FIRE Crossroads 034: Mid-40s with $4.2 Million Net Worth

We’re excited to present another FIRE Crossroads interview today.

In it we find a married couple pulling down about $40,000 a month in take-home pay who have a number at which they can survive, and a number at which they’d feel more comfortable pulling back on work, and they’re in between the two right now.

Explore today as our couple winds through a typical cycle of consumerism, rewarding themselves for delaying gratification during an intensive schooling process, and then eschewing the materialism as they get older and set their sights on FI.

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?

I have always been a relatively frugal person.  Growing up, my family had a lower-middle-class lifestyle.  We are first-generation immigrants. I was born in India and immigrated to the United States when I was almost two years old. My sister was born in Michigan. While my father was an engineer, we lived well below our means so he could build an investment portfolio that has made him a multimillionaire. 

My husband and I both attended public university for undergraduate training and had full scholarships, being paid stipends to attend.  We both attended public university for medical school as well which helped to keep costs down. 

While I mentioned that I have always been a conservative spender, my husband has always been less frugal and a bit freer with his spending.  This has caused some friction in our marriage over the years.  After reaching our height of spending, he has realized the diminishing returns of that lifestyle. 

Recently he read Your Money or Your Life by Vicki Robin, and now we are on the same page.  In reviewing our net worth, we realized that we could be financially independent at this point so long as our monthly expenses are $10,000 or less.  

 

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 husband and I are both physicians (ages 46 and 45, respectively) living in rural Tennessee, which is an area with a very low cost of living.  We have one daughter who just turned 15 years old and has miraculously discovered that she is an expert in everything!

We also have one cat and one dog. While we both have aging parents, they are in pretty good health for their age so far and have not required much assistance from us. 

Part of our desire to be financially independent is to ensure that we can be there when they do.  Although we have dreams of living abroad, we feel it is best to stay in Tennessee to support our family for now.

 

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

My husband is a neurologist, and I am a gastroenterologist.  We have both been in practice in our current location for about 15 years.  As rural Tennessee is an underserved area, we were able to secure student loan repayment and a relatively high income. 

My husband has been employed by the same “non-profit” hospital since our arrival whereas I have been employed in several different gastroenterology groups. 

My career has been fraught with many issues regarding toxic work environments and misogyny as well as unequal pay/monetary punishment for not running on the hamster wheel fast enough. We both are experiencing growing frustration with the ins and outs of medical practice and have felt more stressed over time.

I feel like I spend more time with paperwork and checking off boxes than taking care of patients. We cannot see how our current healthcare system can sustain itself at this rate over the next ten years.  Thus, we have regular conversations about how long we wish to continue practicing.

 

Do you feel you’ve come to a crossroads of sorts?  If so, tell us about it.  What options are you contemplating?

I have been considering my options for a while now.  In addition to working in several different practices over time, I have also done some locums tenens work here and there. 

As our daughter is currently a freshman in high school, we are reluctant to move and uproot her from the life that she knows. Once she is off to college, we are considering options such as moving out of our large, expensive-to-maintain home as well as the possibility of part-time or locum tenens work.  

 

Investing

 

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

We currently have a net worth of about $4.2 million. 

  • 60% is in stocks
  • 15% is in bonds
  • 25% is in real estate

 

Our home is our only real estate holding with a current value of $1.2 million.  In contrast to many people in the FIRE community, we still have some debt including a mortgage and car payment totaling $400,000, but both loans are at low interest rates (i.e. <4%). 

We recently refinanced our home and locked in an interest rate of 2.625%. We pay about $6,000 per month out of our $40,000 per month take-home pay on our mortgage and car payment. 

So far, we have preferred to invest all our savings as opposed to aggressively paying off these loans.  We also keep 6-12 months’ worth of monthly expenses in our checking accounts and a money market fund. We will have a significant inheritance from my side of the family, but we do not include that in our retirement calculations. 

