FIRE Starter 009: A Resident in the Red Questions His Career Choice

It gets better. That’s the main message I have for today’s FIRE Starter interviewee.

He describes some aspects of life as a resident as “demanding, draining, soul crushing.” Those are strong words, and I can empathize. There is a hierarchy in residency and a lot of work to do. As a second-year resident, he’s pretty low on that totem pole that includes senior residents, chief residents, fellows, and attendings above him.

He will, however, rise through the ranks, and with a busy work life and home life that includes two young daughters, these years will fly by. He and his wife are making financial progress to dig themselves out of debt, and I see a bright future ahead for them.

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Getting to Know You

 

Where are you on your financial independence journey? Have you reached a positive net worth? It’s OK if you haven’t! Most of us started out in the red.

My wife and I are early on in our FI journey and our careers. I am now in my second year of residency. It should come as no surprise our net worth continues to be well below zero. I don’t particularly feel ahead of my peers with our net worth number, so perhaps I am underqualified to be writing this at all. What we do have going for us is a little grit, willpower, and a knack for winning in the margins.

When it comes to investing, I only have 2 years of experience and that started with a Robinhood account (thankfully I’ve continued learning from there).

However, we do have a lot of experience with living frugally. I grew up in a blue-collar family and was a first-generation college graduate. I went to undergrad on an academic scholarship along with summer jobs to pay my other expenses which allowed me to graduate debt-free.

I then attended a state medical school, although not necessarily the cheapest state school, with tuition costing about 45,000 dollars a year. During medical school, my wife finished her undergraduate degree and we ended up borrowing max amounts on her loans to live off since they were at a much better interest rate than mine.

She worked for a little while after graduation, but we decided to start a family and she wanted to take a full year off to be home with our little one, which I fully supported. She started working again after I started residency but when we decided to have baby number 2, she took some time off and is now back working part-time.

At the end of medical school, our net worth was around (-) $207,000. Our current net worth now is (-) $132,000. It is hard to say exactly what our yearly income is because my wife is now working part time, but I would say our combined annual income is ~$75,000. My goal right now is to have our net worth better than (-) $100,000 by the end of residency.

 

Tell us about your household. How many people? Are you supporting anyone outside of your home? Where do you live?

Our household consists of my wife and me and our 2 daughters. Starting to have kids was one of our biggest decisions, but we decided we didn’t want to wait until we were more financially secure. We decided we want to enjoy being young parents and are hoping to still be able to bike, ski, and vacation better than our future teenage children can, at least for a time.

Currently, we live in the East, but it is unclear where we will go after residency.

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

I work as a resident physician in year 2 of residency. As any resident finishing an intern year, I’ve had doubts on my career choice.

Living at the hospital along with the stress of a never-ending workload, constant pressure from seniors and attendings, and the underlying fear that I don’t know or ever will know enough can be… demanding, draining, soul crushing.

I do like being a physician, though, and I have no idea what I would be if I wasn’t. I have grown leaps and bounds in the last year which has been internally rewarding to see.

I am still deciding if medicine is a calling or a job for me. The worst part of my job is the time commitment. Getting back time is one of the big appeals FI has for me is time freedom.

When I am not at work, I try to spend time with my kids and spouse. My work has taken a toll on my health and that is a real focus for me right now. There have been no true health scares, but I do wish I was able to exercise more and need to eat healthier. Learning to balance work, young children, and my health has proved a difficult task.

 

What is the most challenging obstacle to making progress towards financial independence?

Currently, I feel my biggest obstacle to progress towards FI is my limited amount of time for saving and investing and our huge debt. Our income is fairly small compared to our debt but obviously, this is temporary, so I have not lost any sleep on this issue yet.

Another obstacle is that I think/know I have too much money in cash. It started off with a well-funded emergency fund of $10,000. However, it grew towards the end of medical school when we saved money to go on some trips.

However, because of the COVID pandemic, we never got the chance. Now we have no time to travel, but holding the cash is us holding on to the ability to do those trips later. We also saved up a lot of money to pay off our medical bills for our second baby, but we recently paid them off which was cheaper than we’d budgeted for adding more cash to the pile.

Another thing I did last year was max out my wife’s Roth IRA, but we didn’t invest the money, just placed it in the Roth as a place holder, so we didn’t lose any money that year.

My wife is a little more conservative than I am, and we decided that we would put the $6,000  in the Roth but keep it out of the market as we could always pull it out if anything happened (remember at this time we were planning another baby and we didn’t want money to be an obstacle to my wife having all the time she wanted to be home with the new baby).

All this plus the slow trickle of unspent cash at the end of every month and we are sitting on about $36,000 of uninvested cash. Now with the market so high, I really debate what we should do.

