Nate (00:13)
Hello, physician moms and dads. I'm Nate Reneke, certified financial planner and primary advisor.
Chelsea Jones (00:20)
And I'm Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors.
Nate (00:27)
We'll see, we have we're back, first of all. You and I are together again. Think summer's dying down even though it's still midsummer, but I I think we got some vacations out of the way. You just went to Disneyland. Or was it Disneyland?
Chelsea Jones (00:32)
Yep.
I did. Just
World. Disney World.
Nate (00:45)
Disney World.
I don't know. I never know the difference. I just I'm just show up on vacation. How did it go?
Chelsea Jones (00:54)
It was a lot of fun. my daughter was not afraid of any of the characters this time. She didn't know what to make of the first time, but now every time she saw one she ran up and gave them a hug. so that was really sweet. But yeah, there's nothing like it like the Disney magic with when you go with your children.
Nate (01:00)
Yeah.
That's awesome.
Yes. Yeah, we were talking about that a little bit. I I was I I've I've been to now the Disney the Disney in Hawaii. I've been Disneyland and there's just no denying it. I used to try to I used to be a Disney denier, but there is no denying it. It's just the best and kids love it.
Chelsea Jones (01:33)
Mm-hmm.
Yeah.
Nate (01:37)
Okay, well, we have been asking for a friend. We have four questions, couple of them listener questions, which I'm excited about. And we won't we can't forget questions that we're getting from clients every day too. So we'll jump right in.
Chelsea Jones (01:53)
All right. So our asking for a friend question. so Nate, what do you mean when you say that the stock market is expensive?
Nate (02:03)
Yeah, I so I actually got this question and I have you know sometimes we we say things and it feels like it's not industry jargon, but it just doesn't make a lot of sense. So it's not necessarily industry industry jargon to say that, but like what does that actually mean? and for any new listeners out there, Chelsea, Kyle, and I here, we we're not we don't try to time the market. We're not trying to pick individual stocks.
Chelsea Jones (02:22)
Yeah.
Nate (02:33)
We're not trying to say when the market's gonna go up or down, but that doesn't mean you can't take a real honest look at the stock market at any given point. And this is the one thing that we at least I look at. It's how expensive is the market. And that's not to say you shouldn't invest or you should invest. It's just to say if you have extra money or you're trying to decide should I pay off this high interest mortgage or invest.
Chelsea Jones (02:47)
Mm-hmm.
Nate (03:03)
It's one thing to look at amongst many. So what does that mean? Well, when you are buying a stock, think of it as you're just buying a tiny little part of a business, of a company, of something that earns money. Right? Because that's why you would buy a business. It's it's very so the, you know, let's use the lemonade stand example since it's asking for a friend.
Chelsea Jones (03:06)
Mm-hmm.
Mm.
Nate (03:29)
If you had a legitimate investment opportunity and the the neighbor down the streets came up to you and and said, I want you to invest in my lemonade stand. And you weren't trying to be nice, you wanted to actually get a return on your investment. They said, I want you to put, I want a hundred dollars. Okay. But then then of course you should ask as a savvy business investor.
Chelsea Jones (03:51)
Mm-hmm.
Nate (03:58)
Well, how much do you make?
Right. And if that lemonade stand makes a profit of one dollar a day, it's going to take you a hundred days to get your money back, assuming they continue to work every day. But what if they made a profit of a dollar a year? Then it would take you a hundred years to get your money back. A lifetime, right? And so that would be a bad investment. Now, how long it takes to get your money back is, I mean, it
Chelsea Jones (04:11)
Mm-hmm.
A lifetime.
Nate (04:28)
I I don't know what what your threshold for good investment, bad investment is, but that would be an expensive business to buy. It'd be really expensive to buy a lemonade stand that only made a dollar a day and you wouldn't get money back for a hundred years. that's just one metric to look at this again. Like what's the money for and what's the goal and all all that. But let's let's say the opposite is true, where they do make a dollar a day.
Chelsea Jones (04:37)
Mm-hmm.
Nate (04:57)
And they work every day, seven days a week, you're gonna triple your investment in a year. A little bit more than that. So that would be cheap. It'd be cheap to buy that business. I'll give you $100 and get $365 back this year. Totally passive income. This is just like the stock market. The difference is it's very difficult to know.
