White Coat Investor
by James Dahle, MD
Reviewed by Steve
Have you ever vacillated about reading a book because you weren’t the author’s targeted audience? Dr. Dahle’s fine book’s is aimed towards MDs and other ultra-high earning professionals (Attorneys, Dentists, CPAs, and Engineers).
Still, there are four reasons I read this book, gave it five stars on Amazon, and recommended it to all income earners:
- Personal finance is an important 21st-century skill and should be an interest of all Americans.
- I love personal finance books written by nonprofessionals.
- Dahle self-published his book, which is extremely significant. His words and thoughts reflect the author’s voice (not the thinking of some ghost-written author or a traditional publisher’s editors).
- Lastly, I am quite fond and proud of my young relatives (An MD, dentist, and a pharmacist Ph.D.) who fit the author’s primary audience of ultra-high income earners. I hope this book will prompt their interest.
My review is a bit subjective as I briefly met Dr. Dahle at a Vanguard financial conference. I also have met and talked with the authors he cited, Dr. Bill Bernstein, Taylor Larimore, Rick Ferri, Larry Swedroe, Allan Roth, and Mike Piper (I also read their books). We are Bogleheads, investors who follow industry great, John Bogle, Vanguard founder and father of the indexing strategy. My bias leans towards authors and professionals who are genuine fiduciaries, who look out for the little guy or gal, the average investor’s best interests.
Dr. Dahel’s book is a refreshing read about a young professional who appeared to get investing right out of the gate and became a millionaire by age 38. His few errors were minor. He modestly credits his success by controlling spending. The vast majority of young, highly successful elite earners must be tempted to spend and Dr. Dahel tactfully warns young and talented professional readers to watch and control the overwhelming temptation to spend (most of us teachers and engineers are naturally frugal).
His second important concept is we must discover how to manage our money. Wall Street’s little secret, investing is not complicated, was blown wide open for all to see. Only after reading the book, did I realize I identified with the author on this one issue so many Americans seem to miss! Even if you hire a genuine fiduciary financial adviser, they may charge you up to 1.25% Assets Under Management (AUM) plus their hourly fee (or on retainer). Of course, you are getting advice that looks out for your best interest. Still it’s a lot of money when compounded over your working career.
Self-published personal finance authors are rare. These provide a point of view, which the thousands of finance books written by the professional cannot provide. The primary topics of spending less than you earn, controlling investment costs, etc. are discussed ad nausea in every personal finance book, but Dr. Dahle provides a unique approach to living on less–he lives it. What happens when nonprofessionals implement the strategies that the professionals so elegantly lay out in those hundreds of personal finance books at our bookstores and on Amazon? He provides an in-your-face model that all of us can aspire to be Do-it-Yourselfers (DIY). The DIY paid out handsomely as a 30 something millionaire fresh out of residency.
Many of those financial books written by the industry leaders are a great read. Nevertheless, they sometimes tend to be dry, academic, and impersonal. Dr. Dahle’s book is none of that. He skillfully blends his personal experiences while remaining objective so readers will not get distracted into his personal “stuff.” He is delightfully organic and a solid hybrid. His smooth easy-to-read conversational-type book gives readers the impression and the encouragement that they can begin their financial plan.
Dr. Dahle covers a lot of ground and for good reason. Ultra high-income earners need to be extra careful of financial areas that us regular income earners can skip (except bad advice, inappropriate insurance products, and investment costs!). While all of us need to watch spending, ultrahigh earners might marry into an unpredictable challenge with a hyperactive spending spouse (Who doesn’t want to be married to a high earner and live the “image?”). He also spends a good deal of time on taxes, the advantages of starting your own practice, and referring readers to the work of others who write about the investing process (active vs. passive, rebalancing, diversification, keeping insurance and investment far apart). The authors he cites follow the works of Mr. Bogle–Rick Ferri, Taylor Larimore et. al. to set up your low cost, diversified, indexed portfolio that can be adjusted and rebalanced reflecting each investor’s tolerance or need to take risk.
Personally, I would have wanted more information about how he and his wife handle their finances together. They are obviously on the same page, but I wonder how they addressed those differences. On his blog, his wife interviews him, but it was only about him, not her or their relationship. Many married couples have serious financial problems and I believe the author missed an opportunity to help couples.
If you don’t pay attention to your spending and investing, somebody will gleefully take over “managing” your ultra-high earner’s money. The community of DIY investors is huge and growing. We are everywhere on the internet. This book will help you build and create your long-term plan. It’s for all professionals, no matter what your earning power. I recall hearing when I was a young man, “It’s not how much you make, it’s what you do with what you make.” You must control spending to build wealth.
To stress this point, the author smartly devotes an entire chapter of the great work of Millionaire Next Door (MND) authors. Other financial books also refer to the MND and the wisdoms it contains. It doesn’t matter if you earn $30,000, $300,000 or $3,000,000 if you spend it all on boats, 3rd and 4th vacation homes, private jets and things, it’s gone. The Millionaire Next Door authors go to great lengths to avoid the “The Great Gatsby” image. The classy and expensive images bought on credit is not, and never, has been an accurate reflection of net worth, it’s what’s in your portfolio that counts.
Since the White Coat Investor was published, the author wrote a blog article about a wily and witty young 30-something retiree, Mr. Money Mustache. This guy is hilarious and another talented writer. MMM writes brilliantly about one of the most boring and unappealing topics few want to hear: frugal living. Check out his concise and insightful ramblings on how to live a stress free and financially independent life.
