Transcription – WCI – 363

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 363 – Women and Their Finances with Britt Williams Baker of Dow Janes.

Today's episode is brought to you by SoFi, helping medical professionals like us bank, borrow and invest to achieve financial wellness. SoFi offers up to 4.6% APY on their savings accounts, as well as an investment platform, financial planning and student loan refinancing, featuring an exclusive rate discount for med professionals and $100 a month payments for residents. Check out all that SoFi offers at whitecoatinvestor.com/sofi.

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Welcome back to the White Coat Investor podcast. Today, we're going to be talking with women and about women and their finances, what's unique about their finances and so forth. As part of this discussion, we're going to bring on Britt Baker, Britt Williams Baker, who is one of the founders of Dow Janes, which is a super popular channel for women learning about personal finance and investing.

By the way, for those of you who aren't aware, we have a women-specific community here at WCI. It's called The FEW – Financially Empowered Women. Their next event is coming right up. It's on April 25th at 06:00 PM Mountain. We've got Johanna Turner coming. Those of you on the White Coat Investor Forum probably know Johanna Turner. She's a moderator on there. She's a CPA, does tax prep for docs. Has done some advisory stuff in the past as well, but she's going to be teaching about taxes at that event. Sign up for the FEW at whitecoatinvestor.com/few.

QUOTE OF THE DAY

Let's do our quote of the day before we get our guest on the line as well. This one comes from Robert G. Allen. He said, “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” And that's probably true. You just don't make that much in savings accounts. Very safe, but they don't pay that much.

Thanks to all of you out there in White Coat Investor land. Thanks for being part of the White Coat Investor community. Thanks for doing what you do on your daily job, whether that's medicine or that's something else. It's probably not that easy. And that's why you are a high income professional. Whether that's law or engineering or tech or medicine or dentistry or some sort of allied health profession, you went to school for a long time, you trained for a long time, you worked long hours, and you may have a thankless job, both from your employer as well as those you serve. So if no one else has said thanks today, let me be the first.

INTERVIEW WITH BRITT WILLIAMS BAKER

All right, let's get Britt on the line and have a discussion about this. Stick around afterward. Megan and I are going to talk a little bit about finance for women and some of the things we see as unique there as well.

My guest today on the White Coat Investor podcast is Britt Baker. Britt is a Harvard Business School grad and one of the founders of dowjanes.com, which is a pretty cool company. It's a financial education company. They do some online courses, they do some financial coaching. As you can imagine, with a name like Dow Janes, the target audience is women. And they talk about the things that are unique for women. And a lot of that is what we're going to be talking about today. So welcome to the podcast, Britt.

Britt Williams Baker:
Thanks so much. Good to be here.

Dr. Jim Dahle:
So let's start by letting people get to know you a little bit. Tell us about your upbringing and kind of how it shaped your views on money.

Britt Williams Baker:
Yeah, absolutely. I was one of the lucky ones in that I grew up with parents who taught me about money from a really young age. I know that most people don't learn about money in the household and don't even learn about it in high school. But my parents decided to teach us. When I was seven years old, my dad invented what he called the Daddy Bank, and it was a little notebook where we could invest our allowance and earn compound interest. But we had to calculate it ourselves. From a pretty young age, I learned the value of saving money.

They also had these ways of instilling the value of a dollar. If we wanted to buy a toy, they'd say, “Okay, if you want to buy half, we'll get you the toy.” And so you really had to think about if you wanted it or not. It was this little subtle ways that they taught us, money doesn't grow on trees, you have to work for it, you have to earn it. And so, really taught us both how to value it and appreciate it from a pretty young age.

Dr. Jim Dahle:
You leave home at 18 really with a substantial financial education already. Where did you go from there?

Britt Williams Baker:
Yeah, I went to Georgetown for undergrad and then Harvard Business School for grad school. And then after that, moved back to the Bay Area. I worked in a lot of different jobs. I did management consulting, I worked in startups, I did some freelancing before starting Dow Janes at the end of 2019.

Dr. Jim Dahle:
Dow Janes, as I mentioned, it's a financial education company really, a service company. Tell us about the motivation to get it started. Why did you decide this is a need, this is my ikigai in that famous Japanese phrase, the thing the world needs that I can get paid for, that I love and that I'm good at. Why Dow Janes?

Britt Williams Baker:
Yeah. I didn't start it to be a company in the beginning. It started as a living room meetup. I graduated from business school, came back to the Bay Area, and my girlfriends asked me to teach them how to invest. It was this like “We're in our mid-20s, we think we're supposed to be investing, but we don't exactly know how.” And so, I just created some PowerPoints and taught my friends about diversification and asset allocation and what it means to be invested in the stock market.

And it was this really casual way of learning from each other and learning from your peers. And so it started as this living room women's investing club. The name I took from my mom's investing club that she was part of when I was a little girl. And so, we called ourselves Dow Janes. And we would have these monthly meetups and talk about how to create a budget or how to set financial goals. Just these common financial topics.

And eventually, I realized that people had these big ambitions of wanting to invest and wanting to save for retirement, but they weren't quite there yet. They needed first to save more than they were saving. And so, I backed up, I brought in my friend, Laurie-Anne, to teach a session on budgeting. And we taught this different approach to budgeting called values aligned budgeting, where we flipped it on its head and said this doesn't have to be restrictive, it can be how you share your values in the world. And people loved that. That was kind of the first time that she and I collaborated in the financial space.

And then it was not until late 2019, that enough people had been asking about Dow Janes and about this meetup that I thought we could reach way more people if we brought it online, people outside of the Bay Area. So we launched an online course at the beginning of 2020 right before the pandemic. And that was the initial online version of Dow Janes.

Dr. Jim Dahle:
Yeah, it was a great time to be launching an online course business.

Britt Williams Baker:
Really worked out. Yeah.

Dr. Jim Dahle:
Yeah, all of a sudden, people have all kinds of time, and they're no longer using their money to go travel or go out to shows. So good timing. Nice work. Must have learned something at Harvard Business School there.

Britt Williams Baker:
That was luck.

Dr. Jim Dahle:
Now, here at White Coat Investor, our big focus is on doctors and other high income professionals and their unique financial needs. But if I'm honest, I'll tell you 95% of personal finance is the same for everyone. Now, your focus is on women. What percentage of financial information or financial experience in life do you feel is unique to women?

Britt Williams Baker:
Yeah, I'm with you on that most of it is universal. I would say, in fact, all of the information is universal. And none of the information is unique to one population, but how you apply it can be different depending on the population. Since women live longer, for example, we have to be prepared for having a longer retirement, and that's with more savings. That's something that people often don't think about.

There's also, this isn't unique to women, but I think we're just more aware of it or in touch with it is the emotions that come with dealing with money and our awareness of our relationship with money. And so, that's all genders and all people should be paying attention to it but I think women just tend to pay more attention to it.

But that's something we really address in our program is looking back at the root. What were your examples of money growing up? How did you learn to relate to money and what needs to shift in that realm before you can start shifting the practical pieces?

Dr. Jim Dahle:
If you had to identify the biggest problem, the biggest roadblock for women gaining financial literacy, what would it be?

Britt Williams Baker:
There are a few. It starts young. The first is that parents are more likely to talk to their sons about money than they are their daughters. This starts young with just lack of education. The second is that women learn best in community and from each other. And since money is still so taboo, it's one of those last topics that's really hard to talk about with your friends, with your peers. So, we miss out on that way of learning.

