Nate (00:13)
Hello, physician moms and dads. I'm Nate Reneki, certified financial planner and primary advisor.
Chelsea Jones (00:19)
And I'm Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors.
Nate (00:26)
Chelsea, it's it's you know, still summer and I noticed that in Oregon at least, where I am, you're in Florida, so it's it's different. But in Oregon, that's when talking about new cars or like wanting a new car always comes up. And I feel like it's just cause everyone's outside and they're looking at everybody else's new car and they're getting they're getting like, I don't know, jealous. But when it's raining all the time, nobody's really thinking about that. They're like holed up in their house. So I tend to get car
Chelsea Jones (00:54)
Mm-hmm.
Nate (00:55)
questions.
this time of year from
Chelsea Jones (00:57)
Okay.
Nate (00:57)
our Oregon clients. And I also am thinking about cars. I'm victim of it too. You're like, man, a car's nice. You know, as you're driving everybody
Chelsea Jones (01:05)
Yeah.
Nate (01:05)
around. So we have an asking for friend questions about cars. And then we have four other questions from our listeners that we'll get to. what's the asking for a friend question this week?
Chelsea Jones (01:17)
So our asking for a friend question this week is, why is leasing a car all that bad?
Nate (01:22)
So this is like I think, you know, this is an asking for a friend question because you never want to ask a personal finance person about this 'cause they love to talk about cars and just like beat you up over cars, right? And I'm not a huge car yeah, pay
Chelsea Jones (01:34)
Yeah. Pay cash.
Nate (01:36)
cash like why would you ever, you know, like i i and you do get just like beat over the head with with a baseball bat whenever you buy a car. There's no way
Chelsea Jones (01:47)
Yeah.
Nate (01:47)
to buy a new car cheap. All right.
Chelsea Jones (01:50)
Right.
Nate (01:51)
But
This question comes from people who are like probably a lot more interesting and cool than people like me who are super into personal finance. so leasing cars, this is the the the finance 101. Maybe if your parents knew anything about money, they would talk to you a lot about cars because middle class get gets obliterated by car loans. Like they they
Chelsea Jones (02:15)
Mm.
Nate (02:16)
really middle class really needs to focus on not spending too much on cars. But doctors
You know, they're looking at these payments, they see like, the payments not that much different. It's easier just to lease it. what's the big deal? So the way to think about this is the reason it's so bad, which I do actually think leasing
Chelsea Jones (02:37)
Mm-hmm.
Nate (02:38)
a leasing cars is not it's not smart. Yeah.
Chelsea Jones (02:41)
Ideal. Yeah.
Nate (02:43)
It's not a wise choice. But the reason it's considered so bad in this space is
You're essentially paying for a depreciation on a car. So
Chelsea Jones (02:55)
Mm-hmm.
Nate (02:56)
you take the same car, let's say it's I mean, this was maybe a this is a little dated, but let's say you got a new car for fifty thousand. I think they're like a hundred now. But let's say you got a car for fifty thousand dollars and you make fifteen hundred dollar a month payments for three years on the lease.
fifteen hundred dollars times thirty-six months is fifty-four thousand dollars. So you've just now spent fifty-four thousand dollars over three years. And then you look at the payment and it's like the same thing. It's roughly the same. Question is why
Chelsea Jones (03:36)
Mm-hmm.
Nate (03:36)
is it why should shouldn't you just lease it versus buying it? Well, at the end of that three month or that three years, when you lease it, you give the car back. But if you bought it.
That's about when the car starts to get cheaper. So now
Chelsea Jones (03:51)
Mm-hmm.
Nate (03:52)
you're making progress toward the loan, and by the end of the loan, like a five, six-year loan, you actually get to keep a twenty-five thousand dollar asset. That's
Chelsea Jones (04:04)
Yeah.
Nate (04:04)
depreciating, a depreciating asset. So but here here's the nuance, and this is why people who aren't big personal finance folks, like they they they don't really get it. A lot of times.
People nowadays, by the end of that three years, they're just going to buy a new car again. They're
Chelsea Jones (04:23)
Mm.
Nate (04:23)
just back at the lot. You know, the amount of times I hear, my car's got about 50,000 miles on it. It's time for a new one. I mean, I I remember growing up, like, if it didn't have 200,000 miles on it, it had a lot of life left. Right.
