They are two hard-working dentists who have done very well for themselves. In their mid-30s, they have a net worth approaching $2 Million, and they could easily coast to a shared FIRE goal, if they had one.
That doesn’t appear to be the case, though, as he reports. While they’ll be in great shape financially, and he sees the benefit of working less or not at all in the next decade or so, she feels differently.
He realizes that full FIRE looks quite a bit different if his life partner is tied down to a job, even if it is one that she thoroughly enjoys. How will they reconcile? He asks for your thoughts on their first-world conundrum.
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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?
We are moving along quite well on our FI journey and I’d say we are right around the halfway point. Our household has an annual spend of around $120,000.
Plug and chug this into the 4% Rule (25 x $120,000) and we get an F.I. number of $3 million. If I aim for a more conservative 3.33% withdrawal rate, 30 x $120,000 would equal $3.6 million.
Our nest egg is currently about $1.9 million. Applying the Rule of 72, if we just sit back and do absolutely nothing, $1.9 million would double to $3.8 million in 10 years if we project 7.2% growth.
We can be considered “Coast FI” by our mid 40s. Our plan right now is to keep feeding the nest egg, so we will most likely hit our FI number earlier, perhaps early 40s. Our net worth is approximately $2.5 million after factoring in home value/debt and dental practice value/debt.
Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?
My wife and I are in our mid-30s and recently welcomed a baby into this world.
We live about an hour outside of a city, so taking advantage of some geographic arbitrage (thank you PoF for writing about that!).
In what field are you working? How is your career going? What do you like best and least about your chosen profession?
My wife and I are both dentists, and we’re about 8 years out of training. I feel like we’ve hit our stride and we’re at really good points in our careers.
We are still learning and definitely still far from being considered masters of our craft, but confident in our skills and happy with how far we’ve come.
There are many things to like about our jobs – good hours, compensation, autonomy, and practice reputation within the community. As in many fields, managing people is probably the least enjoyable part.
We started off with about $500,000 in combined student loan debt, and our range of household income has been $325,000 – $650,000. After we finished our training, we definitely experienced some lifestyle creep but were able to pay off our student loans in about 7 years while investing at the same time.
In hindsight, we got really lucky that we started investing early because the market has had awesome returns during that time period. It’ll still be a while before we can do our Dave Ramsey debt-free scream; we still have dental practice debt (~$690,000 4.25% 10 year) and a mortgage (~$340,000 2.5% 15 year).
Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?
We’ve worked really hard to get to where we are. When I learned about the “Coast FI” concept and realized our portfolio no longer requires new contributions to reach our FI number in approximately 10 years, this was a huge load off my shoulders.
Cutting down to part-time is something I’ve considered. Maybe I can start dialing down the number of days, number of hours, and/or number of patients. Maybe this is possible sooner rather than later?!
How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?
Our nest egg is all index funds, and I haven’t really had the itch to try anything else yet. We used Boglehead Rick Ferri’s Core-4 80/20 portfolio as a template (48% US Stocks, 24% International Stocks, 20% Bonds, 8% REITs), but I’ll admit my risk tolerance has increased with the recent market returns.
Our overall asset allocation is currently at 87/13, but I’m comfortable letting it float up to 90/10 as long as we have a healthy 6-month emergency fund.
Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?
We max out our 401(k)s and backdoor Roth IRAs every year, then extra monthly savings go into our taxable account.
Our taxable account has grown considerably (~$1 million). We try and keep REITs in Roth IRAs, bonds and international stocks in 401(k)s, and US stocks in our taxable account.
Do you have investments in an HSA? How about 529 Plans?
What has been your best investment?
I’d probably say education. Student loans stink, training was hard, but “front loading” the time, energy, and money was totally worth it!
Your worst investment?
I hate to say it, but I got suckered into whole life insurance… At the time, I knew absolutely nothing about personal finance, a total ostrich. We were making decent income, but didn’t know what to do with it besides put it in our 401(k)s or spend it.
Whole life insurance and mutual funds (that happened to be actively managed funds) were recommended by two different financial advisors (salesmen). First opinion recommended it, second opinion recommended it…I didn’t bother getting a third opinion, and I didn’t even know what a fee-only fiduciary was at the time.
I figured the financial professionals are there to help people like me, and this is just what investing was. We agreed to those products, but I had an uneasy feeling about them.
Luckily, it wasn’t long before I found White Coat Investor and started reading financial blogs, books, and listening to podcasts. We did end up working with a fee-only fiduciary financial advisor who helped us ditch those products. It really hurt at the time, but it was a sunk cost. We got out of those products, and we moved on with our lives.
PoF, I’m not sure if I’m breaking any rules here, but I’ll give an unsolicited plug. As a disclaimer, I get absolutely no kickbacks and they never asked for me to do this…Just my honest review.
