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How to Achieve Financial Independence Spending $200K Per Year

FI 200k

Today’s Saturday Selection is a bit of a jaw-dropper from Passive Income MD. I’ll be honest. It’s a lot easier to become financially independent when spending $60,000 to $80,000 per year than it is when your annual expenses are two to three times that!

There are some reasons that PIMD’s numbers are much higher than mine. He lives in southern California; I live in Minnesota. He pays absurd southern CA prices for everything, including a mortgage and childcare. I own my home outright and my children are in elementary school.

Most of our flights are practically free using travel rewards cards. PIMD doesn’t play that game. I give from our donor advised fund and don’t count that in the spending tally. PIMD gives directly and includes it.

Nevertheless, he and his family have rapidly achieved financial independence in spite of the higher costs. This article originally appeared at Passive Income MD.


How to Achieve Financial Independence Spending $200K Per Year


In all my time writing this blog, I’ve avoided using a lot of concrete numbers when it comes to my own financial situation. I’ve been hesitant to put it all out there, but with this post, the time has finally come. Right to the point, our family expenses currently total up to more than $200,000 a year.

(Pause for dramatic effect)

I’m not sure how you feel about that number, but for me, it can be quite embarrassing–especially when I see people like Mr. Money Mustache or Physician on Fire, throw out annual expense numbers like 40k or 60k. I had to take a step back and really examine things – are we just being overly extravagant?

I needed to know why, exactly, these expenses are so large. So I broke our entire budget down to figure out the biggest factors.


FI 200k
PIMD’s second home?


My Big Annual Expenses


First, there’s the high cost of living in our area. I’m sure Miss Bonnie MD gets me on this one. Expenses directly related to housing account for roughly 40% of our total spending.

Second is the fact that we hire help for childcare. My wife doesn’t work full-time, but we need help for the times when she does work. That expense can add up.

Third is the cost of preschool for our children. Brace yourself; it’s over $1,600 per month which works out to nearly $20k a year. Yes, that number does sound ridiculous, but believe it or not, we went with one of the cheaper ones in the area.

Coming in strong for fourth is student loan payments. It’s not overly extravagant, but between my wife and I, we owe six figures in student loan debt (not uncommon for our profession). We’re extremely lucky though that we were both able to consolidate our loans at very low interest rates (<3%).

Fifth is health insurance. Being my own corporation means that I pay it all on my own. People who are nearing or shooting for financial independence worry about how they will pay their health insurance. I’m already paying for it so I’m used to figuring it as an expense.

Sixth and finally, donations to charity. I don’t really consider this an “expense,” because we give willingly, but at least 10% of our income goes to worthy causes. This is important to us, and something we won’t be changing.

Adding It All Up


When you combine all of these large items (plus all the other small things that come with living), it comes out to more than $200,000 per year.

And yet, if you look at my income report, we’re fast approaching what I consider Financial Independence – from medicine, anyway. I expect to fully hit that point in the near future, and at that point, I could retire from medicine and nurse my investments, passive income sources, and side gigs instead.

With six digits worth of expenses every year, how am I able to do this and still have a good amount to put towards investments? The answer couldn’t be more simple. My income exceeds my expenses. This is a direct result of my multiple streams of income. Indeed, even if I quit medicine altogether, I’d still have an income strong enough to support my family.

That’s an awesome feeling.

Okay, okay, so there are other things to consider besides regular expenses. What about the kids’ college, for example? Or some unexpected event?

Well, I do expect my sources of income to continue to multiply and increase. And even when I hit financial independence, I plan on working in a part-time capacity for as long as my health will allow (and as long as I enjoy it). I only expect to continue to add to my net worth from that point on.

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How I’m Making It Happen  


As I mentioned before, I could be truly financially independent right now (if I move). However, my wife and I are not willing to do that at this point in our lives. We love where we live too much.

So with that in mind, these are some of the things that play a part in my personal journey to being financially independent – even while spending more than $200k a year.


  • I have additional sources of income, preferably passive income sources. Now, “passive” doesn’t necessarily mean you’ll never have to put any work in. It means you put more work in front and reap ongoing benefits into the future. Even with real estate crowdfunding, which is extremely passive, you still need to do a little due diligence on the front side.
  • If necessary, I could reduce my expenses. At this point, I could downsize my house and move a little bit out of the area if needed. I live in a very desirable neighborhood and the price per square foot is on the high side. We also aren’t extremely frugal when it comes to eating out or trips. Definitely room for improvement.
  • I’ve been very aggressive about putting my money to work, even early on in my short career. My initial goal was to put my money into cash flowing investments like real estate investment properties and crowdfunding. This takes time, but I’m starting to see the dividends. I plan to continue to be aggressive by saving quite a bit and just throwing that into investments.
  • It helps to have a high-paying specialty. I can’t discount the benefit I’ve received from working in one of the higher paying specialties in medicine.
  • I have a life partner who works. I’m where I am because of my wife and her ability to bring in enough money to cover around 40% our expenses. She’s doing it in a sustainable way, with a great work-life balance.
  • Lastly, I’m smartly insuring against a huge unexpected event, like a disability, so it isn’t able to derail the whole plan.