Chelsea Jones (04:39)
Yeah. My first
car when I got it had two hundred thousand miles on it.
Nate (04:44)
Mine mine was close. It it had less Yeah,
Chelsea Jones (04:47)
Yeah, and it gave me a hundred more.
Nate (04:49)
yeah. It had less than two hundred, but it had a couple dents in it. So I got
Chelsea Jones (04:54)
Yeah.
Nate (04:54)
it as if I bought it as if it was worth you know, had two hundred thousand on it. So the the there's more to this story about like why leasing is so bad, which is just how you own cars in general. Are you buying you like the best way to buy a car is still by
Three to five years old in cash and drive it until it has 200,000 miles on or until it dies. That's still the cheapest way to buy a car. But if you are financially independent and you love cars, you just love cars and you're gonna buy a new car every year, which I would not recommend. This is not advice. But
Chelsea Jones (05:37)
Right. Yeah.
Nate (05:38)
if that's what you're going to do, leasing it doesn't make a huge difference.
like i you're still paying for the depreciation because the second you drive the car off the lot it depreciates in value it is now a used car and you're
Chelsea Jones (05:51)
That's it.
Nate (05:51)
paying that you're footing that bill the alternative would be much better way to own cars or cheaper way to own cars is let someone else pay that bill and then you buy it. Buying a car with 20,000
Chelsea Jones (06:02)
Mm-hmm.
Nate (06:03)
miles on it, it's it's almost new, feels new, and it's just cheaper. So is it all that bad?
it's not necessarily the lease that's all that bad. It's how you own cars and how long you drive them. But you know, if you are going to buy a car and return it in a year versus lease it for a year, it's pretty close. So, you know, the the good wise advice is not to put too much value in cars and to to buy used
But not everyone does
Chelsea Jones (06:40)
Mm-hmm.
Nate (06:41)
that. So lease isn't the end of the world. It's not gonna sink the ship. You'll never own a car and make stop making payments. So when you lease, the problem with leasing is that you will never stop having a payment.
Chelsea Jones (06:57)
Right.
Nate (06:57)
That's the problem. Sort sort of like renting a house, you're just like renting a car.
Chelsea Jones (07:02)
Mm-hmm.
Right.
Nate (07:03)
So that's
it. That's asking for a friend.
Chelsea Jones (07:05)
Very good. Our first
Nate (07:07)
Mm-hmm.
Chelsea Jones (07:08)
regular question is from a surgeon in Georgia. They said we have a decent sized brokerage account, but found ourselves in a position with no emergency fund and a five figure emergency. Should we take out a HELOC or withdraw from the brokerage account?
Nate (07:22)
So first things first is this is a huge call for or reason to have an emergency fund. It's because you now you're put in a position where you have to borrow money or you have to pay, presumably you'd have to pay taxes to get to the money in your brokerage account. Not the end of the world. You can pay the taxes, you can pay the interest, and you'll be okay. But get an emergency fund, treat it like a
the foundation to your plan. So five
Chelsea Jones (07:56)
Mm-hmm.
Nate (07:57)
figures, mid-five figures is very typical emergency fund for most physicians. Actually it's probably small for most physicians. Yeah.
Chelsea Jones (08:06)
Yeah, I was gonna say it seems kinda low, but
Nate (08:10)
So but now that you're in this position, maybe you had an emergency fund and had to spend it. You had the the old back-to-back emergencies, which is unfortunate. the question is should we
Get a loan or should we take it out of a brokerage? And the there's kind of three things to look at look at. It's one is opportunity cost, so like keep the money invested. that's difficult to determine. We don't know what returns will be in the future.
Chelsea Jones (08:40)
Mm-hmm.
Nate (08:42)
but you kind of gauge this with your plan. Like if it would be catastrophic for your plan to pull this money out, you should consider maybe taking out a HELOC.
And paying it off as quickly as you can. But by the same token,
Chelsea Jones (08:55)
Mm-hmm.
Nate (08:56)
you can replace your brokerage account just as fast. So the only thing I think about here is behavior versus math. A lot of people are more intent on paying down a loan than they are catching up with their investments because they hate paying interest. But if we set that aside,
Then you're looking at interest rate versus taxes. If you set aside the opportunity cost of investing because the investments might go down, what is the interest
Chelsea Jones (09:30)
Mm.
