. I mean, we have the errors and omissions. We have cybersecurity insurance.
 
Trevor: Identity theft.
 
Jon: You’re right.
 
Trevor: You can get the tax thing you pay for that, make sure you get it all back and they help you with it.
 
Jon: Yup. I’m good with that. Well, all right, I think we gave them a lot of stuff, Trevor.
 
Trevor: Yeah, it was great. Good catching up with you as always.
 
Jon: Yeah, you too.
 
Trevor: Talk to you soon.
 
Jon: Thanks to our listeners. Hope you enjoyed it. Be sure to check out the Financial MD community on Facebook if you like what you hear here. There’s a lot of discussion happening there and if you want more videos, get us on TikTok and Instagram and if you want portrait mode, shorter, or if you like the landscape view, go to YouTube and Facebook and no shortage of stuff there. So hit us up if you’ve got questions on anything we’ve talked about in any episode at financialmd.com. Take care, guys. 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:
Understanding defined benefit plan – https://equitable.com/retirement/articles/understanding-defined-benefit-plans
What is an alternative investment? –
https://corporatefinanceinstitute.com/resources/knowledge/finance/alternative-investment/
What is syndication? – https://www.1031crowdfunding.com/education-center/blog/92-what-is-syndication
Cadre | Real estate investing, reimagined – https://cadre.com/
Fundrise website – https://fundrise.com/
CrowdStreet: Online commercial real estate investing platform – https://www.crowdstreet.com/
Best real estate crowdfunding sites of 2022 – https://www.investopedia.com/best-real-estate-crowdfunding-sites-5070790
Real estate limited partnership – https://www.businessinsider.com/personal-finance/real-estate-limited-partnership-relp-definition
Capital appreciation definition – https://cleartax.in/g/terms/capital-appreciation
What are REITs? – https://www.investor.gov/introduction-investing/investing-basics/investment-products/real-estate-investment-trusts-reits
What is an ETF? – https://www.schwab.com/etfs/understand-etfs
What is a non-correlated asset? – https://insights.masterworks.io/finance/investing-strategies/what-is-a-non-correlated-asset/
Hard asset definition – https://www.accountingtools.com/articles/hard-asset
What is liquid asset – https://economictimes.indiatimes.com/definition/liquid-asset
Making sense of Bitcoin, cryptocurrency and blockchain –
https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html
Liquid vs illiquidity – https://www.connectinvest.com/resources/blogs/liquid-vs-illiquid-assets/
Podcast Cardone Zone – https://grantcardone.com/podcast/
Errors and omissions insurance – https://www.thehartford.com/professional-liability-insurance/errors-omissions-insurance
What is a surety bond? – https://www.suretybonds.com/what-is-a-surety-bond.html
Tail coverage: What it is and who needs it – https://www.magmutual.com/learning/article/tail-coverage-what-it-and-who-needs-it/
Cybersecurity insurance: What it is, which businesses need it – https://www.nerdwallet.com/article/small-business/cybersecurity-insurance
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 019 - Market Update

Summary:
Are We Heading Towards A Great Depression? [0:03:39]
Current News Update On Crypto And Bitcoin [0:06:33]
Just What Happened To The Luna? [0:11:16]
Trevor Shares His Personal Strategies In These Unique Times [0:17:37]
Leverage: An Interesting Strategy [0:20:16]
Sometimes, It All Boils Down To A Person’s Emotional Well-being [0:23:16]
 
 
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 to The Financial MD Show. We’ve got an exciting show for you today. We’ll, it’ll be an interesting show anyway. I’m here with my ever-present partner, Dr. Trevor Smith. How are you, Trevor?
 
Trevor: Been well, Jon. Good to see you.
 
Jon: Yeah, you too, buddy. Excited to be back in the saddle and back on the mic and we’re coming in hot with all sorts of things on our mind and we’ll try to give you some good financial info that’s going to help you. They might not be necessarily connected topics but we’re going to talk today and you’ll get to listen to our thoughts and expertise in different areas but hopefully you can walk away with something that will help you out just by spending a few minutes with us. So, today, on the Financial MD Show, we’re going to touch a bit on some market commentary about what’s been going on. As of today’s recording, it is May 16th and it’s been a rough year, pretty much every sector – for stocks, funds, crypto – whatever you want to talk about, there is nowhere safe.
 
Trevor: Except commodities, if you bought them last year.
 
Jon: That’s right, and we’ll have to probably educate some people on what commodities are but that’s okay. That’s the point of the Financial MD Show. As of today, at any given point in time, S&P 500 is down probably 15 percent, give or take, from its high in December. What does that mean for you? Most of you listening to this are young physicians and that really means nothing to you and if you’re a resident and you’re putting money into a Roth IRA and you’re saving into your residency’s 403(b) or 401(k) – keep doing that. At end of the day, if history tells us anything, it’s a great time to put money into the market. I’m just going to be honest. We need to chill out and if you’re older and you’re listening to this, kudos to you for finding podcasts and you’re probably a little more concerned and maybe rightly so, but if you were aggressively invested, meaning, if you had a lot of your investments in stocks and Bitcoin or whatever, then you knew this could happen, and that’s always a possibility. So let this be a lesson to you. This is why we say aggressive because it’s risky. This is what risky means, and even this isn’t drastic. I mean, it was worse during pandemic, worse in 2008. Could it get worse still? Sure.  We can talk about recession, but there’s really between stocks, bonds, crypto like all of those things – what’s causing this. In the stock market, at least I can speak to that and then Trevor’s going to touch on Bitcoin and just kind of state of the Bitcoin address.
 
Are We Heading Towards A Great Depression? [0:03:39]
 
Things are weird as we’re coming out of the pandemic and recovering from that. Some of the big companies that really had some gains last year – your Zoom, your Amazon, your different things – I’ve had to pull back because they haven’t had the same scenarios. It’s not the same atmosphere. We’re getting back to “normal.” People are going back to the office. Zoom isn’t used as much. Peloton’s not being used as much. You know, all these things that are hitting some lows that are affecting the market and the interest rate increase, I think, is leading to a lot of this. You’ll probably see it affect the housing market shortly, not as drastic as buyers want it to but some and we may be looking at a recession which means two consecutive quarters of negative GDP – gross domestic products. Basically, the country is going down for two consecutive quarters, that means a recession. Now, again, we’ll get through it. We have every time. This has happened before. It’s not a Great Depression type of scenario, but just be prepared that that may be a thing and I’ll just say it. I said this three years ago that the Feds needed to start raising interest rates. The economy was doing well. I didn’t know why they were waiting but you’ll probably all say it because of politics and you’re probably right which just is one of those frustrating things that pisses me off when politics get in the way. This is people’s money. These are mortgages – it’s people’s livelihood – and the Federal Reserve is supposed to be a fiduciary, meaning, I don’t know if they’re technically a fiduciary but like their job is to handle things like inflation and interest rates and all those things and then they come in like they have recently and jumped them drastically which we see it in reflection in things like mortgage rates that go from 3 percent up to 5.5 percent. It’s insane, and it just hurts, I think, the average consumers. I think they should have raised rates years ago. We still would have gotten some inflation but it wouldn’t be as drastic and we still would have had interest rate increases but it would have been more gradual and so this is them being reactionary because they didn’t want to raise them during an election year, right before an election year or all this kind of things. So that’s stuff, just kind of pisses me off. So we could be heading for recession, increased unemployment, high inflation, things like that. You’ll see this concept called stagflation which means rising prices without rising income and that’s a thing. So who knows but that’s my explanation for why stock markets looking like they have bonds have been doing poorly because when you look at current bonds out there, they weren’t paying great interest rates and then when the Federal Reserve raises the interest rates that these bonds are paying, that makes current bonds out there look even worse so they lose value so there’s just no place to get any steady rate of return right now. Some of you guys have been watching Bitcoin or Ethereum or any crypto. Trevor, can you speak to that at all or what are your thoughts on that?
 
Current News Update On Crypto And Bitcoin [0:06:33]
 
Trevor: Yeah, absolutely. I mean, in my circle, people know that I’m a Bitcoin fan, right, so I often get the question why did the Bitcoin price do this or that. I’d say, first, it’s interesting that people – we talk about price of Bitcoin because really it’s an exchange rate like it’s another currency rate.
 
Jon: Yup.
 
Trevor: It’s really is an exchange rate, but we think of it as an investment so we talk a lot about price. Bitcoin is one of the most volatile assets out there. It goes up and down a lot. That is what it means for it to be volatile. So, usually I just say Bitcoin’s just being Bitcoin. That’s how it works. It’s a true free market so it really follows the psychology – the human psychology of markets very, very closely. You can Google image search the human psychology of markets and see a very obvious trend of what spikes and troughs look like and they don’t always match up, but the 2018 cycle matched up pretty well for how fast it went up and the pace and the ups and downs even along the way. It’s just kind of doing one of those things where, you know, why did the price go down like the answer is there’s more sellers than buyers like that’s the reason. It doesn’t get propped up in the same way. If there’s a lot of selling in the stock market, they’ll actually halt trading. If it’s going up too fast in the stock market, they’ll halt trading and it’s a really manipulated system and the idea there is just to control volatility because then investors don’t get nervous or buy too much or sell too much. There’s some good intentions there but it’s not truly a free market. So, Bitcoin’s going to be inherently more volatile because it’s a global free market. It’s pretty much the last free market. These other cryptocurrencies can be manipulated, that is absolutely true, just based on the size and it’s based on who controls the creation of new coins so similar to the Fed in the U.S. The Federal Reserve prints money. I don’t get to print U.S. dollars. They get to print U.S. dollars. But with these alternative cryptocurrencies, non-Bitcoin – some would call them unregulated securities because you’re creating a token and then you’re raising money potentially from other people and then you can sell it in an open market. Regardless, that’s not really been enforced totally by the SEC so that’s to be determined, but those are more manipulatable because they’re centrally controlled and their supply is controlled. So if I made a new currency and I had 50 percent of it sitting here in my house and then I sold a bunch of it to other people and I gave it to some people and then more people wanted it because they thought my business model of how I was going to somehow use this makes a lot of sense starts to go up, and now I have this 50 percent pile here and everyone else is buying and buying, I can just sell as people are buying it so people would be like selling into retail or selling into bull market or whatever it is. It’s not full-on like pump and dump. Even the name doesn’t even matter but if you’re pumping it and you’re selling your own, I mean that is kind of the definition of a pump and dump. So that is where you’ll see the legitimacy of a market is oftentimes seen in the downturn and what happened in the 2018 cycle after the big crypto top end of 2017, early 2018 is you saw 95, 99 percent drawdowns in these alternative coins – cryptocurrencies – and if you have a similar bear market which were pretty much undoubtedly in for Bitcoin and other digital assets, yeah, it’s going to get rough. It’s probably going to get – if you haven’t been through it before, you know, it’s rough. I don’t feel it emotionally after being through it before. Part of that is because experiencing how unregulated all these alternative coins are. It’s not that there’s no value in them or there can’t be another new thing in the future but Bitcoin is very well established. So, for me, I don’t have to really worry too much about that portion of my holdings because I understand it. I know what it is. I know that it does these quick highs and lows and I’m not in it for the short term and that mental framework translates to not being too stressed out about it.
 
Jon: Yup, yeah, exactly. If you know the purpose of it why you chose the investment you did or the strategy you did whether it’s Bitcoin or stock market or whatever the case might be, then it all comes back to that same concept. I think that’s a great reminder.
 
Trevor: There was another event too. Should I tell them about the Luna thing we were talking about?
 
Jon: Yeah, I think that’s worthwhile. Explain what that means.
 
Just What Happened To The Luna? [0:11:16]
 
Trevor: There was this company that came along that – I’ll try to keep it as brief and digestible as possible and you can listen to other podcasts or check out on Twitter – but there’s this company called Luna and their goal was to create an algorithmic stablecoin so we’re getting into the weeds a little bit already. So we’ll just say they create these coins that are supposed to match the price of the dollar and you can trade in and out of them and it’s just faster, it’s more efficient than sending your dollars around, and the idea is if you think Bitcoin is going to go down, you could sell into this coin and it’s just a little bit faster than really settling out into true U.S. dollars and then the real trick – the reason people were buying this – is because you could go on to a certain platform and you could get a 20 percent yield on your stablecoin. So you’ve got – it’s this feeling, this idea of I can take my U.S. dollars, not have the volatility risk literally none ideally, sit in a stablecoin and earn 20 percent. It’s like if you could earn 20 percent on your cash that you put under your mattress, it’s kind of that similar feeling that people would get about this. It feels secure, and then the question is what is that backed by? Well, Luna kind of tapped into the Bitcoin safety, the stability of Bitcoin that people like which non-Bitcoiners would laugh at, but in this space, Bitcoin is seen as a true long-term store of value. So, if it’s backed by that, people kind of like that – oh that’s interesting, okay. So, now it feels extra safe and plus they’re buying Bitcoin as people put more and more U.S. dollars in there. They’re kind of like matching it up and they’re going to use Bitcoin as their reserve – kind of like this idea of a Bitcoin standard rather than a gold standard. So they’ve got this narrative. It sounds pretty nice and plus you’re earning a 20 percent yield and people when they’re earning a 20 percent yield don’t always ask as many questions as they should, right?
 
Jon: You’d think you would at 20 percent, like doesn’t that sound a little too good to be true?
 
Trevor: In the Bitcoin space, in the digital assets space, it’s a little unclear as to how it works until one of them blows up. So, what happened in this one is they got a bunch of people in and they had about 70 billion dollars, I believe, is the number of value. This, in the last week, was what people would have read. This got erased all the way down to about two. So, how did that happen? The way they were backing the coin so like if I bought hundreds of millions of dollars in the stablecoin and then I decided to sell it, they would have to be able to back it up to trade like dollar to dollar.
 
Jon: That’s the definition of a stablecoin, right?
 
Trevor: Yeah, right. So, they have to match it up. So, if you exit it, when you trade one thing for another, there has to be like a shift. They’re backing it up with their own coin that they made called Luna and then their reserves were some in Bitcoin as well. So somebody decided – it’s very obvious how they would do this. I guess people were publishing articles on how you could basically attack the system and break it and somebody went and did that. So they shorted Bitcoin to bring the price down and they shorted Luna and they sold the stablecoin. When they sold a bunch of the stablecoin, it had to be switched out for something like Luna and Bitcoin but as Bitcoin was losing value this last week and Luna was losing value, now the thing that they had to kind of like hold that stablecoin at a dollar, they didn’t have enough money to back it up. So, people were trading out of it and they couldn’t trade them back. They basically were like – it’s like a bank run. They couldn’t make these people whole so as they couldn’t make them whole as they tried to exit, the value of that currency drops dramatically, and in a matter of hours, it went from basically worth a dollar worth nothing. It was kind of associated with Bitcoin so maybe that news got misinterpreted and Bitcoin went down a little bit further – irrelevant. I mean Bitcoin is volatile but this was a specific attack on Luna is what failed in that scenario and not Bitcoin. It should be reason for everybody to be very, very cautious for any of these new projects, for things that have too good to be true yields, and there’s also a lot of big-named folks that were involved in the project. Frankly, you should know better. Anyways, it’s good reason to be cautious the whole YOLO-ing approach to the spaces. It is not wise and know what you’re buying. I mean, know what you’re buying with stocks, with the diversified portfolio. This is your money. If you’re investing, it’s ultimately your responsibility you can have a great guide like Jon here and he’ll help you and it’s still ultimately your responsibility to understand what you have and what you’re buying and creating your own plan and your own reasons for having what you have.
 
Jon: Yeah, and full disclosure. If you are simply looking for Bitcoin advice, I would contact Trevor.
 
Trevor: Not financial advice for me, but I’m happy to discuss the technology and the features.
 
Jon: How about Bitcoin consultant? How about that?
 
Trevor: Sure. No problem.
 
Jon: I think that helps a lot. I mean that was the gist of what we wanted to mention today is some reasons for what’s going on in the market and some of you are staying on top of that. Some of you – I think most of our listeners know what’s going on but I wanted to have us come in and give some perspective on the various markets of why and ultimately not to panic but I think that Trevor’s point, too, like know why you’re getting into what you are – this YOLO approach or just whatever it is. When you’re getting into something that is potentially risky or volatile, fine, if that’s money you can stand to lose, but if you’re investing your life savings or retirement savings or whatever the case might be, everything’s kind of a purpose. We talked with our clients about at a certain point we put together an investment philosophy statement which basically says regardless of the market or our emotions or whatever, we want these guidelines to guide what my family, my company, invests into and why, and so it just helps to maintain some stability at least of emotion and thought through ups and downs. Be aware that I think long-term investment strategy doesn’t change. This has happened before. It will happen again. We are certainly in unique times in terms of – it’s hard to say, gosh, where I can turn to the find stable growth. I don’t know, but where most of us are just staying the course because we had a strategy and a plan and this doesn’t change that. Anything else to add to that, Trevor?
 
Trevor Shares His Personal Strategies In These Unique Times [0:17:37]
 
Trevor: No. I don’t have anything else to add to that. Yeah, I’ll just share a little bit of my own personal strategy that I’m obviously into Bitcoin and I am heavily weighted in that in my portfolio. I won’t say exactly how much unless I said it before which I may have. I’ll just use it as an example for the purpose of having a specific asset or equity or stock in your portfolio or combination or ETF. When you know something’s going to be volatile, you want to size it appropriately and if you think Bitcoin is going to 10x in five years which I think is totally possible from a point of 30,000 – could be wrong – but that’s kind of like my thesis. So 10x from here in five years, I would totally consider that reasonable. So, if I have 10 percent of my net worth, let’s say, in that and we get a 10x, we’ll, that portion of my portfolio will now be 100 percent value. I don’t need to have 90 percent of my wealth in asset that I think is going to go up really high, and if I know it’s volatile and it could drop in half or 80 percent then I can tolerate from 10 percent down to 2 percent and my overall portfolio could drop a good 8 percent or something if it goes down 80 percent, and for me being 35 and losing 8 percent of my net worth is not a big deal. It’s not going to ruin me. It’s not going to affect my payments and I am not YOLO-ing into any sort of investment. I am looking at this soberly knowing it’s going to suck when I see it go down and I’m going to put in 10 percent because 10x should be plenty good for me and having 100 percent return over five years for my entire net worth would be ridiculous. It’d be amazing especially in the current inflationary world we live in, that’s great. That’s going to keep up with inflation and that’s one of my goals and I only have to really “bet”, stand to lose 10 percent of my net worth. My dad’s like at retirement. Do I want him to have 50 percent of his net worth in Bitcoin? No, that would be crazy. If it drops down by 80 percent, then he could lose 30, 40 percent of his net worth. That’s too much. You know, that’s irresponsible, unquestionably. But 5 percent, 2 percent Bitcoin and then at 10x’s and then now he’s got a 20 percent boost with such an extremely low risk, that’s where it’s valuable and it’s outside of the current system and the Fed can’t print in a way that can manipulate Bitcoin as much, although it’s a liquid asset. It's going to be affected, at least in the short term, but yeah, just to land the plane on that.
 
Leverage: An Interesting Strategy [0:20:16]
 
With that in mind, leverage is an interesting thing. So you can have a 100 percent net worth but if you leverage your money, you actually can have a higher percentage than 100 so you can invest like 120 percent of your net worth if you have 20 percent leverage in. People are, well, that sounds crazy. Well, most of you are doing that because you have a home so it’s balanced out by the debt but if the value of your home goes down then you are actually leveraged above. So, let’s say, you got 100 percent net worth and then you borrow against the home and you get a 400,000-dollar loan for a 400,000-dollar house. So you’re still at 100 percent because those cancel each other out, right?
 
Jon: Yeah.
 
Trevor: If your house value drops in half and you got now 400,000 dollars you owe and 200,000 dollars of house value left and you’ve got a million dollars, well, now you’re minus an extra 200,000. So you’ve got 1.2 in assets but you have 400,000-dollar loan, so now you’re at 800,000. So, yeah, it’s right about 20 percent. People might not be leveraged right now but depending on what you own, you could be. So, with that same kind of thing in mind, I have student loans and I have been investing so there’s always that discussion – should I be investing or should I pay off my student loans or a little bit of both – personal decision. Talk with the financial advisor and then scope it out, maybe two different directions, know where you’re headed and pick the one that sits well with you. Well, recently, what sat well with me was, I’d like to kind of de-leverage. I’m basically when I’m making payments and I’m investing at the same time, it’s almost like I’m borrowing to invest that money because I’m effectively not paying off the loan. You can do some mental gymnastics. My loan was at a 5 percent rate. That’s not too bad with inflation. Some people would say borrow that money all day long and there’s been times where I felt that way and I was just like, you know what, there’s a peace of mind I could just feel myself desiring and I wanted to pay it off and I had the funds and then looking at the environment of recession – potentially – I did this before where, you know, a year ago, all my assets were up a lot higher than they are now because I was in volatile assets and I could have paid it off with a smaller percentage of my net worth than I had to do this last week. But I just thought, you know what, that percentage of my net worth I would have to sell to pay this off could double again in the next year if things keep going down. I just want to de-leverage myself and have that peace of mind and so I decided to pay off. I still have some student loans remaining but I paid off about 50 percent of what I owe and that lowers my monthly payments and making the cash flow more comfortable. It allows me to more conservatively pursue the career that I want to have so I don’t feel as limited by that and that was my financial decision.
 