Chelsea Jones (05:04)
Mm-hmm.
Mm-hmm.
Nate (05:23)
If the stock market's cheap or expensive, because you don't know every little company that's in it, because you haven't looked under the hood ever, maybe, to see like which part, like which businesses are cheap, which ones are expensive. So you can just look. There's a bunch of charts. You know, we like charts. You look at the charts and you just say, like, how much money do these companies actually earn? And compare that to how much money are they selling for? And the company's not actually selling, but the market, you and I, everybody else.
Is determining how much they're willing to pay. And right now, the market, for whatever reason, continues to buy and is willing to pay a lot for a very long expected payback period. Meaning the companies that you're buying, it would take them a long time based on how much they're earning today to get your money back or to get a good return on your investment.
Chelsea Jones (05:57)
Mm-hmm.
Nate (06:19)
So market being expensive just means that for the amount of money these companies actually make, which is why you buy into businesses, they're charging a lot. And again, like we won't get down too much into the weeds. The companies aren't actually charging anything. It's just what the what the price is for them right now. So if the market's really expensive and you have a high interest mortgage, you know, you should keep doing your saving because I've been saying the market's expensive for years.
Chelsea Jones (06:38)
Mm-hmm.
Mm.
Nate (06:49)
And it has
been at least historically speaking, looking at what it used to, the price used to be versus how much they money they they made in the past, it's really expensive right now. but since I've been saying that for years, if you would have taken that advice and taken all your money out of your investments five years ago, you would have missed out on a whole bunch of gains, whole bunch of returns. So we don't know when the market goes up, when the market goes down. But if you can compare two things
Chelsea Jones (07:10)
Mm-hmm.
Nate (07:18)
To each other, and you can say, Well, I'm doing all the saving I need for retirement. I'm doing all the saving I need for college. I have extra money. Should I pile more money into the market or should I pay off my mortgage? You know, that's at six and a half percent. And that's when I y you'll find me saying this or comparing this. It's when you can actually compare two things. so yeah, market expense market being expensive is just it costs a lot to invest right now.
Chelsea Jones (07:32)
Mm-hmm.
Yeah. And on the flip side, if there's a big drop in the market, you might hear us say, you can get those stocks. You can get cheap stocks 'cause their price is relatively inexpensive compared to what it used to be. 'Cause you know, capital market theory says everything's gonna revert to the mean, right? So when the market's been up and up and up, it's gotta
Nate (07:56)
Yeah, cheap stocks. Yeah.
Yeah.
Yeah. Which essentially means yeah, and revert
to the mean, like the the since w in the spirit of asking for asking for a friend, revert to the mean is just a eventually there is sort of what you what might call the appropriate price for all of this. Like you should be able to get your money back in a reasonable amount of time, you should get a reasonable rate of return based on not what the market thinks.
But just how much money companies make. And so the reason the market's expensive right now, one of the reasons, is they're looking at potential. Potential is always factored into the stock market. just because an AI company isn't making a lot of money today, essentially the the the people out there, the public, are making a bet. They're saying, I think but I do think AI is gonna be a thing. And I do think they are going to make money someday. So they're inve they're
Chelsea Jones (08:40)
Mm-hmm.
Mm-hmm.
Nate (09:05)
They're banking on the potential of some of these companies. And if that makes you uncomfortable, then stocks probably aren't for you. Right? I mean, if you only want to invest in steady, eddy things, there are some stocks for you, but it's not AI companies. the the the hard part about that is that risk is what makes you money because AI probably is here to stay and it probably will make money someday. So it's it it's not worth
Chelsea Jones (09:21)
Mm.
Nate (09:35)
trying to time the market, you're not gonna be any good at it. but that doesn't mean you can't make some good decisions with your extra money. Or I guess risk adjusted decisions.
Chelsea Jones (09:44)
Yeah. And
Mm-hmm. Yeah. And we never recommended buying individual stocks anyway. So just putting money in AI is not something we would ever recommend. But when you buy a broad index fund, you're gonna get pieces of AI. and so you're not gonna miss out on all of the gain if there's a gain to have an AI. because we recommend you buy into everything in the appropriate amounts.
