Transcription – WCI – 412

INTRODUCTION

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

Dr. Jim Dahle:
This is White Coat Investor podcast number 412.

Today’s episode is brought to us by SoFi, the folks who help you get your money right. Paying off student debt quickly and getting your finances back on track isn’t easy. That’s where SoFi can help. They have exclusive low rates designed to help medical residents refinance student loans. That could end up saving you thousands of dollars, helping you get out of student debt sooner.

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All right. For those of you out there in White Coat Investor land, I hope you’re aware of our online communities. There are four of these communities. We have a subreddit. You can find this by going to Reddit and looking for the White Coat Investor subreddit, r/whitecoatinvestor. We have a forum. You can go to this by going to forum.whitecoatinvestor.com.

We have a Facebook group. If you go to the Facebook group called White Coat Investors, you have to apply and sign up and you’ll be let in there. We also have the Financially Empowered Women. This is a much smaller group, but it’s all women. If you prefer to learn in an environment where there’s all women, you can do that. Not only is that an online community, but they also have events, not only at WCICON in person, but also during the year via webinars and online meetings.

Check those out. The benefit of being in a community is you don’t feel so alone when you’re doing all this stuff. A lot of times you just have questions. And the truth is, just like going through medical school and residency, there’s somebody a year ahead of you in this process and they can answer all of your questions. You don’t have to know dramatically more than somebody else to be able to help them. Knowing just a little more than them oftentimes can help them with their questions and their support. You do not have to do this alone.

I discovered early on that the way I learn is by reading books and by participating in online forums, communities. And if that’s the way you learn as well, check those resources out. Each one of them is a little bit different. Facebook is Facebook. People tend to have a little bit shorter, sometimes a little more superficial interactions, but there’s a ton of people there. If you want to just reach a whole bunch of people, that’s a good place to be.

The subreddit tends to skew a little bit younger. Lots of students, lots of residents, lots of young attendings. And the subjects discussed there tend to be younger kinds of subjects.

The forum tends to skew the other way, mid-career, late career, retirees, et cetera. And if you prefer interacting with more people like that, you might find the forum meets your needs. And of course, the FEW is a self-explanatory group.

Check all that out and realize that you are not alone. You do not have to do this alone. Not only are there tens of thousands of people listening to this podcast, but there are a whole bunch of other people out there that are high-income professionals, just like you, navigating the same financial setbacks, looking for the same guidance, and really just wanting to become more knowledgeable, more financially literate, maybe a little more financially disciplined. Ask your questions in those communities and pay them forward.

CORRECTIONS AND CLARIFICATIONS

Okay, let’s do some corrections, clarifications, additional information, whatever you want to call these. Oftentimes we get feedback on the podcast and it’s not as easy to correct podcasts as it is a blog. Errors last a very short time period on the blog because somebody posts a comment at 07:00 in the morning. I see it at 08:00 in the morning. I’ve fixed it already. And most people that read it, unless they read it in their email, never realized that it was wrong to start with.

That’s not the same with podcasts. There’s a delay in making a podcast. It’s a lot harder to correct. We don’t generally go back and correct little things and add information to the old podcast. We do a correction in an upcoming one. So it might be four weeks before we really correct something.

TAX GAIN HARVESTING IN UGMA ACCOUNTS

This is one of those. Somebody writes in and says, “I was listening to yesterday’s podcast. It was recorded a month ago. A listener asked you about tax gain harvesting in UGMA accounts.” The writer says, “I agree with you. This is extreme optimization. Although I admit I’ve done it too, but there is an additional problem you didn’t mention. Unearned income above a certain level gets taxed at the parent’s marginal tax rate, the kiddie tax. You have to make sure the combination of tax gains and dividends and interest stays below $2,700 in 2025. Otherwise it defeats the whole thing. It might help your listener to know this before she sells all of her kids winning stock to raise their basis.”

This is a good point. I should have mentioned this. I don’t know that I said it wrong, but this is a consideration and you’ve got to realize that tax gain harvesting your kid’s massive UGMA would not normally cause them to have to pay capital gains taxes unless the kiddie tax applies to them.

This is a good thing to do. Maybe when they’re in their early twenties and they don’t have much income, they’re in college, whatever, you might be able to tax gain harvest then, but maybe not the time to do it when they’re six or at least not in an amount that’s going to be more than gains of $2,700 a year. I hope that’s helpful.

ESCROW ACCOUNTS

Okay. Another one is about escrow accounts. This one’s just kind of some additional information, but you might find it useful. They write in saying “On your most recent podcast, number 409, you mentioned that mortgages require an escrow account for insurance as well as property taxes.

I suspect that there’s some regional or risk profile analysis to determine who needs an escrow account. On both my residency and attending house purchase, they did not require an escrow account on my loans, both of which were physician loans, although 20% was put down. I found it interesting. They let a resident not have an escrow account. Also, they never mentioned the options for or against an escrow account. This was simply decided without me being aware of it until I looked at the payments amortization tables.

I suspect this may catch some people a little bit less financially savvy off guard, but it’s my natural propensity to have this in my own account and put away on a monthly basis. Anyway, I just wanted to mention it.”

Okay. That’s interesting. I thought, I don’t know that I’ve run into that. I think most of the time when you have a mortgage, that mortgage, that lender requires an escrow account, but apparently not all of the time. So, make sure you know when you take out a mortgage, when you buy a house, whether you have an escrow account or not.

An escrow account is just the lender forcing you to put money away month by month to pay your property taxes and your insurance, and then they take care of the payment as well. That’s all an escrow account is. It’s a little bit maybe convenient for some people, maybe a pain for other people. It’s just a different way of doing it.

I think most commonly it is required as long as you have a mortgage loan, but apparently that is not the case all the time. So I thought I’d mention that on the podcast as well.

POSSIBLE CASE OF PEOPLE LOSING 457(b) MONEY

We also have a Speak Pipe where somebody called in and mentioned something that I’ve said before. I’ve talked about 457(b)s. One of the downsides of a 457(b) is that it’s technically not your money yet. It’s your employer’s money. So if your employer’s financially on the rocks, you might not want to put money in there. Because it’s accessible to your employer’s creditors. Now, if the employer went under, you would be one of those creditors. And truthfully, over the years, I’ve never actually heard of a case of somebody actually losing money from their 457(b) because something happened to the employer.

Now, somebody wrote in to mention that this might be happening. It hasn’t actually happened yet, but it might be happening. So let’s listen to that Speak Pipe.