Nate (09:30)
rate on a HELOC and how much taxes would you pay? So
Chelsea Jones (09:34)
Yeah. And I would say
how long do you plan to take to pay off the HELOC?
Nate (09:39)
Right. Like let's say you have a bonus coming
up and it's in six months or three months and you could pay off the HELOC right away. Well, as soon as you sell those stocks, you guarantee yourself a tax bill. Whereas if you get if you might get a big bonus, then there's no guarantee that you're gonna hold on to that that HELOC balance for a whole year. So that's a good point. But
maybe you don't get a bonus or you know you're not gonna be pay be able to pay it off, or you know when you're gonna be able to pay it off. And let's say it's a year, you have to take out fifty thousand dollars right now. I know of a really good key lock you can take out in most states where it's prime Wall Street Journal prime, which is an interest rate that gets set,
Chelsea Jones (10:28)
Mm-hmm.
Nate (10:29)
minus a half a percent. So it's a pretty reasonable interest rate. I think it's around
think right now is around six percent, maybe five and a half. Let's say six percent interest for a year, you're gonna pay three thousand bucks in interest. So you can go model what it would look like to take the money out of your brokerage account. And if you're gonna pay more than three thousand dollars in interest in ta or if you're gonna pay more than three thousand dollars in taxes, then it would probably it would make sense to get a HELOC. if you're gonna pay less than three thousand dollars in taxes, it makes sense to take it out of the brokerage.
But once you set aside
Chelsea Jones (11:04)
Mm-hmm.
Nate (11:05)
behavior and you kinda take a step back from your plan and realize like one way or another I gotta get to this money, one way or another I'm gonna have to replace it, either in a your replace your by paying it back on a loan or replacing a brokerage account, it's just taxes versus interest.
Chelsea Jones (11:22)
Okay. Our next question comes from a pediatrician in Oregon. They said I have been a diligent saver for much of my career, and on top of that, I just received a sizable inheritance of a couple million dollars. I still plan on working until age 65. Can I start sp overspending on travel a bit now? So this I actually love this question.
Nate (11:44)
Mm-hmm.
Chelsea Jones (11:45)
Or I love when I can give the answer that this this couple got, at least.
Nate (11:51)
Yeah.
Chelsea Jones (11:52)
so basically they're saying I have this, my plans on track, and then I got this windfall on top of it. Can I spend some of it?
Nate (12:00)
Mm-hmm.
Chelsea Jones (12:01)
And when we get down to the you know, the brass tacks of this question, like you need to be able to enjoy your money now too. We're
Nate (12:13)
Mm-hmm.
Chelsea Jones (12:14)
big on and you'll talk you'll see this if you do planning with us. I constantly am talking about.
a happy medium. You know, we don't
Nate (12:23)
Mm-hmm.
Chelsea Jones (12:23)
want you to shove every dollar that you have into some kind of savings account and then your your mental health and your your happiness and your ability to enjoy life now comes at the the sake of that. And
Nate (12:38)
Yeah.
Chelsea Jones (12:39)
so yeah, if you can reasonably expect to cover the higher expenses without putting your retirement in jeopardy, then yeah, go for it.
Nate (12:51)
Yeah.
Chelsea Jones (12:51)
It's
it kind of goes back to our kind of philosophy on budgeting. Like you need to know how much you need to save. Everything and you know, spend on bills. Everything beyond that is up to you. and so this is a little bit different because it's already in an investment account. It's in an inherited IRA, I would assume, or maybe a a brokerage account that they inherited. and so it's not like they're getting a paycheck and asking, Can I spend it if I've already saved?
Nate (13:18)
Yeah.
I I think right there is really why this question gets asked because you know, back of the napkin, they're like, I have millions of dollars now. I like work. can I spend this? And it's it's they're s they're they've trained themselves to view investments as not you can't touch that. And so it's just a paradigm shift of when am I allowed to touch it? And and oftentimes people who are about to retire have the same paradigm shift. They really struggle.
with the shift from this is savings, you never touch it, and now it's time to spend it.
