In this episode, I interview Jim Dahle, creator of the White Coat Investor. He has literally created a new asset class of content: the health care professional personal finance space.

He discusses how he got his start with the White Coat Investor, why his message still resonates today, and how financial literacy can combat burnout. He then moves on to his take on real estate and cryptocurrency. Finally, we end by discussing his most recent book on asset protection.

James M. Dahle is an emergency physician and founder, the White Coat Investor. He is the author of The White Coat Investor’s Guide to Asset Protection: How to Protect Your Life Savings from Frivolous Lawsuits and Runaway Judgments.

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Hosted by Kevin Pho, MD, The Podcast by KevinMD shares the stories of the many who intersect with our health care system but are rarely heard from.

Transcript

Kevin Pho: Hi, and welcome to the show. I normally say that this is the show where we share the stories of the many who intersect with our health care system but are rarely heard from, but I’m sure all of you have heard of my next guest, Jim Dahle. He’s an emergency physician, and he’s the founder of The White Coat Investor empire. His latest book is The White Coat Investor’s Guide to Asset Protection: How to Protect Your Life Savings from Frivolous Lawsuits and Runaway Judgments. Jim, so happy to have you on the show.

James M. Dahle: Wonderful to be here. Thank you for having me.

Kevin Pho: So I think it’s fair to say that you’ve created a new asset class of content, which is the health care professional personal finance space. But I want to go back to the very beginning. You wrote The White Coat Investor back in 2014. You’re an emergency physician. So what triggered you to take that next step and write a book on health care professional personal finance?

James M. Dahle: You know, it’s interesting. I had the blog before the book, and the inspiration for the blog was that I just got sick of typing the same thing over and over again into internet forums. So I thought I’d put it in one place, and then I could just post links in forums to people who were asking questions. The book kind of grew out of that. My blog readers kept telling me, “You should write a book, you should write a book, you should write a book.” And they were right. I needed to write the book.

The interesting thing about writing a book, if you’ve ever written one, is that all of a sudden, once you’ve published a book, everyone views you as much more of an expert than before you published it, no matter how good the book is, whether it’s self-published or not. It’s this thing out there that really establishes you, for whatever reason, in people’s eyes. So I found that very interesting.

But the inspiration behind it all was that I just got sick of getting ripped off myself by financial professionals. So I embarked on basically a self-study course to learn all this money stuff, and I found it really interesting, just as interesting as I found medicine. After a few years, I realized I loved teaching it as much as I loved learning it, and that nobody else was teaching it to doctors. So I kind of embarked on a Don Quixote-esque quest to fix doctors’ financial literacy problem.

Kevin Pho: So you have multiple books now, you have the podcast, you’re all over Facebook, and obviously you have the website. Why do you think this topic has resonated so much? Why are you so successful with this?

James M. Dahle: I think part of it is simply that I was able to speak to doctors in their terms. It’s an important subject. Trainees, students, and attending physicians all love learning this stuff; it’s really interesting to them. But nobody had spoken to them in their language about it before and explained how it works from their point of view. So I think it was not that the information was totally new, and not that the audience was totally new, but I was able to blend them together in a way that really hadn’t been done before. I think that is why it became so successful.

Kevin Pho: So what’s an example of that? What do you mean by speaking to physicians in their language as it relates to personal finance?

James M. Dahle: Well, for example, doctors have this view of other professionals where, you know, we’re guided by the Hippocratic oath. We’ve basically raised our hands and sworn we’re going to first do no harm, and we’re going to put our patients’ needs before our own needs. And we get this misunderstanding that that’s the way the rest of the professional world works. Particularly in financial services, that is not the way the world works. They do not have a Hippocratic or fiduciary duty to you. Most of the time, they’re trying to sell you something.

So just empowering doctors to realize that it’s not the same as calling a GI consult, that when you call up somebody looking to get insurance you need to be a little bit more on your guard, I think is a really helpful perspective for them to gain.

Kevin Pho: Now, you’ve been doing this for 10 to 20 years now, it’s fair to say. What’s the situation like now when you talk to other physicians, or when you go on your Facebook groups or your message boards? Is personal finance more on a lot of health care professionals’ radar? What’s the situation now compared to, say, 10 years ago?

James M. Dahle: Yeah, I think we’ve made a lot of progress, and I can’t claim that I am the only person out there doing this. There are other people blogging and podcasting and writing books and trying to help in any way they can. So I am seeing progress, and that is absolutely really fulfilling to me, to feel like we’re actually making a difference.