Sometimes, It All Boils Down To A Person’s Emotional Well-being [0:23:16]
 
Jon: Sometimes, I recommend that. I usually, in the interest rates we’ve had in the last several years, have said, don’t pay off your loans early. We can get a much better rate of return in the market or investments, but there have been times when I knew it had to with a person’s emotional well-being. We had a client that really hated their job, hated where they were at, just a bunch of stuff, and it was affecting his family and I just said, hey man, I think you’re going to be happier if we switch, alter course a little bit and try to aggressively get these loans paid off, then you can move, you know, because he was a thousand of miles away from home where he grew up and he’s trying to raise a family away from his parents and their family. It’s like all these things that – I’d been a financial planner long enough to say and a therapist for a little bit to say – yeah, I think you’re going to be better served. The numbers are not going to make sense but your happiness and emotional well-being just outweighed the numbers.
 
Trevor: If you can’t do stuff like that and you’re making money and you’re saving money, you got to remember what’s the point of the money? It’s not just to get more of the money. It’s you want to preserve your buying power.
 
Jon: To what end, yeah.
 
Trevor: Yeah, part of it I was like what I’ve sacrificed lots of emotions, learning and investing in a volatile market and assets and taking on lots of debts and stuff. I was like, you know, I’ve paid the price for this, and occasionally, you just need to reap the rewards. I’m not going out and buying a car. I still like driving my old used cars. They’re great, but this is a big goal and I don’t regret it at all and then the market dipped 25 percent so that was particularly satisfying. I don’t think that usually happens but I was like, well, there you go. I would have otherwise had to just wait another year because I’m not going to sell down at that. I’m not going to sell at the bottom, but selling in the middle – the middle-ish – that’s all right.
 
Jon: I can get onboard with that. All right, well, it seems that covers it for today. Trevor, thanks for sharing. Your perspective is always valuable and I appreciate you doing this with me, and for the rest of you out there in Financial MD world, just keep at it one day at a time. Stick with the plan. If you’re unsure, consult your financial planner. Find somebody you like and you trust and you feel like has your best interest in mind. You know how to reach us at financialmd.com. We’re coming out with new Didactic Minute videos every week; kind of blowing up on TikTok and Instagram so if that’s convenient for you, follow there. Otherwise, we’re still always on Facebook and YouTube for the video piece but if you haven’t yet shared the Financial MD Show, please do. If you care about somebody, you’ll share the Financial MD Show. Get this information out to as many people as possible and share the love. Subscribe on iTunes and Spotify and Google. Other than that, until next time, it’s Jon Solitro saying goodbye, and Dr. Trevor Smith. We’ll see you next time.
 
Trevor: Good to see you, Jon. Bye.
 
Jon: All right, see you later.
 
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 a 403(b) plan? – https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-403b-tax-sheltered-annuity-plans
The 401(k) plan: Complete Guide – https://www.investopedia.com/terms/1/401kplan.asp
Gross domestic product (GDP) definition – https://www.bea.gov/data/gdp/gross-domestic-product
Current Federal Reserve interest rates and why they change –
https://www.thebalance.com/current-federal-reserve-interest-rates-4770718
Federal Reserve website – https://www.federalreserve.gov/
What is stagflation? – https://www.investopedia.com/terms/s/stagflation.asp
Bitcoin website – https://www.bitcoin.com/
Ethereum website – https://ethereum.org/en/
Stock Market Psychology – https://www.dailyfx.com/education/understanding-the-stock-market/stock-market-psychology.html
All about Terra with it’s token, Luna – https://www.cnbc.com/2021/12/27/what-investors-should-know-about-terra-and-its-token-luna.html
The great Terra Luna crypto crash – https://indianexpress.com/article/technology/crypto/5-things-you-need-to-know-about-luna-crypto-crash-7919632/
Terra 2.0 – https://www.euronews.com/next/2022/05/26/terra-luna-2-0-how-backers-of-the-project-want-to-revive-the-failed-cryptocurrency
Stablecoin definition – https://www.investopedia.com/terms/s/stablecoin.asp
Leverage trading: Pros and cons – https://www.wealthwithin.com.au/learning-centre/leveraged-trading/leverage-trading-the-pros-and-cons
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 016 - What Happens After You Die?

Summary:
What Happens After You Die (Financially-Wise) [0:02:50]
What Is An Estate? [0:06:07]
Aaron Spelling – An Example Of A Well-Managed Estate [0:08:51]
What Is SECURE ACT? [0:11:16]
Bitcoin As An Early Inheritance [0:16:17]
There’s Something Called A Step-up In Basis [0:19:18]
Gift Tax – What Is This? [0:23:17]
How Do I Dictate What Happens After I Die? [0:27:07]
Who Should Have A Trust? [0:30:15]
Role Of Regulatory Bodies Like FINRA And SEC [0:32:48]
It Pays To Invest On Life Insurance [0:36:33]
 
 
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: Hey everyone! Welcome to the eighth episode of the Financial MD Show. Hope you’ve been having a good time listening through all the episodes and learning stuff. Today, we’ve got a fan favorite. This is a highly requested topic both through emails and correspondence, and after getting requests on podcast topics as well as just getting straight up questions in the webinars and lectures and things that we do. Disability insurance is what we’re talking about today, which is great, because I’m knowledgeable on it, Trevor is knowledgeable on it, and we’ve had some good and bad experiences, but there’s a lot of mixed information out there and we hoped to straighten some of that out today. We’ll give you some tips on how to buy it, how to shop for, what to look for, what not to do, and ultimately how do you feel you’ve done well and just protect your finances. Without further ado, here’s today’s show.
 
Trevor: Need to go back a little further.
 
Jon: Okay, let me think a topic today. Your thoughts on topics today?
 
Trevor: What have I been thinking about lately? I’m thinking about life or death. We could not talk about that.
 
Jon: I don’t know.
 
Trevor: I think it’s bad up there. This is good. What have you been talking about with clients? We can talk about bitcoins. It’s almost at an all-time high if you want.
 
Jon: Yup. What have I been talking about lately? Well, a lot of wondering if Biden’s going to make any big tax changes.
 
Trevor: Certainly. Do you get calls about that stuff right now?
 
Jon: Yeah. I mean mainly emails, text, whatever. Clients just like, hey, should I be doing anything, or what should we do or etcetera. And, you know, the answer is still at this point like it’s too early to tell, really and so that run maybe we can do yet so anything else would be preemptive until we have a better idea what’s going to be passed and all that stuff.
 
Trevor: Yeah, that’s a little premature.
 
Jon: Yeah. I mean I can kind of run that. We can chat about it.
 
Trevor: We chatted about that last time.
 
Jon: I think we did.
 
Trevor: That was the last topic we did.
 
Jon: I’m kind of curious about...
 
Trevor: What about…yeah, go ahead.
 
Jon: Well, let’s talk about…let’s have a show called, “What happens after you die?”, but let’s talk about it more specifically with financially like what does happen to my stuff after I die? How do I…do I know? How can I know? When should I be thinking about that or making moves on that? I think that’s probably a good question we haven’t really addressed.
 
Trevor: Yeah, sure, like wills, estates.
 
Jon: Estate planning, basically, yeah.
 
Trevor: Well, I will be honest. This would be mostly you. I know almost nothing about that. That’s something I’m going to start looking into.
 
Jon: Well, that’ll be a good…you’ll be a good person to talk to because that’s what most of the doctors we have are like I’m not – anything about that.
 
Trevor: Okay, yeah. Sure, let’s do it. That’s great. I can ask you questions. Yeah, please, go for it.
 
What Happens After You Die (Financially-Wise) [0:02:50]
 
Jon: So what happens after you die is the question that we’re addressing today and we’re going to try to keep it nearly in the scope of financially. Spiritually, that’s probably out of the podcast, we can recommend for that, but on Financial MD, we’re going to talk about what happens after you die and the answer to that is our typical legal approach of, well, that depends. So on our show, of course, we have Dr. Trevor Smith giving us as always the valuable yet slightly more informed physician opinion and experience and then myself, Jon Solitro. We’re going to talk about this. So we’re in a unique situation where Trevor may be in the position that many other physicians are in from a knowledge standpoint of estate planning. So he’s going to approach it as though he is an estate planning dummy and ask some questions and we’ll try to do kind of an estate planning for dummy show and try to keep it very simple because it can get very complicated. You know, people get entire degrees in this thing. Alright, so first question that pops into your mind, Trevor, when it comes to what happens to your money after you die? Or your stuff?
 
Trevor: Big picture – I’d like to know in terms of…I think the main thing is a question of when you see a lot of this in the news right now, we were just talking about taxes and potential buying tax. Changes that are coming up the pipeline, we don’t if they’ll occur so there’s not really much to do. Maybe get to read about. Maybe click bait – probably a lot of articles are click bait on this kind of stuff – but what gets taxed after I die. I mean that’s the question I’m in. If you’re going to leave your money to somebody else whether it’s a charity or individual, children, spouse, partner – whatever it is – not everything gets taxed, even if you have a lot of money as far as I understand. But I’m early enough in my career and I don’t have dependents so it’s not something I spent a lot of time thinking about but, you know, right now for me as a single adult it’s, you know, filing a single…it’s pretty simple, you know. Just like the accounts I have are going to go to somebody else and a lot of the banks and whatnot, you just write a beneficiary down – brother, sister, parent, whatever. For any, you could just pick friends. You could pick whatever you want. You can give things away to people, and you barely even as far as I understand need a will but I know there’s frozen accounts of having one for specific items. So I would like to know first what is taxed and then I would like to know what is an estate and then after, it’s right into that.
 
What Is An Estate? [0:06:07]
 
Jon: Yup. So what if tax…maybe I’ll start with the second question. What is an estate? So most things when you die will be in your estate. Estate means anything that really needs to get settled or given to somebody or dealt with after you die. Now there are some things that are inherently out of your estate specifically the 529 plan if you started one for your kids or somebody else, that will be out of your estate as soon as you die and doesn’t get counted in terms of... When you say out of estate, that’s typically…what that means to an attorney or even who’s dealing with this is what counts towards estate planning – or not estate planning – estate taxes, we’re in an environment right now where it doesn’t get talked about that much because currently the threshold of your net worth above which you would have to pay estate taxes and estate taxes are typically about 40% is 11 million and some change for a single individual or basically 22 million/23 million for a couple. So if your net worth is more than that when you die then, yeah, you have to think about estate taxes and what’s in your estate and that’s everything – house, land, bank accounts, IRAs, life insurance – any kind of assets that you own or have any ownership in whatever your worth. More specifically, if you’re a business owner, this really comes into play because if you don’t have a lot of stuff, right, just got a house and some money, you know, I got 5 million bucks in savings and house and all those things, okay, that’s not that uncommon in this world, but then so what do you do for a living. Well, I own a company that’s probably if I had to value it is worth 50 million, but, you know. Well, that is part of your estate. That’s part of what you own. So that’s a big deal. So a lot of estate planning when it comes to business owners is how do I get this business out of my name before I die essentially or just be prepared to pay the estate taxes because whoever inherits it is going to have to pay. I mean we’ve got stories and you can see horror stories of…Michael Jackson’s estate to what other estates were terribly managed? Oh one interesting example who I think did it well – do you remember Aaron Spelling? TV producer – Melrose Place, Beverly Hills 90210 – that kind of stuff?
 
Trevor: Oh, nice.
 
Aaron Spelling – An Example Of A Well-Managed Estate [0:08:51]
 
Jon: Yeah. So he died recently and his estate was structured in such a way his daughter, Tori Spelling, was kind of a mess growing up and he had set aside a trust that was very specific as it was multimillions of dollars, but all she could get was a certain salary every year out of that. She couldn’t just pull a million bucks out and do something with it, but she could pull a million bucks out to donate it or start a business or do stuff like that. So he had very clear trust and estate planning documentation set up. Now, not a lot of us have to go to that extent but you could have any kind of jackass in your family that if you got a hundred thousand dollars that goes to him and you know they’re going to blow it. So back to the original question, what’s in an estate? Anything you have ownership in, frankly. There’s a couple of things that are specifically at this estate and then kind of more specifically, what is a probate asset and what’s out of probate. If something clearly has a beneficiary on it – life insurance, IRAs, 401ks, stuff like that – that is stays out of probate. But if you don’t have a will or trust and you have stuff that does not have a beneficiary on it – house, bank accounts, cars, that stuff – that’ll go into probate and a probate judge will decide who gets what and how much and that kind of thing plus you typically will pay 3 percent of what goes into probate as a probate tax and stuff. So people want to try to avoid that, but a lot of…you know, so when it comes to what’s taxable in a worst-case scenario, there’s probate tax but then in a scenario where you own a bunch of stuff – business things, whatever – totaling over 11 million, there’s estate tax. But what most people are going to deal with is things are going to get transferred fairly without tax unless it has never been taxed. So we have two scenarios there. So a qualified account of 401k and IRA – things like that basically or retirement investment account – those have usually never been taxed, right? We’ve talked about before. Money goes in pre-tax. Then you die – your son, daughter gets it.
 
What Is SECURE ACT? [0:11:16]
 
What changed in 2019/2020 was the SECURE Act which changed it so that as soon as you inherit something, you get 10 years to get it out of there and pay taxes on it. So 401ks, IRAs – things like that specifically. Life insurance death benefit is not income taxable when you get it. Now if it’s over 11 million then yes, there’s a portion that would estate-taxed.
 
Trevor: Interesting.
 
Jon: Yeah, the whole beauty of life insurance is the tax-free nature of it for the vast majority of people.
 
Trevor: Okay. I didn’t realize that.
 
Jon: Yup. So it’s kind of...and some people look at it, a lot of middle America will have a lot of money in 401(k)s and IRAs at the end of their life and that they say, here, son or daughter, you can have this after I die and also here’s a little life insurance policy that cover the taxes on this. That’s kind of a strategy sometimes.
 
Trevor: Interesting. So I thought that retirement accounts were not taxed actually.
 
Jon: They are, you know, when you pull them out and it used to be you’d get what’s called an inherited IRA or an inherited 401k which would then have a or rightly called a stretched IRA which means you could stretch it to your life expectancy and the IRS has this formulas and tables to say, here’s how long we think you’re going to live based on how old you are and we’re going to give you a formula so that if you make it to your estimated life expectancy, you will have completely liquidated that account and paid taxes on all of it.
 
Trevor: Got it.
 
Jon: So for example, typical 65-year-old has what’s… well, a typical 72-year-old, we’ll say, because that’s the age when you have to start taking money out of your IRA or your 401(k). That’s called a required minimum distribution but at that age, 25.6 is the typical multiple, I guess, or divisor, but you basically take if you have a hundred thousand dollars in your IRA, you divide it by 25.6 and that’s how much you have to take out this year and then each year that amount goes up a little bit. It comes to about 2.7 to 3% the first year and then bumps up a little bit every year after that. The point is you got to take that out and then pay taxes on it, that’s why. So IRA is taxable, 401k is right. ROTH IRAs – different story. That’s all tax-free.
 
Trevor:  Inherited, is that free too?
 
Jon: If you inherit a ROTH, you still got to take it out but you don’t have to pay taxes on it because the government can find…
 
Trevor: Okay, so it can’t keep growing tax-free.
 
Jon: Exactly.
 
Trevor: You can take it out immediately all at once?
 
Jon: No, it’s still with 10-year window, I believe.
 
Trevor: Okay, got it. So the new SECURE Act made everything a 10-year window?
 
Jon: Correct, for almost everybody.
 
Trevor: Okay.
 
Jon: There are what’s called eligible designated beneficiaries which are disabled beneficiaries, spouses, and any beneficiary that’s less than 10 years younger than you. In that case, they keep the spread provision that says, here, you have to take some out every year but you can stretch it out over your lifetime.
 
Trevor: Okay, that’s make sense. I’ll give you a specific context, just to add a little flavor here. I like to jump in the clubhouse. I think my handle is the same there – trevorsmithmd@trevorsmithmd.
 
Jon: Yup, I’ve been there some times.
 
Trevor: Occasionally, I’ll hop on stage and chat with big-pointer people about stuff and we were talking about ways to pass on your bitcoin and the bitcoiners are not afraid to get creative and there’s like a small contingent of bitcoin folks that are basically willing to break the law. We don’t like the tip, okay, so that’s a bad luck for a great asset. It’s like avoiding taxes is not part of the ethos of bitcoins. Must be a good store value. You could buy more later with it than you can buy today. I mean that’s a simple kind of…that’s like where good money would be regardless if it’s bitcoin or not. So we we’re talking about how do you give it to your kids, right, especially once it’s going to be worth more later down the line, let’s say, 30 years from now, what’s it’s going to be worth. So one of the things we talked about was gift taxes so you can give up to 15,000 dollars per year to anybody in your immediate family.
 
Jon: Correct.
 
Bitcoin As An Early Inheritance [0:16:17]
 
Trevor: And we’re just kind of saying like 15,000 dollars of bitcoin if it keeps going up in an exponential or parabolic manner, it’s almost like you can give substantial pieces of wealth to your children just by giving them whatever amount 15,000 is at the time of the gift. So like earlier this year, bitcoin is like 30,000 so you could give half of bitcoin to your kids and nobody would have to pay any taxes on it.
 
Jon: Yup.
 
Trevor: It’s kind of like a workaround, almost like an early inheritance and the context was, okay, what would make that make sense. But you have to have a great relationship with your kids, you with your parents or your parents with you to do that and then you also want to…like the idea there is that’s inherited so like don’t spend it. But if you have the context where your kids are responsible they’re not going to spend it, bitcoin is unique too because you can gift it to somebody and then somebody else can custody it as well. So you can almost do like trust level gifts where it’s controlled, pay no taxes, and then actually not really physically handed off to them and then withdraw until later. That was a little more advanced than I intended it to be, but just in general, I think of it in U.S. dollar terms, just giving cash. You can give 15,000 a year and they don’t pay taxes on it and you can kind of just… If you have 30 million dollars, that’s not going to move the needle for you, right, to limit your taxes that you pay after death. But if you got like 5 million and you think you’re going to double again in 10 years and you might be flirting with that level of 10 million/11 million and then they’re going to gouge 40 percent, you know, 4 million roughly out of 10, then like certainly give some early tax-free with gift tax. We’re just talking about that. I’d be curious what your thoughts are, and do people do that often or do they just kind of not mess with it and just do like trusts? How do you transfer wealth to your kids?
 
Jon: Is it kind of capitalize that to where if you buy and sell, it’s a capital gains tax or income tax?
 
Trevor: Absolutely. It’s treated just like real estate long-term and short term gains. The other thing is you can spend the bitcoin? That’s the same thing as a sale so like anytime you transfer it to somebody else, it’s a taxable event, it’s a capital gains event. It just depends on how long you’ve held that whether it’s long term or short term and then you get a higher or lower tax bracket based on that. Those are googleable on the IRS website and currently there are like if it’s short term, less than a year, you pay your income tax rate generally if you’re making good money like a doctor, and then if it’s long-term after a year, then you’re paying either 15 or 20 percent. The more you make then you’re on the 20 percent category. Usually long-term gains 20 percent.
 
There’s Something Called A Step-up In Basis [0:19:18]
 
Jon: Correct. So it depends on the type of assets. So most capital assets like that – stocks, real estate, bitcoin. As of today, October 20, 2021, there’s something called a step-up in basis, which is one of the most advisable things is to not gift stuff before you die because when you gift something, your basis becomes their basis which means, okay, great, you didn’t gift it to them to sell, but if they do, they’re going to pay taxes on the growth that you had. So you bought it, you know, you bought bitcoin at 40,000 and they sell it at 60, they’ve got 20,000 in gains, that’s taxable gains. That’s a recognized gain that they have to pay taxes on. But if you wait till you die and bitcoins at 60,000, their new basis is 60,000 and if they sell it that day when it’s 60,000 then no taxes for them. Same thing with the house, same thing with stocks in a brokerage account.
 