Chelsea Jones (13:54)
Mm-hmm.
Nate (13:56)
So, you know, they have millions of dollars, they're diligent savers, which means they're probably not big spenders. And now they're like, Am am I allowed to be a big spender?
Chelsea Jones (14:06)
Yeah. Or at least a bigger spender. Cause from
Nate (14:08)
Yeah.
Chelsea Jones (14:09)
what from what I gathered, they're like, Can I just travel a bit now? It's not
Nate (14:13)
Right.
Chelsea Jones (14:13)
like can I go out and buy a hundred and fifty thousand dollar car and like, you know, do something crazy. There's like,
Nate (14:20)
Yeah.
Chelsea Jones (14:21)
can I take a extra vacation this year?
Nate (14:23)
Right, yeah.
Chelsea Jones (14:24)
Yeah. Please do it. But
Nate (14:26)
So inherited IRAs,
I assume th there's like the the the technical aspect of this, they have an inherited IRA and probably a some form of a brokerage account. That's what most people inherit. What would be like
Chelsea Jones (14:38)
Mm-hmm.
Nate (14:39)
the best way for them to spend this money?
Chelsea Jones (14:41)
Well, with inherited accounts, especifically pre-tax inherited accounts, well, all non spousal IRAs are subject to the ten year rule now. So if you're r if you inherited accounts from your parents, that would be non spousal. So you have you have to have you have to take the full balance out by the end of ten years, regardless.
Nate (15:02)
Mm-hmm.
Chelsea Jones (15:03)
and that could usually mean taking it out in smaller chunks over ten years.
Or it could mean taking everything out in the beginning or taking everything out in the end. so the money is coming out of the IRA regardless. The question is just when. and usually how we coordinate how we include that in the plan is we just assume that those contributions or those distributions get reinvested in your brokerage account.
Nate (15:28)
Yeah. Yeah. So we
we've been there there have been times where people get these distributions out and then they just assume they can go spend it. And so now here at Physician Family, we just invest it for you. Like, yeah, we're just gonna reinvest this. Which is great because you end up with a big giant pile of money. But what's if you don't kind of if you don't remember that that's going on, you assume that this money is not ever coming to you.
But if you get the money out and you already have to pay the taxes on it, because it's inherited IRA, you're not causing an extra tax bill above and beyond what you had to pay to spend some of it at this point.
Chelsea Jones (16:13)
Right.
Nate (16:14)
Right? Yeah, so i not that you won't pay taxes, but it won't cause an extra tax bill to spend some.
Chelsea Jones (16:22)
Yeah. The taxes were gonna happen anyway. So see ya, take it maybe
Nate (16:25)
Mm-hmm. So a couple million bucks,
you know, inherited IRAs, maybe it's half that. I mean, you have a big distribution coming out, like six
Chelsea Jones (16:35)
Mm-hmm.
Nate (16:36)
figures worth of distributions. And, you know, of course, make sure that the here's one thing I was I I always think about in these situations. And in in this situation, a diligence aver for many, many years, and throw in a million dollars on top, a couple million dollars on top of that. They're they're they're completely.
completely safe to spend some of this money.
Chelsea Jones (16:58)
Yeah. Yeah.
Nate (17:00)
but something that can happen in these situations, let's say the the margins are a little bit thinner. Like maybe you weren't such a diligent saver and maybe you only got only only got a million dollars. What can happen is your your taste for the expensive things in life goes up because now you have this
Chelsea Jones (17:19)
Mm-hmm.
Nate (17:20)
money that you weren't expecting and now you love to spend
50, 60, $70,000 a year on travel, but your plan can't sustain it forever. So
Chelsea Jones (17:30)
Right.
Nate (17:31)
that is something to consider at least. it's hard for people who have lived like this for a long time. You know, a pediatrician isn't the highest paid specialty. And it's hard for people who have saved on that on that salary for many years to overspend so much.
That they're gonna blow through several million dollars on travel.
Chelsea Jones (17:57)
Yeah, they've done the work to get to the point where they are. It would be hard 'cause like I can kind of empathize with their position. Like if I save diligently for so many years, I would be afraid to spend too much and like wreck the hard work that I put in if
Nate (18:12)
Yeah.