My newest idea is to pay off $2,500 of student loan interest and get the tax savings next year, but that still leaves a significant amount. I’ve already maxed out our Roth IRAs for this year, but should I max out our Roth IRAs early next year and then put the rest toward debt? Should I start contributing more to my 401k and live off the cash until I’m more balanced? Should I just splurge a little and spend it?

Since starting my financial education, I have really enjoyed winning both big (obviously) but small, too, so please share anything I can do to optimize.

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

I am invested in a total market index fund at 82%, an international index fund at 14%, a small value tilt at 1.89%, REITs at 0.59% and a bond index at 0.26%.

Obviously, I am still figuring out asset allocation and rebalancing. I started by just putting everything into a total stock market fund and am now contributing with an asset allocation of 70% total stock market, 15% international, 5% small cap value, 5% REIT and 5% bonds.

 

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

Me and my wife both have 401(k)s at work and put in enough to get our employer match.

We both have Roth IRAs which are maxed out for this year and the last year.

I have a small taxable account with less than $2,000.

 

Do you have investments in an HSA? How about 529 Plans?

We have a 529 plan for each of the girls. These have about $1,200 dollars in them a piece. Currently, we don’t qualify for an HSA.

 

What has been your best investment?

Financially, my best investment so far has been learning to live frugally without feeling like I am missing out. When I was younger, I loved to ski but learned early that there was a lot more money for ski passes if I was willing to eat PB&Js instead of lodge food.

It seems small now, but the small things seem to add up and make a big difference. Other things I’ve been caught doing include driving a bit of an older car. Last year, we made sure to get the tax savers credit, and I could go on, but there are many other small victories that don’t really make a big impact on our actual quality of life.

 

Your worst investment?

Not starting to invest or learn about investing sooner.

 

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FIRE Kindling

 

What attracts you to the FIRE movement? Do you think you’ll retire early when you’re in a position to do so?

I think, for us, it is the freedom of time that comes with FI. I feel like knowing what I’m doing day to day is by choice and not because I have bills every month would be very liberating.

I have spent so much time pursuing my career in medicine that I sometimes wonder what other passions I might have stumbled upon if I hadn’t been hard at work in a hospital. I love learning new things and picking up new hobbies, so I am sure there are ample things out there for me to discover.

 

How do you anticipate your life changing post-FI?

I would love to spend more time on my bike and skiing. I really hope my kids will enjoy skiing. I would also like to learn a few new hobbies.

I have always wanted to learn to surf, improve my fly fishing, and more international travel would be something I’d love to pursue. I’ve lived out of the country for 19 months before, and would love to do that again if I could.

 

What steps have you taken to hasten your time to FI?

Increasing my financial education has been the biggest hastener for us to move towards FI. I hope this will eventually catapult us forward.

 

Are your friends, family, or coworkers aware of your interest in financial independence?

I have spoken to a few family members in an inviting way to try to move them toward FI as well, but overall, I try to keep my interest in FI low-key, and as we have a long way to go, it hasn’t been too difficult.

 

What advice do you have for others beginning their own FIRE journey?

I think choosing to spend money on the things we really enjoy and cutting out other things has made a big difference.

I am a big advocate for deliberate spending and then saving in the areas where others are spending.

 

Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.

I already brought up the large amount of cash that we have saved. If anyone has any thoughts, please share.

Also, I know I’m new to all of this, so any other advice I would gladly take. If anything we’re doing right or wrong stands out, feel free to point it out.

Cheers!

 

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I thank today’s interviewee for sharing their story, and I’ve shared my feedback privately with them. I wouldn’t want my opinions to influence yours. Please give your take and answer any questions they have had in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.

 

12 thoughts on “FIRE Starter 009: A Resident in the Red Questions His Career Choice”

  1. 55 y.o. about-to-FIRE radiologist here. Twenty years ago, my situation was very similar to yours. I was an older med student, graduated and got married at age 30. My wife left her job that paid a tad more than my residency salary when we had our first kid when I was PGY-5. I had about $100K in student loans and $15K in high-interest consumer debt. We paid off the consumer debt with a combo of my frugal wife’s savings and borrowing against the car she owned at a much lower interest rate. We deferred the student loans and even used forbearance for one loan. I don’t regret it. Loans were paid off in about 2 years of private practice. We lived frugally but comfortably, even on one resident income the last 1.5 years and even while tithing to our church the whole time.

