INTRODUCTION:

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor podcast number 314 – Loving your timeshare with Dr. Cory Fawcett.

It's great having you back with us on the podcast. We love having you, we love doing the podcast, and we hope you enjoy listening to it as much as we do producing it. This podcast is guided by you, what you want to hear about. There's stuff on here that's like, “We hate this, don't tell us that anymore, don't talk about that. There's too much of this.” Let us know. Send us feedback. Now, obviously, if you tell us, “Take all the ads out”, we can't have a podcast. I'm not producing this for free. I got staff, I got to pay them. We're going to have ads. But otherwise, the content you want to hear about is what we're going to talk about. If you want to hear about more basic stuff, ask more basic questions on the Speak Pipe, the whitecoatinvestor.com/speakpipe. If you want to get into the weeds, we're more than willing to do that as well. We'll talk about what you want to talk about. Let us know by email, let us know on the Speak Pipe, and we'll keep bringing you great content for a long time to come.

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Thanks for what you do out there. You might be on your way home, you might be on your way to work. Maybe you have a bad day, maybe somebody died on you. I don't know. Lots of bad things happen in this world, and many of you are on the front lines to watch them, and it can be hard. So, I want to tell you if no one said thanks, thank you for what you do.

Bill Schultheis taught a lesson that I think is important for doctors to know, both in their doctrine and in their finances. He said, “Having the guts to say ‘I don't know’ can be refreshing.” And it's nice to be able to say, “My crystal ball is cloudy. I need a plan that works no matter what happens in the future.” And that's what I advocate that you get here at the White Coat Investor.

Hey, for those of you who aren't aware, we have a student loan advice company. It's called studentloanadvice.com. Very straightforward. And if you need help figuring out what to do with your student loans, you're in a complicated student loan situation. Maybe there's two earners in your family. You're not sure what IDR to be in. One of you is trying to maximize your PSLF or something, you're the perfect person to meet with a student loan consultant on studentloanadvice.com.

And for May, this podcast drops on May 11th, so for this entire month, you get a special benefit. If you sign up for a consult at studentloanadvice.com, you're going to get a signed copy of Financial Boot Camp. It's signed by me, not by your consultant. I wrote the book, so I'm signing the book. But you'll get that sent to you if you book a consult that's scheduled during May. So, check that out at studentloanadvice.com. Besides those student loans coming off at some point this summer, coming off the 0% deal, and you actually got to figure out what to do with them, it's also kind of a disability insurance season. For whatever reason, people buy a lot more disability insurance between April and June than the rest of the year. And so, if you don't have disability insurance you're coming out of residency, you're coming into residency, whatever, you don't have this important insurance in place yet, check out our recommended list, whitecoatinvestor.com/insurance.

All right. I think I've gotten through all the pre-material now, and I'm sorry to pack that all in at one spot. I know you guys don't like that because we get the feedback you don't like that. But I had to do it today because we got this great interview with Cory Fawcett. And it's a controversial subject. Cory is actually a fan of timeshares. I know. What's wrong with him, right? Next, he's going to be coming on and defending whole life insurance or Ponzi schemes or something.

But hear him out. He makes some good points and I think I give him the appropriate pushback he needs at times in the podcast. But this is worth hearing. So, let's get him on the line and do this interview.

GUEST: Dr. Cory Fawcett

Our guest today on the White Coat Investor podcast is none other than Cory Fawcett, MD. And we were just talking. I thought I wasn't going to have to introduce him to you because I was assuming I'd had him on this podcast a couple of times before. But going back through show notes, I don't think he's ever actually been on the podcast.

So, let me tell you a little bit about Cory. He's submitted a number of guest posts to us over the years. He's been a WCICON speaker multiple times. But where you probably know him from the most is from financialsuccessmd.com.

He is also the author of six books now, most of which are titled the Doctors Guide to something. Doctors Guide to Starting Your Practice Right or Eliminating Debt or Smart Career Alternatives in Retirement or Real Estate Investing or Navigating a Financial Crisis. That's not what we're going to be talking about today. We're going to be talking about his sixth book, which is A Guide to Loving Your Timeshare.

Cory is a successful surgeon. He had a full career as a surgeon, and during that career also built up portfolio of self-managed rental apartment buildings. So, he is also a direct real estate investor. He's a big kind of anti-debt proponent and apparently a big proponent of timeshares, which I didn't know until he wrote this book. But Cory, welcome to the White Coat Investor Podcast.

Dr. Cory Fawcett:
Well, thanks for having me. We'll see though if we're done, if I really thank you for having me.

Dr. Jim Dahle:
Yeah, exactly.

Well, as I told you before we started recording, I need to warn the readers here. Most of the time I'm not all that confrontational with guests, but I know Cory well. I know he can take it. And I'm really going to ask him to defend some of the positions he's taken in his book on A Guide to Loving Your Timeshare, which you can pick up, I assume, on Amazon, right?

Dr. Cory Fawcett:
Yes.

Dr. Jim Dahle:
They can certainly get it on your website.

Dr. Cory Fawcett:
Yes.

THE CASE FOR TIMESHARES

Dr. Jim Dahle:
If you're interested in reading more about this. All right. So Cory, timeshares. Almost everybody in the finance space, bloggers, authors, podcasters, whatever, will tell you, don't buy a timeshare. Timeshares are stupid. It's people taking advantage of you. It's a hard sale to a crappy product. It's a product designed to be sold, not bought.

There's entire websites dedicated to people who would like to get out of their timeshare, who would sell their timeshare for a dollar if they can only find somebody to buy it. And yet here you are saying timeshares are a great way to vacation. So, tell us why you feel differently about timeshares than the common wisdom out there about them.

Dr. Cory Fawcett:
Well, it's interesting that you used the word wisdom, when you said that, common wisdom, which is not really what's happening. I've been a timeshare owner and loved it for over 30 years. I've been vacationing. I bought mine at the end of my residency, and I've been vacationing with timeshares ever since and love them. And I hear so many things that are negative, and you just listed a whole bunch of them that you hear all the time.

And many of the things when I hear people say them aren't even correct. And I kept saying, “Well, why would they say that? Don't they know better? Don't they know?” And it turns out they don't know often. Many of the people who make these kinds of statements haven't ever owned a timeshare. They just heard somebody else make that statement and they're passing it on. And that's been what my experience has been.

There's a chapter in my book when I went around interviewing people at the swimming pool at three timeshares in a row that I went to. And when I interviewed them, I asked every single one of them the question, “Do you feel you got good value for your money when you purchased your timeshare?” I was very surprised that I got a 100% said yes. Not one single person could I find at the timeshare enjoying their time, who thought that it wasn't a good deal for them. And that's been my experience as well.

And so, I kept hearing these people say these things. For example, here's a good one, “Who wants to own somewhere where you have to go back to the same location every year for the rest of your life?”

Well, that's not even true. I've had my timeshare for 30 years. I've never vacationed at the timeshare I own. That's the most expensive way to use your timeshare is to go to the one you own. So, I don't do that. I'm kind of timeshare hacking and figuring out the ways that I can get the most out of it. But I kept hearing this over and over and I kept saying to myself, “Yeah, but that's not true. That's not true.”