We had an amazing experience with Ryan Inman and Kayse Kress at Physician Wealth Services (and Financial Residency Podcast). I’d highly recommend them if you need a fee-only fiduciary financial advisor who will be transparent with their pricing and won’t sell any commissioned products! We worked with them until I was comfortable to DIY our investing.
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Into the FIRE
Numerically, what is your FI goal?
Around $3.6 million, but we’d aim to overshoot this.
When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?
After playing around with a compound interest calculator, the math seems to work out for us to be FI by early 40s if we stay on course with monthly investments. This totally blew my mind!
Once we are comfortably FI and no longer rely on a paycheck, I could see myself cutting back to two days of work per week. I’d consider dentistry to be a well-paid hobby at that point.
With this extra free time, I’d pursue my hobbies and test the FIRE waters. If I’m loving my off days way more than my work days, I’d consider going full FIRE. If I still find fulfillment from work, I could keep practicing, but probably dial down the patient volume.
What are your post-FI plans? How will your life change? What do you look forward to the most?
I think it will be an amazing feeling to be in full control of my time. Morgan Housel has written that money’s greatest value is to give you control over your time. Wealth is the ability to do what you want, when you want, with whom you want, for as long as you want. I don’t know if he’s written about FIRE specifically, but that sounds a heck of a lot like FIRE.
With the increased autonomy over time, I’d spend more time doing other things I enjoy. I try to keep a diverse “portfolio of hobbies” which helps with different seasons and different circumstances.
When some aren’t feasible due to weather, or a global pandemic, or having a young child at home, there are different ones to fall back on. Some of these include running, cycling, skiing, reading, travel, and spending quality time with friends/family.
I look forward to being able to slow travel several times a year. Without a job to get back to, this opens up a world of opportunities that we didn’t previously have.
Have you made any major changes in your lifestyle or investments to accelerate your FI path?
There was a period of time when I tried to be super frugal to get to FI as fast as possible. I would overanalyze and scrutinize our spending. While this helped with our savings rate, I noticed this behavior started negatively affecting me and my relationship with my wife.
After zooming out and realizing that we are actually doing pretty decently on our FI path, I’ve been more willing to spend and selectively splurge on things that we really enjoy.
This is kind of counterintuitive because loosening up the purse strings decelerates us on our FI path, but it’s making the journey much more enjoyable.
As mentioned previously, the major investment changes were ditching the whole life insurance and actively managed mutual funds, and DIY-ing our portfolio.
Are you facing any unique challenges making FI or RE more difficult?
I guess this isn’t unique, but I have FOPO – fear of people’s opinions. I’m a little self conscious about what my family and friends would think if I told them I don’t work anymore.
While I got bitten by the FIRE bug and got really into this stuff, my wife has zero interest in retiring early or even cutting back anytime soon.
She’s supportive of me cutting back to part time, but she’s thinks the full RE part of FIRE is too extreme. From a financial standpoint, this is awesome, because we will continue to have her income!
From a lifestyle standpoint, longer vacations and slow travel may not be feasible because of work demands. Quite the first world problems, right?
What advice do you have for others who are seeking financial independence?
At first, the numbers/spreadsheet part of personal finance was scary to me. But after learning a little more, the investing part of the equation is actually the easy stuff. You can optimize and simplify. It’s mechanical and finite.
From this technical perspective, I’d say the first step is just to track your spending, then calculate your FI number. Once you have a ballpark idea of how much you need, you can play around with a compound interest calculator and see how much you need to invest to reach your target FI number by your target FI age.
The other part of the equation is the behavioral, emotional, more mushy stuff. Things like asking yourself…What is your relationship with money? How do you view money? Are these views serving you, or are they holding you back? How do these views affect you and others around you?
If money were no object, what do you want to do with your time? What gives you a sense of purpose and fulfillment? What brings you pure joy? What do you currently “have to” do that you wish you didn’t?
Try to have a vision of the life you want to live, and use money as a tool to get yourself closer to living this life.
Any book recommendations?
Reading some behavioral economics / money mindset books can really help accelerate your path to FI. Some things really do move the happiness needle, but a lot of things don’t. When you become more self-aware of these things, you can be more frugal and spend more intentionally.
- Predictably Irrational by Dan Ariely
- Dollars and Sense by Dan Ariely
- Happy Money by Elizabeth Dunn
- Psychology of Money by Morgan Housel
- I Will Teach You To Be Rich by Ramit Sethi
Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.
Has anyone out there been really into FIRE, but your spouse is anti-FIRE?
How did you align your lifestyle and goals? Was there any resentment when one FIRE’s and one doesn’t, even though the household is comfortably FI?
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!