 

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

Currently, we only have about $500,000 that is in taxable accounts.  The remaining investments are in 401(a), 401(k), 403(b), and Roth IRAs.  We have about $500,000 in Roth accounts. 

We have not invested in an HSA, but we do have a fully funded 529 college account for our daughter.  We have also started 529 college funds for our nephews and nieces and contribute a set amount to them monthly. Our nephew is 10 years old, and our twin nieces are four. The 529 college funds were our birthday presents to them last year. 

Our taxable assets are largely in managed accounts at Fidelity.  So far, the cost has been about 0.33% of the total assets under management, which seems acceptable, but we have considered whether we should simply opt for low-cost index funds instead.

 

What has been your best investment?

Participating in the full range of tax-deferred accounts available to my husband through his job has been our best investment so far. 

He can contribute up to $80,000 per year pre-tax to his 401(a) and 403(b) as he is employed by a “non-profit” hospital.  In addition to this, contributing yearly to both of our backdoor Roth IRAs has been advantageous.  

 

What has been your worst investment?

When we first started our jobs, we made the mistake of purchasing a whole life insurance policy.  A few years ago, we realized that this was a very bad decision on our part and cashed out at a small loss to fund taxable brokerage accounts and our daughter’s 529 college fund. 

We also foolishly purchased an unlimited vacation club membership about 10 years ago.  This was a terrible decision costing us $35,000.  Imagine a timeshare but without the benefits!

 

 

Into the FIRE

 

Numerically, what is your FI goal?

Assuming we can keep our monthly expenses at no more than $10,000, our FI number is $3 million.  We have surpassed that, but we would prefer to continue building our nest egg to $5 million or greater before taking the big step of either cutting back or stopping working altogether. 

Our plan is to really analyze our spending and reduce this as much as possible so we can get our savings rate to 50% or greater which should help speed up the process. 

My husband plans to work for the next five years and then reconsider if continued full-time employment is needed.  I have begun considering other options such as part-time work with locums.

 

What are your post-FI plans?  How will your life change?  What do you look forward to the most?

We are homebodies and are satisfied spending quiet time at home reading and streaming movies or shows. I have taken up diamond painting and my husband also enjoys playing video games. He plays guitar and does some woodworking. However, we do aspire to travel periodically so that we can explore other cultures and learn more about ourselves in the process.

I love animals and would like to spend some time volunteering at animal shelters and sanctuaries. I have some autoimmune issues, so I think not having the stress of getting up early and coming home late will be life-changing.

I can focus on my well-being and ensure I get enough rest, relaxation, exercise, and hydration to maintain my health. Both my husband and I look forward to having the luxury of not doing anything if we wish.

Currently, I feel like we always have a list of things to do and, when that list is complete, there is a new list of things to do. It is an endless cycle that is mentally and physically exhausting. 

 

Have you made any major changes in your lifestyle or investments to accelerate your FI path?

My husband and I were both anxious to have the nicer things in life after starting our careers. We had sacrificed the best years of our lives in education and training and felt that we deserved to reward ourselves. We equated material things with happiness.

I realized sooner than he did that more money and more things did not make us happier but just made things more complicated as we had to maintain these belongings.

I tended to hoard things such as candles and clothes and he bought guitars, amplifiers, and pedals on a regular basis. He has a lot of woodworking equipment too such as specialized saws and lathes.

We rewarded ourselves with things, feeling like we deserved them for working so hard or making it through a tough work week. I was also an emotional eater until one day I realized that eating a doughnut or a candy bar made me feel worse rather than better.

We did not invest in our personal and spiritual growth or our health. We are now both working on losing weight and eating better. We are not going all out at Christmas for everyone anymore. My husband is selling some of the music equipment that he does not use.

We are slowly simplifying things. We make sure we eat what we have before buying more dry goods. We are maximizing our investments in our retirement accounts and are now investing any extra money that accrues in our bank accounts that we don’t plan to use right away.

