FIRE Starter 003: A Young Anesthesiologist’s Take on Geographic Arbitrage

This doctor got a high-paying job, built a beautiful home, and shortly thereafter, decided that wasn’t the place to call home, after all.

While such a realization would be a setback for most people, the anesthesiologist featured today made the best of the situation, designing a lifestyle and work schedule that was closer to ideal.

While this physician is doing amazingly well and will be just fine without our input, there are a handful of questions and requests for feedback at the end. If you’ve got any suggestions or answers, please leave them in the comments section below.

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.

 

 

 

Getting to Know You

 

First off, thank you so much for an amazing blog, and thank you for this great idea!! I am so excited to read the other physicians’ stories.

 

Where are you on your financial independence journey? Have you reached a positive net worth? It’s OK if you haven’t! Most of us started out in the red.

Short answer:

When I finished fellowship 2 years ago, my net worth was -$171,000. Today, my net worth is now +$371,000. I increased my net worth by $542,000 over 2 years.

At the end of training, I had $185,000 in student loans from undergrad and medical school combined. I currently have about $88,000 left. I have no other debts; my car is paid off and I rent a 1 bedroom apartment.

Long answer:

I am 32 years old, single (in a committed relationship), with no children. I am now 2 years into practice. I started reading WCI 5 years ago while I was a resident and (at the time) was trying to figure out how to approach disability insurance.

I decided to check out the blog because a Northwestern Mutual agent was trying to sell me disability insurance. We met for coffee initially to talk about this; when he insisted on paying for my tea, the warning bells started going off. Yes, my tea was like $3, which made his insistence suspect.

That is when I opened the WCI blog… and the rest is history. I only started reading about FIRE as a fellow 3 years ago. I was living paycheck to paycheck and felt this was not acceptable.

With picking up a lot of extra calls, I made about $130,000 that year. I was livid with myself and decided enough was enough.

While I was a fellow, my partner would make jokes about how upon waking up and before going to bed, I had developed this ritual of either reading a financial blog or checking my finances. Everyday!

There was one post about the “first attending paycheck,” and how the way you spend that paycheck is crucial. Coincidentally, I read this the same month I received my signing/retention bonus check, $36K after taxes.

I decided this would be my first action item. So I sat down one weekend and I made a plan for every dollar of my bonus as well as that first paycheck. Then I revised the plan again at least twice before executing it.

During fellowship, I had many friends, colleagues, and mentors in practice (anywhere from 5-15 years out of training) who were already tired of medicine.

This scared me. I knew I had to make a solid plan so I could have the freedom to choose to exit medicine if I had similar feelings to my friends.

The “X Factor” WCI post was one of the first posts that really lit a fire under me and got me motivated. I felt reassured that no matter how I felt about medicine in the future, I would always revisit my “why” and reconnect with the X factor within me. I know, soooo corny!

I worked throughout undergrad and had need-based and academic scholarships; I finished undergrad at a prestigious and very expensive school with only $6,000 in student loans.

I worked as a tutor during medical school to help offset living expenses and cover interview costs; I finished medical school with $145,000 in student loans.

As a resident, I kept my loans on deferment for about half of training and I lived paycheck to paycheck (moving, board exams, etc…). As a trainee, I was also supporting my mom and two family members while they were out of work.

At the end of fellowship, I had about $185,000 in student loans. I had a $10,000 emergency reserve and $4,000 in a retirement account from the tutoring job.

So when I finished fellowship in a high cost of living area, my net worth was about negative $171,000.

I moved to a low cost of living area in the Midwest where I was closer to family; I took an employed position at a regional hospital making about $450,000 base before a bonus, and with the opportunity to make more by picking up call shifts. In my first full year of practice, I made $540,000.

After one year, I decided to buy a house because things were going well (actually, I built a house! HA!).  And then over the following several months, the honeymoon period was over at work and I started realizing this was not a good fit for me.

I left after about 8 months into my second year. Yes, I became a statistic! I was one of those young physicians who left their new job within 2-3 years. This was DEFINITELY not my plan.

