Ravi Davis is the Founder and CEO of Hippocratic Financial, a full-service financial firm that specializes in providing comprehensive financial care for doctors.
In this new episode of How I Doctor, Dr. Graham Walker, Offcall co-founder, and Ravi discuss the importance of physicians managing their finances effectively. They include some key tips for doctors to apply early in their career to set them up for success, along with a few common investment mistakes that you should avoid.
How I Doctor is a podcast from Offcall, a physician-only platform dedicated to improving their wealth and wellbeing.
For a full transcript of this episode click here
Find all episodes of How I Doctor at offcall.com/podcast or subscribe on your favorite podcast player at https://episodes.fm/1767429315.
In this episode, Graham and Ravi discuss:
05:09 Simple financial advice for physicians.
07:10 Delayed financial gratification for doctors.
11:40 Career options and financial awareness in medicine.
19:20 Long-term investment for financial security.
21:24 The importance of an umbrella policy.
25:33 Compound interest is crucial
Mentioned in this episode:
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Ravi Davis:
There is nothing in finance that you should be dealing with at the personal level that is more complicated than concepts that every physician, every single one, has mastered many times over by the time they finish their training. So if someone in finance is saying something, you're not getting it, it's one of two things. Either they're not smart enough to explain it to you, in which case leave, it's financial advisory, or they're purposely using technical language to obscure the underlying nature of the good or service that they're trying to sell you. If you can't get your questions answered to your satisfaction and you don't feel like you have an understanding of what's being proposed, just walk away.
Dr. Graham Walker:
I can see the title of this episode is, "The Kidney is More Complex than any Financial System for a Doctor to Understand."
Welcome to How I Doctor, where we're bringing joy back to medicine. Ravi Davis is the founder and owner of Hippocratic Financial, a team dedicated to providing comprehensive financial care to physicians and healthcare professionals. I'm personally excited to talk to Ravi today because I'm always amazed at how well he understands the physician challenges. I think that must make him a really thoughtful and deep listener, and I can't wait to hear about how he combines his financial literacy and strategy with his understanding of doctors.
So welcome to the show, Ravi. Thanks for joining us.
RD:
Thank you so much for having me.
GW:
Ravi, talk a little bit about the origins of Hippocratic Financial. Obviously, this is not sponsored at all. I just have gotten to know you over the past several months and found you to be extremely insightful when it comes to doctors. So where did Hippocratic Financial come from?
RD:
It came out of the:I started asking around. I have four physicians in my family, and my wife's a doctor. And so I started checking around a little bit more and it turned out that the advice that doctors were getting was actually worse. And so as I was looking at this reset and do I want to try to stay in real estate or do I want to go do something else, one of the first things you have to do is figure out in business what's a better mousetrap to what's out there. And it really looked like a pretty low bar in terms of giving a better, just honest financial advice really that is actually for the benefit of the person receiving it.
And the other element that really jumped out at me is that the system itself is set up incredibly poorly. I mean, the biggest medical analogy I could give you would be imagine a hospital that has no hospitalists and no shared medical records. And that's basically how, not just physicians, but really everybody consumes financial advice in this country. You have one person doing taxes, someone else is doing insurance, maybe someone else is doing planning, someone else is helping with student loans, someone else might be doing investments or legal, and none of those people are really talking.
So you end up with this scattered group of specialists. There's no one who's overseeing how that all integrates, goals of care and helping to navigate where the real decisions are in finance, which is on a relative basis. Not should I go do my estate plan, should I max fund my 401k, should I protect my family, but when I only have a certain amount of money and I have to make priorities around those things, how do I prioritize those decisions?
And so that was the other big impetus was going, okay, well, we can set something up that's multidisciplinary, that there's some cohesion and prioritization in the advice. And so this seemed like an opportunity where we could really put something together and focus on doctors and serve those who serve. And so I just said, "Hey, I'm going to take a shot at this," and it just took off and did well.
GW:
I always think, oh, a financial advisor just knows all this information. So it was actually interesting that not only were you getting financial advice, you have to learn how to take financial advice, and you also figured out that you weren't getting good financial advice and that you were motivated by that.
