Financial tips that resident physicians need to know [PODCAST]

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“These strategies on how the rich get richer do not only apply to the wealthy. These same opportunities and strategies are open to us as well. If we want to accumulate wealth, or simply keep more of the money we currently have without paying a large portion in taxes, then we should consider following the strategies above. Think about what you are good at or what you like doing and consider a business you could start, product you could create/sell, or service you can render then file it as an LLC (or other business entity). Before you know it, you’ve “started your own business” and can now take advantage of tax rules that allow you to write off many of the expenses you already paid for.

If you feel you pay too much in taxes, then meet with a tax advisor or talk to an experienced professional about ways you can lower your taxes. If you’d like to have your net worth increase in value so you can start living the life you’ve always envisioned, then talk to a financial planner and start investing. If you don’t have a financial planner or don’t think you can afford one, then start by putting money aside in your job’s 401(k) plan and investing the money in that account into a low-cost index mutual fund. (If you’re an advanced investor, then start learning about real estate and other active/passive investments.)”

Altelisha Taylor is a family medicine resident and can be reached at Career Money Moves.

She shares her story and discusses her KevinMD article, “3 ways the wealthy increase their net worth.”

This episode is sponsored by Elsevier Health. Looking to update your personal or professional medical library? Shop Elsevier Health’s Holiday Sale and save up to 35% on your purchase of medical books! Plus, you can take an extra 5% off your order with code KEVINMD at checkout. Take advantage of the biggest sale of the year from Elsevier, the world-leading provider of medical books and reference materials. Shop us.elsevierhealth.com now through December 31.

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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, where we share the stories of the many who intersect with our health care system but are rarely heard from. My name is Kevin Pho, founder and editor of KevinMD. Today on the show we have Altelisha Taylor. She’s a family medicine resident, and she wrote the KevinMD article “3 ways the wealthy increase their net worth.” Altelisha, welcome to the show.

Altelisha Taylor: Thank you so much for having me. It’s a pleasure to be here.

Kevin Pho: Thank you. So we’ll get into your article in a little bit, but first off, can you share your story and your journey to where you are today?

Altelisha Taylor: Yeah, sure. So I grew up in Pensacola, Florida, which is in the panhandle of Florida. I grew up there for the first 18 years of my life and did my undergrad at Duke University, go Blue Devils, where I majored in public policy. So I had some writing experience there in undergrad. After I finished that, I decided to work in health policy in D.C., so I did that for a year at the Center on Budget and Policy Priorities. Then I got a master’s in public health and decided to go to medical school.

I went back to my home state of Florida, to the University of Florida, for med school, and it was there that I fell in love with family medicine, because I liked a little bit of everything and also liked sports medicine. And now I’m a resident in Atlanta in family medicine, and I’m hoping to specialize in sports medicine.

Kevin Pho: Fantastic. Now, a lot of the articles that you’ve contributed to KevinMD are personal finance articles. What got you interested in personal finance, and why did you decide to write about it?

Altelisha Taylor: Yeah, so my father is into business and finance, and so is my oldest brother. In fact, the majority of the people in my family are not doctors; they are in business and finance. So I got an early start there. My father has a small business and is also an accountant and auditor for the Department of Defense. I think him teaching me a lot of things when I was younger is what first started my interest in personal finance.

And then, fun fact: When I was at Duke, there were a lot of people who were pre-med, but also a lot of people who were interested in finance, and I got sidetracked a little bit and almost considered a career on Wall Street. I think it was my junior year of undergrad: I was flying out to New York a lot, and I was doing a lot of stuff at Barclays Capital, Morgan Stanley, and Goldman Sachs. So that was my second introduction, if you will, to personal finance. I decided that that wasn’t the route that I wanted to go for a career, but I always liked personal finance and investing.

And then, ironically enough, when I was in medical school, I realized I was actually going to go into family medicine, and it’s one of the lower-paid specialties. I remember having this conversation with my father: “Oh my gosh, what am I going to do? Why am I choosing a specialty that doesn’t make as much as the others?” And his advice to me was, “Choose something that you love, and I can teach you how to invest.” So from that moment on, from his teachings and from me doing a lot of research on my own, reading a bunch of books, and listening to a lot of podcasts, I learned a lot myself. I made some mistakes along the way and thought, “Oh my goodness, I should share this information with other people.” So that’s a long-winded way of saying I had three introductions to personal finance, really loved it, and love to write about it.

Kevin Pho: So we always talk on this podcast about how physicians don’t get a lot of personal finance training. Now, you’re a family medicine resident, and you’re obviously much closer to training than I am. What’s the current state of personal finance education when it comes to medical students and residents?

Altelisha Taylor: I don’t think much has changed. Obviously, I wasn’t in medical school when you were, but I can tell you from my own personal experience at the University of Florida, I don’t remember getting much education at all about personal finance. I think we had maybe one or two physicians, my fourth year of medical school, come in and do a lecture or two on some personal finance stuff, but that was about it. As a resident, I’m constantly getting emails from personal finance advisors. I’m not sure how they got my information, but I get a lot of emails from them. But other than that, I don’t think there is a lot of education.

