This week, I have the honor of welcoming Dr. James Dahle to my series on debt free doctors. Dr. Dahle hardly needs introduction. He is the founder of the White Coat Investor and has changed thousands of lives (including mine!) with his sensible money advice for high income professionals. He is here today to tell us more about his background and his debt free journey.
About Dr. Dahle
Welcome Dr. Dahle! Please tell us about you and your family.
I am 13 years out of residency, current practicing emergency medicine in a community hospital in Utah half-time and running The White Coat Investor full-time. I attended the University of Utah School of Medicine and trained at the University of Arizona. I am married with four children ranging from 3 to 14.
Sounds like you have your plate full! What are your hobbies or passions outside of medicine?
I enjoy the outdoors- skiing, rock climbing, mountaineering, mountain biking, canyoneering, boating, exploring, hiking, backpacking, rafting, paddling, and ice hockey.
Early Career
Could you tell us about your student loan situation in your early career? Did you take out any student loans?
I had one real student loan, an 8% $5K loan I took out in 1993 from the State of Alaska. It had nice terms as the interest was deferred while I was in college, med school, residency, and military service. I paid it off as the interest started building as I left the military in 2010 all in one fell swoop. I figured that in 1993 dollars I borrowed $5,000 and paid back something like $3,200.
I worked the rest of my way through college and paid for medical school with an HPSP scholarship. It took me 47 months to pay off the military and I assure you that they came out ahead on the deal. It wasn’t all bad, I had a lot of unique experiences, but it certainly wasn’t a brilliant financial move. In-state tuition at the University of Utah was only $10K the year I started.
My spouse is a teacher and she never had any student loans either, working her way through undergrad and graduate school with part-time jobs and scholarships.
Excellent. Thank you for your service to our country. Did you have any other significant consumer debt (excluding house)?
No. We never borrowed for cars or carried any balances on credit cards.
That’s awesome.
So, there is always a debate in the finance community about whether or not to pay off the mortgage before building wealth investing. What motivated you to become debt free and pay off your mortgage?
It seemed silly to be carrying around a small mortgage (small in relation to our income and assets) while investing in bonds at record low interest rates in a taxable account.
More About Debt Repayment
What debt repayment method did you use?
We paid the minimum payment on the mortgage for about 6 years, then made two or three large payments over the next year when we had extra money after maxing out retirement accounts.
If you (and/or your spouse) did take out student loans, how long did you take to pay them off?
I wish I could have paid off my “student loans” with gazelle intensity, but there was no way the military was going to let me pay them off in anything less than four years. The only reason I got out a month early was saving up my paid leave to do so.
Your advice to “live like a resident” majorly impacted my life and helped my family pay off student loans in a hurry. So I have to ask- did you live like a resident?
Yes, for four years and we were really quite frugal for at least 2 or 3 more. We didn’t have a huge choice though, the military was only paying me 2-3X what I made as a resident. There was no way we could 5X our lifestyle even if we wanted to. It was kind of an advantage in some ways to get multiple smaller raises throughout my career rather than the one big one most emergency docs get.
That’s a good way of looking at it. This question is a bit redundant but for consistency in the series: Did you frugal down or try to earn more to pay off debt or both?
We were pretty frugal, but our life has been one of continually increasing spending. We started so low that we never had to go backward. I’m proud to say it has been over 20 years since I had to donate plasma for food money though.
Ha! That’s a win.
We know you have WCI, but did you always do something to bring in extra income?
As I look back, I’ve had a second job for most of my life. I’ve only had a grand total of 1-2 years as an attending where I only had one job.
Could you tell us a little more about your mortgage debt?
Yes, we’ve had three houses bought on mortgages. Our current house we paid off something like $370 in 7 years, most of which was paid off in the last year.
Nice! At what age did you become debt free?
I think I was about to turn 42. My wife was 39. We don’t plan to go back into debt but it wasn’t some incredibly life changing moment. We never really had a “debt problem” like most Americans. It was more life-changing to finish up my military commitment for sure.
It’s nice to have a little bit of improved cash flow and less need for life and disability insurance. It’s nice to have that financial goal ticked off. It’s nice to know that if something happened to me all my wife would have to do is cover the property taxes. It certainly contributed to our financial independence which has allowed me to cut back and enjoy medicine more.
And that’s the moral of the debt free story!
Cuteness Overload!
Investing Strategy
You know your stuff when it comes to investing, so I’m curious, how are you investing your assets?
We invest in our 401(k)s, a defined benefit plan, Roth IRAs, 529s, an HSA, a DAF, and a taxable account. Our asset allocation is 60% stock, 20% bonds, 20% real estate/small businesses. We don’t use target date funds as they just don’t work well when spread across all those different accounts.
Thank you for sharing. How are you investing for for kids?
Our children each have a 529, an UGMA (their “20s fund”) and a Roth IRA for their earned income.
Spending
Do you use credit cards?
We use credit cards that pay us between 2.5-5% cash back. We put most of our expenses on them. However, I do believe we spend more than we would if we used cash. That’s a good thing for us though as we can be a little cheap if we’re not careful.
Haha, yes it’s good to find a balance between frugal and cheap! Yet, I’m sure you’re also generous. Do you donate to charity?
Yes, we give more away each year than we spend. We started using a DAF (Donor Advised Fund) this year to do it and that has made it a little easier and provided a lot more anonymity.
Last Pieces of Advice
I know our “debt-free story” isn’t the typical one, but it does illustrate that if you never really rack up much debt, it makes for a pretty nice life. It also demonstrates that being overly afraid of a reasonable amount of debt for school or a mortgage can also have a cost.
Great advice. That’s really relevant to my family’s situation as we think about taking out a mortgage for our primary residence. Thanks for sharing here, Dr. Dahle, and congratulations on being debt free!!!
TFP readers, don’t miss Dr. Dahle’s Physician Wellness and Financial Literacy Conference in Las Vegas on March 11-14th, 2020! CME credit is available. I will be there as a panel member discussing financial and professional issues for women. You can find the 2018 conference content here. This conference sells out fast, so make sure to sign up when registration opens at 7pm on July 8th, 2019!
Stay frugal,
Dr. D
Standard Disclaimer: Not meant as individualized financial advice.