Speaker:
Hi, Jim. I’m a physician in Massachusetts. I’ve heard you warn people about the dangers of 457 plans, but I’ve also heard you say that you’ve never heard of anyone losing their money in one.

I just want to let you and your listeners know about a case where people could end up losing their money. Stewart Healthcare was a large multi-state healthcare system that employed thousands of physicians before they went bankrupt last year. I was not a Stewart employee, but I was talking to one who was telling me how they’re seeking legal advice about how to get their money out of the deferred compensation plan.

I read online that there is some $60 million in the deferred compensation plan that is currently being litigated over by the creditors of Stewart and physicians that contributed to them. Thanks for all you do.

Dr. Jim Dahle:
Okay. This one isn’t done yet. Again, I suspect all the docs are going to get their money, but keep me updated. Those of you out there working for Stewart or who were working for Stewart, let me know if you end up losing 457(b) money. I would like to hear about it. There’s not much I can do to help you if that’s the case. Realize those of you with 457, that this is a risk of them. It’s deferred compensation. It’s not yet your money.

The fact that it’s Stewart makes it more near and dear to my heart. For those who aren’t aware, Stewart owned my hospital for a couple of years, two or three years while they gradually went bankrupt. And we got to see firsthand the downsides of a terribly run hospital as all of a sudden capital started drying up.

I remember one day the CT scanner broke and I said, “Well, we’ll call the CT repair guy.” And the answer I got from the X-ray techs was “They won’t come. They haven’t been paid in six months.” And imagine running an emergency department without a CT scan. It doesn’t work very well.

I’m not thrilled right now with Stewart as a company. And it’d be interesting to see how that all ends up, but hopefully at least everybody with money in the 457(b) ends up getting it.

WHEN A TOXIC WORK ENVIRONMENT IS LEADING TO BURNOUT 

Okay. Speaking of maybe not so awesome employers, I got a question by email. It said this, “My question pertains to mitigating employer risk and finding alternative streams of income. I work as a hospitalist, same hospital I did my residency training in. When I interviewed and signed my contract, the job and terms were great. But before starting my job, there was a change in management. The administration tried to argue that our contract had implied coverage of the ICU and procedures and cross coverage that wasn’t written in the contract. And after some pushback in negotiations, they agreed to give us a small pay increase and limit the coverage to only a few shifts each month.

The contract wasn’t amended, but over the next year or two, they’ve mandated us to cover more shifts than initially agreed upon. They changed our schedule and location a few hours before they started the shift. Despite us voicing our concerns and working with the new management team, we only get empty promises.

It seems they’re trying to phase out our position entirely and expand daytime hospitalist hours with swing shifts and APC overnight coverage. We’re working less hours and seeing fewer patients make about half of our usual RVU based salary. The job and pay is now terrible. And I wonder how doctors can protect themselves against bad employers and the loss of their job.”

Now, here’s where it hits this doc personally. “I work in a small/rural area. There’s not a lot of hospitals nearby. The nearest one is an hour drive away and moving would probably mean selling our home and being further away from family. I explored the possibilities of locum tenens, outpatient clinic, urgent care, going to fellowship, but none was particularly appealing.

We considered trying to learn real estate, self-publishing, expert witness work, or corporate consulting, but we would need to invest a lot of time learning the field. The work also seems inconsistent, risky, and less profitable. Better as a side gig than a full-time job.

Switching to a daytime position in the same hospital as possible, but I worried that the administration will continue to push more responsibilities and limit pay. We’re looking into hiring a contract attorney to see if we can negotiate a better deal or be released from the contract without paying back or sign on bonus.

I know there are many doctors who find themselves in a similar situation. We’d like your opinion on how to best approach this. Should we fight to keep a good job at a place that doesn’t seem to value their employees? Should we leave our life and home behind in search of a better job somewhere else? Should we try to find a new job, medical or non-medical, in the same city? We have a good emergency fund, no debt, and are still living like residents, but are too young to retire. What would you do in our situation?”

Okay, I think this sort of thing happens to lots of docs, and it’s unfortunate. Sometimes jobs get bad. When you treat docs like labor, they start to act like labor. You treat your employees crappy, where do they go? They go somewhere else and work for somebody else. And you won’t have employers, or you’ll have crummy employees that can’t get a job at other places.If you’re hoping on keeping them there just because they have family nearby, or they want to live in that small town, that doesn’t seem like a great long-term strategy.

What should this doc do? Well, you got a toxic job. The job either needs to change, or you need to go to a new job, or you’re out. The biggest financial risk in your career is burnout. You need to make all of your career decisions with the number one priority being career longevity. It’s pretty wild. This is a doc that’s still in the live like a resident years. And is considering leaving medicine, considering doing real estate, self-publishing, expert witness work, corporate consulting because of a bad job.

Well, this doc probably needs to keep working in medicine. I’d keep this job for now. Maybe switch to days if that’s a little bit less toxic, but start looking for a better job. Don’t quit and then look for a better job. Look for the better job, get the better job, then quit.

Does that mean you’re going to have to move your family? Probably, probably does. I’m sorry. And I hope this house you’re in isn’t a big fancy doctor one that you just bought a year ago. I hope it’s the one you were living in as a resident or something. But it is a problem. You go to a job, you think the job likes you, you like the job, so you buy a house, then the job changes. Well, what are you going to do? You got to adapt, you got to roll with the punches.

But at this point in your career, retiring is not an option. Switching to a side gig you haven’t even started yet, that’s not a good option right now. Sure, work on side gigs, build up side gigs. Obviously, the side gig worked out really well for me. Now there’s 18 people working at my side gig. Sometimes that happens. But most of the time, a side gig stays a side gig. And the best way for most doctors to make money is doctoring.

This doctor needs another doctor job. And if you can’t force this job to get better, you probably need to go somewhere else. Now that might be locums, mentioned you looked into that. And then you can still live in the place you have, you can be near your family, and you’re just gone for a week or two a month doing locums somewhere else. Maybe it’s commuting an hour away for a while, until you line up another job, but most likely, it’s probably moving.

Lots of people don’t live in the same town as their family, because their job doesn’t let them live in the same town as their family. And while that’s unfortunate, it sure beats being in a job that’s going to burn you out in two years, or a job where you’re making half of what you can make somewhere else.

