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2021/07/01

The WCI July Newsletter - What Are Your Hobbies Really Costing You?

Featured Business

This newsletter is sponsored by Bob Bhayani at Dr. Disability Quotes.Com. He is a truly independent provider of disability insurance planning solutions to the medical community nationwide and a long-time WCI sponsor. Bob specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. He has been extraordinarily responsive to me any time any reader has had any sort of an issue, so it is no surprise I get great feedback about him from readers like this recent one:

Bob and his team were organized, patient, unerringly professional and honest. I was completely disarmed by his time and care. I am indebted to Bob's advocacy on my behalf, and on behalf of other physicians, and to you for recommending him

If you need to review your disability insurance coverage to make sure it meets your needs, or if you just haven't gotten around to getting this critical insurance in place, contact Bob Bhayani at https://drdisabilityquotes.com/ today by email at info@drdisabilityquotes.com or by calling 973-771-9100


WCI News

We are having a sale on ALL of our online courses for the next 12 days, 10% off plus a free WCI T-shirt from the store. Use code WCIJULY21. This includes our flagship course, Fire Your Financial Advisor, the version of FYFA that qualifies for CME (Financial Wellness and Burnout Prevention for Medial Professionals), and Continuing Financial Education 2021.

Our new student loan advice company, StudentLoanAdvice.com, is doing great. If you need some help running the numbers and deciding what to do with your student loans, I highly recommend scheduling a consultation. We also launched a store where you can get WCI swag/merch. We'll be adding items there from time to time, but if you haven't seen it yet, check it out!

We are hiring yet again. WCI needs a full-time Content Director. If you know someone who might be interested, please encourage them to apply. More about the job here, but who wouldn't want a job that pays well, allows you to work from home on your own time, provides what may be the world's best 401(k), and whose only downside is working with me? If these other 10 people can put up with me, surely you can too!

The WCI Scholarship competition is running full bore. If you would like to apply, you must do so during July or August. We could use more judges (email scholarship@whitecoatinvestor.com with the words "scholarship judge" in the subject line-no residents or students) and contributors. Thank you for supporting those who support the scholarship.

Platinum Level Contributors ($7,500 or more)

Gold Level Contributors ($1,000 or more)

This month I'll be doing a Q&A session with ACEP on July 13th at 5pm MDT, you can register here. I'm also doing a webinar sponsored by locumstory.com on July 15th at noon MDT. It is free and you can preregister here. I'll be talking about how financial health can affect your physical health.

WCICON22 will be Feb 9-12, 2022 in Phoenix. Registration opens in September, so keep an eye on the conference page for more details. For those interested in speaking, the call for applications closes today!



Market Report

Link to Spreadsheet Data sources: Vanguard and Morningstar

A surprisingly good month for stocks and bonds as most stock and bond asset classes made money at a pretty good clip. In a bit of a reversal of recent trends, Large, Growth and US outperformed Small, Value, and International. Another strong month by real estate as well, at least domestically. The real surprise here IMHO is that in a month when inflation was as high as it has been in more than a decades, TIPS, Gold, Silver, and Bitcoin, all of which are "supposed" to help with inflation, really didn't perform all that well. It turns out markets are hard to predict, who knew? Overall, most investors should be pretty happy with their returns for the first half of the year. A diversified portfolio should be up 10% or so.


Best of the Blog(s)

Lots of great posts from across the WCI Network this month. Check them out!