I was hoping to stay in this position for 3-5 years. So I decided to become a full-time independent contractor to have more autonomy over my schedule while waiting for the fluctuations in hospital systems with covid to pass.

 

Thankfully three things lined up for me:

[1] I bought the house when the cost of building was still low ($350,000 with 5% down payment) and I limited my budget to less than 1X my income.

[2]  I chose the right time to lock in the interest rate (2.25% for a 15 year conventional loan with PMI $50 per month).

[3] I lived in the house for 6 months and sold when home values were rising and supply was super low.

 

I walked away with a $40,000 profit after all the fees, on top of my original down payment. I would not recommend this route for others coming out of practice… I recommend waiting a full 2 years before buying a house.

I believe I got lucky and I made a series of decisions that helped me come out ahead. However, I could have just as easily lost $40,000 in this process.

Now, as an independent contractor, I decide exactly when I work, how much call I take, I negotiate how much I get paid, and I am in love with it all.

 

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

I live alone in a 1 bedroom apartment in the Mid-Atlantic area where I rent; I moved here after selling my house in the Midwest.

I do still support my mother here, along with several extended family members in my country of origin. Monthly, I spend $7,000 to $8,000 on myself (variable expenses included) and $2,000 to $3,000 on the family members I support.

It took me some time to stop feeling guilty about spending $11K a month. It was really when I became an independent contractor when I stopped feeling guilty about this because I was able to increase my net income.

Honestly, the physician bloggers who write about geographic arbitrage for building wealth do not fully grasp the importance of cultural community for emotional and mental health for minority physicians.

I remember reading one WCI post which detailed the benefits of geographic arbitrage for physicians. As someone who works in the Midwest, I completely agreed with the benefits. However, the drawbacks to living in these LCOL were not fully fleshed out.

When one reader mentioned this in the comments – the lack of cultural diversity in these areas with higher physician incomes – WCI’s reply was that the largest city in Utah is supportive of the LGBTQ community. Well… needless to say, I concluded that I could not really expect WCI to completely understand. This is not criticism; I’m more so pointing out the difference in background and experiences.

I was going stir crazy feeling stuck in a Midwest town where businesses shut down at 5pm on weekdays, restaurants close at 9pm, there was no spice or pepper in food unless it was from an Indian restaurant. I had to drive to Chicago to find stores which had foods/spices from my country of origin.

I was fully aware of the lack of diversity when I took the job, and I accepted the limits to my social life – the trade-off, in my opinion, justified the sacrifice.

It was a great job and a high enough compensation I could support family and travel frequently. However, with COVID, travel was no longer possible; and with decreasing autonomy in my schedule, I no longer wanted to make this sacrifice.

I decided I could not do geographic arbitrage in the way it is traditionally described (living in a LCOL). I was too young to spend my childless years in culturally homogenous cities.

I decided to take advantage of geographic arbitrage in my own way: by living where I am happiest, seeking contracts in LCOL/high paying areas, aggressively negotiating these contracts to cover my traveling and living expenses, and then spending my free time in areas better aligned with my social and cultural needs.

This meant more (domestic) travel but I was willing to accept this tradeoff. I started with locums but eventually secured my own contracts.

 

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

I am an anesthesiologist. I was a pretty traditional student.

After 4 years of undergrad, I went directly to med school for another 4 years, matched into anesthesia (4 years) and then completed a 1-year fellowship. I love my career!

I chose this path to eventually be in a Director position 5-7 years into my career and to start doing global health education and teaching anesthesia trainees in low-income countries 10+ years into my career. I have since decided that I don’t really care to be a director because of the politics involved and the glacial pace of change.

I still feel very strongly about global health anesthesia education and aligning in global health efforts.

I enjoy mission trips; but I feel long term it is almost a disservice to the local community because when I leave, I take my skills with me. My goal is to leave my skills behind by training others.

I love that my chosen path of being an independent contractor gives me the flexibility to easily pursue my passion for global health.

I am an instant gratification person, a kinetic learner, and I nerd out on physiology and pharmacology; anesthesiology caters to these needs very easily.

I also do not get personal gratification from long-term follow up, but I really enjoy gaining/earning patients’ trusts during the brief time we interact.