You can buy a lot of plane tickets home, you get a net jet subscription and come home for half a doctor’s salary. So it’s just not okay to be in a place where you’re getting making half of what you’re really worth. It sounds to me like a change is coming. I’m sorry to hear it. But there certainly are toxic jobs out there. It doesn’t mean you shouldn’t be a doctor, though.

Now, if you want to learn how to do real estate, and you want to do some consulting work, or you want to do some medical legal work, great, start getting into that stuff. But you can’t walk out of your doctor job today and support your family and pay off your student loans and save for retirement with a medical legal job tomorrow. It just doesn’t work that fast. It takes time to build that business up.

All right, let’s take a question off the Speak Pipe.

BUYING INTO YOUR BUILDING WITH IRA MONEY

Edward:
Hi, Jim, this is Edward from the southeast. Thank you for all that you do. I have the opportunity to buy into a soon to be constructed surgery center. There will be two separate buy-ins, one for real estate and one for operations. Each buy-in is relatively low as it’s a new center and both expect to pay out on K1 dividends. I’m considering buying into at least the real estate portion using my Roth IRA. One of the servicers on your recommended page believes they’d be able to handle this kind of transaction.

Assuming the real estate return is comparable to the total stock market return, does it make sense to put this kind of asset into a Roth IRA and avoid paying taxes on the dividends? Would the appreciation on my investment also be tax-free when I sell in retirement? I can’t see that there’d be any hiccups with stock laws or anti-kickback laws. Is there anything else I’m missing? Thanks for your help.

Dr. Jim Dahle:
Okay, lots of questions there. Let’s see if we can answer them all. First of all, should you do this? Is it a good idea to buy into a surgical center? Most of the time, the answer is yes. Most of the doctors I talk to that buy medically related businesses, whether it’s emergency docs buying an urgent care or nephrologists buying a dialysis center or pathologists buying a lab or radiologists buying an outpatient imaging center or surgeons and anesthesiologists getting some sort of an ambulatory surgical center or GI docs opening up their own suite or whatever.

This is often the best investment doctors ever make. These often work out very, very well. Now, every one of these is individual and needs to be evaluated on its own merits. Owning your own practice and your own real estate is generally a good thing. I’m a huge fan of ownership. Not only does it often pay off really well with a great return on investment, but it gives you control and that control matters when it comes to stopping burnout.

If this were me, I’d be trying to buy into both the real estate and the operations. I suspect both of them will probably end up being good investments, especially if you’re able to be involved in them for the long run. And you’re talking about it being a relatively small amount of money to buy in, great. Yeah, you’ll have to deal with the K-1s, but this thing’s in your state already. You don’t have to file any other state tax returns. Maybe you got to pay somebody to prepare your taxes, but you’re probably doing that anyway. That’ll cost you a couple of hundred dollars more because you got some more K-1s, but that’s not a big deal. So I would probably try to do this.

Okay, the next question is, do you have to worry about Stark laws and stuff? Well, you need to understand that there are rules and there are laws about self-referral, but for the most part, there’s a whole bunch of ambulatory surgical centers out there. Doctors are clearly allowed to own these facilities without being in violation of the Stark laws. You just got to follow the rules like everybody else does. I wouldn’t let that keep you from making this investment.

Now, should you put it in a Roth IRA? Now this gives me a lot of pause for a couple of reasons. Number one, putting equity real estate in IRAs, not 401(k)s, but IRAs introduces unrelated business income tax if they’re leveraged. Basically you have to pay tax on them despite them being in an IRA, which is not awesome. But that does get you out of capital gains taxes and having to pay taxes on the income as it comes in. You just have to deal with the unrelated business income tax, which is a little bit complicated.

Because of that, in general, I don’t love putting equity real estate in retirement accounts. You also don’t get the benefit of depreciation shielding that income from taxation like you would in a regular old taxable account, non-qualified account or outside of your retirement account.

When I think about putting real estate in retirement accounts, I’m usually thinking of publicly traded real estate. We’re talking REITs, something like the Vanguard REIT Index Fund, VNQ is the ETF for that fund, or like a debt real estate fund. We’ve got a couple of debt real estate funds inside retirement accounts.

Debt real estate is terribly tax inefficient. It’s a great thing to have inside a retirement account if you’re allowed to. Now, obviously, it has to be some sort of self-directed retirement account, but that’s been a great thing for us.

But the equity side, I usually try to keep the equity side in the taxable area. Now, if all your money is in retirement accounts, then you may have to decide between not investing in the real estate or doing it inside a retirement account. But I don’t know that that’s your situation. You didn’t mention that. Hopefully, that gives you my thoughts on your opportunities with the surgical center.

We talk a lot here at the White Coat Investor about private investments. This question was about a private investment, one that you’ll be involved in, presumably. The next question is also about real estate, which is typically a private investment, at least outside of something like VNQ.

But there’s a lot of merit to private investments. There’s a lot of cool things about them, a lot of opportunities out there. In fact, the actual number of stocks in the US stock market is going down because investments are not going public at the same rate they used to. They’re being taken private at a much higher rate than they used to. And so, there’s a big market out there for private investments.

But if you are investing in the US stock market, there’s a pretty darn clear way to do that. And I’m surprised that I keep running into people who are not aware of the best way to invest in publicly traded stocks.

The best way to do this is to invest in index funds. I know a lot of you have been listening to this podcast for a long time. This shouldn’t be news to you, but this is news to lots of people. Today, I’m recording this, which is March 18th. I published a blog post that I actually wrote like a year before then. But basically, the point is, when it comes to publicly traded stocks, the data is very clear. Managers don’t beat markets.

Let me explain what I mean. I quoted in that post a fellow by the name of Mark Hebner, who wrote a book. His book was called Index Funds: The 12-Step Recovery Program for Active Investors. And he pointed out the behaviors that define an active investor. These include owning actively managed mutual funds, assuming prices are too high or too low, picking individual stocks, picking times to be in or out of the market, picking a fund manager based on recent performance, picking the next hot investment style or sector, disregarding high taxes, fees, and commissions, investing without considering risk, investing without a clear understanding of the value of long-term historical data.

We’re talking about market timing. We’re talking about actively managed mutual funds. We’re talking about picking stocks. None of those are a great idea. The data is very clear. And if you haven’t seen the data, I would spend some time looking at it. You can look at it using something like the S&P’s SPIVA return. They publish this every six months that shows how many US stock funds are underperforming their benchmark, the index, essentially.