Once our daughter goes to college, we plan to downsize our home. We currently live in a beautiful 7,000-square-foot home which we bought at a great price and upgraded. We hope to get a good price when we sell this home and will wait until the real estate market is optimal to do so.

We recently made out our wills and advanced directives which has given us peace that everything is in order if something were to happen to one or both of us. Ensuring our daughter and our pets are taken care of is a priority.

I am also thankful that we have not only been able to ensure that our daughter is financially sound but have also been able to allocate money to our close family members and to several animal shelters and sanctuaries that are close to my heart. 

 

Are you facing any unique challenges making FI or RE more difficult?

We are not facing any unique challenges making FI or RE more difficult. We are very grateful that we have had a smooth and consistent influx of money and, for the most part, have made good choices in allocating that money to meet our goals.

We have been blessed to receive sound guidance and advice from my father, who started work in this country with a few hundred dollars and became an investment expert and multimillionaire. We also have a wonderful financial advisor who is guiding us on our journey to FIRE.

 

What advice do you have for others who are seeking financial independence?

We would recommend always living well below your means if you are able and saving/investing the balance.  Start early and let the power of time and compound interest do the work for you. 

After years of deprivation during medical training, it’s understandable to want to live it up a bit. Just don’t forget to invest in your future self. Life is about so much more than acquiring material belongings. Take the opportunity to see all that life has to offer. 

 

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13 thoughts on “FIRE Crossroads 034: Mid-40s with $4.2 Million Net Worth”

  1. This is a great read, and I appreciate the honesty to the question about worst investments. Everyone loves a good win, but we learn the most from our losses. Thanks for sharing.

    Reply
  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. congrats guys! you are doing awesome! and great plan that now you have financial success you are focusing more on your health- and you hubbie on video games! I plan on doing the same for myself when I retire- hopefully the arthritis won’t be too bad while I’m catching up on Halo!

    do you guys find that you aren’t pulling the trigger yet though to retire and maybe pushing up your goal number higher b/c your identities are tied to being docs?

    Reply
    • Hi, there. I’m the husband in this scenario. Glad to hear I’m not the only old dork who still plays games. I think we are reluctant to make any big changes like retirement until our daughter graduates. But knowing that we finally have some FU money has been reassuring.

      Reply
  4. Does a 401a have a higher limit than a 403b such that the husband is putting $60K into the 401a and $20K into the 403b?

    Also, they say their monthly expenses are $10K. Doesn’t $3M sound too low as they aren’t accounting for taxes given only some of their assets are in Roth? I’d imagine they would need to be upwards of $4M to account for their tax bill.

    Reply
    • The 401a does have a higher contribution limit but once you decide on the amount (or percentage of income) you are locked into it with no way to opt out unless you quit. Which is great! In my case, it’s about $60,000 per year.

      Reply
  5. Impressive! I resonated a lot with this, although I was born in the U.S my parents came from India, and funny enough I lived in Chattanooga for some time! Tennessee is beautiful, and if you can deal with it’s rough edges it is an excellent place to FIRE because as mentioned it’s very low cost of living, no state income tax, low property tax.

    Sounds like you are already in a great position to pursue your other passions, a 7,000 square foot house feels like a lot to maintain for 3 people!

    Reply
    • Thanks for the comments! Yes, living in TN does have some advantages. Chattanooga is a lovely area. In regards to our house, we are actively looking to downsize and further reign in our monthly expenses.

      Reply
    • That’s a great question. We only seriously started to consider early retirement in the last year. I suppose there is some fear of making a big change as well as pulling the trigger during a bear market. At this point we have agreed to keep working for the next three years until our daughter graduates, then reconsider.

      Reply
  6. Excellent . We are at your exact numbers, dual physicians as well, just 5 years younger than you all.. all the very best to building up on your very solid platform..

    Reply

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