From Residency to Riches

The clinic is busy towards the end of the year. Uh it's also you're also trying to figure out all the logistics of the end of the year in terms of the business, the taxes, you know, how to plan for the next year. You know, there's a usually a big tax payment due in January that you're kind of getting ready for, making sure the cash flow is there. >> Uh end of the year is always a busy busy time, you know. >> No, it is, man. For sure. And that's >> for you as a surgeon. Surgeons are busy.

>> Very busy, right? I mean, every patient has met their deductible. And I mean, dude, for the last like six weeks, every patient that comes in is like, "Can you get me in before the end of the year?" It's like every single person wants to have their surgery before the end of the year. I'm like, "I don't have any more O time." >> And you know, when uh when everyone's trying to get into emergency surgery, who else is busy doing cardiac clearances? >> That's right.

>> I've sent you quite a few of them. >> Yeah. Yeah. Uh so I'm busy doing cardiac clearances. People coming in. Oh, I need the surgery before the end of the year. can you uh >> yeah, >> I need a clearance. I'm like, honestly, I'm I'm booked out till December, >> end of December. My I had to open up a extra stress test day >> because uh there weren't any spots for the stress test days I already had. So, I had to open up another day for that. So, you know, it's it's >> it's a good problem to have.

That's good. >> It's a good But, you know, when January comes, the business does dip quite a bit. January and February for me are the slowest in terms of uh in terms of the volume is not the slowest but in terms of the revenue collected and the collections is it's much lower because uh the insuranceances are changing and it's a little slow to pay slow to pay at that time.

So I can I always see the collections and revenues dip January and February and that's why you have to kind of start planning you I wish you know thinking of like you know we just talking about planning for the next year.

Um it's always it's crazy how less of a financial planning and wealth building education we get as uh physicians in medical school and through our training right >> it's like non-existent >> non-existent I mean you know I I I truly believe there should be courses in like high school for financial literacy uh which this is something like I've just started learning whereas I should have learned this like 15 years ago or 2018 yeah No man, I hear you.

It's like financial literacy and personal finance knowledge is it really doesn't exist. I mean, you have to actively seek it out. Even people who have finance degrees, you're learning about finance in terms of the financial services companies and entering that workforce. It's not really geared towards personal finance that that's kind of something you just learn by reading or talking to financial adviserss.

Um and so I I think you know what we had discussed this episode is really going to focus on that is what is relevant personal finance that we have learned on our way and honestly a lot of the mistakes we've made and realize them and what's worked for us and what hasn't and I think this will be really relevant for a lot of the people not just healthcare and doctors it it's anyone who is entering the workforce finally getting a paycheck coming into finally getting some money and what to do with it how to save how to invest how to still have fun and enjoy it um and focus on things like that.

So, I I think it'll be really interesting to talk about just our anecdote, but also kind of what we've learned along the way. Well, I'm excited for this because this is going to be a, you know, part one of two. Like part one will be us amateurs talking about uh, you know, some financial planning and wealth building.

when part two we'll hopefully have a actual professional who will come in and kind of answer some of our questions and I think hopefully answer a lot of questions for the audience as well and people who are listening some of their financial concerns and questions about what what you know what are some things that doctors can do or even just any professional not just doctors I mean you know not all doctors are unique in in their financial there's a lot of people making a lot of good money and you know they need to know what to do with it And you know there's it's funny.

I I read this thing recently. There's two things. There's being rich and being wealthy, right? And being rich is something that you see like the cars you drive and the the clothes you wear and the watches you wear and uh you know the restaurants you eat at and the vacations you take. That's that's that's being rich. But being wealthy is something you don't see. Uh and a lot of people uh may seem rich, but they truly don't have any wealth.

And there's a lot of people that do not seem rich at all and seem very modest and they have tons of wealth and you might be just surprised of how much wealth they have. So wealth is something you do not see. Uh >> totally you know a funny um a funny kind of aside on that topic is you know that website Reddit um that everyone you know you can go on and stuff. They used to have this very popular segment called AMA right ask me anything.

So I remember this exact topic, Mark Cuban, this is a long time ago. He did an AMA and you know he was answering all these questions and stuff and one person asked him just, you know, I think they were just being funny, right? Have you ever gone to a strip club and made it rain? Meaning like taken a bunch of hundred like $1 bills, 100 whatever and just like throwing them, you know? And Mark Cuban's answer was hilarious. He was like, "Someone who thinks they're rich would do that.

Someone who's wealthy like me wouldn't do that because that's just stupid. Where's the return on that? I'm just like that's just hilarious. His mindset, his perspective was very different, but it's kind of what you're saying. It's it's not just for show. It's not just for flash, right? It's you build wealth also as an internal measure of success. It's not for the outside world only. >> I think that's a very a very interesting thing. >> It's an interesting thing and you know u and it's true.

There's there's a lot of people I mean look at there's a lot of very documented uh facts about very wealthy people that live very modest lives. Like look at Warren Buffett, right? >> Yeah. Totally. The Oracle of Omaha >> is an enigma. He truly uh you know lives a very modest life. He has a modest home and uh is not flashy. But he is one of the richest guys in the world. And the way he became a richest guy is he started investing or investing at a very early age, right?

