Today’s guest is an Emergency Medicine physician, Dr. Jim Dahle, publisher of The White Coat Investor, Jim has taken on the task of improving the financial literacy of those entering medicine. Physicians make a decent amount of money, but still seem to struggle with paying bills. Join us as we discuss what he has learned and how he is helping physicians manage their money.
Hopefully, this will show you as you're on your journey to medical school that it is possible. You just need to set yourself up for success and do things intentionally. Too often in this life, no matter if it's financial, or anything else, we let things happen to us and we aren't intentional enough about those things and a lot of what Jim talks about is just being intentional.
[2:22] Jim's Calling to Medicine
As Jim recalls, he took a survey in eighth grade suggesting he should be a doctor thought it wasn't until his junior of college that he decided on it. He told his dad should at least be 31 before he went out and got a real job. At that time, 31 seemed very old but now, 31 seems young. Nevertheless, it turned out that the time spent to invest in his career was a wise decision. In the grand scheme of things, taking a gap year or two is actually nothing. It takes a few years under your belt to really get that perspective.
Jim was premed the whole time in college and already knew it's where he was going but he wasn't that committed until he eventually studied for the MCAT. Jim has always had an interest in medicine. The more medicine-related, the more interested he was.
[4:19] Things that Initially Held Jim Back from Medicine
A lot of doctors discourage premeds to pursue medicine. There is a wisdom in the statement that if you can be talked out of it, you should be because it takes so much commitment to get through the long training pipeline. If there was something else in the back burner that you think you would really be enjoying, when you get to those 80-hour work weeks and residency, that's what you're going to be thinking about. Whereas if there was nothing else you want to do as much as medicine, you're going to be fully committed to it and you're going to have the commitment you need to make it through.
[5:10] Taking Gap Years
Straight out of college, Jim went to medical school. He took a couple of years off as an undergraduate and spent time on a mission in Arizona, specifically a couple of years off between his Freshman and Sophomore year. That's when he developed the drive to really help other people. Combining that with his interest in science simply made medicine a natural fit once he came back. Not to mention he got better at studying at this point and getting the A's required for medical school got easier for him.
[5:55] Challenges as a Premed
For Jim, the worst part about being an undergraduate is the competitive environment. He found medical school residency to be far more collegial than undergrad ever was. It felt like everyone was out there to get you. It was very competitive and probably this was because you're going to a college that sends out 50-300 people to apply to medical school every year. Utah is an exporter of medical students where they send students all over the country.
When he got to medical school, it no longer felt that he was competing with anybody. They were all just trying to learn medicine together.
Meanwhile, Jim did the best he can with his grades and on the MCAT and tried to explore his other interests. He was playing in an intercollegiate hockey team and spent time with friends. By his senior year, he got engaged to be married. He realized there were going to be competitive years and he just had to deal with the it and the fact that 2/3 of medical school applicants don't get in. The statistics are just what they are. The most competitive part of the entire process is just getting into a medical school somewhere.
My thoughts: There are enough seats for medical school for those that deserve it and although there is no checklist to go into medical school, they have “checked” enough of those boxes. There are so many students that apply to medical school that they really don't know what the process is so they're applying blindly.
[8:45] Collaboration, Not Competition
Jim further says that you can collaborate with all those people around you because you're not competing with those sitting next to you in Organic Chemistry class, but you're competing with hundreds of other people across the country. So you might as well collaborate with that person next to you.
[9:10] Jim's Transition to Medical School
Jim considers medical school as four of the greatest years of his life. He loved everything about it – the friends he was making, what he was studying, the activities he was doing, he was newly married – everything about it was just great.
A slap in the face came a couple of months in at a time he got his grade back on an Anatomy test where he didn't do nearly as well as he thought. He realized he needed to up his game and spend more time studying and less time playing. It simply required more time that you have to put in.
[10:20] Choosing Emergency Medicine
Jim initially wanted to be a family doctor until he heard of what an emergency medicine physician does and from there he knew he wanted to do Emergency Medicine. Rotating into Emergency Medicine was what cemented his decision that it was going to be the best fit for him. He wished though that he took a closer look into Anesthesia and wondered if he would have enjoyed aspects of it such as the procedures, the opportunity to take care of really ill people, emergencies, and short-term, concentrated relationships.
[12:00] The Future of Emergency Medicine
Jim thinks Emergency Medicine isn't going anywhere and it’s probably the last specialty that could be outsourced to a foreign country. So there is a lot of job security. In fact, there's still a huge percentage of EM jobs that aren't filled by board-certified EM physicians. So the demand for EM physicians are going to be there for a long time.
Conversely, the greatest threat to the field is the corporate practice of EM where there are large groups trading on the New York Stock Exchange. They basically buy off contracts with hospitals throughout the country and all the EM docs are their employees. As a result, the physician loses control of his practice in terms of the number of patients he's seeing or who his co-workers are are or how and when he's paid and how vacations are taken, and what the shift differentials are. There is now a rising trend that there are fewer EM physicians who actually own their job, which is bad for both the doctor and the patient.
But in terms of the practice of Emergency Medicine, it's going to be here for a long time and it's only getting stronger.
[14:14] Paying for Medical School Through the Military
Coming from a family of six kids to a dad who's an engineer and a stay-at-home mom, Jim belonged to a middle class family and knew they were supposed to go to college. However, there were no resources coming from his parents at that time they were going to college. It was going to be on them to provide for their own education.
When he started looking at medical school, he looked at the expense and he was highly debt-averse so he signed up for the military and got a stipend to pay for medical school. Coming out of residency, he went back to serve for 4 years of duty.
