Coming Clean: How Financial Independence Came More Easily & I’m Not Exactly Retiring.
With all the talk about early retirement around here, you would think I’m about to retire.
You would be wrong on both counts.
Recently, our friend Tanja at Our Next Life wrote a blogging manifesto (<– that’s called a back-link, which helps send traffic to the target site and improves its rank and position with search engines) calling out the FIRE bloggers to be more honest and transparent about their true plans, side hustle income, advantages they’ve had, and more.
I fail to see excessive opacity or misleading rhetoric among the blogs that I follow, but I also realized any post of mine being read in isolation might make me appear guilty of being one of those nefarious bloggers. I also understand that I’m less likely to follow blogs that don’t pass the sniff test of being up-front and honest in the first place. Finally, I’m willing to admit I may have blinders on and implicit bias likely plays a role in my failing to see the injustices that others pick up on.
In the spirit of being fully transparent, this is my attempt to share the many ways my path to financial independence might look different than yours, and how this blogging venture has changed the way I approach my pending retirement from medicine in terms of both financial and lifestyle standpoints. While I’m not necessarily revealing anything new here, I’ve never put it all in one big, long disclaimer of a blog post before.
Coming Clean: How Financial Independence Came More Easily For Me
I don’t believe I’ve ever represented reaching financial independence as being easy. Like losing weight, it is fairly simple, but I wouldn’t call it easy. That being said, early financial independence will come more easily for some than others. I’ve benefited from a number of advantages and a few relative disadvantages, too.
Advantages I’ve Had in My Path to Financial Independence
I’m a man. I have white skin. I’m taller than the average white man. All of these features, none of which I had to work for, are known to be associated with higher income and other privileges.
My parents were good financial role models. Despite my father earning a solid income as a dentist, my parents have always enjoyed shopping at thrift stores and garage sales. I learned the Rule of 72 as a pre-teen.
They helped me start an IRA when I worked at a grocery store in high school and continued to help fund it when in college and most of the work I did was of the volunteer and research variety. I earned enough in the summers to justify an annual $2,000 contribution, but not a whole lot more.
My brother and I certainly didn’t grow up poor. Dad was a dentist, my mother was a nurse turned stay-at-home Mom, and her father had been a physician. He passed away when I was young, and what could have been a small inheritance for my mother was invested in high-interest savings bonds (this was 1980) that turned into about $40,000 dispersed over six years to help fund my collegiate and medical school education. His other two grandchildren received a similar gift.
The Cost of Education
I graduated from college debt-free. I was granted one of four full-tuition scholarships from the real U of M (I don’t want to hear it Michigan or Miami. What’s that, Montana?!? I don’t think so). These were made available based on proceeds from Golden Gopher license plates sold by the state for the first time when I was a high school senior. I now have these plates on both of our vehicles.
I also received a Byrd scholarship worth $1,500 a year for four years and a number of additional one-time scholarships. Between these scholarships, the $6,000 to $7,000 a year from my deceased grandfather, living in cheap apartments near campus, and summertime work, I was able to graduate from undergrad with a positive net worth.
My final medical school loan balance was below average. Remaining at the University of Minnesota, where I was awarded a $5,000 endowed scholarship, and again living close to classes and some rotations, I was able to finish medical school with a loan balance between $50,000 and $60,000 when the average indebted student had nearly $100,000 in debt in 2002.
**I’ve created a Student Loan Resource Page which is designed to help you learn how to best approach your loan balance, save you money, and earn money for this site. More on that last bit below.**
My Career and Side Gig
I chose a high paying specialty. Anesthesiologists typically earn 50% to 100% more than the lowest paid medical specialties. I further grew my income and savings rate by taking advantage of geographic arbitrage working as a locum tenens physician (<– these are internal links designed to give you additional information without you leaving my site) on some of my weeks off, particularly in the first six or seven years of my career.
Our boys have never been in daycare. I know that daycare can be costly. We have chosen to have my wife stay home to raise our boys full-time. She’s not using her master’s degree to earn a second income for our household, but we’ve been happy with this tradeoff.
We’ve been relatively healthy. I have a family of four and outside of a handful of minor surgical procedures, we haven’t had any particularly costly medical problems. My wife and I enjoy a healthy marriage and are very much in agreement when it comes to money and most other things in life, country music (<– this is a “smile” affiliate link to amazon.com. if you make a purchase after clicking the link, this site receives a referral fee. The smile means a small percentage is donated to a charity of your choice by Amazon) notwithstanding.
While I’ve had many advantages, I haven’t had every advantage. There’s been no inheritance, and I’m not expecting anything substantial. I didn’t marry into money. Some or all of the above are assumed when colleagues I work with hear about my new part-time schedule.
I use the terms “I” and “we” interchangeably when talking about family finances, as our financial independence is based on our household spending, but we’ve essentially done this on one income. My wife has occasionally worked as a very part-time teacher. Her contributions to the income side have probably been less than 1%, but her contribution to the household duties are far in excess of 50% (and she might tell you in excess of 99% and not be too far off).