He started investing small amounts of money and playing with the stock market or playing with the you know financial industries since he was 10 years old. And uh slowly that wealth grew and you know um there's a fact that I read that it wasn't until after his 60s that he made $82 billion. Before that his net worth was much much uh lower than that. You know it's a much smaller percentage.

So most people think you know I need to um you know kind of save up and build my wealth till I'm retired and then I can live off. And this guy kept going kept investing. >> Yeah. And >> yeah he never stopped. >> He never stopped. It tells you the power of compounding right.

Compounding is this idea that everyone tells you uh oh yeah compounding but no one explains to you what that is but compounding is pretty much time of money invested growing over time and uh you know with time growing exponentially right it starts off slow and takes time for it to get to a point where it can then truly accelerate and uh the only way you get that is by disciplined uh investment or savings that grow on top of each other and eventually give you the returns that you need to be wealthy >> dude.

Totally. That you know that's something that like I personally you know in hindsight wish I had done differently when I was a bit younger like even you know in residency training. I started residency when I was like 26 years old. Um and you start getting a paycheck. It's not a lot. It's a livable wage. I think you know you could equate it.

They they've done a lot of research on like the amount of hours you put in and the the value is something like between $8 to $10 an hour at least at that time uh based on how much we were working. But that's still not nothing. And to be frank, we were working so much in residency, you really don't have a lot of time to spend the money. So you do have forced savings. It's not a lot of money, but relatively you still have a percentage from your paycheck that you can save and do something with.

And I, you know, I was smart in some things, I think, in terms of savings, but not others. I didn't really do a lot with my paycheck. Whatever was left, I kind of just left it in the bank. And I think a lot of people do that when my mindset was, okay, I just have to focus on blank right now, learning my craft, learning how to be a surgeon, and down the road, I'll figure it out. I'll I'll invest later when I have like what I thought real money, right? All money is real money.

And I I didn't really do much of that. I don't know if you did, Homaya, when you were in training, if you like actively saved or thought about putting aside blank amount each month or different types of investment or retirement accounts. >> Yeah, you know, it wasn't until um much later, you know, when I started early on my uh the goal was to hey, I'm just finally after years of just having to live on loans uh and financial aid, I'm finally starting to make some money.

At that time, that money that I made in residency seemed a good amount. I mean, yeah, I was making what 60 65K uh a year, which is a decent amount. It's more than a lot of people make. So, yeah, you're working a lot and you're working almost 80 hours a week or sometimes more or less, but you're making a decent amount of money, but I did not invest like I should have. You know, a lot of times, a lot of times many people go to um you know, state schools for residency, right?

University of Texas or Baylor College of Medicine. uh and people the nonprofit organizations that have um options of matching your savings as well, right? Uh things like 403b plans or or uh you know 401ks and you know investing in it is the smartest thing to do because you can invest small amount and your employer uh can match those amounts to a certain percentage and help it grow even faster. But a lot of people don't even know. I personally was not even educated on where to put my money.

I mean, I, you know, I I didn't even log into my I didn't even log into my uh accounts to see if I would had the ability to save and have that matched. I was so just focused on, hey, this is the time that I'm going to focus on my residency. Yeah. In the future, I'll make money and then I'll start investing. And when it comes to investing, you you you get so overwhelmed because you don't even know what to invest.

All your life as a 18-year-old, 20-year-old going through med school, you just hear about stocks. People invest in stocks and they make a lot of money, >> but you truly don't understand what that means. And at that time, you don't truly know what it means to have an index fund to to invest in index funds or ETFs or just in the S&P. You know, what truly is the S&P or NASDAQ or or, you know, or Dow Jones? Uh >> yeah.

So, let me let me ask you this, Hay, how old were you when you bought your first stock? >> My first stock was probably I bought that sometime in residency. >> Sometime in residency. Okay. So, you were probably what late mid late 20s? >> Yeah, mid late 20s. Yeah. >> My gosh. I got in the stock game a little earlier.

was I I was a junior in high school when I you know there's not much money you accumulate a few checks from birthdays you know when you're a teenager and that's what I had in my savings account it wasn't much but like it was really my dad that pushed me he was like hey the best way to learn about it is to have some investment in it you know like you have an emotional investment when you put your money in something it's not just the amount and it was nothing big I think the first stock I bought was BP the oil company BP cuz at that time they had just had um like that big oil spill in the Gulf of Mexico and it was like tanking.

So their stock had gone way down. I didn't know anything but I was just like that's bad and everyone says buy low. It can't get much lower than this. So I bought it was pure dumb luck. I mean obviously they went up BP still around but um that was the first foray I had into stocks and investing and stuff.

And you know, the reason I asked you this question was because I think it's very different like investing in the stock market kind of like like for fun and for learning rather than as a like retirement strategy. You know what I mean? Like they're very different things. Um like now after, you know, getting older and having a financial planner, I don't dabble in the stock market as my means of retirement cultivation. Like that's not that would be foolish.

I don't have the time or the acumen to do that. I just kind of play around with it. But it helped me learn a lot about what a stock market is and stuff like that. So that that's why I was curious because I think most people, you know, that go through medical education, residency, and training. They >> for one don't have the time or don't think they have the time to really dabble and play with the market. I think most of them probably are just of that mindset. Well, we'll wait.