He wasn't really sure “scholarship” was the right word for it since they still get the money back and they just pay you earlier in the process. Running the numbers on his situation, he figured he came out about $180,000 behind by going through the military.
However, you can still come out ahead financially by having the military pay you rather than taking out loans especially if you don't have a way to pay out your loans within four years of coming out of residency. At least in the military, your loans will be gone after four years so it's not a bad option.
But Jim would not recommend anybody to go into the military just for the money. The primary reason you go in has to be a desire to serve or you will be miserable in the military. Many military physicians are miserable and counting the days until they can get out. If Jim had to do it again, he said he probably would have chosen the loans.
If you're going into primary care and going to an expensive medical school, you're going to come ahead financially by going through the military. But if you're going to an inexpensive medical school and you're going to be an orthopedic, you're going to come out behind going into the military. The rest will fall somewhere in the middle.
The biggest downside of going through the military is the military match. For some specialties though, it's easier to match in the military match than in the regular match such as Dermatology. But in general, it's harder to match in your chosen specialty if you go through the military match such as Emergency Medicine (the match rate the year Jim applied was 50% compared to 93% in the civilian match).
[19:49] The Birth of the White Coat Investor
Jim seriously had no interest in business and finance when he was an undergrad and even when he was in medical school. It wasn't until he came out of residency and started earning a paycheck which he thought was good but realized he just kept getting ripped off over and over again by financial professionals. He figured that he didn't start learning about this stuff, he's just going to continue to be taken advantage of throughout his career.
So he started buying and reading financial books and realized he could totally learn this stuff. He started participating online in forums and blogs and realized he was doing a lot more teaching then he was learning and got sick of typing the same thing over and over again on the internet. So he figured he could just start a blog and just post a link to his blog to address any issues. He also realized no doctors were getting this kind of financial training. Hence, the birth of The White Coat Investor in 2011. Once he started the website, it just took off immediately because the need was so huge and it has continued to grow since then.
[22:00] The Importance of Seeking Financial Knowledge
First, physicians who are financially secure make better doctors. Doctors are taken advantage of because they are very idealistic and trusting of other professionals. Because they do the right thing for their patients, they assume every other professional in every other field works the same way. And this doesn't work that way, especially in the financial services. So you have to be a lot more skeptical especially when you realized you're a great target by virtue of your high income and a lot of people want to have a piece of that.
Realize that you have no financial training and there are people who want to take advantage of you so you can't be too trusting of the financial world out there or you will be taken advantage of.
[24:48] Lifestyle Inflation and Explosion
The key to paying off your student loans in a short time after residency is to live like a resident while you're making an attending salary. Maintain that discipline 2-5 years after residency and you can have your student loans paid off, get retirement savings, and have your down payment saved up for your dream house. The problem is too many doctors out of residency immediately draw into that attending income and can't resist the siren call of that additional income and before they know it, they've drawn all the way in or even past their income.
This happens all the time to physicians because they're busy. They're not paying attention and they don't deliberately have a financial plan when they come out of residency. If you're not living within your means, the problem is not that you don't earn enough. It's a spending problem.
Jim's advice to premeds is to literally have a written plan of what you're going to do with your first 12 months of attending paychecks before you ever walk out of residency. By the time most doctors graduate from residency, they've got two car payments and mortgage that can only be paid on an attending salary. Before you've ever started making the income, you've already got it spent.
The secret is not pinching a few pennies as a resident or as a medical student but what you do with those first few years of attending paycheck.
10-25% of physicians who come out of medical school are not okay. If you really want to get out of that debt anytime soon, live a lifestyle similar to what you do as a resident for a long time.
Jim ran a post on his blog recently and at that time, his record for a single medical student's debt upon completion of training was $635,000. Within 6 hours after running that post, he heard of those who have $665,000, $800,000, $950,000 and even $1.1 million. Those extreme debts are just ain't enough to take care of that. So don't be one of those extreme situation with a very low income and a very high debt level. Generally, though, a vast majority of doctors are still going to be okay.
Do not borrow more than twice what your gross income will be after residency. If you get much above it, you're going to have a hard time paying it off. Do not get things out of balance.
[32:40] Paying Off Your Loans Short-Term Versus Long-Term
Back in 2003 when he came out of medical school, several of his classmates refinanced their loans at 0.9%. They were paying it back with dollars worth less than the dollars they've taken the loans at due to inflation. But doctors who come out of residency these days have loans at 5.6%, 6.8%, 8%, 10%. When your debt is compounding, and you're paying it off in 30 years, it is going to turn out into an astronomical sum of money to pay back.
The key is to get your debt paid off quickly and not drag it out over time. Otherwise, you won't be as excited about practicing medicine anymore as you were as a premed student. Borrowing large sums of money now means you're basically stealing money from the future you and the future you might not appreciate that so much. Having that freedom to do the things you want to do and the way to get that is to get your loans paid off before you get used to the income.
[35:45] The Biggest Financial Mistake of Physicians
The biggest problem is they spend too much of it alongside several other mistakes such as not realizing that we live in a 401 world. You then have a second job as a pension plan manager. Jim suggests you learn how to do it relatively early in your career so you can take advantage of those things. Have the discipline to carve a significant chunk of your income and save it for retirement before it's too late.
[37:40] Getting Financial Training to Medical School Curriculum
Jim is currently talking with individual schools about this in the hope that they can put out a course that would teach them their future business. We’re not only training physicians, but also, businessmen since the medical practice is a business. If you don't know anything about business, that medical practice may not be able to be around long enough to take care of patients. No margin, no mission.
There is at least one medical school that has successfully incorporated a Business of Medicine class into its 4th year 3-month curriculum, an optional class at the University of Arkansas. Although optional, about 65% of the class is taking it so it shows heavy interest in medical students to learn about this early in their career.
