If you forgot to live like a resident for your first few years as an attending physician, it isn't too late. In this podcast episode, I interview Dr. Disha Spath, of The Frugal Physician blog, who did just that. They were stressed about money and making minimal progress towards being debt-free, so she and her husband made some drastic changes in their life. The result of frugal living? They paid off $208,000 in student loans in 17 months.
How did they do it? Focusing on the big expenses; housing, cars, and food. They tried to be intentional in their spending, ensuring that they were spending on things that brought them joy. Doctors are in the top 1- 5% when it comes to income in this country. If anyone can afford to not be frugal, it should be a doctor. But we also know that you can always outspend your income no matter how large. Listen to this episode to hear a discussion on spending tips for things that people spend a lot of money on and how you can spend a little bit less. Choosing to be generally frugal and selectively extravagant will help you build wealth while living the life you want.
I estimate that 80% of doctors need, want, and should use a financial advisor and/or an investment manager. Some investment gurus such as Dr. William Bernstein think my estimate is way too low. At any rate, if you want to use an advisor temporarily or for your entire life, there is no reason to feel guilty about it—just make sure you are getting good advice at a fair price.
If you need help updating your financial plan or just getting one in place, check out our list of recommended financial advisors at whitecoatinvestor.com/financial-advisors.
You can do this and The White Coat Investor can help.
Dr. Disha Spath, of the Frugal Physician blog, has actually had to “frugal down” twice in her life. I'm sure the first experience when she was a child gave her confidence that she could do it again as an attending. She was born into a pretty affluent family in India but her father died by suicide when she was nine. Her mother brought her to America when she was ten and they experienced quite an overturn of their lives and a culture shock and she lived below the poverty line for most of the rest of her upbringing. As she calls it, “uncomfortably frugal.”
She started working at 13 and helped to pay the family bills and was involved in the family finances pretty early on. It gave her a healthy respect for financial knowledge and the power of savings. She put herself through college and did medical school with loans. She is currently working in a multi-specialty physician-owned practice in primary care.
When she finished residency they moved to a nice home on an island in the South. It wasn't until two years later, she was on maternity leave, without a steady paycheck, that she realized things could go bad very quickly. Her student loan bill of $2800/month took the entire short term disability payment. It isn't that they couldn't afford this new lifestyle but that they were living on the edge and that was uncomfortable and a somewhat scary place to be.
It was actually on maternity leave when she was listening to the White Coat Investor book on audio that she became determined to frugal down from their inflated lifestyle. She realized that they had done it all wrong but that she could still turn it around.
If you can relate to Dr. Spath's story so far, she gives some steps for you to follow.
Initially, they just cut back on their spending and paid off their cars. But then they got a little drastic and started looking at moving to a new location when her contract came to an end. They decided to go back to living like a resident.
Do you have any idea how rare that is among doctors, how difficult that is to do? I got an email this week from a doc who is literally just out of residency and looking at buying a $700K house and wanting to figure out how to buy a $35K car. Of course, the student loan payments haven't even started hitting yet, and he's trying to figure out how to borrow more money for all those things. I think it's just very incredible to see someone that went forward, kind of adopted an attending lifestyle, and then changed it back to a resident lifestyle. Very unique.
She said what really motivated her to change was her children.
Renting instead of owning saved them $300 on their payments each month but also there was no maintenance or home insurance when renting. And less feeling to keep up with your neighbors. Downsizing can bring up all these fears Disha mentions. Like, “where am I going to put this stuff? What are other people going to think? Are people going to think I'm not succeeding in my career because I'm going down in house?” That is a hump to get over, to realize that having a big house does not mean you are financially stable.
Regarding food purchases, it is those little habits that you have, that you don't think about, that really add up to a lot of savings if you can change them. Disha decided to batch cook and take lunch to work and then drink the free coffee instead of buying it. She realized eating lunch out at work and drinking fancy coffee didn't increase her happiness. Going out to eat with her family and on dates with her husband did make her happy so they didn't cut back there at all. She feels like that is what really kept them going on this path for as long as they did, because if you're too miserable, you're not going to sustain it.
Paying off $208,000 in 17 months is impressive. I asked Dr. Spath how she did it. Downsizing helped a lot. But she also refinanced those student loans at 6-8% down to 3.875%. Her husband went back to work too, so now they had two incomes to throw more money at the loans. When they first started keeping track of their net worth, they were worth about negative $300,000, four years ago. And four years later they are at a positive $300,000.
Disha is calling herself the Frugal Physician so I asked her what that looks like.
Now one of the difficulties of being frugal is that if you are frugal, usually after a while you no longer have to be frugal. So I asked her when that time comes, will she still be frugal?
I asked her if being frugal was part of her identity and if she would always be frugal. Long time readers will know that we were frugal for a long time but are not anymore. I asked her if this was just a means to an end for her?
What's the difference between frugal and being a cheapskate? How do you distinguish between those two?
We had a good discussion about student loans. Recently Dr. Spath said,
College tuition rates have doubled and interests rates are high but no one wants to or should help high income earners because we have the ability to pay off the debts. The plans by Elizabeth Warren and even the Obama administration in 2013 wouldn't have moved the needle much for high income earners with these high student loan burdens. They might be great for the middle class or the lower class, but they're not going to do anything for doctors. Disha has some strong words,
Some people tell me, “my student loans are at 2% so why should I rush to pay them off?” So they are taking their money and investing it instead. This was her thought about that,
I think she is right that it is a good dress rehearsal for life. If you can pay off your student loans in two to five years, you can become financially independent in 20. Using the exact same skills, the exact same mindset that you use to pay off your student loans quickly you can use to achieve financial independence. But if you drag them out for 25 years, well, how long are you going to spend becoming financially independent? 100? That's not going to work out very well with your mortality.