We'll figure it out later. >> Yeah. Yeah. And it's important to know, right?

uh at that time when you're when you're that young like you said you you started early learning about stocks for the first introduction I had to kind of investing is everyone was talking about cryptocurrency >> a nice first >> right so I bought my first bitcoin uh uh that like first not my first bitcoin but made an investment into bitcoin around 2017 uh 2018 and put some money in there because I had some extra cash from just not spending it during residency and I put some money in in in in Bitcoin.

Yeah, it paid off over time and it did well, you know, but it was not the smartest thing to do. But what I tell people is, you know, best to have three different buckets, right? >> There's the long-term retirement savings. So, when you have the long-term retirement savings, you think of things like of having a like a Roth IRA or a 401 401k or some kind of regular IRA. And um you know, that's your long-term savings.

And then your middle savings there's some kind of a investment growth account where you it's somewhat liquid um uh and somewhat cash as well available to you to invest or use an emergency fund and then there have some money just to play around with where you put in crypto or you know buy some stocks or just to learn the market and what it means to invest into stocks and that should not be a large amount that should be something you should be willing to lose right it should be a small amount uh but I kind of divide things into three different buckets where I have something longterm that that's what I'm hoping that'll grow over time, build me um you know my retirement savings and you know the wealth and then there's a middle uh portion which is mainly for emergency funds or spending or making investments in the future right and then the fund aspect but do you want to kind of go into u the differences between like Roth IRA and IRA for for people who don't really understand what a 401k is?

Yeah. I mean, so >> Yeah. Yeah. So, all of these like, you know, these numbers like 401k, 403b, all that stuff. It has nothing to do with like 401k, like 401,000. That's not what it is. It's it's just like tax code. And it's just like these numbers have just become a thing. It rolls off your tongue. So, okay, what's in your 401k? That's just the name of the account. Basically, these are just accounts, whether it's a 401k or 403b.

These are like employer sponsored accounts that depending on the company you work for, you know, you have X amount from your paycheck that goes into them and you can determine how much you contribute and then your employer in a lot of settings also will contribute and that's what matching is. And so there's usually a set percentage like up to 3% up to five up to 8% of whatever you contribute your employer will contribute up to that and meaning they'll match it.

Um some companies even have like a multiplier on it that you contribute three your employer will contribute six. It's like a double. That would be awesome. Basically, what that means is you should maximize how much you contribute up to at minimum what your employer contributes because that's free money.

Like if you are contributing 5% of each paycheck and your employer is going to match that, oh my gosh, you're just losing out on an opportunity to get an extra 5% that goes towards your retirement. The the main catch, I guess, on these accounts is that since they are not taxed, you can't I guess you you can't really take money out of them without a penalty until retirement age. You can take money out of it, but then you're going to get a penalty on it.

And so, you know, the biggest benefit is it's a force savings for retirement. And I think that's a really good thing because it's the same thing you mentioned earlier, the compounding and the consistency of it that it goes in every paycheck. You put it on autopilot. You don't even think about it. You don't even see it because it's taken out of your paycheck before it comes to you. Like I I've personally availed that. I use those accounts because for the same reason there's an employer match.

Why wouldn't you do it? Um you're getting you're getting free money from it. It's just >> especially especially if you have an employer match. I mean it's foolish not to do that. It's foolish not to do that. That's true. Not every not every company that you work for will have an employer match, but many many do. A lot of them do. And it's even outside of healthcare.

I mean, like if you work for I don't know an engineering firm, an investment bank, any financial services company, um in retail, like there's there's so many different things that have uh some employer sponsored retirement account and you should contribute to those. Um and they roll over, right? Like if if I switch jobs, you switch if anyone switches their jobs, you don't lose that money. It's not stuck with your employer, that follows you. You can take that and put it into your next job.

So the money doesn't go away. Your account doesn't go away. It doesn't disappear. It's yours. >> It's your money. And you know, it's it's one of those things where a lot of people can even think about these things when they're looking for jobs, right? When you're looking for your first job, your second job coming out of your training or college, see what kind of matching they do for your retirement account. what what are the retirement savings they're offering?

Are they offering a two times uh 2x match or you know uh one to one match for every saving? And that's that means every time you you add a dollar to your account, your employer adds another dollar and that compounds over time. So those 401ks or 403bs that are employer sponsored accounts can grow very aggressively for retirement.

And sometimes um the amount of money you add is very low and as it compounds over time, you know, people can easily have money that they can live off uh a stable income and after they're 59 and a half years old, right? A lot of people do that, right? There's there's a formula where uh if you've accumulated $2 million in your uh retirement accounts at 59 59 and a half years of age when you retire, you can take out $78,000 as a yearly pay just without it getting any lower number, right?

$2 million produces uh I think I forgot exactly $80,000 to 100,000 something like that. Yeah. >> Year for you to live off of. So, uh, a lot of people should avail that and that's again that's that long-term budget, long-term, uh, bucket that you're thinking about and where you should be putting the money that's going to help you in the future in your retirement and it doesn't go away, right?

I mean, it goes on and if if something happens to you before retirement, it does go on um to your next ofkin as well. >> Yeah, for sure. You can you can put dependence in there, too. Another thing to mention I I think that's good to know is a lot of these companies will have a vesting period. Meaning you have to work for blank a number of years before you are so-called fully vested in your own account.

