Debt Free Doc Interview 5
Here’s our latest interview with a doctor and his story on eliminating debt. These stories allow us to continue to learn from those who are free of debt or currently on the path to do so.
If you’d like to be considered for an interview, drop me a note and we can talk about specifics.
Be sure to read all the way to the end and either leave your questions or comments.
Let’s get started…
Today’s interview is from my friend Dr. Cory Fawcett.
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 56 and my wife is 55. We have been married for 30 years, and retired from medicine for 2 years.
Do you have kids/family (if so, how old are they)?
We have two boys ages 24 and 26. Both are financially savvy and one already owns 2 houses, one of which he will own free and clear by the end of the year.
What area of the country do you practice in (and urban or rural)?
I was a general surgeon in private practice in a small rural town in Southern Oregon.
How much student loan debt did you have?
I acquired $6,000 of student loan debt for my undergrad degree at Stanford. I worked full time every summer and part time during school to keep my debt burden down.
My first year of medical school at OHSU I borrowed $12,000. I didn’t like continuing to add more debt at that rate, it felt high in 1988, so I got a Navy scholarship to cover the rest of my medical school expenses. I left medical school with $18,000 of student loan debt.
How much other debt did you have?
I had paid down most of my student debt during residency, so I began my practice with very little debt. Three years later I was over half a million dollars in debt. It seems that when your income goes up, everyone is willing to lend you money. That’s when I decided to pay it all off.
Is your house paid off? If not, is it on a 15 or 30 year mortgage?
We made our final house payment in 2001. We had a 30 year loan and paid it off early in four years.
What was the defining moment that made you decide to tackle your debt?
My wife was uneasy with so much debt. She was an accountant during my residency and once we moved to Oregon for my job, she stayed home to care for our kids instead of returning to the workforce. She wasn’t sure she could earn enough to pay off the debt if something were to happen to me.
Hoping to stop accumulating more debt and start decreasing our debt, she bought me a book called Debt Free and Prosperous Living. This book made me realize how much nicer life would be without debt, and started us on our way to becoming debt free. It turned out that life without debt is even nicer than I thought it would be.
What type of plan did you use to pay off your debt?
We used the snowball method. We were only living on about half of our income so we had plenty of money to put towards debt. I provided full details of this journey in my book The Doctors Guide to Eliminating Debt.
Did you make any mistakes or hit any snags along the way?
During the time we set out to become debt free, we bought a few big items that increased our original three and a half year payoff, to six years.
- two new cars
- a new house
- invested funds to build a surgery center
How long did it take you to become debt-free?
It took us six years with our debt peaking at over $600,000.
What is your profession?
I was a general surgeon. I practiced 20 years in a single specialty private practice, followed by three years as a part time locums at rural hospitals providing call relief to lone surgeons.
What is your annual income?
My W-2 income averaged $200,000 over the 20 years I was in practice, peaking early on at about $250,000 in my highest year.
What’s your work-life balance look like?
I took 8-12 weeks of vacation each year while I was practicing, and 17 weeks during my final year before becoming a part-time locums doctor. Our family took a three week motor home trip every summer and spent about one weekend a month camping during the rest of the year.
I coached youth soccer, performed in a few plays and musicals, worked at my church as a worship leader one week a month, was a youth leader at church, raced bicycles with my boys, each wining Oregon’s best all-around rider for our age groups (I raced in over 60 races throughout the state that year).
I rode my bicycle in Oregon about 5 times (400 mile one week bike ride), hosted a radio talk show for 18 months, and started a medical clinic at the Gospel Rescue Mission. I think I did a good job of not letting my practice rule my life. (Way to go!!)
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
After we became debt free, we used the money we were paying for debt to buy real estate. We bought our apartment complexes with no money down and used our excess funds to speed up the payoff of the mortgages.
Today, 17 years later, these properties spin off $150,000 of cash flow a year. Depreciation makes half of that tax free, and it grows a little more every year. I also own a commercial property in a partnership that brings in another $13,000 in cash flow each year. That income should double next year when the mortgage is paid off.
What is your annual spending (personal not business)?
About $100,000, not counting taxes or tithing. You would be amazed at how well you can live on $100,000 when you have no debt payments to make. (You got that right, Dr. Cory)
What are the main categories (expenses) this breaks into?
The big categories are:
Entertainment and Travel: $37,000
Housing: $28,000 (seems like a lot with no mortgage)
Health Insurance: $2,100 (Christian Medi-share program)
Do you have a budget? If so, how do you implement it? (who creates it, who monitors it, how do you work together on it (if married), etc.)
My wife, the accountant, tracks all our income and expenses. We use a self-made Excel spread sheet that we have used for our entire marriage. She then shows me the figures monthly. I track our investments and net worth on another Excel spread sheet.
We don’t specifically use a budget, when we only live on half of our income there is so much wiggle room, we don’t need to get too picky.
What percentage of your gross income do you save and how has that changed over time?
When we got married, a few months into my internship year, we agreed to live on half of our income and save the rest. Maxing out our IRA and 401K accounts each year until recently reaching our retirement income finish line.
Our savings outside of retirement has been used for big purchases, paying down our apartment debt, and vacations. Now that I have retired from medicine, we are living on the income from my new business as an author and physician financial coach, Prescription for Financial Success, and taking profits from the apartments as needed.