Jim shares resources you can tap into resources to get the training you want such as forums on investment and mutual fund investing. Just get out there and start learning and you'll be surprised how easy it is to learn and implement this yourself without having to pay thousands of dollars a year to a financial advisor.
[40:50] Jim's Last Words of Wisdom
It's a wonderful career. At this point in his career, he is financially independent and doesn't have to go to the hospital to take care of patients but still does because he loves it. But loves to see more doctors practicing medicine because they love it and not because they have to. By taking care of your finances early in your career, you can be in that position as well, also surprisingly early in your career.
The Short Coat Podcast has now joined the Med Ed Media network. The podcasts are broadcasted from the amazing and intense world of medical school from the students at the University of Iowa Carver College of Medicine.
Check out Jim's book, The White Coat Investor
Dr. Ryan Gray: I'm excited to announce that the Short Coat Podcast has now joined the Med Ed Media network at www.MedEdMedia.com. The Short Coat Podcasts are broadcasts from the amazing and intense world of medical school from the students at the University of Iowa Carver College of Medicine. Go check them out directly at www.TheShortCoat.com.
The Premed Years, session number 223.
Hello and welcome to the two-time Academy Award nominated podcast, The Premed Years, where we believe that collaboration, not competition, is key to your success. I am your host Dr. Ryan Gray, and in this podcast we share with you stories, encouragement, and information that you need to know to help guide you on your path to becoming a physician.
Welcome to The Premed Years if this is your first time joining us here. Thank you for taking some time out of your day. Today I have a very special guest, someone who has been helping physicians, and maybe more people outside of physicians for a while online in the financial space. Physicians make a decent amount of money, but still seem to struggle with paying bills. And I'm going to talk all about that with Jim, and discuss what he has learned, and how he is helping physicians manage their money, and hopefully show you as you're on your journey to medical school that it is possible, you just need to set yourself up for success, and do things intentionally. Too often in this life, no matter if it's financial, or anything else, we let things happen to us and we aren't intentional enough about those things, about anything really, and a lot of what Jim talks about is just being intentional. So let's go ahead and dive right in.
Jim, welcome to The Premed Years, thanks for joining me.
Dr. Jim Dahle: Thank you, I'm glad to be here.
Meeting Dr. Jim Dahle
Dr. Ryan Gray: So you are an emergency medicine physician. When along your journey through life did you realize that medicine was your calling?
Dr. Jim Dahle: Well I don't know when I definitely realized it. I remember taking a survey in eighth grade that suggested I should be a doctor, but I don't think I really decided on it until my junior year of college. I remember a conversation with my father and I said, “Dad if I become a doctor, I'm going to be at least 31 before I get out and get a real job.” He said, “You know what? You're going to be 31 then no matter what you're doing. You might as well figure out what you want to do and do that.” And that was good advice. From my perspective, 31 seemed really old. Well now 31 seems very young, and that time spent investing in this career was a wise investment, it turns out.
Dr. Ryan Gray: Isn't it so funny? I find it hilarious when I talk to college students, and we talk about a gap year maybe to strengthen their application, and they're like, “I can't take a year off, that's just a year that I need.” I'm like a year in the grand scheme of things is nothing.
Dr. Jim Dahle: Right, that's exactly right. I think it takes a few years under your belt to really get that perspective. When you've only been alive for twenty years, it seems like a year is a long time.
Dr. Ryan Gray: Yeah. So you were in college at this point not premed, you were-?
Dr. Jim Dahle: No I was premed the whole time in college. I had a pretty good idea that's where I was going, but I wasn't really committed to it I think until then, and that was when I started studying for the MCAT.
Dr. Ryan Gray: Okay so you kind of had one foot in.
Dr. Jim Dahle: Yeah I came into college interested in science, and studying all the stuff that relates to medicine. It turns out the more related to medicine, the more interested in it I was. So this wasn't a huge surprise, that's kind of the way I was heading, I think I just had at that point gotten some more information about the career, and was really trying to decide whether to go for it or not.
Dr. Ryan Gray: What do you think would have held you back from it?
Dr. Jim Dahle: Well I think part of it is that I didn't see anything else I thought I would be happy doing. A lot of doctors discourage premeds from going into medicine, and I think there's some wisdom in the statement that if you can be talked out of it, you should be because you really take so much commitment to get through the long training pipeline, that if there's something else on your back burner in the back of your mind that you think you would really be enjoying, when you get to those eighty hour work weeks in residency, that's what you're going to be thinking about. Whereas if there's nothing else that you want to do as much as medicine, you're going to be fully committed to it and you're going to have the commitment you need to make it through.
Dr. Ryan Gray: Yeah. You study for the MCAT, did you go straight from college to medical school?
Dr. Jim Dahle: I did. I mean I had four months off, three months off, something like that, but yeah basically straight through. I took a couple of years off as an undergraduate and spent a little bit of time on a mission down in Arizona. So I had a couple of years off between my freshman and my sophomore year, and that was where I kind of developed a drive to really help other people, and so combining that with my interest in science made medicine a natural fit once I came back. Plus I was a heck of a lot better at studying at that point and getting the A's required to get into medical school was a lot easier at that point.
Challenge of Transitioning to Medical School
Dr. Ryan Gray: A's are important, grades are important. What was the hardest thing for you going through your undergraduate path to get into medical school?