Meaning let's say you enter a job and you start this process, you contribute every month, your employer matches it, blah blah blah. You're getting this extra money into this account from your employer's match and all this and you leave after a year. Um and they will often say in the contract you'll be fully vested after two or after 3 years. So if you don't meet that time limit then all of that money that was contributed is not yours and there will be some stipulation.

Every company is different but potentially you could lose all of that employer match that you were gaining. That's what fully vested means that it's really not all yours without any catch until blank time point.

Uh so that's another thing to consider and that these all of this stuff these are the benefits right when someone talks about a job what are the benefits that comes with this is one of the main benefits is what is the retirement strategy that is offered by your job and how are they going to help you achieve that which tell you talked to me about this so that this is all from like the employed side for you since you aren't employed you own your own and run your own practice how do you go about something like this >> yeah I mean you know there's a few different options And that's kind of another uh and I I'll uh take a little detour and talk about this a little bit, you know, when you're uh coming out of training and um um thinking about long-term um wealth building and you know um how you going to save for retirement and how you going to save for your investments.

Usually the riskiest routes are the ones that pay off the most and provide the most opportunities. And uh and this is a known fact that uh um you know self-employment uh provides the most opportunities for savings uh more faster savings and even uh more chances of tax savings, right? Um and and we know that tax savings and uh is what builds wealth. A lot of times the government has ways to incentivize business owners to uh do certain things like uh have their have their employees do well as well.

So have employees save and that's that's why things like 401k are u you know businesses are tax incentivized uh to match uh for their employers as well employees as well. So for example an employee uh is contributing $1,000 uh to their 401k a year you know and whatever money I contribute to the 401k as a match is a tax deduction for me. That way I'm helping uh you know employee build their wealth as well. I'm saving money on taxes because the government is incentivizing me to do that.

Uh and also uh retaining those employees because if I have better benefits then they're staying with me. Um so you know a lot of times we think of taxation and IRS as someone that's out to get get to us but a lot of times it is the government trying to incentivize us uh to do certain things that will be good for society as a whole. Right?

So, um, you know, as as a business owner, there's a lot of different tax incentives that help you, uh, um, save and build your wealth and, uh, contribute towards your savings. Some of the things you can do, I mean, there's different options, right? So, when you start off at a lower end and as an early small business, there's uh, things like SE IRA, right?

you know, self-employed pension plan or self-employed pension IAS where you can contribute a certain percentage of your W2 towards uh a certain percentage of your yearly income towards that IRA and that saves and grows know and it's a a way to save uh on taxes as well. The government's incentivizing you to save towards that. Then as your business grows, you can add on 401k plan and you know they can offer that to your employees.

Uh and when you offer that to your employees, your employees can start saving and building um their wealth as well. And then there's things like cash balance plans as well where you know there's actually calculations by acturial uh analysts that tell you how much money to contribute towards each employee and you know let that grow. But for me uh you know as a smaller business owner right now I'm focusing more on a SE IRA and 401k.

Um um but you know there's I think there's many ways to do that but in the end uh the opportunities you get uh to build wealth as a self-employed person you don't get that as an employed person a lot of times. I mean what do you >> No that makes sense.

I mean it basically like the ability to use expenses which are real and so like the just to clarify for everyone listening when people talk about like tax advantages or you can do X or Y or Z to decrease your taxable income really all that means is you have blank amount of money that comes in as revenue whether you're employed and you get a salary or you own your own business and it comes from goods services whatever so that revenue is potentially all taxable but you can remove expenses from that.

When you're an employee, you don't really have expenses because that's covered by your employer. So, you just have your salary and your salary if you don't contribute from that into a tax advantaged account like we just talked about a 401k or 403b because that income comes from your paycheck and then the remainder is what is your taxable income.

So that's the real big benefit tax-wise for an employee to contribute to these accounts is that the the money goes out into these accounts prior to it hitting u your taxable income. So it decreases that total taxable income. And what you're saying as a as a business owner or as an employer, you can use expenses like you just mentioned like the contribution the matching contribution that you do for an employee that comes out from your expenses and all the other business expenses.

So it decreases the total revenue with all that stuff and then that final number is what is ultimately taxed. And so that's really it's like an incentive structure. That's really how the IRS code could be interpreted. It's not that people, oh my gosh, they're using loopholes. They're shady. It's not shady. You just know what is considered a real expense and you make sure that you itemize it if it if it's going to help you. There's nothing wrong with that.

That is what a lot of people do who are wellversed in the tax code >> and and you want to be careful with that too, right? you don't you you there's a chance to get audited. So, you want to make sure you have a good CPA, a good accountant that's keeping track of things and documenting things well and make sure everything that you have is also documented.

So uh you know as a as a business owner uh when you take that risk of going into business and starting a new business yeah there are uh there's a huge risk of that business failing but the advantages that come with it of uh you know uh much higher chances of savings towards building your wealth is is I think a lot of times worth it and that's why a lot of people do go into business right the government wants us to go and start new businesses and new ventures so we can start uh you know hiring more employees and you know create more jobs.

And that's why tax advantage um loopholes or not really loopholes but incentive structures or deductions or um you know plans like these are provided to business owners so they can >> Yeah. That's why they exist. >> Right. Right. Right. >> They want people to be employed and have jobs. So businesses are incentivized.