We know that doctors can be poor with a very high income because income does not equal wealth.
For those doctors who love practicing medicine and see no need to save extra to reach financial independence early. They have life and disability insurance and just want to save enough to reach FI at 65 or 70. I asked her what she would tell those people.
I agree that financially independent doctors are better doctors. They can make decisions for their patients, for the practice, to avoid their own burnout, rather than having to make them in order to bring in enough each month to pay their bills.
We talked a bit about cheap flights. She wrote a post about finding cheap flights recently. She is a big fan of using credit card points to pay for travel. Some of the other tools she uses are:
Dr. Spath really focuses on cutting down fixed expenses. They cut cable and only use streaming services and an old fashion antenna. Don't deprive yourself though. That is the sure way to not stay frugal.
If you forgot to live like a resident for a few extra years after being becoming an attendant, it is never too late. Track your spending and decide what changes you are willing to make. Take control of your money. Don't let it control you.
Intro: 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. Here's your host, Dr. Jim Dahle.
Dr. Jim Dahle: This is White Coat Investor Podcast number 122, frugaling down with Dr. Disha Spath MD. Thanks so much for what you do. I had a unique opportunity this week. I got the opportunity to take care of an 800 pound man. I wanted to give a special shout out to those you working with the severely obese. Whether you're in primary care or you're a bariatric surgeon, this is a real issue. And I think you're making a big difference in helping these folks. Their lifespan is shortened so dramatically by their weight that anything you can do, even helping them to drop just 100 or 200 pounds, makes a dramatic, dramatic difference in their comorbidities and their lifespan. So it was interesting, I called the cardiologist about him cause he was having chest pain. The cardiologist said, “There is almost nothing I can do for this man.” Because we could not put him on the cath lab table. We could not put him on the CT scan table. It was just a very, very difficult person to take care of just because of his sheer size.
Dr. Jim Dahle: So those of you who are working on this problem and most importantly probably preventing this problem, I wanted to give you a special shout out and thank you for what you do with your daily work. As much as you are trying to help others, I want to help you to be successful in your finances. And that's what the White Coat Investor Podcast is all about.
Dr. Jim Dahle: This particular episode is sponsored by Set for Life Insurance, which was founded by Jamie K. Fleischner. CLU, ChFC, LUTCF in 1993. She started the firm while attending Washington University in St. Louis, and specializes in individual term life, disability, and longterm care insurance. They work on the client's behalf to shop around to find the most suitable products at the most cost effective rate. So for more information, visit www.setforlifeinsurance.com.
Dr. Jim Dahle: I told you last week about the Passive Income MD Conference. That is still available, I believe for registration. I don't know how much longer it's going to be. That will take place on October 26th in Los Angeles. It's a one day conference with some of the biggest names in physician real estate investing that there are out there.
Dr. Jim Dahle: I'll even be giving a talk at it. So maybe they'll let anybody in if they're letting me speak. But it should be really interesting and really fun. If you can make it, I'd love to meet you there. If you missed out on registering for the White Coat Investor Conference, this is your chance. Three of the speakers at WCI Con will also be speaking at this conference. It's less of a time commitment, less money, especially if you're already on the West Coast. Come on down and come meet us. I hope to see you there. You can get more information at passiveincomemd.mykajabi, K-A-J-A-B-I, .com/pimdconference.
Dr. Jim Dahle: Our quote of the day today comes from my friend Taylor Larimore, who said, “Just as the gambling industry wants people to think they can beat the casino, the investment industry wants investors to think they can beat the market. Of course, a few lucky gamblers do beat the casino, but most don't. It is the same for investors. Some will beat the market, but most won't.”
Dr. Jim Dahle: Thanks also to those of you telling your friends about the podcast and leaving us five star reviews on Apple Podcast. We appreciate you doing that. It does help spread the word. So please do tell your friends about it. Leave us a great review.
Dr. Jim Dahle: Our guest today is Dr. Disha Spath, an internist now living in New York, who may be known to you as the voice behind the Frugal Physician, found at thefrugalphysician.com. I don't think your name is actually on the website, but your picture is all over. So I don't think you're going for total anonymity there. And you're also lined up to be one of our panelists at WCI Con 20. So welcome to this podcast, Dr. Spath.
Dr. Disha Spath: Thank you so much for having me here. I'm so excited.
Dr. Jim Dahle: Well, let's start with just a little bit of introductory material. Tell us a little bit about your upbringing.
Dr. Disha Spath: Well, I was actually born in India. Far, far away from here. And I was actually born into a pretty affluent family. My father was a pharmacist, and my mom was a science teacher. But my grandfather was in government there. So things were pretty good. But then tragedy hit. And actually my father committed suicide when I was nine.
Dr. Jim Dahle: So sorry to hear that.
Dr. Disha Spath: Thank you. It was tough on everybody, but at age 10 my mom brought us here to the states. And we experienced quite an overturning of our lives and culture shock, and we quickly realized that there were really no savings. So my mom worked as a scientist, a bench scientist. And we lived below the poverty line for most of my upbringing. That's what we would call uncomfortably frugal.
Dr. Disha Spath: So I started working around 13, and babysitting, and all of that stuff, and waiting tables a little bit later. I helped my mom pay the bills, and I was involved in the family finances pretty early. That gave me a pretty healthy respect for financial knowledge and the power of savings. As I grew up, I put myself through college with some help from my parents and took out loans for medical school.