Nate (10:11)
Yeah. And
Yeah. An AI semiconductor business. I mean, they're they're all over the map right now. If you're watching the news, you'd think that your portfolio is like going sky high and then hitting the floor. But if you are in a broad based index fund, you have international stocks, you have really small companies, not quite lemonade stands small, but small. And those have done really well this year. And the market, even though from
Chelsea Jones (10:36)
Mm-hmm.
Nate (10:44)
From the news may look like it's all over the place. It's kind of been steadily up this year. so you don't have to worry about this the longer your time horizon is. And the sh shorter your time, the closer you are to retirement or college, the less and less you'll you sh probably will be, should be exposed to all of that. And you'll have a a a good amount of money in things that do not go sharply up and down.
Chelsea Jones (10:50)
Yeah.
Nate (11:13)
like AI stocks and you you'll have time for that to, as you said, to kind of revert to the mean, go up and down. And so stock market being expensive is not a reason to make some drastic move. It's just a good reason to be to make some risk adjusted choices when you have extra money.
Chelsea Jones (11:37)
Yeah, it's just a thing to consider so you make informed decisions.
Nate (11:41)
That's right. Okay.
Chelsea Jones (11:42)
Okay.
So our first question that we have is a listener question that someone sent in. So thank you for sending this in, whoever sent it. they said, I've been listening to your podcast for some time now, and it's been very helpful. I want to ask about the new 530A account, which if you are not familiar, that's also been called the Trump account. I'm currently funding a 529 account and a UTMA for my five year old.
Nate (12:02)
Mm-hmm.
Chelsea Jones (12:08)
And I'm considering opening the new 530A account and funding the maximum 5,000 per year until she turns 18. My understanding is that I put in post-tax dollars, then if I plan to convert the whole amount to Roth when my child is in her early twenties, the money will be taxed again. Does the double taxation make this account worth it? Thank you for your time. So this well, first of all.
Nate (12:32)
Yeah. What do you think?
Chelsea Jones (12:36)
There's no there's not actually double taxation. So when you make post tax contributions to this five thirty A account or any account, that builds what's called basis, which basis it just means money that you've already paid taxes on. So when you if you are able to convert when when your child turns eighteen or at some point after, you wouldn't be taxed on your basis. So on your 5,000 per year that you put in after taxed. It would just be
the growth that's taxed as regular income. So I just wanna make that clear that there's not actually double taxation. and but is the account worth it? This question is I don't know, it's kind of tricky. if yeah, if the law stays the same and you are able to once this
Nate (13:13)
Mm-hmm.
It is tricky.
Mm-hmm.
Chelsea Jones (13:35)
transitions to effectively a traditional IRA. if the law still allows you to convert that money to Roth when your child is in her early twenties and, you know, possibly in a very low tax bracket if she's not you know, whether or not she's a dependent might affect that, a dependent of you still. but if you're able to convert that money at a really low rate, then I would say that it's worth it. But
it's unclear whether or not that that law will that will be the law at the point. Because these accounts are so new. not everything is ironed out. There's still, you know, kinda kinda some money water in terms of the legislation and what the rules truly are for this account. But but yeah, you are using post tax dollars and if
Nate (14:12)
Yeah.
Chelsea Jones (14:34)
Once the account turns into a traditional IRA after the child turns eighteen, if the law changes and you can't convert, then all of that growth is just gonna be taxed at regular income when it comes out. And if that's the case, the UTMA would have been better because the money comes out and it the growth is taxed at capital gains rates. and then the five two nine, depending on what the money is being used for, if you're if we're doing apples to apples
Nate (14:46)
Mm-hmm.
Yeah.
Chelsea Jones (15:04)
with a five two nine, if this money is intended for college, it's not better than a five two nine for college. there's just no question about it.
Nate (15:13)
Yeah. To
me this you have to do a lot of make a lot of assumptions about how this would work out in order for it to work out. so it could. I mean it certainly could. It's not and again, this is like i if your goal is to is to is for your eighteen year old to have a whole bunch of cash when they turn eighteen.
Chelsea Jones (15:25)
Mm-hmm. Yeah.