So that's why um you know that's a big very useful move to make in the beginning where I'm very happy that I did that uh of being self-employed because the advantages and the way you learn about these these savings uh as a business owner is you know I've learned more in the past four years than I learned in my first 31 years of my life. >> Yeah, you'll probably keep learning more too, right? I mean it like opens your eyes, huh? >> Yeah. The other thing we I I think I brought up earlier.

I kind of want you to talk about that as well. The Roth IAS and regular IRA. >> Yeah. I mean, it's basically like when the tax is taken out, you know. So, for example, in a traditional and I, you know, to be honest, I always get them confused a little bit. I often have to look them up again, but I what I recall is that a traditional IRA, the money that you put into it is already taxed, and so you don't have to pay tax at the end whenever you would take the money back out. >> Other way around.

So >> is that the other way around? >> Yeah. Roth. >> So Roth IRA is something that you uh want to invest in early on. So usually people with a household income of around 170k, your husband, wife together can only invest to that. You have to have a lower income level to be able to contribute to a Roth IRA. And Roth IRA is a lot of times post tax money. That money that's already you've paid taxes on.

Uh um but uh what happens is that money grows over time and then >> so when you take it out then it's not >> when you take it out it's taxree because in the future your income is supposed to be much higher right and you're going to be in a much higher tax bracket uh at that time you're when you pull out the money it's taxree and you can use adv you know take advantage of that money taxree whereas a regular IRA is where you u you know start contributing and and deducted towards taxes so you for example you got paid $1,000 that year.

You contributed $10,000 or uh I forget what the limit is for uh a regular IRA. >> The change it changes every year, too. >> It changes every year. Yeah. Roth IRA is usually $14,000 to $17,000. I forgot forget how much a regular IRA is, but you you contribute from the $100,000 you made, you contributed 14,000 for that year, right? So now you can only get taxed on $84,000 instead of you know or $86,000 that that's left over after contributing. Now that money grows but it's not taxree.

So when later on uh you take it out it it does get taxed you know um >> basically you're deciding when you're going to be taxed right like either you >> are paying tax now and then you contribute post tax money and then when you take it out when you're older you're not taxed or the other way around you don't pay tax on it now you put money into it before you pay taxes so it does decrease your taxable income in the here and now but then down the road you would pay tax on it.

So it's really just a calculus of when you think it would be better for you. >> Exactly. So when you're a resident, you're in medical school, you're a resident, >> um you you want to contribute or maximize if you can your Roth IAS because right now you have the lowest tax bracket. You're in the lowest uh tax bracket uh and right now you're getting at the lowest percentage tax on that money that you're making.

So you want to pay less taxes now so you can take advantage of that money later on when you're in a much higher tax bracket. >> Meaning if you contribute to a Roth now, just to make sure I understand. So you contribute to a Roth today when your income is lower meaning you're paying less tax and it gets taxed. It goes into this account and then when you take it out at retirement time, it's taxree at that time. >> Taxree.

And at that time you don't have to pay at that time your tax uh you might be in the 35% tax bracket. Now uh you got taxed on it for at 21%. And you're paying at a you know now you're taking the money taxfree where you could have gotten a 35% tax on that money. The Roth IRA is something you do early on in life. So as a medical student or as a resident when you're have some extra cash and savings and you want to save and let that money grow, right?

Because now when we talk about 401ks, 403bs, Roth IRA, that money is just not sitting in that in that account. the money is is usually getting invested into different markets, right? So, um either some some some employers have their internal managers that manage the money and they have certain funds and you can just go in and choose you want aggressive, conservative or medium and you don't get to choose what investments you make with that money for a lot of 401k or 403b accounts, right? >> Yeah.

You pick like the overall strategy rather than picking individual stocks. >> Exactly. Now, Roth IRA and uh or a regular IRA is something that you open, right?

So, you can go on Fidelity or or Charles Schwab or uh you know, one of these websites uh and then you can open up an account and you know Roth IRA or you know an IRA and you start putting money in that account right now that money is gone and you should not be able you you cannot u withdraw that money until retirement at 59 and a half years old. But that money grows and you can choose where you want to invest that money in. Right.

So most people um >> yeah it's basically it's just like a stock brokerage account. It's just like when you log in to whatever your portal of choice is like Erade Schwab, it'll show whatever your normal stock trading account is and then it'll just show your IRA right there. And like you're saying, the distinction is you choose to put money into the IRA up to whatever the limit is for that year. It is in there and you can't pull it out now without a penalty until you hit the age later on.

>> Exactly. And that money grows. So you can choose and a lot of people, you know, you can buy stocks with it. You know, you can go and just buy all put all your put all your uh Roth IRA money into a Tesla account and Tesla buy Tesla stock and let it grow like that. And that's something idiotic that I did when I first opened up.

I went and bought all these random Apple or Tesla you know uh but you know most uh prudent financial uh advisors or people who just know how to invest their money they always advise you to invest into indexes or the market you know things like ETFs index funds um you know uh just the S&P 500 and what S&P 500 is a conglomeration of 500 different success uccessful uh companies and their stock and it kind of you know reflects the current market companies come in and out of S&P 500 and these are the top 500 companies uh you know there's other indexes as well like the like the NASDAQ which is very techheavy and if you think the tech there there's a big uh advantage in in investing to tech then you can in invest into that and that can grow at the rate of market.

