FIRE Crossroads 011: Two 36-Year Old Physicians Halfway to a FI Goal of $5 Million

These two young physicians, living in a relatively high cost of living area, have already accumulated half of the $5 Million goal they’ve set for financial independence. They expect to reach it by the time they’re 40.

As a nephrologist and radiologist, they earn good money. But remember, it’s not what you earn, but what you keep, that matters most when it comes to building wealth.

Like many others, their “why of FI” is time, and they look forward to reclaiming some time for themselves, their young children, and their extended family around the world.

If you’re interested in participating in one of three interview series, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes. To see other posts in the series, visit our Q&A archive.

 

 

Getting to Know You

 

Where are you on your financial independence journey? Have you crossed the halfway point in terms of net worth and/or passive income?

I think this is an unending journey. Thanks to the saving mindset my parents instilled in me, I have been on the path for a long time now and have started to see rewards.

We are close to 50% of my FI number of $5 million.

Passive income, purely outside of medicine, is equal to about 2 months of our expenditures at this time or enough to pay for most of our vacations!

 

Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?

We are a family of 4 living in the biggest Midwest city. My spouse and I will be 37 in a few months. We have 2 young kids ages 5 and 3.

We are not supporting anyone outside our immediate household, and I think that has been a huge factor for us to be able to put more towards investments and for our kids’ education.

 

In what field are you working? How is your career going? What do you like best and least about your chosen profession?

I’m a nephrologist and my spouse is a radiologist. This is my 8th year of being an attending, and my spouse has been working as an attending for 4 years. Both of us are in private practice.

I think all nephrologists enjoy glomerulonephritides and I’m no exception, but beyond the complexities of GN’s, I honestly have not thought about what’s the best thing about it.

When I started my training in nephrology, I did not anticipate the amount of traveling required between hospitals, dialysis units, and offices. This is one aspect of my job I truly could do without.

 

Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?

I enjoy clinical medicine but the toll heavy night calls, weekend calls, unending charting take along with the phenomena of medicine cannibalizing its young — has led me to try to meet my financial obligations (so to speak) to (a) myself, (b) my spouse, and (c ) my kids, so that I can either retire early (I’m not sure I want to do that) or practice on my own terms.

 

Investing

 

How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?

60% Financial markets

40% Real estate

Of the 60% in financial markets → 70% is US Stocks, 15% International stocks, and 15%  US bonds.

We have some physical gold but it is not significant enough to be counted in our retirement plan.

 

Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?

We both max out our 401(k). I have a match and profit sharing via my practice (which I put in place), while my spouse does not have a match or profit sharing. We make about $80,000 in pre-tax investments each year through these vehicles. I do a backdoor Roth each year in January.

I started early and contributed to a 403(b) when I was in residency. I did not come close to maxing it out, but I used it to put all the extra money I made from moonlighting towards my 403(b). That has served me well most crucially to give my spouse the visual of compounding!

In our taxable account, we dollar cost average about $100,000 a year.

 

Do you have investments in an HSA? How about 529 Plans?

We have insurance through my spouse and the plans do not qualify for HSA. My company’s plan would qualify for an HSA, but we prefer the peace of mind (of what we consider a better plan) for us rather than trying to get HSA benefits, as well.

I often have spirited debates with myself about whether we should switch insurance (since we currently are not heavy consumers of health care) to take advantage of HSA benefits.

This is something we might change in the future — if someone has insights or wisdom to share, I’d love to know.

We are funding 529 plans for both of our kids. We gave them $30,000 each for the first 2 years and now do $10,000 each to maximize the tax benefit. Both of them combined have ~ $260,000 and we plan to continue to contribute $10,000 to each at least they are 18 (or longer if we continue to work and they go for grad school or as potential funding education of future grandkids — assuming, of course, the laws don’t change)

Both of us graduated without student loan debt and have witnessed firsthand the huge advantage it gave us in life. A good cardiologist friend of mine was not able to secure a mortgage because his loan to income ratio was too high.