And then I think you're really good at adding in language that physicians, that will resonate with us. You mentioned hospitalists, you mentioned goals of care, all that stuff that's like, oh, this guy's putting it into our own words, so I really appreciate that about you.
When you first meet with a physician or when you've met with them in the past, are there themes that tend to come out? Are there common questions that all of us ask you?
RD:
I would say that one of the things that I've had a number of physicians come up to me after a lecture and say, "Hey," and this is pretty counterintuitive, "but thanks for treating me like I'm stupid." But because there's this expectation, I think physicians are super smart and everybody knows that, but what they don't know is that the training is so intense that there's really not a way to get up to speed on a lot of this stuff.
And then even to your earlier point about physicians looking at financial advisor and going, oh, they should know all this stuff, and so a lot of those questions will come up early, and a lot of the questions are pretty simple. A lot of physicians will come in and say, "Well, where should I open an account," or, "Do I need financial advisor," or, "How do I not get taken advantage of," would be a lot of the early stage questions, or, "How do I tell if someone's good?"
GW:
You mentioned getting taken advantage of. I think that's a really common concern from physicians because a lot of people know that we have a high income earning potential. Are there common errors that you see physicians making or that they're worried they're going to make when it comes to finance?
RD:
I would break down into two categories. Like errors I see them making, the errors that they're worried that they're making.
One of just the most important things is the importance of being comfortable asking questions about money to people who are giving you advice. I think physicians are exceptional in a lot of ways, highly intelligent, very motivated, willing to put their bodies in harm's way to go through the training that you go through. You really give up health and youth and all the things that are sacrificed. I would also argue that physicians are actually specifically selected for having below average profit motive, right?
GW:
I know about that.
RD:
Relative to general population, right?
GW:
I was lecturing, [inaudible:That's a nervous laugh because it's like it totally hit me to my core. Yeah, for sure.
RD:
Yeah, but it's true. I mean, the reality is that while the general public thinks that physicians make so much money, what we know is that you give up money to go into medicine. Medicine is probably the ultimate delayed gratification profession, I think, particularly if you go into surgery and do fellowships and all that kind of stuff.
So there's an element of that where you go into then medical school with the subset of those high performers who are willing to give up money to go into medicine, and you're with them for four years. And then you finish that and you go into the training hospital, which is staffed by the subset of those people that are willing to give up even more money to go into academic medicine, right?
GW:
Oh, interesting.
RD:
So what happens is there's just a general, this idea that there's a skewed sense of the profit motive that exists in the general public. You shouldn't be asking questions about money or talking about money, and that is just such a disservice. I mean, everywhere in medicine, outside of academia, everywhere in the broader world, asking questions about money is really important.
GW:
And normal.
RD:
And normal, it's due diligence. Yeah, I mean, that's exactly where I was going. You're dead on with that. If someone's making a recommendation to you, asking them what's your relationship with a company that you're recommending me to, how are you compensated, how long have you been doing this, how many doctors have you worked with? It's not rude. It's due diligence, and you're exactly right. It is expected. You have to do that. It's the first way that you can really protect yourself is being willing to ask all those questions.
And the corollary to that is that if you're getting answers from someone in finance that you don't understand, it is them, not you. You have 130 IQ, and there is nothing in finance that you should be dealing with at the personal level that is more complicated than concepts that every physician, every single one, has mastered many times over by the time they finish their training. So if someone in finance is saying something, you're not getting it, it's either, it's one of two things. Either they're not smart enough to explain it to you, in which case leave, it's financial advisory, or they're purposely using technical language to obscure the underlying nature of a good or service that they're trying to sell you. If you can't get your questions answered to your satisfaction and you don't feel like you have an understanding of what's being proposed, just walk away.
GW:
Ravi, you've been doing this a while. I want to ask about trends that you've seen, changes over time. The colleagues that I'm seeing that are just now joining me, they're just a new attending. I've now been an attending for, gosh, 13, 14 years now. Are you seeing differences in what questions they ask or what they need or what they expect or want compared to myself or someone older than me?
RD:
The single biggest one would be the importance of student loans. I mean, it's a staggering number. I think that the average coming out of training right now is a little over 200. Most of my clients come from elite coastal programs. The average that I see is about 300. And the financial impact of that is dramatic because one of the things that is really important to remember when you're thinking about student loans is it's after tax money. Meaning if you think about what you're going to have to earn to pay those student loans off, it's not 300. It's, depending on tax ratios and things, probably somewhere between 500,000, 600,000 of earnings are going to have to go to pay that off.