And then I thought about that book, The Lorax. You read the Lorax, Dr. Seuss? They're chopping down all the trees and he stands up and says, “Yeah, but who will speak for the trees?” And I kind of thought that about the timeshare. Well, no one's speaking for the timeshares. And so, I decided I'd write the book.

And as I did the research trying to figure out why all the negativity, I found that there are two recurring problems that happened in the timeshare industry. And I think those are the source of all the problems. And that's the wrong people buy timeshares and they don't come with instructions. So you don't know what to do.

And so, if you are the wrong person, and in the book I list out, “Here are the actual criteria to be a happy timeshare owner”, those are not the criteria that the timeshare salesmen use to sell a timeshare to you. They pretty much, “If you're breathing, you're married, you're over 25, and you could afford the payments, I'm going to sell you a timeshare.” None of those are the right criteria to be a happy timeshare owner.

And if you are a happy timeshare owner, you meet those requirements and you own a timeshare and you learn how to use it, you would find that it's a real bargain. If you don't meet those requirements and you don't bother to learn how to use it, then you're going to be like, I was at a book signing a few months ago and the guy came up and says, “Yeah, I own a timeshare. I've had it for 15 years and I've never used it.” And I'm thinking, “What a waste.” And it's like, “I bought this cool boat and I parked it in my driveway and I've never taken it to the water yet for 15 years.”

And if you do that and you have to keep making payments, you have to keep paying your maintenance fees, there's some ongoing expense with owning it and you never use it, you become very unhappy. And then you begin spreading that rumor about, “Oh, how terrible this is. Look at this. It's costing me all this money and I never get to use it.” Well, whose fault is that?

Dr. Jim Dahle:
Yeah. All right. Let's go back for a minute. You talk about the criteria for being a happy timeshare owner. Who are the people that should buy these, in your opinion?

Dr. Cory Fawcett:
I have seven criteria that I think you should have. The first is you need at least three weeks of vacation a year. Because when you own a timeshare, it's like owning an RV. If you own an RV, you need to use some of your vacation time with your RV.

If you don't have enough vacation, and a lot of people who buy timeshares only have two weeks of vacation. That's a common amount of vacation throughout the country is two weeks.

If you only have two weeks and you're going to go to a family reunion this year and your class reunion, you're going to go visit your parents, you don't have any vacation time left for your timeshare. And so, it didn't get used. You shouldn't have purchased a timeshare because you don't have the bandwidth to fit this into your schedule. So, at least three weeks of vacation, more is better.

You need to have the money to make upscale travel plans. If you are going to use a timeshare and you have a family of five, that means every time you go someplace cool, you need to buy five airplane tickets. You're going to need to rent a big car. You're going to need the time off from work. And when you get there, you are going to do things. If you timeshare in Orlando, you're going to buy six days of Disney tickets.

So, if you don't have the money for that, you're not going to use your timeshare. And a lot of people gripe about that. They thought they were going to do this. The timeshare itself is a good bargain, but they don't have the money for all those other things that are going to happen on that vacation and they want to go camping because it will be a low-cost thing for them. And so, they don't have the income to vacation in the style that you would do when you're using your timeshare.

Now, you don't always do that. I've gone to Las Vegas on a timeshare and I spent the week hiking in the Red Rock Canyon. So, that was a very low-cost use of my timeshare. Not like go to Orlando and go to Disney every day. That's a high-cost use of your timeshare.

Another one is you got to be able to pay cash. Most of the complaints about people who bought timeshares, they bought them on the primary market at a very high price and they had to borrow money to do it.

You already mentioned, I'm an anti-debt guy. You should never be borrowing money to buy luxuries or vacations. You need to be a flexible person. This is a real key to timeshare bliss.

If you are the kind of person who has to vacation on a particular day at a particular location, you're probably going to be unhappy as a timeshare owner. Because if you wanted to go to Lahaina in Hawaii on June, or let's make January 15th, the odds of you finding a spot there are way lower than just getting a hotel. And people think about there's lots of hotels, there's not as many timeshares.

But if instead you said, “Why did I want to go to Lahaina? I wanted a warm tropical beach.” If instead you said, “Where can I go for a warm tropical beach?” You might get 200 options of nice warm tropical beaches all over the world and you could just go to a different one.

Dr. Jim Dahle:
Especially if you can go any week in January.

Dr. Cory Fawcett:
And you can go any week in January. So if you just said, “I want a tropical beach in January”, you'll have lots of choices. If you say, “I want this beach on this day”, your odds of being happy with that choice are going to be lower. So you got to be a flexible traveler. You can't just got to go a particular place. You have to have a style that you like doing upscale vacations. So for instance, take you. You like slot canyon work, okay?

Dr. Jim Dahle:
Work is a good description of what you do once you're in a slot canyon.

Dr. Cory Fawcett:
If that's the kind of vacation you want to do most all the time, then that's not usually going to fit into timeshares. Now, there are some timeshares reasonably close to some slot canyons, but I think you would be unhappy if the bulk of your vacationing wanted to be that, or if the bulk of your vacation was used in your RV. If those are the ways you want a vacation, then you shouldn't be looking at this style. You got to own it for the long haul. This is kind of like buying a house.

Dr. Jim Dahle:
Well, let me pause you before you move on. What style of vacation should you like if you're going to buy a timeshare? You're talking like an all-inclusive resort-style vacation or a sit-on-the-beach style vacation or what exactly do you think should be your ideal vacation to maybe be happy with the timeshare?

Dr. Cory Fawcett:
You should like to go to a resort. That's kind of a cool thing. One of the cool things about the timeshare is you end up getting a nice place with usually lots of activities and amenities at the resort. If that's the kind of thing you like, then you should be pretty good.

But you can go to the beach, you can go to the lake, you can go skiing, you can go to the mountains. They're all over the place. All different kinds. There are all-inclusive places. I don't go to all-inclusive places because I'm kind of a cheapskate. And so, all-inclusive places charge you a big fee to use all their facilities, but I don't use all of their facilities. And so, I feel like I overpaid for the few I use. I'd rather pay for the ones I'm going to use. So I kind of avoid all-inclusive things in general. But that is an option with timeshares. There are options in the all-inclusive.

In fact, you can search for these things. If you want a skiing vacation, you can search for just that. And it'll show you all available ski vacations. If you want to go to a lake, you can do that. If you want a beach. You can get one in downtown San Francisco, downtown New York, New York City. And that's a completely different kind of vacation than going to Hawaii.

But you've got to like kind of going to the resort concept, I think, because that's what you're going to do when you get your timeshare. You're going to kind of be at a resort. And some people just don't go for that. There are camping people. There are people that only like to visit their parents for their vacation.

I just talked to a doctor who never likes to take vacation because they hate that feeling when they get back home and they're not caught up and they got to do all this stuff to catch up. And so, they don't take a vacation. And they said it got so bad that their boss forced the manager to just book a vacation for them every quarter because they weren't taking their vacation time. And that person probably shouldn't own a timeshare. That's not the kind of person that should be here.

Dr. Jim Dahle:
Did we hit all seven of them? How many have we hit now?

Dr. Cory Fawcett:
There's two more. You have to own it for the long haul. Just kind of like buying a house. You shouldn't buy a house if you know you're only going to be there for a couple of years. You want to buy a house when you know you're staying someplace for a while. And this is the same with the timeshare because once you get into it, you need to learn the system and there's a little time to do that.