Trevor: That is critical information. That’s very helpful because that shifts... You could kind of do a bit of both. I mean I’m one of those guys I think bitcoin is going to…each one is going to be worth a million dollars plus; somewhere between a million and 5 million each at some point in the future. It could be, you know, in the range of 12 years from now is kind of what I picture just based on the supply and demand curve but it could be well down the road. But hitting some office good but like having a step-up in basis, that’s massive. That is incredibly massive if you’re going to sell it at some point.
 
Jon: Well, and that’s why… that’s been a very longstanding law and the Biden administration has discussed eliminating step-up in basis, so that’s a big deal.
 
Trevor: Wow. Huge deal.
 
Jon: And that’s a thing that wouldn’t just affect high net worth people. That affects anybody. I mean if you inherit your parent’s house and, you know, everybody does that, then there’s a step-up in basis issue there. So that’s why it’s typically better to inherit or bequeath something rather than gift it because if you give something before you die, they take on your basis which means more taxes for them. I have had clients ask me all the time about, hey, should I just put my house in my kid’s name? Would that be easier when I die? Well, if you do that, you effectively gifted it to them and now they have your basis. No step-up in basis and you’re going to hold the government more than you should so step-up in basis becomes a huge question.
 
Trevor: Okay, so just to like hammer it home, make sure I understand, so if one of my parents passed away and they had shares of Tesla and let’s say they had one share there and it was 200 dollars and they bought it 10 years ago and then now it’s worth a thousand. If they gifted it to me before they passed away, I would have the basis of 200 dollars?
 
Jon: Exactly.
 
Trevor: Okay.
 
Jon: Now that’s outside of an IRA or qualified plan. That’s like a broker’s, just Robinhood or whatever.
 
Trevor: Taxable account.
 
Jon: Taxable account.
 
Trevor: Yeah, well, they’re technically all the taxable accounts but you might just call it like a regular, non-retirement account.
 
Jon: Yeah, kind of taxes-you-go account you could say where you have to taxes every year.
 
Trevor: Taxes you go, that’s actually a very helpful common sense term. Okay, cool. That’s helpful. Were the other…? Go ahead.
 
Gift Tax – What Is This? [0:23:17]
 
Jon: Well, the gift tax…your gift tax point is another one. Gift tax is not a thing until 11 million dollars either so you got an 11 million dollars of stock you can gift. The reason the 15,000 is there, if you keep it under 15,000 a year, you don’t have to report it. But if you gift something that’s worth more than 15,000 dollars, you have to fill out a gift tax return schedule on your tax returns that year and the IRS keeps track and if you get to the point where you gift more than 11 million dollars’ worth of stuff then you got to pay taxes on that.
 
Trevor: Oh, so you can give more. Do you have to pay taxes on it though if you give more?
 
Jon: If you give more than what? 15?
 
Trevor: Yeah. I thought you had to pay taxes on it.
 
Jon: Nope. I thought so too, but you just have to report it.
 
Trevor: Just have to report it and that’s maximum of 11 million.
 
Jon: And it starts counting towards what they call a gift tax exclusion or exemption.
 
Trevor: Interesting.
 
Jon: Yeah, pretty sure. Disclosure – I’m not a tax professional. I’m just deep in the weeds of the CIP right now and I hope that’s true because that’s how I may answer on the CIP exam next month. But that’s what’s had been. That’s what I understood in the tax planning course that I’ve been going through. You know, I don’t see issues like that that often that’s why. So when I try to keep clients under that 15,000 and it comes up like I had a woman that wanted to gift 15,000 into her granddaughter’s 529 plan that’s a gift. She wanted to just…so she was 72/73. She had to take a required minimum distribution from her IRA and she said instead of taking this, can I put it in my granddaughter’s 529 plan? Yeah, you can. You still have to count as income so it’s not like you just bypassed you, but it still comes to you and you can put it on a 529 plan but her RMD was like 18,000 dollars or something which was going to be over which meant we were going to have file a gift tax return. So what we did was we had, the investment company, withhold the taxes on that like 20 percent for taxes. So it came out to like 14,000 or something was the actual check that she got, which is great, because now it’s in the 15,000 and she can kind of standard rate with that. So that’s how that works. There’s a gift tax exemption amount as well as an estate tax exemption amount and they’re both kind of around that 11 million. In fact, we can kind of confirm this with the ultimate tax planner Google.
 
Trevor: Yeah, 11,580,000.
 
Jon: There you go.
 
Trevor: It’s the limit.
 
Jon: They’re similar because people, you know, would try to gift stuff to get it out of their estate. Just like well, here’s how we fix that.
 
Trevor: Oh, interesting. No incentive.
 
Jon: Yup.
 
Trevor: Yeah, that’s wild.
 
How Do I Dictate What Happens After I Die? [0:27:07]
 
Jon: So, in general, for most people with estate planning, the question becomes then, how do I dictate what happens after I die with my stuff? A will is the most basic way to do that, that just gives directions to an executor, but if you’ve got young dependents or you got some other specific plans or things like that, you can establish a trust and when you die, a trust creates a separate entity with its own social security number where all of your assets if they’re properly named and titled and beneficiary and everything, go into that trust, so now this trust pulled that this trust has to file on tax return. It has a trustee whom you’ve given specific instructions on what to do with this and when and how, and you know, it would bypass all the probate stuff potentially because there’s some things that just have to go through probate unless you set up a trust. So that is something you want to…I recommend typically just getting a trust done. It can be 2 to 3 to 4,000 dollars but when people are at that point in life where you got a spouse or dependents or enough stuff that they want to, you know, make sure some very specific directives are done when they die then that’s where a trust makes sense and I recommend using an estate planning attorney rather than just a random attorney, you know, just helps to make sure they are specialists and a lot of experience in what this is.
 
Trevor: How much money do you have to have to make it worth having a trust?
 
Jon: You got to think of life insurance face amount in there as well, a death benefit. So let’s take, for example, if you’re a resident and I’m talking to you, most of my residents especially if they’re married, even if they don’t have kids like they’re going to have a million bucks or 2 million bucks in life insurance and assets and everything altogether. So at that point, yeah. Gosh, what’s the dollar amount?
 
Trevor: Because there’s been a couple grand for it, that’s the context I’m thinking in, you know, like if I have… yeah, I don’t know.
 
Jon: I would say it’s not so much dollar amount but complexity of your estate and your assets and your whole make up of what you have. You know if it’s just house and car or you’re renting, you just got a car, then yeah. But as you start to accumulate assets, you know, that’s a different story. So, I don’t…I don’t know. That’s a tough question. I just say, probably, I don’t know. I guess I can’t answer that.
 
Who Should Have A Trust? [0:30:15]
 
Trevor: Let me ask you differently. How do you determine who of your clients should have a trust?
 
Jon: For sure, if you got minor children.
 
Trevor: And what’s the reason behind that? If I don’t get the money like immediately or something just knocks on them.
 
Jon: Yeah. The other option is if you don’t then the court’s going to establish a guardian or custodian that’s going to have more freedom and flexibility around whatever assets that you set or that you have left over.
 
Trevor: Got it.
 
Jon: It’s just safer for the trustee. It’s safer for the kids, if you just put it in a trust, that’s very kind of regimented and controlled, and has specific language. Because then with a trust, you can say, okay, I want my kids to get this much at 18, this much at 25, this much at 30, like you can dictate directions like that.
 
Trevor: Got it. You can probably even do like percentages or absolute amounts, things like that like if it grow super fast, then you’re like, oh, I didn’t know this account was going to be 30 million dollars. I mean that’s a great problem to have, but you probably don’t want an 18-year-old getting a third of that like upfront or something.
 
Jon: I mean even a hundred grand to an 18-year-old.
 
Trevor: Yeah, so true.
 
Jon: Right?
 
Trevor: Just a massive amount of money. I mean, can you imagine? It won’t last very long.
 
Jon: Nah, I know and it’s been so many times.
 
Trevor: I bet. It’s kind of the default, right?
 
Jon: Yeah. I mean it is the default if you don’t set up any other rules.
 
Trevor: Yeah, that’s important to remember – the defaults. The defaults on how money is treated is pretty horrendous.
 
Jon: You can’t just kind of let it go and be like, well, I’m sure the government’s set up different defaults that’ll make sure this gets handled a different way.
 
Trevor: They haven’t.
 
Jon: The government will say that’s on you buddy like we just want to get our taxes.
 
Trevor: Yeah, it is important to remember the IRS isn’t there to…There is no benefit really to individual. They just collect taxes.
 
Jon: Their job is to generate revenue for the Unites States government.
 
Trevor: For the government. Yeah, that’s the way to say it. Yeah, that’s absolutely right. That is their job.
 
Jon: For-profit arm of the Federal Government.
 
Trevor: Huh! I’ve never thought of it like that either. Those are both really good.
 
Role Of Regulatory Bodies Like FINRA And SEC [0:32:48]
 
Jon: Well, that was like, yeah. When I’ve had dealings with regulatory bodies like the FINRA, the SEC or something like that like take FINRA for example. FINRA is the Financial Industry Regulatory Authority. Every advisor or at least broker is regulated by them to where they can levy fines and penalties on you for different stuffs and sometimes dumb stuff, and I don’t mind saying that, but I was talking to an attorney about it one time and I was like, you know, what’s the likelihood… You know how do they typically look at this attitude-wise? And he said, well, you got to look at it this way. FINRA is what’s called a… it’s actually a private organization, so to speak. It’s a self-regulatory organization that doesn’t necessarily get funded by tax reg. It gets funded by fines and penalties so you can imagine that there are little one…you know they’re not going to be just like, ah, sure. We’ll let that go without a fine or penalty, you know. It’s like that’s how they make money so is that a conflict of interest? Probably, like yeah. So if it’s an easy opportunity for them to collect the penalty or fine, then probably will.
 
Trevor: You think the SEC is similar. Like the SEC – Securities and Exchange Commission – the positive optimistic view is that they’re trying to protect investors from malinvestment.
 
Jon: Correct.
 
Trevor: A common example I hear is like you can’t…Burger King can’t claim that the Whopper cures cancer. So because of that, people can trust a lot of marketing in the United States. There’s like make a false sense of security that like if somebody says something is true, you can trust that it’s true and that’s not always the case but they’re one of the ones that enforce that type of thing and then they also determine like you can’t sell snake oil, and I’m saying that in the sense of like people selling shirts of a company like you can’t fleece people. You can’t say, oh, buy into my company. We’re going to do this and then just disappear. They determine that you selling parts of a company is a security and so they’re trying to protect American investors from being ripped off. So there’s some good… I’d say the SEC is not all bad but there are certainly because there’s rules and there’s a lot of money to be made, it gets gamified a bit so there ends up being certain ways to play the system and have winners and losers in terms of companies going public and being tradeable and all that kind of stuff.
 
Jon: Oh yeah, the whole conversation on us back is where allowed companies to go public without really going to the whole IPO filing process and then filing their S and filing just all that kind of stuff that’s a way to kind of get around that sort off. They kind of would go public in a bundle sort of, you know, when they get around some of those – what do they call these – the name of the disclosures that they would have to have file when they go public.
 
Trevor: That’s right, yeah. They don’t really have much.
 
Jon: Yeah.
 
Trevor: It’s cheaper, it’s faster is the main thing, I think.
 
Jon: Faster, right. All right, well I think we are probably out of time, but yeah. That had been a really beneficial conversation. It’s amazing.
 
It Pays To Invest On Life Insurance [0:36:33]
 
Trevor: Yeah. It seems as if there’s a lot to think about and just the basic big picture stuff that you shared on retirement, accounts, and life insurance not being taxable, I mean. Again, you know, I say this all the time I’m like not a normal person in the sense that I think insurance is amazing and really interesting. It’s such a good product like for the things that we buy, like we buy a car and it’s so worthless so quickly or you buy a computer and it’s out of date in 2 years like you can spend money on insurance year after year and man, nothing’s going to pay you out like for what you’re paying, you get a lot out of it and yeah, the industry, the people at the top of those companies, they make a crap ton of money. They could charge less, sure, but like man…I mean you get a lot out of a contract with an insurance, the really reliable long-term insurance company, and the fact that it’s not taxable for life insurance is just a pretty remarkable product. We’re fortunate to be a country where you know it’d be enforceable. Your family would get paid. It’s sweet. That’s a level of assurance you can have that a very large portion of the world does not get to know that your family will have the money that they need to survive.
 
Jon: As long as you made the right choices along the way, right.
 
Trevor: And it’s not even that expensive. Some already get approved. It’s like… that’s a sweet product.
 
Jon: Yeah. Now I mean it’s just a general advice that I’m giving like life insurance for sure is a no-brainer. Term insurance – a 20-year term policy – for a 30-year-old male, let’s say, is probably 60/50 bucks a month for 2 million dollars of 20-year term like it’s so cheap and these days, there’s a couple of companies out there that will get it. Sometimes you can get approved in 10 minutes if you’re healthy and boom, you got a policy. Like that’s all over the world now so there’s no excuse. If you die without life insurance, it’s like that’s…It’s so easy and cheap to make sure that your family is taken care of. Or a charity or a ministry or mission or any of these kind of things like I grew up always believing in life insurance because my dad was in a life insurance business and just always felt like, boy, that’s a cheap way to make sure that, you know, things you care about, people you care about are set. And I still feel that way. So I wished it was a mandatory thing. There will be a lot less people dependent on the government, I think, on just different programs because what if every parent had life insurance for their kids and, you know. I’ve just heard so many stories where, yeah, my Dad died when I was young and my mom had to work 3 jobs and he didn’t have life insurance and I was raising my brothers and sisters and you know it’s…oh yeah, all the time.
 
Trevor: Yeah.
 
Jon: All right, well, thanks for joining me, Trevor. Love the conversation as always.
 
Trevor: Thank you.
 
Jon: For those of you out there listening, hope this helps. Be sure to get the financialmd.com for more info. Join us for our weekly didactic minute videos. Those can be found on YouTube and Facebook and then we’ve got some upright versions on TikTok and Instagram to get just here, your weekly 2 minutes of good financial info. Join the Financial MD community on Facebook where the conversation is happening. We’re sharing articles and resources that will be helpful to you as physicians and then subscribe to this podcast and please share this stuff if you think the information’s good. Get it out there. All right, so have a great week. We’ll see you next time. Trevor, stay healthy and get back in shape.
 
Trevor: Thanks Jon. See you.
 
Jon: All right, see you later.
 
Trevor: Bye.
 
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 Probate? –
https://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/the_probate_process/
What is the SECURE ACT? – https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743
What is an inherited IRA? – https://www.investopedia.com/terms/i/inherited_ira.asp
What is an inherited 401(k)? – https://smartasset.com/retirement/inherited-401k
Internal Revenue Service (IRS) website – https://www.irs.gov/
What is Step-up in Basis? – https://www.thebalance.com/how-the-stepped-up-basis-loophole-works-357485
FINRA website – https://www.finra.org/about
SEC website – https://www.sec.gov/
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 015 - What Are Employee Benefits?

Summary:
What You Need To Know, What You Should Look Out For [0:03:17]
What Are Employee Benefits? [0:05:08]
Generally, Large Companies Pay Less; Private Groups Pay More [0:06:56]
Let’s Start With Health Insurance [0:09:03]
Look Out For A Retirement Plan; 401(k) Vs 403(b) [0:12:29]
Next Up: Disability Insurance [0:15:48]
Life Insurance: Not Only For You But Sometimes For Your Spouse And Kids As Well [0:17:43]
Footnote On Insurances: Don’t Rely On Your Employer [0:18:44]
Other Benefits: Continuing Education, Concierge [0:20:24]
In Summary: Ask, Get, Compare, Decide [0:21:11]
 
 
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: Actually, it’s just Jon. Welcome to today’s episode of the Financial MD Show. Today, it’s going to be just me. Trevor is off in Jamaica doing some good medical work down there, and so today, I thought I would riff a little bit on something that every doctor needs to know about whether you’re in residency, fellowship, or you transitioned into practice. These are going to affect you, and that is your employee benefits. You could possibly be missing out on some big dollars here and not fully maximizing your benefits. So I’m going to tell you several tips – what they are, what you need to know, and how to fully maximize them and sometimes reduce taxes, which is always good. So, if you haven’t yet, subscribe and leave us a review. Share it with another doctor and share the love and the info. Here’s our show:
 
Jon: All right, welcome everyone to The Financial MD Show. We got a great show for you today. I’m excited because I’m all by myself, which is not necessarily a good excitement, but it’s excitement. I basically have to fill the time all by myself which is not impossible. In fact, it’s quite simple. I can talk for 45 minutes at a time – no problem – but it probably will be shorter. Most of my lectures tend to be quick and to the point so I’ll treat this kind of like one of my resident lectures and I do probably 100 of those a year so we should be fine. But this will be a little bit of a different format. Our friend, partner in crime, co-host and partner, Dr. Trevor Smith, is doing some mission work in Jamaica, slaving away for the kingdom, serving, and I’m sure he’s enjoying a little bit of beach time as well. So, we’ve checked in with him. He’s doing good. He sent me some pictures. Life is good for him. Life is good here in Financial MD world. We got a lot of great stuff going on. Lectures are happening all over the country. We’re doing workshops for the residency and fellowship programs, teaching financial literacy, getting the word out, getting residents to make smart financial decisions before they jump into the big six-figure income.
 
What You Need To Know, What You Should Look Out For [0:03:17]
 
 So we’re going to talk a little bit about that today, getting into this concept of employee benefits. Specifically, I want to cover what does employee benefits mean. You hear the words like group or qualified plan or employer plan – all these different things. I’ll break down what they mean, what’s kind of the mumbo-jumbo garbage jargon and what you need to know, what you should be looking for. We do a lot of lectures specifically on employment contracts to our residency and fellowship programs with our attorneys and so a piece of that talk is often on the employee benefits and understanding what role that plays in your job offer in your compensation. And so that’s not something to be ignored by any means. It’s something that you need to know more about and you need to take advantage of because there’s potentially some money on the table. As we’re putting this out there, we’ve got coming up a financial wellness – Prepping For Residency – so if you’re listening to this and you are in your final year, let’s say, you’ve just gotten matched during your last year of med school, we’re going to be doing an event that’s going to be both live and streamed. It’s going to be based out of Detroit, Michigan. We’re going to stream it. It’s on May 4th. So shoot us a message if you want an invite to that. It’s going to be kind of a guest panel so it’ll be myself. It will be a physician mortgage and physician loan specialist and we’re also going to have a realtor. We’re going to talk about a lot of things like getting your residency, buying a house, renting, other smart financial decisions to make along the way. So check out our website for that. Look at LinkedIn and other social media but the quickest and easiest way to get the info on the invite is just shoot us a message – info@financialmd.com.
 
What Are Employee Benefits? [0:05:08]
 
So that’s what’s going on here. Let’s dive into employee benefits. If you’re listening to this whether you’re in residency or fellowship or training or you are into your attending position, there’s about a 90 to 95 percent chance that you have some sort of benefits, and what are benefits? Essentially, you’ve all seen the job offer in the contract. You may have gotten this 18-page employment contract and you kind of skimmed through to try to find that heading that said compensation or salary – that six-figure number that you’ve been waiting and slaving for years and years and a decade plus to get to. You finally get it, you see the number, it sounds good, great, accept the offer and you move on. What so many residents and fellows don’t look at is what can often be a large piece of the compensation is the employee benefits. Why is that? Well, let’s say you’re going to make 250,000 in your first year. Okay, that’s great, and let’s say you’re comparing job offers too. Let’s say you get two or three job offers. One is 250, one is 275. The 275 one sounds good, but if you were to look a little bit deeper, flip on through the contract more. It’s not always in there. A lot of times you have to ask for it but ask for what’s the benefits are. Here’s why: Employers often will spend a lot of money on benefits to try the three R’s – recruit, retain, and reward great physicians. So you’ll see these in a couple of different formats. You’ll see them in private practice and you’ll see them in hospital settings, and they tend to have some common denominators between the two.
 
