They say that perfect is the enemy of good. If the goal is happiness, putting in too much time and effort into getting your finances just right can detract from achieving your goal to be happier.
This is the lesson that Ether to FI, the anesthesiologist now in his 4th year post-residency, has recently taken to heart. It’s one that I still struggle with, too, although the poor choices I make with money article I wrote several years ago is in tune with the same concept.
Could they further optimize earning, spending, and investing? Yes, actually. But for reasons shared below, they don’t want to, and I don’t blame them.
It’s been over 7 months since the latest Ether to FI installment. Initially, his plan was to write about 6 times a year, but he realized that it wasn’t making him happy to contribute so often, and so he’s writing less. It’s quite alright to change course when you realize your current habits aren’t helping you achieve your goals.
Read on for his update on life, investment portfolio, and current net worth.
It has been many months since the last post. I hope everyone is safe and doing well.
I have been thinking about our financial plan, and I realized that some areas are not optimized. There are many steps we could take to achieve our goal of financial independence earlier.
There are some mathematical truths that we ignore in our continued quest to build our stash of F.U. money. After thinking about this for the last few months, I realized our goal is happiness not perfection.
What is the point of becoming financially free if you are unhappy?
None. If you ask people chasing financial independence, why do you want to accumulate a large nest egg? The most common response will be freedom.
I personally want to be free to choose my work schedule. I want to decrease the total hours worked and incorporate volunteer work into my week.
I want to decide how much of my time I sacrifice. I want to choose the people and things that make me happy and eliminate everything that does not.
How much of your life energy are you trading for money?
I was recently shocked by a podcast episode that discussed the length of time we spend with our birth family. The speaker did not measure time in years, months, or days. Time was measured in summers. Most people will spend 18 summers with their nuclear family. 18, only 18?
When “summers” are your measure of time, the scarcity of time is evident. How many summers have already passed? How many do you have left?
If you did a time audit of your life, how many “summers” are you spending with your spouse, children, and friends? I would be lucky if 20% of my waking hours were spent with my family.
I am currently trading my life energy for money, and I know that needs to change. Happiness for me is spending time with the people I love; my schedule needs to reflect that fact.
In our quest to grow our net worth, we have taken some steps that are not optimized.
Paying off the mortgage early
Our mortgage interest rate is currently 2.875%. Every month, we pay extra on the principal balance. Investing in the stock market with a 6-8% return would be the mathematically intelligent thing to do. Instead, we pay extra every month for a 2.875% return.
Our reasoning is that a low-interest rate debt is still debt. The sooner we stop paying interest to a bank, the quicker we can accumulate wealth. Mathematically it’s nonsensical, but debt for us does not equal happiness.
Investing the extra principal payments in the stock market would not be a guaranteed return on our investment. Over the long term, we might make more money, but “past performance is not a guarantee of future results.” We will gladly remain unoptimized.
Investing in Roth accounts
I have a contrarian view when it comes to our current tax brackets. We are in a high tax bracket; conventional wisdom is to shelter as much of our income from taxes as possible.
These tax brackets are low from a historical perspective. There is no reason to believe that taxes will not be raised in the future. In that scenario, Roth 403B/401k accounts that are not used now would be deferring taxes at a low rate to pay higher taxes in retirement.
If you are early in your career and already on the financial independence journey, there is a higher likelihood that you will accumulate a large nest egg.
After a few decades of compounding, Required Minimum Distributions in retirement could put you in a higher tax bracket. If you are married and become widowed, filing taxes as a single filer could also place you in a higher tax bracket than planned.
Our retirement contributions have the largest amount going towards tax-deferred accounts. Still, we take every opportunity to invest in Roth accounts at work. Personally, I hope our income, both from passive and active sources, keeps us in the highest tax bracket each passing year. Hoping to be in a lower tax bracket at any point in our lives is not a goal I aspire to.
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Traveling in style
If you have been following the series, you know that I am a big fan of travel. Many people travel in a budget-conscious fashion. I don’t fall into that category. I love to travel, and I spend money to make it as enjoyable as possible.
Spending money to travel well brings me happiness. Taking a twelve-hour international flight in business class and lying flat and sleeping is something I am willing to spend money on.
I also value nice hotels and Airbnb’s. Could this money be better used to build the nest egg? Yes, but I subscribe to the mindset of spending lavishly on things you value and cutting mercilessly in areas that you don’t value.
Paying for more time
Time is the most precious non-renewable resource we possess. If you are a busy professional, time is a commodity in short supply. Yet, an inner conflict arises when you debate spending money to free up your time.
If you are a medical professional, you likely have 1-2 days off in a 7-day week. My day “off” during the week was full of tasks that I could not accomplish. The day of “rest” was more stressful than any other day of the week.
I decided to try outsourcing some of these tasks, and it has been liberating. A cleaning crew comes to our home. Cleaning our house use to last half the day, they clean the house in a couple of hours.
The same holds true for landscaping. A multi-hour task is accomplished by professionals in under an hour. I used to think of these things as luxuries, but the amount of time recouped has been spent with my family and the time back is well worth the expense.