Dr. Jim Dahle: I think the worst part about being an undergraduate is the competitiveness. I found medical school and residency to be far more collegial than undergraduate ever was. I mean it just felt like everyone was out to get you, just very competitive. And I think the reason for that was I went to a college that sends out 250 or 300 people to medical school- well not to medical school, but applying to medical school every year. And so there was lots of people around that felt very competitive. Utah is an exporter of medical students; we send medical students all over the country, and so I think that was probably the worst part. It just felt competitive as opposed to when I got into medical school, it didn't feel like I was competing with anybody, we were just all trying to learn medicine together.
Dr. Ryan Gray: How did you shield yourself from it?
Dr. Jim Dahle: From the competitiveness?
Dr. Ryan Gray: Yeah.
Dr. Jim Dahle: Oh I don't know that I did or that I could have. I think all I did was realize, ‘Well this is what I want to do, and I'm going to do the best I can on my grades, and do the best I can on the MCAT,' and then I tried to explore my other interests. I was playing on an intercollegiate hockey team at the time, and so I was spending a lot of time doing that, and a lot of time pursuing interests, and spending time with friends, and then by my senior year I was engaged to be married. And so I think I just explored other interests and realized that this was part of my career path. There was going to be a couple of years where it was going to be really competitive, and just deal with it I think. I'm not sure you can really get away from the fact that something like two thirds of those who apply to medical school don't get in. I mean those statistics are just what they are, it's a competitive thing to do, and that's actually the most competitive part of the entire process, is just getting into a medical school somewhere.
Dr. Ryan Gray: Yeah I agree, and one of the reasons for this show is the cut-throat nature of some online sources out there, and I preach collaboration and not competition on this podcast because my theory in looking at the numbers is that there are enough seats available in medical school for those that deserve it; whether that's deserving it because of their grades and MCAT score, or- obviously those are huge factors in it, but deserve it because they've done the shadowing, and extracurriculars, and clinical experience, and they've- even though there's no checklist to get into medical school, they've checked enough of those boxes. There are so many students that apply to medical school, even today, that really don't know what the process is, and so they're applying blindly.
Dr. Jim Dahle: Absolutely, absolutely I agree the percentage is much lower for someone who actually understands the process, as far as percentage of people not getting into medical school. And the truth is you can collaborate with all of those people around you, because you're not competing with the guy sitting next to you in organic chemistry to get a slot into medical school. You're competing with hundreds of other people across the country, you might as well collaborate with him. There's nothing keeping both of you from getting into medical school, even the same medical school.
Dr. Ryan Gray: Exactly. Awesome, I love hearing that. So you go into medical school, what was that transition like going from playing sports in college, and studying, and doing all that stuff that you did in college, and then getting slapped in the face with medical school?
Dr. Jim Dahle: Well it was awesome. I mean medical school was the best four years- maybe not the best four years of my life, but certainly four of the greatest years of my life, there's no doubt about it. I loved it, I loved the whole time. I loved what I was studying, I loved the friends I was making, I loved the activities I was doing, I was newly married but we didn't have children, I mean everything about it was great. Truly I loved medical school. Now there was a slap in the face that came a couple of months in, about the time I got my first grade back on a gross anatomy test and did not do nearly as well as I had thought, and realized I needed to up my game, and basically I just needed to spend more time studying and a little bit less time playing. But you know I think that happens to everybody, you realize you're going from college where maybe you were taking fifteen or sixteen credit hours to a load that's maybe the equivalent to 25 credit hours as a medical student. It just requires some more time put in.
Choosing a Specialty
Dr. Ryan Gray: Yeah. When along the path did you realize that emergency medicine was what you wanted to do?
Dr. Jim Dahle: Well I thought I was going to be a family doc coming into medical school, but I think it was probably during one of those lunch and learns they have during your first couple of years where they drag in a specialist and he tells you all about his specialty and his life, and they had an emergency doc come in and I said, “Hey that guy is just like me.” And from there I had a pretty good idea that was what I wanted to do. Of course I didn't really know for sure until I rotated in emergency medicine late in my third year, and that pretty much confirmed it for me that that was going to be the best fit for me. I wish I had taken a little bit closer look at anesthesia than I did. For some reason I put anesthesia into this category with other stuff like pathology, and radiology, that those guys weren't real doctors, and I think I would have enjoyed anesthesia as well. So I don't know that I would have picked it over emergency medicine, but I think I should have taken a little bit closer look at it because I think it would have fit me well.
Dr. Ryan Gray: What about it do you think would have fit you?
Dr. Jim Dahle: I like the procedures, I like the opportunity to take care of critically ill people, as well as take care of some emergencies. I would enjoy I think the short-term relationship, but a concentrated relationship in a critical time in people's lives. I think those are all aspects of anesthesia I would have enjoyed.
Dr. Ryan Gray: Yeah. What do you think the future of emergency medicine- it's funny I have the Specialty Stories Podcast, and I had an emergency medicine doc on, and we talked about the future of emergency medicine, but I'm interested to hear your outlook on where emergency medicine is going.
Dr. Jim Dahle: I think emergency medicine isn't going anywhere. I mean it's probably the last specialty of medicine that could be outsourced to a foreign country. You know maybe somebody in India is going to be reading our CT scans soon, but I don't think they're going to be taking care of people in the emergency department. So I think there's lots and lots of job security there. In fact, among emergency departments, there's still a huge percentage of emergency medicine jobs that aren't filled by board certified emergency physicians just because there aren't enough board certified emergency physicians to fill them. And so I think the demand for the skills of an emergency physician is going to be there for a long, long time. Now one of the biggest threats to the field is the corporate practice of emergency medicine. There are some large groups that actually trade on the New York Stock Exchange, I mean you can buy shares in them, that basically buy up contracts with hospitals throughout the country, and then own the emergency docs as their employees. And so when the physician generates a fee, they skim off some percentage of it for their profits and their expenses, and then pay the physician a lower rate. And the problem with that is the physician loses control of his practice. He doesn't get to control how many patients per hour he's seeing, he doesn't get to control who his co-workers are, he doesn't get to control how he's paid, and when he's paid, and how vacations are taken, and what the ship differentials are. So I think we're seeing a trend where there are fewer and fewer emergency physicians who actually own their job, and I think that's bad for doctors and bad for patients. But is the actual practice of emergency medicine going anywhere? No I don't think so, it's going to be here for a long time and it's only getting stronger.