Nate (15:42)
And you're okay with not having any control over what happens with that money. This is one way to save money for them. we are not in, we we we don't see a lot of scenarios where it makes a ton of sense to have money in UTMA accounts, to have money in these Trump accounts, because it it requires quite a bit of saving just to pay for college. And so
Chelsea Jones (15:51)
Mm-hmm.
Mm-hmm.
Nate (16:11)
I I can tell you just just from clients who have a whole bunch of student loans, it's one thing if their parents were to give them, you know, fifty thousand dollars, it's a whole nother thing to for them to just graduate with no loans. Like, if they're not tied down to loans, that is just as big of a gift, if not more, than having cash because young kids, I mean, they're just not good money managers yet. Most people aren't at eighteen.
Chelsea Jones (16:24)
Yeah.
Yeah.
Nate (16:39)
Or 25, sometimes 30. So are they actually going to convert this money over to a Roth? I mean, it's their money. You can't make them, you know, and you I I I just see some kind of landmines that would that c could potentially arise. And it's always hard for me to see parents who have saved well for their children and then either they and actually giving them cash.
Chelsea Jones (16:49)
Mm-hmm.
Nate (17:09)
And then they tur it turns out where they have to force their child to do what their plans were for what is now their money. So it's like makes for an awkward like Thanksgiving conversation. Or they have to talk about money constantly. Like they have to talk about money in a way that your child's just not really prepared for. Like to talk about a Roth conversion for to a child over just like spending less than you make. They're not.
Chelsea Jones (17:16)
Mm.
Yeah.
Nate (17:36)
They're not really prepared to do it. But in theory, let's say you just like, let's say you had a Nate Reneke in your house who just gobbled this stuff up at 18 years old and was willing to do whatever it took to like do the right thing. Or I'm sure you're the same, Chelsea. I mean, like, if you told me, hey, this is what this is for, you can convert it at a really d low tax rate. And hey, by the way, Nate, if you do this really cool thing, I might even be willing to gift you the money to pay the taxes to convert it. Right. I would have done it.
Chelsea Jones (17:43)
Mm-hmm.
Mm-hmm.
Nate (18:06)
And that would be awesome, right? Like to have I mean at that point, I mean it could be it be at least tens of thousands of dollars, if not a hundred grand over into your Roth IRA.
Chelsea Jones (18:06)
Yeah.
Yeah. I mean this child's
five five thousand a year for the next thirteen years, so that's fifty, sixty five thousand in just basis.
Nate (18:26)
Yeah.
And basis. And with with all that growth, I mean, I I think it would be great. But the more important thing is to look at what the goal is for the money. So Utma, what's the goal? You want your your child who's not good at managing money to have a bunch of cash? Then create an Utma. If you want same thing with the with the Trump account. But if you want control over the money, not to say that you need to control your child, but just at that age, if you make a kind of
Chelsea Jones (18:48)
Mm-hmm.
Nate (18:56)
prudent decision to say like they're not going to be good money managers, but I still want to help them. 529 is great. And you can and right now you can convert if you have extra money in a 529, you can convert 35,000 of it into a Roth at some point. So the to me, that there's a lot of like mileage you can get out of a 529. But if your goal is flexibility, like let's say when you believe the time is right
Chelsea Jones (19:02)
Mm-hmm.
Mm.
Nate (19:22)
Because you're a good money manager, obviously. You have an Utma, you have a Trump account, you have a 529, like you're a good money manager. and let's say you wanted flexibility for, well, what if they want to start a business? I keep hearing this. what if my child wants to start a business? What if they want to buy a house? What if they want to do these things? Well, a more tax-efficient way to do this would be to invest in your own brokerage account and strategically gift.
Chelsea Jones (19:49)
Exactly.
Nate (19:51)
them appreciated securities when they're of age.
Chelsea Jones (19:54)
Yeah. That's an option that I've talked about with a few a handful of clients and they're always like, Wow, I didn't know you could do that. Yeah, you can transfer shares. If you're gifting your child money out of your taxable account, you don't have to sell the positions. You can just transfer them straight. Mm-hmm.
Nate (20:07)
Yeah. And you still get a tax benefit there, similar to
kind of the ones we're talking about here, which is the whole point of putting money in a Trump account is when when they pull the money out, theoretically they won't be making a doctor's salary. So they'll have a lower tax bracket. Well, the same goes for capital gains. You move the money over, let's say you give them a hundred thousand dollars and your your basis was fifty, they're gonna pay ga the gains on the fifty, but at a lower rate.