And so there are some really powerful ways, public service loan forgiveness, there are a bunch of local to different states, things that can help, NIH program. And so the questions that I see coming out, I would say the number one difference is a much greater awareness of what do I do about my student loans and needing to integrate that in, and that's actually part of why we even added a service where we just do that for people. The student loan thing is really important to get right.
I also think the other questions that I get that honestly make me a little sad are how do I get out of medicine within 15 or 20 years because I think it's become not as enjoyable to practice medicine, and so I think that's one of the other.
GW:
I that's part reason we're building Off Call and doing this podcast is to try to help people understand what their options are. That was certainly the trend that I started seeing. Everybody's trying to get away from the bedside. Maybe they're still practicing but practicing less. Maybe they're doing a side job. Like you said, it is extremely sad that we've dedicated ourselves for decades of our life and now we're like, gosh, can we leave this thing that we gave so much of ourselves to? So I appreciate you acknowledging that.
You mentioned that I think residents and probably medical students are way more aware of their financial futures than probably even I was a decade, a generation older than them. Do you see people making a career decision based on that public student loan forgiveness? If it's $300,000 and if they put in 10 years, as long as the rules don't change, those potentially get wiped. Are you seeing people factoring that into their decision stronger?
RD:
Absolutely. I think particularly with, there was a recent change around the qualifying criteria for public service loan forgiveness employment, and it's specific to California and Texas. The fundamental difference is that in those two states, you now just have to work at a facility that is owned by a 501(c)(3) or nonprofit. You don't have to be directly employed by it. And so that really expanded the employment opportunities that would do that. It used to just be that we had to help people with this when it was you're going to go work for county or not and look at that differential, and now there's a lot more qualifying options for it.
GW:
You mentioned a little bit about side jobs and people leaving medicine. Do you have advice on how you would advise a client that's thinking about either, I guess one question is leaving medicine altogether, and then another question is, taking a side job? Either they're doing extra work or they're maybe reducing their clinical hours. Do you have a sense of how you'd give people advice about that?
RD:
It depends on people's goals. For physicians, doing meaningful work, it's a little bit like a fish in water. At the end of the day, even if it feels like they've taken a lot of fun out of it, you are functionally reducing human suffering. And that's probably the most universally basic meaning, definition of meaningful work that I can think of, reducing human suffering. And so it really is sometimes lost in the grind, but I really do also try to make sure to refocus people on the fact that meaningful work really does matter in terms of your satisfaction and what you're really getting out of your work. Because making money can be great, but we all know that there's obviously a lot of very unhappy, very wealthy people out there.
versus:So one of the things that I do pretty broadly encourage is if you're in a W-2 position and you're thinking about taking on a side hustle that don't let the tail wag the dog, but really 1099 income in combination there can be really powerful because that 1099 income, it allows you to run business expenses against it. It allows you to do additional retirement things or set your own side benefits up. In California, it can even allow you to pay a portion of your state income tax where it's not taxed by the federal government.
If you're already:GW:
ings that we can find through:RD:
You're exactly right, because it comes off of what's called your top marginal bracket. So something that I think also is a common misunderstanding for physicians is that, hey, what's your tax rate? Well, my tax rate is 37%, but that's not really your tax rate. That's what's called your top marginal bracket. So the tax system in the United States is progressive. The first 50,000 is taxed at one rate that everybody pays, and then the next 50,000 and so on and so forth.
utions or you're able to take:GW:
Are there things physicians should think about if they're trying to retire early or earlier than they maybe had thought about when they were a med student or a resident?
RD:
If you're looking at, hey, I'm going to hang it up at 45, well, you're still really making a lot of projections about stock market returns and inflation and expenses, and there's a lot of, if those projections turn out wrong, you might not figure it out or these big black swan events might not come in until you're in your sixties or seventies or eighties. And so I tend to encourage people to take the perspective that it's marathon, not a sprint, and you really do want to make sure that you are having a margin of safety and that you remember that to enjoy your life now.