Dr. Ryan Gray: You are the creator of the White Coat Investor, and the www.WhiteCoatInvestor.com. Talk to me about your journey into medicine from the mindset of money. At what point did you ever, if you ever, did you look at the cost of going to medical school, and question whether or not it was worth it?
Entering the Air Force and its Help with Tuition
Dr. Jim Dahle: Well I certainly did that. It's kind of funny in retrospect, and everybody listening to this is probably going to get a laugh out of this story. But I came from a family with six kids, my dad was an engineer, my mother was a stay-at-home mom. We were certainly middle class, but not- we weren't poor, we always had food to eat, and we all kind of knew that we were supposed to go to college. That was what our parents instilled in us from a young age. But when it came time to go to college, there were no resources coming from my parents to provide for that education. It was going to be on us. So we could either get scholarships, or we could take loans, or we could work our way through, and so most of us did some combination of that in college. But when it came time to start looking at medical school, I looked at the expense and I really was debt averse. I did not want to have that debt from college. I mean the tuition at my college when I was a premed student- or the tuition at the medical school, the local medical school when I was an undergraduate was $8,000 a year. I mean that was really expensive. And so I couldn't imagine taking on all that debt, and so I actually signed on with the military and they got me for a song. Because obviously even though tuition went up in the few years I was in medical school, I think by the time I got out, in-state tuition was only $12,000 or $13,000 a year. So they got me for a really good deal with the military, and that's how I paid for med school. They gave me a stipend, I think it was $930 a month while I was in medical school, and paid for all my books, and fees, and tuition, and then when I came out of residency I owed them four years of active duty. And you know it's interesting because they call that a scholarship, whereas in reality I'm not sure scholarship was the right word for it.
Dr. Ryan Gray: Indentured servitude.
Dr. Jim Dahle: Not exactly, I mean they get their money back because they just pay you less than you'd make if you were out in the private practice world. And so you get your money earlier in the process, but I don't know that you necessarily come out ahead. I once ran the numbers on my situation and figured I came out about $180,000 behind by going through the military. But these days with tuition being much more expensive, and especially if you're in a specialty that doesn't pay as well, you know you can certainly come out ahead financially by having the military pay rather than taking out loans; especially if you don't have a way to pay off your loans within four years of coming out of residency. Well at least going through the military your loans would be gone after four years. So it's not a bad option but I would not recommend anybody go into the military just for money. The primary reason you go in has to be a desire to serve or you will be miserable in the military, and many physicians in the military are miserable and are counting the days until they can get out.
Dr. Ryan Gray: My sentiments exactly. I don't know if you know, I was an HPSP student myself going through the Air Force. So what branch did you serve through?
Dr. Jim Dahle: I was in the Air Force, I was active duty from 2006 to 2010.
Dr. Ryan Gray: There you go, alright. So two Air Force docs, former Air Force docs. Are you guard or reserves anymore or did you cut all ties?
Dr. Jim Dahle: I'm completely out, cut all ties. You know I don't know that I didn't have any great experiences in the military, because I certainly did and I enjoyed the camaraderie, and I enjoyed being able to practice medicine on four different continents in four years, but if I had to do it again I probably would have chosen the loans.
Dr. Ryan Gray: Interesting. Yeah and I think it'd be interesting, do you have that math anywhere of that kind of breakeven point, of if your loans are X number of dollars, then military would be good for you, or if they're lower then you shouldn't do it?
Dr. Jim Dahle: Well I mean it all varies, right? It's all garbage in, garbage out anytime you do a calculation like that. But the bottom line, if you're going into primary care and you're going to an expensive medical school, you're going to come out ahead financially by going through the military. If you're going to an inexpensive medical school and you're going to be an orthopedist, you're going to come out behind going into the military. And the rest of us are somewhere in the middle, and it may work out okay, it just really depends. Part of the issue though is just the fact that tuition has gone nuts the last few years, and it's unbelievable the debt burden some students are coming out with these days.
Dr. Ryan Gray: Yeah and that equation also needs to take into account whether or not you can actually match in the specialty that you want through the military.
Dr. Jim Dahle: Absolutely. The biggest downside of going through the military is the military match. And it doesn't necessarily have to be a downside, in some specialties it's easier to match in the military match than it is in the regular match, such as dermatology. But it's just different and people need to understand that if you sign up with the military you will be going through the military match, and that means that it might be much harder to match into your chosen specialty. For example emergency medicine is a tough match in the military, lots of people in the military want to go into emergency medicine. And I don't know if that's just because the same people that are adventurous enough to go into the military are adventurous enough to be in emergency medicine, or what the correlation there is. But I think the match rate the year I applied was like 50%, I mean it was terrible. Whereas it was 93% in the civilian match.
Dr. Dahle’s Interest in Finance & Why It’s Important
Dr. Ryan Gray: Wow, big difference.
Dr. Jim Dahle: Yeah.
Dr. Ryan Gray: Where did your interest in finances come from?