  1. What You Need to Know About Inflation. Perhaps my most important post this month. Lots of talk out there about inflation with CPI up to 5% these days.
  2. How to Access Your Retirement Money When Retiring Early. I get lots of requests from people to write more for those in the withdrawal stages of life. This article goes through an Order of Operations of how to spend down money, especially prior to age 59 1/2.
  3. Student Loans: 6 Reason to Refinance Now. The student loan holiday is soon coming to an end, but some companies are now offering you an even better deal than what the federal government is offering.
  4. Financial Security When Partner Isn't On the Same Page. This guest post addresses a common situation for many readers of the blog. If you can't get your partner on the same page, at least make sure you're reading from the same book!
  5. How to Endow a Scholarship and How Much it Costs. As part of our 2020 giving, we endowed two scholarships. Unsurprisingly, it was really easy to do.
  6. Why Many Doctors Live Paycheck to Paycheck. Peter Kim touched a nerve with this one. I'd guess approximately 25% of doctors are living hand to mouth.
  7. Ownership is the Key to Tax-free Wealth Accumulation. Just being an employee and sticking to fixed income investments is a great way to remain poor and paying a lot in taxes.
  8. The Unspoken Risks of Not Retiring Early. The Physician on FIRE reminds us that there is always opportunity cost.
  9. My Many Real Estate Investments. POF also gives occasional updates on his private real estate investments. He's still naming names too.
  10. 10 Ways to Use 104,000 Chase Ultimate Rewards Points. FIRE folks love them some travel hacking and credit cards. I prefer # 7!
  11. The Tax Benefits of Passive Real Estate Investing. Passive Income MD shows how to save tax money by investing in real estate.
  12. Why Creating Passive Income Streams is No Longer Optional. Perhaps more controversial, Peter argues doctors HAVE to have an income stream beyond medicine. I know lots of people were nodding their heads in agreement last Spring!


Best of the Web

Every month I recommend (about) ten articles from across the web. Thank you to those who send me suggested articles.

  1. The Emergence of Single Family Rentals as an Attractive Asset Class. Larry Swedroe has noticed SFHs are a good investment. That's usually a bad sign as it seems like every time Larry writes about an asset class it is about to turn South! Still, the article is really great. Total returns were less than the S&P 500, but that did not include leverage and was pre-tax.
  2. Department of Education Updates Series of Student Aid Quarterly Data Reports. Sounds really boring, but includes an important update on changes in the PSLF reporting process. So far over 5,000 people have received PSLF.
  3. The Lord of the Roths. Lots of people sent me this one this month. It seems a tech mogul put some start up shares into a Roth IRA that is now worth $5 billion. Everyone is talking about how it isn't fair. Maybe the share price he paid was improper, don't know, but yes, that's how Roths work. If you make awesome investing decisions inside a Roth IRA, the gains are all tax-free. The real story is that he grew something from $1,700 to $5 billion. Figure that out and you won't need the tax benefits of a Roth IRA!
  4. A Physician's Guide to Balancing Work and Family. I'm quoted in this one advocating for part-time work. I'm a big fan and so are most of you. In fact, 9/10 doctors would cut back on how much time they spend at work if they could afford to do so.
  5. Real Estate Scam Robs Florida Mom of $63K in Life Savings. It's not uncommon either. Always confirm wiring instructions by phone. Email is not secure. This has also happened to a member of the WCI community who lost $25K to it.
  6. Never Sell Assets and Pay Less in Tax Like Billionaires. Most people don't realize that most of the methods billionaires use to reduce their effective tax rate is also available to them.
  7. Common Money Fights in Marriage. How many of them have you had?
  8. I Almost Lost $186,000 by Not Getting a Second Bid. Cory Fawcett's discusses his experience getting second bids.
  9. Giving to the Needy. A great discussion of the issues those of us who give struggle with and maybe how we can do it a little better and quit judging those who give differently, all by "A Lawyer and Her Money."
  10. Getting the Goalpost to Stop Moving. Morgan Housel explains how America's wealth has grown since the 1950s, but our expectations have grown more rapidly!
  11. Robinhood Hit With Record Fine. It turns out that what we were all warning you about was actually against the law.
 