So, you're going to invest a little bit into this process and you should be there for the long haul. If you just say, “I'm going to own a timeshare for a couple of years, get some cheap vacations, then I'm going to drop it”, don't do that. This is a long-haul move.

And then you need to be your own travel agent. You have to be the kind of person who's willing to look for “Where do I want to go?” and book. If you book your own airplane tickets, if you book your own housing now when you travel, that's consistent with this. You'll like that.

It's kind of like if you are the kind of person who loves travel hacking, credit card hacking, house hacking, that kind of stuff, oh, you'll love timeshares because there's so much hacking you can do in this system.

In fact, when I started writing this book, I learned a whole bunch of hacks that I wasn't using because I interviewed people and they were giving me their hacks. “Oh, I didn't know that one. That's good.” But I already had enough hacks to keep me happy.

Dr. Jim Dahle:
Yeah. That's a good segue. We've talked about the people that it's right for and let's say somebody's been listening to your list of seven items and unlike me, they don't want to spend a whole bunch of their vacations camping or doing slot canyons or the lake or whatever and they're still interested at this point. So, you also said they have to know how to use it. They need the operator's manual. Give us the brief version of the operator's manual. What do you mean by that?

Dr. Cory Fawcett:
Okay. You don't need an operator's manual at all if all you're going to do is stay at the one you bought. If you are going to buy a timeshare, and some people do this, not me, some people do this, they buy a timeshare because there was an exact spot they wanted to vacation all the time. And there's a particular beach and it's nearby their house and they always want to take their family there. They don't need an owner's manual. They just show up their vacation every week and that's that.

But if you want to make trades and go for value and do the hacking, you need to join a group. The trading group I use is called RCI, Resort Clubs International. I think that's what that stands for. There's another one called Interval International. There's over 4,000 timeshares in the system to trade with. And you got to get familiar with all of the buttons on their website that you can poke and all of the ways that your timeshare could be traded.

And so, most people don't learn how to use their VCR or their DVD player. They don't bother to figure out what does this button do. And if you're one of those people, you're going to have a hard time figuring out all the little hacks you can get because you haven't looked at everything on their website.

Basically if you just click around and do the website or you join a timeshare users group or you ask around the people at the pool when you're at a timeshare what do you do, you'll begin to learn there's no actual owner's manual out there. That's the problem.

I guess my book is kind of an owner's manual now. There's two chapters on how to actually use your timeshare and all the hacks you can get. But here's the cool thing about the timeshare. Most people think “If I own a week, that means I can use a week.” And that's not true. Once you own a week, you are a member of the group. It's kind of like being a country club member. Once you're in, you get all of the things that they have at the country club available to you. But if you're not in the country club, you don't get any of those things.

And so, that's what timeshares is mostly like. That's what you got to learn. What are the things that are available to me? And so, I own one week and I trade it for about seven, eight weeks of vacation a year. And so, most of the people who sell the timeshares don't know that you can get more than one week out of your week.

And so, that is kind of a really key thing to know. Because for instance, it used to be your timeshare was a straight-across trade. I own a timeshare, I want a trade it for another one. It was just a straight-across trade. As long as their timeshare was worth a lower ranking than yours, you could have it.

And then about a decade ago, they changed the system and they changed it to give your ranking some points. So, if I got a 35-point timeshare and I trade it for a 10-point timeshare that gives me 25 points of change that I can use again to trade another time.

And so, looking for those bargains can give you lots of extra trades. That's one way to get the trades. And those bargains usually aren't low because it's a low timeshare. I've traded into five-star resorts for three points.

And the reason they're trading them for three points is because they're building a new timeshare there and they want to get people in there to sell them some timeshares. They're putting their price way down to three points to trade into theirs so you'll pick theirs.

And so, you go there for the three points but never go to their meeting. They'll try and get you to come to the meeting for the timeshare, but you're on vacation. So don't go to those meetings, just skip them. Take your phone off the hook in the room because the only people who are going to call you on that phone is the timeshare guy trying to sell you a timeshare and you don't want to talk to him because that's not where you want to buy your timeshare from.

Learning all these hacks, for instance, once you are in the system, you are allowed to rent some excess inventory. And so, you could rent a nice place for $200 a week once you're in the system. Where do those come from? Those are unsold units. Those are units that people traded for something other than a timeshare. You can trade for a cruise. If you did that, then that's an unused timeshare that's sitting there that they could rent out for something. But never trade for a cruise because that's a bad exchange rate.

It's kind of like airline miles. You get your best deal if you trade for a flight, but they'll let you buy a TV with your airline miles, but you don't get a very good trade for that. So, you want to trade for timeshares.

Those are some examples of ways once you're in the system, you're a member and you get all kinds of benefits. And you could literally, with one-week ownership, vacation all year long at timeshares once you're in the system and can play with the hacking.

NEVER BUY A TIMESHARE FROM A SALESMAN

Dr. Jim Dahle:
All right. I think I've given you the opportunity to kind of explain the main ideas here and how to use these. Now, I'm going to ask you to defend them. People go to sell timeshares and discover that they're not worth anywhere near what they paid for them. And you're a successful real estate investor, you understand how this works to actually make money in real estate.

But when I look things up, such as a real famous one is WorldMark, where you buy points and you can use them at WorldMark Resorts all over the place. And you pay $2 or $3 per credit. And if you go to sell them, the resale value is 25 to 40 cents per credit on the resale market. And you look at these other places, people trying to sell their timeshare, they're listed for a dollar. They basically just want you to take over the annual maintenance fees.

Dr. Cory Fawcett:
Right.

Dr. Jim Dahle:
Why would you buy something that is going to crater so much in value?

Dr. Cory Fawcett:
You wouldn't.

Dr. Jim Dahle:
Especially as some sort of a long-term hole.

Dr. Cory Fawcett:
You wouldn't. That's why you never go to those timeshares spiels because you don't buy the one that they're selling there. You buy the one for a dollar. Exactly how bad will that dollar depreciate on you? And when you get done with it, you're going to get rid of it for a dollar. Or maybe you sell it for $2 and you double your money. You don't buy them from the timeshare salesman, you buy them on the secondary market. So, there isn't the issue of “it's expensive.”

When people say, “Oh, well, timeshares are so expensive and there's this huge depreciation.” Well, that's because you don't know how to buy it. If you are buying them at retail price from the salesman, you are getting hosed.

I interviewed a guy when I was doing the book and he said he was in Hawaii listening to a timeshare and they wanted $95,000 for his timeshare and they'd financed it at like, I don't know, 17% interest or something like that. And he pulled out his phone and he says, “Well, yeah, but this same timeshare is for sale on eBay for $2,500. Why would I pay you $95,000 when I can get it for $2,500?”

And that's the right answer. You wouldn't pay $95,000 for that. You should buy the $2,500 one. And then you're not worrying about depreciation. And you got to remember too, timeshares are not real estate investments.

Dr. Jim Dahle:
But you're still in a partnership or a business with people who run their business that way.

Dr. Cory Fawcett:
That's true.

Dr. Jim Dahle:
These are not my favorite folks to be in a partnership with that run that sort of a business, right?