Chelsea Jones (18:13)
I didn't know the consequence of spending some of the money. So
Nate (18:16)
Yeah.
And and they are in a sp unique position too with this, which is they have plenty of money to retire. They actually asked me, can I just save less? And my heart broke because I'm like, please don't, because you're gonna
Chelsea Jones (18:32)
Mm-hmm.
Nate (18:33)
pay a whole bunch of money in taxes. Like we save money in our four three B's four one K's and our Roth IRAs for retirement, but it's also a tax arbitrage, you
Chelsea Jones (18:42)
Yeah.
Nate (18:42)
know, so I would rather
them spend all the money out of, well not all of it, but you know, a a good amount of the money out of these forced distributions,
Chelsea Jones (18:55)
Mm-hmm.
Nate (18:57)
and save money so that you can defer your into your 403B or 401k while you're in a high tax bracket. So this is the that that money could be spent. You can also avoid pulling money out of the brokerage account with these distributions, inherited distributions.
and pull
Chelsea Jones (19:15)
Mm-hmm.
Nate (19:15)
it out of your brokerage account when you're in a lower tax bracket as well.
So this is this is unique, but it's not like it never happens. That the about this time, right when you've been a diligence saver for twenty years, is when you might get a bit of an inheritance. And
Chelsea Jones (19:30)
Mm-hmm.
Nate (19:30)
it's worth planning through and deciding on if you want to spend some of it.
Chelsea Jones (19:35)
Yeah. Just intentionally spending it instead of what's the word I'm thinking of?
like on a whim saying I got this let me
Nate (19:46)
Mm-hmm.
Chelsea Jones (19:48)
okay so our next
Nate (19:49)
Mm.
Chelsea Jones (19:50)
question comes from a family medicine doc in Texas they said I'm working toward PSLF public service loan forgiveness and I've heard about the buyback program what is that and how does it work
Nate (20:02)
Yeah. The buyback program is I would say pretty misunderstood. Not the not exactly like at a high level what it is, but eg ha the mechanics of how it works. It reminds me of almost ten years ago when I first started helping doctors with T SLF. It was misunderstood, not that just at a high level lo your loans get forgiven. That part was a misunderstood. But
How you actually get it was misunderstood because it was so early they had never spoken with anybody that had actually gotten it. So
Chelsea Jones (20:37)
Mm.
Nate (20:37)
2017 was the first year anybody could have ever gotten it because the program was released in 2007. So from the day the program was released to 2017, you would have had done all your paperwork right, you would have been on an income-driven plan the whole time, you'd have had to worked at a nonprofit the whole time, you'd have not skipped any payments.
And so it looked like everybody was getting denied for it and that it wasn't real, but it was really just that people didn't understand how to execute a student loan plan.
Chelsea Jones (21:06)
Mm.
Nate (21:07)
so it's similar here. The buyback program, let's tell you exactly what it is. And I'll use an example. Let's say that there was a period of time where you worked for a nonprofit and you were in forbearance. Okay, so you're in forbearance.
And you realize, man, I really shouldn't have been in forbearance. I wish I would have made my payments, but I was in forbearance and now now I have to wait, you know, an extra amount of time to get my loans forgiven. And it's the worst time because I now make more money than I ever have. So I'm gonna have to make, let's say, ten extra payments during the ten months I
Chelsea Jones (21:46)
Mm-hmm.
Nate (21:47)
was in this forbearance at the highest rate. Okay, so you're sitting there, you have a hund you've made a hundred and ten payments toward
Public service loan forgiveness, you have 10 left to get to the 120 10 year mark. But
Chelsea Jones (22:02)
Mm-hmm.
Nate (22:02)
the buyback program was released, and they say, well, if you're in forbearance and you checked all the other boxes, you just weren't in the right payment plan because you're in forbearance. you can submit to pay for those payments right now. So let's say it was during residency when you weren't making a lot.
And you went into forbearance because you didn't want to pay the payments. They're saying, let's say your payments were a hundred dollars a month in residency, or they should have been, but you were in forbearance.
Chelsea Jones (22:32)
Mm-hmm.
Nate (22:33)
And there's ten of them. You give us a thousand bucks right now, and your loans are forgiven. Sounds like a sweet deal.
Chelsea Jones (22:43)
Yeah.