Dr. Jim Dahle: Now speaking of medical school, let's hear a little bit about your professional pathway and your current practice.
Dr. Disha Spath: I finished residency in 2015, and I started working as a hospitalist. And I worked as a hospitalist for about three years, then switched to primary care. And I'm currently working in a multi-specialty physician-owned practice.
Dr. Jim Dahle: Cool. Now you've done something very unique among doctors. And one of the big reasons I actually wanted to bring you on here. You actually, in your words, frugaled down from an inflated lifestyle. Tell us about that and the why behind that, the how behind that. Tell us a little bit of what it meant to you to frugal down.
Dr. Disha Spath: So as I told you earlier, we were uncomfortably frugal when I was a kid. So finally when I became a doctor, I was like, “This is it. Now I finally get to live it up.” And when I first got my attending job, me and my husband decided to move to the beach and buy a nice house on an island. And that was relatively easy to do. What wasn't easy then was dealing with finances after that.
Dr. Disha Spath: It's not that we couldn't afford it. We could, by all usual definitions. But things really came to a head when I took maternity leave. I had to take two maternity leaves during that time, and it quickly became apparent that without a steady paycheck, things could go south pretty fast. They didn't, but the potential was there. Especially with a $2,800 student loan bill coming in every month. That in itself, that took the short term disability payment.
Dr. Disha Spath: We realized that we were living on the edge. And actually, I was downstairs away from my baby during my maternity leave and sewing a cover to a couch because I was too afraid to spend money during that time, and listening to your book on audiobook while I was doing it. And that's kind of when I realized that I had done it all wrong, that we had done it all wrong. And that's when I decided to turn things around.
Dr. Jim Dahle: Wow. I've inspired somebody to actually change. Sometimes you wonder, you spend so much time telling people about things they can do or should do. And you wonder if anybody out there ever actually does it. And it's always kind of fun to hear that you did change somebody's life.
Dr. Disha Spath: Oh yeah, absolutely. I remember the moment picture perfect because it was a turnaround in my thinking. And I went upstairs and I talked to my husband and I was like, “This is uncomfortable. Something has to change.” So we sat down and we made a plan, and we listed our debts and our assets, and real quickly realized that we didn't have many assets and a lot of debt. So we decided to make a plan to get out of debt. So we started that with a debt snowball.
Dr. Jim Dahle: And this is where it gets exciting. This is pretty awesome. So listen up listeners, this is where the plan gets really interesting.
Dr. Disha Spath: So initially, we just started tracking our spending. It's really difficult to track your spending if you've never done it before. So the first month, we started to list where our money was going and realized that there was a lot of different places that we were spending that we didn't realize we were spending as much as we did. And then we also looked at are the expenses for the house and that was really killing us too because not only was there the mortgage, but also the upkeep and the upgrades, and Keeping Up with the Joneses, and all of that.
Dr. Disha Spath: So we started cutting back, just spending initially, and paid off the cars. And then we looked at moving to a new location when my contract came to an end. And that was when we decided that we were going to actually downsize, and go back to living like residents just for a little bit until the student loans were paid off.
Dr. Jim Dahle: So you actually did not live like a resident initially, but later went back to living like a resident?
Dr. Disha Spath: Right, yeah. And it was pretty recent. It was just two years prior that we were living like residents. So it didn't feel that foreign.
Dr. Jim Dahle: Do you have any idea how rare that is among doctors, how difficult that is to do? I mean, this is incredibly hard to do, right? It reminds me, I got an email this week from a doc who is literally just out of residency, and looking at buying a 700 something thousand dollar house, and wanting to figure out how to buy a $35,000 car. And student loan payments hadn't even started hitting yet, and he's trying to figure out how to borrow more money for all those things, you know? I think it's just very incredible to see somebody that went forward, kind of adopted an attending lifestyle. And then changed it back to a resident lifestyle. I think that's very unique.
Dr. Disha Spath: Thank you. And honestly, my background helps with going from being affluent to not affluent. Being frugal while I was growing up and then not being frugal and just completely rebelling against having to keep a budget. It was a personal insult that I would need to keep a budget because-
Dr. Jim Dahle: That's a good point. This isn't the first time you've done this in your life.
Dr. Disha Spath: Yeah. Yeah. So I was used to having that change and shift in the lifestyle. And really what brought it home was that I didn't want my kids to ever have to go through that uncomfortably frugal phase where something turned upside down, and something happened and then they had nothing to keep them going. I wanted to make sure that we insured a good feature for them, and really parenting and being a parent really brings that to a head. So it was worth it.
Dr. Jim Dahle: Okay, so nuts and bolts. What'd you do? You were spending this money and then you weren't spending this money. How does that work?
Dr. Disha Spath: So initially we had to sell our house, which was quite an experience. We put it on the market and it sold in three months, but had 50 showings in the meantime. I was working a full time job and trying to get the house show ready. It was very difficult. But anyway, we did that.
Dr. Disha Spath: Then we had to find a house in upstate New York we were going to move. And we decided to move there because we had family to help with the kids. We wouldn't have to pay for as much daycare.
Dr. Jim Dahle: So the location was chosen because your expenses would actually be lower despite going to a relatively high tax state?
Dr. Disha Spath: Right, exactly. And also, if I had all the money in the world, I would live in New York City because I love it. So does my husband. But Albany is a much cheaper place to live, much more affordable place to live. So that along with the family factor was a huge influencing factor.
