Know Scrubs Podcast Episode - Dr. Rikki Racela’s Financial Journey

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Know Scrubs Podcast Episode - Dr. Rikki Racela’s Financial Journey 

Dr. Verma: Hello, and welcome to the Andwise podcast. I'm so delighted today to be joined by one of my old med school classmates, Dr. Rikki Racela. He is a neurologist. He went to Princeton for undergrad. He went to Robert Wood Johnson Medical School. He did his neurology training at New York University where I did my internal medicine training and he's just one of the most honest, down to earth, and nurturing people I know. He's so generous with his time. He's one of our medical advisory board members at Andwise and he's just so open about his own financial journey. Rikki, welcome.

Dr. Racela: Oh, thank you so much Varun! And yeah, everybody I pay for Varun to like me and say those good words.

Dr. Verma: We'll hear about Rikki's financial journey later, but first, let's start with a rapid-fire Q&A. I haven't shared these questions with Rikki in advance. They're based on common topics from physician forums like Facebook and Reddit. Ready for question one?"

Dr. Racela: Oh my God. Should I stretch first? I don't know. 

Dr. Verma: Rikki, do you follow any rules of thumb for physicians' retirement savings? And I wonder about this because I see older physicians working tirelessly, and it makes me question retirement goals.

Dr. Racela: Personally, I'm a fan of the 4 percent rule, which is based on research by Bill Bengen, an old-school financial advisor. He crunched the numbers and found that if you spend 4 percent, adjusted for inflation, of your retirement savings, depending on your asset allocation, you're highly likely never to run out of money in retirement.

Dr. Verma: Absolutely, you've got it. The 4 percent rule is a guideline for determining a sustainable withdrawal rate from your retirement savings. In Rikki's example, he reversed the calculation to figure out that he and his wife would require $4 million in savings to maintain an annual income of $160,000 in retirement. This rule is a practical tool to help plan for financial stability during your retirement years, taking into account your desired expenses and savings. It provides a clear framework for long-term financial planning.

Dr. Verma: A few years ago, I got obsessed with credit card bonuses but realized it led to many cards with annual fees. Now, I use a 2.5 percent cash back card and an Amazon Chase card for specific benefits. Most other cards seem like a waste for minor percentage gains. Do you have a favorite credit card? I threw out two there - the Alliant Credit Union Visa card and the Amazon Express card. What do you use if you're comfortable sharing?

Dr. Racela: Certainly, when it comes to credit card rewards, it's like focusing on $3 questions instead of $30,000 questions as Ramit Sethi suggests. I'm also quite into credit card rewards hacking, and my personal favorite is the Fidelity Visa, which offers 2 percent cash back that can be directly invested in a Fidelity account. This not only acts as a 2 percent discount on all purchases but also encourages a mindful approach to investing. Currently, my wife and I have around 20 credit cards combined, and by adding each other as authorized users on these cards, we've been able to boost our credit scores. 

Dr. Verma: Apart from that, I've noticed many doctors using American Express High Yield Savings Accounts, Ally, or SoFi. Have you personally used any of these accounts and have a preference?

Dr. Verma: I've moved our high-yield savings from online banks to a brick-and-mortar bank, PNC, where I earn 4.3 percent. Additionally, having a PNC cash rewards card allows for a higher interest rate on these savings.

Dr. Verma: Over the past decade, have you observed any improvements in the willingness of physicians, trainees, and medical students to discuss financial wellness openly? Have you personally received valuable guidance or found it lacking within the healthcare community regarding managing personal finances alongside medical training and practice?

Dr. Racela: I've experienced a lack of guidance in managing finances, which led to significant financial mistakes, including losing $50,000 to whole life insurance and being misled by Northwestern Mutual financial advisors. Unfortunately, there's no legal protection against such practices, which is a significant issue in the financial industry. Additionally, the taboo surrounding financial discussions among doctors and the assumption that all doctors are inherently wealthy contribute to the problem. Lastly, the time and dedication required to learn about finances can deter healthcare professionals who want to focus on patient care. I'm now actively working to change this by sharing my experiences and advice with my colleagues and advocating for informed financial decisions.

Dr. Verma: You're right; it's crucial to find a financial advisor with the right credentials and low fees. However, even with a good advisor, it's essential to be completely honest and transparent about your financial goals, assets, and expenditures to get valuable advice. Bringing up a somewhat controversial subject, both of us attended pricey private undergrad institutions – I went to NYU with my parents' support for a $22,000 annual tuition. Today, NYU tuition stands at $65,000 for commuters, a significant increase. Given our backgrounds, do you believe the choice of an expensive undergraduate university makes a difference for aspiring physicians in 2023? We've heard varying opinions from friends, like our vascular surgeon friend who praises his Cornell education. Do you think, for our own children aspiring to become physicians, the university choice, whether expensive or a state school, will have a significant impact?

Dr. Racela: I think it does make a difference, but it's hard to quantify. Attending a prestigious school like Princeton likely played a significant role in my acceptance to Robert Wood, even with an average GPA and competitive MCAT score. I noticed that students from Rutgers, who were equally or more intelligent, faced more competition for spots, highlighting the impact of school reputation.

Dr. Verma: Does the choice of medical school matter, considering the competitiveness of admissions? For example, when I interviewed for ophthalmology positions alongside students from prestigious institutions like Harvard and Columbia, I attended Robert Wood Johnson Medical School in New Jersey. Should individuals with multiple offers prioritize a school's reputation?

Dr. Racela: Nope, go for the cheapest one. Once you're in a U.S. medical school with an M.D. degree, the school's name doesn't matter much. For instance, even though neurology wasn't highly competitive at NYU, I got into one of the better neurology programs, and my undergraduate background didn't significantly impact my prospects. Your wife, who attended a state school, excels in dermatology, one of the most competitive specialties. Once you're in medical school, they primarily consider your research experience, rotations within the program, and connections within the residency program.

Dr. Verma: You're absolutely right. Rikki, before we wrap up, do you have any off-the-cuff advice for younger physicians, considering our experiences and those of our colleagues and friends? While none of this is professional advice, it's a form of mentorship. Is there anything else you'd like to share?

Dr. Racela: Absolutely, number one is to get started. Whether you're a medical student or not, consider reading "The White Coat Investor" book. It's crucial not to rely solely on your MD salary and remain ignorant about finances. Being financially literate and having a financial plan is essential to avoid making costly mistakes and becoming a better physician who can balance work and personal life effectively.

Dr. Verma: You're a great doctor, and we all make financial mistakes. Thank you for sharing your wisdom, Rikki. It's valuable to have honest mentors like you to guide others and prevent them from repeating those errors. Thank you for your insights.

Dr. Racela: Thanks, man! I appreciate the support and kind words. It's all about helping our fellow docs and making a positive impact. Take care!

Dr. Verma: Yeah, I appreciate it. Take care, have a great week.