And if you look at any long-term time period, the answer is 90 to 95% of them. One out of 20 beats the market in the long run, and typically not by very much. And maybe not after taxes, and certainly not after taxes and the value of your time. It’s just a terrible way to bet. You are much better off getting the market return, beating 95% of other investors, and sleeping well at night.

Now there’s lots of books out there. If you’ve never read one that convinced you that index funds were the way to invest in US stocks, I would recommend you do so. These books could be something like those by Jack Bogle, like Common Sense on Mutual Funds. Those by Burton Malkiel, A Random Walk Down Wall Street is his most famous one. Just about anything by Rick Ferry, All About Index Funds is maybe the best known one.

William Bernstein. If you want a doctor’s writing, check out The Investor’s Manifesto. Alan Ross, How a Second Grader Beats Wall Street. Bill Schultheis wrote The Coffeehouse Investor. Investing Made Simple by Mike Piper. The Simple Path to Wealth by J.L. Collins. Unconventional Success by David Swenson.

You name it. Any of these books are going to show you the data and demonstrate and convince you that this is the way to invest in the US stock market. That doesn’t necessarily mean you shouldn’t invest in real estate on the side, or you shouldn’t buy into your ambulatory surgical center.

But for the money that you’re investing in stocks, publicly traded stocks, both in the US and internationally, the best way to do that is to buy and hold and rebalance a static asset allocation of low cost, broadly diversified index funds. Each of those terms I just said has a specific meaning. If you don’t know what they are, you need to look them up and understand that statement.

But the bottom line is if you’re buying stocks, you ought to be buying them via index funds. The data is very clear. Don’t be ignorant of it. And if you think it doesn’t apply to you, make sure you’re not just being overconfident. Because the truth is, if you can beat the market, or pick managers that can beat the market, you shouldn’t just be managing your own money. You should be managing billions. And you should become a gazillionaire and solve some serious problem in the world, like curing malaria, a la Bill Gates. If you really do have that skill of beating the market, your skills are so rare, that you should not be using them just for your own portfolio.

Okay, let’s take that real estate question out the Speak Pipe now.

CAN YOU DO A 1031 EXCHANGE FROM A DIRECT REAL ESTATE SALE INTO A SYNDICATION?

Warren:
Hi, Jim. This is Warren from the Southeast. I’m a longtime listener and just want to thank you for everything you do for us. My question involves real estate. I have been a part-time real estate direct investor. I own a few small single family rental properties. I’d like to know if it’s possible to do a 1031 exchange from a direct real estate sale into a syndication.

I’ve tried to read up some about this online, and it appears that it may be possible as long as the syndication will accept your ownership as a tenants in common. I’m not sure if that is true. I’m not sure if any of your preferred providers allow that sort of thing, and if that’s even possible. I really appreciate input on this. Thank you very much again. Bye.

Dr. Jim Dahle:
Okay, great question, Warren. 1031 exchange. What’s the point of a 1031 exchange? You’re swapping from one real estate investment to another real estate investment that’s relatively similar. And that’s a very broad definition of relatively similar, by the way.

It’d be awesome if you could do this with stocks or mutual funds. You can’t. When you sell one mutual fund or one stock to buy another one, you got to pay capital gains taxes on it. But you can exchange real estate as one of the things in the tax code that really benefits real estate investors. You can buy a house and own it for a few years and exchange it for a duplex and own that for a few years and exchange that for a quadruplex and own that for a few years and exchange it for a small apartment building and then exchange that into a larger apartment building.

You can do all this. And not only do you never pay capital gains taxes, especially if you die still owning that large apartment building and your heirs get a step up in basis at that, but you don’t pay the recapture of the depreciation either. So you’re depreciating and exchanging and depreciating and exchanging and depreciating and you die. And nobody pays capital gains taxes, not your heirs, not you. Nobody pays recapture of that depreciation. And yet your heirs get the basis which is the value on the day when you die.

And so, it’s a pretty awesome, very tax efficient way to invest in real estate is generally a good thing to do. It’s a pain though. You have a time limit for which you got to identify the new investment. You got to complete the purchase of the new investment within like six months of the time you sell the old one. It’s got to be an exchange. It can’t be you sell one now and you buy another one in 10 years and you call it an exchange. That’s not going to fly with the IRS.

The question is, you got some appreciated properties that you’ve depreciated a whole bunch. You don’t want to pay the depreciation recapture. You don’t want to pay capital gains taxes. What are your options? Well, you got a few of them. One, you can die. If you die, still own it. Your heirs get a step up in basis of death. Nobody pays capital gains. Nobody pays depreciation.

Another option is you can exchange it into another property. And then nobody pays capital gains. Nobody pays depreciation recapture. But can you exchange it into a syndication. Well, what’s a syndication? A syndication is like a hundred investors going and buying a big 200 door apartment complex. That’s a syndication. Maybe your share of it is $50,000 or $100,000 or something like that. But it allows you to have these economies of scale, this big, huge apartment complex, even though you’re only putting in $50,000 or $100,000.

Can you do that? Yes. But guess who has to work with you to do it? The syndicator has to work with you to do it. So you need to ask that question to the syndicator. Now, most of the advertisers we have here at White Coat Investor, most of the people on our real estate list, they are fund managers. Because I think most people investing in private real estate benefit from using funds. Most White Coat Investors are probably not going to be better off picking individual syndications.

We do have a couple of companies on there that do individual syndications. It would not take much for you to pick up the phone, call them both and ask them, “Hey, can I 1031 exchange into this syndication that you’re selling right now?” Because when they’re doing a syndication, it’s only available to invest in for like three months. Then they’re on to the next one. That’s the way it works.

I just pick up the phone. I would give them a call. I have not called them and asked each of them this particular question of whether you can take your three duplexes you have in some small town in Iowa and exchange them into the syndication. They will work with you on that. I think the answer most of the time is no. I think most people don’t want to hassle with that. But there are some to do.

There is also what’s called the 721 exchange. Basically you are exchanging your property that you own into REIT shares, essentially. And so, that’s kind of cool. That can be done with, some REITs will allow you to do that. So, look into the possibility of that as well.

Another thing that’s kind of beginning to sunset a little bit is the concept of an opportunity zone. An opportunity zone fund is basically where you’re investing money someplace where money supposedly needs to be invested. And so there’s some additional tax breaks associated with, and that can help you to put off some of your capital gains taxes for a while. It’s not nearly as good as the 1031 exchange, but it might help you with your problem, which is you don’t want to pay taxes on the sale of this property you no longer want to own.