Dr. Jim Dahle: Yeah. I interviewed there for residency in January, I think. I remember the snowbanks were pretty impressive.
Dr. Disha Spath: Yeah. It's not a good time to interview. But yeah, it's good skiing anyway. So we decided to frugal down up here, and it was more difficult because the rental situation is just not, the rental market isn't great. And we're looking at rental houses and they were terrible. But finally found something and frugaled down. So basically what we did was take all of our belongings and whatever didn't fit, we put in the very large attic that this house had. And that was a key factor in us choosing this house because it had a lot of storage. So I would, if anybody else's considering frugaling down to pay student debt off, I would take that into account. Because if you're going to pay for a storage facility, that kind of negates the savings that you're going to have.
Dr. Jim Dahle: So how big of a change was it? How many square feet was the old house and how many square feet was the new house?
Dr. Disha Spath: The old house was around 2,000 square feet, but it also had a livable basem*nt area that we had finished. And the new house was about 1,500. Actually initially it was around 1,300 and then we moved again to a 1,500 square foot house.
Dr. Jim Dahle: So neither was a mansion by any means, but definitely smaller.
Dr. Disha Spath: Yeah, definitely smaller. Initially, when we had bought the house on the coast, we were still looking to buy the smallest house in the nicest neighborhood we could find. So we weren't completely terrible about spending, but still. Downsizing did take away about $300 a month. And it wasn't a whole lot at that point, just $300 a month. But what compound was that there was no maintenance when we were renting, there was no insurance costs. We had to buy pretty expensive flood insurance on the beach, so we didn't have to do that. And that really helped us. It's the little things that add up to make you gain a lot when you're downsizing.
Dr. Disha Spath: And also, there's the maintenance costs. We didn't have to spend on the house, but also I didn't have to make it look picture perfect. We lived in a nice neighborhood. We felt forced, not forced, but you wanted to fit in the neighborhood and have nice furnishings and stuff. And then just the pressure was lower.
Dr. Jim Dahle: You picked up a different set of Joneses.
Dr. Disha Spath: Exactly. Yeah. You got to surround yourself with people that you want to be like. And not that I didn't want to be like people on the coast, but still.
Dr. Jim Dahle: Not that Albany's all that far from the coast, but you really were on the coast before. You described downsizing as a scary experience in a recent blog posts. Why was it scary, and what can people do to make it less scary?
Dr. Disha Spath: Well, it's scary because you get used to spreading out, and you have a lot of stuff. Thinking about downsizing to a smaller space, it brings up all these fear points of where am I going to put this stuff? But also, what are other people going to think? Are people going to think I'm not succeeding in my career because I'm going down in house? I mean, to be completely honest, house is a status symbol. I'm Punjabi. We're super showy. That was a hump I needed to get over to realize that that's not what financial stability is. Having a big house does not mean that you are financially stable or doing well.
Dr. Jim Dahle: Now obviously you saved a lot of money in housing. In decreasing your housing and housing-related expenses. What other areas in your budget did you go after besides housing?
Dr. Disha Spath: So the big three costs were housing, cars, and food. We had the opportunity to upgrade our car at one point because someone hit it and it got totaled, but we decided not to because we were on this journey to get out of debt. So we just took the money from the insurance and just bought as much car as we could afford to pay in cash, which happened to be exactly the same car that we had before, which is fine.
Dr. Jim Dahle: It's funny how that works out, huh?
Dr. Disha Spath: Yeah, right? Yeah. So we didn't upgrade the cars when we could have. I really cut back on the spending to go to work. What I mean by that is spending when I'm at work. Buying coffee, buying food every single day. It's those little habits that you have that you don't think about that really add up to a lot of savings if you can change it. Especially going to work and then spending at work, you're paying to work, which is silly.
Dr. Disha Spath: So instead, I decided to batch cook and take lunch, which made a big difference. I haven't spent on lunch at work in, I don't know, a couple years now. And it does add up to a lot of money once you start making it a habit and doing it consistently. And I got the free coffee instead of the Starbucks coffee. However, if you really want the coffee freaking get the coffee. If it's going to make you unhappy, don't. But just don't make it a habit.
Dr. Jim Dahle: Yeah. So how about eating out? Did you eat out less other than lunch or …
Dr. Disha Spath: Yeah. Yeah. So what we really sat down to do was to decide the whole budgeting process really brought in front of us, what makes us happy and what doesn't? Spending at work for lunch that I didn't like anyway, didn't make me happy. So I decided not to spend there. But going out to eat with my family, going out on dates with my husband. Those are things that make us very happy. So we decided we're not going to cut back there at all. And that's what really kept us going on this path for as long as we did because if you're too miserable, you're not going to sustain it.
Dr. Jim Dahle: Now you're an internist, which is generally considered to be a somewhat below average specialty of medicine as far as pay goes.
Dr. Disha Spath: Yup.
Dr. Jim Dahle: And you had just a little bit more than the average student loan burden at 208,000. Yet you paid it off in 17 months.
Dr. Disha Spath: Yup.
Dr. Jim Dahle: How'd you do that?
Dr. Disha Spath: Well, downsizing was a big thing. But we also refinanced the loans. I had the federal student loans at six to 8%. And when we refinanced down to 3.875%, that really helped a lot in making progress. Along with the fact that we were now actually had breathing room in our budget. We were throwing money at the principal so that the interest was in compounding, and that was huge.
Dr. Disha Spath: We also increased our income because my husband went back to work. Initially, the first two years of me being in attending, I was the only earner because my husband was going to school for his master's. So once he got back to work, our income went up. And that helped along the payback a lot.