Chelsea Jones (20:22)
Mm-hmm.
The same works. Yeah.
Nate (20:37)
Because they didn't make less money, whatever their rate is. So I I just it's really difficult for me to see why you would choose a Trump account, other than you would have to strategically give the money. So it wouldn't truly be theirs. Like maybe so that you don't go over the gift tax limit, which is a whole nother conversation, but it's it's not really a big deal. You just gift them the max for a few years until the money's out. And that that
Chelsea Jones (20:37)
Whatever their rate is. Yeah.
Uh-huh.
Mm-hmm.
Nate (21:05)
to me is almost better rather than a thousand hundred thousand dollars dropping in your account on day one for a child, instead maybe you get twenty thousand dollars a year for five years. That's a a better way to teach them how to manage that gift. So I don't believe at this moment, at least I haven't ran run across a scenario where the Trump account really does anything.
Chelsea Jones (21:19)
Yeah.
Nate (21:26)
It's like a cool idea that I can't qu I I want it to work for people because I I like that it's triggering these thoughts about preparing for your child's future. But again, I mean, there's no reason to create complexity and more accounts for no reason. I mean, why? 529, if it gets fully funded, start investing in a brokerage account. If unf if you have the unfortunate scenario of your child being really bad with money or not making good decisions in life.
Chelsea Jones (21:36)
This is
Yeah. Yeah.
Nate (21:56)
Doesn't just become theirs, but you can have all the intentions in the world and plan to just gift them money later on for a house.
Chelsea Jones (21:58)
Right.
And I could see a situation where the Trump account would work out in somebody's favor, but all the stars have to align. Like the money has to be for their retirement. They have to be responsible and actually convert it to a Roth if Congress doesn't change the law and that that's still a thing by the time they turn eighteen. and then they have to keep the money in there. It's really tempting for young young adults when they see a balance in an account.
Nate (22:09)
Yeah, they really do.
Mm-hmm.
Chelsea Jones (22:30)
to just take it out, even though there's all kinds of taxes and penalties that would be owed if they took the money out of the IRA.
Nate (22:36)
Yeah.
Now if you're willing to take that risk, like, okay, the stars don't align, my child pulls it out and, you know, goes to Vegas. Like w they would have done that. Name if if they're making those decisions, they could have done it with any gift you give them. But if if i if you're willing to take that risk in return for the risk that maybe there's gonna be a hundred thousand dollars in a Roth account and it's gonna grow for sixty years, and that's and you're
Chelsea Jones (22:50)
Mm-hmm.
Yeah. Yeah.
Nate (23:04)
That is totally acceptable. I mean, if that's the risk you wanna take. the reason it generally doesn't work out is I have yet to see someone that severely overfunds their five twenty nine. So they might just need the money for college.
Chelsea Jones (23:08)
Mm-hmm.
Yeah.
Yeah. College is expensive. It's hard enough to fund that. Cause this should Trump accounts should be funded once college is funded. It's not one or the other. So Okay. The next question comes from a surgeon up in Maine. They said we're considering private school for our kids. The tuition would be thirty thousand a year. How do we know if it's a financial mistake or a fair trade off?
Nate (23:22)
So yeah.
Yeah. Agreed.
Well, the the na the way this question is asked makes it seem like an and this happens all the time. As a physician, you you have a great income. So you could quote unquote afford it, but that's not really the barometer for if you should do it. It's like you could afford to throw a hundred dollar bill out the window every time you went to drove to work, but why would you? So that's the question. It's like, is this a prudent decision?
and it's really hard question, because every child is different, every child has different needs. But the the bigger one that I've seen is every parent has different standards. So if you are a parent who has high standards for education, which you're a physician, so I would imagine you could be, then that's a decision that is personal. And it's really
If you're on track for college, you're on track for, you know, the whole thing. If you're if you're saving enough money, you have plenty of cash, and that is something you value is a very high level of education, even in middle school and and high school, then sure, it's a fair trade off. If if that school is actually substantially better than, let's say, a public school. But, you know, something that that my mind goes to trade offs in
Chelsea Jones (25:06)
Mm-hmm.