Generally, Large Companies Pay Less; Private Groups Pay More [0:06:56]
 
In general, the large employer – the university, the hospitals – are going to have a lot more negotiating power and so they’re going to be able to get better benefits dollar-for-dollar for their employees than a small group or a private practice might, which means what you often see in these settings – and you guys can probably vouch for this just as much as I can – that the academic world and the hospital settings are going to pay less often than you’re going to make in a private group depending on your specialty and so they’re going to make that up in benefits, so they think. So, let’s dive into that. Let’s say we have two jobs that have even the same compensation, so we’re looking at two jobs – 250,000. You’re trying to figure out – everything else is the same – which job do I want? Let’s say, they’re same city, where you want to be, with your family, same hours, same kind of requirements, duties, responsibilities, etcetera, you’re definitely going to want to flip through the benefits. Step one: Look in the back. There’s either exhibit pages. Hopefully, they sent an attachment – a PDF – that says like 2020 at a glance, gives your benefits. Half the time you may have to reach out to the person you’ve been speaking to or to the HR person or whomever and get more details on the benefits themselves. They’ll often send you a PDF and it will go through all the details. So, you’ve asked for it, you found it, you’ve got the benefits handbook and you’re looking through it. So let’s find out exactly a lot of times they’re going to tell you what the employer pays but sometimes they won’t. So especially let’s start with this: Health insurance.
 
Let’s Start With Health Insurance [0:09:03]
 
Health insurance is one of your employee benefits. Now, it may mean a lot to you or you may be like me where it’s like, hey, if they’ve got coverage and it seems decent and fine, I don’t go too much into the details versus my wife who likes to know this kind of things. She is looking deeply into them to see what kind of health insurance is available to us, what kind of providers, kind of networks are they in – all those kinds of things. What’s the copay? What’s the deductible? All that stuff. So a quick breakdown on that – we’ll go deeper into health insurance in a subsequent show – but for all intents and purposes, you want to look at what the deductible is and if it’s a high deductible health plan – so if it’s over a certain limit, they call it a high deductible health plan – you can then get an HSA with it which honestly can be nice for a couple of reasons. Most employers with an HSA what we’ve seen for a lot of our physicians will put some money into the HSA for you. So they’re going to put 1000, 2000, 5000, whatever, into the HSA and then you might put some of your own money in as well but it’s basically going to cover the bulk of the deductible that you would have to pay. Deductible means you have to pay this much before the insurance company would start kicking in, and the idea behind it is that it’s meant to make you a smart shopper so you’re not just going everywhere, getting all sorts of unnecessary procedures with the really expensive physicians and not shopping around. So that’s kind of what the point of a deductible is. Now there’s also an out-of-pocket max. So what an out-of-pocket max means often once you reach your deductible then you’re going to be on the hook after that for maybe 10 percent and the insurance company will pick up the other 90 percent. So if your deductible is 5000 dollars but your out-of-pocket max is 10,000 then you’ve got to pay 100 percent up to 5000 then the insurance company would kick in and they have some rule it might be 10 percent or 20 percent – whatever what they call the cost-share, a copay is. But no matter what happens, an out-of-pocket max is basically like a stop max limit type of thing and so that means that you will not have to pay over and above this certain amount. If you get into some sort of situation where you have to go more than that, then the insurance company will pick up 100 percent. So that’s something to know. All right, along with that, you’re going to see vision insurance, dental insurance – those kinds of things. So just things to know, things that are often included in there and can be important and what you want to look at is what you’re going to have to pay for the premium, if anything, and then what the employer picks up and what the employer is going to pay, you can basically stack on top of your salary to say what’s the employer actually paying for me as an employee to work here. There’s the salary which is the vast majority of it but then let’s tack on the health insurance premium, that’s another piece.
 
Look Out For A Retirement Plan; 401(k) Vs 403(b) [0:12:29]
 
After that, I often look at the retirement plan, that’s the second biggest cost to an employer because they’re going to put just straight up dollars in your account usually. Then again, this is usually. And typically, the universities tend to have the best matching in a 401(k) or a 403(b). Now what’s the difference between a 401(k) and a 403(b)? Really for your sake as the employee – nothing. There’s some difference on the employer side. Usually, a 403(b) is for non-profits; typically, non-profits – academic institutions, things like that, hospitals – but they can also have a 401(k). They don’t have to have a 403(b) and the 401(k)s are typically in the for-profit – the private groups, things like that. Either way, as of this recording, 19,500 is the max that you can put into it on your own which may seem like a ton to you right now if you’re still in training, but if you are an attending and you’re making 250,000 plus then that’s going to be a lot more valuable and you’re going to save on taxes. That’s one of the biggest deductions that a W-2 employee can have on what they call an above-the-line deduction. So that means that if you make 200,000, you put almost 20,000 into the retirement plan, you’re only taxed on 180,500 technically. So that’s something to know. But the value as far as compensation and what the employer puts in is all in the match or in the profit sharing or whatever they call it, that’s the piece where the employer is pulling money out of their accounts and putting it into yours and it can be high. Michigan State used to do this. It’s cut back recently in light of some other expenses they’ve taken on. Wayne State University does this where you put in a dollar, they put in two dollars. Usually, it’s up to 10 percent. So if you put in 5 percent, they’ll put in 10 percent for a total of 15 percent of your income going into the 403(b) but it’s only costing you 5 percent. So that’s super nice. If you put in 19,500 then that’s 38,000 that the employer is putting in. Boom! Stack that on top of 250,000-dollar salary, that’s 288,000. So that’s money right there, that’s something to think about. It’s not like something that you feel in your paycheck necessarily, but it’s still your money. It goes into your account. You’re just not using it yet but you’re going to be super glad that you did it when you get your retirement. We’ll go further into 401(k)s and 403(b)s in a different topic but basically you want to look at what the retirement plan is, what the match is, how much you have to put in to get the full match and we usually recommend you do at least that. Beyond that, how much you put in is totally up to you. You may have a different tax situation. You may be working with your financial planner to figure out something else, but in general, that’s free money and you can’t beat that.
 
Next Up: Disability Insurance [0:15:48]
 
So we talked about health insurance – that’s an employee benefit that can be expensive and costly and valuable to you. We talked about 401(k)s and 403(b)s. The next thing I would look at that cost money that ca be valuable is the disability insurance. Now we’ve talked to you guys enough but we’re not going to stop about how important it is to get the right disability insurance for you. Disability insurance with your own occupation that’s going to protect you as a specialist is super important but you first want to see what your employer is providing because it costs them something. Now they’re going to pay less for that policy than you would pay as an individual because they’re operating on a large scale group kind of bulk discount type of fashion. But it’s still there and it often covers between 65 and 70 percent of your income which is great. So then all you have to do is go out in individual marketplace to your Guardian or Principal or Ameritas. Get your own policy to bridge the gap in the other 20 to 25 percent. You’re going to be hard-pressed to find 100 percent of your income covered even between multiple policies because they look at each other. They communicate. They’re going to ask you how much you get it at work and limit what you get based on that. That’s something that can be a valuable benefit. It certainly reduces the cost you’re going to have pay for your individual policy and often that long-term disability at work is free or at least very cheap. So that’s LTD. Short-term disability – that’s another thing that basically would pay for the first typically 90 days to maybe 12 weeks that you’re off work and then your long-term disability would kick in but there’s a cost to that as well and that’s not something you’re going to just be able to go get on your own.
 
Life Insurance: Not Only For You But Sometimes For Your Spouse And Kids As Well [0:17:43]
 
The other piece we’ll look at is life insurance, and it’s life insurance for you but many employers also offer the ability to get very cheaply life insurance for your spouse and sometimes your children as well. So this is stuff, again, they’re paying the price for some of that to help defray that cost. You may have to pay some, but whatever they pay is just something you can stack on top. Now, typically, they’re not going to give you a flat dollar amount. They’ll give you a multiple up to a certain cap. For example, Henry Ford will cover four times your annual salary so if you make half a million dollars a year and they cover four times in life insurance, that could be potentially a 2-million-dollar life insurance policy. But their limit is a million dollars, so no matter how much you make, you’re not going to get more than a million dollars in life insurance. But again, if you had to go get that on your own, that could be potentially fairly expensive. So nice benefit.
 
Footnote On Insurances: Don’t Rely On Your Employer [0:18:44]
 
I’ll kind of put a footnote on the insurances especially. Don’t rely 100 percent or even the vast majority on your employer group benefits or your perks that you have at work especially for your life and your disability insurance. Get life insurance on your own as well. Get disability insurance on your own as well. In fact, get a little bit more than you think you should because at any time employers can take away the life insurance. Let’s say, times are tough and maybe they were hit by a giant lawsuit; they’ve got to come back at different areas. Typically, they don’t cut pay first for employees. They’re typically going to cut benefits first. And so if they cut life insurance and you said, oh, I got a million bucks at work, I don’t need anything else, or let’s say you said, yeah, I need 8 to 10 times my income like Jon said, so I may get a million at work and I get another million and a half on my own in term insurance; that’s cool but if they take away that group insurance, you’re left with a million and a half of term insurance which is not as much as you need and then something could have happened in your health between now and you can’t get more insurance because on the individual insurance whether it’s disability or life insurance, you’ve got to get underwritten. You’ve got to qualify for that health-wise and you guys know better than I do as physicians, anything can change. We’re all just one doctor’s visit away from having some news that can change our lives. I stress that because we’ve seen it here. Life insurance, disability insurance – get it early. Lock that in and then you’re golden.
 
Other Benefits: Continuing Education, Concierge [0:20:24]
 
We’ve covered health insurance and we’ve covered retirement plans. We’ve covered life and we’ve covered disability insurance – all of those have a cost associated with them that the employer is picking up and adds on to what the actual value of the compensation and the job offer is. So, something to think about there: There are also other benefits. It may be helping to pay for continuing education. It may be paying for some other out-of-pocket things. There’s employers that offer a concierge type of service where the physicians and some of the more higher-level senior employees can have access to people that will get their dry cleaning done or go get their oil change in their car – things like that. Those obviously have a cost that the employer is picking up.
 
In Summary: Ask, Get, Compare, Decide [0:21:11]
 
So when you’re looking at job offers, look at the employee benefits. If they didn’t get it to you in the job offer or the employment contract, ask about it. Don’t be afraid to ask because that’s an important factor when you’re making a decision. Hopefully, like we recommend, you’re doing a few things. You’re doing the legwork ahead of time to get multiple job offers. The more job offers you get, the more you can come at it from a position of confidence saying, hey, this is my favorite job. I’m going to negotiate with this one, but if it doesn’t work out, that’s okay. I’ve got a lot of fallbacks. The second reason to get multiple job offers is it gives you some context to say, okay, this is my favorite one. I like this job offer but I want to get some other offers just to see what else is out there and see if this one is reasonable, usual, customary – those kinds of things. So get those multiple job offers. When comparing, don’t skip the benefits. They’re not just a nice thing to add on. They can be 50/60/70,000 dollars’ worth of compensation that a lot of people don’t think about.
 
Hopefully that was enough detail and information for you. If you have any further questions on these then email us at info@financialmd.com. Check us out on the Facebook community – Financial MD Community. It’s where doctors get together and ask questions and give advice and share ideas and learn more about some of the just quick questions that we’ve got or little tips or all those kinds of things. Hope that helps. Join us next time on the Financial MD Show where Dr. Trevor Smith will be back, a little bit tanner, and we’ll see you guys 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 are employee benefits? – https://www.questionpro.com/blog/employee-benefits/
What is health insurance? – https://www.investopedia.com/terms/h/healthinsurance.asp
Copay vs deductible – https://www.singlecare.com/blog/difference-between-copay-and-deductible/
Definition of health savings account (HSA) – https://www.healthcare.gov/glossary/health-savings-account-hsa/
What is an out-of-pocket max? – https://www.cigna.com/individuals-families/understanding-insurance/what-is-an-out-of-pocket-maximum
Meaning of retirement plan – https://www.dictionary.com/browse/retirement-plan
401(k) vs 403(b) – https://www.forbes.com/advisor/retirement/403b-vs-401k/
What is an above-the-line deduction? – https://bench.co/blog/tax-tips/above-the-line-deductions/
Disability insurance definition – https://www.guardianlife.com/disability-insurance
Own-occupation disability insurance definition – https://www.guardianlife.com/disability-insurance/own-occupation
Life insurance guide – https://www.investopedia.com/terms/l/lifeinsurance.asp
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 014 - Investing in Startups Part 2

Summary:
What’s In a Name? Venture Capital Firm Or Venture Studio [0:04:20]
Reuben’s Startup Journey [0:07:03]
What Areas/Sectors Do Venture Studios Look For In Startups? [0:11:23]
Steps Doctors Can Make To Invest In Startups – First, Be An Accredited Investor [0:14:33]
You Have The Opportunity To Do Impact Investing [0:17:36]
Places To Go For Startups [0:22:38]
A Success Story [0:24:49]
 
 
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.
 
Jon: All right, welcome to the Financial MD Show episode 17. We’ve got a little bit of a surprise for you today. It’s a follow-up from our last show where we discussed investing in startups and we thought what better way than to get you an actual conversation with someone in the venture capital world – the funding, the startup world – none other than Reuben Levinsohn. You know him, you love him and you’re going to hear him talk specifically about what he’s doing with Washington Avenue Ventures, what to watch out for, what to know when you’re looking for startups, and just some good info whether you’re getting into it now or you hope to get into it someday. So please leave a review. It helps more young physicians find this show and get some good financial information. Listen up.
 
 
Jon: All right, well, welcome to another episode of the Financial MD Show. Today, we have your normal hosts, me, Jon Solitro, and Dr. Trevor Smith in the house. What’s up, Trevor?
 
Trevor: What’s up? What’s up?
 
Jon: Right on, and today’s show, we got a special guest with us who is kind of a guest, he’s kind of a host. He’s been a friend of Financial MD for a long time. Mr. Reuben Levinsohn is here to help us get into some more personal examples and stories and some specialized expert insight into what we started last episode so today is part two of talking about startups. How are you doing, Reuben?
 
Reuben: Good, Jon. Thanks for having me. Happy to be here.
 
Jon: Absolutely. We’re stoked. Trevor and I have known Reuben for quite a while and we’re all buddies outside of this and enjoy a good bourbon from time to time but we’ll be just drinking virtually right now although none of us are drinking, I don’t think.
 
Reuben: Would like to; just coffee.
 
Jon: Right. That’s kind of made me think about that – why don’t I have any bourbon around here? Oh, well, another problem for another time. Okay, so last week we started startups and there’s a lot of conversation – it has been for years frankly – as the internet has made tech startups more common, more prevalent, more well-known and profitable for a lot of people and bankrupting for a lot of people. Last week, Trevor and I dove deeply into what some of the downsides are from our standpoint – me as a financial planner; Trevor as definitely a financially experienced and knowledgeable individual but he’s had some of his own experiences with that and still does. We got to talk a little bit about some of the things we know and as I talk to clients about a lot of our physicians bring ideas or want to get into things or hear some other doctor at the watercooler talking about this or that or read something online or in a Facebook post – all sorts of things. We went into that into our last episode but today, we thought we would talk with Reuben who was one of the founders and partners of Washington Avenue Ventures, a Michigan-based, would you say, a venture capital firm or a venture – how would you describe it Reuben?
 
What’s In a Name? Venture Capital Firm Or Venture Studio [0:04:20]
 
Reuben: Yeah, we’re a venture studio. It’s a newer term here in the States is that certainly a newer term in the Midwest but it came out of Europe more. I think there’s a lot more of it there but it’s venture studios. We connect that space – that kind of black hole or abyss between angel investors and VCs because a lot of these startups think they go right from an angel round to a venture capital round and it’s not that simple. They’re not always ready. The other thing that’s a little different – there’s accelerators and incubators out there that usually lasts for a couple of months that these startups can apply and get themselves into then those are great but they’re a couple of months and then they’re on their own again. So the venture studio, we partner with early stage companies, startups, and even sometimes precede before they’ve even had revenue and work with them to help build that solid business foundation. So they’ve got something they can scale off of it and we also, I would say, that were really good at helping tee them up better or package them up so their investable before they go out for those investor rounds.
 
Jon: Perfect. So it’s not only maybe connecting them with money but also maybe even more importantly getting them ready for that point and just taking – I mean, kind of an incubator but also more of a facilitator or support consulting, would you say?
 
Reuben: Yeah, we’re definitely on there. I usually hold a seat on their advisory team whether it’s formal or informal. I’m usually one of their go-to advisors for anything to do with fundraising, legal, finance, cash flow, forecasting, cap table management. I just got up a call with one of our founders and we’re setting them up on our system to manage their cap table so they always know what the notes – convertible notes – and everything, because these guys are brilliant. These founders we work with are brilliant at whatever they’re doing but they generally haven’t held a lot of these basic business experience and they don’t realize until it’s too late how critical that is and then they start having meetings with investors; investors are asking questions that these guys have never heard of and we fill in those gaps for them really well.
 
Jon: Okay. Trevor, you got any questions off the bat?
 
Trevor: Yeah, I’m curious. What was your first experience in the startup world? Were you already working with the same studio group? I mean, how long have you been doing it? What got you interested in it? Just tell me a little bit about the beginning of your story.
 
Reuben’s Startup Journey [0:07:03]
 
Reuben: If I went way back, it starts with just having entrepreneur in my blood like at 9/10 years old, I was running the biggest paper route in the area by having my brother and all his friends do all the work and I was just running the business. So I told that story to some entrepreneur groups at the local university here but I think it’s just entrepreneurialism in the blood first and foremost and then I’ve launched and exited my own companies. My most successful one was around my late 20s when I exited my painting franchise and that did pretty well. From there, it was more starting to angel invest here about 7/8 years ago. I’d say right around late 30s, early 40s I started realizing like I’m probably not going to be the entrepreneur who’s going to found and launch a bunch more companies and if I can’t do that, the only other thing that keeps me in the game is investing in others or advising others who are doing it and working off their energy and their brilliance. So that’s angel investing, I guess. Informally, I was angel investing. I made my first angel investment – my first official angel investment – in a Denver-based company, probably that was 2015-ish, maybe 2014, and that one failed and you learn a lot on the failure and you can look back and say like that well, what did I do wrong. That one for me was pretty easy to identify years later is that I invested in a founder who didn’t know how to build a team or was just not a good leader. So from there, I start selecting better and you start learning and there’s a lot of things you wish you could go to school for this and learn and I’m sure there’s a ton of great resources I’m not aware of but I’ve learned a lot of it just by making my own mistakes, generally how I learned most of my stuff in life. So I started informally angel investing 25,000 here and there. You could take a couple of hits on those and you’re like, okay, if I’m going to be in this game, I got to play it better. And so a few years ago, I formalized it with Washington Avenue Ventures where we – I was starting to realize the reason most of these were failing were not always just that the person didn’t have the drive or didn’t have the leadership skills, it was also they just did not have good business background – business experience – the basic business functions whether it’s accounting or finance or legal. They just didn’t have any of that experience. They could be a brilliant software engineer who can solve some pretty big problems but didn’t know how to build a foundation of a business or maintain that. So I reach out to Angie, someone I had worked with for years in the past. She had her MBA and she was running a pretty big division of a large corporate company in Grand Rapids and she was looking for a change. She wanted to go back in a small business and I said, how about we go really small, let’s work with startups. They need more than money, they need our expertise, so let’s put together a team that can help advise and help them build solid companies and that’s what we’ve been doing for the last three years. We’ve gone really deep with one company that we took on at pre-seed stage and we’ve got half a dozen other companies that we’re advising and working with now too. To answer the question, full circle there Trevor, it was informal angel investing and realizing you can throw checks at these and be a passive investor and have a high likelihood of loss or you can increase your chance of return by actually working with these companies that you’re investing in. All of them that we work with I made a personal investment or we’ve made an investment as a venture team into them financially but more importantly, it’s the investment of time and expertise we’re putting in.
 
Jon: I see.
 
Trevor: Go ahead.
 
Jon: Well, I was going to dig deeper into some of the people investing into startups but finish yours, Trevor.
 
What Areas/Sectors Do Venture Studios Look For In Startups? [0:11:23]
 
Trevor: I was just going to ask what areas do you invest in? Most investors a classic thing so people only invest in things they feel like they have some sort of edge. What sectors do you look for startups? Are you just doing tech? Are you just doing software as a service like the SAS kind of stuff?
 
Reuben: Yeah, no, we’re all over.
 
Trevor: Local, national?
 
Reuben: So far – I can’t say this will be forever – but so far I’m going at it like Jon would as a financial advisor. I’m saying to my team and to our investor network that diversification is important so we’re not going to go after just SAS. We’re not going to go after just deep tech or AI. I know there’s plenty of VCs and accelerators out there that honed in in that niche. We are still going with the philosophy that diversification is important and we are smart enough to pick the exact sector that’s going to be the dominant one. For instance, we’ve coffee shops. There’s very little to no tech. We’ve got Lingco Language Labs which is SAS, software as a service, in language learning built for the classroom so that’s more of a B2B-focused. And then we’ve got REZA Footwear. REZA Footwear is IoT of wearables so internet of things for wearables and that’s a very different play. There’s tech for sure but not like SAS at all; very different. And then we’ve got V.One which is an app builder. They are an app for building apps for people who don’t know how to code. It’s a no-code, low-code app builder which is a pretty hot space, definitely high tech; and then we’ve got Halo out of Indianapolis area. Halo is a community-based microfinancing company. They don’t focus on tech but they’re using tech as their platform; they’re more of a FinTech. And then the Advisor2.0 which is a group that does gap assessments and consulting for financial advisors. So it’s all over the board. We have not picked a sector yet.
 