Dr. Jim Dahle: So now you're playing on both sides of the ball, both offense and defense.
Dr. Disha Spath: That's right.
Dr. Jim Dahle: You're earning more, you're spending less, and you took the difference and you through it at your student loans.
Dr. Disha Spath: Yup.
Dr. Jim Dahle: 17 months to freedom. How'd that feel to make your last payment?
Dr. Disha Spath: It felt really good. It felt really good. I did a little happy dance in the kitchen for quite a long time.
Dr. Jim Dahle: Give us a sense now for where you're at in your journey toward financial independence.
Dr. Disha Spath: So when we first started keeping track of our net worth, we were worth about negative $300,000. That was four years ago. And four years later we're at a positive $300,000
Dr. Jim Dahle: Making good progress then.
Dr. Disha Spath: Yeah. Our FI number is 2.5 to 3 million, and we should be there in about 10 to 15 years.
Dr. Jim Dahle: And you are still in the rental house, or have you kind of moved up in house? Do you have plans to move up in house?
Dr. Disha Spath: Right now, we actually still own my residency house in Nashville. So we have the tax advantages of owning a house from that house. And currently, we're renting that house out. So that's actually cashflow positive and it's paying for our rent here. So I really just don't feel, I'm not super excited to buy another house yet. We are going to do it at some point, but at this point, we're just saving. And if we find a house to buy, we'll buy it.
Dr. Jim Dahle: So how do you like owning your rental house in another state?
Dr. Disha Spath: You know, it's not as bad. It's not terrible because we have a good management company, and we have reliable renters. It's mostly just upkeep. And they did burn down the deck once, but that's okay.
Dr. Jim Dahle: These are the good renters, huh?
Dr. Disha Spath: laughing
Dr. Jim Dahle: All right. Well, tell us about your investments. What do you invest in?
Dr. Disha Spath: Right now? So it's the rental house, and we're just doing low-cost index funds in tax-protected accounts. We have one taxable account that we invest very small amount in just to dabble in it and kind of learn the market. But for right now, most of it until two months ago, all of our extra cash was going towards the student loans. So we're starting now to max out all the accounts for the rest of the year.
Dr. Jim Dahle: So what does your budget look like now? Basically what was going toward student loans is going to retirement accounts and other investments? And you're spending exactly the same or do you start spending more money when you got rid of the student loans?
Dr. Disha Spath: We were paying eight to $10,000 a month towards the student loans. We are still living at the same level. The first month afterwards, we paid for three separate upcoming vacations. But this month we're going to be positive that much cash. So …
Dr. Jim Dahle: It's exciting isn't it?
Dr. Disha Spath: Yeah. Yeah it is. It is exciting. It's really great now because I have the plan and the financial footing to know how to handle that.
Dr. Jim Dahle: So let's talk a little bit about this. I mean, you are calling yourself the Frugal Physician. Tell us about what you drive and how you vacation, and what frugal looks like for the frugal physician.
Dr. Disha Spath: You know, it doesn't look all that frugal, I got to say. Because the frugal parts of my life are the ones that only affect me. The frugal parts of my life are my smaller house. I drive an older car. And yes, people comment on it at work. It's the same 2011, I think Honda Civic that I've been driving. But otherwise, we go out to eat. We don't really watch, if we go out to a restaurant, we're not just getting water. We go on good vacations. We are really blessed as high income earners to have that room. If you just cut back a little bit on the fixed spending, all the discretionary spending can still stay the same and you'll still make humongous progress.
Dr. Jim Dahle: Now one of the difficulties of being frugal is that if you are frugal, you usually after a while no longer have to be frugal. What are you going to do when you have a lot more money either from your practice, your blog? Are you still going to be frugal? Is this going to cause a disconnect for you like it does for Mr. Money Mustache, who says he's living on less than $30,000 a year while making hundreds of thousands or millions from his website?
Dr. Disha Spath: So, one thing that was really critical to our success, my husband and I would sit down and have a budget date. And we would go through our budget and our plans for the future as well. So we're constantly looking ahead and adjusting because life changes, and what we want changes. So we're constantly looking forward to what our goals are and then kind of adjusting from there. So as long as we meet our goals, I'll be happy. I don't hold us to a certain spending amount, but we do have a big picture goal of being FI at a certain point. As long as we reach that, I'll be happy.
Dr. Jim Dahle: So do you feel like frugal is part of your identity, that you're always going to be frugal? Or is this a means to an end? Is there a time in 10 years where you're really not frugal, because you don't have to be anymore? What do you think?
Dr. Disha Spath: I don't think I could ever stop shopping for a good deal. It's kind of part of my DNA. Frugal to me means getting the most value out of the dollar and not just throwing it away. I think you should and can do that at every income level. It doesn't matter what you're bringing in because if you don't save anything, it's all gone. You don't have anything to show for it.
Dr. Jim Dahle: And what's the difference between frugal and being a cheapskate? How do you distinguish between those two?
Dr. Disha Spath: That's a good question, and it's a really fine line to walk. Generally, I think people being cheap is a label someone else puts on you because they feel bad because of your spending decision, you know? Because if you are compromising someone else's safety, your own safety, or you are compromising their happiness because of your frugality, that's when you start being called cheap. So it's a fine line to walk. But I think being frugal is getting good value without compromising anybody's safety or wellbeing.
Dr. Jim Dahle: Very well. Now let's turn the page a little bit and talk a little bit about something you said recently about student loans. When you said the student debt crisis is upon us and people are looking for a way out. Let's be real. No one is going to give doctors free money. Even Elizabeth Warren's plan won't help most high income professionals pay off their debt. We are going to need to find our own way out. What is the way out?