Nate (25:11)
Like beyond that, if we just set that aside and say purely financial, what you're most people are really deciding in these cities is should I move to a more expensive neighborhood to get into a great public school, or should I stay in my current neighborhood and pay for private school? And that is a more interesting financial question to me, like an actual trade off, set aside kind of your wants and wishes in your own life, which you should never do. But if if
That that's kind of the direction I'll go here. And the interesting part about that is the houses are more expensive in part because the public schools are better, which tells you you have a more valuable asset. So in a world where you would say, h everything is the same, one is just public, one is just private. meaning
Chelsea Jones (25:51)
Mm-hmm.
Mm-hmm.
Nate (26:07)
Like you're the same distance from work, you don't have to change jobs when you move, all that stuff. It's all it's all fine. You're just ten miles away or something from one house to the other.
Clients need your attention. That's what that is. so I think it is an an interesting idea to say, well, we're buying a more valuable asset. And if you have $30,000 a year and you're making this trade-off, you know, well, would a house cost more than $30,000 a year in a better neighborhood? And if it if it's like, well, actually a better house would only cost an extra
Chelsea Jones (26:19)
I know.
Mm-hmm.
Nate (26:45)
$2,000 a year rather than $2,500 or $2,000 a month rather than $2,500, you're buying a better asset that will that will hold its value better, will grow more inside of a great neighborhood with a great public school. and you essentially get to put that $30,000 towards an asset instead of a private school. So every every decision's different. Sometimes this isn't a real comparison. Sometimes it's like there is no good public school. And if that's the case, then you know you should.
Chelsea Jones (27:06)
Yeah.
Nate (27:15)
you I imagine someone asking this question should go to private. But if it's not, and you can that that's a true trade off, then I kinda prefer a cool house in a cool neighborhood that's gonna like grow in value versus just going to private school.
Chelsea Jones (27:31)
Yeah, that's interesting. 'Cause I un until we had talked about this before and you kind of ex explained it that way, I had never thought about it that way. So
Nate (27:42)
It it
it's you know, neither did I until I I I can't remember which which family it was, but s one family would just like laid it out for me. I'm like, this is oftentimes the choice. You know, the neighborhoods in in here in in Portland area, the neighborhoods that are more expensive have nicer schools. And I'm like, that's why.
Chelsea Jones (28:01)
Mm-hmm.
Nate (28:03)
And and then naturally more affluent families move to that neighborhood, build up the neighborhood, spend more money on their houses, therefore it's more expensive. So it's just kind of like they're gonna support that ecosystem a little bit more on the housing front.
Chelsea Jones (28:19)
Yep. Okay. The next question comes from a psychiatrist in Oregon. They said, My spouse wants to go part time or stop working to be home with our kids. How do we actually stress test that decision instead of just guessing?
Nate (28:36)
Okay. again, I'm you th cause this coming from someone who really values if someone can stay home and they wanna stay home, it's like worth more than money to me. But the stress test is i I like the way they're asking. It's like is it worth it? Well, you're never gonna get me to say that saving an extra thousand dollars a month is worth worth you not staying home if you can aff afford to stay home.
So, but the stress test, I I I think this is the way to think about it. This would be how much does your spouse make? So let's just imagine after taxes and everything, your house your spouse brings home five thousand dollars a month. And that's a pretty good income because after ta I mean, that that might be a six figure income if they're paying for insurance. So then bring home five thousand dollars a month. And the question in in your mind, you're thinking
We would lose five thousand dollars a month. But there are things that you pay for. exactly. And so the things that come to mind, the big one is child care. I I don't know about you, Chelsea, but childcare for in my house is very expensive. It's at least I mean, in the lean months, it's like two thousand dollars a month. And my my kids are in
Chelsea Jones (29:38)
Mm-hmm.
To allow your spouse to work. Yeah.
Mm-hmm.
It's up there.
Nate (30:05)
elementary school. So it was way it was a lot more than that when they weren't in elementary school. in summer months, it's probably a thousand more than that every month. So let's just say $2,500 a month goes toward childcare. And so you're not losing five thousand. You're at this point, you're you're only losing $2,500. Right. Yeah, assuming you only have two kids.
Chelsea Jones (30:07)
Yeah.