Jon: Nice. So for our listeners, specifically, we have doctors either doctors in training or a lot of times younger and we’re surprised at how many older physicians are listening to this but it’s across the board. Getting into it, we talked a little bit about some of the downsides but you would know, Reuben, more specifically. Let’s say somebody has talked with their advisor and they’re at a position where they can do something like this. They’ve got some discretionary income. A lot of questions that people might ask is how much do I need to have to invest in a startup? How do I do it? Where do I find it? So what are the first steps for an investor who wants to and should, you know, or it’s okay for them to get into this space?
 
Steps Doctors Can Make To Invest In Startups – First, Be An Accredited Investor [0:14:33]
 
Reuben: Yeah. First step is probably not going to suitable for someone who’s still in residency. They’ve got to be an accredited investor; household income of – what’s the current rules here – 200,000 plus.
 
Jon: Yeah, a million of net worth.
 
Trevor: A million.
 
Reuben: Yeah, or a million of net worth of investible net worth so we do make sure that they’re accredited. We only work with accredited investors in these. For someone who’s accredited and they’ve got the basics in place with their financial advisor or they’ve got their liquid money they need, they’ve got their retirement on track, I think this is a great alternative space to play in and it’s becoming more of a movement than it was even just a couple of years ago. It’s like real estate used to be the only other alternative people knew about or wanted to look into. Then there’s things like cryptocurrencies, of course. Don’t get Trevor going, right, but startups, you’ll be surprised. I would not be surprised if there’s a crypto exchange or coin that is backed by venture capital at some point or there’s some really interesting movements where venture capital – I think that by end of next year, you will see exchange traded funds (ETFs) or something similar that are all into early stage venture companies. I think it’s going mainstream so I think it’s going to be talked about more and more. But, again, if you got the basics in place, I think it’s a great space if you’re working with someone who understands it. Don’t just go out and throw your money around at everyone that pitches you because that’s the typical problem we see. Doctors or other high-net worth people make is that they’ll just throw money at everybody that pitches them because they all sound good. But there is a process of picking them. There’s a process of eliminating them; knowing who to make the bets on and how we can actively track or monitor their KPIs and how they’re doing for a while before we invest in them. There is a good due diligence process we use and we are starting to introduce it to more and more financial advisors for their clients because it’s a nice alternative investment with high impact, especially your high net worth investors who want to know where their money’s going and they want to have some impact. Maybe it’s social impact, maybe it’s environmental impact. Maybe they just love the idea of helping young, brilliant founders and entrepreneurs and they want to make a return but they can speak with these founders and teams. They can advise these founders and teams. The investor can even use some of their background and expertise to influence their investment which is a really neat thing. You can’t do that when you throw your money at basic stocks, bonds in the market.
 
Jon: Yeah.
 
Trevor: Say that again? Say that one more time.
 
You Have The Opportunity To Do Impact Investing [0:17:36]
 
Reuben: Well, I’m saying that it’s neat to be able to share with other financial advisors and their clients that you have the opportunity to do impact investing. We call it impact investing because you can either pick the area you want to have an impact on with your money or the person you want to have an impact on and you have a direct line of communication with the people running these companies because they’re early stage companies.
 
Jon: You can feel like you have some influence?
 
Reuben: Yeah. I mean, maybe you don’t have voting rights. Maybe you don’t have a lot of shares enough to have an influence but these are early-stage companies and founders and teams who value their investors and value the investors’ experience and credentials that any way that can help them or even if it’s just networking or introducing other investors, there’s a lot of ways you as an investor can have an impact on your investment in this space.
 
Trevor: I’m thinking about like your investors that invest in these startups or really any, especially, alternative assets, what percentage you think of their motivation is just like that connection? Because it’s got to feel a little bit more special, right, to be investing in people who you’ve met and heard their story. I mean, it’s so compelling, that’s why the SEC exists, right. There’s the downside of these regulations where you have to have a certain amount of money or make a certain amount to be able to invest in specific types of investments and assets and the Securities and Exchange Commission regulates all that and it’s supposedly in order to protect investors, and to a degree, it certainly has at times. Right now, it’s kind of laughably restrictive in some ways where you could be educated and you’re still not allowed to invest your money and there’s lots of people writing and talking about that sort of thing right now. But back to my first thought, what do you think people get excited about it? I mean, part of it is the narrative, right? It’s fun, it’s exciting, it’s interesting, it’s new. You’re building something. What percentage do you think is that part of it for investors like?
 
Reuben: Yeah.
 
Trevor: Because it’s definitely 99 percent financial because they’re looking for something else. It’s 99 percent financial.
 
Reuben: Yeah, I agree. They are still highly interested in a return I would say that. The most the network of investors we introduced to these startups and these investment opportunities, they’re definitely motivated by return, but I’d say it’s more, you know, whereas if they’re throwing money in the stock market with their financial advisor, that’s like 99 to 100 percent. All they care about is return, right, because they don’t know anything about where’s the money’s invested or what it’s doing or what company. But in this case, I’d say, it’s probably more 80/20 like the 80 percent, they’re doing it because they want a chance at a higher return in something but 20 percent at least is about they love the fact that they’ve got that. They get that investor update monthly from the company they’re invested in. They get to see what this company is doing. They could come sit down with the team and meet with them and they’re very close to them and they can see the impact that their money is having much better than you can in traditional investments.
 
Jon: Yeah, makes sense.
 
Trevor: Yeah, which makes communication by founders critical.
 
Reuben: Yeah, and I was just on a call last week with a small investment group, a group of retired guys and ladies that came together with some money and they threw together about a million bucks of their money and that’s a group, I would say, they are more like 50/50 like 50 percent care about return; the other 50 percent was about social impact. They specifically wanted me to only introduce them to social impact. So they came in and invested, matched us on some investment with Halo because Halo has a very clear social impact. They’re fighting off the predatory payday lenders for underserved markets – underserved people – who don’t have access to capital. That’s a social movement. And so this company was specifically – this group was specifically attracted for that reason.
 
Jon: All right.
 
Trevor: That’s interesting.
 
Jon: Are there places to go? I don’t know. I mean it seems like there’s a lot of online places to invest in a real estate syndication or private placements or limited partnerships or things like that. Are there places to go for startups like this?
 
Places To Go For Startups [0:22:38]
 
Reuben: Yeah, more than people realizing it’s happening fast. There’s more and more of it coming out, but an easy place to start is like AngelList. Go to AngelList. The AngelList, they run syndicates. You can lead a syndicate there and use them as a platform or you could join us and get there, get in for as little as, I think, 2500 dollars. That still requires you to be accredited but there’s also, of course, crowdfunding. Crowdfunding is where they kind of let anybody – if they broke the Reg D issue and let anybody be somewhat of an angel investor through crowdfunding campaign like Kickstarter. But there’s several out there. AngelList is a popular one. If they’re not connected with a group like us who tee up the deals and do the due diligence; in some ways, we are like a syndicate. We just haven’t formalized it because we’re teeing them up. We’re doing the deal flow. We’re doing the due diligence. We’re most likely investing ourselves before we even present it to investors.
 
Jon: Yeah.
 
Reuben: By the time we’re presenting to investors, there are people in our network that it’s like a syndicate. We’re generally dealing with minimum checks of 25,000 whereas you can go to AngelList and get on a small syndicate for 2500 dollars. You make that commitment so as the investor you’re making a – to be in a syndicate, you have to make some sort of a commitment that, you know, I will make 10 investments in the next 24 months at 2500 each or something.
 
Jon: Okay. I see. Can you give us some kind of success story? Again, last episode we talked a little bit about some of the downsides and things but I’d love to hear from you as you look back over the last several years of getting into the angel investing whether it was with WAV doing some of the consulting piece or you individually investing or whatever the case might be or just things you’ve seen. Do you have any success stories that you can point out to and say, here’s where it was done well and it worked out well?
 
A Success Story [0:24:49]
 
Reuben: Right. Yeah. Well, like I said, my first one was a bust and that’s probably normal when you just impulsively invest in the first one you see and it sounded cool. I was out in Denver and I think we’re having some whiskey and I met the founder and I said, yeah, I’m in. That one didn’t work out so well but I would say statistically – actually, that company is still going so it’s still a chance. My money is still invested and they’re active company; they just have never learned how to build a team or expanded beyond Denver. They’re an Uber-type company for moving stuff instead of people so it’s on-demand light moves like your apartment furniture or whatever. Anyways, I love the concept and now other companies, competitors, have started to scale across the country but this one hasn’t. I just chose the wrong one; not the wrong idea, just the wrong one.
 
Jon: Okay.
 
Reuben: Anyway, statistically, the way you look at these is for every 10 you invest in – and I tell people diversification is important and I tell people that doing enough of them is important because there is a bit of a number’s game here. Now by working closely with these companies, we can eliminate some of that number game or we can optimize it to our advantage, but in general, you need to be prepared to get into about 10 of them if you’re going to play the game at all. It’s kind of like real estate. Don’t go start getting into real estate if you’re just going to either stop with one or two that you can manage or go to like 30 or 40 where you can hire a manager.
 
Jon: Yeah.
 
Reuben: But in this I think, you can get stuck and if you get into two or three, you could have easily picked two or three bad ones. If you go to 10 and you are being pretty smart or you’re working with a syndicate, there’s a pretty statistically is a chance that in 10, you’re going to have three or four complete busts; two or three are going to be just break even on your money, and then you’re looking for one that could be a 3 to 5x your money and you’re looking for that one shining star that’s going to give you 10x plus on your money that makes up for the losers. I tell people compared to traditional investments where you’re trying to double your money about every 8 to 10 years in the markets, this should be something that because of the higher risk, higher reward profile, you should be looking to three to four times your money if you play it right about every 10 years. Otherwise, that extra risk isn’t worth it.
 
Jon: What could we do in the stock market over 10 years or the S&P, right?
 
Reuben: Yeah, if you get really good at it, you’re looking to 5 to 10x your money overall. Then there’s definitely angel investors and good VCs who would say, I wouldn’t be doing this if I didn’t think I could 10 times every dollar I put in. And that’s where the risk-reward – once you get good at it like anything, you mitigate the risk side and optimize the reward side. I know people who have gotten really good at it like that.
 
Jon: Of course.
 
Reuben: Yeah. A good resource would be Jason Calacanis’ book, Angel Investing. Jason Calacanis is known as one of the greatest, most accomplished angel investors in the world. His book, Angel Investing, kind of shows the numbers in how you can literally go ahead like it’s your job. He has had people quit their jobs and go angel investing full time by following his program.
 
Trevor: I listen to his podcast of All-In podcast.
 
Reuben: Yeah.
 
Trevor: It’s funny because they all make fun of him, kind of.
 
Reuben: Yeah.
 
Trevor: Yeah, he’s like definitely big in the angel world.
 
Reuben: He can take it. He’s pretty arrogant and pretty successful. I think he can take it.
 
Trevor: Yeah. He can handle it but it’s just funny. It’s a great podcast, listening to people rip on each other that are good friends. I mean they can take it but all four of them are sensitive to a degree as well which is really interesting. You can hear it when they talk about different things, how accomplished they are and how wealthy they are. Yeah, exactly. They care.
 
Reuben: Yeah. it’s funny. Even when you read his book, you can see where his strengths and insecurities are like you can feel it in the book.
 
Jon: Definitely. Trevor, any last questions?
 
Trevor: No. Reuben, thank you so much for your time. It’s great to learn from you and your experience in this area so thanks for coming on.
 
Reuben: Yeah, I’ll be sending you both some pitch decks after this and I expect your investments to come wired through.
 
Jon: That’s right. Yes, obviously, let’s preface.
 
Trevor: Absolutely.
 
Jon: This is not a solicitation to invest or purchase in any startup or any syndication of any kind.
 
Trevor: Or securities, yeah. This is not individual investment advice.
 
Reuben: And this is completely unsuitable for 99 percent of people and you are very likely to lose every dollar you put in to startups.
 
Jon: That’s right, and we are not specifically endorsing Washington Avenue Ventures and we have no formal financial relationship with them at all.
 
Trevor: There you go. Got your disclosures out there.
 
Jon: Reuben, if someone wants to learn more about WAV or Washington Avenue Ventures, where can they go?
 
Reuben: They can get connected to me through you or on our website, wa.ventures.
 
Jon: Awesome. Well, we may have some doctors in the crowd listening that have a startup. Maybe there’s a device or something that we see that quite a bit over the years, so cool. Well, thanks so much for joining us guys, Trevor and Reuben. This has been super great. It’s been a different dynamic having a third person in here and hopefully a nice refreshing change for our listeners who are probably tired of hearing just Jon and Trevor all the time. But for those of you who loved just Jon and Trevor, stick around. The next episode will be that again so we’re not necessarily doing away with that but I think we’ll bring some more guests on to mix things up a little bit and makes us have to talk a little bit less which is nice.
 
Reuben: Let me know any input – your feedback – you get if there is more interest in diving deeper into this world at all. I’m happy to do it.
 
Jon: Yeah, that would be great and we love to learn more about this stuff and just be a resource. So for any of you physicians out there listening, again, we’ll be posting more resources that Reuben has talked about as we get more articles and things like we always do on the Financial MD community which is a Facebook group and then we keep things updated through our social media through Instagram, Facebook, Twitter, and TikTok. So with that, you guys have a great week and we’ll see you next time here in the Financial MD Show.
 
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:
Reuben Levinsohn, Partner, Financial Advisor, Washington Avenue Ventures – https://www.waadvisors.com/team/reuben-levinsohn
Washington Avenue Ventures LinkedIn Account – https://www.linkedin.com/company/washington-avenue-ventures/about/
Venture Capital – https://www.investopedia.com/terms/v/venturecapital.asp
What is a venture studio? – https://www.applicoinc.com/blog/what-is-a-venture-studio/
Everything you need to know about cap table management – https://www.heavybit.com/library/blog/founder-101-almost-everything-you-need-to-know-about-cap-table-management/
What are convertible notes – https://techcrunch.com/2012/04/07/convertible-note-seed-financings/
Angel investing: What it is and how to start – https://www.nerdwallet.com/article/investing/angel-investing
What are exchange-traded funds (ETF)? - https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-2
What is impact investing? – https://thegiin.org/impact-investing/need-to-know/
Securities and Exchange Laws and Rules – https://www.sec.gov/investment/laws-and-rules
AngelList Venture: Invest in startups – https://www.angellist.com/
Crowdfunding explained – https://ec.europa.eu/growth/access-finance/guide-crowdfunding/what-crowdfunding/crowdfunding-explained_en
What are private placements or Reg D? –
https://www.sec.gov/smallbusiness/exemptofferings/rule506b
Kickstarter – https://www.kickstarter.com/
Jason Calacanis personal blog – https://calacanis.com/
Angel: How to invest in Technology Startups by Jason Calacanis – https://www.amazon.com/Angel-Invest-Technology-Startups-Timeless-Investor/dp/0062560700
All-In podcast (Jason Calacanis) – https://podcasts.apple.com/us/podcast/all-in-with-chamath-jason-sacks-friedberg/id1502871393
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 013 - Finding Locums Jobs

Summary:
Looking For Locums Work [0:02:35]
Trevor’s Long-Term Goals And Aspirations Career-Wise [0:07:24]
When Finding Jobs – Be Positive, Know Your Worth, Don’t Put Down Somebody Else [0:12:36]
Burntout To Badass – Honing In On Your Priorities [0:19:57]
There’s Something Called Geographic Arbitrage [0:24:23]
The Secret Sauce If You Are Doing Locums – Call Up Hospitals And Ask For the Physician Recruiter [0:030:03]
Locums Interview Process Vs Typical Interview Process [0:33:20]
When You Get A Job Offer, What’s Next? [0:37:26]
Very Important – Read All Your Contracts [0:41:44]
On Getting Paid – Do Some Simple Math [0:43:50]
 
 
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 Episode 16 of the Financial MD Show. Here, Trevor and I, figured out that something interesting to talk about with residents and fellows that are nearing the end of their training is finding work and, more specifically today, we’re going to talk about finding locums work. This can be an extremely lucrative type of work but has pros and cons in both direction – from taxes to scheduling to how do you find the work and how permanent or temporary is the work. Dr. Smith has some recommendations and some experience, so listen up. Subscribe on Google, Apple, and Spotify, and leave a rating in, if you don’t mind. Here’s the show:
 
Jon: Anything in your mind financially?
 
Trevor: Financially? I’m paying the bills; paying those student loans off as soon as possible so I can make completely unbiased decisions about my life and be free. You know what I mean?
 
Jon: Yeah.
 
Trevor: That sounds good, yeah, which is good. I think that’s realistic this year. But yeah, that’s kind of hyper. That’s a little, you know, egocentric. That’s what I’m thinking about financially.
 
Jon: Let’s go about locum work or being an independent contractor as a physician.
 
Trevor: We probably have not although I have to say I haven’t really done it yet so probably it would be good to down the backburner.
 
Jon: Okay.
 
Trevor: I could talk about…
 
Jon: Looking for locum work.
 
Looking For Locums Work [0:02:35]
 
Trevor: Yeah, looking for locum work. Yeah, definitely. Looking for locums is highly dependent on your subspecialty – that’s one thing I’ve learned. I was talking to somebody the other day and they’re like, hey, how’s the job search going, are you still thinking maybe start your own practice or whatever, and I was like no, I’m kind of putting that on the backburner. What about locums? And I said, yeah. They’re like, yeah, there’s probably lots of those jobs. Well, it really depends. She knew somebody that was an anesthesiologist and they had done locums basically their entire life – 1099 all the time – hopping around, and typically if you do it your whole career, you do end up doing longer stints too like 9 years here or 10 years there. But, regardless, in anesthesiology, it’s a lot more common and it sort of just in and out work already. But other clinical work, it’s a bit less count. Just to characterize how many I’ve seen while keeping my ears open for opportunities over the last year. I’ve only seen like six-ish come up and you know that they’re really legitimate opportunities especially if you signed up for multiple locums companies. They’ll all email you if there’s one that’s really broader or really looking for something. So, if you’re counting those plus like one or two extra, there’s only been about six that I’ve seen for ophthalmology in the last year. So they are not incredibly common.
 
Jon: Is it more common with other specialties, do you think?
 
Trevor: Yeah, if you can plug in and out really easily then it’s fine and then the more hospital-based it is, it seems like the more likely because they can credential you. Basically, they have to set you up to be able to get paid through the insurance and they can kind of, I think, my understanding is that like a radiologist who’s sitting in a dark room can just show up and work 8 to 5 or whatever just for chest x-rays and they can just filter. If you’re not credentialed with all of them, you’re at least going to be credentialed for Medicare which a ton of people will have.
 
Jon: Oh sure.
 
Trevor: They could have you to see those patients. They can filter that stuff.
 
Jon: Or I wonder if they can float you for a while until you get credentialed too.
 
Trevor: There is some of that. They can. If you’re seeing patients that you’re not credentialed with, though, the hospital and you will not; basically, they’re paying you a daily rate but they’ll eat the cost of you interpreting the things that you want credentialed for. So maybe they’ll eat the cost for that a little bit. Medicare is cool because you can get signed up pretty fast. They’ll backdate your payments up to 3 months. Like if someone’s opening their own practice, the first one they can get oftentimes is Medicare and maybe some private payers, but the private payers tend to take longer like up to three months, six months, or 12 months, depending on certain part of the country. As far as credentialing goes, some parts are so bad as to say that you couldn’t get it even within up to 12 months because they’ll just close off who they’re willing to credential. So they’ll have cameras it’s called but closed something. So like you could get it if you wanted to and it’s just like we’ll let you know when we’re starting to bring in new providers and you can’t get on unless they open it back up.
 
Jon: This is déjà vu.
 
Trevor: It’s crazy.
 
Jon: When I was a therapist, I went through some of that because I had to get credentialed for insurance companies and when I was doing it, there were a couple that were closed at the time to therapists and certain areas or whatever and so I remember that. I remember getting – yeah, Medicare was pretty easy to see. There are a couple other like – I never got credentialed with Blue Cross. I wasn’t doing it that long, just two or three years, but I would have eventually but it was just like you didn’t and then you started getting enough patients through the other carriers and it was just like it was fine. I wasn’t going to hustle too much on that but yeah I remember that process.
 