Dr. Disha Spath: Well, I think you have several good resources on your side for it. But honestly, the student loan crisis is getting out of hand. We have $1.56 trillion as a nation in student debt. Actually, the fed projects 40% of people are going to default by 2025.
Dr. Disha Spath: And this is because college tuition rates have doubled, and wages haven't. Interest rates are higher, and there's very little underwriting to the student loans. But, nobody wants to or should I think help high earners because we have the ability to pay this stuff down. Elizabeth Warren, her plan will offer $50,000 in student loan debt reduction for households with incomes less than $100,000. So 50,000 for households earning less than $100,000. And then that credit or that deduction scales down, it's $1 for every three if you're earning between 100 to $250,000 as a household. And there's nothing offered for households earning more than $250,000.
Dr. Disha Spath: So that's really not going to help any attending or most attending families. It may help residents, which is good. But again, it's $50,000. And student loan debt for medical students is averaging over $200,000.
Dr. Disha Spath: So the thing is we borrowed money to go to school and get this degree, which has a lot of value. So we will need to take care of that somehow. Whether it's paying it off or pursuing PSLF or repay, we're going to have to deal with it. We can't stick our head in the sand.
Dr. Jim Dahle: It's interesting that $50,000 sounds like a lot of money. But I had a comment left on the blog from a two doc family who owes nearly a million dollars between the two of them. And 50 grand just doesn't move the needle. It's a drop in the bucket for them. And this discussion of this from Elizabeth Warren isn't necessarily new. The Obama administration in 2013 proposed limiting public service loan forgiveness to the total amount that you can get in Pell grants, which at the time was $57,000. Changes like that. Yes, they might be great for the middle class or the lower class, but they're not going to do anything for docs, are they?
Dr. Disha Spath: No. And honestly, we have the earning power to take care of this. We have the income to take care of it. So we should. And why not? It's ridiculous that over 40% of physicians still have student loan debt by the age of 49 according to the recent Medscape survey. At 49 they're still paying student loans off. And that results in physicians having, 39% of physicians having a net worth less than $500,000. That's pretty sad.
Dr. Jim Dahle: That is pretty sad. I agree with you. But when I tell people this, you know what their response is? They come and say, “My student loans are at 2%,” or, “My student loans are at 3% or 4%.” So if you have two to 4% student loans, why should you rush to pay them off?
Dr. Disha Spath: Well, would you take out … I'm going to go full-on Dave Ramsey here. Would you take out $200,000 in a personal loan just to go invest it in the market?
Dr. Jim Dahle: You know what, most people will say to that is no. I run into a few that say yes though. They're like, “Yeah, if I can get money at 2%, I'll take as many millions as you'll give me.” You know?
Dr. Disha Spath: Right. And that's the thing. Leverage is risk, and it depends on how risk averse you are. But leveraging debt to make money takes on a lot of risks. The problem with that is that with leveraging student loans, is that there's no inherent value in student loans. If you have a rental house for example, you can always sell that off should things go south and your income, you lose your job or whatever. You can sell it, and then it's not something that's hitting your monthly cashflow. But student loans are yours until you die. And not only that, they're a depreciating asset. Real estate generally appreciates. But student loans, as soon as you're done with your medical education, your medical education is out of date. And then you have to work on continuing medical education and paying more money to update your knowledge.
Dr. Disha Spath: So you are leveraging a depreciating asset, that's not transferable. And that's super risky. Paying off student debt, especially at six to 8% is the safest thing you can do. It's actually a really nice way to get a financial fellowship. Because if you pay off your student debt right after you finish your residency, it's going to take a few years. And in that few years, you can keep your ear to the ground, learn about investing, watch the market, read financial blogs like the White Coat Investor. And get your head in the game so that when you do have the money to invest, you can do it with confidence.
Dr. Jim Dahle: You know, it's interesting. I think you're right that it is a good dress rehearsal for life. If you can pay off your student loans in two to five years, you can become financially independent in 20.
Dr. Disha Spath: Yep.
Dr. Jim Dahle: Using the exact same skills, the exact same mindset that you use to pay off your student loans quickly you can use to achieve financial independence. And it really is kind of a dress rehearsal. But if you drag that out for 25 years, well how long are you going to spend becoming financially independent? 100? That's not going to work out very well with your mortality.
Dr. Disha Spath: That's right.
Dr. Jim Dahle: The other thing I get a lot from people is when they go to buy a car and say, “I have the cash, but they're offering me a 0% interest rate.” Why not borrow for cars if you can get it at 0%? You're then paying it back with depreciating dollars, aren't you?
Dr. Disha Spath: Well, that's the same thing. Why not buy furniture and finance that out? Why not buy clothes and finance that out? The thing is, as long as you're financing out your life and financing out depreciating assets, you are tying yourself to these things. You have to continue to work, and your future dollars are going towards yesterday's purchase. And as long as life is stable, that's fine. As long as your job is stable and you're going to work and you're not sick, that'll work out just fine. But if something happens, you will be in the dumps, your finances will be in the dumps because you won't be able to pay for this stuff. So buying a car in cash doesn't become a hit to your monthly cashflow. You own it. It doesn't own you.
Dr. Jim Dahle: That's a good way to think about that. I like that. But, is frugal really for doctors? Doctors are in the top one to 5% when it comes to income. If anybody can afford to not be frugal, not be thrifty, it should be a doctor, right?