And then of course, the last option is to just sell it and pay your stupid capital gains taxes. No big deal. Now you have your money, maximum flexibility. You can do whatever you want with it. You can spend it. You can invest in something else. You invest in stocks. You invest it in more real estate if you want. You can always just sell and pay your taxes. That’s not the end of the world either. Congratulations on making money. Now you get to pay taxes. Welcome to how the rest of the world works.

I hope that’s helpful, Warren. I would ask them individually if that’s something you want to do, and maybe it would be worth the hassle for you and them to arrange that tenants in common structure so that you can do this.

QUOTE OF THE DAY

All right, our quote of the day today comes from Morgan Housel, who said, “Use money to gain control over your time. Because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.” Well said, Morgan. And you should check out Morgan’s book, by the way, if you’ve never read it. I believe it’s called The Psychology of Money. One of the best books on personal finance I’ve ever read. It’s one of those things you read it and you’re like, “Ah, I wish I’d written this.”

He just did a really nice job on that. I like Morgan. He was a WCICON speaker in 2020. And unfortunately, he was one of the 25% of our speakers that weren’t able to make it to that conference. He gave his talk virtually for the conference, but it was great to work with him. I don’t know that we can afford having Morgan Housel anymore at WCICON, but he’s a great person. I love the way he thinks.

Okay, let’s take another one off to Speak Pipe.

CONSTRUCTION LOANS FOR NEW HOME BUILDS

Andrew:
Hi, Jim, this is Andrew from the Midwest. Longtime listener, first time caller. First off, thanks for all you do for this community. I’ve been listening to you for 11 years and it’s made a very positive impact on my financial life.

For my question, curious if you could speak to construction loans for new construction home builds. We are considering whether to have our builder carry the construction loan or for my wife and I to do so. Some potential advantages that I’ve read for carrying this are that the transaction price of the house is unknown. So, nosy neighbors and friends can’t look. The county assessor also doesn’t know this information. Property taxes may be lower in the first few years and then you can deduct interest paid on the construction loan if you itemize deductions.

On the contrary, it seems builders may not fully deduct the cost of interest paid from the home price and it may reduce incentives for builders to complete projects in a timely fashion. Any general guidance here or specifics that I’ve misstated or I’m overlooking? Thanks in advance.

Dr. Jim Dahle:
I don’t know if anybody’s ever asked me this question before. I don’t even think I realized it was possible to get the builder to carry the loan on it. I assure you that they’re not going to do that for free. It just doesn’t make any business sense for them to do that for free. They are going to make sure that they come out ahead if they’re doing that.

Whereas if you take on that risk, you take on that hassle of having the builder loan yourself, the construction loan yourself, that’s probably going to work out best for you financially most of the time, I would guess. I didn’t even know it was really much of an option though.

A lot of times what people do is they buy the land with cash they have and then they borrow against the land to build the house. And then when it’s all done, they wrap it all up in a brand new mortgage on the entire thing. I think that’s what’s done most commonly.

But I would look at all your options. If the builder’s willing to take the loan and it seems to work out better for you financially, fine. It sounds like they’re taking on all the risk. Maybe they have a little more incentive to get it done fast and get the house into your hands so you take over the payments on it. That sounds like it might be a great option. I would explore that. I would also look around and see if you can get a particularly good rate or particularly good terms on your construction loan, then maybe you don’t want to do that.

I would look into both options. I don’t know that there is a definitive way that you should or shouldn’t do this. But in general, most people who are building a home should be in a pretty good financial position. This is generally not the house you’re putting yourself in six months out of residency when you still owe $400,000 in student loans and you only have $20,000 to your name.

This is not the time to do a new home build. This is usually a few years down the road. You can’t find anything that you want. And you’re like, “I guess we’re going to have to build.” So you’ve got to have your current mortgage. And now you’ve got another house that’s going to take nine months or 12 months or whatever to build. You’ve got to be able to afford to carry both of them for a year. Hopefully you have a big, huge down payment. Maybe you can even buy the land with cash.

Those are the sorts of situations where it makes sense to build your brand new customized home. But you’re a ways down the road most of the time when you’re doing this and hopefully quite a bit wealthier than the typical first-time home buyer. I hope that’s helpful. Good luck with your new home. I hope it’s awesome.

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Don’t forget about our social and online communities. We have a subreddit. We have the WCI forum. We have the White Coat Investors Facebook group. We have Instagram, which is a bit of a community as well. Lots of great comments and feedback there in this group. I don’t know what it is, 40,000, 50,000 people or something right now that are following us on Instagram. And of course, the Financially Empowered Women. Check out the FEW group as well.

Thanks for those of you leaving us five-star reviews. Thank you for those of you telling your friends about this podcast. It does help us to spread the word. A recent review came in from dlcwm6 who said, “Thank you. I’m so grateful for all this podcast has taught me. I’ve been listening since I was in residency about five years ago and the impact WCI has made on my personal and financial life has been profound. Thank you for all you have done for my family and I.” Five stars. Awesome, thanks for that review. Reviews do help other people to find the podcast. Thank you for doing that.

We’ve come to the end. You can do this stuff. It’s not that complicated. I promise this is way easier than whatever you’re doing day-to-day that you spent a decade learning how to do.

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

DISCLAIMER

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

Transcription – MtoM – 215

INTRODUCTION

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

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 215 – Dentist pays off his HPSP contract.

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By the way, those of you who just matched, congratulations. If you did not, I’m sorry and I hope that good things happen to you as you scramble or apply again next year to figure out what to do with this next year and that your career works out in the way you want.

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All right. We’ve got a great interview today. It was another great milestone I don’t think we’ve ever had on this podcast before, but stick around afterward. We’re going to talk for a few minutes about why your credit score is not your adult GPA.

INTERVIEW

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

Stephen:
Thank you for having me.

Dr. Jim Dahle:
Tell us what you do for a living and how far you are out of school.

Stephen:
I’m a general dentist in the United States Army, and I am just shy of five years out of school.

Dr. Jim Dahle:
Okay. Did you do any residency training or go straight in after finishing school?

Stephen:
I did a one-year advanced education in general dentistry residency through the Army right after graduation.

Dr. Jim Dahle:
Okay. But that didn’t count toward your payback.

Stephen:
No, unfortunately it was a neutral year. I ended up sticking around an extra year in the Army.