And now, as an independent contractor, I feel better appreciated by the surgeons and the staff when I work at a location. They had to deal with being understaffed (and thus lower productivity) prior to my arrival, so they really appreciate the presence of a competent anesthesiologist.

What do I like the least? That is a difficult question to answer. I would say in-house calls are my least favorite; as much as I love my job, I strongly dislike sleeping in the hospital because the rooms feel like small boxes.

This is closely followed by the low temperature in the OR! I am that person who pulls the extra warmer into my room when I am doing my own cases.

I also strongly dislike the fact that other physicians think they understand what anesthesiologists do when in reality they have no idea. I already accept that anesthesiologists are underappreciated. [PoF: I hear that!]

However, I would prefer other physicians be open and forthcoming about their ignorance – then maybe they can walk away with something new. I strive to keep myself open as much as possible to potential lessons from other physicians; this has made me a much better anesthesiologist. I really respect this humility in other physicians and healthcare professionals.

Along the same lines, I think in general physicians do not appreciate each other as much as they should, or give each other the benefit of the doubt. I hear so many physicians judge or bad-mouth other physicians’ decisions without having the full context.

It makes me think to myself, it’s always easy to be the Monday quarterback or the backseat driver. Hindsight is 20/20. As long as your colleague is safe, give them some grace.

 

What is the most challenging obstacle to making progress towards financial independence?

I am not sure I can fully articulate this – what has been challenging is keeping the forest in view to and avoid keeping up with the Joneses. It is relatively easier to stay the course when the steps are outlined, and it is clear whether or not they have been completed.

However, sometimes it is easy to lose sight of the big picture. This is where everyone says “have a written financial plan.” I try to get past this obstacle by revisiting my written goals, revising them if needed, or just reminding myself again.

As far as keeping up with the Joneses, I tell myself that “wealth is the money not spent” or something along those lines from The Millionaire Next Door. And in revisiting my goals, I envision what I want my “rich life” to look like, and remind myself of the progress I have made.

 

 

Investing

 

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

• $372,000 in securities
• 90% stocks and 10% bonds, all in index funds.
• 55% large cap, 15% small cap, 10% international, and 10% technology.

 

I feel a little embarrassed to admit this, but this is where I am. I have $72,000 in cash; $36,000 is my emergency reserve and $36,000 is in preparation to invest in the acquisition of a 2nd cash flowing business.

I am an angel investor in one business; I already invested $15,000 for 9% ownership.

I have no real estate; real estate is so boring to me. My only venture into real estate would be to get into REITs or invest in a good syndication.

My goal is to build multiple streams of income. I have a couple of friends who are great entrepreneurs.

When I was learning to vet deals and syndications, etc, I walked away concluding that it would be to my benefit to find someone like these two friends to invest in.

Instead of doing a startup, they came up with an amazing idea to buy existing cash flowing businesses from owners who are doing well but want to retire. The plan is for them to run these businesses themselves, scale and grow them.

I love their work ethic, grit, and vision, and I trust their knowledge and skill set. This is very much in the early phases, so I am excited to see how this venture goes and to invest in more cash flowing businesses.

 

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

At this point, it is about 60% tax-deferred, and 40% post-tax. I have only had a Roth for 2 years, so that amount is about only $15,000. I recently decided to establish a cash balance plan/401k plan and use that for my tax-deferred savings.

 

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

I do not have an HSA, but if I get a high deductible health insurance plan then I will. I do not have a 529, but I plan to start one after my student loans are paid off in about 3 years.

 

What has been your best investment?

This is going to sound very cliché but my best investment has been investing in my financial literacy and negotiation skills. I am very grateful for the free content physicians take the time to put out (free to me, at least).

WCI, PoF, Physician Philosopher, Wealthy Mom MD, and Financial Residency. Thank you so much! And I am so glad you get paid for these efforts (through ads, etc…)!

I have also read a number of the books on the recommended lists from these blogs; they have been very educational. Thanks to these blogs and these books, I have been able to easily access and take advantage of high value knowledge at a fraction of the typical cost.