Dr. Disha Spath: Well, yes. But that doctor can also be very poor with a very high income, because income does not equal wealth. Wealth only builds if you have space in your monthly cashflow between your income and your expenses. If you spend everything you'll make, you'll never have anything to invest. So even if you're making 100,000, 200,000, 500,000, million dollars. If you throw it all away, it's not yours.
Dr. Disha Spath: So doctors have this immense privilege of having a very valued skill that we are compensated for. But it doesn't take all that much with this huge income to make progress financially. All you have to do is just be a little frugal. It doesn't have to be uncomfortably frugal. You don't have to be cheap. Just watch your spending a little bit, and you'll make immense progress and become quite wealthy.
Dr. Jim Dahle: Now you're obviously kind of on a track to hit pretty early financial independence. You said something like 15 years out, something like that. Our friend, the physician on fire just retired a few weeks ago. He's completely out of medicine at this point. But what about these docs who say, “I really like practicing medicine. I've got all kinds of life and disability insurance to cover me in case something bad happens. Can I just save just enough so that I can retire and be financially independent at 70 instead of 45, or 50, or 55, or even 60?”
Dr. Disha Spath: Sure. It's a good question. The problem with that is that medicine is changing. And while this doctor may like their life right now, who knows what it's going to be like in 10 years?
Dr. Disha Spath: We have so many outside forces. Insurance, government, administration, private equity. Things are changing right now. Medicare for all might pass, and who knows what our life's going to look like, our job life is going to look like? Having savings, being financially independent gives you flexibility. And that flexibility is the power to choose your own destiny, create your own practice, and be a master of your domain. And that's what we need in medicine right now is the doctors watching out for the doctor patient relationship. There are so many people and so many factors that are affecting that. And doctors as a whole need to be able to speak up and take charge, and advocate for their patients, for their patient's finances so that we can as a whole make healthcare better.
Dr. Jim Dahle: I think that's an excellent point that financially independent doctors are better doctors. They can make decisions for their patients, for the practice, to avoid their own burnout. Rather than having to make them in order to have a big enough, nut each month, to pay their bills. Their student loan bills, their mortgage bills, their boat payment bills, whatever they might be.
Dr. Disha Spath: Right. Yeah. Running on the RVU hamster wheel in a system we can't control is the best way to burnout. So in order to find our way out of this mess, we have to take charge a little bit of our own house first so that we can begin fixing what's around us.
Dr. Jim Dahle: Okay. Let's talk a little bit about some specifics. We've talked a lot about mindset today. You had a recent post on how to find cheap flights. Airline flights are a big ticket item, especially if you have a decent sized family like mine. When we go someplace, we got to buy six tickets. If we go to Alaska, we go to Europe, that's a big spend. What are your strategies for saving on this big ticket item?
Dr. Disha Spath: So I'm a huge fan of credit card points. We do all of our spending on credit cards, and utilize the points to travel. And that works out great as long as you are paying off the cards on time and not accruing interest. So as long as you can do that, utilizing points and then transferring to travel partners saves you a lot of money and gets you a lot of perks too.
Dr. Disha Spath: Having a travel budget helps too because if monthly you're putting aside a little bit of money, you can really jump on the good deals. And the good deals happen every once in awhile. Airline prices fluctuate a lot, and it has a lot to do with demand and the time of year that you're booking it. So if you can jump on it when it goes on sale, that's the best way to get the best deal.
Dr. Disha Spath: There are a lot of apps and tools online that you can use. I like Hopper a lot because I can put in my destination, and it will actually watch that route for me and then send me a notification when the price hits the lowest it's likely going to go, and then I can book it then.
Dr. Jim Dahle: And how do they determine how low it's likely to go? That seems like a guess. Are they just basing it on some algorithm in the lowest it's been in the last year? Or how do they do that?
Dr. Disha Spath: Magic.
Dr. Jim Dahle: It's a black box.
Dr. Disha Spath: Yeah, well I watch the travel flights. They have some sort of algorithm, but I'm not an expert on it.
Dr. Jim Dahle: But it actually advises you. It says wait to buy, don't buy yet. It'll get better.
Dr. Disha Spath: Yeah, exactly.
Dr. Jim Dahle: What if they're wrong? Can you sue them? Do they guarantee it at all? How does that work?
Dr. Disha Spath: I don't know, I don't work for Hopper but I will say that I get awesome deals when I use them. And I do watch these routes on other sites as well. I have gotten some good deals. I just booked a flight to India on Christmas and New Years for less than $1,000 round trip, which is huge.
Dr. Disha Spath: And you can actually, you can go on Matrix airfare search by Google ITA. That will give you all kinds of insane information about the flights. Like going out from a certain airport, you can see all the different flights that are there and what time they're going out, and the layovers in a block format. So you can really look around and do your research prior to buying as well. And I watched that India trip for six months, and the price that I got was the lowest I'd seen it.
Dr. Jim Dahle: So my wife is good at watching things like that like you are. She's a good shopper. I am a terrible shopper. I shop like a Hunter. Go out, kill the beast, slay it, drag it home. Right? When I go shopping, I consider it a victory if I can spend less than five minutes in the store, you know? So how does somebody like me that really does not want to spend six months watching airfare, put in a little bit of effort and get 80% of the value? Is there a way to do that? What is the lazy, frugalista like me supposed to do?
Dr. Disha Spath: Well, I think Hopper would be a good match for you because all you have to do is put in your destination and it'll give you a notification when it comes up. There are other email LISTSERVs that will send you emails when routes go on sale. And you have to sort of jump on it. You have to be the hunter, so that might suit you. Like Scott's Cheap Flights I think is what it's called. And there's a listserv called Next Vacay which is paid, and they'll send you routes that are on sale from your airport. And then as soon as you see one that you like, you can jump on it.