Nate (22:43)
The issue is the reason it's kind of misunderstood and why nobody has I mean there are people that have gotten it, but they're hard to find, is that you can't apply for the buyback until the result of the buyback program would be forgiveness. So
Chelsea Jones (23:03)
Mm.
Nate (23:03)
let's imagine that same situation, but you you don't have 110 qualified payments, you have 105. Okay?
And you have 10 payments that you want to buy back. If you bought those payments back today, you would only have 115 qualifying payments. Therefore, your loans would not be forgiven. Therefore, you will not be approved for the buyback. You need to wait five more months so that the result of the buyback would be forgiveness. Now, this is the problems I'm running into now. They are taking forever to process.
Chelsea Jones (23:40)
Mm-hmm.
Nate (23:40)
These requests.
And I got a number here. I looked this up. There was 88,000 requests were pending at the end of April 2026. And the department's best month, and in their best month, they cleared about 7,000 of those requests. So there's an enormous backlog of requests. So you're sitting there waiting.
wanting to get in line so that they will process your requests, but it's gonna take them at least at this rate, at least a year to get to your request.
Chelsea Jones (24:20)
Yeah, just to get through
the ones that are already pending.
Nate (24:23)
Yep.
And so the question is, well, do I now leave my my nonprofit job like I wanted to, even though it's gonna take them a year to get to it? What if they decline me for some reason? And now I have to go back to a nonprofit for ten more months instead of getting my request granted? That is a difficult question to answer.
In a vacuum where you just say, yep, it all makes sense. You're gonna get approved for this. I would
Chelsea Jones (24:56)
Mm-hmm.
Nate (24:57)
say don't leave the income-driven plan. Just stay on the plan, keep making your payments. And in chronological order, they should refund you the overpayment, which again is hard to find people that you know or see an example of where the refund actually happens in a timely manner. It sort
Chelsea Jones (25:16)
Mm-hmm.
Nate (25:16)
of feels like you're gonna wait a year to get approved.
Hopefully you get approved. And maybe you're going to wait another year to get your refund. So when you
Chelsea Jones (25:28)
Mm-hmm.
Nate (25:28)
thought PSLF is over, right now, if I submit this form, you're in a two-year waiting period. And it's
Chelsea Jones (25:34)
Yeah.
Nate (25:34)
it really just it just sucks to wait two years and not feel done. So what I would recommend for listeners who they they want to look into this.
would be if there is a minimal amount of savings, if you determine that there's a minimal amount of savings and it would be worth just paying it for ten more months. Like let's say it's gonna save you two thousand bucks, you know, and it but it might be worth it just to spend the two thousand dollars to get it forgiven versus waiting
Chelsea Jones (26:08)
Mm-hmm.
Nate (26:09)
two years kind of on pins and needles. this family has big plans for when their loans are over, so they're gonna wade into the treacherous waters.
Of the student student aid department.
Chelsea Jones (26:25)
Mm-hmm.
Nate (26:26)
but I will say that a lot of those requests that did get processed were approved. So it's not like they're just denying you for no reason. and as far as the refund goes, they it they haven't written a lot about this at the Department of Education, so it's still a bit of an unknown.
The landscape for student loans continues to change all the time, but that is what it is and that is how it works.
Chelsea Jones (26:54)
Mm-hmm.
Right. Our last question comes from an emergency medicine doctor in Oregon. They said I feel pretty risk averse, but I've been told I should invest aggressively while I'm young. What do I do?
This is a really interesting question because it's kind of at least in our minds of as financial advisors, it's counterintuitive for a young person in their 30s to be risk averse, which to us usually just means invested less in stocks and more in bonds if you're risk averse. and when I get this question and I actually dig into it, it's less about
the actual risk, then it is about understanding where the risk is coming from. Like if you don't understand what you're invested in, it's gonna feel really risky. But if you know what's behind
Nate (27:46)
Yeah. I I I I th
yeah, what what's y I think about it like this. I take my dog on a walk and there's this really nice loop around our n it's not even our neighborhood, it's like a a public path, but it's it's near our house. And there's this
Chelsea Jones (28:08)
Mm-hmm.
Nate (28:08)
part of it where you go over a bridge over a river and
Chelsea Jones (28:12)
Mm.