The whole point of this post is a simple one – it’s not impossible to become financially independent if your expenses are in the six digits. (I’m not an advocate for high spending, I just believe it’s sometimes a by-product of where you live.) It’s possible to live the way you want to, all while maintaining a good work-life balance. If you have enough streams of income (ideally passive ones, you know me), you can afford to enjoy your life now and in the future.


Could you achieve financial independence with an annual spend like this? How many of your current expenses would you expect to disappear when retired?

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26 thoughts on “How to Achieve Financial Independence Spending $200K Per Year”

  1. Love this post and the comments. I have somewhat recently been exposed to FI community… as a doc as well i found I too couldn’t relate to folks accustomed to spending 60k/ yr or less… folks spending 20k / yr?? huh… we live in a “cheap” area in rural NorCal but its still CA and even though house was a whole lot cheaper than Bay area or So Cal its not like buying in middle america… The frugality movement has its limits and like other docs … MINDSET OF ABUNDANCE should be the key. Find ways to expand your income (passive income/ side gig etc…) so learn to earn more and more and yet make it more TAX advantaged than our active W-2 patient care… slowly but surely you out that “gap” money [gap between what you earn and what you spend] to use well at 5-12% /yrly and *BOOM* next thing you know you are well on your way…

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  3. Love this. We’re not quite in the $200k expense range, but hovering between $120k and $140k for reasons similar to what you highlighted (live in CA and have childcare costs). We’re saving, growing our investments and I’m planting seeds for passive income and side gigs. Maybe eventually moving to a cheaper area. I love the mustachian philosophies and frugality, but this is far more applicable to my own personal situation. Thanks for writing!

  4. As you can tell from the comments, there are plenty of others who identify with your situation. I currently follow several FIRE blogs loosely after initially discovering them and reading them all voraciously. I also was initially embarrassed about my annual spending – $280k in 2017 – when comparing it to the FIRE community. I also have 3 small children in private school, nanny, large house, boat, regular travel and I’m not interested in changing any of that right now.

    However, I second the request from a poster above about further details of your passive income sources. If your goal is truly to educate we need more information. I just visited your site and read your article “10 Perfect Passive Income Ideas for Physicians”. None of those suggestions seemed particularly enlightening, and I am now a little skeptical, as anyone should be without data. Sure, $4 mil in a muni fund can net you 5% and pay for your annual expenses. However my interpretation of your post was that you have something to teach us about generating passive income, so lets see some data! Please break down your sources for us. Thanks!

  5. It’s pretty crazy how expensive things are in California nowadays. Even just 20 years ago after the dot-com crash, California was so much cheaper. Nowadays “middle class” in San Fran is like 200-300k a year.

  6. Sounds like you have it figured out PIMD, congrats. Plenty of ways to make money and plenty of ways to enjoy it.

    Personally I find MMM or GCC annoying. But I guess they have it figured out too. ‘scuse me I gotta go make some soap and count how many squares of TP we used today.

  7. The key to financial independence is not how much you spend, it is the difference between what you spend and what you make that is crucial. If you take home $1,000,000 a year net, and you only spend half of it, you are putting away $500,000 for the future, yet your spending is super high and frugal people will criticize you. Most people never save that much money each year. But for a super high earner, they are doing great. It would be bad if the spending was higher than the $1,000,000 take home though.

    Everybody earns at a different level, but as long as they spend less than they earn and save the difference, they will reach financial independence, even if they spend more for pre-school tuition than many people spend for college tuition.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

    • You have it so right… I’ve heard it referred to as “the gap.” As long as you focus on it vs landing on a generic spending number you’ll do fine.

  8. Horray for you spending some real money on what is important to you. Going ultrafrugal is unsustainable for our family, we’ve tried it. We got frugality burnout.

    To your post questions very few expenses would go away with retirement for us. Also, yes I could (and nearly am) spending that much due to working my tail off and high paying specialty. Part of the costs were accidental second homeownership and really expensive daycare due to lack of supply and high demand.

    Quoting your post
    I live in a very desirable neighborhood and the price per square foot is on the high side. We also aren’t extremely frugal when it comes to eating out or trips.

    Good for you. We plan on doing the same and buying a nice house for our family and traveling well.

    • Can’t say we’ve ever tried being ultrafrugal. I remember reading about the financial impact of not buying one cup of coffee a day and tried it. I was pretty unhappy ha. So I found out I would rather figure out a way to scale my income – make a little more without additional time – and would never have to skimp on those little things that make me happy.

      And you know who’s traveling like crazy these days and seems pretty happy? PoF…

      • Yeah the “latte factor” is unacceptable to me. I’ve given up too much time training to skip on delicious coffee. Penny foolish and pound wise is our strategy for the next decade (of awesome). Seems like you would condone this choice.