Mm-hmm.
Mm-hmm. That's assuming they only have two kids.
Nate (30:35)
You might pay someone to clean the house. And maybe you'll want to continue to do that, right? So who who knows? But you you think about all the things that you were doing with this income and you and you kind of net those out. If at the end of the day, between a a nanny, between someone cleaning the house, the difference in health insurance costs, like if your spouse has a great health insurance coverage, then you might have to it go the opposite direction where their benefits package is bigger than just the.
Chelsea Jones (30:49)
Mm-hmm.
Nate (31:05)
Take home pay that they have. and you just look at that and you say, okay, we would actually lose out on $2,000 a month. And so now let's see if we can make all our savings goals and could and spend an a com an amount we're comfortable with off of that reduced income. So what you can do.
Chelsea Jones (31:07)
Mm-hmm.
Nate (31:32)
And this is like, this is great advice for your kids too. If your kids say, Hey, I want to get a car payment when they're like 20, and you say, How much is the car payment gonna be? Say, it's five hundred dollars a month, which is a cheap car nowadays. then you say, Why don't you spend six months saving five hundred dollars a month and see if you can actually do it? And in six months from now, if you have three thousand dollars in your in your bank account and life is good.
Chelsea Jones (31:39)
Mm-hmm.
Mm-hmm.
Nate (32:01)
I guess you can kind of afford it. spoiler alert, they're not gonna be able to do it. Right for the child. But you probably could. So you see what the difference is and you set aside two thousand dollars a month and six months later, if that was easy, then you know you can afford it.
Chelsea Jones (32:07)
Yeah.
Mm-hmm.
Mm.
Nate (32:22)
So this is I have done this many times with many things in life. I've done this with mortgages, I've done this with cars, I've done like even things that just like our bills are gonna go up by this much if we do this thing. sh let's set aside that money first and see like how uncomfortable it would be. And if it's comfortable and you still value the thing six months later, go for it.
If it's very uncomfortable, then you have the decision to make. Right? So if the the answer is save the difference. How exactly how you get there takes some budgeting, but it's probably good exercise if your income's going down to do some a stress test on your budget.
Chelsea Jones (32:57)
Mm-hmm.
Yeah. Which that's that's really smart. 'Cause when you're saving the difference and you don't actually go through with it, i it's easy to just not go through with it instead of having to back up the decision and spouse go back to work and and all of that and then you know.
Nate (33:25)
Yep. And the cool thing is
at the end of that exercise, you have an extra ten thousand dollars. Cause you saved it. So th this is a you know, a baby fund thing too. And you're having a baby and you're like, maybe I should go part time. Well, the act of saving for that baby fund is going to help you build the muscles that requires you to reduce your income. So you have a baby fund, one, and two, you're acting like you're working less because you're saving more.
Chelsea Jones (33:33)
Exactly.
Mm-hmm.
Nate (33:55)
Think we got one left.
Chelsea Jones (33:57)
Yep. Our last question is another listener question from a family medicine doc down in Texas. They said, I'm forty years old, I make two hundred and fifty thousand and have about six hundred thousand saved. Everyone online says I'm behind. Am I?
Nate (34:13)
This is one of my kind of pet peeves about on about these kind of forums. And the honest the kind of take on this is stop asking this question online. The online, like they there's some great forums. They don't know you. They they so it if if you had the ability
Chelsea Jones (34:20)
Yeah.
They don't know you.
Nate (34:40)
To give them all the information that they would need in order to make an honest assessment of your situation, you wouldn't have to ask this question.
Chelsea Jones (34:45)
Mm-hmm.
Nate (34:49)
Because what would you need? You would need they would need to know how aggressive have you been on your mortgage? How much student loans did you have? Did you pay them all off? They'd have to know, you know, what were you invested in? How much are you saving now? What are your goals? And by the time you were good enough to give all that information, you would just have the answer. So I'm gonna take a a a like a little bit of a different approach on this, but I'm curious to hear before I kind of tell you what I think, what what what do you think? Like
Chelsea Jones (34:58)
Yeah. How much are you saving now?
Yeah.
Mm-hmm.
Nate (35:18)
Limited information obviously, but what's your kind of gut reaction on this?
Chelsea Jones (35:21)
Gut reaction of are they actually behind?