But it’s not as much progress as we need to make. Doctors, particularly mid-career and later doctors, are still not particularly financially literate and are still making the same old mistakes. And there’s not as much room now to make mistakes. You know, there’s pressure on physician incomes, especially with the trend toward employment, and people are coming out with so much more debt. There’s just not the room to make the mistakes that doctors used to be able to make and still be OK. You’ve got to make a much higher percentage of your financial decisions right these days in order to still have a comfortable retirement as a doctor.

Kevin Pho: Now, on this podcast, on KevinMD, and I’m sure that you’re certainly familiar with it, a lot of physicians are struggling with burnout. The numbers were 50 percent before the pandemic; now it’s like 75 percent. There’s a concept of financial independence as a solution for burnout. Comment on that intersection: financial independence as a solution to physician burnout.

James M. Dahle: Yeah, well, part of the issue with burnout is that you can’t buy insurance against it, right? I mean, it is more common. Like you said, 50 percent plus of physicians have burnout. Now, it’s not quite that many who leave their practice because they’re burned out so badly, but even that number is pretty significant. We buy disability insurance to protect ourselves from disability, which is only about a one in seven chance of becoming disabled for a period of time. Burnout’s much higher, but you can’t buy insurance against it. So you need to really be taking steps during your career to maximize your longevity in the career. Every time you are faced with a decision, you should be thinking, “What is going to allow me to practice longer?” That is probably one of the most important things.

Now, financial independence is the ultimate burnout treatment, right? If you’re totally burned out and you don’t want to practice again, well, if you don’t need the money, you can just leave. So financial independence is the ultimate burnout treatment. But my hope would be that when people have their ducks in a row, their financial ducks in a row, they don’t need to go all the way to that extreme. They can simply cut back on call. They can change jobs to a less toxic job. They can find the things about their practice they love the most and be able to spend their time doing that, rather than doing what pays the best because they have all this financial pressure to make student loan payments and mortgage payments and payments on a second house or a boat or a couple of Teslas or whatever. So I think there’s a lot of benefit to being financially literate even long before you become financially independent.

Kevin Pho: So when you talk about having all your financial ducks in a row, and like I said, you’ve been doing this for so long, what are the common red flags that you still see, or the mistakes that physicians still commonly make, in 2022?

James M. Dahle: Oh, I mean, it’s the same ones we’ve been making for years and years, and frankly that a lot of Americans make. It’s not necessarily all physician-specific. We tend to buy the wrong insurance. We don’t buy enough of the stuff we really need, such as personal liability insurance or an umbrella policy, and a big old term life policy if anybody else is depending on us, or disability insurance. Instead, we buy a bunch of insurance that we don’t need. We insure our iPhones, we insure our vacations, and that sort of stuff, instead of having the insurance we really need. So that’s a big one.

We still spend too much. I tell attending physicians they really need to be putting 20 percent of their gross toward retirement, and that’s in addition to any money you’re saving for college, any money going toward student loans, etc. So we spend too much, just like every other American. That’s a big problem.

We get suckered into investments and insurance products that are designed to be sold, not bought. The classic one is whole life insurance. Just about every physician has whole life insurance pitched to them at some point when they’re a resident or a young attending, and too many of us are buying a product that’s right for probably only 1 percent of us. So that’s a big common red flag.

Most of us are either getting bad advice, not getting enough advice, or paying too much for good advice. So that’s a big red flag. A lot of doctors just don’t know the going rate for financial advice, and they don’t know how to recognize when they’re getting good advice at a fair price. So that’s a big red flag.

I think doctors are still making a lot of mistakes, and I’m surprised how many of them don’t understand their retirement accounts, whether they’re the ones they can get individually or the ones they get through their employers. It’s just understanding the ins and outs of them and how big of a benefit it is to be able to invest within those tax-protected and asset-protected accounts. A lot of docs just don’t understand those, or even the difference between the accounts and the investments inside the accounts. So it’s just basic financial literacy principles that have never been taught to them in their science curriculum as undergrads, in medical school, or in residency. And then all of a sudden they’re out there making the big bucks, and they have no idea what to do with them.

Kevin Pho: Now, I think one of your courses was titled Fire Your Financial Advisor, or something like that.

James M. Dahle: Yeah, it was a little bit provocatively titled. My financial advisor advertisers didn’t like that title so much. But the truth of the course is that the first module teaches you how to interact with the financial services industry, so it’s not all about firing your advisor.