We also started spending money from my IRA using the 72t rule for taking money out before age 59 ½. I wrote about how we do it here.
What do you secretly love spending money on?
It’s not a secret. We travel a lot. We are on the road about 50% of the time now. During my practice our traveling averaged one week a month. We trade our one time share each year for up to eight weeks in different cities, (you can learn how I do that here) we travel in our motor home, and we like to take cruises. You can see from my spending noted above that vacationing accounts for about a third of all our spending.
In 2018 we did the following travel: 10 day cruise to Mexico with my kids and my mother, 31 day cruise of Eastern South America and the Amazon River, one week time share in San Juan Capistrano, one week time share with my son and a friend in Welches Oregon, one week time share in Reno, two week motorhome trip from Oregon to South Dakota and back with my son and his wife (Yosemite, Mt Rushmore….), Spartans Race with the kids, Medical school class reunion in Portland, four weeks of back to back time shares in Florida, 4 day cruise to Cuba, one week at a resort in Phoenix, Thanksgiving with my in-laws in Portland, and a one week timeshare in Orlando with my mother.
Next year we already have booked three months of motor home travel in the Southern US, a week of scuba diving in the Caribbean, a cruise up the Rhine River in Germany, and a six week/500 mile walk across Spain on the Camino de Santiago. (You’re a busy guy!)
What is your investment philosophy?
I maxed out my office 401(k) retirement plan and our IRA’s every year. Those were traditional deductible IRAs in the beginning (residency), and then non-deductible IRA’s as our income rose. Those funds are invested 100% in equity mutual funds.
Just recently we started pulling money out of retirement and I moved 5 years’ worth of withdrawals to interest bearing CD’s so we don’t have to sell any equities for the distributions under the rules for Substantially Equal Periodic Payments to get your money penalty free before age 59 ½.
The money invested outside of retirement plans has gone into our real estate business.
What’s been your overall return? (rough estimate is fine)
I really don’t know our overall return. I don’t spend time tracking our overall return since it isn’t much help to me. I’m not going to use that information to make investment changes. I track the rise of my net worth, but since I regularly invest the actual return is unknown.
I did check once a while back, looking at the money I invested during my residency, which never had any more money added once I graduated, and that account had an annual return of about 10%. I do know that the real estate has done much better than the funds invested in the stock market. But I don’t have a number to provide for how much better.
What is your current net worth?
Do you have a target net worth you are trying to attain?
I was shooting for two things before I pulled the trigger for retiring from medicine. I wanted my real estate cash flow to exceed my expenses, and I wanted my retirement plans to be worth more than a million dollars. I didn’t retire when I met these two things, so by the time I actually quit medicine, they had both significantly passed their targets. My net worth has continued to climb, even after I retired from medicine.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
I don’t have any personal debt, but I do have some investment real estate mortgages on apartments in my LLC. Real estate equity makes up about 66% (including my home), stock mutual funds make up about 27%, and cash or CDs make up about 7%
When do you plan on retiring?
I retired from medicine in February, 2017. Since I now work in a different field, I consider myself repurposed, not retired. I now write books and blogs, speak, and coach to teach doctors how to become financially independent at an early age, so they can reclaim control of their lives.
What are your retirement plans? (both financially as well as activities in retirement)
I hit my savings target and then developed a plan for my retirement years so I didn’t end up bored. I wrote about this extensively in my book The Doctors Guide to Smart Career Alternatives and Retirement. My wife and I are traveling about 50% of the time and home 50%. I am writing, speaking, and coaching even while we travel.
What advice do you have for Debt Free Dr readers on how to become debt free?
First I recommend they read my book, The Doctors Guide to Eliminating Debt. It is very important to live on significantly less than earnings. Many doctors live on the financial edge. When something unexpected happens, they get into trouble. Buying too much house, carrying too much debt, buying a new car every other year, or putting your kids in private school can cause a financial hardship that might last their entire life.
Back off on the spending. Plan to pay off all student loans in the first four years out of training. There is no reason to carry lifelong debt. It’s time to stop managing debt and start eliminating it.
How did you learn about finances? Was it from someone you knew, school, books, etc.?
I got my financial start with three books:
- Common Cents by Art Williams
- Wealth Without Risk by Charles Givens
- Debt-Free & Prosperous Living by John Cummuta
I also took a 10 week bible study course from Crown Financial Ministries and later my wife and I became instructors for the Crown course. My wife played a big part in helping me stay on track.
Who inspired you to excel in life? Who are your heroes?
My parents and grandparents taught me to live within my means and to avoid debt. My grandmother showed me that wealth can be easily created in real estate. My wife has shown me that one doesn’t need to spend in excess to be happy. My father showed me the importance of spending time with your family when you are not working. My uncle taught me to be an entrepreneur.
Do you give to charity and/or tithe? If you do, what percent of time/money do you give
Yes. We tithe to our church and give to many other organizations. It varies based on the needs but hovers around 15%. I also give of my time, which is not a substitute for giving money.
I give time by leading worship one Sunday a month, helped in the youth group while my kids were in middle school, led crown ministries classes, was a member of the finance committee at church for three years, gave time to the Gospel Rescue Mission setting up a doctors clinic and then working the clinic one morning a month.