And then I'd say third, there aren't a ton of great relatable teachers that women would want to learn from in the personal finance space. You look at the examples that there are today, it's either stodgy or intimidating or frankly boring. So, that's what Dow Janes does differently. We make it approachable. We make it relatable. We try to make it enjoyable for people to learn about money.

Dr. Jim Dahle:
Yeah, it's certainly a problem. We talk about gender equality in medicine and some specialties, you look at gynecology, you look at pediatrics, and there's a lot more women than men. In medical school classes right now, there are more women than men.

But still, there's some specialties that are very heavy. It's a pretty significant ratio of men to women, and especially orthopedics, emergency medicine, etc. But you go to a financial conference, and it makes even those specialties in medicine look egalitarian. You go to a financial advisor conference, it's like 95% men.

Britt Williams Baker:
Yeah, it's so bad.

Dr. Jim Dahle:
Why do women not go into finance?

Britt Williams Baker:
Well, I think for those, the first reason I mentioned, that people just aren't talking to women about money. It's a boy's thing to talk about your investments and to talk about money. And so, it becomes a lot easier to understand when you're talking about it all the time. Women haven't had the exposure that men get. That's probably the biggest reason.

It's happening more and more. And we've seen that women want to learn from other women. Having women financial advisors and women financial professionals really helps. It's who we want to learn from. But there's few and far between at this point.

Dr. Jim Dahle:
All right, let's talk about stereotypes. I fully admit, these are stereotypes. They don't apply to every person out there. So don't send me hate mail about these next couple of questions. But there's some data out there suggesting that women are better investors than men. I think a lot of it comes down to they're less likely to churn, less likely to gamble with their accounts, look at it more comprehensively, tie it to their values better, etc. Do you believe that, number one? And what else do you think women do better than men in the financial space?

Britt Williams Baker:
Yeah, statistically, that is true. Women, their investment accounts tend to outperform men's and it's exactly what you were saying. It's because we hold on to our investments longer instead of buying and selling them or trading more frequently. And when you hold on to your investments, that tends to be a strategy that outperforms in the long run. So, that is true.

Women tend to do more values aligned investing. They want their money to be used in alignment with how they view the world and the world that they want to see. We are more likely to do values-based investing. And so, you're better at it in that sense.

Dr. Jim Dahle:
Another stereotype is that women are not as good at negotiation as men are when they go in to negotiate their salary for a new job, etc. The men do a lot better at that. Do you think that's true? Or do you think that's simply a byproduct of our society? Our society that expects, that doesn't look at women well when they negotiate, they're not looked at as favorably as men who negotiate. Men who negotiate are looked at as savvy, women who negotiate are looked at as money hungry. What do you think about what do women not do as well as men?

Britt Williams Baker:
Yeah, on the topic of negotiation, from what I have seen, this is definitely due to societal expectations. And the fact that no one teaches women how to negotiate, and that they're seen in a more negative light than men are negotiating. I absolutely agree with this.

What I have seen is that once you teach women how to negotiate, they're incredible. Part of our program is teaching people how to negotiate for raises or to negotiate to lower their bills. And we've seen that once you give them the tools, and once you teach them the idea of having a BATNA, your Best Alternative To a Negotiated Agreement, once they understand those concepts, they're fantastic. We have seen this over and over again that women can make great negotiators.

Dr. Jim Dahle:
Women live longer, you mentioned this earlier. They are likely to marry younger, they're likely to live two, three years longer on average than men are. They're thus more likely to be widows than men are to be widowers. What implications should that have on their financial planning?

Britt Williams Baker:
Yeah. I wish we were more aware of this from the beginning. But what that means is women have to save more for retirement, they're just going to have more years that they're using that money. And then best case, they're learning how to manage money on their own, because they're going to be doing it eventually, we're most likely to be widows. And so, might as well learn how to manage it on our own.

The other piece, I'd say that most people probably aren't talking about as much or are aware of is learning how to find their voice in their relationships when it comes to money so that they can be seen as an equal partner, and know where the money is, know where the money is being used, so that when they do take it over, eventually, it's not a big mystery.

Dr. Jim Dahle:
I think about social security. The general rule for social security is to delay it to 70 if you're in good health, particularly if you're the higher earner in a couple. That seems like particularly good advice for someone that's more likely to live longer. Maybe even women should work a little bit longer than they otherwise would and be more likely to delay social security. Does that make sense to you?

Britt Williams Baker:
It depends on your financial situation if you need to do that. But it's hard to tell people to work longer than they want to. Some people, their bodies are done, they're tired, it's hard to work beyond 65. But if you're doing something that you love, and it's not super taxing, work as long as you can, have an income for as long as you can, because the longer that you have an income, the more you can save, and the more you can put towards investing.

Dr. Jim Dahle:
Now, historically speaking, maybe not as much today, but probably still to some extent today, there are a fair number of women who feel trapped in unhappy marriages for financial reasons. If you were talking with a woman that felt trapped in her marriage, what advice would you have for her?

Britt Williams Baker:
This is such a hard one. I just can't imagine how bad it would feel to both be in an unhappy marriage, but then to also just feel trapped on top of it. So, I just want to first say that I'm sorry to anyone who's in that situation. It's also hard to give advice in this realm, because each person's situation is so unique. They might actually be trapped. And so I don't want to say something that someone's like, “That's not an option for me, or that's insensitive for my situation.”

This is not blanket advice. But I would say like anything else, the more you can create your own outlet, meaning have your own source of income, have your own support systems, that might make it easier to start seeing a way out from that situation.

Dr. Jim Dahle:
Yeah. And certainly, it doesn't hurt to be more financially literate. The more you know about finance, the more options and tools you have to deal with a situation like that.

Britt Williams Baker:
Exactly.

In a lot of couples, one partner is the saver, and one's a spender. In a lot of couples, one's a hobbyist and enthusiast about personal finance, and the other one isn't. I wanted to ask you what advice you have for women, both in the case that they are the more financially interested partner or spouse, and in the case that they're not really interested in this stuff. What advice do you have for those two different types of women?

Britt Williams Baker:
Yeah. For the partner who is more interested in finance, I would just remind you that what we've seen is that an interest in the financial realm or interest in personal finance is contagious. We have a lot of women come to us and they say “I'm so excited to take your course, and I really want to learn about this, but I can't get my husband on board.” And what we say is, just do it. Just do the course, go do your weekly money rituals, spend an hour on your finances each week, and you will see that your partner will start to be interested.

That's what we see, once you start getting into it, checking your financial statements, setting up savings goals, it often brings the other partner, inspires them to get on board. Or in some cases, the partner who's not on board will just hand over household finances to the person who is interested. And that's a place of complete empowerment. Either way, you have a good outcome.

But for the woman who's not interested, the person who's just letting their partner take care of things, what I would say here is do whatever you can to get interested. Because the more you know about family finances, the better. Whether that means having a money management meeting, a family money meeting and say “Will you teach me? I want to know how things are managed.” And because we live longer, because we're more likely to be widows, there's a good chance that we'll be managing things eventually. And so, having a say over what's happening now is going to serve you in the long run.

The other thing I'll just say is that finances and partnership are hard. They're tricky. We have a special course on this called Managing Finances in Partnership. And it's for couples to go through together. One thing that's often overlooked in the dynamic in a marriage and in money is that people are coming in with their own backgrounds and their own money stories. And one person's family may have related to money completely different than the others. And so, they just have different expectations about how money is used and how they talk about money in their relationship.