Great Stuff From the Forums

The WCI Forum, subreddit, and Facebook Group continue to be a great places to get some help with your questions. See these great topics that people are discussing now:

  1. The Residents Are Asking for a Finance Talk. So give one! All the residents want one, too many attendings aren't comfortable giving one. So educate yourself enough that you become comfortable.
  2. Anyone Using Health Sharing Ministries? Come weigh in on this controversial topic!
  3. Doximity IPO Thread. Lots of people interested in this one this month for some reason....It's only been a week, but everyone made a few thousand bucks so far. Great marketing move by Doximity, but it's still an individual stock.
  4. Future of Emergency Medicine. Lots of talk about this since ACEP published a projection of oversupply. I think it's a little overblown, but here's a great discussion about. I'm hearing from lots of MS3s who are now scared to go into it.
  5. Taking on New Partner Who is Less Productive. How do you deal with it?
 

New Podcasts

Be sure to check out the podcast if you haven't yet. If you'd like to leave a question to be answered on the WCI Podcast, record it here.

  1. #216 Gold Bullion, Franchises, Taxes, and Divorce. (Sponsored by Doctor Disability)
  2. #215 Q&A on Investments – Calculating ROI, Dollar-Cost Averaging vs. Lump Sum, UTMA Accounts & TIPS (Sponsored by Pattern)
  3. #214 Will Student Loans Be Forgiven? (Sponsored by Laurel Road High Yield Savings℠ account)
  4. #213 Rules and Options for Managing Inherited Retirement Accounts (Sponsored by Bob Bhayani at DrDisabilityQuotes.com)

The Milestones to Millionaire Podcasts (all accessible at this link) are short podcasts celebrating your accomplishments! Here are five from April.

  1. #20 Psy-FI MD Millionaire (Sponsored by StudentLoanAdvice.com)
  2. #19 Millionaire Status in 5 Years (Sponsored by M3 Global)
  3. #18 Cancer Researcher Pays Off $130K (Sponsored by Pattern)
  4. #17 Nurse Practitioner and Pharmacist Millionaires (Sponsored by DLP Capital Partners)

Not enough podcasts to get you through the month? Try these from WCI Network Partners:


New Videos

Welcome to the new WCI Youtube Channel subscribers. There are now 11,700 of you! Please subscribe, like, and share!

Tons of new videos this month. Here are just a few of them:

  1. Should I Follow Dave Ramsey's 100% Stock Advice?
  2. How to Treat Low Interest Loans from Family Members
  3. What To Do If You're Late to Investing or You Feel Behind


Tip of the Month

Most of you know I suffer from a terrible scourge--I have too many hobbies. I can only remember my father having a few hobbies and I'm not sure my mother had any, but I have at least a couple dozen hobbies--far more than I have time to do. On a recent camp for young men that I helped supervise, one of the young men (a 16 year old) commented on how much he enjoyed boating and wanted to get into it. I had to break it to him that it was a $100 per hour hobby. I think that's probably about right. For every hour that boat is run, the costs of doing so probably add up to $100 between gas, repairs, maintenance, and depreciation. I further depressed him with the out-the-door price of my boat that he was enjoying surfing behind (which was half the cost of what a high end surf boat is now selling for). The conversation got me thinking about my other hobbies and their price per hour of enjoyment. I think this is a calculation worth making for each of your hobbies. If you will make it, you can then compare the amount of enjoyment you get from each one to the price you are paying for it. That will help you decide which you want to pursue more and which ones maybe you can let go. Remember to consider the costs of equipment, the cost of actually doing the activity, and the transportation costs to get to where you do the activity.

For example, let's consider one of my cheaper hobbies, disc golf. A golf disc costs about $10. If you don't throw it into a river or pond, it might last you years. In fact, you can buy every piece of disc golf equipment you might ever want for just a few hundred dollars. Most courses are completely free and there is one a 15 minute drive from my house. I bet I play 10 rounds without having to replace a $10 disc and it probably costs me 1/10th of a tank of gas round trip to go play. So $5 in gas and $1 in equipment for two hours of fun. That's $3 per hour.