Trevor: Yeah. And Medicare, it depends about like they’re pretty good about paying and it’s really the private payers that can be a little bit more difficult.
 
Jon: So when it comes to locum work then – I don’t know when our last – our listeners knew, you were working maybe, maybe not but can you bring our listeners up to speed a little bit about what you’ve been doing, what’s your mindset behind the locum work; how does it fit into your long-term goals, aspirations, career trajectory.
 
Trevor’s Long-Term Goals And Aspirations Career-Wise [0:07:24]
 
Trevor: I started looking at locums for the first time a year ago during coronavirus. I was in practice then – it wasn’t a good fit – and I started looking into right now at the time of recording – it’s mid-April – and I was starting to look pretty right around the same time a year ago. So I started looking knowing that I kind of thought I knew what I wanted in the next practice as I’m a young associate and I knew some of the things I didn’t want and you kind of collect those a little bit easier than you collect what you do want. The things that you do want tend to be a little more vague is another thing what I’ve realized so you do want good ethics, you want to have patient priority, and these are not just talking points. It’s legitimately like what are you going to do this for if you’re not doing it for a couple, you know, those important reasons, just foundational.
 
Jon: Right.
 
Trevor: And then you want to also have a good business. If you’re looking at private practice, you’re looking at the business factor too because that should be one of the reasons you’re involved in private practice or if there’s not an academic place around it. Academics will take care of some of many of those details. If you don’t really care how much you make, there’s certainly an easier way to find the ethics and the quality of patient care because you’re going to have more resources at the university, too.
 
Jon: Absolutely.
 
Trevor: So, anyway, I was looking at locums because I thought it’d be a good, transitionary period. So I look at either – I didn’t know any of the ropes for building a practice – and I was just preparing to read books and realizing like, holy smokes, there’s a lot that goes into it. Anybody who’s in solo practice like that’s impressive. It’s a lot to undertake just to get the ball rolling and then you’ve got the stress and the pressure of succeeding or failing or how am I going to find patients and what’s the timeline knowing you’re going to potentially even lose money for a year or two. It’s such a significant decision so I have so much respect for people that have done that. And because they’ve been through a lot, they have a lot to pass on, a lot that they’ve learned and they enjoy sharing it with kind of the next generation. They really believe in that model. So kind of dug into that and was thinking, okay, solo is like a six-month runway from when you decide to do it. Six months is a very safe amount. If you’re really, really going after it, you can do it in like four, maybe. So I was looking at locums as like a transitionary thing initially and then I happened upon a different job opportunity which was permanent and not necessarily in a place that I wanted to be long-term but seemed like a simpatico kind of business approach and heard about it. The connection was through a former attending from my residency so it came with a good kind of thumbs up, and just over a period of time, it was clear that it was not going to probably be a good fit and there’s a couple of those things where you know that someone was looking for something different than they thought they were looking for when they hired you. And you just have to know that that’s a part of it and be confident in yourself that part of what you’re looking for, someone else is also looking for something when they hire you and you can’t know, just like I didn’t exactly know what I was looking for in this second job out of residency.
 
Jon: Right.
 
Trevor: Some people when they hire you, they also kind of don’t know what they’re looking for or what they want out of the end of their career. So I found myself on a similar path as many other associates where you got hired in and you find someone was kind of planning on retiring in the near future and that’s kind of the language of it, I’m looking for a partner very soon, and then there’s things you find along the way. Maybe you find that someone had been there for a while and wasn’t made a partner or someone was there temporarily, moved along, and you didn’t know about them before.  Those are the kinds of things that when you talk about a contract or negotiate about a job, you want to ask about those very thoroughly. You can go on websites actually and look at backdated versions of websites and find people who have been in the practice on the website. That was nice. I skipped one opportunity because of finding that. So these are the different things that happened. Anyways, I was in this other position for a short period of time really about six months and it wasn’t a good fit for a number of reasons and it’s one of those things like you have to be careful how you talk about things when you’ve been on the job and I do advise people, you know, know your reasons but be as positive as you can about them and no future employer wants to hear negative things when you’re interviewing at your next jobs.
 
Jon: That’s absolutely true.
 
When Finding Jobs – Be Positive, Know Your Worth, Don’t Put Down Somebody Else [0:12:36]
 
Trevor: You got to just be positive. You got to know your worth. You’re not worth more by putting down somebody else. Just basic stuff, which is challenging to do when you’ve been driven your whole life and you’ve been successful of becoming a doctor and getting good grades and getting a residency that you wanted and all that kind of stuff. Yeah, you can interview well. You can have had a couple job opportunities that you didn’t think were great from the start and that’s okay. You’re not going to lose opportunities for the future. You know, I picture myself at any point in the last year if somebody would have come along and said, how’s the job going, do you like it, what are your thoughts, I’d be that person or that my former self like, hey, you’re going to do a great job somewhere else. If you don’t think it’s a good fit, get going; get looking for something else. There’s no sense in hanging on to something that you feel like it’s not a good fit because there’s so many practices out there and if you just want to take good care of patients, you’re going to find a place where you can do that and not be stressed out, not feel like you’re kind of bending your care plan towards a certain mentality or efficiency or cost-effectiveness.
 
Jon: At what point should someone look and say, okay, either this is not a good fit or this is pretty good, there’s something in me that I need to come to terms with or adjust? How do you react with that?
 
First And Foremost, Don’t Make Any Rash Decisions [0:14:31]
 
Trevor: I agree totally. I’m somebody who looks at themselves in the mirror and really think like, okay, what can I be doing differently too. I think one thing you could do, if you find yourself in a position where you’re not enjoying your job, don’t make any rash decisions – number one.
 
Jon: Yup, good.
 
Trevor: I’d say the first thing you want to do is talk to a couple of mentors if you feel like there’s some things that are conflicting with you internally, you’re having that mental stress of like, I don’t know if this is quite the right thing or I feel like I’m not being allowed to practice in the way that keeps my patients safe or whatever it might be. You should talk to someone who’s a co-resident or a colleague or an attending and just have a confidential discussion. Hypothetically, if I found myself in this scenario, what would you think about that? Like I feel uncomfortable with it but, you know, I just came out of residency and maybe I don’t really know how the real world is and can you reassure me or is this something that should be a hang up for me I should talk to my boss about. That’s the real world. You started to have to have these conversations with your employer that are, you know, kind of uncomfortable or make you nervous but if you can have them in a respectful, responsible manner, it’s well thought out, you’re not firing off multiple e-mails, I mean, if you’re doing a lot of your discussion about this kind of stuff over e-mail, do not expect to be the one.
 
Jon: It’s not going to go well.
 
Trevor: That is not how you make any sort of resolution to really anything.
 
Jon: Yeah, that’s good advice. That’s general advice to anybody in the 2000s, now that we’re in this century like don’t have emotional conversations over text or e-mail. Have it verbally.
 
Trevor: Yeah. Even I would say don’t have any important conversations at all. If something’s a pain point for you, do not have that discussion over e-mail. I made this mistake and I was really fortunate because my first position, the president of the group – it’s a pretty big group – he would just come in and say like, hey, you know, I know you’re new, you just had residency, you want to make things better, don’t do it over e-mail. And that was like such a great tip because I was just like here I am like ambitious, well-intentioned. I’m writing this long e-mail and I’m thinking, I’m getting all my thoughts out perfectly like this.
 
Jon: This is going to be received so well.
 
Trevor: Yeah, exactly. I’m like, they’re going to be so glad they hired me. I was just like totally – I didn’t know 12 other ophthalmologists, I didn’t know. They’re going to all read one e-mail and potentially each person could take it differently rather than just having a conversation. I think that that’s something that most people wouldn’t do so it’s probably like not advice that everybody needs but I would just say the overarching thing for me like a huge – I like to have action points because it’s just easier. It’s just more tangible like here’s my rule. I really want to feel good about my work and about my ethics and about my patient care so I can easily prioritize the urgency and importance of that above the efficacy of my communication. And that’s probably a lot of doctors, I would guess. I know that’s probably why a lot of doctors butt heads with administration and hospitals and you hear that a lot. So, no e-mail for important conversations. Maybe an email to set something up to chat about it. I mean, that’s been one of my big takeaways. It goes both ways, you know. So, in terms of working on things, I have talked to a coach before which I found was really helpful.
 
Jon: Okay.
 
Trevor: A lot of people do that. it’s kind of becoming a thing now. You probably know it.
 
Jon: Yeah, it kind of is. You’ll see it with The Physician Philosopher and others like that in the arena that are offering coaching. Did you speak to someone that was physician-specific?
 
Trevor: Yeah. I found it incredibly helpful to talk to someone who was a physician who had experienced burnout. I’ve definitely experienced burnout and it’s helpful to have a little bit of that commiseration but you’re okay. The person I was talking – she gets it, you know, like she really loves people. She really loves medicine and like she was not enjoying it. She also was just not vibing; like the fit she had with her job was not good. She did not like the priorities lined up and so she made a shift and now she loves it and she doesn’t do many hours. She kind of figured out like what do I need to want to keep doing this. My story is different than hers but the same principles come across. Yeah, go ahead.
 
Jon: Is that somebody you think you can recommend that we could put a link in the show notes?
 
Burntout To Badass – Honing In On Your Priorities [0:19:57]
 
Trevor: Oh, totally. Let me look up her name real quick. I just got an e-mail from her. She puts out great stuff. Errin Wiseman is her name. She has a course called the Burntout to Badass. I haven’t done that. She came out with that after – I did just a few sessions with her a couple of years ago and that was incredibly helpful and so you don’t have to plan on shelling out like thousands of dollars for a year or whatever it is. I just had a few and it was just like really helped me hone in on my priorities like what I wanted, what I’m looking for. So, I’m kind of a long roundabout. We’re talking about locums but – I mean, hopefully even if anyone just listens to this and it’s just like, oh, cool, there’s other doctors that thought they knew what they wanted, pride themselves on knowing what they want that didn’t know what they want, and now they’re looking for something different. Part of what I’m looking for with locums is to try something different and see if maybe I like that version of medicine a little bit better and then it provides the flexibility to keep learning about solo practice. It’s also a nice try before you buy for practices so it’s sort of a non-committal or less committal almost more like dating rather than getting engaged right off the bat for starting a new job. Because you can’t know what the practice is like; you can’t really know what the flow of patients is like whether the doctor is going to share with you, you know, just the Medicare or going to share with you the premium patients. There are a lot of these things that can happen, that can really change the dynamic of what you think you’re getting and the locums really is a great way, like if I had a solo practice, I would love to hire somebody and it’s a 1099 to start. They like it and I like it then boom! Let’s mutually get more serious about the job now that we know we’re good to go and now it hasn’t cost the practice or the hospitals much money and it hasn’t cost them, you know, maybe all of their time or them moving themselves or their family or something like that. To me, it’s almost like if you’re going to go like first principles thinking like how would I want to hire somebody to feel something out because we’re expensive. It’s a huge loss. You sign a full at least one-year contract for a set amount no matter how good or bad somebody is. It seems like an awesome way to hire. I’m liking it just because it’s almost like you’re dating somebody, now you feel like you’re on the same page like you’re both taking it slow.
 
Jon: Sure. You are friends first and then you take this to the next level.
 
Trevor: Yeah, so to me, it just feels like the most sort of intelligent responsible way of looking at a new physician so I’m excited about that.
 
Jon: No, I think that’s awesome, and so for you, it kind of started out as, you know, I got to get out of here, I know I don’t necessarily want this, I think I want to have my own practice at some point, let’s go for this kind of locums part-time but still decent money. I mean is it the kind of money you said you’re going to be doing what you’re looking at right now. There’s a job that’s looking at 7 to 10 days a month, you said?
 
Trevor: Yeah, that’s right. So that’s what I’m looking for. I mean one thing that’s cool about medicine in general, I mean, it’s got the pros and cons, right, but if you are in rural America, you tend to get paid more. The payer mix is either higher or there’s just almost always you get paid a little bit more.
 
Jon: Oh, for sure. We’ve always thought it was like federal grants to some of these underserved areas can boost a lot of that or something.
 
Trevor: There are some of those programs but it’s mostly that there’s a different multiple that Medicare pays based on location.
 
Jon: Okay.
 
There’s Something Called Geographic Arbitrage [0:24:23]
 
Trevor: It’s supposed to kind of be related to living costs, I think. I’m not really sure exactly but it has to do with that multiple at least for the government program. But then there’s certain pockets of the country too that have really good pension programs. Some of them will be in rural areas so that can be helpful too. Anyways, they call it geographic arbitrage and you can work in a remote area and then do locums and you can make pretty good money. I know especially like if you’re a radiologist and anesthesiologist and things like that can be really pretty easy to find a position and then you can work in places that are not as necessarily going to attract as many people and then they’ll kind of pay you a little bit more just because they need radiology and even though they’re not quite making as much – an average doctor at hospital might make like a hundred grand often a year or more eventually – maybe they’ll just eat that cost because they need a radiologist and then they’re going to make it up.
 
Jon: They bring in more people eventually.
 
Trevor: Yeah. All that’s to say you can make a little bit more money in certain areas. There’s a huge range for what they pay per day in ophthalmology. That was kind of interesting.
 
Jon: Oh really.
 
Trevor: Yeah. And you can negotiate but you’re kind of competing with other people for a limited number of positions so you don’t want to drive too hard of a bargain or else they’re just going to take guy number two for hundreds of dollars less per day potentially if they’re really price-driven.
 
Jon: Yeah.
 
Trevor: Yeah, there’s varying amounts.
 
Jon: Okay.
 
Trevor: You can look at how much doctors make and compare the different subspecialties and clearly some more than others but it is interesting to break that down all the way to a daily rate and when you’re looking at locums, you’re looking at a daily rate of what that doctor will get paid for the work that they do and then you have to include the fact that if you’re working with a locums agency, they’re going to get paid too at some sort of rate either for the contract duration or I’m sure there’s a few ways to do it and then they’re going to pay for your travel, for your lodging, and for your car as well, so your rental car; so flights, rental car, and lodging. I don’t know if they need to pay for food but certainly some hospitals have free cafeterias and stuff. So they’re paying your daily rate plus all of that so you already know that the hospital somehow is making more hiring you.
 
Jon: Yeah.
 
Trevor: Most physicians, they’re not going lose on average generally, right, because they can’t on average. So they’re paying somebody else to find you and you and all of your travel expenses. I talked to a radiologist. He started hunting around – he’s been doing this for 25 years or so.
 
Jon: Locum work?
 
Trevor: Yeah, just purely locums. He started hunting around for his own locum’s work, not using an agency and just calling hospitals or making friends – other radiologists – and asking around. When you do that, you can cut out the middle man and meet in the middle.
 
Jon: Okay, So, per-day rates can be higher?
 
Trevor: Your per-day rate is going to be higher. And what could be better than increasing your per-day rate? You know what I mean?
 
Jon: Yeah.
 
Trevor: That’s like a lawyer charging more per hour substantially.
 
Jon: For the same work, yeah.
 
Trevor: With the same work, you’re already going to be doing the work. It’s an interesting way of thinking about a raise in a different way. That’s something I have attempted a little bit. I think it’s hard for ophthalmology, but if I was a radiologist, I would not be using a recruiter. If I was an anesthesiologist, I would not be using a recruiter, and certainly other high-paying subspecialists like if I was a dermatologist and I did like Mohs and I was just graduating and I didn’t care where I lived and I wanted to be somewhere or I was okay with being there for two to five years, you could definitely find a hospital that doesn’t have a Mohs surgeon and just call them and say, hey, would you support me in my first couple of years. You could make your own deal. I mean, residents and fellows that are graduating right now that aren’t doing that, I know it’s busy, I know it’s stressful, but if you go and do that, holy smokes! I can imagine how much more you would make in your first or second year just being basically a free agent instead of being drafted.
 
Jon: Sure, yeah.
 
Trevor: Yeah. I mean it would be loads, loads of money for those people. We’re talking like easily a hundred thousand dollar raise just from looking around and finding your own thing.
 
Jon: Yeah, I wonder because again we have residents that their main financial goal before they talk to us and sometimes even after afterwards is that they want to pay off their student loans first no matter what before they really invest and that’s certainly if they want to frontload that before they really settle on their final job or maybe they want to do that before they have kids or whatever the case might be, it’s a good time to do that. Maybe you can aggressively pay down loans with that extra hundred grand a few years sooner.
 
The Secret Sauce If You Are Doing Locums – Call Up Hospitals And Ask For the Physician Recruiter [0:030:03]
 
Trevor: Oh, yeah. I mean some of them when I’m saying 50,000 to 100,000, that might be part of the daily rate. It might be part of whatever. If you’re doing locums, they don’t really do signing bonuses but you could call – you know, the world is your oyster – you can call places and just say, hey, who’s your – and this is one thing I learned – is you have to know who to ask for. So this is like the tip of the podcast here – ask for the physician recruiter. You can just call the hospital – I feel like I’m giving away the secrets sauce here – but you can call the hospital – and I’ll let you know, me I love just like cold calling and talking to people – call the hospital. It doesn’t matter. Talk to their operators and say, hey, would you mind transferring me to administration. They’ll transfer you to admin. Someone in admin is going to know who the physician recruiter is and if they don’t outsource that then, you know, fully 100%, if they have somebody that fits that type of role a little bit or some similar name, that person will love that you went straight to them rather than using a recruiter because they save money too and they look good. So you’re helping whatever hospital you’re calling. The person who hires you and brings you to everybody else, you’re making them look good. I mean, that’s a great way to get a job right there. And those people, they’re physician recruiters so they’re also the nicest people ever. They’re always bubbly. They’re like, oh, let me take down your e-mail and we’ll let you know and let me talk to so and so and I’ll give you a call back and they’re actually responsive to e-mails. Because that’s what they do. I don’t know. If I was talking to residents, I would just say like do yourself a favor. Pick a state and just start calling hospitals and talk to their physician recruiters and see what you can find out because, you know, doctors can do this stuff and it’s not that difficult. There’s so many resources for contract negotiation now too. You know these paid services where they really do, they look at so many contracts. You could start setting yourself up for your own thing and you’re like, oh, I don’t know if this is even going to be a good deal or am I making up. You just pay under a thousand bucks and get an expert review and now you know. So now you’ve done it yourself, it’s like selling your own home, you know. For sale by owner is such a great way to sell your house.
 
Jon: Good learning experience.
 
Trevor: Yeah, the buyer’s agent will basically do all the work for you because they want the sale or else they don’t get any percentage. So if somebody brings you a buyer then you don’t even have to do any work or if you find somebody else who doesn’t want to use an agent, you can just figure out what deal you want to make and then go to a lawyer and they write it up and it cost you like 1500 bucks instead of 6 or 7% of the total worth of your house. There’s just these big moments where you can kind of buck up and do your own work and then pay an expert to make sure you’re not being an idiot and you’re going to clean up six figures pretty easily and, for a lot of people, you’re halfway done with your student loans at that point.
 
Locums Interview Process Vs Typical Interview Process [0:33:20]
 
Jon: Yeah, exactly. Going about the process of finding it once you connect with some, tell us about the interview process. Is it different than a typical interview process?
 
Trevor: It is different. I would encourage people to interview just as seriously as you would for a normal interview. Like right now, I didn’t shave really. You can see this is my preferred kind of look but, generally, I won’t normally have, you know, maybe half this or something. But if I’m interviewing on a Zoom call for a locum which you pretty much always are, I would shave. I would wear like a dress shirt; maybe even a suit coat jacket on top. So, take it seriously. Assume they haven’t read your resume. I think on at least one interview, I was just kind of thinking they were going to take it seriously as I was taking it and I found that they didn’t really. I interviewed with somebody and then within an hour, I got an email from the locum’s person, my agent, and he was like, hey, what about this part of your resume, hey what about this part of your resume, and I was like I literally just got off the phone with them 45 minutes ago, why didn’t they ask me? I thought that was the point of the interview, you know.
 
Jon: Sure.
 
Trevor: It was just funny. I don’t know if it was a lack of organization.
 
Jon: What’s the point of a resume, yeah.
 
Trevor: Yeah, so it was just kind of funny. I was like, oh, yeah, I’ll totally, you know, here’s my answer, here’s my answer; happy to hop on a call if they need clarification. So just kind of assume they don’t know, give your story, kind of tell them what you’re looking for. And then I’ve been reading this book – I haven’t talked about this with you – but it’s called Business Made Simple – there you go.
 
Jon: Okay, yeah.
 
Trevor: Business Made Simple, and it’s by Donald Miller. I love his stuff. He is kind of like a marketing guy.
 