I only question the author’s views when he compares California and Utah’s real estate. Of course, the values are starkly different and you will get more bang for the buck in Utah. It is just not as bad for MDs as the author writes. If MDs take one of the author’s primary point about continuing to live below their means after their medical school and resident training, of course, MDs can practice in Los Angeles and purchase a nice home in a safe neighborhood. The author said it would take $3 million to live in a home he bought for $300,000 back in Utah. I agree, if you want the “terminator” or Mitt Romany as neighbors who live in exclusive Pacific Palisades or La Jolla, respectively. Even then, $3 million might get you a one bath casita because those neighborhoods house some of the richest humans on earth.
Los Angeles city and county are huge geographic areas with many safe, affordable, and beautiful neighborhoods. For instance, as a couple of Los Angeles educators, my hubby and I started from nothing in our late twenty’s and early 30s. We managed to buy into one of Los Angeles many secluded and scenic hills. Our home was designed and built by a student of Frank Lloyd Wright and also owned a second home, Palm Springs vacation condo, which we rented out seasonally for 27 years. When we first bought our home in 1981, we rented out the bottom half for 13 years to help pay the mortgage. Along with the rental incomes, we did fine making combined salaries less than one MD’s and still invested enough to retire early (BTW, we do not have lucrative pensions. I have a modest teacher’s pension, and hubby has only Social Security).
The author writes another important chapter “Paying for Help,” might be the most important chapter because so many Americans are seeking help. The problem is that the effort it takes to receive non-conflicted financial help from the financial industry that resists with all of its lobbyist power, learning to set up your own plan is a snap. The irony brings up the next question: Do I need a financial adviser? But, I digress. Let’s just say, in all of my years of investing and negative experiences with self-conflicting financial advisers, it’s damn tricky and almost impossible to find somebody who truly has your best interests. If investors would focus on investment costs, they could address half of the problem. The 100% sure way of getting excellent advice is to become a do-it-yourselfer. Otherwise, this is a problem you will ultimately face: the investment system only returns about 9.5% average over time. This return cannot cover all of the following costs and provide you with a decent return on investment: inflation, investment costs (12b(1), AUM, fee-only hourly rate, front and backend commissions, loads, revenue sharing, third-party administrator fees, record keeping costs, advisory fees, turnover costs and taxes on inefficient mutual funds and taxes on distribution). In my opinion, an investor can meet or beat inflation and pay taxes due on distribution, if you reduce total investment costs to less than 50 basis points. There just isn’t enough return to pay for the investment costs and the costs of the adviser. The one way you can do this is to be a DIY. This book will help you on this goal.
If your doctor’s nurse informs you at your annual physical you have a temperature of 98.6, do yourself a huge favor and read this book! No other qualifications exist and you too can become a do-it-yourselfer. Trust me, and all of the other hundreds of positive reviewers. What more evidence do you need? I am not an ultra-wealthy investor and never been an ultra-high income earner, and I loved this book. Twenty years from now, you will thank yourself over and over. Older people, who discovered the investing process, never regreted that they read up on investing.
Dr. Dahle gives the reader plenty of positive, biased wisdoms (the “good” bias is from our point of view) and inspirations to begin the do-it-yourself financial journey. Thank goodness, we now have one more nonprofessional who knows more about personal finance and the Boglehead investment philosophy than those brilliant quants and stockbrokers who work for the avaricious and unethical big banks and brokerage houses.
Here are the books that Dr. Dahle cited:
Bogleheads Guide to Investing by Taylor Larimore et. al: http://www.amazon.com/The-Bogleheads-Guide-to-Investing/dp/1118921283/ref=cm_cr_asin_lnk?ie=UTF8
Rick Ferri: http://www.amazon.com/Richard-A-Ferri/dp/B001IGJTE8/ref=cm_cr_asin_lnk?ie=UTF8
Coffeehouse Investor: http://www.amazon.com/The-Coffeehouse-Investor-How-to-Build-Wealth-Ignore-Wall-Street-and-Get-On-with-Your-Life/dp/159184584X/ref=cm_cr_asin_lnk?ie=UTF8
William Bernstein: http://www.amazon.com/The-Four-Pillars-of-Investing-Lessons-for-Building-a-Winning-Portfolio/dp/0071747052/ref=cm_cr_asin_lnk?ie=UTF8
Below are additional books and one blogger that I recommend as they are written by financial nonprofessionals. However, both have been traditionally published and Mr. Hallan, the 2nd book’s author may be teaming up to be a financial adviser. Still, I recommend both books.
- Average Family’s guide to Financial Freedom by Bill and Mary Toohey. He was a teacher and she was a secretary. It’s over a decade old, but the investing process and money management involving the children are brilliant and still current. The authors show in great detail how this Iowa family of five, saved $467,000 in only 8 years while raising 3 children (one with disabilities) in a 1 bathroom house making $65,000 a year! They cover a lot of ground in their book and they were in their late 30s. Highly recommended. http://www.amazon.com/Average-Familys-Financial-Freedom-Fortune/dp/0471352284/ref=sr_1_1?s=books&ie=UTF8&qid=1442016065&sr=1-1&keywords=Average+families+guide+Financial+freedom
- Millionaire Teacher: The Nine Rules of Wealth you should have learned in school by Andrew Hallam. Read my critical review of the author’s book, especially his Rule number 9, and why I gave it only three stars: http://www.amazon.com/Millionaire-Teacher-Wealth-Should-Learned/dp/0470830069/ref=sr_1_1?s=books&ie=UTF8&qid=1442015531&sr=1-1&keywords=millionaire+teacher+the+nine+rules+of+wealth+you+should+have+learned+in+school
- Blogger: Mr. Money Mustache, read my review here: https://old.latebloomerwealth.com/2014/04/09/mr-money-mustache-the-best-blog-for-the-most-boring-aspect-of-wealth-building-frugal-living/