That's one thing that we start with, is we have people look at the root and share those stories with each other in partnership. What was your earliest memory of money? Or how did your parents deal with finances in your house? And how do you want to do it differently? And when you get to those root causes and the more emotional pieces, it can create more connection for them dealing with how are we paying the bills?

Dr. Jim Dahle:
Yeah, I love that discussion. I think it's even more powerful if you do it before you get married or even before you get engaged.

Britt Williams Baker:
Totally, yeah. The earlier, the better. Just kind of awkward on an early date.

Dr. Jim Dahle:
Let's talk about mom guilt. Modern mom guilt is a very real phenomenon. And many women just feel absolutely torn about it. They want to have it all. They want to be incredible homemakers, raise awesome kids and also change the world through their paid work. But they feel guilty when they're at work that they're not with their kids. And they feel guilty when they're at home that they're not working. It seems to be a much bigger deal for women than it is for men, although I'm sure it goes both ways to some extent. What advice do you have for women who are feeling this? Working women who feel mom guilt.

Britt Williams Baker:
Oh, this one is too real. I think I need advice on this one right now. I am a new mom. My six month old is at home. And I'm really feeling this one. I'll just share a quick story, which is last week my son started crawling and he did it during a baby class that his nanny took him to. And I cried for hours because I wasn't there and I didn't see that moment that he first started crawling. And it really got me. It didn't affect my husband at all. He's like, “There's going to be many firsts and we'll see other things.” But it tore me up.

I'm trying to be soft with myself because I love my work and I feel so much passion about the good we're doing in the world. And even so, it's really hard to leave him all day. The advice I'm trying to give myself is that it's not the hours that I spend with him, but it's how present I can be with him. When I'm with him, giving him my full attention and really savoring those moments at the beginning of the day and the end of the day and all weekend long. But it is hard. I’m not here to tell moms it's any easier than it is because it's brutal.

Dr. Jim Dahle:
Thank you for being vulnerable enough to share that. It's true. You can't be in two places at once. It's hard to do it all. It really is. I've got two jobs, essentially, two part-time jobs and I get torn just between those. And if you add in some community service and you add in some time with my kids, balance is elusive. It's extremely difficult. It's something you'll struggle with your entire life.

Britt Williams Baker:
Yeah.

Dr. Jim Dahle:
All right. Well, a lot of people start this process late. 40s, 50s, 60s. They're like, “Ah, I got to figure out my finances. I got to start saving for retirement.” What advice do you have for late starters? Is it ever too late? Should you do things differently if you're just starting to figure it out in your 40s, 50s and 60s?

Britt Williams Baker:
Yes, yes. We get this question all the time. And I want to say with a resounding, in all caps, IT IS NEVER TOO LATE. And the reason for that is what else are you going to do? If you don't start tackling things now, it's only going to get worse. And so, you have to just start. Whether you're in your 40s or 50s or 60s, now is the time to get your finances handled. Some people say, “When's the best time to start investing? Yesterday.” The sooner, the better.

And if you have less time, if you're starting later, it just means you have to save more. It means you have to do everything you can to save as much as you can because your money doesn't have as long to grow. And that can be hard. You're in your 40s or 50s. You've gotten used to a certain lifestyle. It's hard to make those shifts where you can actually start saving a decent amount of money each month.

I will say the good news is that you have more time than you think. And that's because you don't take all of your money out of your investments the day you retire. You just take enough out to live on that year. And so, especially as women, since we live longer, your money is going to have that many more years to grow. So you have more time than you think. Just start.

Dr. Jim Dahle:
Even if you're 50, you may still be an investor for 40 more years.

Britt Williams Baker:
Totally, exactly.

Dr. Jim Dahle:
Plus starting at 50 and 55, your retirement accounts and your HSA start letting you put more money in there.

Britt Williams Baker:
Yeah, exactly.

Dr. Jim Dahle:
The government wants to help you. They want you to save. They're going to do what they can to help you.

Britt Williams Baker:
Yeah.

Dr. Jim Dahle:
All right. As I thumbed through your material on your site, one of the things I was struck by was just how many people were dealing with credit card debt. And I think about finance 101. If there were one line that's finance 101, it'd be don't carry a balance on a credit card. But 58% of credit card owners are carrying a balance month to month. And it's not because they can't do math. I'm confident that the vast majority of them understand that 29% interest rates are not a good thing. How do we actually get people to stop doing things like that?

Britt Williams Baker:
Well, with the way that things are right now, with the inflation we've had recently, with the astronomical cost of living and underpaid work, it's just harder and harder to make ends meet. I'll just start by saying I get it. As much as you don't want to, sometimes it's your only option is to rely on credit card debt to get by. And it's tough. I know a lot of people, personally, with credit card debt who have feelings of shame about it. And just first want to say that, sometimes it is out of your control that you are in this situation.

To answer your question, the global solution, how do we get people to stop living on credit card debt is to implement a universal basic income. But that is not something I have any control over. So, let's talk about what we can do. What we do in our program is yes, people understand the math, they can do the math, but they don't comprehend the cost, the true cost of carrying a balance on their card. Yes, they maybe understand that it snowballs or that how daily compound interest works against them. Maybe. They see 29% interest, but I don't know if they understand, really, daily compound interest. So some of the things we do are just extrapolate. Like, here's what it actually costs you in dollars.

But the bigger cost, and this is what we really teach, is the opportunity cost. When your money is stuck in debt, it means you can't even start saving yet because your first thing you need to do is pay off that credit card debt. It's the biggest expense in your life. That's the first thing you have to do with any additional savings, which means you can't start investing. You can't start investing until you pay off your debt. And that's what's holding you back. And that's what we try to get people to understand, is that the sooner you can pay off your debt, the sooner your money can start growing and you can get compound interest working for you instead of against you.

Dr. Jim Dahle:
It's good advice. It's so difficult to change behavior. And I don't know how much of it is people really don't learn the difference between needs and wants. And they buy things that they think are needs but are actually wants. I don't know how much of it really is from people who are really their back is against the wall and they do not eat, or they don't take their medications, or they are evicted if they don't put debt on a credit card. And how much of it is people that just “Oh, everybody else is doing this, I'll do it, too. But the only means I have right now are a credit card.” And then once you're in that hole, it's hard to get out. At 19 or 15 or 29%, you've got a serious opponent to your finances at that point.

Britt Williams Baker:
Totally, totally. And I love that you brought up needs and wants and just awareness, because that's a big thing we talk about, too, is bringing more consciousness to your spending. We have people track every dollar that goes in and out of their life early on in our program. And then whether or not it's a need or a want and how they feel about that purchase. Do they feel positive, negative or neutral?

And bringing that level of consciousness to your daily spending instantly changes things for people. They become aware of, “Oh, I went out to brunch with friends because that's just the default. And it was $75. And now I'm looking at that charge and I actually feel negative about that charge. And so, how now do I want to do things differently?” Bringing that level of awareness and consciousness to spending, that's another way that it can really help.

Dr. Jim Dahle:
Now, Britt, you've been learning about finance since you were seven. Then you went to Georgetown, you went to Harvard Business School. Now you teach women how to manage their finances and invest. What does your investment portfolio look like? What are you invest in?

Britt Williams Baker:
Yeah, yeah. I for a long time just followed the index fund approach and had pretty simple investments. Recently, I've spent the last couple of years building a values aligned investment portfolio. It has been really important to me that I feel really good about what my money is being used for. I have a pretty varied portfolio at this point. I have some money in socially responsible ETFs and mutual funds. I have some money in real estate. I have some money in venture capital and small businesses that I believe in and our values align. And then I have some money in community loans.