Dr. Jim Dahle: It came from being ripped off. I mean seriously I had no interest as an undergrad in business or finance, I took no classes in any of that stuff as an undergraduate. Got into medical school and really didn't have much interest there either. When I came out into residency and started actually earning a paycheck which I thought was a pretty good paycheck. I was getting paid $37,000 a year. And I was feeling pretty good about that and then realized that I just kept getting ripped over and over and over again by financial professionals. You name it, I've been ripped off by it. I've been ripped off by a realtor, mortgage lender, an appraiser, an insurance agent, a financial advisor, and finally I just hit the straw that broke the camel's back and I said, “If I don't start learning about this stuff I'm just going to continue to be taken advantage of throughout my career. So luckily I lived almost next door to a used bookstore, and I started walking over there from time to time and buying financial books and I'd read them. And after about twenty books I realized, ‘Well this stuff isn't that complicated, I can learn this, this is way easier than learning pulmonology or nephrology or anything like that.' And I started participating online with forums and blogs, and after awhile I realized I was doing a lot more teaching than I was learning, and I got sick of typing the same thing over and over again into the Internet, so I figured if I started a blog I could just post a link to my blog where I'd previously addressed that issue. And I realized as well that almost no doctors were getting this training, this financial knowledge as part of their education and training, that literally I knew more than any other doctor I knew about it. And so that was kind of the birth of the White Coat Investor in 2011; I started the website and it just took off immediately because the need was so huge, and it's continued to grow year after year since then, and it's been a pretty exciting journey to watch just how much it's grown and how many people I've been able to help with it.
Dr. Ryan Gray: Yeah that's phenomenal. Why do you think it's so important specifically for physicians to have this knowledge?
Dr. Jim Dahle: Well I think it's important for a few reasons. One, because I want physicians to be financially secure because it makes them better doctors. But they're kind of a set up to be taken advantage of for a few reasons. One, they are very idealistic and trusting of other professionals. Just like when we call up a GI specialist and we know he's going to come in and do the right thing for the patient, we assume every other professional in every other field works the same way. And in financial services, it just doesn't work that way. People don't go into becoming a financial advisor or an insurance agent for the same reason that you went to medical school. There is no essay where they talk about how they just want to help people and how much they love science. It just doesn't exist in financial services. And so you have to really be a lot more skeptical, especially when you realize that you have a target on your back by virtue of your high income when you finish residency, and there are a lot of people that want a piece of that. And so I think that's really the key, is to realize that you've got no training on this stuff, that there are people who literally want to take advantage of you, and that you can't be too trusting of the financial world out there or you will be taken advantage of.
Dr. Ryan Gray: Yeah and I think hopefully it's- with today's day in age with what's in the news, and the fiduciary rules that are being withdrawn, or cancelled, or whatever you want to call it, where these professionals that are supposed to be giving us good advice don't necessarily have to give us good advice for us.
Dr. Jim Dahle: Exactly, why is this even a debate? Shouldn't this be a given that when you're going to somebody and paying them for advice that they're giving you the best possible advice for you? I mean it's ridiculous that this discussion is even taking place.
Dr. Ryan Gray: Yeah. It's kind of silly, but it is what it is, and having that knowledge is what empowers us to move forward.
Key to Paying off Loans in a Short Amount of Time
Dr. Jim Dahle: That's exactly right, and it's becoming more important as downward pressures on salaries in many specialties are occurring, and as upward pressures in medical school tuition are also pressuring doctors. I just cannot believe what some doctors are facing as they start their career as far as debt burdens.
Dr. Ryan Gray: Yeah. You mentioned earlier when you were talking about your kind of thought process now looking back at it of choosing the health profession scholarship for the military, of if you aren't able to pay off your loans within four years of graduating. Talk about that for a minute. I wouldn't know anybody who's able to pay off loans within four years.
Dr. Jim Dahle: Well the key to paying off your student loans in a short time period after residency is to live like a resident while you're making an attending salary. So it works like this, let's say you come out and you're making $250,000, but you're still living that same lifestyle you had when you were making $50,000 as a resident. You'll pay a little more in taxes, but even after tax you're still going to be freeing up a six figure amount that can be used to build wealth. That can be used to max out retirement accounts, it can be used to save up a down payment on your dream home, and it can be used to pay off your student loans. And so if you will maintain that discipline coming out of residency for two to five years after residency, you can have your student loans paid off, you can catch up to your college roommates as far as retirement savings goes, and you can have a down payment saved up for your dream house. But the problem is too many doctors come out of residency and immediately grow into that attending income. They just cannot resist the siren call of that additional income, and before they know it they've grown all the way into their income or even past their income. It seems unbelievable to a premed that this could happen, that someone could spend $300,000 a year, but I assure you it happens all the time to physicians just because they're busy, and they're not paying attention, and they don't deliberately have a financial plan when they come out of residency. You know if you're having trouble living within your means on $200,000 the problem isn't that you don't earn enough, it's a spending problem.
Dr. Ryan Gray: Lifestyle inflation.
Dr. Jim Dahle: Yeah well I mean a little bit of lifestyle inflation is fine, it's the lifestyle explosion upon coming out of residency that you've got to avoid.
Dr. Ryan Gray: The lifestyle big bang.
Dr. Jim Dahle: Exactly, I mean even if you want to increase your lifestyle from $50,000 a year to $75,000 a year, I mean that's a 50% raise, that would be huge in Corporate America. But what you can't do is go from $50,000 a year to $200,000 a year and expect to get those loans paid off anytime soon.
Dr. Ryan Gray: Yeah. Do you think- what do you think causes that desire? So talking to a premed student right now, how would you instruct him or her to prevent those desires, and that kind of pull to have that lifestyle inflation or explosion?