    Agree with many comments above. Invest the extra cash using dollar-cost-averaging to ease any potential short-term pain of “timing”. For example, invest $3-5K/month until your emergency cash gets as low as you want it to be. Whether Roth, 529’s, or combo, is up to you. Most advisors say to take care of yourself first (i.e., your own Roths instead of 529’s), but since you’ll probably pay for college anyway, a split investment might be a good idea. I know having enough in our 529’s to cover undergrad for both kids has been psychologically helpful to my wife, since we are using “earmarked” funds that accumulated over the years tax-free (both are in college now). If you’re investing in Roth or 529’s this $ will now be semi-illiquid (penalty for withdrawing), so make sure you keep enough liquid. Another option is to open a brokerage account now, apart from Roth’s and 529’s, if you want to invest and get that cash working, but are short on cash reserve and want to be able to tap it with no penalty except for capital gains (and opportunity cost of pulling it out of the market). But I think a better approach is to invest it in your more tax-favorable options, and realize that as a resident and future practicing physician, your income is reasonably certain, and as long as you have a personal disability own-occupation policy, you probably don’t need as much cash reserve as you think, especially if – in an emergency – your wife could go back to work for a while.

    It’s not too early for you and your wife to come to an agreement on what your 529 target will be. Some of my partners save enough for the higher end of our state colleges for each kid, and tell the kids that’s where they will apply or else they have to work for/borrow the extra cost. Others save beyond that, like we did; it was a priority for us. Others cash-float it, which, frankly, I don’t understand, except as a last resort for poor planning or unexpected costs (based on college choice or taking >4 years to graduate).

    The question isn’t whether the market will go down in the next few months or years, but where it will be in 20-40 years. And the danger of trying to time the market is at least 2-fold; not only is predicting the downturn difficult, but people lose tremendous amounts of long-term gain by missing the first days (or even the first one big day) of the recovery. Just get in and stay in.

    Depending on your wife’s mindset (mine is also more conservative than me, but understands the math when I reason with her), I suggest you carefully and precisely crunch a lot of numbers. “If we don’t invest or pay off loans, with these estimated rates of return and loan interest, here’s where that money is in 10 years. If we pay off loans and don’t invest…if we invest a little and pay loans a little…”, etc. Even without spreadsheets but just sharing a few facts about compound gains, I’ve been able to get my wife on the same page for long-term planning, or at least gotten to the point where she trusts me with it.

    Unless your student loans are not deferrable and are high interest, I would not worry about paying them off now. Live like a resident your first couple of years after finishing – with the exception of buying a nice but reasonable house in which you can stay content for years – and those loans will vanish quickly.

    Come to western NC to practice! Mountains are close, cost of living is reasonable outside of Charlotte, Asheville and some resort towns like Blowing Rock.

    Reply
    • Really appreciate you taking time to comment. After reading yours and others comments I am feeling more comfortable with the plan of dollar cost averaging over the next 6 months to get my extra cash in the market. (I feel like I really already knew this but sometimes it takes a little extra push of courage.) It is great to hear your long term view of things and I hope to make it to where you are. Planning with my wife has been key in all of this and although I’m significantly more interested I feel like we are starting to fall in step together.

      I have read about taking care of yourself before 529s and such as not taking care of you later is a big gift to your kids that they will probably never truly appreciate. However, it is an easy motivator to save for since we want the best for them. I do wonder how much to save and give them. Both me and my wife paid for our own school and I felt like that helped unlock some financial understanding, increase our creativity, helped us realize wants vs needs. I do feel like a little more though would have gone a long way and created some opportunities for us that we didn’t have. We have some friends who’s families were more involved in their school. For them, school took longer and they still came out with more debt than us merely b/c they didn’t learn to live like college students and continued to live like they were living when they were home with mom and dad. I don’t think their is an easy answer. Gives me and my wife a lot to talk about and sort out…

      As for NC we will keep it on the radar! Haven’t spent really any time there but I’ve had others say it is beautiful as well.

      Reply
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  3. Take the best paying employed job at a small hospital in a small town and buy a small home there, once you finish training.

    If you have an inkling for a great dinner and a show, fly to NYC for a weekend; it’s cheaper than living there.

    Save like mad for 5 years then move anywhere you want for your kids to go to a highly ranked but public high school.

    Finally, timing the market is not the risk. Divorce is the risk.

    Reply
    • Appreciate your comment. Luckily for me I’m a small town type. But I completely agree doctors living in more rural places have some definite perks: often better wages, lower cost of living, less traffic.

      My one trial is I love the mountains and think it would be hard to live somewhere I didn’t have any.

      Reply
  4. Young attending here. I know exactly how you feel as I was you only recently (family structure, trainee pedigree/state school background, first gen, debt level, etc).

    Maybe I am interpreting wrong, but I think the undertone of your worries is the debt bothers you more than the missed investing opportunities. From what I can tell you have almost $40,000 in uninvested cash. There’s also a lot of pressure on you to succeed at work and contribute the majority financially. Not uncommon, but it can take a toll so you do need to exercise and take care of yourself as you said.

