There’s a bicuspid joke somewhere in that title. Today’s interviewee deserves a frugal crown for both he and his wife as they spend in a normal fashion despite a high income.
Behind the frugal veneer is a couple that spends intentionally and has a FIRE plan that could be enacted quite soon.
Much like I felt about anesthesiology, he sees dentistry as a good career but something less than a calling, and he and his wife look forward to reclaiming their time and living less stressful lives.
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?
Based on the 4% rule, we became financially independent about a year ago. However, we will FIRE before age 50 and are more comfortable with a 3% initial withdrawal rate.
We hope to become financially independent (by our definition) in the next three years.
Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?
I am 43 and my wife is 41. We don’t have children. We aren’t supporting anyone other than ourselves.
We live and work in a small town approximately 20 minutes from a big city. We love where we live and hope to never move.
In what field are you working?
I am a general dentist. I (we) own my practice and the building where I practice. I am the only dentist in the practice. My wife works in the office.
Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?
I feel that we have as close to the ideal practice as we would be able to find. We have a good staff and do a nice job caring for our patients. However, my wife and I are exhausted and feel chained to the practice.
We have experienced significant stress and anxiety dealing with staff, patients, and dental insurance. We decided several years ago that when we reach a usable net worth of $2,000,000, we will attempt to sell the practice and commercial real estate. We will then FIRE.
How much does your household spend each year?
We don’t have a budget, but we do track our annual spending. In 2020, we spent a little under $51,000. This includes paying our own health insurance premiums.
In 2021, we will likely spend close to $55,000. We round up to a projected annual spend of $70,000 when we FIRE to account for future car purchases, future health care costs, and unexpected expenses.
What are your current debts?
We don’t have debt of any kind. The military paid for dental school, and I paid off my student loans less than two years after graduating. We have never carried consumer debt, and we pay for our cars outright.
We bought our practice in 2009 ($311,000) and paid off the practice in 2014. We bought the building ($264,500) where we practice (we are the only tenants) in 2010 and paid off the mortgage in 2015.
By 2015, we had still not purchased a house and made the decision to never have debt again. We built a house in 2017 and paid $384,000. We paid for the house in full and did not take out a mortgage.
What is your current net worth?
We really only calculate our “usable” net worth. So, for the sake of simplicity our house, practice, and commercial real estate are worth $0.
Our “usable” net worth is everything we have in checking accounts, Roth IRAs, HSA, and our brokerage account. As of today, our “usable” net worth is $1.895 million.
How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?
We are 70/30 equities to fixed income. Approximately 30% of our “usable” net worth is in fixed income. This includes bond funds and checking accounts.
Approximately 70% of our “usable” net worth is invested in equities. Within our equities we are 30% in a total international index fund and 70% in US index funds (60% VTSAX, 5% small US blend fund, 5% REIT index fund).
So, we have a slight tilt to small US blend (not value) and REIT. I believe approximately 4% of VTSAX is small blend and 4% is their REIT index fund, but we want closer to 10% of our US equity allocation for each.
Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?
We don’t have a retirement plan for our office. We did have a safe harbor 401(k) plan from February 2010 to February 2013. I was nervous about the plan from the beginning and called it the 401(k) experiment.
I offered the 401(k) because I knew that I would want a retirement plan if I were an employee, but my wife and I were the only staff members that contributed. In addition, the financial advisor pushed actively managed funds.
The fees significantly hindered the returns, and we decided to terminate the plan. One positive was that we used a Roth 401(k) and were able to roll our account into Roth IRAs. In 2018, we again investigated safe harbor 401(k) options with lower-cost providers. But we weren’t able to justify the costs versus benefits.
My wife and I currently max backdoor Roth IRAs, we max our HSA account (and use this as a “stealth IRA”), and we contribute to a brokerage account. POF’s post on tax-efficient investing in a brokerage account has been really helpful and eased our concern about having no money in tax-deferred vehicle(s).
What has been your best investment?
Our best investment has been our practice. As a dentist, the easiest path to FIRE (it isn’t easy) is practice ownership.
As an index fund investor, I would also want to emphasize the importance of having a globally diversified portfolio with an asset allocation that one can maintain. Maintaining our asset allocation and rebalancing periodically helps ensure that we are buying low and selling high.
Your worst investment?
When I graduated from dental school in 2004, I started taping the Suze Orman Show (yes, I heard her interview with Paula Pant) and I bought a subscription to Money Magazine.
Both encouraged relative frugality, paying off debt (and never incurring bad debt), investing in index funds, and using investment vehicles like Roth IRAs. Because of these resources, my wife and I never made major mistakes.
Into the FIRE
Numerically, what is your FI goal?
Our FI number is $2.4 million. When our usable net worth reaches $2,000,000 we will attempt to sell our practice and FIRE. I would prefer to also sell the commercial real estate but would be open to renting to the dentist that purchases the practice.
If no one buys the practice, it would likely take us 2-3 years to reach our minimum FI goal of $2,400,000. If we reach this point, we would maybe be open to giving the practice away to a dentist who would take care of our patients and staff.
When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?
I believe that we will be financially independent in the near future. I don’t anticipate that I will be practicing dentistry after age 50.
What are your post-FI plans? How will your life change? What do you look forward to the most?
We don’t have any concrete FI plans. This actually feels great! We have always had the next step planned. After college, I went directly into dental school. After dental school, I went directly into the military.
Toward the end of my military commitment, I started working in an associateship in private practice. During my associateship, my wife and I began looking for a practice to purchase.
We hope to retire from dentistry with no concrete plans. After this career is over, we hope to finally have a healthy work/life balance. We have several hobbies that will keep us busy. We both also feel the need to be productive and want to help others.
What advice do you have for others who are seeking financial independence?
The recipe for financial independence is simple but it isn’t easy.
Work hard and ambitiously. Practice relative frugality. Become financially literate. Concentrate on accumulating wealth instead of looking wealthy.
Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.
We really enjoy constructive criticism. Feel free to comment on our situation and ask specific questions. I would value any opinions from POF readers.
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!