Nate (35:24)
Yeah.
Chelsea Jones (35:27)
It's hard for me to give a gut reaction. I'm not really a gut person when it comes to this kind of stuff. I'm a planner. But yeah.
Nate (35:30)
Yeah. Makes you a good planner. Yeah. Well, okay. I'll give you mine then.
the quick the quick look at this is well, first of all, you know, you're to you're probably on a physician forum and $250,000 is on the lower end of physician incomes. And so you may sit there thinking, like, I make less. So
Chelsea Jones (35:51)
Mm-hmm.
Nate (35:57)
I'm behind because some all the other positions I know in their 40s have a million dollars. Well, they spend more because they make more. So that's not a bad thing. What that means is you need less. Right. So the the easiest math in my head is just to say, well, you know, if you were investing consistently from the time you were 32 to 40 and you have $600,000, how much, how much were you saving?
Chelsea Jones (36:03)
They spend more.
Yeah.
Mm-hmm.
Nate (36:27)
Well, they're saving probably twenty percent of their income. And save yeah, pretty good chunk. And I think the average physician family, this is even families who spend more, in retirement might spend ten or eleven thousand dollars a month. And so really simple, like like investment calculator math says Social Security plus six hundred thousand dollars saved, plus you continue to save until you're sixty-five, you will have enough money to spend eleven thousand dollars a month.
Chelsea Jones (36:27)
Mm-hmm.
Which is a pretty good chunk.
Mm-hmm.
Mm-hmm.
Mm-hmm.
Nate (36:56)
Now, do you wanna retire at sixty-five? Like if you want to retire at sixty, maybe maybe you need to save a bit more. but it you know, there's a chance that you paid off your mortgage in this time. We don't know. You need a legitimate plan, but the idea that somebody could look at this and say you're behind is just wrong. Like you ever
Chelsea Jones (37:09)
Mm-hmm. Yeah.
Yeah, 'cause I
I saw this and I saw age forty and I was like, okay, so you've been probably in attending for maybe a decade and you have six hundred thousand saved?
Nate (37:28)
Mm-hmm.
Chelsea Jones (37:30)
No, it's not bad.
Nate (37:32)
Yeah, it's not bad. it's also like you've had good market returns. so maybe you're saving a little less than twenty percent. But this is about the time where most physicians like they can really ramp up their savings too, because student loans might be gone. kids are older, you're not paying those child care bills anymore, and maybe you need to save a bit more, but I don't think you're necessarily way behind or way ahead. You need a legitimate plan.
Chelsea Jones (37:37)
Mm-hmm.
Yeah. Mm-hmm.
Mm-hmm.
Nate (38:01)
that tells you according to what you're the outcomes you're looking to achieve in your financial life, what they are, and and this and that will tell you. But I I will say this just as a point of encouragement. The quick, like back of the napkin math here, I don't think you're way behind. Just judging by how much you make, therefore how much you could even spend before going negative, and the fact that you have six hundred thousand dollars, I mean, there's there's a lot of I have a lot of family
Chelsea Jones (38:25)
Mm-hmm.
Nate (38:31)
That's a, you know, maybe they're in their 40. They don't have much money saved at all. So, you know, and by by the way, maybe they work for the VA and they have a pension. You know, we just don't know. But keep saving, you know, twenty percent of your income is a great place to start. And if you are worried about this, you you just need a plan. you need a plan and that will get you you know, solid answers to this.
Chelsea Jones (38:41)
Yeah.
Mm-hmm.
Nate (39:00)
'Cause whether or not I say here that you're ahead or behind or they say you're ahead or behind online, like you won't know and you won't feel comfortable and stop thinking about this until you have a solid plan in place.
Okay, these were really good questions this week. I encourage everybody on I just I I know I asked this on the last episode too. Like if you're a listener and you've never sent us a question, please send it in. we will make sure we answer it no matter if it's on the show or by email. But I wanna thank everybody for listening. if you like this episode, you can subscribe anywhere you listen to podcasts, so you don't miss any.
You can send your questions to podcast at physicianfamily.com. And if you would like to work with us to get a plan, you can visit physicianfamily.com to schedule an interview. Until next time, remember, you're not just making a living, you're making a life.