Dr. Jim Dahle:
Okay. For those who don’t know about the Health Professions Scholarship Program, it’s a little bit misnamed. It’s a contract program. They pay for four years of school and give you some sort of a living stipend. And then you typically owe them a year for a year. And so, if they pay for four years of dental school or four years of med school, you owe them four years as a practicing dentist, as an attending physician, et cetera, above and beyond whatever type of postgraduate training you did either with them or not with them.

So let’s go back in time a little bit. Well, first of all, let’s talk a little bit about what we’re celebrating because you got something big coming up soon. Tell us what we’re celebrating today.

Stephen:
In a little over a month, I’ll finish back my HPSP payback and I will be on to practicing as a civilian.

Dr. Jim Dahle:
Yeah. Pretty awesome. Now you said this is a month from now. As we record this, we’re at the end of March. Why are you done in a month? Shouldn’t you be done in like three months? Did you save up a whole bunch of terminal leave or something?

Stephen:
I did. I was thinking about whether it was best for me to take my leave as I went or to save up a bunch and exit early. And the best thing for me in my situation is to get out a little bit earlier instead of sticking around until the end.

Dr. Jim Dahle:
Yeah. This is what I did too. I saved up a month of terminal leave. It was easy to get one month. It was a little bit harder to get two months. So I saved up one month, but I remember how happy I was driving off base, leaving that town after four years in the military, deployments hanging over my head the whole time, having to dress the way I was told to dress and live where I was told to live and salute who I was told to salute. I was squealing as I drove that U-Haul away from the base. And so I’m pretty excited for you too to be finished with your payback. But I’m curious how you’re feeling now looking forward to it here in a few weeks.

Stephen:
I don’t know if it’s quite hit me that it’s real that I’m able to get out quite yet. It’s something I’ve been looking forward to for a long time and I’m very excited. I can’t wait.

Dr. Jim Dahle:
Let’s go back in time a little bit. Let’s go back in time to when you just been accepted to dental school and you looked at the price tag. And you realized, “Well, this is really expensive stuff.” And you had a decision to make. Tell us about making that decision.

Stephen:
My undergrad had had Army, Air Force, Navy recruiters come and speak to the pre-health club several times. And it was something that sounded like an interesting adventure, but nothing I considered too seriously. And then once I interviewed at my state school, which is where I ended up going and seeing the cost of attendance breakdown, I was like, “Man, I don’t know if I want to take care of all this with loans.” So that’s kind of why I went in that direction.

Dr. Jim Dahle:
How much do you think you would have owed if you had paid for your schooling with loans?

Stephen:
Oh, that’s a really good question. Probably $300,000 to $325,000.

Dr. Jim Dahle:
That’s actually not too bad these days for dental education, but we got to keep in mind we’re talking about a date nine years ago. You spent four years in school, a year in residency, and now four years in the military. Well, tell us about what was good about your time in the military. What did you enjoy?

Stephen:
I received some really great training in my one-year residency. I’ve made some great friends, had the opportunity to meet all kinds of amazing people from different walks of life. It’s been a great opportunity to learn and grow as I started practicing. I’ve had some opportunities to do things I would have never pictured myself doing. I was an AM attached to the 82nd Airborne, so I’ve been jumping out of airplanes. I volunteered to go to Africa for a humanitarian mission. A lot of really good came out of this besides just the financial.

Dr. Jim Dahle:
Yeah, that’s pretty awesome. I would have loved to jump out of airplanes while I was in the military. It was not an option for me. That would have been a lot of fun, I think. And the humanitarian bit to Africa sounds way better than the three weeks I spent in Chile not allowed to leave the base where we built the 10th hospital. Tell us about where you’re stationed during your active duty time.

Stephen:
I did my one-year residency at Fort Benning in Georgia, and then I’ve spent the rest of my HPSP payback at Fort Bragg in Fayetteville, North Carolina.

Dr. Jim Dahle:
Okay, in the southeast most of that time. Did you have any deployments? Did you go spend any time overseas other than that humanitarian trip to Africa?

Stephen:
I have not. Being with the 82nd Airborne, they don’t have any set deployments. It’s more of a response force. I’ve been kind of on call, so to speak, for several months at a time in case we get activated, but I’ve not been sent anywhere.

Dr. Jim Dahle:
Yeah, what a difference between 20 years ago and the ops tempo of everybody’s being deployed all the time back when I was in. Very different. Okay, tell us about the downsides. What did you not like about paying for your schooling using the HPSP contract and about your time on active duty?

Stephen:
Yeah. For me, the cons were kind of where I ended up living. I didn’t mind Georgia, but I quite frankly have not enjoyed living in Fayetteville, North Carolina. I can’t wait to sign out and drive as far away as I can. And then I have a decent amount of freedom to practice how I want, but there’s some issues with getting the exact supplies and materials that I think might be best for patients.

And then the other thing would be we do a lot of training and we’ll go to the field for weeks, sometimes up to a month at a time. And that really can disrupt your personal life, especially if it’s on shorter notice, it’s a little hard to plan.

Dr. Jim Dahle:
I think you need to describe for our listeners, because I have a pretty good idea what you’re talking about when you’re talking about going to the field to do some training. Tell them what you’re actually doing when you’re going to the field to do some training.

Stephen:
Yeah. What we’ll do is we’ll set up the role two, which is like a field hospital, several tents, we’ll set it up and then we’ll run patient scenarios. The dentist is usually the triage officer. We simulate taking a bunch of casualties, I’ll go up front and triage. And that’s usually a pretty intensive process. And then if there’s any dental emergencies that walk in, I’ll take care of that because we have a fully functioning setup. It’s a lot of downtime, a lot of just sitting there reading a book or hanging out with friends, but punctuated by periods of very intense activity for quite a while as well.

Dr. Jim Dahle:
Yeah. Gas mask on, gas mask off, gas mask on, gas mask off.

Stephen:
Absolutely.

Dr. Jim Dahle:
I’ve been there doing field training before. It may not be what people are super excited about doing with their career. And one of the I didn’t enjoy all that much about my time on active duty. Obviously, it’s important to do training. If you’re ever called upon to actually be the triage person in that situation, you need to know how to do it. But it’s not exactly super fun times.

Okay. Well, tell us, what’d you make while you’re in the military? What’d they pay you?

Stephen:
You accrue more time in service, the pay goes up. I think my first year, before taxes, about $104,000, $105,000. And then this past year, like $125,000-ish.

Dr. Jim Dahle:
That’s all in, that’s counting your BAS, BAH, everything?