Tomorrow's not promised, and physicians already give up so much of their youth to the training that you go through and your freedom. And so the idea that you want to make sure that if you're going to then live like a resident for another 10 years to try to get ahead on this and eat Top Ramen, well then something like COVID comes along, and this happened to some of my clients where it knocked them out of medicine or had someone pass away. That's obviously something where they were thinking so far into the future that they weren't paying enough attention to the value of now. It's really important.
GW:
In some ways, I think we're more aware that tomorrow's not promised because we see so many terrible things happen to such nice people. And then on the other side, we also have this, I'm sure you know about this with your family physicians, we have this weird thing that disease happens to other people and not to us. I like that John Lennon quote, "Life's what happens when you're busy making plans."
Ravi, let me wrap up with some final questions for you on the larger advice piece. Can you think of three things that every doctor should do no matter where they are in their career? Any advice from someone like yourself?
RD:
The core thing that all physicians really have one financial plan in common, if you really boil it down. And it's basically, hey, I'm going to put my earning potential off for a very long time and go through this training, oftentimes going to go well into debt. And then I'm going to come out of that training and I'm going to have a guaranteed six-figure income for the rest of my career. In the end, all physicians are going to have enough money to have a quality of life that precious few people on the planet get, frankly, as long as two things don't happen. As long as they can earn their training out, that's disability insurance.
But the other one that I see that I want to encourage everybody to really pay attention to is liability. And of course, every doctor, first thing they thought about was malpractice. That's usually taken care of too.
But the one that I see screwing a lot of physicians over is actually personal liability, and particularly related to driving in cars. Physicians are at a vastly higher risk of being sued in garden variety car accidents relative to almost any other profession because of the way that accident attorneys are compensated.
Normally, if someone wants to sue you, they have to pay an attorney a bunch of money out of pocket and go through the whole process, and on the back end, no one knows what a jury's going to decide so it's a big gamble, and so that dissuades a lot of lawsuits. But accident attorneys will sometimes take cases on what's called contingency. Have you ever heard of this?
GW:
Yeah, sure, sure. Yeah, once you said it, I was like, oh, I bet if they find out you're involved and you're a doctor, they're more likely to sue you because they have a bigger chance of getting a bigger payout, is my guess.
RD:
That's exactly right, and they know they're going to get paid. And so accident attorneys will offer that contingency, which is where they go to someone and say, "Hey, I'll just sue them. If we lose, you don't owe me anything. But if I win, I get a percentage of the winnings." They don't offer that every time. The main thing they care about is, to your point, am I going to get paid if I win? And if it's me, I could be driving a fancy car, but I could be living with mommy and daddy. They don't know what my financial circumstances are, but if they find out it's a doctor, it's they know they're going to get paid eventually, and so physicians have this much higher risk of being sued.
And so there's two fixes here. So one is, unfortunately if it's a low acuity accident, do not get out of the car and say, "Hey, I'm a doctor. Are you okay?" Because as soon as you say that, you identify yourself as a physician.
But the other thing, to your specific question, is you need to have something called an umbrella policy, and the good news is it's really cheap. It's something you get through your auto insurance company or your homeowners, typically you want all three, and it's like 30 bucks a month that adds a million dollars of coverage to the judgment that an insurance company is going to have to pay if you do get into a legitimate accident. I think one of the big ones is just make sure you have and maintain an umbrella policy over the course of your career.
GW:
And like you said, I'll just say it again, it is relatively, extremely cheap for millions of dollars worth of coverage, and it adds a large amount of protection for you as a doctor as well.
RD:
The other two things I would say, at least one of them is that there's, in the life insurance world, I would say over 95% of the times when I see what's called cash value life insurance, so there's three main flavors of that whole life, variable universal life and index universal life. They're usually not in the best interest of the physician, and those can be really made to look like something that they're not. The consequences of trying to get it, the commissions are really high. I've seen six-figure commissions regularly for selling one policy, and it can be expensive to get out of them.
But for the most part, if you're saving for college education, 529 plan, if you're saving for retirement, focus on the government plans. There's reason that there's limits in those. They are more tax efficient than those policies, and you're not paying these huge commissions out and huge expense ratios to insurance companies on the inside of them. So that would be another one-
GW:
I love that.