Dr. Jim Dahle: You're obviously close to New York city. You've got several airports there. You've got flights going everywhere in the world. You can probably fly direct to India out of New York city. What about somebody that's in small town Indiana, or some much smaller airport? Do these services work just as well there as they do out of the big centers?
Dr. Disha Spath: It depends on what you're using. Like Scott's Cheap Flights will only send you stuff from big hub airports close by. The Next Vacay will send it from your smaller airports. But then generally those things are from the larger airports. So it does, if you are interested in traveling, it does pay to be close to a nice, big hub. And that is one of the factors I take into account when I'm choosing where to live is how quickly can I get on an international flight.
Dr. Jim Dahle: Yeah, it definitely makes a difference.
Dr. Disha Spath: Yeah.
Dr. Jim Dahle: It sounds like you can save a lot of thousands. I mean it takes a while even for a physician to make $5,000 after tax. If you can save that by researching your flights well and by looking for deals, and by being flexible. I suppose that can make that difference up pretty quickly.
Dr. Disha Spath: Yes.
Dr. Jim Dahle: I mean maybe that's easier to go in and see another 100 patients.
Dr. Disha Spath: Yes. Yeah, absolutely. I think especially for big ticket items like that, it's worth waiting and watching. I enjoy the process because it's like hunting to me, but in a long term.
Dr. Jim Dahle: Yeah. What other spending tips do you have for things that people spend a lot of money on and how they can maybe spend a little bit less?
Dr. Disha Spath: So my biggest thing is to cut down fixed expenses. So one way we found to do that was to cut the cord with cable and actually just stream everything. We have an Apple TV, and we just get apps for that and we subscribe to Hulu, Netflix, and HBO. And then we get Amazon Prime TV, which has a lot of stuff too. And between those things and actually just an old fashioned antenna, which by the way still works. You can get everything that you ever need to watch. I watch things live from the antenna and that I can watch other stuff, on the streaming services.
Dr. Jim Dahle: Although, if your blog keeps getting bigger between your family responsibilities, and the blog, and the practice, I'm not sure you'll have any time to watch any TV
Dr. Disha Spath: So true. I mean yeah, I barely do. But when I do, I do watch The Bachelorette.
Dr. Jim Dahle: Yeah. See this is painful for me because I have all that stuff. I've got the cable, I've got the Netflix, and I'm like, wow. I hardly watch it at all. I really don't watch much TV at all. So it really is a lot of money being thrown away for us. We could probably save quite a bit there. Yeah, I could frugal down dramatically I assure you. We spend more money than we used to make for a long time for sure.
Dr. Jim Dahle: All right. What else should our audience know about frugal living? I mean, you've got the ear here of somewhere between 20 and 30,000 docs that are going to listen to this episode in the next month. What should they know about frugal living? What is your message to them? If you could just sit down with each of them for five minutes and talk to them, what would you say?
Dr. Disha Spath: Just focus on fixed expenses, and don't deprive yourself because that's the sure way of not being frugal anymore. Frugality is about getting closer to what you want, getting closer to what's important to you in your life, and valuing the heck out of that. Spending there. But cut back on everything else. Cut back on things that don't make you happy, that don't get you closer to your goal. And if we can do that, we can get out of debt, we can be financially healthy, and we can also be mentally healthy. And if I could just tell every doctor that, that would make my life, that'd be awesome.
Dr. Jim Dahle: So generally frugal and selectively extravagant?
Dr. Disha Spath: There you go. I like that.
Dr. Jim Dahle: Excellent. Thank you so much Dr. Spath for coming on the White Coat Investor Podcast. If you want to learn more about her or her message, you can find that at thefrugalphysician.com where she's been blogging now for a year and a half or so. How long has it been?
Dr. Disha Spath: One year.
Dr. Jim Dahle: Well congratulations on hitting the one year mark, and we wish you success going forward.
Dr. Disha Spath: Thank you so much for having me on Dr. Dahle. It's been a true pleasure.
Dr. Jim Dahle: That was fun to have her on. I really wanted to bring her on to talk about frugality. I feel like it's a subject I can't really speak to anymore. I felt like I was frugal for many years, but not so much anymore. Part of that is just because we can spend more, we often do, and we're not nearly as intentional about our spending I think as we have been in past years. Occasionally we do certainly buy things that are much less expensive than we could. You'll be hearing I think soon a blog post about an $800 car we purchased for instance, which I think will be a very interesting story, especially as we follow along and see how long this car lasts. But there'll be more on that on a blog coming up in the future.
Dr. Jim Dahle: This episode was sponsored by Set for Life Insurance set for life is first and foremost a client-centric company. They listen carefully to the needs of clients. Because of the volume and exceptional reputation of Set for Life Insurance, as well as the relationships they have developed over the years, Set for Life clients have access to special services not available elsewhere in the industry. This includes special discounts, gender-neutral policies, saving women significantly. Priority underwriting handling. And on some occasions, exceptions in the underwriting process. For more information, visit setforlifeinsurance.com. Thank you for giving us a five-star review on the podcast and telling all your friends about it. Head up, shoulders back. You've got this, and the entire White Coat Investor community is here to help you. See you next time on the White Coat Investor Podcast.
Disclaimer: My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He is not a licensed accountant, attorney, or financial advisor. So this podcast is for your entertainment and information only, and should not be considered official, personalized financial advice.