Kevin Pho: Now, can physicians, or health care professionals, in this day and age, with all the volatility in the stock market and a lot of alternative financial investments, really do it themselves these days?

James M. Dahle: Absolutely they can. Should they all do it? No, they shouldn’t. In fact, my estimate is that probably 20 percent can and should be their own financial planner and asset manager. For the other 80 percent, the best thing I can do for them is connect them with someone who gives good advice at a fair price.

Part of the requirement in order to do this yourself is that you have to be interested in it. You know, it has to be at least a little bit of a hobby for you, and it’s the best-paying hobby out there, don’t get me wrong. When financial advice costs thousands of dollars a year, this is a really well-paying hobby. But if you are not interested in it, if you are not going to do it well, you should not be doing it yourself. So again, the key is to get in with someone who can help you.

Kevin Pho: So I’ve had a lot of physicians on this podcast talk about things like real estate and cryptocurrency, so I want to ask about those two things in order. What’s the role of real estate in a typical health care professional’s financial portfolio?

James M. Dahle: Well, I think real estate’s a great asset class. I own stocks, I own bonds, and I own real estate. I think there are three big building blocks for any sort of traditional portfolio. I’m a big fan of real estate; I’ve got 20 percent of my portfolio in real estate.

There are a lot of different ways to invest in it, everything from a simple publicly traded real estate investment trust mutual fund, such as something you could buy at Vanguard for very low cost, all the way to buying properties and fixing and flipping them, and having long-term rentals or short-term rentals, and really being involved in the day-to-day, hands-on work of running a real estate company, and everything in between, including syndications and private funds and that sort of stuff. There are lots of ways you can invest in real estate, but I think most docs would probably benefit from adding at least a little bit of real estate to their portfolio.

Kevin Pho: Like you said, there’s a whole spectrum of involvement when it comes to real estate. What kind of questions should health care professionals ask themselves if they want to dip into the real estate world?

James M. Dahle: I think the key is to match the type of investment to your desire. For example, I am really not interested in being a landlord. I don’t enjoy it; it’s not that fun for me. I don’t like getting the calls from tenants. I don’t even like screening tenants. So when I look at real estate investments, I’m looking for something more passive, and all of my real estate investments are more passive than that. I’ve been a landlord in the past. I know how to do it, but I don’t enjoy it.

So do I give some things up in return for that? Yes. I pay some additional layers of fees. I don’t have as much control over the investment as I might. There aren’t as many opportunities to add value to it when I’m not in control. But it’s worth it to me to give up those hassles.

Somebody else, on the other hand, might want to be in total control of the investment and not have to pay fees to other people and that sort of thing, so they might be more interested in buying the property down the street and renting it out. But the key is to match your desires, your expertise, and your time to the type of real estate investment. I think if you can do that right from the beginning, you’re much more likely to be successful as a real estate investor.

Kevin Pho: All right, next is cryptocurrency, and I have no doubt you get a lot of questions about cryptocurrency. I think Fidelity announced last week that it was going to be part of their retirement accounts. I get a lot of questions about cryptocurrency, and there are a lot of articles on KevinMD. Does cryptocurrency play a role in a typical financial portfolio?

James M. Dahle: I would not say it plays a role in a typical or traditional portfolio. It’s definitely considered an alternative asset. There are all kinds of crypto assets, and every one of them is a little bit different. The use cases for all of them are different, and they’re fascinating to watch. I find the whole space super interesting to watch, not only from an investment perspective but just from a “How is this going to change the world going forward?” kind of perspective.

But looking at it purely from an investment perspective, should you be investing in this? Remember that just about all of these are speculative assets, right? It’s like buying empty land. It’s like buying precious metals like gold or silver. Essentially, if somebody else is not going to pay you more for it in the future, you’re not going to make money on it. It is not going to produce any rents. It is not going to produce any dividends or interest, etc. There are no earnings for a lump of Bitcoin, if you will. So it’s a speculative asset, and I caution people to limit the speculative assets in their portfolio to a single-digit percentage, something like 5 percent.

So if you are a huge Bitcoin fan, you think it’s going to change the world, and you think it’s going to go to 500,000, I still say you ought to limit it to 5 percent of your portfolio, rather than 60 percent or 80 percent of your portfolio. I think that’s just too big of a bet on a relatively new asset class.