Dr. Cory Fawcett:
That's correct. And that's why you never go meet the partners. It's set up so you could completely stay away from those guys. But here's the thing, everybody who sells stuff sells it at a higher price than it should be. Everybody who buys stuff wants to pay a lower price than the seller is offering. That works in every single sales situation. Every piece of real estate you buy, the seller wants this much and you want to pay this much. It always works that way.

In timeshare sales, they want their profit. At boat sales, they want their profit. Car salesmen, they want their profit. If you know what you're doing buying a car, you can pay a lot less than the car salesman is selling it for. And that's the way you should treat your timeshare. Treat it like a purchase that you're trying to make on the cheap. You want to make a good purchase.

Dr. Jim Dahle:
Yeah. But people are not swooping in there and buying up all these timeshares for a dollar. They stayed there listed for a dollar for a long time.

Dr. Cory Fawcett:
That's true.

GETTING OUT OF A TIMESHARE: 

Dr. Jim Dahle:
And so, there's these people that want out of it. They don't want to pay their annual maintenance fees, but they can't find anyone to buy their timeshare even for a dollar. What's your response to that problem?

Dr. Cory Fawcett:
Most of those people in that situation never should have bought the timeshare in the first place. That's why they're selling it. I ask “Why are you selling this? – Well, because I never use it. – Well, why did you buy it? – Well, I thought I would use it.”

So if you take it back a step and you can prevent the wrong people from buying, we wouldn't have a flood of those things because the right people would own them. But the wrong people do own them.

Dr. Jim Dahle:
But eventually, you got to leave it to your heir. You've got to leave it to your heir eventually.

Dr. Cory Fawcett:
Yeah. My kids are going to love it.

Dr. Jim Dahle:
And they may not want it and they can't unload it either. I had this discussion with my parents recently. They own a few WorldMark points and one of my sisters had some WorldMark points. And they're like, “Who wants these?” And nobody wanted them. They got six kids. None of us wanted these WorldMark points and we had to convince the sister that already had some to take them.

Dr. Cory Fawcett:
But here's the thing, you guys should have taken them. And then all six of you could have been going on a vacation every year for almost nothing because you guys didn't know what you could do with owning that thing.

There's no owner's menu. The people don't know what a gold mine they could hold in their hands. And when they don't know that, the only thing they think “I'm going to have those maintenance fees to pay.” But the thing is, the maintenance fees are cheap. Look at mine. Mine are, I wrote that down here somewhere. $733 a year is my maintenance fee.

Dr. Jim Dahle:
That's for a “one-week timeshare.”

Dr. Cory Fawcett:
One-week timeshare.

Dr. Jim Dahle:
Okay. You say you trade into eight weeks’ worth or whatever. I assume you're paying some other fee when you go, right?

Dr. Cory Fawcett:
Yes, I have the $733 plus I am an RCI member. I have to pay a fee to be part of that. They've got employees and stuff to manage this brokerage of trading timeshares around. That's $80 a year. So my carrying cost just to hold that is $813 a year.

If all I did was go to one timeshare a year, I could stay at a five-star resort for $800 a week. That is a bargain. That's the worst-case scenario for owning my timeshare is it would cost me $800 a week.

Dr. Jim Dahle:
What'd you pay? Did you buy yours on the secondary market or did you learn that lesson?

Dr. Cory Fawcett:
I did not.

Dr. Jim Dahle:
What'd you pay for it originally?

Dr. Cory Fawcett:
I paid $16,000 for mine originally. I didn't know there was a secondary market. This book didn't exist when I was, and there was no internet and I didn't know anything. I got roped in just like most of the people who were unhappy by the $25 free buggy ride. If I just go to this little meeting for a couple of hours, I could get this free buggy ride around New Orleans. I didn't know better. I went for the free buggy ride. I was going to tell them no, but my wife said, “Sounds good to me.” And I couldn't believe it. And we bought it. And we paid full price, which was $16,000 back 30 years ago.

I'm paying $813 a year just to have it. If I make a trade, the trade costs $289. If I made seven trades this year, the total cost of my membership, RCI and my maintenance fee, RCI membership and those trades is $2,836, which comes to $405 per week of vacation. I can stay at a nice resort for less than the cost of a cheap motel. That's a pretty good bargain.

When people are talking about these maintenance fees that are high, it's almost always that's not the issue. The issue is they're not using their timeshare, but they have to pay a maintenance fee. The issue is they're not using it. If you were using it, it's a bargain. If you don't use it, no matter what you paid for it, you're getting screwed.

Dr. Jim Dahle:
Yeah. Well, even if you're just trading it for one week, you're spending $800 a year on a one-week vacation. I can go to Roton, Honduras, and rent a house on the beach for $150 to $200 a night. That's not that much more than $800 a year and I don't have to have any of the hassle…

Dr. Cory Fawcett:
What hassle?

Dr. Jim Dahle:
Having to pay this $16,000 payment up upfront. I can just Airbnb it.

Dr. Cory Fawcett:
I don't have any hassles. Let's Airbnb it. Okay. Let's talk about that. We go to a bunch of financial meetings to talk about all this money you can make on Airbnbs. Well, where are they making that money from? They're making that money from charging it from the people who are staying in it.

I know when I was interviewing people, I met somebody who turns their house into an Airbnb. They get $350 a night for their house. And when their house is renting, they go to the local timeshare that's nearby for $80 a night. They stay $80 a night at their timeshare and it's free to stay at their timeshare if they use their own points.

But if they don't use their points and they just buy some time at their timeshare, once they're in, they rent their house for $350 as an Airbnb and they stay at the timeshare and their timeshare is nicer than the house because it comes with all the amenities. The house is just a house. It doesn't have any activities for the kids. It doesn't have the pool. It doesn't have all those things. And so, there are places you can go cheaper.

You can go to Las Vegas and you can get some greatly subsidized housing and maybe pay $30 a night for a nice place to stay. But you'll still just be staying in a hotel room, which the timeshare is more like a suite.

I love to stay at my timeshare when I go to a meeting. I had to go to a weekend business meeting down in Los Angeles. And I said, “Okay, well what timeshare could I tie into that?” Because I'm already going to get to deduct the trip. So I'm getting there for not free, but for a good price. While I'm there, what if I just stayed in a timeshare for a week?

I looked around, I found a timeshare. I got the timeshare and I stayed there for a week. And it was like a two-bedroom place with a kitchen and fireplace and living room, really nice. It was on a lake and had canoes to just go grab one and go out on the lake. It was a really nice experience for that week.

Then I went to the conference and I stayed in the hotel at the conference, which was a room with a bed and a chair and a bathroom. And that cost me $250 a night, plus $50 a night to park my car at that place. One night there was about what I paid for the entire week at the timeshare just a couple of hours away that was a whole lot nicer experience.

So yes, you can get some cheap places, but usually, your experience isn't going to be as nice as being at a resort. Usually, when you get an Airbnb you just get the place to sleep. You don't get all the things that come with being at a resort. Sometimes you can. And yes, you can find places that are cheap also. But you said, “And you don't have to deal with all the hassle.” I don't really have any hassle to deal with. I heard one person when I was interviewing them at the pool they said, “Timeshares are passive vacation home ownership.” You own a vacation home. You don't have to keep up the pool, you don't have to take care of the hot tub. You don't have to go to the same place every time.