Dr. Jim Dahle: Well I think you've got to realize that it's totally natural, and that if you don't do anything, that's what's going to happen. And the other key I think is to literally have a written plan, even if it's one page, but a written plan of what you're going to do with your first twelve months of attending paychecks before you ever walk out of residency. Because the problem is by the time most docs graduate from residency, they've got two car payments and a mortgage that can only be paid on an attending's salary. Before they even have earned a single paycheck. There are banks that will give you a doctor mortgage without you even showing proof of income, all you have to have is a contract. And so before you ever start making the income you've already got it spent. And so I think the key is just to have that written plan ready to go when you become an attending. Because the secret isn't to pinch a few pennies as a resident, it might not even be pinching a few pennies as a medical student to keep your debt levels down, the key is what you do with those first few years of attending paychecks.
Dr. Ryan Gray: I like it. I don't think I've ever heard of it in those terms, but it's easy for me to think of because I'm a big sports guy, and so you always hear football teams coming out with their first like quarter of plays already set in stone and then they adjust as necessary after that. So it's very similar to what you're talking about. In your mind, knowing that medical school tuition is so much money, what do you say to a premed student to reassure him or her that it's okay, or that it will all be okay on the other side? That they'll make enough money to pay it back, and they'll be living a lifestyle that is okay at least for awhile?
Advice to Students on Borrowing Money
Dr. Jim Dahle: Well I think it's important not to give them false reassurance to start with. I think probably somewhere around 10% to 25% of physicians are not okay. They really aren't. They come out of medical school owing $400,000 and they take a job paying $180,000. And the fact remains that if they want to get rid of that debt anytime soon, they're basically going to be living a lifestyle similar to what they did as a resident for quite a long time. And you know I'm starting to see people having really outrageous amounts of debt. I ran a post on my blog a few weeks ago, and at that time my record for a single medical student's debt upon completion of training was $635,000. Within six hours after running that post, I've heard of someone who had $665,000, someone who had $800,000, someone who had $950,000, and somebody who had $1.1 million. Now when you're talking about those kinds of extreme debts, an income of $200,000 a year just isn't enough to take care of that. And so I think the key is to not become one of those extreme situations with a very low income and a very high debt load. But the vast majority of doctors are still going to be okay, even racking up the average amount of debt and having an average physician income. My general guideline I give to people is to not borrow more than twice what their gross income will be after residency. So if they're going into family practice and they expect to make $200,000 a year, they've got to keep their debt burden below $400,000 and preferably a lot closer to $200,000. If they get much about there, they're going to have a very hard time paying it off, and it's not going to be anywhere near the lifestyle you thought you were going to have as a physician. But on the other end, I still meet lots and lots of doctors who are coming out, and depending on the specialty might be making $200,000, $300,000, $400,000, and they've got a debt burden of $150,000. They're going to be able to clean that up very, very quickly. And so I think the key is just keep those two factors in mind and not let them get too out of balance. But at the same time I don't think the message can be that you can borrow any amount of money and you make so much money as a physician that you can take care of it later. That just isn't the case and the people who think that and end up going to an expensive medical school in an expensive place to live and pay for their spouse and a couple of kids with loans, and then expect to be able to clear all that debt rapidly upon completion of residency, especially in some of the lower paying fields, that's just not going to work out well for them.
Dr. Ryan Gray: It sounds like a lot of your advice and your information is based on the fact that obviously the goal is to pay down the debt as fast as possible, to make the interest as low as possible. What's wrong with coming out with a lot of debt if somebody has to, and going into a family practice field because that's what they're driven to do, and they pay off their loan in thirty years?
Dr. Jim Dahle: Well the main issue with it is that when I came out of medical school in 2003, a lot of my classmates refinanced their loans at 0.9%. I mean literally they were paying it back with dollars that were worth less than the dollars that they had taken the loans out in due to inflation. But medical- well doctors coming out of residency these days, they have loans that are 5.6, 6.8, 8%, 10% I saw the other day from somebody who went to one of the Caribbean medical schools. And when your debt is compounding at those kinds of interest rates, that's likely your best investment. Dragging that sort of a thing out over thirty years is going to turn it into an astronomical sum of money to pay back. And so I think the key is to get your debt paid off quickly, not to drag it out over time because I can assure you that five or ten years out of residency you will not be nearly as excited about practicing medicine as you are as a premedical student. You will start looking at ways in which you can perhaps change your practice, perhaps go part-time, perhaps have more vacation, maybe even retire early, and those sorts of things will be much more important to you then than they are now. But the problem is by borrowing large sums of money now, you're basically stealing money from future you, and future you might not appreciate that so much if he starts having different views on life than what you have.
Dr. Ryan Gray: Future you might have access to a time machine, we don't know where technology is going, so be careful.
Dr. Jim Dahle: That's right, he'll come back and punch you in the nose for borrowing all that money.
Dr. Ryan Gray: Stop doing that, future me.
Dr. Jim Dahle: I think a good case can be made still for paying for medical school education with student loans, but it's got to be coupled with a plan to actually pay off the cost of that education. You're really not done with medical school until you've paid for it, and if you change your mind and decide, ‘This isn't really what I want to do. I want to be a ski instructor, or I want to be a river guide,' you're stuck if you owe $400,000 in student loans. There's nothing else you are trained to do that can pay you enough to pay for the interest on those loans, let alone pay them down, other than practicing medicine. And so having that freedom to do what you want to do is pretty important, and the way to get that is to get those loans paid off before you get used to the income.
Dr. Ryan Gray: And bankruptcy is not a solution because educational loans are not part of a bankruptcy filing.
Dr. Jim Dahle: That's absolutely right, they do not go away. And in fact if you really want to carry them for a long time, you will learn that they garnish social security payments to make your federal student loan payments.