Dr. Jim Dahle:
So have you completely divested out of a broadly diversified index funds?

Britt Williams Baker:
Yes, I have.

Dr. Jim Dahle:
What do you tell someone who's just getting started? They've never invested a dollar in their life. What should they invest in?

Britt Williams Baker:
I would first open a Roth IRA. I love Roth IRAs. And then buy a target date fund. It's the simplest way to get started. At least there aren't a lot of decisions that have to be made. And I think that's a big piece that holds people back when they're getting invested is just the analysis paralysis. “There are so many options out there. How am I going to choose? How am I going to choose the right option?” And so, buying a target date fund based on the year that they plan to retire is a really simple, set it and forget it approach to investing.

And then for the people who care more about values aligned investing or want to really understand it or get into it, we do have a program called Intentional Investing, where we walk people through how to build an investment portfolio that they feel good about. So, it's a little bit more complicated, but I think it's worth it.

Dr. Jim Dahle:
Where do you send people to? Do you send them to Vanguard or Fidelity or Schwab? Where would you call someone to go open that Roth IRA and get a target fund?

Britt Williams Baker:
Yeah, I can't send anyone anywhere, SEC compliance rules, but I invest at Vanguard, Fidelity also makes it super easy. All the big names, Schwab, Fidelity, Vanguard, they're all great.

Dr. Jim Dahle:
Now Britt, we're coming to the end of our time here. You've got the year of 30,000 or 35,000 high income professionals. What have we not talked about today that you feel like they ought to know about finance and so forth?

Britt Williams Baker:
One thing that didn't come up is, I mean I touched on it briefly here and there, but the idea that how we use money as a way of voting, of voting with your dollar, of using your voice and that the way that you choose to either spend money or invest your money can really be an amplifier of what you stand for in the world. And I think that's something that is often overlooked. People just think about voting on the ballot, but the way that we use money, whether that's to buy organic food or to buy an electric car, whatever it is, can really speak to what you care about, the world you want to see in the future.

Dr. Jim Dahle:
And where can people go to learn more about you and what you're doing?

Britt Williams Baker:
dowjanes.com. On the internet, on Instagram, on YouTube, you'll find us in all those places.

Dr. Jim Dahle:
We've been talking with Britt Williams Baker, co-founder of Dow Janes. We've been talking about some of the things that are unique about women and her work in helping women become financially literate and financially successful. Thank you so much for your time today, Britt.

Britt Williams Baker:
Thank you.

Dr. Jim Dahle:
All right. I hope you enjoyed that interview. It's always good to reach out and think about what's the same and what's different. What's the same for doctors? What's different between doctors and other professions? What's the same as for men as is for women? And the truth is most of it is the same. Let's be honest. 95%-ish, obviously a statistic I just made up off the top of my head like most statistics, but most stuff is the same for everybody. The tax brackets don't change if you're a man or if you're a woman. Your investment doesn't care if you're a man or a woman, if you own that index fund or that investment property or whatever. So, most stuff is going to be the same.

So, let's focus on some of the stuff that's not the same. Life insurance. It costs less for women. It's cheaper for you to buy life insurance. A 20-year-old or 25 or 30-year-old is probably more likely time to be buying life insurance. You can get a million dollars in life insurance as a healthy 30-year-old woman for like $550. If you're a man, that's going to cost you $50 to $100 more a year. And the reason why? You're more likely to die. Yes. It's true.

Disability insurance. Women pay more. They're more likely to be disabled. That's a little bit different than it is for men. And so, that's why women are always trying to get unisex pricing on their disability insurance because it costs more if they have gender-specific pricing. Well, those are a few unique things as well.

We talked about investing prowess. Women are far more likely to leave their investments alone. It's like that infamous study at Fidelity they did that one time. I don't even think it's real. It's probably apocryphal, but they said basically the best investors at Fidelity were the ones who had already died because they didn't mess with their investments. They just let them ride. They bought and they held.

Whether that study actually exists or not, when they have looked at women versus men and their investment performance, the women get performance much more similar to that of the investment. The time-weighted return rather than the dollar-weighted return. I think that's pretty clear out there that women in general, and this is a stereotype, obviously, if men do the same thing women do in general, they're going to get just the same investment returns.

We talked about negotiation. Negotiation is one of those things that's really hard, and I think it's even more nuanced than the discussion we had during the interview. Part of it is discrimination. Women are more likely to be discriminated against by an employer. Now, do all employers discriminate? Of course not. But it's far more likely, if you're going to be discriminated against one gender, there's going to be discrimination against a woman.

They're more likely to feel like they can't or shouldn't negotiate due to societal expectations. They also are more likely to care about stuff other than salary. The benefits are often more important. The time off, the ability to have flexibility, because women are more likely to have child-related duties or duties related to extended members of the family or grandparents. They're much more likely to have those needs come up at work, and so they care more about that sort of stuff during negotiation. As a result, that might be leaving salary on the table in order to get that flexibility.

But hey, Megan's got some thoughts on this. We don't get her on the podcast very often. So let me turn the microphone a bit forward Megan. What do you think, Megan? What do you think men do better than women? What do women do better than men?

Megan:
Okay, Jim, I think that's a good question. And I think it's a tough question because no two people are the same and no two family dynamics are the same. I think it's hard to throw a blanket statement over something like “What are men good at? What are women good at? What are they bad at?” I think that's complicated and tricky.

But what I do think is that men are traditionally more comfortable in the financial space, and maybe that's totally unfair, and men feel just as uncomfortable with their knowledge. But if we're talking about stereotypes, there's more ground to make up to get women feeling like they are comfortable with their financial literacy, that they're comfortable communicating about finances.

And I also really agreed with something that Britt said. She talked about how women like to learn from other women, and that is absolutely true for me. I would actually change that to say that people like learning from people like them. I think for me, it's that I like the feeling that somebody knows what it's like to be female, like me, or in your case, male, like you, or perhaps people who are African American or Latin American. They relate to people who understand a little bit, at least, their life or their way of being.

I prefer female physicians, and I try to find female teachers to educate my daughters in whatever their extracurricular things are that they're doing. I think at least for me, there is a lot of truth to that, that we want to learn from other women. And is that true for other women? I don't really know. Do they also value those things? I'm not sure. Maybe that is something that's different between men and women. Maybe that matters more to women than to men.

But the point of that is that if we want to learn, if as a woman I want to learn finances from other women, there's just a lot less mentors out in that space. There are less women who are financial professionals, whether that's a financial advisor or a tax professional or a financial educator or coach. There are just less people to turn to.

I think it's really important to continue to have these conversations and do what we're doing here at White Coat and do what Britt is doing at Dow Janes and trying to help raise the education and the financial awareness, the financial literacy for women so that there are more of us out there who are confident in what we're doing and in our investing and our financial planning so that we can then teach others and elevate the financial knowledge and financial literacy of everybody.

I am not an expert by any means in finance and I'm certainly not an expert in behavioral finance. But we have talked a lot about this at our house. Just this idea of how much of how we show up in the world as men or as women is inherent to who we are versus how much of that is learned behavior from our upbringing at home or from our cultures.

And again, I keep saying this, but I don't know the answer to that, but I suspect an awful lot of the way we show up in the world has to do with societal expectations or cultural expectations, education we get. I think those cultural and societal norms are really hard to shake. I grew up in a home with very traditional Christian values, stay-at-home mom, working dad, dad was the leader of the home, handled all the finances.