And most of the people that I know who own a vacation home spend half of their vacation fixing stuff at their vacation home when they get there. In fact, they sometimes take tools because they're going to do a particular project when they get there and they kind of blow their vacation working on their vacation home. But when you go to the timeshare, you don't have to do any of that. Somebody else takes care of the pool. Somebody else keeps the hot tub nice. You just show up, enjoy it, and leave.

Dr. Jim Dahle:
Yeah. Well, I think we started that discussion, it went all kinds of good places. But I'm going to bring it back to where we started it, which is this problem of someone who actually wants to get rid of it and can't.

Dr. Cory Fawcett:
Okay. Selling. There's several ways to sell your timeshare. The easiest way is to call the resort and ask them if they'll take it back. Many resorts will just say, sure, I'll take it. And you're done.

Dr. Jim Dahle:
Meaning you're selling it for zero.

Dr. Cory Fawcett:
You're giving it to them. You're giving it to them. But hopefully, you bought it for zero or close to zero. And you've used it for many years and now you're just going to give it away.

Any resort that you own from that is still building, they're interested in getting that back from you because they're going to turn around and try and sell it for $80,000 to somebody. So, they have an incentive to take it back.

If you own at a resort that is not still expanding anymore, they're done with that project, they aren't going to want it back because they don't have a system set up to sell timeshares on site.

There's a reason to, when you bought your timeshare for close to zero, you bought it in a system that is actively growing, not a standalone timeshare. Because the growing ones have that sales force all set up. And so, if you said, “Hey, I don't really want this timeshare anymore, I've used it for 20 years, would you take it back?” Those guys may say, “Yeah, sure, we'll take it back.” And you just give it to them and you're done. So, if you bought it right, you didn't lose anything by just giving it away when you're done. What you had was 20 years of membership in the group.

Another way is ask around. A lot of your friends who own timeshares and you might not know that you have friends that own timeshares because people bash timeshares so much a lot of people don't want to bring it up in conversation.

Dr. Jim Dahle:
Like whole life insurance is that way. They don't want to admit they have it.

Dr. Cory Fawcett:
Or I'm a landlord. If I get into a conversation about, and I say I'm a landlord, oh, man, do I hear all the crap about being a landlord, what that's like. But if I say I'm a doctor, oh, I get all the praise about being a doctor.

So, I don't really want to bring up usually in casual conversation that I'm a landlord or that I own a timeshare because I don't want to listen to all of the stuff they're going to tell me about how horrible that is and how they'd never do it.

You may have friends that have timeshares and you don't know it. And if you find one of those, a lot of those guys would be interested in another week, especially if they haven't read my book because they think they need another week to get another week of vacation. You really only need to own one week. Because once you're in the system, you can game the system for lots of vacation time.

But there are a lot of people who think to have one more week of timeshare, I need to buy one more week of timeshare. And there's a couple of examples in the book where people had found a friend, “Oh, you have a timeshare? I'm wanting to get rid of mine, would you be interested?” And they made the deal for $500. A small token thing to trade it off. You can put an ad in the local paper or something or Craigslist and see if you find somebody that wants that. And then there's some companies that are designed what you just mentioned. You see all these for sale, they're usually at a resale group. That's a harder place to sell because you are one in 1,000 of people who want to sell a timeshare. But there are ways to get rid of it.

But you can't be saying “I paid $80,000 for this, I want to get $70,000 for it.” That's not going to happen. If you made the mistake of paying $80,000 for the timeshare instead of $2,000, you're going to be very unhappy when it comes time to get rid of the timeshare for whatever reason. And there are people who need to get rid of the timeshare. I had a stroke. I'm never going to be traveling again. I don't have any kids to give it to. I'm ready to get rid of it now. It came full cycle. I bought it. I've used it. Now it's time to dispose it. Same happens with a boat or a car or a motorhome. Eventually, you're going to get rid of it.

And there are ways to get rid of it. It's not as easy to get rid of. It's kind of like trying to sell your used car. There's a bit of hassle in getting rid of it and that's going to be part of the deal. Thus, the reason you need to be a long hauler, so you're not going to be getting rid of it for 20, 30 years is the idea. You're going to use this for a long time. And by the time you do get rid of it, you already sucked all the value out of that thing and it's okay to just give it away, especially if you bought it right.

Dr. Jim Dahle:
It's interesting, I saw an expose recently. I don't know if it was a video or an article or what it was, but it talked about all these terrible sales practice to these people selling timeshares for $80,000. They're licensed to lie and they can basically tell you anything they want to get you to sign on the line.

But the other part of the expose was about these timeshare exit folks that take your money to help you get out of a timeshare and then just disappear. Close the company, and run away with your $2,000 or $3,000 you paid them to get out of your timeshare.

Dr. Cory Fawcett:
That's right.

Dr. Jim Dahle:
I'm taking it, you don't think those sorts of companies are worth using to get out of your timeshare?

Dr. Cory Fawcett:
Never, never, never, never use a timeshare exit company. Yes. There was a lawsuit, and I mentioned it in the book and actually detailed what happened there, that a company was sued from timeshare exit company that said, “We give 100% money back guarantee if we don't sell your timeshare for you or get you out of your timeshare.” And they weren't doing things for people and they weren't given the money back. And they lost $3 million in this lawsuit and were told to change their ways.

Timeshare exit companies are the people who call you cold calls and say, “Hey, are you happy with your timeshare?” Because they know most of the people that bought a timeshare didn't qualify to own the timeshare and they're not that happy owning the timeshare and they can get a lot of hits for that.

Never ever sell your timeshare to somebody who called you about it. You want to sell your timeshare with reputable companies and you contacted them and you can check them out on the Better Business Bureau and stuff.

Timeshare exit companies, they're just as shady as the people who were selling it in the first place in telling you things that “I guarantee will get rid of your timeshare in this amount of time.” Or they'll say, “Stop paying your maintenance fees.” Well, if they're telling you to do something unethical in the beginning, you don't want to use that service.

You made an agreement, you'd take this timeshare, you'd use it, you'd pay these fees as long as you had it. That's your agreement. You should honor your agreement. And when somebody comes up and says, “Hey, I can get you out of that agreement”, that's probably not a good thing. I remember a medical deal I had like that where we developed a business. The lawyers said, “Oh, this is ironclad. No problem.” So, one of the guys left and took all of our stuff and started his own. Wait a minute, you can't do that. Then we hired lawyers that said, “Well, we can get him for that.” And he hired a lawyer that says, “Hey, I can get you out of that.” And now we're all paying lawyers to get us, but yet if we go back, we had an agreement.

And the real bottom line problem was there you are not following the deal. This is what we said we would do when we became partners in this. And if you have somebody telling you to do something unethical, like, “Oh, just quit paying the maintenance fees”, that's going to turn out bad for you, not for them. Because you are going to get some sort of a hit for being irresponsible with your money.

It's kind of like, “Oh, you could just quit making your car payments and keep your car.” That's not going to turn out so well for you. But the guy telling you that, no problem for him.

So, just stay away from timeshare exit companies. There is legitimate ways to transfer your ownership to somebody else. Don't go down those roads. A big warning. And I put that in the book too to watch out for that.