Nate (28:13)
the dog my dog sees the river.
It hears the river. It thinks, I don't want to fall in that river. And it does not know because it's a dog. It does not
Chelsea Jones (28:24)
Mm.
Nate (28:24)
know that how reliable a bridge is.
Chelsea Jones (28:29)
Yeah.
Nate (28:30)
Right? Like, but if I could just say, hey, my dog's name is Moses. Moses, this this bridge is okay. Like, yeah, there's some risk here. You could jump off the side. It could break.
Chelsea Jones (28:41)
Mm.
Nate (28:43)
but like, you're probably okay.
But as human beings, we're totally comfortable with that risk because we understand what a bridge is. Stocks are
Chelsea Jones (28:48)
Yeah. Mm-hmm.
Nate (28:51)
riskier than bridges. I won't say that, but or at least most bridges.
Chelsea Jones (28:54)
Yes.
Nate (28:55)
But yeah, it's like you it's like you don't really understand what you're doing. There is risk involved, so you just kind of say, I don't really like risk. But like what is risk? You know,
Chelsea Jones (29:06)
Yeah.
Nate (29:06)
like what are you actually what risk are you taking?
Chelsea Jones (29:10)
Mm-hmm. Yeah. Usually whenever we have that conversation and we get to the bottom of like what actually feels risky?
Nate (29:18)
Mm-hmm.
Chelsea Jones (29:19)
it's it's more about understanding than it is about the actual risk that they're taking on. It's like understanding
Nate (29:24)
Mm-hmm.
Chelsea Jones (29:24)
what the risk actually is. 'cause like I said with us, we don't do speculative investments. We don't do, you know, we don't typically recommend things that are riskier than stocks.
A mix of stock
Nate (29:39)
Mm-hmm.
Chelsea Jones (29:39)
and bonds. so yeah, more risk to us means a larger percentage of your portfolios and stocks. and when we talk to clients about that and kind of break open maybe the funds that we would recommend they invest in, they see, I am actually investing in thousands of different companies. And in order for me to
like actually lose all of my money, some catastrophic things would have to happen. then that makes them feel a little bit better because the the actual risk of losing all of the money is relatively low. You know, the value will of course fluctuate, but one of the good things about being, you know, a young 30 something doctor that's just starting out is you have time on your side.
You have time
Nate (30:31)
Yes.
Chelsea Jones (30:31)
to withstand the ups and downs in the market and and history shows
Nate (30:35)
Mm-hmm.
Chelsea Jones (30:37)
us that you usually come out on top in the long run if you're responsible.
Nate (30:40)
Mm-hmm. I I I I had
to go through a valuable but somewhat unfortunate experience of talking to an advisor, another advisor, who in order to invest her money, they needed to talk to my spouse. Like in her, she had a interesting plan at work. It was like a really small company, so it's a simple IRA they set up. And so they had to get her risk tolerance. And I'm over there like signing to her like
More risk, you know, like cause she says she's they're like, What's your risk level? And she says, I don't like risk, you know, that's my
Chelsea Jones (31:17)
Yeah.
Nate (31:18)
spouse. And I'm like, No, no, no, more, more. It's like I wasn't allowed
Chelsea Jones (31:21)
Ha ha ha.
Nate (31:23)
to just tell him for her what what we're gonna invest in.
Chelsea Jones (31:27)
Right.
Nate (31:27)
but it w it's it's a kind of a disservice in some ways if you stop there, you just ask someone these theoretical questions about like how much risk do you like to take?
And I know we have to do that in our industry, and we do that, but the better way to do it is get a feel for someone's risk and then explain to them what they're going to buy. And so anytime that you and I like we call it lifting up the hood, we look inside of a fund and you actually look at the names in the fund. Like go look at the positions that you're buying, the the companies that you're buying a stake in, you'll probably recognize the top 50 of them. And you're just like, Well.
Chelsea Jones (32:07)
Exactly.
Yeah.
Nate (32:07)
What would
have to happen to to actually lose all your money? What would have to happen for, you know, Tesla, Netflix, Meta, Google, Johnson and Johnson, like what would have to happen for yeah,
Chelsea Jones (32:17)
Yeah. Apple, yeah.