Stephen:
Yes.

Dr. Jim Dahle:
All right. I don’t claim to be the expert on what dentists make, but that’s significantly less than the average dentist is making out there. Even if you’re an associate in somebody’s clinic, you’re probably making more money than that. Have you run the numbers on this? Did you come out ahead, getting your stipend and all your schooling paid for and then making less money for four years? Or do you think you came out behind?

Stephen:
I think I came out ahead. I did the numbers once or twice when I first joined. And to be able to save for retirement and invest money, like I have been, in order to live a similar lifestyle and still do those things and pay off the student loans in about four years, I would probably have been, I think I calculated needed to make $325,000 to $340,000 pre-tax. That’s what I would have needed to make in order to pay back my loans and have everything else be the same. And that’s significantly higher than the average general dentist. I would say I came out ahead.

Dr. Jim Dahle:
Yeah. Being done with your student loans as a dentist in four years is unusual. You know, most dentists are carrying their student loans longer than that, and you’re out of debt. You have a time debt, not a money debt. You’re done in four years. My classic two to five year live like a resident period, you’re done. And the nice thing about that is that’s kind of fixed. So if people are worried they don’t have maybe the discipline or whatever to make huge payments to their lender over that time period, it does give them the option to know that, “You know what? This is done in four years.” Or if you save a bunch of terminal leave, it’s done in three years and 10 months or whatever. That part is a benefit as well.

Okay. There’s somebody out there sitting there staring at dental school. They’re staring at med school going “This sounds like an adventure. I’d like to jump out of airplanes. I’d like to go get stationed in Germany. I’m not thrilled about owing $400,000 or $450,000 in student loans.” What advice do you give that person?

Stephen:
I would kind of echo what I’ve heard you say on your podcast multiple times. It ended up working out well for me financially, but it’s really the best deal if you want to be a healthcare provider in either the army or whatever branch. I think it was kind of undersold to me, the army aspect of it. I was very much sold by the recruiter. “Oh, you’re just going to be a dentist, like a regular clinic, and you won’t have loans, it’ll be good.” And I don’t think that was done maliciously, but that definitely wasn’t the case.

Dr. Jim Dahle:
Your recruiter hadn’t been to dental school, nor been a military dentist, huh? That’s interesting.

Stephen:
Yeah.

Dr. Jim Dahle:
Yeah. It is part of the issue. The recruiters are generally not college graduates. They haven’t been to undergraduate for four years. They certainly haven’t been to med school or dental school for four years or done a residency. A lot of them didn’t even work in healthcare in the military. And so, you shouldn’t expect awesome information from the recruiter, is what I’ve generally told people. And I tell them, you got to talk to an attending in your specialty or a dentist doing what you want to do, who’s on active duty right now. That’s who you need to talk to. That’s who you need to get the information from. Would you agree with that?

Stephen:
I would 100% agree. I’ve had the privilege of talking to several pre-dental students who are considering the scholarship. And I’ve been very honest about the good and the bad for me personally. I think out of the handful of students, some have applied for the scholarship and accepted it. Some of them have decided that’s not for them. But I think having that perspective really would have helped me make that decision.

Dr. Jim Dahle:
Yeah. We don’t want people who feel like they got conned and joined the military. They’re not going to be happy while they’re in there. They’re not going to be given good care. They’re going to make the rest of us miserable. So you might as well have people know what they’re getting, go in with their eyes wide open. That’s the way I look at it.

I think the stipend now is not insignificant. I think it’s $2,300 a month or something now while you’re in med school. It’s significant money. Katie and I, back then it was like $900. That’s how old we are. We not only finished not owing any debt for medical school, we had cash in the bank. We took money with us. We had a great trip to Italy off some of that money.

And so, there’s something nice to be said for having an income during medical school, during dental school, for sure. And then typically as a resident, you’re making more. Obviously more as a dentist, because most dentists are paying tuition during their residencies. But more than medical residents are being paid, you’re being paid maybe 50% more while you’re a resident. There are some significant upsides on the front end. The big downside is you just don’t have control necessarily over your career. And of course, you generally get paid less than you would make as a civilian while you’re on active duty.

All right. What’s your next financial goal? What’s next for you?

Stephen:
I would like to keep working towards financial independence and not necessarily to retire early, but to make work optional and be able to maybe do more humanitarian work or mission work with dentistry, as opposed to feeling like I have to practice to get paid.

Dr. Jim Dahle:
Yeah. It’s pretty cool. What country did you go to in Africa when you went there?

Stephen:
Ivory Coast.

Dr. Jim Dahle:
Ivory Coast. Very cool. Now, has there been anybody else along for the ride? Do you have any kids or significant other or a spouse?

Stephen:
Nope. It’s just been me.

Dr. Jim Dahle:
Makes it a little bit easier to look back on it. There’s nobody else’s regrets or expectations to deal with for sure. But certainly before signing up for this sort of thing, if there is somebody else in your life, this is going to affect them as well, right? In your case, it was a nine-year journey.

Stephen:
Absolutely.

Dr. Jim Dahle:
In mine, I think it added up to a little bit more than that because I spent a little more time in residency. And for some people, it’s an entire career. Now, how come you decided you were going to get out instead of sticking around for 20 years, get a pension, et cetera?

Stephen:
With the new retirement system, the pension isn’t as good as it used to be. That played a factor. Honestly, being able to have more freedom over where I can live and the Army would require for general dentists, they require more training, whether that’s a two-year comprehensive dentistry residency or specializing.

I’m quite happy as a general dentist. I wasn’t particularly interested in the extra training. I don’t think that would help me reach my career goals. And then also I would really enjoy traveling and some of the restrictions with paperwork and other things that are involved in making trips overseas. Just the more freedom to live my life as I would like it to be lived versus how I’m told it needs to be.

Dr. Jim Dahle:
Yeah. Freedom isn’t free. And the reason we all have freedom is because there’s people like you who are willing to give up their freedom for a few years in order to protect it. Thank you very much for your service. Thanks for being willing to come on the podcast and share your experience with others and celebrate with us and help us inspire somebody else to figure out the best way for them to pay for their medical or dental education and good luck with the rest of your career.

Stephen:
Thank you.

Dr. Jim Dahle:
I hope you enjoyed that interview. It’s always fun to do new milestones. And I’ll tell you what, paying for med school or dental school, whether you paid cash or whether you paid time, is a pretty significant accomplishment.