And the early years of my marriage looked really similar to that and we have really drastically changed all of that since then. And it's taken an awful lot of work and time to undo those narratives of what we're supposed to be and what we're supposed to do and who's in charge of what, the messages that we got growing up and it takes a lot of intentionality to change that.

Dr. Jim Dahle:
To be fair, your husband was a personal finance enthusiast, a hobbyist, if ever there was one, and now a professional. We're talking about a dentist who's transitioned to being a financial planner. And so, no surprise that he's going to have more knowledge and interest in this sort of stuff than you given his professional and hobby interests there. But even so, I think it's a truism across much of society.

Megan:
Something else that I've thought about is we have talked about both here today and in my own life that men are “better” at finances or more comfortable with finances. I would imagine that also comes with a lot of pressure and expectation there. If you don't actually feel comfortable with your financial literacy and knowledge that there's probably some guilt and shame, embarrassment, fear baked into that, that you are supposed to be this provider for your family that can go towards the men or the women.

But I think that this notion that we're supposed to be anything is really something that can be internalized by both genders. But as a female, I can say that we definitely internalize who we're supposed to be and can really carry a lot of stories around that, too.

Speaking of guilt, we touched on this in the podcast, that this mom guilt thing, it's like been coined a phrase because it's so common. Mom guilt. And men don't seem to feel this struggle in quite the same way that women do. They love their children and their families. They work incredibly hard for them.

But in my experience, anecdotally, at least, this area is not as big of an issue for them. And I feel pretty lucky on this front because I spent my children's younger years at home with them. I spent better part of a decade at home raising my young children, not having a career at that time. And now that they're a little bit older and back in school, I'm back to work full time. And thanks to you, Jim, I have a really flexible job that allows me time off and flexibility to go on a field trip or help in the classroom. I feel like I need to acknowledge my privilege on that point.

But I think as women, we can be pretty extreme perfectionists. I think we put a lot of weight on our shoulders of what is a “good” mom or a “good” wife, or in my case, a good podcast producer and what that's supposed to look like. I've worked really hard to stop with all of the “should” and to focus more on what I'm grateful for, who I love and how present I am with those people.

And presence can be a super hard thing to come by in our world. And that is not gender-specific and it takes a really intentional effort, I think, to practice presence. But that for me has been the biggest cure for my mom guilt is doing whatever I'm doing with my full attention. When I'm at work, I give it my all, and when I'm home, I'm with my people. And my kids have shown me how resilient they are. I think we layer a lot of our own stories on top of them. And when I give them the opportunity to just be the cool little people that they are and I show up with a lot of presence and love, it really works out for both of us. And so, that has been my practice and my way of battling off all of that.

Another area that I have thought about with differences between men and women, and are there really any, or is it more family dynamics, is spending and saving. When I think about spending, I've been trying to think if women or men are more traditionally the higher spenders. And I think that's a hard question to answer, too, which is not very helpful.

But in my house, I am certainly the spender. But I am also the buyer and what I mean by that is I buy everything for our family. And that seems fairly consistent among my female friends, as well. I make sure that the kids have clothes that fit. I buy the school supplies. I decorate our home so it's nice and comfortable. I make sure the fridge is full and the cats are fed. I'm the one going out and purchasing what it takes for us to live our lives.

And so, I wonder if because I am the one who is doing all of that buying, the necessary buying, if that is more likely to impact me being a spender because I'm out in the world. I am getting access to more stuff and I buy more stuff. So I love buying myself things. I certainly buy myself a lot more stuff than my husband buys. And so, is that because that's my role in our family? Is that because it's my personality? Is it because it's my gender? I don't know. I don't know.

But on the other side of that, I also love a budget. I love watching our investments grow. The more I learn about my finances, the more excited I get about finances. I love that I finally understand the difference between Roth and pre-tax money and knowing what a target date fund is. I think it's drastically oversimplifying it to say that women are good at one thing and men are bad at that same thing because I just don't think it's that simple.

The other thing with spending is I also think that spending feels different if you are the earner. I spent the better part of 10 years taking a break from my career to raise my children and I was a full-time stay-at-home mom to three small daughters and it was grueling. It was awesome and it was hard.

When Ty, my husband, would get home from work, I wanted to get out of there. I wanted to go to dinner or go get drinks or meet a friend somewhere or do absolutely anything but be home for one more minute. And when Ty would get home after a long day of dentistry, he was exhausted and burned out and he wanted to crash on the couch and he wanted to cook at home. So, we had these really different desires around spending and spending time and money.

But on the flip side, because I wasn't working, I felt really guilty spending money. I wanted to spend because it gave me something to do but it was causing me a lot of stress, too. Now that I'm back working full-time, I feel more of the desire to be home, to relax, to stay in because my days are more full and less exhausting from chasing toddlers around. But I also spend a lot more freely. One, because I'm contributing financially. And I think two, more importantly, we have finally put a financial plan in place. So I know that I have that money to spend.

None of this is linear, Jim. There's caveats and asterisks to everything that we're talking about here. And I think that is just part of the trick of life. Are there differences between men and women? Yeah, I think so. I think that's probably a fair thing to say. But as far as finances go, I don't think there's such a thing as like special male finance or female finance. I think there's behavioral finance, which is not necessarily gender specific. I think that's person specific.

And in my experience the bigger thing is that we just need more examples for women to have financial mentors and educators that they can learn from in ways that are comfortable for them. I think that that's true for everyone. Finding people in places to learn and to gain financial confidence in spaces that feel right for them. That's where the magic is going to happen. Could this also be true for men? Absolutely.

In my experience, women love to gather together. We love a community, a book club, a girls night, a weekend away together. We love to be together. I think finding opportunities where we can create and empower each other in the ways that are meaningful, whether that is in a traditionally male space, like on a golf course or more traditionally female space, like in a club or at a community, the better off we will all be.

That's largely why we created the Financially Empowered Women Group, because all of the women here at WCI were like, “This is how we want to learn. This is how we want to do this. We want to see other women who know their stuff and who are going to give us confidence that if they can do it, so can we.” I think there is something to that. But is that the power of community? Is that the power of harnessing what we know about women and how they like to learn and connect? Maybe it's both.

But most importantly is education. We have an incredible community full of incredibly intelligent, hardworking people who have shown that they have the capacity to learn anything that they want to learn. These are smart, high-income professionals who have difficult jobs. And any one of us, of any gender identity, will have the ability to learn how to run our finances and how to be financially successful. And the key is education. I think so much more than something specific to a gender is just getting good education out to people in the ways that will connect with them.

I hope that the work we're doing here at White Coat and the work that Britt is doing at Dow Janes, and there's so many other people out there doing it, as well, I hope that will help bring more women into the financial world, feeling more confident and empowered to take those finances on side by side with their partner. Or if you don't have a partner, as the head of your own life, or as the single parent in your own life. I just love the vision, the idea that we can all do this, and we can find the way that works best for us. And there's a lot of resources out there for us to do it. I hope that the work we're doing here will help empower people to keep doing that.

And for me, I'm really passionate about female education and growth. For me, when I make that statement, I really hope that the work that we're doing here at White Coat will empower women specifically to expand their financial knowledge and their confidence. I know for myself that the more I have expanded that knowledge, the happier I am, the more relaxed I am. It's such a great feeling knowing that everything is going to be okay. I'm going to be able to retire. I can spend the money that I have because everything is taken care of, and every dollar has a job. That has been such a gift. And I think that is true regardless of your gender. Those are my thoughts, Jim. What do you think?