Dr. Jim Dahle:
Well, let me see if I can sum up what you're saying here. You're saying if you buy it right, which means a place that can be exchanged as part of a growing network and you don't pay full value for it, you're buying it essentially on the secondary market and you're this type of person that has the flexibility and the funds and the time off to be able to actually use it, that this can work out right for you. What percentage of timeshare purchasers do you think are represented by that ideal?

Dr. Cory Fawcett:
I have no idea how to answer that. I've never taken a poll. But my poll as I walked around the pools for three weeks was, I would've said it's 100% because everybody I talked to loves their timeshare. But I know there's a lot of people at home that's not.

Dr. Jim Dahle:
But how much of that is people trying to justify their decision? They're trying to justify their decision, plus they're only halfway through it. They've never tried to get out of this timeshare either.

Dr. Cory Fawcett:
This is true. And the justifying their decision may be a part of it. But I'm not trying to justify my decision. I love this thing. I'm having a great time with it and I'm teaching my kids how to use it and they get to use it too and it's going to be theirs someday. Even if they each took only one vacation a year, it's a deal for them. So, there is some of that.

Interestingly, I ran into a guy at my timeshare when I was doing those interviews who rented the place. He's not a timeshare owner, he just happened to be at the pool because he got it on hotels.com. Somebody rented out their timeshare week instead of using it. I said, “Well, tell me about your time here. – Oh, this is a great place. I'm paying $319 a night for this place and it's really nice. This is like staying at the presidential suite at a hotel. I love it. This is super.”

And then I told him, “Well, I'm paying $70 a night.” He wasn't as happy. “What do you mean you're paying $70?” Then we talked about it a little bit. As an owner, I'm here $70 a night, but you as a renter are paying $319 a night for the same place.

And so, it doesn't take a whole lot of convincing to convince yourself you did a good thing once you learn how to use the system. If you don't learn how to use the system, you could be one of these people who is pretty unhappy with it. And yeah, you need to convince yourself that what you did was okay.

But a lot of those people have gone through the selling of their timeshare because they own more than one and they've gotten rid of a few of them. And everybody I talked to who had gotten rid of some didn't have any problem getting rid of it. It didn't happen overnight. I recently sold a car, and it took a while to sell the car. It didn't just happen overnight. There's ways to get out of it and it's not that big a deal, but there are lots of people trying to get out of it. That's true. I'd love to have some laws that reigned in those salesmen so they weren't selling this to people who should never have purchased it because you can guarantee they're going to be unhappy.

Dr. Jim Dahle:
But without those people, what you're doing, it may not be possible.

Dr. Cory Fawcett:
That's true. Without people buying new cars, none of us could buy used ones. And without people leasing cars, none of us could get that nice two-year-old car that's only been leased for a couple of years and they turned it back in to get another one. There's always going to be those guys. There will always be people who didn't read the book or didn't know that there is a secondary market.

Dr. Cory Fawcett:
The same thing with paying your taxes. Unless you pay for somebody who knows how to do the stuff, you may be missing a lot of things you could have got, because they hide them buried in a 7,000-page law that it's hard to figure that stuff out. People don't make those things easy for us. And I wish they did. It'd be nice if you didn't have to be in the know to pay the right amount of taxes. It'd be nice if you didn't have to be in the know to get your timeshare correctly.

Dr. Jim Dahle:
Yeah. Well, Cory, you've done a fine job defending your book. For those who are interested in reading more about this, for getting the manual on not only buying correctly, but using correctly your timeshare, check out “A Guide to Loving Your Timeshare by Dr. Cory Fawcett.”

Cory, it has been a pleasure to have you on the podcast. While I'm surprised we've never had you on before, it's been great to have you here. Thank you so much for sharing your wisdom and your experience with the White Coat investors.

Dr. Cory Fawcett:
Thanks for having me. And now you should have me back because then you can say, I've had been there before

Dr. Jim Dahle:
That's a great idea. Thank you, Cory.

All right. I hope you enjoyed that. Cory is fun. I like Cory. I've known Cory for many years. His post career work is not all that dissimilar from what we do here at the White Coat Investor, but he does a good job of it. And so, we like to help him to reach more people when he can, even if he's talking about a controversial subject like timeshares.

Now, I'm not going out to buy a timeshare. Cory’s not convinced me that this is the way I'm going to vacation. But he's also convinced me that this can work for some people. And if you're one of those people, knock yourself out. Buy it on the secondary market. Make sure you pay the right price for it. Make sure you get the right kind of timeshare, and of course, make sure you're actually going to use it and use it in the right way to maximize its benefit. And you too might be one of those people sitting in the pool happy with your timeshare purchase.

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Keep your head up and shoulders back. You've got this, and we can help. We'll see you next time on the White Coat Investor podcast.

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INTRODUCTION:

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 117 – Sleep Doctor pays off a mortgage in two years.

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All right, we got a great guest today who's reached not one but two milestones and stick around afterward. I want to teach you a little bit about 529s and how to use them and what they're good for and when maybe you shouldn't bother. But we'll get to that after the interview. First, let's get Chris on the line.

GUEST INTERVIEW:

Our guest on the Milestones to Millionaire podcast today is Chris. Chris, welcome to the podcast.

Chris:
Thank you very much for having me, Jim.

Dr. Jim Dahle:
All right. Well, we're going to celebrate a couple of milestones that you have accomplished today. Do you want to tell us what those are?

Chris:
Yes. I have one, paid off my mortgage, and two, I'm right at the borderline of crossing into being a millionaire.

Dr. Jim Dahle:
Awesome. That's pretty awesome. Congratulations to you on that. Both of those are impressive feats, and to do them both at once is pretty awesome too. So, tell us a little bit about you. What do you do for a living? How far are you out of training, et cetera?

Chris:
Sure. I now practice just 100% sleep medicine. I originally trained as a psychiatrist and about three and a half years ago just transitioned to just doing sleep. And I've been out of fellowship for around seven years now.

Dr. Jim Dahle:
I'm going to reveal my ignorance here. I didn't know that was a career pathway.

Chris:
Yes.

Dr. Jim Dahle:
I thought sleep docs were like pulmonologists or something. What are all the pathways into sleep medicine? Can I do this as an emergency doc?

Chris:
You could not. There's actually seven main specialties that could do it. Psychiatry, neurology, general medicine, family medicine, pediatrics, ENT and anesthesiology are all the ones.

Dr. Jim Dahle:
Pulmonology isn't even one of them, huh? I didn't even understand an entire subspecialty here.

Chris:
Well, you used to be able to have to do pulmonology, but then they just made it so that as long as you were general internal medicine, you didn't have to. A lot of pulmonologists still go on and do that, but they just don't have to per se.

Dr. Jim Dahle:
Fair enough. So what's your day to day practice like?

Chris:
My practice is pretty nice. I actually work clinic three half days a week and two full days a week for right now. And then the other time is pretty flexible, just reading sleep things. I kind of joke that it's the best part-time job I've ever had that doesn't pay like a part-time job.

Dr. Jim Dahle:
Pretty awesome. How far are you out again?

Chris:
Seven years.

Dr. Jim Dahle:
Seven years. And you've been doing sleep since when?