I remember how happy I was when I completed my military service and received my freedom back in a lot of ways. It was pretty awesome and very much akin to how people feel making their last student loan payment and coming on this podcast and telling us all about it.

FINANCE 101: CREDIT SCORES

I promised you at the top, we’re going to talk a little bit about credit scores. And a few years ago, I wrote a post about why your credit score is not your adult GPA. I think we reran it just a few months ago, but there’s a lot of people that get confused about credit scores. And they start almost worshiping at the altar of the FICO score, trying to do things to get their FICO score higher and always thinking about their credit score and letting it really drive a lot of their financial decisions. And that’s probably a mistake most of the time.

A credit score for the most part goes up when you have a lot of debt and you manage it in some reasonably responsible way, not paying it off, but making the payments on it. That’s the key to having a high credit score. Having a high credit score in a lot of ways says, “Yeah, I borrow a whole bunch of money.” That aspect of it is not necessarily awesome.

But the problem these days is that credit score gets used for a lot more than just credit decisions. It might be used by your utilities company. It might be used by your landlord to determine how responsible or reliable you are. It might be used by a potential employer. It matters when you’re going to get a security clearance with the government, maybe the governor, but primarily with the federal government. And so, it’s important not to have a terrible credit score if any of that other stuff matters in your life. And it usually does.

The good news is it does not take very much to have a great credit score. And there’s a lot of little ways that you can kind of game the system to have a great credit score. But for the most part, the way you have an awesome credit score is you borrow some money and you pay it back as you agreed to do so. That’s the main way you have a good credit score. And you don’t even have to do it yourself. You can bum it off your parents.

My oldest came back from a mission. She hadn’t had a paid job. She hadn’t borrowed any money at all in the previous 18 months. I added her to my oldest credit card as an authorized user. I didn’t even tell her the name of the credit card, much less the number. And I didn’t give her a copy of it. I just added her as an authorized user. And two months later, she had some high 700 credit score. It doesn’t take much. It’s a goofy little system, but that’s the way it works. And now she’s got a credit score good enough to go get whatever credit card, probably even buy a house.

The truth is it doesn’t take much to have a good enough credit score, a good enough credit report to get a mortgage. If you just get one credit card and you put your gasoline on it, nothing else, just your gasoline on it for the next year, you’ll probably have just from that a good enough credit score to buy whatever house you need to buy.

And most of us have more debt than that early in our careers. We’ve got some student loans. We’ve got a car loan. We’ve got a couple of credit cards. You don’t have to go looking for more debt here. It takes a very minimal amount in order to have a decent credit score.

But that’s just not your most important financial number. If we’re going to rank financial numbers, we ought to be talking about things like your gross income, your fixed expenses, your savings rate, your net worth. Those are the numbers that matter. If there’s an adult GPA out there, that’s what it is. It’s not your FICO score. So, keep that in mind.

What goes into a credit score? Well, there’s a few things. The most important one is an on-time payment history, meaning you paid as agreed. Not that you paid it off, but that you made the minimum payments every month on time. That’s it. That’s a huge percentage of the credit score.

The next thing on that list is the credit to utilization ratio. This is the idea that you have a $20,000 credit limit and you only borrowed $200. That’s a very low credit to utilization ratio. And that increases your credit score as opposed to if you borrowed $19,000 of the $20,000 available to you.

The length of your credit history matters, although as I mentioned, that can be borrowed from your parents. The mix of your credit. How much is mortgage? How much is student loans? How much is credit cards and consumer debt, et cetera? That has a small effect on it. And any recent hard credit inquiries. There’s hard inquiries and there’s soft inquiries. Only the hard ones count. If you just applied for seven different credit cards, that lowers your credit score for a few months. But that doesn’t have a huge effect and it goes away relatively quickly. Mostly they want to know that you paid as agreed on the money you borrowed. That’s what’s going into a credit score. That’s what causes you to have a higher credit score.

Don’t go crazy about it though. Once you get to whatever the number is, 740, 760, a higher number doesn’t help you. Being 770 is no better than 760. And being 820 is no better than being 760. Trying to gamify this and getting your credit score up from 806 to 820 is not helping you. There’s no benefit there. This doesn’t mean more wealth for you. There’s nothing else that you got to do with that.

As I look over our credit score recently, I saw that it went anywhere from 802 to 815. And I don’t really care when it goes up or goes down. That’s just from paying our bills. All our credit cards are an automatic payment. Well, that’s all the debt we have. And even that is only until the next payment comes due. We don’t have a mortgage. We don’t have student loans. We haven’t had that stuff for years. No auto loans. And yet we still have an 800 plus credit score. So you don’t have to have all kinds of different types of credit in order to have a high credit score. You can just buy gas with your credit card and it’s going to be fine.

A few things to keep in mind about credit. You should review your credit report once a year-ish is probably fine. It’s free to do that. I think the website’s annualcreditreport.com and you can get your credit score or your credit report from three agencies. Sometimes they don’t give you the score unless you pay a little bit extra. But frankly, as long as there’s nothing inaccurate on there and you don’t have some terrible credit report, your score is going to be fine.

You might consider freezing your credit. If you’re worried about fraud, you can freeze it. And then before you apply for any new credit, you’ve got to go in and unfreeze it. Some people even freeze their kid’s credit. They’ve got a two-year-old and they’ve frozen their credit and they’re going to leave it frozen for decades. I don’t know that we ever bothered to do that, but it would be the most protected way to protect your kid from some financial scam while they’re a teenager or whatever and maybe worth doing.

All right, I hope that’s helpful. Yes, pay a little bit of attention to your credit score. Yes, it can help you a little bit in your life. It’s probably a pain to try to buy a mortgage. You can do it. You can do manual underwriting with some mortgage companies if you don’t ever borrow any money whatsoever, but that’s a little bit of a pain. It’s just way easier to buy your gasoline on a credit card at the pump. It’s more convenient anyway and just have a credit score and a reasonable credit history that allow you to do everything you need to do with both credit and a credit score during your life.

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All right, I hope you enjoyed the podcast. You can come on this podcast. Apply at whitecoatinvestor.com/milestones. We’d love to highlight what you’ve done and use it to inspire others to do the same.

Thanks for everything you guys are doing out there. It really does matter. And if you’ve had a hard day and nobody said, thank you, let me be the first. Thanks for what you’re doing. We’ll see you next time on the Milestones to Millionaire podcast.

DISCLAIMER

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