Dr. Jim Dahle:
I think part of it is you become more comfortable from doing. Because Katie and I have had the traditional thing. We work on our budget together, but guess who does the income side? I do the income side. I add up all the income from our investments and the business income and my clinical income and all that sort of stuff. And she adds up the outgo. She adds up where goes to the credit cards, make sure there's nothing that was fraudulent on there and goes through the bank account and adds it all up. And then we put the two together and decide, “Well, how much is left over to be invested or given or whatever for this month?” So, that's very traditional.

But what we've tried to do is actually go and do the chores of each other. For her to actually put in the buy and sell orders in an investment account. For her to actually do the logging in to the account to see where it's at. We don't do as much of that as we should because I'm the spreadsheet guy but I think that's an important thing because if I get hit by a bus, who's managing the money in this family? She needs to know how to do it.

Even for those of you out there that you're not super interested in this, you're not a hobbyist, you're not an enthusiast, somebody just made you listen to this podcast, you got to know how to do the basics. You've got to know how to log into those 401(k)s and IRAs and that taxable account and you got to know about how much you can take out of that account every year and live on and you do have to learn this stuff.

If you need help, one of the greatest things we have out there is our Fire Your Financial Advisor online course. This is designed to be taken together by couples so that you're on the same page financially so you're both financially literate, so that you have a financial plan that you both written together and can help you whether you're a man, woman, whether you're interested, not that interested because everybody needs a written financial plan. I truly believe that you will be more successful if you actually write down what you're going to do with your finances than if you don't.

I hope this episode has been helpful to you. Whether you're a man, whether you're a woman, whatever kind of partner situation you're in, we're grateful for you listening and being a part of this show.

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Don't forget, the Financially Empowered Women event is coming right up April 25th at 06:00 PM. It will be Joanna Turner talking about taxes. Sign up for that at whitecoatinvestor.com/few. Thanks for those of you leaving us five-star reviews and helping spread the word about this podcast. We had a most recent one come in who said, “Thank you. I am so grateful for all this podcast has taught me. I've been listening since I was a residency about five years ago and the impact WCI and Dr. Dahle have made on my personal financial life has been profound. Thank you for all you've done for my family and I.”

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

DISCLAIMER

The hosts of the White Coat Investor 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.

Transcription – MtoM – 166

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 166 – Family docs pay off $705,000 in student loans.

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All right, Megan has asked me to announce the next Financially Empowered Women aka The FEW virtual event. It is April 25th at 6 P.M. Mountain Time. Come learn about taxes. Yes, Joanna Turner, who you may know from many years of service on the WCI Forum, is going to be there teaching about taxes. You can sign up at whitecoatinvestor.com/few.

INTERVIEW

All right, we have got a couple of guests today to bring on the Milestones to Millionaire podcast. They've accomplished a recent milestone. I'm super proud of them, but stick around afterward. We're going to talk about Rich Dad Poor Dad, and I think you'll enjoy that discussion as much as the interview.

Our guests today on the Milestones to Millionaire podcast are Nate and Danielle. Welcome to the podcast, guys.

Danielle:
Thank you.

Nate:
Thanks for having us.

Dr. Jim Dahle:
Tell us what you two do for a living, how far you are out of training, and what part of the country you live in.

Danielle:
I'm a family physician and I had a fellowship in maternal child health and I finished my fellowship in 2019 and we live in Santa Cruz, California.

Nate:
And I'm a family physician and did a fellowship in osteopathic manipulation and neuromusculoskeletal medicine and finished the fellowship in 2018 back east. And we've been living in Santa Cruz now for about three and a half years.

Dr. Jim Dahle:
Okay. And you two have done something pretty remarkable in your first few years out of practice. Tell us what you did.

Nate:
We paid off all our student debt, which was a total of $705,000 four years after Danielle finished her fellowship in 2019.

Dr. Jim Dahle:
Awesome. $705,000. Was it evenly split between the two of you? Were you at the same medical school borrowing the same amount or how'd it work out?

Danielle:
Not even close. I really helped Nate pay off his loans. Nate had about twice as much as me.

Nate:
I went to a private school in California, osteopathic school and Danielle went to a state osteopathic school in Michigan. I had about double the debt as Danielle did when we first started paying it off.

Dr. Jim Dahle:
When did you two meet? What stage of training?

Danielle:
In residency. And we got married during my fellowship.

Nate:
It was full disclosure. She knew that I had debt.

Danielle:
Yeah.

Dr. Jim Dahle:
I want to hear about that conversation. Do you remember back then when you found out he owed twice as much as you did?

Danielle:
I don't. I do remember in the beginning, we're putting in twice as much into his loans. I was working while he was in fellowship. And I was thinking, “Wow, I'm really carrying this family.” And then about a year or two ago, I was like, “Okay, we have to evenly pay these off. I want to see mine go down more.”

Nate:
Yeah. And I feel when I started first reading White Coat probably about five years ago, you had somewhere in there talking about a financial emergency. And I very much felt for the first time after I was in fellowship, like, “Oh my God, I'm in a financial emergency” or “We're in a financial emergency here” because the income to debt ratio is not there. I graduated with $380,000 and swelled to $470,000 during training with interest at 7%. And then I knew that I didn't really want to go for public service loan forgiveness. I felt like I'd really wanted to do private practice. Yeah, we had to get on the same page pretty quickly.

Danielle:
I remember meeting with a financial advisor early on and we told them that plan and they were like, “You need to get something in writing that he'll pay you back if this marriage doesn't work out because you're putting a lot of money into his loans.” It worked out though.

Dr. Jim Dahle:
Yeah. I'm glad it's working out. It's true. There's a little bit of risk there. People are so worried about getting sued for an amount above their policy limits. And that's incredibly rare. In my specialty, it's probably one in 20,000 patients, one in 10,000 patients. Something like that. Just to get sued at all, much less having an above policy limits judgment. And people get divorced all the time. It's actually lower for docs though. Two doc couples have one of the lowest divorce rates in the country. Did you know that? It's only about 10%.

Danielle:
I did not know that.

Dr. Jim Dahle:
Most of the time it does work out. All right. So, this is pretty wild. You guys came out of training, it was a little bit of a different time period. But essentially, what was your net worth when you came out?

Danielle:
Negative $706,000. No, maybe negative $704,000. I think we had about $2,000.

Dr. Jim Dahle:
It was all debt.

Nate:
You had some retirement.

Danielle:
I had been contributing to a Roth since I was really young. My parents started it for me pretty young.

Nate:
We were probably about a half a million, I would say, at least, negative.

Dr. Jim Dahle:
Big hole. Big hole.

Danielle:
Yeah, yeah.

Dr. Jim Dahle:
So you looked at each other, you poured some strong drinks. You looked at each other and you started talking about what you wanted to do about it. Tell us about that conversation.

Nate:
I think we became, possessed is a strong word, but I think we became so obsessed with paying off our debt and trying to be free from needing to make clinical income to live. One of the sample questions I sent was about people saying, “You should invest the difference rather than pay off your debt.” And I think for us, it was a cash flow issue. And so with such a high debt burden, even after refinancing, it's still $6,000, $7,000 a month of a minimum payment. And yes, we maybe would have got a little bit more, maybe somewhere else. But the emotional toll of the debt just drove us. We were calculating every month. “Okay, how much more this month? How much more this month? Okay, we got a little tax return back and we put that in.”

Danielle:
It was really nice to have that conversation though, because we were like, “What are our priorities in life? What are the things that we still are really important to us that we want to do no matter what? And what things can we scale back?”