Dr. Ryan Gray: What have you seen, or what is your sense beyond taking out too many loans, or not paying them off and having this lifestyle inflation, what is the biggest mistake that you see physicians making with their money?
Dr. Jim Dahle: Well I think the biggest problem is that they just spend too much of it. They make a lot of other mistakes as well. One of them is not realizing- and this isn't specific to physicians, this is for everybody, but not realizing that we live in a 401k world, and they have a second job, whether they want to learn anything about it or not, as a pension fund manager. Nobody else is going to be managing your retirement funds for you, you've got to do it yourself. So I suggest you learn how to do it relatively early in your career so that you can take advantage of those things. I ran into an emergency physician at a conference a couple of years ago, he was 63 years old and had a net worth of $300,000. So after thirty years of physician level paychecks, that was all he had to show for it. And that was just because he'd never learned anything about how to manage money, he never had the discipline to carve out a significant chunk of his income and save up for retirement, and basically it was too late at this point. I mean what do you tell him? At this point he's going to be mostly living on social security despite living on a physician level income for his entire working career.
The Need for Institutions to Provide Financial Training
Dr. Ryan Gray: Where can- actually I want to switch gears. How can we get financial information, financial knowledge, financial teaching into a medical school curriculum? Because we're training people to come out and heal people, and there's all this information out there, but we're also training people that are going to have high incomes as they progress forward in their careers. So I think it should be mandatory to have some sort of financial education while in medical school. How would you pitch that to the ACGME or whoever's- the LCME, the people that are accrediting schools?
Dr. Jim Dahle: Well I haven't tried pitching it to them yet, but I have tried pitching it to the individual schools, and there certainly is some interest in it. I mean when these guys are getting paid $50,000 a year in tuition, I think they can take $100 a student and put it toward a course that will teach them how to manage their future business. Because we're not just training physicians, we're also training businessmen. I mean a medical practice is a business, and if you don't know anything about business, that medical practice may not be able to be around long enough to take care of patients. No margin, no mission. But there is at least one medical school that has successfully incorporated a business of medicine class into its fourth year curriculum. It's an option class at the University of Arkansas where basically the students take- it's an evening class but it's an hour or two once a week in the evening for about three months. And they're taught all this stuff. They're taught about personal finance, and investing, and the business of medicine, and insurance, and how it works, and all those kinds of things, and it's not that hard to implement, and so I would hope to see a lot of other medical schools incorporate that class. But for a class that's optional, I think something like 65% of the students in the class are taking it. So obviously there's a heavy, heavy interest among medical students to get this information early in their career.
Dr. Ryan Gray: Yeah I think that's great, and I'm very excited that it's an SEC school since I'm an SEC grad myself. Even though it's Arkansas, that's okay. Jim, where can people go and find everything that you're doing online?
Dr. Jim Dahle: Well the easiest place to start is at www.WhiteCoatInvestor.com. I have a forum there, I have a blog there, I just started a podcast as we discussed earlier, also I have a book called ‘The White Coat Investor.' But now after I've been doing this for a few years there are some other bloggers out there who are also trying to get information into the hands of doctors on financial topics. And so that's good to see, I'm happy to see it and it's probably more collaborative than competitive for me, but it certainly helps to fulfill my mission to help those who wear the white coat get a fair shake on Wall Street. But that's probably some of the best places. There are some other good Internet forums out there as well. For those interested in real estate investing, Bigger Pockets has a nice forum. For those interested in mutual fund investing, the best forum is probably www.Bogleheads.org. But there's lots of places online. If you just get out there and start learning this stuff you'll be surprised how easy it is to learn, and actually implement yourself without having to pay thousands of dollars a year to a financial advisor.
Words of Wisdom to Premeds
Dr. Ryan Gray: What are your last words of wisdom for the premed staring at their undergrad loans, and looking at what medical school is going to cost, and questioning whether or not it's worth it?
Dr. Jim Dahle: Well it certainly is a wonderful career. I really enjoy taking care of patients. At this point in my career, I'm financially independent and don't have to go to the hospital and take care of patients, but I still do because I love it. What I'd like to see is more doctors practicing medicine because they love it, and not because they have to, and by taking care of your finances early in your career you can be in that position as well, surprisingly early in your career.
Dr. Ryan Gray: Alright again that was Dr. Jim Dahle and he can be found at www.WhiteCoatInvestor.com. We'll have links to everything in our show notes at www.MedicalSchoolHQ.net/223.
I want to take a second and thank the people that have taken the time to leave us a rating and review in iTunes. We have one from Narutorocks! that says, ‘My number one resource. So thankful that I have this podcast to rely on with the many questions I have as a premed.' Thank you for that.
We have another one here from D_from_NYC that says, ‘Awesome and very helpful. All of the podcasts are packed with lots of information drawn from the vast experiences and perspectives of the individuals invited by Dr. Gray, the majority of whom are doctors or med students.' Thank you for that review.
If you'd like to leave us a rating and review, you can do so at www.MedicalSchoolHQ.net/iTunes. We have one more here from chowkapow that says, ‘Inspiring. If you are considering a career change to medicine, this is the podcast for you. MSHQ brings quality stories and concise answers to your questions and doubts.' Thank you for that. Again www.MedicalSchoolHQ.net/iTunes if you would like to leave a rating and review.
I hope you enjoyed today's podcast and I hope that the discussion with Jim will help ease some of your fears with going to medical school, and getting into debt, and on the other side paying off that debt. Yes there are challenges if you allow some of those things to creep up on you, but if you are intentional about everything that you're doing, then you should be okay.
Have a great week and we'll catch you next time here at The Premed Years and Med Ed Media.
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