*If you’re a physician looking for a side gig of your own, consider joining the Physician Side Gigs Facebook Group. (<– a polite request to join my friend Dr. Nisha Mehta’s group. She may notice an influx of new member requests and reciprocate in some fashion.)
I Am Financial Independence, and So Can You!
Riffing off of Stephen Colbert’s best-selling title (<– yes, another amazon affiliate link), I want to distinguish between sharing my story and believing that you can precisely replicate it.
The households in my Tale of Four Physicians each earn $300,000. That’s way more than the average household earns, and it’s more than many physician households earn. I know that and I trust my readers do, too.
I write for other physicians and those with a similar income and demanding workload in stressful careers. Some of the lessons are universal, but many of the strategies I discuss, whether it’s minimizing capital gains taxes, increasing income with locum tenens work, or investing heavily in a taxable account are only high-yield for my target reader.
Your path to financial independence will look different than mine. You might have five times the student loan debt. You may earn less. Or more. You face unique challenges being both a surgeon and a mother. You have a son with disabilities. You’ve been divorced. Twice.
For all kinds of reasons, most people won’t reach financial independence within ten years of starting their career. I’ve quantified the effect of financial help from family and its effect on my timeline to FI.
I figure without the help I received in college to help pay for school and fund an IRA, it would have taken me six to nine months longer to become financially independent, based on our recent years’ savings rate exceeding 50% of gross and 75% of net pay. Each of the last two years, we spent about $62,000.
Our other advantages are tougher to quantify, but there’s no doubt the many other advantages listed sped up my path to financial independence. It would have been even quicker with a working spouse, no debt, no kids, no second home or extensive travel, etc…
The fact is I didn’t even know I was pursuing financial independence. When I discovered the term, we more or less had enough to retire right then and there if we had wanted. That was a few years ago, and I’m still plugging along while I figure out what the rest of life is going to look like for my family and me.
I’m Not Exactly Retiring
I discovered the concept of financial independence and started dreaming of retiring early in late 2014. That inception is what ultimately led to me starting this blog about 14 months later in January of 2016.
I didn’t know if people would find my blog or find it worth reading, and my plans at the time were to retire from clinical medicine after another five years or so of full-time work.
A funny thing happened.
People did find the blog. They stuck around to read. I knew that blogs could be monetized, but I also knew that most blogs earn little to nothing. According to a recent post from Passive Income MD (<– a business partner of mine — I’m financially incentivized to send him traffic), only 13% of ProBlogger (a blog about blogging — how meta) readers earned $1,000 or more per month from their sites.
This particular site is now among that 13% and is on pace to soon be among the top 4% of sites earning even more. Sites without obvious advertising can also lead to lucrative money-making opportunities for their authors. One’s popularity as a blogger can be leveraged to drive book sales, book public speaking gigs, attract coaching clients, and more.
At this point in my career, when my alarm goes off at 0515, I’m not excited to get up and go to work. I look forward to the end of the workday. I work with great people and get to do some cool stuff, but it’s just not how I would choose to spend most days. And so, I’m working part-time now, and I may be done working as an anesthesiologist as soon as next summer.
I used to think I’d simply retire after that. Then I discovered blogging. I enjoy writing. I have fun trading barbs and insights on Twitter. I wake up and I’m excited to see what my new friends are talking about in my Physicians on FIRE Facebook group (<– a subtle plea to other physicians to join and see what we’re up to there) and what my blogging friends have posted on their sites.
The argument over what retirement is and isn’t has become a tired one to me. I don’t care to wax philosophical about the precise definition of the word “retired” or summon the internet retirement police. But when a stranger asks me what I do for a living in 2020, I’ll probably tell them I’m a writer and a digital marketer, because that’s essentially what I will be. Or maybe I’ll just tell ’em I’m a homebrewer.
This Site Makes Money
The final piece in today’s transparency puzzle is the fact that I unapologetically earn an income here. Feeling a bit guilty about monetizing a site I started after achieving financial independence, which by definition means I don’t need any more money, I have pledged to donate half of the profit this site generates for me. I could have chosen to donate all of it, but I know me, and I know I’ll do a better job if I have more skin in the game.
Anticipating dropping to a lower tax bracket due to working less and tax reform, I’ve already donated over $136,000, mostly to a donor advised fund (<– a link to my quarter million in DAF post, which will be seen as grandstanding by some, but inspirational to others, and I believe the ends (more people donating generously) justify the means in this case), since starting this blog.
Meanwhile, I’ve only seen about half that total in personal profit from the site. Rather than donating half, I’ve donated double. I’ve done so to take advantage of tax arbitrage by donating in my peak earning years as an anesthesiologist while planning to earn enough from the site later on to make good on my pledge.
Essentially, I’ve donated enough to satisfy the pledge on the first $272,000 in profits. Once that number is reached, and I’m confident it will be eventually, I will begin adding to the charitable fund and will also be compelled to donate more from our donor advised fund.