So when when you hear things like, "Oh yeah, I did better than the market. I beat the market." Or, "No one can beat the market." Or, "Nancy Pelosi always beats the market." They're talking about >> She She does. >> She does. Yeah. So follow her. >> Insider trading helps. >> So So when when they say that, they're they're talking about the S&P 500, which is, you know, a bunch of 500 top companies and their stock. Um, so you know, >> Yeah.

So the the index funds is good too you know because especially like you know for example when I was in residency um it was the first time I had I had done a lot of like stock trading and messing around with stocks and ETFs and even some currency trading um before that just on my own. Um but that was the first time where I actually had a real like retirement account because just like every other residency program you're an employee you have some type of retirement account.

I was in Tampa in Florida and so they had a special it was called a TURP TE RP a temporary employee retirement program where it was just money contributed into the account every month from your paycheck and it would grow grow grow and you had the option when you logged in of just like you're talking about is divvying up however much percentage of your total portfolio. Let's say you got 10,000 bucks in there. I want to put 10% into aggressive heavy growth.

I want to put 5% into very stable, not going to break the bank, but it ain't going to go down and anything in between. And so I I was 26. I was like, well, this isn't that much money anyway. I don't really need it for anything right now. I'm not going to be able to touch it for a while. I'm just going to put 100% of it into the most aggressive option possible. That's that's just what I did. And I didn't even think anything of it. I didn't look at it again or whatever.

And at the end of the five years of my ortho residency, I had about 60,000 bucks in there from like doing nothing and not even thinking about it after that one time I logged in. And two of my co-residents, they never even bothered to log in. Like we all were told, you know, you do your orientation and onboarding like, "Oh, we all have blank blank retirement. You have so much information thrown at you." They didn't even log in one time.

And when they finished their 5 years, I literally had like 60k and I did nothing. It was just money that was being put in every month. I didn't even know about it. They had about 14,000 bucks. That's a huge difference. Even if you know in the grand scheme of like, you know, you live to 80 years old, okay, it may not be that much, but when I graduated, I was like, "Wow, this is like a nice pot of money." And it just keeps growing.

And that just shows the compounding and the ability to grow if you just set stuff early on. And it wasn't invested in individual stocks, nothing like that. It was just a relatively aggressive index fund, meaning it just tracked a series of stocks which were known to have higher potential return but obviously higher risk. That's all it was. It was just an index fund investment. >> Yeah, index funds are great because you know usually index funds have a fee, right?

So there's a fee because there's a manager managing those investments >> and those have a fee but there is a higher rate of growth with that because that manager is making some uh prudent uh investments and they're they are there they have the knowledge and they're they're trading for you in a sense instead of you having to go in and buy a Tesla sell Tesla uh you know they're they're doing that for you. So that way it grows.

Now, the the worst thing you can do is uh keep as a as someone who has a full-time job and is working is keep checking your account and keep selling and buying new stocks every day, right? >> You're going to go crazy. >> Yeah.

You you'll go crazy because what's going to happen is you're going to see you're going to buy, for example, you bought a BP and next day they had an oil spill and it started dropping and now you freak out and you start selling it because you don't want to lose all the money, right?

And >> then you you see that okay yeah now Tesla is going up and then you you invest into Tesla and all of a sudden next day Elon Musk does something crazy and then the Tesla stock starts crashing you're going to go crazy about that and you're going to start selling that way it's shown that people end up losing uh more money you know there's three examples one person for example that for 10 years they just rain or shine recession no recession market downturn uh market booming they kept investing the same amount every month into the market versus someone who, you know, watched and did what they, you know, invested in something that was doing well and invested take sold something that was not doing so well.

And the person that invested consistently on a daily on a monthly basis in rain or shine did much better than anyone else. >> Yeah. I mean, it's it's kind of like the advice you get when you're a kid from your parents like, "Hey, put $5 of your allowance away every time, every month." the that grows the consistency. It's not about the large amount. It's the consistency. Yeah, that's just that's a huge factor. >> Yeah. The market goes up and down, right? Up and down.

And it's kind of like a it's kind of like a wave, right? A zigzag line, but it overall the trajectories upward. So, if you keep investing as disciplined and putting a little bit of your money into those accounts at a slow rate and let it grow, it's going to grow uh and not having to worry about these downturns. So, there's a lot of mistakes I made.

You know, there's uh one of the things that I tell people which is the biggest trap is, you know, these investment accounts and knowing about these things is great, but when you don't have any money, it's even worse because uh right out of high school, you come out and if you uh don't come uh from a family that's right now have money saved right away for your college and college and med school can be very expensive, right? So, uh you have to take out loans, right?

and 18 year olds all across the country are are being shown these hey you can just take $50,000 out every semester and pay for your living expenses and and pay tuition and people are just going about and you know taking these massive loans without understanding the consequences of these student loans right and because it's so easy to get the student loans universities just kept raising their prices and kept raising tuition because they know that students are going to get loans they will pay the the university then the students can do whatever they want afterwards, but what as a 18-year-old, you don't understand and what what is the interest rate?

What will the interest rate means when you're trying to repay these loans, right? Um what is it better to just take out a private loan or is it better to take out, you know, these federal loans? And those are some things you don't know about, don't think about, don't and back, I guess when we went to college, it wasn't as easy to just look things up on on Chad GPT, right?