Nate:
And right off the bat, it was like, “I don't need a $500 car payment.” We sold that car. We bought an old car from our parents. We had no car payments throughout the whole thing. Despite your post on California being a toxic wasteland for physicians, we still moved to California. And I think that highlights one of the big pieces of living, where we live in Santa Cruz is one of the highest rents in the country.

And really for people living in very high cost of living areas is that you have to see your housing or your cost of living as your luxury item. That's what you're spending money on. You don't get a pass on also driving super expensive cars and buying a really over budget house and taking super fancy vacations.

And so for us, we knew obviously our rent is very expensive, but our vacations were always to family. We drove old cars. We wore old clothes. We really prioritize travel to family, good food and living in a beautiful place as our luxury items.

Dr. Jim Dahle:
Preach it. Preach it. I'm even more impressed now that I know you paid off $700,000 in student loans while working as family docs in California. This story is getting better all the time. I really like it. So, how does it feel? That's gone. How do you feel?

Danielle:
It's really good. Really, really good. Yeah, I think both of us use the word liberated when we've talked to people about it. I think it's exciting to think about we have so much more flexibility in our life. And so if we want to switch jobs, we want to try something new or invest in a different way, we're able to do that, which is so exciting.

Nate:
And I have a private practice, solo private practice. And so I actually incorporated this year and there's been a huge delay in payments coming in because of the change in tax ID. That would have been very stressful if we had our debt burden. But now we're able to float that difference easier and make decisions that down the long road will pay off contributing more to our 401(k). Yeah, I think we just feel super liberated. And having a private practice too, there's less pressure in just seeing as many patients as possible and making sure new referrals are coming in, which is great, but it's okay if there's a slow week or it's a slow month because we have that flexibility.

Dr. Jim Dahle:
What was your average household income over the four years you were paying off these student loans?

Danielle:
We both worked in Rhode Island for the first year and I was probably on $400,000. And then we moved here and it stayed around $400,000, $450,000. And then as Nate has built his practice…

Nate:
It's gone up to closer to $650,000, $700,000.

Dr. Jim Dahle:
You're doing pretty good out there. That's pretty awesome. A lot of times people struggle to get their incomes up in California. You're doing pretty darn well.

Nate:
Yeah, thank you. I think the private practice, mostly doing osteopathy and OMM in a high demand area with a couple of really good payers in an area where people want it, has been great.

Danielle:
In our first year here, I work at a community health center and I was doing also a second job at labor and delivery shifts at a hospital. And Nate was building his practice and doing urgent care. And so we worked a lot, but not as much as many.

Nate:
And I think for us too, the other conversation we had was because it was such a daunting number and we felt like it was going to take a while, we still prioritize the things that were really making us happy along the way. We looked at geographic arbitrage, like “Should we move somewhere in the Midwest and just leverage our income and try to get out of this?” For just personal decisions and for personal reasons, we felt like we were thriving every day where we loved living, was a drive for us to continue to do what we're doing. So that was a big piece as well.

Dr. Jim Dahle:
It is daunting to stare down $700,000 in student loans. In retrospect, was it easier or harder to pay it off than you thought it was going to be four years ago?

Danielle:
It was easier, yeah. I think every time we'd make a big loan payment, we would recalculate how quickly we were able to do it. And so, it took a lot of mental energy and time, but in retrospect, it went a lot faster than I was expecting.

Nate:
Yeah, definitely easier. I think being on the same page was 100%. If we weren't on the same page and one of us wanted to travel differently or spend differently, I think that would have been really hard. But we both became so into it and recalculating. And we refinanced outside the government. So we didn't have the student loan pause, but we did take advantage of the low interest rates. When we were paying off our debt for the last probably three years, we were around 2%.

Dr. Jim Dahle:
Yeah, which isn't all that much different from 0% that other people were getting. But how did you feel when that came out? Did you feel like a schmuck when the government said, nevermind?

Danielle:
No, I think we both knew that we wanted the flexibility outside of having these 7% interest loans. I think we were like, “Did we do the right thing?” And then quickly we decided, yes, we did do the right thing. And I'm super happy for people who had that pause because our loans were 7% interest with the government. And so, brutal.

Nate:
For me, I felt like it was just rolling the dice on political policy and just seeing my loan swell every month by $2,000 of interest, where it's like, “I can't rely on the government. Maybe it'll happen, maybe it won't. I'd end up in a million dollars in debt over 10 years trying to just wait.” But I have to say, I felt a little like, “Oh man.”

Dr. Jim Dahle:
All right. Somebody else out there is in the situation you were in four or five years ago. Maybe it's one doc, maybe it's two, maybe they owe half a million dollars or $700,000 or $900,000 and they've just realized listening to this episode that they also have a debt emergency. What advice do you have for them?

Danielle:
I think if you do have a partner or at least a support person, communicating with them about, again, just figuring out what your priorities are in life and making sure that you stick to the things that make you happy. Because if you're not happy, it's really hard to pay off $700,000 in debt. For us, it was just going slow and steady and putting everything extra into our loans.

I had applied to other options for loan repayment as well. And so, making sure you realize your value and finding when you get a new job, asking for loan repayment or what those options are and knowing your value and what your worth is important.

Nate:
Yeah. And I think for me, I'll give you a shout out, Jim, just reading personal finance, reading the White Coat Investor and hearing other stories and just the basics. The principles aren't that hard. And I think the investing world, especially we were targeted a lot for out of residency with financial advisors. But just the basic principles of sticking to a plan we had, we wrote down a financial plan. What other things did we do? We became very uncomfortable with debt. We learned about personal finance, wrote down our priorities.

Danielle:
And we made a list of things early. We didn't have an emergency fund early on. That was a priority. Building our emergency fund while putting in money into our loans and then making sure we have life insurance, things like that. And as soon as those, we were able to check those off, we just went kind of gung ho into the loans.

Nate:
And we maxed out our 401(k) every year.

Danielle:
Yeah.

Dr. Jim Dahle:
Well, congratulations to both of you. You've accomplished something very impressive. You should be proud of yourselves. I have no idea if listening to other people doing this inspired you to do it.

Nate:
A hundred percent.

Dr. Jim Dahle:
But I know your story will inspire somebody else to do it. And so I appreciate you coming on the podcast and sharing your story with others.

Nate:
Thank you.

Danielle:
Thank you. And I should say we also had a baby and have another one on the way. So we were able to build our family during this time too, which is exciting.

Dr. Jim Dahle:
Congratulations. Wealth in more ways than one.

Nate:
Yeah. Thanks.

Danielle:
That’s right.

Dr. Jim Dahle:
All right. Great interview. Great people, super excited for them and their accomplishment. Not only are they making more money now, but they just freed up $6,000 to $10,000 of income. We talked after the interview ended about what they're going to do with it. They're going to Hawaii.

And I encourage you, when you hit milestones, celebrate them. It's important. Not only does it help you reach the next milestone, but it helps you remember that the most important thing in life is not just accumulating a big pile of money. Money is most useful when it actually has a use. So don't be afraid to celebrate when you hit a milestone. Whether that's getting back to broke, whether that's becoming a millionaire, whether that's paying off your car, whatever it is, celebrate it. Then apply to come on the podcast at whitecoatinvestor.com/milestones.

FINANCE 101: RICH DAD POOR DAD

All right, I promised you at the top, we're going to talk about Rich Dad Poor Dad written by Robert Kiyosaki. This is a very popular personal finance book. Many of you have probably read it. It is also a lightning rod. People quote it as their inspiration to become financially successful and other people think it's the worst thing that was ever written.