Chris:
Actually I started as a sleep technologist before I even decided I wanted to go to medical school. But I've been doing a mix of psychiatry and sleep when I graduated. And then this job said, “Hey, would you like to do just sleep?” And I'm like, “That sounds great. I’m never taking call again? I'm all for that.”

Dr. Jim Dahle:
And approximately what have you been making the last few years doing sleep medicine while you've accomplished these two goals?

Chris:
Yeah. Despite COVID, I actually ended up running my hospital's COVID response ambulatory testing center for the first year of the pandemic. But I've been making around like $380,000 to $400,000 pretty consistently.

Dr. Jim Dahle:
With no call, sounds pretty nice.

Chris:
Oh, it’s amazing.

Dr. Jim Dahle:
Okay. So, let's start with the first year goals. Paying off a mortgage. Tell us about your house. Tell us about your mortgage. Tell us about the process of doing this.

Chris:
Yeah, yeah. I guess maybe even going back a little further, I graduated with med student debt. By the time I started paying it back after fellowship, I think I had about $280,000 and started paying that back. I was just upset with it. It was like, “Ugh, I'm going to be paying like $2,000 a month forever, it feels like.”
And then something just switched for me and I was like, “You know what? I'm just going to get rid of this thing. I'm not going to wait for public service loan forgiveness or any of that. I'm just going to get rid of it.” And so, I just started putting all my extra money. First I'd get paid and be, okay, I'm just really going to be like, how much can I put at it?
And so, at times I was putting like $10,000 a month toward my student loans. I paid the initial $280,000 off in two, two and a half years, a little less than two and a half years. And then I was like, “Wow, that feels amazing. I don't have that weight on my back anymore. What if I just kept going with that?” So I did that, saved up a 40% down payment on my house, bought that, and I was like, “Well, what if I keep going?” And so, I bought my house for $530,000 with 40% down payment. And then I paid that off in like less than two years.

Dr. Jim Dahle:
Wow. I thought we paid our mortgage off the house. We paid ours off in about seven years. Two years is lightning.

Chris:
Yeah.

Dr. Jim Dahle:
Yeah. Why? Why did you want to pay it off? A lot of people feel like mortgage debt, relatively low interest. I'm going to be here for a long time. It's deductible debt. Why were you so anxious, fixated, et cetera, on wiping this thing out?

Chris:
For me, it was just like if that was gone and getting into that habit of really kind of like focusing on a goal, if I just got rid of that, then that would free me to just continue doing that to whatever the next goal was. And it just feels really almost weird. I didn't have a mortgage payment for the last two months now, and it's just like, “Wow. I literally have no expenses anymore.”

Dr. Jim Dahle:
Yeah, it's a pretty good feeling. Don't get me wrong. I love being mortgage free. I just don’t know how I could have possibly done it in two years. So, tell us what the month budget look like? You're making $30,000 a month, $7,000 or $8,000 presumably is going to taxes. How'd the rest of it get divided up?

Chris:
Yeah. The way I get paid is I actually get, I want to say I'd probably make about $12,000 or $13,000 depending on when in the year it was, take home per month. And then I get a quarterly bonus based on our views. So I'd basically set aside, okay, I'm going to put X amount on the mortgage. I still have enough to pay my bills and have some fun, but really do that first. And then when I got my quarterly bonus, I would just X percent going towards extra bonus mortgage, payment X is for having fun and X is for fixing up something around the house and things like that.
And it just kept snowballing and as you see, the accrued interest amount going down and down, I don’t know, it just got me my inner nerd jazzed up of like, “Man, this is just going away. It's going away.”

Dr. Jim Dahle:
Well, you could see yourself making progress so quickly when you're making those kinds of payments.

Chris:
Oh yeah.

Dr. Jim Dahle:
Very motivational. Okay. So where do you sit now? You mentioned you're about a millionaire now. I assume you don't have any other debt. You paid off your student loans, you paid off a mortgage.

Chris:
Yes.

Dr. Jim Dahle:
What do your assets look like?

Chris:
Sure.

Dr. Jim Dahle:
And this house is now worth what?

Chris:
Who knows what real estate is actually worth nowadays, but I'm estimating that it's probably worth about $620,000 if I were to sell it. We haven't had this much market drop here compared to a lot of other places, but we'll see. But I would say probably my equity in the house is probably about $620,000, $630,000 or so. I've got about $40,000 liquid. I've got $225,000 in tax advantage retirement and another $80,000 in a brokerage account and additional $25,000 in ambulatory surgery center shares that our hospital group let us buy into.

Dr. Jim Dahle:
So nothing particularly crazy there. Just kind of a standard set of assets that people own.

Chris:
Yes.

Dr. Jim Dahle:
All right. So now what? Now that you don't have… Shoot, doing the math in my head, you might have been putting $150,000 a year or something toward this mortgage. What now with that $150,000? What are you going to do with that now?

Chris:
Yeah. We have a relatively young residency program for internal medicine residents in our hospital. And I'm really looking into buying real estate specifically for renting to them. I know that they're going to be here for three years. They're pretty reliable. I see them around and I would love to secretly kind of mentor them in just going through residency the right way.
I have residents and med students that come and do rotations with me and they always say, you're the first preceptor we've had that's actually talked about money and how this works and things. So, really I think if we can have more debt free, more financially knowledgeable physicians in our community, the community and the physicians both benefit. So, I want to give back.

Dr. Jim Dahle:
When you buy those houses, apartments, whatever they're going to be, you can pay cash for them, you think, or you think get a mortgage and wipe it out fast? What do you think you'll do with them?

Chris:
No, especially with the way interest rates are right now, just save up, buy cash when there's a good deal and just snowball it.

Dr. Jim Dahle:
Well, let's say there's somebody out there that wants to do what you're doing. They're sitting on a mortgage, they'd thinking, “Wow, mortgage free. That'd be awesome.” What advice do you have for them?

Chris:
Well, I think the biggest thing is just like I said, set aside what your goal is first. You spend based on your priorities and if that's really going to be a priority for you, go ahead and set aside that money first. And just honestly having a budget. I'm not totally fixated on the budget where it's like, “Oh no, I've absolutely met this cap. I can't go above that.”
But it's really helpful just to know where your money is going and what you're spending stuff on. There's a lot of stuff where it's like, “Ah, I'm not really using that much. How much is that really helping me achieve my goals? Yeah, let's turn it off for a couple months and or turn down that budget item and just concentrate on whatever your goal is.” And it's been really working for me.

Dr. Jim Dahle:
And what about somebody that's interested in maybe teaching the residents, being an example for the residents or students? What advice do you have for them that you've found seems to be helpful, that works, and what have you learned maybe doesn't work so well?

Chris:
Yeah. I think it's a very weird conversation to have because you think about the curriculum. I'm a big fan of thinking about the hidden curriculum that really I think residents and med students need to get exposed to, which is, yeah, you got to know medicine, you got to know how to do your job, but what is that for really and making sure that while you're going through this training thing, you're not putting yourself into a position that when you do graduate you're going to be miserable because you're just stuck under this mountain of debt or you've spent in really disadvantaged ways.