So, >> so at that time you just were like, "Oh, I'm getting money, you know, I'm going to pay for my college and have a way to pay for my apartment and my living expenses, so that's the loan I'm going to take out." And you don't pay attention as much to any interest loans. And now when you're thinking about repaying those loans, you're like, "Oh man, like those are some of the mistakes I made.

I, you know, I should have made, minimize the amount of loans I was taking out, uh, and maybe not spent as much." Uh >> yes, it's easy to fall in that mindset, you know, when you're that young and you just you need the money to get your education like I'll worry about it later or that'll be a future or future homeay problem. Well, >> the future is here and now it's our problem. >> Yeah. And luckily, I mean, you know, I you know, we I I got lucky. I got into medical school.

I I became a physician, so it became easier for me to pay off these loans. But for a lot of people that may not end up getting into medical school, may not end up doing what they want to do and may maybe end up getting some um maybe getting a job that's not as high paying. Uh then it becomes almost impossible and people fall into the trap of these high interest student loans and then they are never able to pay them off. >> Yeah. You're trapped.

>> Student loans are not something you can default on. I mean if you die the student loans don't go away. They go onto your family and your wife has to pay for them. >> Yeah. you know, so so it's not something that just goes away.

And that's the crazy part where young people uh going into medical school, uh going into residency, they need to know what student loans are and what they truly mean and what they mean for your future savings and your wealth building when you're ready to pay pay them off. And it's not as easy. Um so just be careful with that. And that's all I can say. I mean, you know, uh um it's tough, you know. >> Yeah. No, it is for sure.

I mean, it's just one of those I mean, that's why if you look at the averages for people that go to professional school, whether it's MBA or law school or medical school, I mean, the average loan rates are so high. I mean, it's I think for med school, it's only like a little over 200 grand now, is the average debt that someone comes out of when they finish. That's a lot, you know? I mean, you're paying that off for like 10, 15 years easily. Um it just it adds another suck.

It's another extra little tick in the box of what are your monthly average expenses just to be alive. You know, you got your mortgage, your car, your kids' school, your grocery bills, and your student loans. I mean, it just adds up. So, it's something to consider. And that's also why all of these other things we've been mentioning are so important to cultivate so that you can have a real plan and it's not just kind of random. >> Yeah. You know, and then you I mean, you're absolutely right.

the these things add up and when you when you start working and then you have uh all these expensive and and then life prep happens, right? You start making a lot of money and then you start buying a little bit more things and maybe spending a little bit more money, you you get a nicer car. Um and you just never know what might happen, right?

A lot of people, you know, stories of people that uh went through med school, did residency, and somewhere along the line they they got injured or got hurt or got sick and they got disabled, right? and then they did not have the means to make that the same kind of money. Uh, and that's why I think I I mean I personally feel getting disability insurance early on residency when you're healthy, you're safe, and the the rates are cheap and you can lock in a long-term disability insurance.

I think it's important just to have that safeguard. It's not that expensive early on, especially when you're in residency. Um, you know, um, and know >> 100% 100%. That's what I did when when I was in residency right at the end. Like is for anyone listening who hasn't gotten disability insurance or isn't aware like you go through a full like physical exam, a history. It's like seeing your primary care physician. They do a bunch of labs on you. They check all your medical records.

If anything and every anything at all is off or you have some discrepancy or you had some injury in the past, they'll try to get you on it. It's just like your insurance premium going up. So the younger you are, the healthier you are when you apply for disability insurance, it's going to be a lower premium annually for the rest of your life. and that insurance policy will cover you, god forbid, like you're saying, if you get injured and cannot do your job.

Um, it's also important whenever you get it, right? And these are the things just like you mentioned when someone's 18 thinking about student loans. Same thing when you're like in your late 20s thinking about disability insurance. Think of the future too. The amount that you get for your disability insurance policy, meaning the payout, god forbid, if you get injured, is initially going to be pretty low because you don't want to pay a lot of money annually.

you're going to have a low premium, so you're going to have a low payout. But as you get older, you you get family, you have kids, and all that stuff. That small disability amount, god forbid, if you do get injured, isn't going to cover anything. So, it needs to get higher. So, you have to have some rider, some clause on there. Rider is just the term that these disability insurance companies use. Some clause that will allow you to raise your payout.

Obviously, your premium will go up, too, but raise the payout to a certain cap without having to go through a repeat evaluation. That's the biggest thing. You don't want to get to like 55 years of age when you realize, oh shoot, my disability policy is not adequate. I need extra on it. Well, your premium is going to skyrocket just simply because you're older. >> Yeah. Yeah. Exactly.

And then you know the the the the important part is that once you pay that cheap amount early on residency when you're converting, you don't have to go through any evaluation and they you stay with the same policy or change for a much increased amount. Other other thing you got to consider about is the own occupation clause as well. >> Yeah. >> Right.

So, so that's another thing you got to watch out for because uh and you got to make sure you have the own occupation which means that if you cannot be orthopedic surgeon anymore that's when you start getting disability doesn't mean that you cannot work right. So a lot of people might get injured they cannot be surgeons anymore and they might become uh consultants for you know some kind of big consulting firm.

Uh but that does mean you're not an orthopedic surgeon anymore and you you know with the with the own profession means that you're you're safeguarded if you cannot practice orthopedic s surgery doesn't matter if you went on to consulting you'll still get that disability insurance that you paid for all these years because you were planning on being a surgeon. >> Yeah I agree with you man.