The main criticisms of Rich Dad Poor Dad are, number one, Kiyosaki's probably a liar. There probably never was a Rich Dad. The people who've looked into it, I think the whole thing's pretty much made up. The second criticism is that Rich Dad Poor Dad really doesn't give very much concrete advice at all. It's mostly just a collection of clichés about money.

And finally, the criticism is that Kiyosaki is just running a cult of personality. What he's done since the book came out, he's kind of now become known as a permabear. He's also always forecasting doom and gloom, which of course, gets quoted in lots of articles and gets his work out there even more. Not surprisingly, he's pretty darn good at marketing.

So here's my advice to you. The criticism is valid. The criticism is probably fair. But like anything in personal finance, including this podcast, take what you find useful and leave the rest. And I think there's some useful stuff in the book. So, let's talk a little bit about why the book can be useful for people.

First of all, the book is pretty good at increasing interest in finance. My mom read Rich Dad Poor Dad. I think I got her to read a really short book a few years later called The Coffeehouse Investor, but that's it. She's read two financial books in her entire life. And she picked this one up on her own, read it and sent a summary out to each of her kids. That says something. I think it's good for people to get interested in finance. I think this book is good at getting people interested in finance.

The second thing you can learn from Kiyosaki is how to market stuff. He's really good at marketing. Look at the tagline on the book. What the rich teach their kids about money that the poor and middle-class do not. That's clickbait. That's clickbait before there was clickbait. A very impressive turn of phrase. Some people with marketing degrees never come up with a line that good in their entire career.

Another key concept in the book is that assets make money. A lot of people think their house is an investment. It's not, it's a liability. Does your house pay you? No, not for the most part. I guess it pays you dividends in the form of saved rent and it you can appreciate over time.

But for the most part, your house costs you money. It's a liability. You have to insure it. You have to maintain it. You have to shovel the driveway. You have to mow the lawn. You have to pay interest on it. You have to pay property taxes on it. It is not an asset. It's a liability. It's a consumption item.

It's important to know the difference between an asset and a liability. An asset is something that pays you. Maybe it's a rental property. Maybe it's a few shares of an exchange traded fund. Maybe it's a TIPS bond. It's something that pays you. It's not something you have to pay for. Your car is not an investment. You do not invest in jewelry for the most part. It's something you pay for. It's not paying you. And so, that's a key concept that I think a lot of people out there just don't understand.

Your stocks, your bonds, your mutual funds, your investment properties, your small businesses, those are assets. They have a positive expected return. So buy those first, become wealthy first, and then you can go buy some consumption items if you like.

Another concept he came up with, and he actually came up with a whole second book all about this concept, is the cash flow quadrant is what he called it. He divided people up into employees. When you have a job, that's the E quadrant. The self-employed, when you own your job, that's the S quadrant. The C quadrant is for corporation where you own a business and others are working for you. And the I quadrant is for investors where money works for you.

Now, granted, there's some overlap between those things, particularly for lots of doctors. But as you go along, each quadrant is better than the next when it comes to tax treatment. But for the most part, that's true. Employees get hosed on taxes. You can't deduct anything. Basically, you're paying payroll taxes on everything you get. You can't write off business expenses, that sort of thing. So, not too awesome. You're stuck with whatever your employer offers you for retirement plans.

As you move to the self-employed quadrant, at least you can get your own retirement plans. You can get a big, nice solo 401(k). You can get a personal defined benefit plan. You can write off your business expenses. Your tax treatment is just a little bit better. You can declare an S corp and have some of your income be distributions and not pay Medicare tax on it. There's some benefits there being self-employed.

With a corporation, the idea here is you now got other people working for you and you're able to scale your own efforts in that respect. And it's pretty cool when you go on vacation and come back wealthier than when you left. The way you do that is by having your money and your people working while you're sleeping.

All right, the final quadrant, of course, is the investor quadrant, whether you're investing in rental properties and you're using depreciation to cover the income or whether you're investing in retirement accounts and don't have to pay any taxes on that money as it grows or whether you're taking advantage of tax loss harvesting and the lower qualified dividend and capital gains rates. There's some nice tax treatment for investors. And I think that's a good concept that Kiyosaki taught me.

Another thing he does is encourage you to be an entrepreneur. Entrepreneurism is not for everybody, let's be honest. But when it works, it works really well. Carving out a chunk of your earned income, investing in a wise way does lead to financial freedom. It takes a little while. It takes some discipline. It takes a little bit of knowledge to do so.

There are other pathways. I think one of the most reliable, quick pathways out of medicine is to build a short-term rental empire. Although a lot of short-term people are moving to midterms these days, but I think that's probably the fastest reliable way to build wealth and be an entrepreneur.

But there are faster ways. If you can come up with your own company. For example, we have an interview coming up with somebody who developed a software company. This is a doc who developed a software company and very quickly scaled it. So, now it's worth millions, just a few years out of residency. That sort of entrepreneurship does work. It's risky. Yes, it doesn't always work, but it can be very, very profitable. And I like that Kiyosaki and Rich Dad Poor Dad encourages you to do that.

Another key concept in there is avoiding the scarcity mindset. This is the idea that the pie is of a limited size, that it can't be grown and that you have to take your bigger chunk of it from somewhere else. But that's not really the way it works. Truly the world is much more aligned with an abundance mindset. You realize the pie can grow. Everyone can become more wealthy and there are no limits on your income.

That's not just being optimistic. I've run into enough people with the scarcity mindset that I think warnings about it are completely appropriate. Imagine a FIRE blogger saving 90% of their income for 10 years to hit the retire button and then live another 60 years washing out their Ziploc bags and reusing their paper towels. At a certain point, it's better to just find a little paid work you actually enjoy and work for a few more years. Seth Godin famously said, “Instead of wondering when your next vacation is, maybe you should set up a life you don't need to escape from.”

All right, the final lesson that I think is worthwhile from Rich Dad Poor Dad is that real estate is a good investment. Now that doesn't mean index funds aren't good investments. It doesn't mean the real estate isn't risky. It doesn't mean that real estate can't be a lot like having a second job. That's all true. But it's still an asset class that I think is worthy of inclusion in a portfolio in some form and in some amount. So, if you're looking for something to add to a stock and bond portfolio, I think the logical next choice is real estate.

Bottom line, there are very few financial books that I regret reading. Just very few. I have read a few that I'm like I can never get that time back. This is not one of them. There's some good stuff in here. It's reasonably entertaining. I think there's some good lessons to learn. You're not going to learn much from it if it's the 25th financial book you've read. But if it's the second or third or fourth, there's probably something useful you're going to get out of it. Take what you find useful, leave the rest and find your own way to financial success.

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All right, we've come to the end of another great Milestones to Millionaire podcast. I'm grateful for you out there. Not only are you guys the guests and the content on this podcast, but you're an inspiration to me. I'm so proud of you and what you're doing out there. Whatever milestone you're working toward, you should be proud of yourself. Celebrate those milestones, set your goals for the next one.

You can do this. Yes, the White Coat Investor is here to help. We'll tell you how to do this, but you still have to do the hard part. And the hard part is actually doing it. But I promise you, thousands, tens of thousands, hundreds of thousands, millions of doctors before you have accomplished what you're trying to do. You can do it too. You are no dumber, you are no lazy than any of them are. They did it, you can do it.

Keep your head up, shoulders back. You've got this. We'll see you next time on the Milestones to Millionaire podcast.

DISCLAIMER

The hosts of the White Coat Investor 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.