        Heck yeah PoF is happy. I love it. Well deserved. I just hope he doesn’t stop posting once he lights the match. Maybe we’ll catch him blazing across the web every now and again like Haley’s comet…..

  9. Summary: How to Achieve Financial Independence Spending $200K Per Year? Just have a happily working spouse that earns approximately half of it.

    I challenge you to write about becoming FI as a household (i.e. without your wife’s job).

    • I think it would be more misleading if PIMD failed to acknowledge the fact that his wife also works part-time. He could write about FI on one income, but that’s not his reality. It is what we did as a household, and I’ve written about it extensively. See my path to financial independence and coming clean posts for details on our journey.


    • Or how about a wife that earns 100% of it? Jk…

      Well we’re fortunate that both of us could completely quit medicine as of this point and our other income streams would help cover our expenses. It didn’t happen right away but both of us were committed to building up those additional sources. Could we survive financially if I quit medicine altogether and took her income out of the picture? I think so.

  10. I’d like more information. Expenses are at least discussed. How much currently on student loan, other debts, and current net worth? What is the income from salary and from passive income (list each)? What’s the timeline and FI #’s? Would be more very helpful for readers to learn.

    Sorry, it’s kind of a tease (annoying) to divulge some but not be fully transparent with FI?


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  12. Congrats to crushing the income side of the FI equation! One of the FI things about reading different people are all the different approaches there are to achieve FI. This truly is a unique community with as many paths as people.

    We are going to try and hit the FI equation a little harder on the expenses side and try to keep things in the sub 100k range.

    Good luck getting the rest of the way to FI!

  13. It’s all about the financial offense when you live in HCOL. The nanny care does eat into the budget, especially as you also have to pay up employment taxes…etc.

    I think the biggest challenge I’ve encountered is getting those alternative income streams outside of my profession. That’s the only way to overcome our “doctor expenses”. 😉

  14. I can empathize. I’m envious of the FIRE minded folks who live out in the middle of the country (but not enough to leave the East coast!). I’m curious though, say with a spending goal of 200k what kind of income will it take to retire early with that level of spending. Also, for you (and I suspect many of us with young kids) the expenses will go down. Childcare, schooling, mortgage should all go away at some point…

    • Community is everything and it’d be hard for me to leave the West Coast as well. I’m sure expenses will change over time. Will we have another child, who knows? We may to help support our parents financially at some point. The way I see it is if we have other income streams providing enough income each month to support our spending, we’re done (retired on paper). So if it was 200k then we need ~17k per month in after-tax income. Simple way of looking at it, and it works for us…

  15. Good on you PIMD for being so open. My wife and I have a very similar budget. We used to struggle psychologically about spending so much because we were both raised in very frugal families (who still have no real idea how much we make/spend). Key for us was that we lived frugally while we developed hefty revenue streams, paid off our non-mortgage debts, and then ramped up spending afterwards. Our guilt causes us to re-examine our budget every 6-12 months, but we honestly are happy with what we have in return for the spending and don’t particularly want to go back to our old lifestyle. We were happy being frugal, but we are happier now. Your post was balm for my tortured soul 🙂

    • 🙂 PoF and others have talked about “selective frugality” and I’m all for it. I don’t feel guilty spending on experiences for the family and educational needs for the children. As a family we just try to be smarter about luxury items like clothes, cars, etc. As long as we feel we’re maintaining some balance, we’re in a happy place.

  16. I’m right there with you PIMD. Private school and childcare for us are huge expenses. They won’t last forever, but as long as they do, our household will spend similar to yours. Certainly pushes you to make more money!

    • I’ve found where we’re at in terms of our lives, careers, etc. it’s easier to make more money than spend less.

  17. “Second is the fact that we hire help for childcare. My wife doesn’t work full-time, but we need help for the times when she does work. ”

    Why is childcare an expense for when your **wife** works, but not when you work?

    • Excellent point fdmcv. Childcare expenses are 100% assigned to usually a female’s salary. This is an unconscious bias. I have even had friends comment to me that why should they go back to work and make 60k when childcare would be 25k. And I usually reply wouldn’t the expense be more like 12.5 k. Meanwhile , many women stay home just to avoid the childcare expenses while they are not investing and getting years of compound interest. So that puts a lot of pressure on the sole earner to accumulate future accounts for FI or retirement.

    • I believe his point is that, unlike some single-income homes where one spouse does the majority of the household work, there are times when both of them are working . Thus, there is an added expense.

      I work with female physicians whose husbands stay home. I know one-income households who have full-time childcare. I think it’s entirely appropriate for a woman to say “my husband doesn’t work full time, but we need help for the times when he does work.” Everyone’s household situation is a bit different.


    • Sorry, that’s just our personal situation. Not trying to speak for everyone. I’m friends with plenty of couples who do the opposite – wife works, husband does part-time or stays home. This is just the way we’ve decided to do it and it happens to work for us. My wife chooses to work because she enjoys it and I support that fully.


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