Nate (32:21)
Apple? What would what would have to happen in our country for all of these things to go to zero? Like
Chelsea Jones (32:27)
Mm.
Nate (32:29)
there would be no place to hide if all these places went to zero. Right?
Chelsea Jones (32:33)
Right.
Nate (32:33)
And and what would have to happen?
For all of those things to go to zero. And nothing, none of the companies below them to replace them, like to to to switch the order of the top companies now becoming middle companies and the middling companies not to somehow improve and take over the top spot and do really well. Cause that is typically what happens
Chelsea Jones (32:57)
Mm-hmm.
Nate (32:58)
when you're seeing fluctuation in the market, it is big giant companies getting knocked off the throne.
And middling companies innovating and becoming top companies. So
Chelsea Jones (33:10)
Mm.
Nate (33:11)
if your question is like I might lose all this money, I guess there's always a chance, like anything could happen. But the idea that the entire world economy will not continuously improve like it always has over a very long period of time is relatively low. So when you look at that and you think about how long you have as an investor, as a young
doctor, most of the time you realize I am taking risk. But the question is, how much how much can I stomach fluctuations versus
Chelsea Jones (33:47)
Mm-hmm.
Nate (33:48)
what I assume they think is I'm buying into a stock that could go to zero. But if you're buying thousands of international stocks, thousands of US stocks, and coupling it with some bonds.
You know, that is more diversified than what they're assuming, which is buying a few single stocks and hoping that they skyrocket.
Chelsea Jones (34:06)
Yeah. Yeah. To take that back to a bridge analogy thro your bridge analogy. I had a friend who was an engineer explain bridges to me once and like you know, everything's triangles and they're like, each of these points takes a little bit of pressure off of this this and I was like, Okay. But now that I'm thinking about it, I'm like, if you just have a bridge with two poles and you're not
Nate (34:32)
Mm-hmm.
Chelsea Jones (34:32)
well diversified, it's not gonna take as much to knock it down.
But if you have a thousand different companies taking pressure off the portfolio
Nate (34:41)
Yes.
Chelsea Jones (34:41)
through diversification, it's
Nate (34:43)
Mm-hmm.
Chelsea Jones (34:44)
a stronger bridge and it's gonna hold up longer. And it would take like an
Nate (34:46)
That's good.
Chelsea Jones (34:47)
earthquake to knock it down.
Nate (34:49)
Yeah.
Exac ladies and gentlemen, we did not practice this. The bridge the bridge analogy
Chelsea Jones (34:54)
Yeah.
Nate (34:55)
made it the whole way through. Yeah, no,
Chelsea Jones (34:58)
It did.
Nate (34:58)
that that's very true. And so what I have seen, this does not mean this is for everybody. You someone could see that bridge and be like, no thanks. Like I'm gonna walk around. And so what does it mean to walk around? You gotta save more because you're taking less risk, therefore you're expecting a lower rate of return. Probably have to spend less. And if that is you.
Chelsea Jones (35:18)
Mm-hmm.
Nate (35:19)
That is okay. That is okay. but most of the time when people actually understand what is inside of the portfolio or inside of these mutual funds or index funds that they're buying, they do get more comfortable and their their appetite for stocks goes up by some degree. Maybe n maybe it doesn't double,
Chelsea Jones (35:40)
Mm-hmm.
Nate (35:40)
but sometimes it's like, you know, I don't need to, you know, be in all bonds. I could buy some stocks. So
But it's a good question. I think lots of people feel this and lots of people feel pressure around like I've just been told I need to be aggressive even though I'm uncomfortable with it. And that's not appropriate. If you can't stomach
Chelsea Jones (36:00)
Mm-hmm.
Nate (36:00)
the fluctuations of the stock market, you shouldn't own stocks. It's just that most people, when they understand it at a high level, they they feel more comfortable with it.
Chelsea Jones (36:10)
Mm-hmm.
Nate (36:11)
Okay, I think that is it for today. Thank you everybody for listening. If you liked this episode, please be sure to subscribe. We release one every week. You can send us questions at podcast at physicianfamily.com or you can visit our website at physicianfamily.com. we will answer all your questions either by email or on the on the show. Until next time, remember: you're not just making a living, you're making a life.