    Split the difference with the money for each goal.

    Earmark 1/3 of your cash to add to your emergency fund. You have to have it with 2 kids and essentially 1 income and probably need more than you think.

    Take 12,000 (Roth IRA max for you and your wife and invest the money. Don’t use your IRA as a short term savings vehicle. Don’t worry about market timing. Pick 4 dates over the next 6 months and buy shares (intentionally vague).

    Take the remaining money, call your student loan servicer, and make a principal-only lump sum payment on the student loan with the highest interest rate. It’s a lot easier to enjoy future vacations when you can spend guilt free.

    Your debt obligation is actually not that high considering almost any future income as a physician, the key is just not letting it get out of control through lifestyle creep (which you are doing a good job to keep in check). As the other poster with the bear in the woods analogy pointed out, if you live frugally 1 to 2 years after finishing training you will pay that debt off super fast with your current habits (like 125k/yr fast).

    Now you contributed some to each goal. Moving forward, truly pay yourself first. Contribute to the Roth and max it out before anything because you’ll have emergency savings covered. Invest the money as soon as the contributions made.

    Set up a small monthly sinking fund and put $200 to $300 in it at a time and in a year take a nice vacation with your family.

    Then you will have to decide what to do with any windfall money in the future.
    For your peace of mind consider snowballing it into your student loan.

    Kudos for doing this interview. It is hard to talk about the decision of getting upside down financially from prolonged training despite trying to do what you love.

    Good luck with your journey!

    Reply
    • I love your comments. Very detailed and I like the idea of putting some money towards all of my goals instead of focusing on just one thing. 40,000 is about right on the cash.

      My newest plan is in January pay off the 4,000 I have in grad plus. (The rest is all just unsubsidized and the grad plus is higher interest.) Then I am going to max out my Roth for 2022. Thinking I will put a lump some of 6,000 invested and then like 2,000 a month ’til all of it is invested. (So that would take to about July to get it all invested) after that I might look into starting to contribute a small amount to my 401k Roth option and maybe a small amount towards debt. I guess we will see how much extra is really there. Also, like the vacation fund idea.

      It is weird to post about my private finances (although anonymously still feels strange) but thanks for the support. Being an attending seems so far away but I guess closer than I think. I wouldn’t mind getting my 125k towards those loans.

      Reply
  5. Is your extra cash allocated to anything? I too am a resident and have a lot of cash but using YNAB it’s all allocated to future expenses so it’s not really free to be invested.
    Then you need to decide if paying down debt or investing is more important to you ( both are wealth building and good options). Paying down debt typically isn’t as profitable by the numbers but can give you a good sense of relief. Of your investment options, I’d fill up both of your Roth IRAs first and invest it otherwise it’s just a glorified savings account. No time like the present to get money in a Roth account and likely it has better investment options than your Residency 401k (also do Roth contributions here if possible). If you’ve managed to save that much, you likely need to increase your 401k contributions also especially 3rd year if you can moonlight.

    Reply
    • Hey thanks for the tips. I really do need to get that cash invested. I’ve thought about doing the Roth 401k as we do have extra money almost every month. I’m going to look in to it. Thanks for your advice. And good luck on your journey too!

      Reply
  6. Invest that cash. The earlier the better. You are way ahead…starting a Roth as a resident is huge. But make sure it’s invested (in indexes) instead of lolligaggin as cash

    Reply
  7. Two docs were walking through the forest and a ravenous bear happened upon them. Your goal as an FI doc is not to outrun the bear, but outrun the other guy (debt up to his eyeballs with cars, houses and credit card vacations). Avoid peer behavior. I strongly agree with the above commenter: excluding your emergency fund, take the cash positions you have and dollar cost average each month you have remaining PLUS 6 months of attending time into index funds. Why the six months? It would leave you an option to use cash for short term expenses such as moving. By the way, the bear represents recession, depression, divorce, death and destruction–all things you cannot control.

    Reply
  8. I’d say don’t sweat it too much till you get out in terms of trying to get ahead. The biggest thing is live like a resident which you are doing. You will have time once you get the big attending paychecks and are already ahead of the game with your knowledge. Also residency does get better, and then you graduate and things get much better. Hang in there!

    Reply
  9. Just invest the cash unless you need it soon. Less than 5 years. Otherwise just pick some low cost index funds and let it ride. Don’t speculate on corrections or recessions with the given market – if it’s money you don’t need in the short term, the market will be higher in 20+ years and you’ll kick yourself for still being on the sidelines. Remember time in the market is more important than timing the market.

    Reply

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