In fact, one of the reasons why I decided to start my own blog, which is careermoneymoves.com, by the way, one of the reasons I decided to start that blog was because my friends kept asking me about personal finance: “How much should I save for retirement? Should I prioritize paying down debt or investing? Should I buy a house after residency?” And I was answering those questions so frequently that I thought, “Oh my gosh, I should just write it out and put it on a website so they can access it at any point.” And that jump-started me sharing that information with other people. But in regards to knowledge that I gained from other people in medical school, I don’t think it was much.

Kevin Pho: You and I, on social media, we talk to a lot of physicians who are interested in personal finance. But let’s say, outside of our social media circles, your colleagues during training, in medical school and residency, was there a lot of interest from the medical side in personal finance?

Altelisha Taylor: Most people were in, I would say, maybe two or three different camps. There were some people like me who were interested in finance, but maybe not as interested to the point where they wanted to write a blog, but interested in that they wanted to learn about it. So there were people in that camp, and not to stereotype, but I think that for the most part, those are the people who really didn’t come from a long line of physicians and wanted to make sure that they had some way to pay off their student loans and create wealth for their families, because that wasn’t something that they had. That was something that they definitely wanted.

And then there were the people who didn’t really care. They thought, “Oh, I’m in medicine. I know I’ll get paid a lot. I’m not really worried about money. At some point in the future, I’ll worry about it, or I’ll hire somebody.” But they weren’t really as interested. So I tend to find that most people tend to be in one of those two different camps.

The people that I talk to personally, maybe some of my colleagues and friends, I don’t think anyone’s as interested in it as I am. But when we have these conversations, it’s something that they’re willing to listen to. So I think if we did teach a little bit more about it in residency and in medical school, more people would gain that knowledge and would be happy to learn about it.

Kevin Pho: So let’s now transition into the KevinMD article we’re going to talk about, “3 ways the wealthy increase their net worth.” Now, for those who haven’t read the article, can you walk my audience through it and maybe share the story of why you decided to write it?

Altelisha Taylor: As a resident who works a lot and doesn’t get paid a lot, one of the things that I’m really interested in is making sure that I’m doing things to increase my net worth and create wealth for my family, and making sure that my friends also have those same tools. As someone who isn’t wealthy currently, I’m always trying to think about what are things that I can do, what are things that my friends can do, to put us in a good position, so that once we finish residency and fellowship and all the other training, we’re in a good position.

So I actually wrote two versions of this article. The more recent one was three ways that I could increase my own net worth, and I talked about those three ways: one being investing in retirement accounts, paying down debt early, and saving a lot of money. And then the other article that I wrote was three ways that the rich get richer, and I talked about how they create businesses, how they find ways to lower their taxes, and how they invest in things like real estate and the stock market. And I can break down both of those.

So for me personally, investing in retirement accounts, I think, is extremely important. It’s one of those things that you can do even as a resident or someone who makes a median salary to set yourself up for the future. So for me, it’s investing in my job’s 403(b), and some people have a 401(k), and it’s putting at least 10 percent of my pre-tax income into that account. It’s a way for me to start investing, and it’s also a way for me to lower my taxes. And as someone who has student loans, it also lowers my student loan payment. So for me, that’s a no-brainer.

The second thing that I do is really prioritize paying off debt. Unfortunately, before I became very passionate about personal finance, I made a lot of mistakes. When I was a postgraduate student who had just graduated from Duke and I moved to D.C., I moved to a very expensive city, I didn’t make a lot of money, and I used credit cards to pay for a lot of things. So, three very big mistakes. I say all of that to say that when I entered medical school and residency, I had a lot of credit card debt, and one of the things that I made a point to do when I started residency was to pay off my credit card debt. That has just made a huge difference.

And then the third thing was saving a lot of money. On top of investing in pre-tax retirement accounts, on top of paying down debt, I think the key to building wealth is really about your savings rate. Are you able to live below your means? Are you able to really live on a budget and be self-disciplined enough to not buy everything that you see everybody else having? And so for me, it’s about saving, you know, of my income, whether it’s in retirement accounts, whether it’s in cash or a Roth IRA. It’s making sure that I’m saving a good amount of money. So that’s that article; those are some things that I’m doing personally. And I’ll pause here, because I realize I’ve just said a lot.

Kevin Pho: Now, for residents and young physicians, sometimes the amount of debt they have is daunting, right? They graduate with two to three hundred thousand dollars of debt, and they have car payments, they have mortgages, and it could be overwhelming in terms of where to start. Now, what would you say is the number one tip in terms of where they should start paying off debt?

Altelisha Taylor: Yeah, so I would start with any credit card debt, especially credit card debt that has an interest rate above eight or nine percent. I think the quicker you can pay down that debt, the less money you’re going to be spending in interest payments, and the more cash you’re going to be able to leave in your pocket each month once that debt is paid off. So for me, that was my first step: paying down credit card debt.