Jon: Yes, the StoryBrand.
 
Trevor: Yeah, StoryBrand guy. He’s written a lot of books about his own life and then he really got into marketing maybe up to 10 years ago now. Good stuff. He wrote this book and it’s sort of like a 60-day going through business principles but the first week or two or is really just on your own personal development and talking about character and your values and what are the things that matter to you that set you apart and when you develop those and they’re solidified in your mind; it’s sort of knowing your strengths. There’s always a classic like what are your strengths, what are three strengths and three weaknesses or something like that, and just knowing yourself on the level of your character and your story, being able to communicate your story in a transparent but still very positive way like no matter what. When somebody says three strengths and three weaknesses, you don’t tell them, well, I’m terrible at time management and I never get anything done. Do you know what I mean?
 
Jon: Yeah.
 
Trevor: Those are not the types of things that you would say on an interview. You wouldn’t say like, I’ve been late. You know, sorry I was late to this interview, yeah. All my friends teased me about being late or whatever it is, you know what I mean? Like you don’t tell them like worst things. You want to give them the best afford, still be honest, still be transparent. But this book, I think is really cool because it helps you prioritize real things that make a difference that’ll enhance your leadership skills.
 
Jon: I’ll have to check that out. Great, that’s sweet. We’ll put a link in the show notes to that.
 
Trevor: Yeah, it’s really good. I’ve enjoyed it. I’m about three weeks into it and they’re really short. It’s kind of like you read it and you’re like I knew that, but now it’s organized and you get that mental framework.
 
Jon: Yup.
 
Trevor: Yeah.
 
When You Get A Job Offer, What’s Next? [0:37:26]
 
Jon: Good. So you go to through the interview, take it seriously even though they may not necessarily appear to read your resume beforehand. So when you get a job offer from somewhere, what does that look like typically? What are some different things about that with locum?
 
Trevor: Yeah, for locums that is different. So you get an offer. Basically, if you work with a recruiter, you kind of get a message like, hey, they’re like good to go, would move forward, and you’re like, okay, cool. I haven’t done this before, what does that mean?
 
Jon: They’re like, oh shoot!
 
Trevor: And they’re basically like, well, we got to get you licensed in the state and that can take however long. This is a cool thing now. They have something called a letter of qualification and you can apply for his letter. You apply actually within your own state but you use an interstate medical licensing, IMLCC, credentialing center or something; imlcc.com is the website. Anyways, you pay a pretty decent amount of money. I think it’s 700 dollars or 800 and the state that you’re in verifies, okay, yeah, like, you’re good to go. You have no malpractice claims. You have no background issues. You do fingerprinting. They give you a letter – they have like an agreement or compact with 30-ish states in the U.S. so mostly Midwest, northern, and eastern states. You can get a license within – 10 days is kind of long – but they can get them usually within 48 hours and that tends to be a rate limiting step for a lot of states with getting credentialed. The locum’s agency, if it’s a good one, they’ll pay for that so you don’t have to do it yourself; just have an out-of-pocket expense and you maybe do or don’t get a position, and then you get the state license, and they kind of walk you through it sort of. If anyone has applied to a hospital for credentialing, typically, it’s like, oh yeah, we’ll help you with all this, we’ll take care of it, and then some hospitals will fill out everything for you. You’ll send them a resume. They’ll fill it all out and you just kind of look it over and sign and then some hospitals will be like, we’ll take care of it all for you, and they send you a link and a code to log in and then you have to fill it out everything yourself, and it sounds like a silly thing to complain about but if you move to a big city, you’re doing like four or five of these, it’s a lot, like it’s one of those things that are like solo doctors. They spend a lot of their time on paperwork because they don’t have somebody who does it for them. Anyways, they’ll kind of help you with that. They make sure you have it all done but you still have to be sitting down signing PDFs like every other day for a month or so. It’s getting a home loan, they’re like, don’t worry, we just need three documents for you.
 
Jon: From your last one.
 
Trevor: You’ve gotten a home before. Yeah, this is the last one. Every day for 30 days, you know what I mean? It’s not quite as bad. They’re like Quicken Loans home loan process or something. It still ends up being, you know, it’s always like one more thing and oh can we get a little more detail on this; that date doesn’t line up with that and you’re like, oh, it turns out it was a typo. That’s kind of the process. So they kind of give you like a thumbs up and then you just start the credentialing process just like you would with a regular job. The big difference is your 1099, they do cover your malpractice and with your tail so you don’t have to pay 5 grand, 10 grand at the end of the contract. It’s just all included capped off specific to that location so you can’t work locums one place and then start doing another one or like range your own or work in your practice and have that malpractice cover you. It just covers your job there.
 
Jon: Yup.
 
Very Important – Read All Your Contracts [0:41:44]
 
Trevor: I read all my contracts. I read them very thoroughly myself. I would encourage all doctors to do that. it’s kind of a headache. It’s kind of a pain. You feel like you don’t know what you’re reading. You read it once. If you feel like it was confusing, take a day off, read it again. It’s set in plain English because it has to be pretty easily understandable by all parties to hold up in the court of law. So like if you’re a doctor and you read it twice, you’re going to understand it. You’re not going to know what you don’t know but if it’s a hospital system, a lot of people have signed it and then you can get a contract person to review it or a lawyer to review it. It shouldn’t cost more than a thousand dollars. Anyways, that’s kind of been my process. Don’t be afraid to hunt around. Don’t be afraid to turn things down. Just because you’re doing locum, it doesn’t mean you have to take the first thing that comes along.
 
Jon: Good point.
 
Trevor: I’ve turned down three, four opportunities that I’m sure I would have gotten if I would have taken their stated introductory rate, daily rate, and I was just like that’s just not enough for me to want to fly out and do this and that. Hospitals are going to try to get the lowest amount and if you’re not getting paid for call and you’re going to take a call, that’s kind of crazy like I would definitely get paid for call. You’re giving up your time even though you’re there just for the job potentially if you’re traveling for it. Kind of value your time. It’s hard to do when you’re looking for something but just know your worth. Value your time. If you’re going to find a job that you like and it might be from that locum’s job and it might not be but find something that really compensates you at a level that you think is reasonable.
 
Jon: That’s good.
 
On Getting Paid – Do Some Simple Math [0:43:50]
 
Trevor: I’ve one other thought on the finance part. I would also recommend just doing some simple math on what you get paid if you were getting paid for a permanent position there. So keep in mind you’re going to have travel days on each end so you’re really losing a couple of days potentially depending on how far you have to go. So if you’re working seven days, let’s say, you get paid the same amount. Let’s say you get paid – and this would be kind of low – but let’s say you get 1500 and you work seven days with the same rate – and it might be less on the weekends, you know, if you’re not seeing patients – that’d be 10,500 dollars. And you’ve lost two days, the travel time back and forth-ish especially if there’s a time change or something. But let’s just say you work that job permanently and you were there, you know, 10,500 dollars for seven days and you multiply that by four so that’s 42,000 a month multiplied by 12 months and then that’d be 500,000 dollars. That’s really good – 500,000 dollars – but really you wouldn’t work that much and they’re kind of paying you for the time of the travel and 1500 is pretty good for ophthalmology potentially, and you wouldn’t be getting paid for those weekend days. So if you’re getting paid like 400, 450 and you’re traveling to somewhere that’s not cream-of-the-crop location – that’s not Chicago or Denver or LA – you’re getting paid pretty well for that time. But, if you cut out some of those days and then you’re down like 20%, you’re at 350,000 or 400,000. If you take a job for 300,000 in a city that you like better and you’re okay working permanently than for somebody else and all that stuff lines up where you find the perfect practice, is it worth an extra 50,000-dollar potential amount? You just have to kind of weigh that out. So I’d like to look at it both on a daily rate and like I’m traveling and losing a little bit of time perspective, and then I look at it from an annual rate too because you don’t know how to price out like how much is my daily rate worth because most doctors have never thought about that before.
 
Jon: No, it’s true, yeah.
 
Trevor: So if you’re switching, you can take your current salary and then divide it down for, you know, if you’re going to just work weekdays, you can divide it down and just look at that, but if you’re going to work 14 days and they’re not going to pay you for the weekend in between, kind of like losing some time. You just have to look at all those factors. It ends up being simple multiplication most of the time and just remembering to factor in, oh, I would have taken vacation. So, really you’d want to multiply that by 10 months because you’re probably would have taken 4 to 8 weeks of vacation so that would be 400,000. So you’re like, okay, this 1500 dollar per day rate makes pretty good sense but 1200 dollars per day definitely does not. That’s kind of like, you know, you could find a part-time job in a city or in a lot of different places potentially and make 200,000 per year. So, it’s good. It’s just an attempt to compare apples to apples.
 
Jon: Yup, definitely. I think which goes back to the, you know, don’t necessarily jump at it right away. You don’t always have to take the first job. Take your time both getting a job and leaving a job which, again, this is true in investing or job choices or anything but don’t base any decisions on any one point in time. Patience is power is what I tell my kids.
 
Trevor: Totally. Unless if you’re in like a horrendous scenario that you know you just have to get out of.
 
Jon: Sure, there’s an exception of that.
 
Trevor: Yeah, those definitely exist in medicine so I would never judge anybody who departed from something quickly just knowing those scenarios happen. There’s personal things that happen. People have step away for whatever. But really, three months, six months like you might know at one month but you can wait another month and then you’re going to start looking. Most of the time, it’s going to take you a good three months to find something especially sorting out between a few good opportunities to find the great opportunity.
 
Jon: Yeah. So if it’s not a big hurry or urgent, try to save up some cash for that gap.
 
Trevor: Yeah, definitely. I mean it’s one of the reasons you want to have an emergency fund of at least three months.
 
Jon: Yup, totally true. Okay, well, I think that’s about our time for today. I think that was super helpful. We got some great stuff out of that. Hopefully, there’s things that listeners can take whether they take action on it now, whether they never do anything with locums, whether they’re thinking about it or they can use it in the future, this is going to be a great resource and I really appreciate your time and letting us learn from your experiences instead of having to learn the hard way.
 
Trevor: Totally, happy to help. If anybody has any questions, they can email me at tsmith@financialmd.com or my other email is trevorsmithmd@gmail.com. Happy to reply on a personal level or professional level if you have any questions. Happy to chat with you.
 
Jon: Awesome. All right. Well, everyone, we’ll see you next time on our next episode. In the meantime, be sure to get up to the Financial MD community, that’s the Facebook group that’s specifically designed for physicians by physicians to ask questions, to start some conversations. We post articles and tips and things there. Get out to our YouTube channel. Subscribe to our weekly Didactic Minute video where we put out little two-minute tips of personal finance things that pertain to you as physicians and other than that, we’ll see you next time on the Financial MD show.
 
Trevor: Awesome. Thanks, Jon.
 
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:
Definition of Locum – https://dictionary.cambridge.org/us/dictionary/english/locum
The Physician Philosopher - https://thephysicianphilosopher.com/
Burnout to Badass by Errin Wiseman – https://www.burntouttobadass.com/about
First Principles Thinking – https://www.jumpstarthealth.co/blog-1/first-principles-thinking-adopted-from-aristotle
What is geographic arbitrage – https://www.realsimple.com/work-life/money/saving/geographic-arbitrage
Business Made Simple – https://www.amazon.com/Business-Made-Simple-Leadership-Marketing-ebook/dp/B085XNKHMB
StoryBrand by Donald Miller – https://storybrand.com/
Interstate Medical Licensure Compact – https://www.imlcc.org/
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 012 - Why Jon Loves Being A Financial Planner

Summary:
There’s A Certain Excitement On Initial Consultation [0:00:31]
Being A Financial Advisor Is Interesting [0:02:13]
Estate Planning – A Fun Kind Of Challenge [0:05:15]
Having No Estate Planning Is A Bad Decision – Take For Example, Howard Hughes [0:06:53]
There Are A Million Different Ways To Do Financial Planning [0:12:43]
At Financial MD, We Are Happy To Have A Good Impact On Our Clients’ Lives [0:15:22]
Ultimate Goal Is To Be The Best You Can Be [0:20:24]
In Financial Planning, You Have To Have Your WHY To Motivate You [0:24:10]
 
 
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.
 
Trevor: I’m just thinking. I mean, when you sit down with people when you’re doing some advising, what do you get most excited about like talking to the clients about? Is it the value – big picture like value? Is it potential money earned, saved, taxes? What pops up along the way where you’re just like, oh, this is the fun part, I get to talk about whatever.
 
There’s A Certain Excitement On Initial Consultation [0:00:31]
 
Jon: Well, great question. I would say when I think back on the last seven years and the clients that I worked with, there’s a certain excitement to sitting down when we do an initial consultation and somebody has seen me at a workshop or lectures – something along those lines – or dinner what-have-you and they’re sitting down with me – I just love that first moment when I just, okay, hey, great to meet you, hope you got some value at the lecture, what can I help you with – and just, you know, whatever comes next. Some were similar but they’re never the same and then the hour-long conversation that ensues after that. I love getting to know people. You know, you know my background. I was a counselor before this and as much as I got bored of that real quick being a counselor – you know, I still loved the people and loved the ones that I felt like I could help – and being in financial planning is a little bit of a different atmosphere because I still feel like I’m utilizing quite a bit of the soft skills and the counselor stuff that I had of just the psychology, but it’s more rewarding in a few different ways because number one, I get to really pick and choose who I can work with for one. Number two, it scratches the itch of being an entrepreneur and get into really determine my future but mainly, I’m sitting down and listening for most of that hour when I first meet people and hearing about some of their fears and some of their goals and dreams and what they love and what they hate and all those things makes for – I never get bored of that part, and I’ll be sad if I ever have to get out of it and play CEO or do any of those things but I hope I’ll always be able to do a little bit of that. Money’s an interesting one.
 
Being A Financial Advisor Is Interesting [0:02:13]
 
When I was first looking at the field of financial planning, I remember I was meeting with a family friend that was the only financial advisor I knew and just talking to him and he was a real genuine guy and he said being an advisor is interesting because there’s a lot of people who, you know, the two most important things in their life – and he worked for a lot of Christians – and he said, the two most important things in their life and they won’t admit to this but it’s money and God and often on the same plane and sometimes not in the right order and people will tell you things that they don’t tell anybody else and it’s interesting. So that part probably just my favorite part about being in financial planning and being a financial planner and then once I’ve been working with a client for a little while, that transitioned out of residency into practice is pretty fun, sitting down for a first review meeting, they’ve been in practice, they’ve gotten a few big paychecks, and I’m excited for them.
 
Trevor: That’s cool.
 
Jon: I have a client right now. I was the first one they told when they got pregnant so that was kind of special.
 
Trevor: That’s cool. You have how many kids again?
 
Jon: I have four.
 
Trevor: Four kids, yeah.
 
Jon: That’s the stuff that keeps me going quite a bit on that end. Topic-wise, what do I really like to get into, I love talking about things that I know a lot about like anybody, say this and brag a little bit. I feel like we’re probably the financial planners that know the most about disability insurance, you know, other than somebody that that’s all they do is sell disability insurance. They’re insurance agents. For us being financial planners, we are licensed to sell it, but we’ve been doing it so long with doctors that we got to be one of the experts as far as if we took a handful of financial planners. So I enjoy that part because that’s probably one of the areas we get the most questions on because they’re getting hit by these insurance companies or agents that are just going after them, trying to get a big policy, thrown into some big policy that they shouldn’t be in and getting a big commission and/or getting some complicated thing and 90 percent of the time when I sit down with these people that already have a policy, I’m like, okay, so can you tell me the details in your policy, and most of them are like, I have no idea, I bought this in second-year residency or whatever. So, it’s fun sorting that out for people. It’s gratifying but sad when I have to tell them that like, you probably made a bad purchase here, because insurance is a sensitive topic. Investing is easy to talk about, right? Cash flow, budget – those things are fairly easy to talk about – but when I sit down and say, okay, let’s talk about when you’re going to die or when you’re going to get sick or injured or the scary times in life, I think a lot of planners or advisors might avoid that. I think, here at Financial MD, we are happy to talk about it. We know a lot about it and so we get a lot of that kind of peace and comfort from clients knowing that, okay, it’s good to know that I’ve sat down finally with somebody that I feel like cares about me that, you know, as a fiduciary because I’m paying them but they can help me sort out this insurance issue without as much anyway conflict of interest and that kind of thing. Yeah, I like talking about that. It’s easy.
 
Estate Planning – A Fun Kind Of Challenge [0:05:15]
 
I like talking about estate planning. I’ve gotten to be friends with quite a few estate planning attorneys, some that I send clients to, just getting to know that profession, that field; the nuances of estate planning, just that concept of trying to take what you have accumulated and earned and worked for, how do I pass this on to my family or charities or people that I care about and – as my conservative root showing – how do I keep that out of the government’s hands as much as possible, you know, with my Libertarian bent. That’s a fun kind of challenge and I’m always trying to learn more about estate planning. I’m actually into the final class of the CFP coursework which is estate planning so I’m trying to really pay attention. It’s super interesting.
 
Trevor: That’s cool. Estate planning is something I’m not terribly familiar with, kind of for obvious reasons. I mean, I’m still not too close to the end of my life and there’s just so many other fish to fry in the short term.
 
Jon: Yeah, that’s what it feels like, and that’s what a financial planner’s job is to help you prioritize what you should do first.
 
Trevor: Yeah. You often have, if you’ve done a great job of planning and if you’ve been a high net worth individual or you often have the most money when you die, you can often have the most money you’ve had in your life when you die and so you have the most to lose, right?
 
Jon: Yeah, that’s a good way to put it.
 
Trevor: I mean when you have the most and you could potentially have the government take half, you’ve done all that work and then to have not organized what happens after you’re gone can cause you more than any decision you ever made while alive. Is that an accurate statement?
 
Having No Estate Planning Is A Bad Decision – Take For Example, Howard Hughes [0:06:53]
 
Jon: Definitely, yup, for sure. Case in point – who was it that died and his estate – this is a different celebrity story. I like listening to a podcast called Celebrity Estates. Howard Hughes’ estate, for example, was in the hundreds of millions at this point when he died. A great aviator – he helped to build some planes during World War II. He was an innovator in the field of aviation. Howard Hughes had an estate valued at, I think, a couple of hundred million dollars – had no will. No trust, nothing, and really no family that was obvious to pass through in probate, and so within a few weeks, there were about 15 different wills that came forward. Howard Hughes, he died, no will, had an estate probably around a couple of hundred million if I remember it correctly and then within a few weeks, about 15 different wills surfaced, none of which proved to be valid and the court just ended up dividing his stuff between a bunch of cousins.
 
Trevor: Wow.
 
Jon: Meanwhile, the probate cost – just for the probate fees and court fees – can be between 3 and 8 percent. So if you think about, let’s say, split the difference, 5 percent on 200 million is 10 million so that sucks and then there was a decent amount of estate taxes, I’m sure, which right now, the estate tax range is about 40 percent if you got a net worth over 11 million as a couple which when we look at 30, 40, 50 years from now when a lot of us are going to die, that’s not a high number and if we think of trends and what, say, this administration has proposed to do some tax changes, one of the big ones is pulling that ceiling way back down so that if you have a million or half a million net worth which is very common, then you’re going to be looking at estate taxes, so it’ll be much more critical to know how you’re set up for estate purposes and trying to avoid that, you know, and then just the cost and things notwithstanding, just the fact if I want to make sure that whomever is important to me that gets what I feel like they deserve whether it’s again charities or family or whatever.
 
Trevor: Yeah, but money actually goes where you want it to go.
 
Jon: Yeah, so there’s a lot of risk there that we want to try to mitigate and I guess it kind of feels like when you think of all the areas from investing to insurance to estate planning to tax planning like a lot of it is just like minimizing the risks that are involved because if you can just avoid some of the landmines and pitfalls will do pretty well especially in this country.
 
Trevor: Yeah, that’s right. We have significantly less although that’s sort of like big area of potential change here coming up with how much money is being printed but we have significantly less existential threats in the United States, or we have, it’s probably more accurate. We’ve had less threats that can completely undermine the value of our money or work. Our government is not likely to seize our businesses or assets because they’ve changed their priorities or the administration is changed or a coup has occurred and that is a luxury beyond luxury on our planet.
 
Jon: Yeah, absolutely.
 
Trevor: That’s pretty uncommon. I mean, let alone your own personal safety and that of your family, you know, all that crazy stuff that can happen and have in the last hundred years.
 
Jon: Yeah, when you think on the side. I heard an interesting tidbit today. Spain or Portugal is going to have a 3-year experiment of doing a four-day workweek, so as a country, that’s interesting.
 