But I wouldn’t feel like you have to invest any money into it. You’re perfectly fine not having money in Bitcoin. And down the road, if Bitcoin becomes the changer of the world that everybody thinks it is, and I had somebody write me this week that they think Bitcoin can end all the wars in the world, for instance, you can always sell your stocks and your real estate and your physician services for Bitcoin, if it becomes actually a usable currency. It’s not like you can’t get it in the future. You would miss out on any sort of a speculative run-up, of course, but I would not feel like this is something you have to own. If you want to own some of it, own a small amount. If you don’t, that’s fine, to watch from the sidelines, as I am doing.

Kevin Pho: And just to be clear, we talk a lot about these alternative investments like real estate and cryptocurrency, but it’s perfectly valid for a health care professional just to put everything into some type of total market index fund, something simple like that. That advice still applies in this day and age, is that correct?

James M. Dahle: I mean, I think index funds have huge benefits, particularly over actively managed funds or picking your own stocks, and so I’m a big fan of index funds. Eighty-five percent of my portfolio is in index funds.

That said, when you put all of your money into just a total stock market index fund, you’re making a huge bet on one country. So I suggest that they also put some money into perhaps a total international stock market index fund, maybe some money into bonds, maybe some money into real estate. If you want to dabble in some alternative asset classes in your portfolio, that’s fine too. But a total stock market index fund as your sole holding does carry some risks, and I think you ought to be aware of that before choosing it. It’s certainly a very simple solution, but I think there’s a better simple solution if you’re looking for something really simple, such as a target retirement fund that gives you U.S. stocks, international stocks, and some bonds, all in one mutual fund.

So I think that’s a great choice, at least within asset-protected accounts like 401(k)s and Roth IRAs, you know, tax- and asset-protected accounts. In a taxable account, that sort of investment has some issues, as some of those invested in Vanguard’s funds learned last year.

Kevin Pho: We’re talking to Jim Dahle. He’s an emergency physician, and he’s the founder of The White Coat Investor. His most recent book is The White Coat Investor’s Guide to Asset Protection: How to Protect Your Life Savings from Frivolous Lawsuits and Runaway Judgments. Jim, let’s talk about your most recent book about asset protection. What are some of the key points that you want readers to come away with?

James M. Dahle: You know, I want people to have a realistic view of what the risks are. For a lot of physicians, they really don’t have that much at risk from a malpractice lawsuit. We’re all very fearful of these, that they’re going to clean us out and we’re going to lose everything. But the truth of the matter is that there’s probably a significant percentage of your assets that are not exposed to that sort of situation. Even if there were a $10 million judgment against you, you would probably still be walking away with a significant portion of your assets.

Now, this is all state-specific. In some states, your entire house is protected. In most states, your retirement accounts are totally protected, even if you have to declare bankruptcy. And so I think having a realistic view of the likelihood of you being sued is, number one, helpful, because there are a lot of people out there selling complex trusts and that sort of thing to try to convince you to spend a bunch of money, and a bunch of hassle, to protect yourselves from something that’s really not that likely.

I mean, the likelihood of you actually having an above-policy-limits judgment in emergency medicine, working time, I calculated out as about 1 in 10,000 per year. So it’s not a very high risk, but it’s not zero at the same time. And so it’s good to know which of your assets are exposed and which are not, and maybe take a few steps to make a little bit higher percentage of your assets protected in that sort of situation.

Kevin Pho: Now, if there is one key thing that physicians should do to protect their assets, what would that one thing be?

James M. Dahle: Max out their retirement accounts. A lot of people don’t realize that those are both tax-protected and asset-protected accounts. Your 401(k) in every state in the country, and your IRA in almost every state in the country, is basically something you get to keep in the event you declare bankruptcy. So that’s probably the very best asset protection move we can make, outside of date night, of course. You’re far more likely to lose money to your spouse than you are to anybody else, so maintaining your marriage is probably the best thing. But beyond that, max out your retirement accounts.

Kevin Pho: And my final question: What are some of the take-home messages that you want to leave with the KevinMD audience?

James M. Dahle: I think the most important take-home message I can give you is to actually pay attention to your finances. Realize you have a second job. You are not just a physician, or an APC, or a nurse, or a physical therapist, or whatever. You are also a pension fund manager. In our 401(k) world, there’s nobody else doing this for you. If you don’t do it, it won’t be done. So spend a little bit of time on your finances, and you’ll be surprised how much better it can make the rest of your life.

Kevin Pho: Jim, thank you so much for sharing your time and insight. Thanks again for being on the show.

James M. Dahle: Thank you for having me.