We firmly believe it to be our duty to our kids to fund their education. We differ on the kind of education – public versus private and whether or not the price tag is worth private college (unless offering a unique /special advantage).

We go back and forth about paying for a masters of philosophy after majoring in history — if our kids want to ensure unemployability, they can do so on their dime. We struggle with what is the right option if our kids want to pursue something we think is not going to lead to a financially stable career.

 

What has been your best investment?

Target date fund — not for any other reason but for starting investing in 2009 during my 1st year of residency and being fortunate enough to have had an incredible bull run.

That investment has since been amalgamated into my current 401(k), and it showed me in practice what common sense told me and my parents taught me — nothing beats time in the market. Invest early; invest regularly.

 

Your worst investment?

I don’t invest in stuff I don’t understand, so thus far I’m happy with our market performance. Real estate investing is something we started doing about 18 months ago, so it’s too soon to say if that has been a dud! Hopefully not — if the cash flows are an indication, it should be good. Of course, there are some deals that are underperforming, but in the grand scheme of things, it is not too bad.

 

 

Into the FIRE

 

Numerically, what is your FI goal?

$5 million

 

When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?

3-4 years.

I probably will not retire but at the very least want to stop doing weekends and potentially night calls. We are seriously looking at me going part-time while my spouse continues to work in clinical medicine when I achieve FI and try for REPS (real estate professional status). Our biggest bill right now is taxes, and I want to lower that!

 

What are your post-FI plans? How will your life change? What do you look forward to the most?

I look forward to the ability to take time off when my kids are off. Spending time with them and my spouse building memories and traveling. I will borrow from Leif the concept of slow travel. I think I was at least as excited about your Spain trip as probably you were. I think it is brilliant!

I want to be present for my kids in school, in PTA meetings, and for games and recitals.

I look forward to being able to meet family — they are now spread out around the globe.

 

Have you made any major changes in your lifestyle or investments to accelerate your FI path?

Fortunately, I had the mindset for this even before I had known the concept of FIRE. I enjoy the simple things in life and never had the urge for bigger cars, bigger houses, fancy watches, etc… I’ve been told by close friends who are not physicians that “my footprint needs to be bigger”

Since we had a very comfortable but modest lifestyle, after much discussion, my spouse saw the advantages of avoiding a massive lifestyle creep.

We own our house which is big enough for us, own both of our Hondas which we bought brand new, travel a week at a time for 6 weeks of the year, and we don’t have to worry about any unexpected expenses that may arise. We are thankful and grateful to be in the position we are in.

I personally never felt I sacrificed anything since I never enjoyed any of that fancy stuff anyways, and we do things we enjoy without hesitation. I think we are good yin and yang for each other balancing out our desire for FI with the need to live in the present.

 

Are you facing any unique challenges making FI or RE more difficult?

CHILDCARE!! I understand it is not unique. Man, kids are expensive! lol

 

What advice do you have for others who are seeking financial independence?

It is brilliant that you have started to think about it. I am always surprised to see and hear other physicians or high income earners who are “struggling” living paycheck to paycheck with outwards appearances of money.

Financial illiteracy in physician circles is appalling and thanks to PoF and WCI it is improving, but the culture of consumerism and keeping up with the Joneses is the doom of most people.

I believe it’s the mindset. All the blogs, figures, graphs, etc… will not change your mind about your needs and your wants if you don’t see the bigger picture and fall into the societal expectation of what a doctor is supposed to do and how a doctor is supposed to live.

Figure out your why — why are you working as hard as you are — does the Porsche, boat, etc… truly bring you happiness?

Is your why valuable; if so, how much? Would you rather have all Saturdays and Sundays free to play with your kids, or do you want the $2 million dollar mansion or the Rolls Royce?

Once your why is defined, and you place value on that, everything else is easy.

It is not rocket science to figure out asset allocation, real estate or angel investing, etc…. Like anything in life, it takes time, desire, and dedication.

Balance your future security with current happiness as well!

 

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I’ve shared my feedback privately with today’s guest. I wouldn’t want my opinions to influence yours. Please give your take in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.