Other hobbies that probably pencil out in the same price range, so long as I do them locally, include hiking, rock climbing, running, weight lifting, video games, and cycling.

As I step up to the next level of activities, the price goes up. Perhaps mountain biking fits in here. That might cost me $20 in gas to drive to a trail, but there is no fee once I get there. However, high end mountain bikes now cost $5-15K. Even spreading that out over many rides is still a significant sum. Plus there are shoes, hydration packs, gloves, tools, clothing, helmets, and maintenance on that bike. The more you ride the better the hourly rate, but I bet mountain biking is at least a $25 or $30 per hour hobby for me. Downhill skiing is similar. Sure, a season pass might only be $500 these days, but you burn significant gas to get there and all that clothing and equipment adds up and doesn't last forever. What skiing saves in equipment costs over mountain biking, it makes up for with lift tickets and expensive lunches. I'm sure it's at least a $30 an hour hobby for me too. It might be three times that if you don't live 8 miles from a ski resort.

At the upper end we see things like boating, which I already mentioned is $100 per hour. Perhaps I put 80 hours on the boat in a year and between depreciation, accessories, the costs of gas running it and hauling it to and from lakes, repairs, and maintenance $8,000 a year seems a very reasonable figure. That's $100 an hour. The good news is that if there are 8 people in the boat, perhaps that is only $12.50 an hour, but let's be honest, the boat owner is covering the lion's share of that for everyone. People will throw you a $20 bill for gas every now and then, but nobody is going to chip in to winterize the thing. If there is anything more expensive than floating stuff, it is flying stuff. On rare occasions, I've been heliskiing. A typical trip might run $6,000. That covers airfare, hotel, meals, rentals, guiding services, and the costs of the helicopter itself. In exchange for that, we might have three, 6 1/2 hour ski days. Let's round it off and call it 20 hours of skiing for $6K. That's $300 an hour. Make it $600 an hour if Katie wants to come too.

So if my hobbies range from $3 an hour to $300 an hour, I have to ask myself whether I am getting 100 times the enjoyment out of heliskiing that I get out of disc golf. The answer, of course, is yes. At least once every two or three years anyway. But probably not enough enjoyment per dollar spent to consider it an "every week hobby."

If you are at that stage of life where you need to really be paying off debt or putting away money to reach your financial goals, you should give some consideration to what your hobbies are costing. There are several ways you can limit how much is spent on hobbies:

# 1 Limit the number of hobbies

The fewer hobbies you have the less gear you have to purchase, store, insure, and maintain. Plus, you concentrate your time into fewer hobbies, and that usually lowers the price per hour of the hobbies.

# 2 Consider the price per hour of enjoyment

If you are going to have fewer hobbies, do the math to figure out which ones pay the most fun per dollar spent. You will likely find that some of your cheaper hobbies have a much better ratio than your most expensive ones.

# 3 There is a time for expensive hobbies

If you actually do the things we talk about at The White Coat Investor for a few years, you will eventually be quite wealthy and can afford to have an expensive hobby or two. Don't confuse that time with those periods of life when you are broke still building wealth. Heli-skiing will be just as fun at 45 as it would be at 25, but its impact on your financial future will pale in comparison.

# 4 Save a few hobbies for your golden years

If I look at my list of hobbies, it is unlikely that I will be able to do very many of them after age 70 or so. So make sure that as you go along you pick up a few things that you will be able to do at that age: Golf, bridge, photography, gardening, whatever. Don't assume you'll be white water kayaking and BASE jumping at hip fracture age. I still canyoneer with some people in their late 60s and early 70s, but they're pretty rare birds and they have to be A LOT more careful than the young bucks in their 40s and 50s.

Hobbies are great. I highly recommend you pick up one or two dozen. But just like with your house and car, consider the cost and its impact on the rest of your financial life.

Jim

James M. Dahle, MD, FACEP
Founder
The White Coat Investor
https://www.whitecoatinvestor.com




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