I think those are the two most important things with it is u make sure it's own occupation and to get that rider that you can increase it later on.

Um, you know, it's funny like one of my friends who's um who's also a surgeon, they um they had like a nerve compression in their arm and they were having numbness, tingling and weakness of their grip um for quite a while, quite a few months and they came to me and asked like hey can you just do a nerve a cubital tunnel release for their ner nerve is very common very straightforward easy surgery right and pretty good outcomes and I just asked them like you have disability insurance right and they were like actually no I And I was like, "Dude, like I won't do the surgery on you until you get the disability insurance." Not that I was worried about my ability to do the surgery without harming them, but because if later they try to apply for disability insurance, it's going to be in their medical record forever that they have cubital tunnel syndrome.

There is already some issue with this arm. So, God forbid if they get into a car accident or something way down the road that injures this arm and now stops them from being able to do surgery, which is their job. the insurance company could come back and say, "Hey, this was pre-existing. This was before your policy." There's possibility that some of the squelli is actually from that nerve compression, which has happened. Those are real examples that have happened to people.

And so, it's really important what you were talking about earlier is doing this early on in residency when you're younger and healthier than you ever will be, right? You're you're going to be healthier now than you will be tomorrow and by and on and on. So, it's just really important to do it early. >> Yeah.

So these are these are you know some of the things I mean I think we've touched on a few things that you got to do in residency and early career right but you know that first two years or three years are very important when you come out of a fellowship right or or residency those first two or three years is when you all of a sudden start making a large sum of money and uh that's when things become a little easy for you you're like okay I can now afford uh to buy a new car I can maybe buy that the dream house that I've been waiting for.

And it all seems very reasonable at that time because the the amount of money all of a sudden here you you were used to living on this, you know, 50 $60,000 salary and now all of a sudden you're making, you know, 350k, 400k, half a million dollars or whatever, whatever you're making. But it's very important at that time to kind of have a financial plan, right? When you're coming out of residency, fellowship, have a financial plan. What are your goals in the next uh 10 years, 15 years?

Uh, you want to make sure that you know where all your finances are. You know, have your bank accounts in front of you. Any investment accounts that you have that maybe your residency helped you contribute and grow like you had $60,000. Any other stock uh accounts you have, make sure you have them in front of you laid out uh combined as one. This is currently my net worth, right? Including your student loans, your most likely your net worth is in the negatives, right?

And that is a good thing to think about. Now there are certain books and you know things like white coat investor which I personally hate the idea of that right they they tell you oh live a resident lifestyle for the next 15 20 years live like you're still making $60,000 save a ton of money and then you can just retire and I personally do not agree with that.

I mean I do think that you work hard all these years you've already delayed gratification and there's time then you want to start enjoying your uh the hard work that you've done and now you're getting paid. So you do want to enjoy that. So, I do not uh agree with living in austerity, but you need to have a plan. There's and and for me, it's always been having those buckets, right?

Make sure that I'm paying myself first, paying those buckets first, filling those buckets, and what whatever is left over is then I'm spending and a lot of time that's a good amount of money, right? You can still spend and enjoy your life and still do things. But make sure you have a plan. Okay, 10 years from now, if I keep investing $1,000 to this account, this is what I'll end up with.

Um, do not buy that dream car right off the bat, and do not uh, you know, buy that dream house right in the first two years of your of your uh, being an attending. Uh, wait a little bit, have a plan, and then if if your finances allow and your overall goals allow, yeah, I mean, spend some money and enjoy life as well. >> Dude, I hear you. I mean, I agree with you in in that regard with the so-called live like a resident forever mantra. I I don't agree with it because you have to live your life.

You have to enjoy your life. Otherwise, it what are you doing, you know? Um, and having a plan from the beginning is huge. And that's why I think if you start early, right? If you start when you're just leaving school, you're starting residency and training, or if you're not in medicine, whatever your first job is, your initial entry- level position, as you grow older and you get more money, you get promotions, raises, all that stuff.

If you have a plan early and you have the consistency and the habit early on of having some saving method that you contribute to regularly that you can put on autopilot and just forget about, you're not really like waiting for some time point to start a plan to start your retirement savings. You've already done it. You've done it the whole way through. So, it's not even a thing. I think that's a huge and really important thing. It's more of a mindset than anything else.

Just making it a habit, making it a thing. >> Yeah. I'm excited, man. I'm excited to get into the the weeds of that with uh you know what to do once you you've kind of started your job and are making money now. What are some next steps you can take? I know I think we'll hopefully have our first guest and we can kind of talk about these things and kind of go into the details of that. Uh you know, so looking forward to that conversation as well. >> Yeah, it's an exciting stuff.

Watch them say everything that Adela just told you is wrong. Here's the reality. Well, one thing I'll say to everyone, I think uh I think it would be great if some people can uh you know, send us questions uh on YouTube or on Spotify or even on our Instagram or Tik Tok page of what they want to talk about or what what questions they have.

I mean if there's physicians listening or there's any professionals or anyone in general just listening maybe have some questions for us and you know that we can even discuss with the professional um and and you know ask on the show when this person comes on and gives us some very useful advice on what kind of tools we can use. So >> yeah, they'll make it more fun and interactive for sure. >> Yeah. All right. Well, this was a fun episode and you know um looking forward to more. Thanks.

>> All right, guys. We'll catch you at two dos one mic