Once that was done, I think it depends on the interest rates of the other debt that you have. For me, it was having a car loan and realizing that I wanted to prioritize paying that off, as well as student loans. I am just like the average medical student; I graduated medical school with a ton of student loans. So for me, I prioritized paying off my car, because I’m enrolled in Public Service Loan Forgiveness, and so I’m planning to get my student loan debt forgiven. So I’ve prioritized paying off other kinds of debt.

So to make a long story short, I would say prioritize paying off credit card debt, prioritize paying off any car loans or mortgages, and make sure that you’re in some sort of loan forgiveness program, if that’s the route that you plan to pursue to get your student loans paid off.

Kevin Pho: Now, for those residents who are just too busy practicing medicine, and they may not have the personal finance interest or knowledge to do everything that you’re saying, what are your thoughts about outsourcing it to a financial advisor?

Altelisha Taylor: Yeah, so I have a love-hate relationship with financial advisors. I feel like they’re helpful. So for anything that you don’t know, you should, in my personal opinion, reach out and get that knowledge, or see if you can get someone to help you with that. In that respect, I think that they’re great. If you can find someone to help you in the areas where you are weak, I think that that is a great thing.

On the flip side, I find that some financial advisors tend to take advantage of doctors, and residents specifically. So it’s really about being careful and making sure that you’re asking the right questions of your financial advisor. I know The White Coat Investor, Dr. Jim Dahle, talks a lot about making sure that you know how your financial advisor is getting paid, making sure that they’re not overcharging for advice. And the second thing is making sure that they’re actually giving you good advice, making sure that they’re encouraging you to invest in pre-tax retirement accounts and to get term life insurance and disability insurance, and those kinds of things. So for me, financial advisors are OK. It’s just all about asking the right questions and making sure that you’re getting charged a good rate for the advice that you’re getting.

Kevin Pho: And where can residents and young physicians find those questions? You mentioned Jim Dahle, The White Coat Investor. Just off the top of your head, what are some of the specific questions that residents should be asking of these financial advisors?

Altelisha Taylor: Yeah, so one of the top questions, I would think, is ensuring that they are asking you what’s important for you. So making sure that you know what your top priorities are, what you’re trying to get out of this financial advisor. Is your priority making sure that you pay off debt as quickly as possible? Is your priority ensuring that you build wealth as quickly as possible? Is your priority saving up for a down payment on a home? What is your personal priority?

Another thing is asking the advisor how much they get paid, or how they get paid. Is it a flat rate? Is it an hourly rate? Is it a percentage under management? So, making sure that you know how your financial advisor is getting paid, so you can delineate whether or not you’re getting charged a fair price.

Another thing is to ask their opinion on life insurance and ask their opinion on disability insurance. Some of the red flags that I’ve seen are financial advisors trying to sell me whole life insurance, which I don’t think residents need, and I don’t think a lot of physicians need in general. And ensure that your financial advisor is helping you get disability insurance, which is something I think every physician needs. Every person needs some sort of disability insurance. So those are some questions off the top of my head, and you’ve just given me a great idea for another finance article. So look out for a blog from me soon, spelling this out a little bit more clearly.

Kevin Pho: We’re talking to Altelisha Taylor. She’s a family medicine resident, and she wrote the KevinMD article “3 ways the wealthy increase their net worth.” Altelisha, what’s the number one mistake that you see residents and young physicians make from a personal finance standpoint?

Altelisha Taylor: One is getting into too much debt, whether it’s credit card debt, expensive cars, or expensive mortgages, goodness. The other thing is just not prioritizing paying off the debt soon enough. And the third thing would be upgrading their lifestyles too quickly. There’s a lot of delayed gratification in medicine. We’ve gone to school for a gazillion years and spent the majority of our 20s, and sometimes our early 30s, in school. We’ve been students, we’ve been residents, fellows. So it takes a lot of delayed gratification, because oftentimes we look around and we compare ourselves to our peers who are not in medicine, who are buying homes, getting married, and going on elaborate vacations, and we want those things too. So I think it takes a lot of self-discipline to hold back a little bit, to build wealth, and to make sure that you’re paying down debt before you upgrade your lifestyle.

Kevin Pho: And my final question: What is your take-home message that you want to leave with the KevinMD audience?

Altelisha Taylor: Yes: Learn about personal finance. That is my take-home message. I think that learning about personal finance and trying to build wealth will set you up tremendously in your life. Building your net worth and having wealth gives you options. It gives you the chance to say, “You know what? I want to take a different job. I want to work a little bit less. I want to go on a nice vacation with my family.” And I think those options become available to you whenever you are able to build wealth, and the key to doing that is learning about personal finance. So that is my take-home message.

Kevin Pho: And how can people find you?

Altelisha Taylor: They can find me on my blog, careermoneymoves.com. I’m also on Instagram, careermoneymoves, and on my personal Instagram account, which is Dr. Lisha Taylor. So that is where they can find me.

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

Altelisha Taylor: Thank you so much for having me. I appreciate it.

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