Trevor: That’s very cool. I wonder who came up with that. I’m going to have to google that.
 
Jon: I don’t know. Millennials, probably.
 
Trevor: More power to them if so.
 
Jon: Yeah. What would the world be like if we all had an extra day?
 
Trevor: It’s funny. Here’s the thing, depending on which generation or whatever your perspective is – usually it doesn’t matter your generation, just how your brain has been programmed over the years of what your experience and exposures – you’ve got this idea, oh, five days is what is done and that is the best that shows hard work, that shows commitment. So you attribute these values to this system when the system doesn’t care what values you’ve attributed to. The five-day workweek doesn’t care whether you think that means that your employees are working hard. It doesn’t care. It’s just the system, right? So what if the system is not optimized for performance or happiness or growth or whatever and also the four-day workweek is actually what causes your company to grow and you to pool in better talent and people want to stay there because they like to be able to travel on the weekends. Whatever it is, it’s so easy to go, oh, yeah, that’s a millennial thing and kids these days don’t want to work and blah-blah-blah. It’s much more the case that our generation just wants to question the value, the base like first principle’s thought of, okay, a five-day workweek, is it best or not; is it optimizing the things that our company or family or whatever unit our church values or does our church value different things, okay, then what if we align those values with how we work our hours throughout the week. And then all of a sudden, the conversation is not like righteous or self-righteous basis of philosophy. It’s now how do we work together to accomplish what we actually wanted to accomplish.
 
There Are A Million Different Ways To Do Financial Planning [0:12:43]
 
And again, this is why we like financial planning is because there are a million different ways to do financial planning and tons of different goals that people come to the table with or even just values and they haven’t even made their goals yet. For some people, they probably sit down with you – tell me if this is the case. They probably sit down with you and they really haven’t put together goals.
 
Jon: No, for sure.
 
Trevor: They never really thought about their life in terms of goals but they did have values and they had never put names and words to those values. Now, they sit down with you and they realized, okay, there’s actual limitations to how much monetary energy I can create with my job which means I have to focus that limited time, limited monetary energy that time is converted into, and then that can be targeted towards goals that can make a difference in the world around you – the physical world around you – just by purposely pursuing them and you can actually achieve more goals if you plan appropriately, and if you save in certain ways or you give your money to certain groups of people who also makes similar or wise decisions that they’re goal-oriented and value-oriented, it becomes exponential. Yeah, that’s why you have a cool job. I mean, you get to rubber meets the road for a lot of people for the first time in their life, and working with doctors, it’s while they’re in the thick of it as residents and then like you said, you get to be one of the cool parts – you get to be part of that transition. With your clients, most of them have a 5x or 10x increase or some of them even higher on their salary like at the flip of graduation from the residency and now they have this entirely new powerful tool to change and form the world around them in their lives and that of their family, I mean, and the right framework which you have and financial advisors have; now also and you can channel that energy.
 
Jon: Yeah, and that’s it. I mean, we sat down and added up one day just an estimate of the income that’s going to happen, you know. If there’s a million and a half attending physicians and they’re averaging even just 200,000 dollars a year of income over a 30-year career, it’s getting into the trillions of dollars and so we began to realize at Financial MD when we birthed this vision like what’s at stake and what we potentially have influence over.
 
At Financial MD, We Are Happy To Have A Good Impact On Our Clients’ Lives [0:15:22]
 
If we can take just a piece of that and influence it for good, I’ll die a happy man knowing that my company helped to steer the trajectory of society by taking these high-income individuals that some of them will do good things for sure, some of them will have good advice for sure, but we just want to be able to impact a small fraction of that for the good to say, hey, let’s just pause for a second and sit down and see what’s important to you in life and how do we make choices with your finances that are in line with those values and how can we, after taking care of yourself – and I try to push all my clients to think through this, you know – you take care of yourself for sure, take care of your family – we get that – but the third step that most of them don’t think about is how do you try and take care of the world around you, and I’m not saying sacrifice yourself to do that although I would say I believe there should be some of that.
 
Trevor: Right.
 
Jon: But almost all my clients are able to make an impact in the world around them without really cramping their lifestyle at all. So much so that if we were to say what’s your target client, obviously, it’s physicians, but to be even more specialized, it’s physicians that have enough care about the world around them that they want to make a difference in some way. And I’ve talked to some that really just don’t care and they’re just not a good fit here and I can’t get them to think of – you know, and I’ll push them too like if you could give a million dollars to something between now and the end of your life and it really made an impact on something, what would that be? What charity? What mission? What cause? And you know, I can usually get something out of people there but some people are just, no, I just want to be happy; like, okay.
 
Trevor: Which is fine, and you’re talking to residents too who are like drowning in stress?
 
Jon: Yeah, right.
 
Trevor: You know what I mean? I feel like I’m just, you know how they talk about like the cliché term – I don’t know if it was the 2000s or the 1990s or whatever – but it’s self-actualization of becoming your better or greater or truer self.
 
Jon: Yeah, the humanistic psychology.
 
Trevor: Yeah, okay. There’s some good movies where people talk about that. Fargo season two, and there’s a great character who’s always trying to self-actualize. I can’t remember who plays it now – Kirsten Dunst, I think. Anyway, it’s very funny the way that she’s always trying to do that and it just kind of flighty and purposeless but it’s like self-actualization for the sake of self-actualization. But if you actually do that, you can make a huge impact and some people when you’re a resident – let me just speak from my experience. In residency, basically we’re forced to, practically speaking, you didn’t have time to and my mentors some of whom really just – I had one person specifically tell me that you are not Trevor who is a doctor; you’re a doctor who happens to be is that you’re now a working physician. And that’s from somebody who is honestly like a great person, a great mentor, really made a huge difference for all the residents throughout our training – very grateful – but it’s just a different perspective and it certainly doesn’t help you free your mind to think like, oh, what are the possibilities that I can build in my life like what do I want to do and be, and that’s a nice version of what some people are told in residency. Some people get way, way worse than that and once you get out, it takes time, I think, for those layers of sort of like stress, I mean, in some cases for people certainly like toxic environments that they’d have had to work in. You have to be in a healthy environment for that stuff to heal and wipe away all of that dirt that helps you to see more clearly. Anyway, for me, I feel like I’m just kind of getting there and I’ve been a couple of years out and I’m learning a ton. I’m always interested in lots of things but it still takes a while to just feel like, what do I want because I was told what my goal was for a while and a lot of us who end up in med school at all were told by our parents or by mentors of like you should do this because it’s the best you can do. it’s just pure optimization. Your interests don’t matter and it’s not that they don’t matter because we think they’re bad. They don’t matter because your goal is to be the best you can be, right.
 
Ultimate Goal Is To Be The Best You Can Be [0:20:24]
 
Jon: That’s especially true in the Asian culture. I’ve talked to a lot of Indians and Middle Eastern. In fact, I was freshman at Michigan State, lived in the dorms, and on my floor was an Indian girl who I became good friends with and one day I just asked her because she was pre-med and I was like, how come all you guys are either doctors or engineers, but mostly doctors, it seems. She’s like, well, you know, we grow up with our parents helping us to be the best that we can be and our expectation on us is that you’ll then go – doesn’t matter what you want to do – you’re going to do the best thing that is out there in the world from a financial standpoint, from a prestigious standpoint, and to them it’s a doctor and so that was just the ultimate goal.
 
Trevor: Yeah, totally. I mean, a tenth of my classmates. I’m grateful to have been able to go to a great medical school and then also medical school that really value diversity. I grew up in a small Dutch community in West Michigan – Holland, Michigan. The amount that I learned about just like the world and what is out there, and I was fortunate to grow up in a family where I traveled abroad. My parents did mission trips that genuinely made a difference in Jamaica and we go there every year with a group of college students. My dad was a professor. So I had a bit of a global perspective, but still it’s not the same as being surrounded by a diverse community of people with different backgrounds. I mean that was very common. You hear that across the board like one of the common jokes is like, my parents told me I could be anything I wanted as long as it’s a doctor or a lawyer.
 
Jon: Yeah, right.
 
Trevor: I had friends who, in a non-joking way, would say like, yeah, my brother’s like applying in medical school again, my parents have always been disappointed with him. And I’m like what he is doing? He is an engineer. You know it’s like – they’re like super smart. They’re making probably as much or more than physicians in their lifetime, but it’s a different priority. So, all that to say I think it takes a lot of sort of unwrapping the programmed mindset that we get and then we program ourselves to be able to study as much as we have to study to get through all the training. For anybody who is listening, I mean, I talked to like a life coach or like a career coach person a couple of years ago and that was super helpful because they equip you with a skill set we weren’t taught which is thinking through your thoughts in a different way. It’s not so much introspection. It’s just like focusing your critical thinking that you learned in medicine on your own decision making for your life and it’s sort of like we kind of want a little bit hands off to stay on the conveyor belt and not think too much about the fact that we’re giving up our 20s and so you’re used to making big decisions and not really thinking too much about where it sends you and I found it really helpful to talk to a physician career coach and just to think about somebody who has also done and been through it and been burned out and all that kind of stuff. They have that perspective. Anyway, I think that’s very helpful. It’s a growing thing right now. I think the physician philosopher; he’s got some White Coat connections. I think he started some sort of coaching thing – he can be a coach now too. I mean you can see why it’s popping up. There’s a huge need for it and it’s really great.
 
In Financial Planning, You Have To Have Your WHY To Motivate You [0:24:10]
 
I mean, in financial planning, you have to have your WHY to be your motivator to stick to a plan and I think it’s why a lot of people don’t end up getting disability insurance when they should early on and they don’t put money into the Roth IRA when they can afford to. They just don’t have a WHY to motivate them because they are not looking at their life like it’s their own. They’re kind of you almost have to step outside of yourself to make it through the training, to sacrifice that much. So, yeah, anyway, I totally recommend anybody to get a few sessions with a career coach or a life coach – whatever you want to call it. Any that are with a physician is particularly beneficial. That was a huge rant about coaches and life perspective but it’s very important. You have to have big motivators and the ones that are truest to yourself are the ones that are going to make a difference. Other people’s dreams of being a multimillionaire, they’re not going to motivate you. You’re not going to care. You have to want something yourself and you have to know that it’s your own thing that you want that just come from you or you won’t get there.
 
Jon: Yeah. What is the phrase? Know thyself, right?
 
Trevor: Yeah, that’s tough. That’s like the toughest part of life, I think.
 
Jon: Yeah. Well, that’s probably our time. There’s so much more we could go on to that but thanks for switching seats and asking the questions today a little more but we’ve got some great resources continuing to come out. We’re going to be coming out with an online course for residents. This summer is the plan so that’s in the works. We’re super excited about that. It will be kind of do-it-yourself approach, step by step, what to do, when to do it, and just a lot of good on-demand education, so be on the lookout for that. Join the Financial MD Facebook community, so search for that. You’ll also find it on our website: financialmd.com. Check out the Didactic Minute videos on YouTube and Facebook. Those come out once a week which is quick two-minute topics, tips, finances, something to move you forward a little bit, and keep an eye on TikTok too. We’ll be throwing stuff out there. Yeah, I’m learning from my teenage daughter how to use that. So, lots of great stuff. We’re trying to give you again just to know more things and that’s usually a good thing. So, hope it helped. Again, with the Financial MD show, this is Jon Solitro and my co-host is Dr. Trevor Smith, and with that, 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:
Financial Planning – Definition, Objectives and Importance –
https://www.managementstudyguide.com/financial-planning.htm
Estate planning: What is it? – https://www.investopedia.com/terms/e/estateplanning.asp
Certification Coursework Requirement – https://www.cfp.net/get-certified/certification-process/education-requirement/certification-coursework-requirement
Celebrity Estates podcast – https://podcasts.apple.com/us/podcast/celebrity-estates/id1466224736
What happened to Howard Hughes’ estate? – https://www.gordonfischerlawfirm.com/howard-hughes-estate/
Spain to try 4-day workweek – https://www.forbes.com/sites/jackkelly/2021/03/15/spain-is-the-latest-country-to-try-a-four-day-workweek/?sh=5c663331f1da
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 011 – Dr. Smith Talks Crypto

Summary:
Tesla Acquired 1.5 Billion Dollars’ Worth Of Bitcoin [0:01:11]
Inflation – What Is The Value Of Money? [0:05:01]
There’s A New Asset Class – Digital Assets [0:08:12]
Everybody Can Have Bitcoin [0:10:49]
The Reason Companies Are Buying Bitcoin [0:11:38]
Pump Up Your Portfolio – Diversify! [0:16:23]
Implication For The Average Young Physician [0:17:52]
Volatility Is Not A Negative Thing [0:19:40]
As Elon Musk Said, ‘In Retrospect, It’s Inevitable’ [0:22:55]
 
 
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.
 
Jon: All right, so you want to get rolling on crypto?
 
Trevor: Let’s do it, yeah, and mostly just Bitcoin. I mean, I’m pretty…call me a Bitcoin maximalist is what they call it.
 
Jon: You bleed Bitcoin?
 
Trevor: I bleed Bitcoin. I mostly just don’t want other people to lose money in other more insanely speculative bets. It makes me nervous.
 
Jon: Okay. Ethereum pretty solid?
 
Trevor: Ethereum pretty solid – great question. That’s probably the biggest debate. Yeah, so Bitcoin is like mainstream. All of them put together, something like, you know, 1.1 trillion market cap that fluctuates a good 10 percent day-to-day, week-to-week, even more sometimes. So the whole market cap of like cryptocurrency and everything was like about 1.1 trillion, right. I think it’s a million for a second there. Yeah, so it’s definitely trillion and Bitcoin’s in the 800 billion range right now and that’s been kind of working its way up, and then Ethereum’s market cap actually should but I don’t know off the top of my head. It’s the second largest but it’s not an insane amount. I want to say – we could google it – but it’s probably between let’s say it’s 100 and 200 which I don’t think it’s that high. If it’s 100 billion then it’s still, you know, significantly smaller than Bitcoin, but it’s a significant part of the cryptocurrency kind of landscape because a lot of the other coins are either like sort of created on what’s considered the Ethereum network.
 
Tesla Acquired 1.5 Billion Dollars’ Worth Of Bitcoin [0:01:11]
 
Yeah, so those are the kind of the top two coins but like the main reason I wanted to talk about cryptocurrency and Bitcoin is because of the big news that Tesla acquired 1.5 billion dollars in Bitcoin a month ago.
 
Jon: Yeah, so let’s talk about that. Why do you think they got that?
 
Trevor: Yeah, so they called it in their filing with the SEC an alternative store of value asset. So it’s a store of value much like gold where it protects against inflation. When they say store of value, they kind of – it’s kind of like a fancy way of saying like hedge against inflation, meaning that there’s a lot of inflation and dollars losing their buying power, you know. Dollar is going to be a dollar, but a dollar versus, you know, what? A loaf of bread. A dollar versus a euro, a dollar versus a peso. You know, if it loses the ability to buy things then that’s important.
 
Jon: Sure. Value…
 
Trevor: So that’s the basis. Yeah, value, and it’s most important, you know, you can talk about like a banana at a store, okay, sure, like those prices do fluctuate and that’s kind of more on the order of the mainstream i...

Ep 018 – War in Europe and Your Finances

Summary:
Russia Invading Ukraine – Implications [0:01:31]
The Market Is Doing What It Always Does – Volatility [0:03:31]
What’s Inside An Average Client Portfolio (It’s Not All S&P Index Fund) [0:04:05]
Crisis In Europe Affects Gas Prices Which Affects The Stock Market [0:06:34]
The Longer You Wait To Curb Inflation, The Worse It Gets [0:08:30]
 
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: Hey everyone! Welcome to the eighth episode of the Financial MD Show. Hope you’ve been having a good time listening through all the episodes and learning stuff. Today, we’ve got a fan favorite. This is a highly requested topic both through emails and correspondence, and after getting requests on podcast topics as well as just getting straight up questions in the webinars and lectures and things that we do. Disability insurance is what we’re talking about today, which is great, because I’m knowledgeable on it, Trevor is knowledgeable on it, and we’ve had some good and bad experiences, but there’s a lot of mixed information out there and we hoped to straighten some of that out today. We’ll give you some tips on how to buy it, how to shop for, what to look for, what not to do, and ultimately how do you feel you’ve done well and just protect your finances. Without further ado, here’s today’s show.
 
 
Jon: Welcome everybody to the Financial MD Show. We are here, your hosts, once again, Jon Solitro and Dr. Trevor Smith. How are you, doc?
 
Trevor: I’m good, I’m good. How are you?
 
Jon: I’m great. I’m, as you know, sunglass shopping. We’re trying this out. We’ll see. I’ve gotten some other good recommendations. Thank you, sir.
 
Trevor: Your welcome, your welcome. American Optical.
 
Jon: American Optics. Sponsoring today’s episode is American Optics. They don’t pay us at all but, we’re going to pick them certainly.
 
Trevor: Yeah, I think is it American? It might even be American Optical. Either way, it’s the Top Gun. It’s the famous Top Gun aviator but they make some other less enormous frames.
 
Jon: Well, I got to tell you coming from an ophthalmologist, that has to mean something.
 
Trevor: Yeah, they’re great. Super quality.
 
Jon: All right. Cool. Well, we want to just bring in a short episode today. We’re going to try to get this out as soon as possible and talk about it’s now February 28th, the last official day of 2 of 22. Hope you all did wonderful things on 2/22/2022 – that was pretty exciting. But lots happened this year. This has probably been one of the worst Januarys on record for a long time and from the stock market standpoint. Here at Financial MD, we had investors who were down, you know, 15 percent within a span of a month or two because we had some aggressive stock portfolios and the stock market just took a hit and there’s a lot of reasons for that.
 
Russia Invading Ukraine – Implications [0:01:31]
 
We’re going to talk about a few of them today just briefly but we’ve also got an uncertain future, frankly, and we’re not going to beat around the bush with Russia invading Ukraine. That’s a big deal and could be potentially the start of a World War III or could be, you know,

Ep 009 – When Its Not a Good Idea to Use a 401k

Summary:
What Is A 401(k)? When Was It Created? [0:03:00]
What is a ROTH [0:10:27]
Capital Gains Explained [0:13:44]
Financial Advisors Can Help Maintain Your Accounts [0:16:16]
When Is It Not A Good Idea To Do A 401(k) [0:25:44]
Other Times To Not Use or Put Money In A 401(k) [0:33:27]
What Can You Do With Your 401(k) [0:38:26]
 
 
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: Hey everybody and welcome to the tenth episode of the Financial MD Show. This is the number one stop for getting direct tips, education, and knowledge on how to make smart personal financial decisions as a resident, so thanks for joining us today. We’re excited because we’re going to give you a twist on a very commonly recommended topic – that being 401(k)s – and, specifically, when is it not a good idea to utilize your 401(k) at work. We’re going to talk a little bit about the history of 401(k)s, how they came about. Trevor is going to go a little bit into the ROTH concept when that makes sense versus a pre-tax contribution to a ROTH, and then we’re going to talk about some things to watch out for. What are the biggest drags on investment returns in a 401(k) or any other account for that matter? Make sure you’re taking notes, rewind if you have to. We’ll be sure to post plenty of resources in the show notes afterwards, but this is going to be a good one to give you some practical tips on when this makes sense and when it doesn’t.
 
 
Jon: Okay, so today, we are talking about when it’s not a good idea to use a 401(k) and we’ll make that a general statement so we can apply it to a lot of situations and it’s not so specific as we do in the advice world especially when we’re making a podcast. Full disclosure, I say it at the end, but this is not necessarily financial advice. You got a couple of financial nerds talking about different topics that pertain to doctors and that’s all we’re doing today. We’re going to keep it fairly general and this helps us to get a lot of traction out of this 45 to 50 minutes.
 
What Is A 401(k)? When Was It Created? [0:03:00]
 
So let’s talk about a 401(k) a little bit first because of two things. Most people don’t know what that is. They know it has something to do with employee benefits and/or they know it’s a retirement at an employer, but I get this question all the time – what’s the difference between a 401(k) and a 403(b)? And I was like, “Oh, nothing for all intents and purposes.” For our situation here – for you, as the investor – nothing. It’s a little different for what they call the plan sponsor which is a fancy name for the employer. In general, let’s talk about what a 401(k) is or a 403(b). It was created back in the 70s with the ERISA, the Employee Retirement Income Security Act. This created a lot of rules around employee benefits and especially rules around retirement. Back in the day, there were pensions. For years and years, you got a pension, which meant that the company would put away money for all their employees, typically into one big pool, and they had a record keeper that would kind of see how many credits different people had accumulated based on years of service and then how much they made, and then when they retired,