I would say also that focuing more on growing assets than aggressively paying off my student loans also worked best for me. When I finished training, I refinanced my student loans and started making large payments towards them to pay them off in 2 years.

I learned that aggressively paying off my student loans did not make me as happy as watching my net worth grow. I switched to making minimum payments on my loan (which will be paid off in another 3 years) and focused my efforts on building assets and putting compound interest to work.

I still sleep soundly at night knowing I have student loans because I have a solid plan for them. I am aware that I could fall into the behavioral trap of spending the money instead. Thankfully, automating transfers for investing has been helpful to avoid the spending temptation.

 

Your worst investment?

I feel I am too early in investing (and maybe too naïve) to say what my worst investment is, but I suppose time will tell. Sometimes I worry if I am too aggressive in my allocations or not diversified enough.

I bought some Tesla stock when I was initially learning the ropes; it has grown in value but I would not recommend this. I have avoided the cryptocurrency bug, for better or for worse.

I would say my biggest regret is not opening a Roth IRA as a trainee. My big financial mistake was not valuing my financial education as much as my clinical education early on, and not actually taking the proper actions as a resident to start building momentum.

 

FIRE Kindling

 

What attracts you to the FIRE movement? Do you think you’ll retire early when you’re in a position to do so?

I hope to retire from anesthesiology in a maximum of 20 years, but who knows? I will likely do a slow transition out of clinical practice whenever I hit my FIRE number. I am attracted to the possibility that I will be able to support my family, immediate and extended, without working myself to death.

I am attracted to being able to build a legacy, ideally with my partner, and be an example for others in my [extended] family. I want to be able to live life on my own terms and to be able to spend time with my kids without worrying about bills or worry about funding my retirement.

I want to be able to take a full year of “maternity leave” if I want to! Down the line, I want to be able to work only 6 months out of the year so I can spend significant amount of time abroad teaching in a clinical setting. I want to use FIRE to be able to raise my children to be global citizens.

 

How do you anticipate your life changing post-FI?

I will be traveling a lot more, spending more time with family, and making sure our children have deep connections with our country of origin.

 

What steps have you taken to hasten your time to FI?

I have increased my net income pay. I am maintaining a retirement savings rate of minimum 30% gross pay. I have started investing in cash flowing businesses since I plan to retire in my 50s.

One exciting step I am taking now is to set up a cash balance plan for myself, since I plan to do this for at least the next 5 years. I am currently aggressive in my investments but I will be much more conservative with the cash balance plan.

 

Are your friends, family, or coworkers aware of your interest in financial independence?

My partner is fully aware since we have had multiple in depth conversations about money and other important topics. We are very much aligned. The only difference may be that I am more willing to trade money for my time/energy/efforts.

I have also shared with two siblings; one sibling is aware because we share this goal of financial independence, and the other is aware because I am trying to help her increase her financial literacy.

I want her to learn from my mistakes. I’ve also shared this interest with a couple of friends who are also physicians, also immigrants, and have similar goals.

 

What advice do you have for others beginning their own FIRE journey?

We fear what we do not know. Take the time to educate yourself and build your financial literacy. But as you go, identify your motivation and use that as a catalyst to start executing an action plan. It is one thing to have this knowledge, it is entirely different to act on it. You can do it! So get to it!

 

Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.

• Is my portfolio too heavily tilted, and is it too aggressive? Should I increase international? Should I add mid-caps? What are your thoughts on value vs growth? The answers I find seem to correlate with age/number of years in finance.

 

• I could use some advice on cash balance plans! How is your cash balance plan invested? I was thinking 60% stocks, 40% bonds. What did you invest in? The income that the actuary considers, is it before or after business deductions are made? Because the pretax 401k contributions is capped at 6% of the income considered, are there any downsides to making a Roth 401(k) contribution to fill up the rest of the 401k bucket? In your experience, how did you set up your plan to avoid making year to year changes to the plan – by percentage of your income, or by a set amount? Do you recommend a percentage if your income varies? I have many more cash balance questions!

 

PoF: Catch all the future interviews from those just getting started, at a crossroads, or at the end of their FI journey with a free subscription to Physician on FIRE.

 

 

 

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.