RD:
...that I would flag.
GW:
I'm going to do a callback to what you said earlier where I think you said if you don't understand it, it's intentional.
RD:
Most likely, yeah.
GW:
I have literally never been able to keep track of what the hell's whole life versus the other one and the universal one. I'd never even heard of that. And at least my realization now is maybe that's on purpose. It's intentional obfuscation so that I don't ask too many questions.
RD:
You're giving all this money to an insurance company into something that you don't quite understand, and do you trust insurance companies? Do you really want to be just giving them all this money because they're such good actors in all the other places that you see them? And that sometimes will help with reframing this.
GW:
I love it.
RD:
Most doctors have had insurance company experiences that aren't the greatest at some point.
GW:
I love it. Ravi, I've got some just very quick rapid-fire questions. One finance myth you wish would just disappear forever.
RD:
Renting is wasting money. There's this halo about real estate right now in medicine, and renting is not wasting money because you're not having to deal with all the stuff that comes with owning a house, property taxes, maintaining it, and you shouldn't be in a rush to buy a house.
The reality is that the real killer with real estate are the transaction costs. What you're really signing up for is selling that house in three years or four years, and there's those huge 6 to 8% transaction costs. Also, the interest inside of a mortgage, the way that works is almost all of your payments in the early portion of a mortgage are going to interest, so you're renting anyway. If you go five years in a house and you're making that mortgage payment and then you add in property taxes and then you're going to pay all that money on the way out, you probably would've been better off renting for a year or two, making sure everything was right, and then buying enough house to really be happy in it for 10 or 15 years, versus rushing out and buying a starter home.
GW:
I tell people the same thing just when they're moving to a new city. Rent for a year or two, make sure you like the neighborhood that you live in. As somebody that's replacing my dishwasher and some hardwood floor damage, I will tell you there are some benefits to renting for a while, for sure.
Ravi, let me just ask you, what do you think the worst money mistake a doctor can make is, if you had to pick one?
RD:
Einstein famously said that compound interest is the eighth wonder of the world. It's one of the most powerful forces in the universe. And one of the things that while physicians make a lot of money that really does hurt them is the lack of early savings. So once you finish, you really want to get in the habit every year. You need to max. You need to do your backdoor Roth. You need to max fund your 401(k), at a minimum.
And the reality is that that's probably not going to be enough. You're only going to get so much enjoyment out of each level of spending and new things you're getting. And so the technical term for that is hedonic plateaus. But if you rush out and just, hey, I'm going to go blow off steam and I'm going to go get all this stuff, well, in some ways, if you go straight to a Maserati and you're skipping those middle levels, you're actually going to have less available enjoyment to you over the course of your life than if you gradually increase that and get in the habit of making sure that you're just saving first because those early savings are more important than the later one.
GW:
Ravi, where can our listeners find you and how can they help support the work that you do with Hippocratic?
RD:
Yeah, just hippocratic.com. We have consultations. We also actually have a 501(c)(3) that helps young physicians who get hurt, sick or injured, and does financial literacy. So that's at hippocratic.org. The basics of the 501(c)(3) is it's Wounded Warriors for doctors, basically. And the difference is because it's a 501(c)(3), if you have someone who's hurt and everybody, typically if they're a younger doctor, everybody wants to go fund me and donate money, those donations are not tax-deductible.
GW:
Oh.
RD:
Whereas if it goes through a 501(c)(3), they are, so now people can give up to twice as much at the same cost to them.
GW:
That's amazing.
RD:
So those are probably the two most easiest places to interact with Hippocratic.
GW:
Great. Ravi Davis, thank you so much. This has really been a pleasure.
RD:
Thanks for having me, Graham. I really enjoyed it. It was fun to talk with you.
GW:
Thanks for joining Ravi and I today. If you want to learn more about the ways doctors should rethink their finances, visit offcall.com/podcast. Make an account on Off Call to confidentially share your details about your work, and sign up for our newsletter where you can hear more about the latest trends we're seeing in physician pay. You can find How I Doctor on Apple Spotify or wherever you listen to podcasts. We have a new episode weekly. This has been and continues to be Dr. Graham Walker. Stay well, stay inspired and practice with purpose.