So, I think just talking with them and saying, “Hey, do you want to have a conversation about money?” I'm very open with it. I'm happy to pull up some things and say, “Hey, this is what I've done well, these are things that I didn't do well. I bought a house during medical school and that was a bad idea.”
The private lending guy will get ahold of you pretty easy when you don't know what the heck's going on. So, I've made mistakes and I'm just like, hey, do you want to learn from my mistakes? Because I'm happy to talk about everything I've done wrong and the things that at least I think I've done right.
I found that both students and residents are really, really hungry for it. You just got to pierce through that weirdness of hey, we're supposed to be talking about healing people and being good doctors, but you've really got to talk about this other stuff too.

Dr. Jim Dahle:
Well, you've done an awful lot right. You've paid off your student loans, you've paid off your mortgage, you've become a millionaire. You're still in an early career. You're only seven years out. Yeah, you've done incredible. So, congratulations to you on your success and thanks so much for coming on the podcast and inspiring others to do the same.

Chris:
My pleasure, Jim. Thanks for having me.

Dr. Jim Dahle:
All right. It's another great episode. Paid off a mortgage in two years. I don't think we've had that one on the podcast before. It's pretty impressive. But it's true. The training wheels for your financial life are paying off those student loans. You come out of med school, you start dedicating a whole bunch of money to wiping out the student loans quickly. $5,000, $8,000, $10,000, $12,000, $15,000 a month that are going towards student loans and then they disappear very quickly when you do that. They're gone in a year, year and a half, two years, two and a half years, something like that. Then what? Then you've got these $10,000 a month with no name on them and you can take some of those and spend them and have a fun time. You can take some of it and redirect it toward investments. That's probably what a lot of people do. Or you can do what Chris did. You can just say I really don't like being in debt. I'd like to be able to have the ability to go work at Walmart and support my family if I wanted to by getting rid of all these fixed expenses I have. And just take that $5,000 or $10,000 or $15,000 a month and put it toward the mortgage. And guess what? The mortgage goes away very quickly too and a couple of years later you're mortgage free. Lots of options in your life that happen when you don't have any payments at all. Something to think about.

FINANCE 101: 529s

Dr. Jim Dahle:
All right. I promised you I was going to tell you a little bit about 529s. And the truth about 529s is 529s are a tax break for the rich. Poor people don't get a lot of benefit from 529s for a few reasons.

One, some states give you a tax deduction and that's helpful. It's true. It is helpful for even low income people, but it's not worth as much. If you're in the 10% or 12% or 22% bracket, that deduction isn't worth as much as it is to me at 37%. But some states give you a credit, so it's fine. That's what happens in our state. It's about the same and that's helpful, but there's no federal tax deduction on this. It's a relatively small deduction. I can put lots and lots of money in there and I get my tax form at the end of the year and it's a few hundred bucks off my state taxes. It's not a huge tax break.

The money grows tax protected. Just like a 401(k), just like a Roth IRA. And when it comes out, as long as it's spent on education, it comes out tax free and that's a benefit. But it's not so much of a benefit compared to a taxable account for a low earner. A low earner is in the 0% long-term capital gains bracket. A low earner is in the 0% qualified dividend bracket. They're not getting a lot of benefit out of this 529. But for those of us who are in the higher brackets, this can be very helpful. You're able to save essentially with tax free money. Your money grows a little bit faster. It comes out tax free and helps you pay for college for the kids.

The other problem is if you're a low earner, you don't have the money to put into a 529. Usually you're barely saving enough for retirement for yourself and you do need to prioritize your retirement over paying for your kids' college. Worst case scenario, they can choose a cheaper college. They can even borrow something for college. You're not going to be able to borrow for your retirement very effectively. And choosing a cheaper retirement has much more drastic consequences than choosing a cheaper college.
So, keep that in mind, who these things are for. They really are a tax break for the rich. And I love the model. I'd like to see it more often in other things, but one of the great things about the United States of America is that we have 50 states, 50 states and a few territories. But with 529s, those states are competing with each other for dollars. And so, over the years that has driven states to provide better and better and better 529s. Lower costs, lower fees, lower expense ratios on the funds, better funds, more index funds.

Now there are five or 10 or 15 of these that are spectacular investment accounts and even the bad ones, they're much more average than they used to be. So, there's lots of great 529s out there. Obviously you want to use the one in your state if you're getting a tax break for it. If you're not, choose one of the really good ones. And the really good ones tend to be Utah, Nevada, Ohio, New York. Those tend to show up on the top five for 529. So, you can just use your state one, you can use your state one for the amount equal to your tax break and then put the rest into Utah or Nevada or whatever. Some states even give you the same break whether you use an out-of-state one or use your own. But you just have to figure that out on a state by state basis. You can do 529 rollovers from one 529 to another. Some states recapture any benefit you got by using their state plan but many of them don't.

A lot of people worry about 529s and what if my kid doesn't go to college? What if my kid gets a scholarship? What if it doesn't cost as much as I think? What if I've now saved gazillions in my 529 and they're not going to need that much for college? I thought they were going to go to medical school but now they're not, et cetera, et cetera.

Well, there's lots of options. One of the best ones is to just change the beneficiary to your grandkid. Now, all of a sudden, you've got an extra 20 or 30 years of compounding in that tax free account and now the money that would've paid for one college education is paying for three. And so, that's a cool thing to do with it.

Another option is to spend it on yourself. You're the owner of a 529, the kid is not the owner. And so, you can go take a cooking class or you can go get a JD after you retire or whatever. You can spend it on your own stuff.

Another option that came about as a result of the Secure Act 2.0 is this 529 to Roth IRA rollover. So, your kid saves money, doesn't spend as much in college and you tell them, “Well, great, you can have that as 529 to Roth IRA rollover money after you leave.” And that's going to be a total of $35,000. We're not entirely sure how that's going to work. But the details will be coming out over the next year or so. But basically instead of them putting $6,500 of their money in, they can put $6,500 from the 529 in as their contribution. I think they still have to have earnings equal to that, but that's another exit plan for a 529 if you happen to get a little bit too much money in there.

But these are a great way to save for college for high earners. It essentially allows you to have some tax-free earnings in there and the more aggressively you invest it, the more tax-free earnings you get out of it. And so, I've taken the perspective with my 529 to invest them very aggressively because I figure what's the downside? Terrible bear market hits when they're 18 like has happened with my oldest. She's 18 now. When she turned 18 and started college in the middle of the 2022 bear market.

And so, values were down somewhat, no big deal. And number one, she's ahead of where she would've been if we invested it very conservatively because of those great returns in 2020 and 2021.

But two, the consequences are not that bad. First of all, she's only taken out a fraction of the money in that 529 this year. Most of it is not going to come out until later years. And second worst case scenario, I could cash flow the expenses she has and save those 529s dollars for a sibling or something like that.

And so, you have lots of options there and I think it's a good idea to invest your 529s pretty aggressively. This idea that it's all got to be in cash by the time they're a freshman or sophomore in high school, I think is bunk. I think you can continue to invest the majority of it into long-term assets into their college years. Because some of that money is not even going to be spent until they're a senior or a medical or dental student. Now that might be five or six years after they start college. So, invest it aggressively, do use it. You do get some asset protection in some states that varies by state. Check out the White Coat Investor's Guide to Asset Protection for details on which states protect and which states don't. But it's worth learning about worth using.

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DISCLAIMER:
The hosts of the White Coat Investor podcast are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.