I am looking for more things to outsource. Spending money on housecleaning or landscaping goes against the do-it-yourself culture. It is money that could be spent on investments. However, the time recouped is more valuable than any returns from the stock market.
We set a net-worth goal of $2 million during our last post by the end of 2022. With 15 months to go, we are cruising towards it.
Our money seems to be working overtime now after accumulating our first million. It is less brute force rowing; the wind of compound interest is moving our boat forward, and it feels pretty good. Our net worth is currently $1,485,440.16.
I will write one more post before the end of the year to review our finances in 2021. Stay well, and I will speak to you much sooner this time.
Follow Ether to FI’s progress to FI in his previous posts:
- Post 1: Introducing Ether to FI: A New Attending Striving for Financial Independence. Net worth $80,283
- Post 2: Ether to FI: Obeying WCI’s Ten Commandments & Net Worth Update. Net worth $145,194
- Post 3: Ether to FI: Home Days & Net Worth Update Net worth $176,674
- Post 4: Rest in Peace, E.T.F. A Love Letter from a Dead Man and a Net Worth Update. Net Worth $197,061
- Post 5: Ether to FI: Mrs. E.T.F., Are We on the Same Page? Net Worth $228,109
- Post 6: Ether to FI: Shifting Focus from the “FI” to the “RE” and a Net Worth Update. Net Worth $335,248
- Post 7: Ether to FI: Don’t Call it Retirement (and a Net Worth Update). Net worth $364,089
- Post 8: Ether to FI: Frugal Spouses: The FI Superpower & a Net Worth Update. Net Worth $429,155
- Post 9: Ether to FI: “I hate it. I hate it. I hate it!” Learning from Those You Disagree With & a Net Worth Update. Net worth $489,200
- Post 10: Ether to FI: Waste Not Want Not & a Net Worth Update Net worth $561,532
- Post 11:Ether to FI: Part-Time Work. Full-Time Life! And a Net Worth Update Net Worth $583,566
- Post 12: Ether to FI: Moving Targets & a Net Worth Update Net Worth $718,212
- Post 13: Ether to FI: Embrace the Dip & 2 Net Worth Updates Net Worth $682,028
- Post 14: Ether to FI: Time Waits for No One & a Net Worth Update Net Worth $937,709
- Post 15: Ether to FI: 3 Years to the First Million & a Net Worth Update Net Worth $1,023,261
- Post 16: Ether to FI: Thank You 2020 & a New Worth Update Net Worth $1,269,059
- Post 17: Ether to FI: The Goal is Happiness, Not Perfection & Net Worth Update Net Worth $1,485,440
- Post 18: Ether to FI: 2022, The Best Year Yet & a Net Worth Update Net Worth 1,559,591
- Post 19: Ether to FI: Halfway to FI? (a Net Worth Update) Net Worth $1,755,453
- Post 20: Ether to FI: Bye Bye 2022 & a Net Worth Update Net Worth $1,754,774
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6 thoughts on “Ether to FI: The Goal is Happiness, Not Perfection & Net Worth Update”
I see your point about Roth. However keep in mind it’s not so much a difference of opinions but rather your account options! Having 2x 403B plus 2x 457B is way more deferred space than most people have, so you’re going to accumulate more RMD-eligible than most. Still, I just don’t see any scenario in which your tax bracket in retirement is going to be higher than a full time anesthesiologist plus working spouse. Even with higher top end rates it’s popular on both sides of the aisle to keep rates low <$200K (aka the “middle class”). Just my 2 cents. But it looks from the balance like you’re pretty much maxing out deferred space anyway, in which case Roth is great next.
Nice work! You’re a little ahead of where I was at that stage but I have to say, having a working spouse that can save that kind of money is cheating! Personally though, it seemed like the first $1M came easy and $1-2M was an excruciatingly slow crawl. Maybe because the end seemed so much closer than in the beginning.
I am very appreciative of Mrs. ETF also taking advantage of the tax-deferred space. I hope to remain sprinting to FI, and avoid the crawl.
I am totally on board with EtF’s decisions for happiness over further investing. Even before we reached FI, my wife and I budgeted international business class flights, housekeeper, and gardener into our expenses. I still have a 15-year mortgage on the 2nd house that I make just the monthly payments, but I think that keeps us on budget even more by remaining cognizant of our outflow. EtF is showing that by being realistic with your plan and doing your best to stick to it is the best way to achieve that balance. Well done!
Thank you for the compliment. Outsourcing is an underutilized skill.
I definitely feel like the key to happiness as it relates to FI is the freedom.
In particular, it’s not just “spending” freedom for me, but it’s more of having the leverage to leave a job I don’t like, and more of being able to choose to interact with people that I like.
Being able to have the leverage to not deal with a poor manager, or having the leverage to spend more time with close friends/family is huge. I feel like socialization is a huge driver of happiness, and being able to optimize it by spending less time in bad relationships and more time in rewarding ones = happiness.
That’s what I’m looking most forward to when I FI.
Oh yeah, and also flying first class.
First Class! Now there is some inspiration. I like the word leverage. Truly that is what we are looking for with financial freedom. You can set the conditions you will tolerate and others can either take it or leave it.