I would love to be able to dole out a six-figure sum annually based on the income made from this site. That’s the ultimate goal.
How This Site Makes Money
This could be a whole series of posts, but people generally don’t come here to learn how to make money blogging — there are plenty of sites dedicated to that — and they make good money talking about how to make money online. I’ll keep it simple and direct.
I’ve got ads in the header, right sidebar, and a couple in each post. There are also ads at the bottom of my e-mails and on some of the other pages on this site. Those are sold directly, mostly to small businesses, by Cindy, my ad manager. If you have an interest in advertising, you can find more information here.student loan refinancers, crowdfunded real estate platforms, Personal Capital (which I’ve been using since late 2014, long before I had a website), and a few others. If you use one of their services after reaching them via a link here, this site may get a commission for the referral.
My best performing affiliate relationship has been with Personal Capital. If you are a blogger interested in an affiliate relationship, please accept my invitation to work with FlexOffers to create your own affiliate links. Doing so could result in some small commissions for me. I’ve earned $13.20 lifetime via this underwhelming program, the equivalent of one quality six-pack of craft beer. Bottoms up!
Another avenue that I’ve started to explore after several years of enjoying nearly free travel via my own efforts accumulating credit card rewards is the recommendation of particular cards via CardRatings. You may have seen a banner or two above.
I have a few served ads, which come from either Google or InvestingChannel. There are also Amazon affiliate links and an ad in the sidebar that may display products related to the post you’re reading or a recent search you’ve made.
I’ve had one paid speaking gig, one freelance writing article commissioned, and some freelance income from articles syndicated at Physician’s Money Digest.
I don’t share this information on the site, but if you’re feeling voyeuristic, I’ll be sharing site revenue in my next quarterly progress note which will be sent out in a few short days. You can subscribe to the newsletter and new posts right here. (this is known as a “call to action,” piquing your interest and asking you to become a subscriber via the text field below –>)
None of This Negates the Validity of Safe Withdrawal Rates
My final point is that just because the people sharing tips, tricks, knowledge, and wisdom are generally earning money in some way, shape or form, that doesn’t mean the research is invalid.
With or without this side gig, I’d be comfortable retiring on a safe withdrawal rate of 3.5% or less. Millions of people have retired successfully with smaller nest eggs and spending a higher percentage. I don’t know the exact number, but the ratio of people earning money writing or talking about safe withdrawal rates to the number of people successfully using them is probably in the neighborhood of 1:400,000, give or take a few hundred thousand.
Safe withdrawal rates (SWR) are based on historical worst-case scenarios for a retiree. For a primer on SWR, start with Big ERN’s first post on the subject and stick around for the next twenty-some posts in the series if you’re hungry for more. If you’re more of an auditory learner, look to the Mad Fientist’s podcast with money savant Michael Kitces.
While there are no guarantees that the future will look anything like the past, if it isn’t worse than what was seen in the Great Depression, a low SWR such as the 3.5% or so I mentioned should be adequate. It also helps to have redundancies and contingencies when it comes to spending and income.
[Post-publication edit: I sent Tanja Hester a sneak preview of this post the other night, but her response was lost to the ether. From Ms. Our Next Life:
“High five, PoF. This level of transparency is fantastic. You’ve always been upfront that you’re a high earner (it’s kinda implied by the title of your site), but as loads of comments on the manifesto tell us, that’s not something high earners are universally upfront about.
And I bet readers would find it interesting to know exactly how you crunch your savings rate since there’s no standard definition of what goes into that. It’s admirable that you say you’re not really retiring, but also, you still are. You’ll be leaving your career and big bucks and giving yourself total freedom of time. That counts as retirement if you say it does. [PoF: I don’t know what to say anymore!]
On the validity of the SWR, my concern is that we make our biases clear to readers, which is really the point of the transparency. And while we can say that our belief in a 3-4% safe withdrawal rate is based on hard data, not emotion, that’s not true. We have zero hard data about the future. We can make some very good guesses based on data from the past, but ultimately it’s a guess. And what sways us when we’re guessing? Our emotions and biases!
So if you’ve generally always had things pretty easy financially, you’ve saved more than you’ll ever need and you’re now pulling in a solid blog income on top of all that? Well you have every reason in the world to be optimistic, and that’s where readers need to know your bias. Because you may be inclined to be more optimistic when interpreting things like SWR research, and your optimism could push you to conclude that 4% really is overkill, and a 5% rate would be totally fine.
Fortunately, you’re on the more conservative end of the spectrum with the 3.5% SWR, so I’m not worried about your readers not saving enough for all the many unknown unknowns out there, especially around health care. Keep telling it like it is! – Tanja”]
There you have it. I encourage other bloggers to “come clean” to give our readers a better understanding of where we’ve been, what we’re up to, and what our futures might look like in a world where we’re allowed to retire from something and continue earning an income.