Financial Planning for Doctors

It is my firm conviction that a financially independent physician is a better doctor.  Financial independence does wonders to treat and prevent burnout.  That said, focusing too much on the goal of financial independence can also cause major harm.  It magnifies the parts of the job that we hate, and can throw our work-life balance off-kilter.  For this reason, it is important to enjoy today.  One way we can do this is by celebrating the milestones to financial independence.

If you are short on milestone ideas, this post is for you.  And with each goal, I want you to celebrate your accomplishments in a way that will build permanent memories.

The Ten Financial Independence Milestones

Though these milestones are listed in numerical order, they don’t have to happen that way. For example, you might accomplish number 5 before you accomplish number 4.

That said, each goal is important and worthy of celebrating!  Let’s get to it.

1) Positive Momentum 

While I prefer the avalanche method to paying down debt, the snowball method does involve nice imagery.  In order to tackle our debts, we need to get the snowball moving down hill.  In other words, the first step is simply positive momentum.

Just like a snowball rolling down hill, the first step worth celebrating in the journey towards financial independence is gaining positive momentum.  In the life of most young medical professionals, this usually happens at the end of training.

When you finally finish that long road, and experience your first attending paycheck, this is certainly a cause worth celebrating. Just don’t forget to use The 10% Rule to keep that celebration in check!  This is not your permission to allow massive lifestyle creep.

What did I do?  The dumbest financial thing one can do.  I financed a naturally aspirated, V-8 four-door sedan with a corvette engine and a stick.  Oh, and we bought a country club membership.  Basically, I am a walking stereotype.  But that’s how we spent our 10% increase. Then, we went to work financially and increased our net worth $250,000 in one year.

2) $100,000 in student loans paid off

If you are in the 20% of medical students who graduate with no medical school debt, you get to celebrate this one early.  For the rest of us mere mortals, paying off this mountain of debt is a big deal.

However, even if you are hammering away at your debt it will take some time.  And that can be discouraging.  So, I encourage you to celebrate the moment when you pay off six figures of student loan debt.  That is a big frickin’ deal.

If you need help on that journey, don’t forget to visit the student loan refinance page.  And remember, you can refinance as many times as you want – it is called a student loan refinance ladder.

3) Zero Dollar Net Worth

Going from broke to woke was one of the more exciting moments of our journey so far.  While it wasn’t quite the same as paying off our $200,000 in student loans, it felt great!

What I am talking about is the moment when the person pan-handling on the streets no longer has a larger net worth than you, the doctor.  Getting your net worth back to zero is a huge moment.  Take it from someone who started with a net worth of less than (-)$207,000 when he started.

When you get back to broke, go do something nice for yourself.  Just don’t make it too fancy. Otherwise, you’ll be back to that negative net worth!  Around the time we got to a zero dollar net worth, we celebrated with a Disney cruise a few months later with our two oldest kids and some of our close friends.

4) Student Loans Paid Off!

This one felt like a giant burden had been lifted off my shoulders.  It also did a lot to mend my burned out soul.  What a big moment in our journey towards financial independence. It also did a lot to continue our positive momentum.  Paying off $200,000 in 19 months proved that we could accomplish our financial goals if we put our minds to it.

And, boy oh boy, did we celebrate this one.  What did we do?  Well, we bought a house.

I’d be lying if I told you that sending a giant check towards our student loans (composed primarily from our prior home sale) at the same time we bought a house wasn’t stressful financially.

The lesson here?  Don’t be me.  Celebrate kicking those loans in the teeth with something a little more reasonable than a new mortgage!

5) Paid for Car with Cash

I look forward to this day, but hope that it won’t be any time soon.  While my wife and I would like a car that could actually navigate snowy terrain, I am in no rush to put more money from our house towards cars.

When we do make that next car purchase, it is going to be with straight cash.  I picture us rolling in like mobsters with a brief case full of $1 bills and emptying it on some manager’s desk.  I’ll come up with something clever to say as I peel out of the dealership.

6) $500,000 Net Worth

The next step on the journey to FI worth celebrating might actually come before this one: when you get to a six figure investment total.  However, if I added that step, this post would not be a well-rounded “10 milestones to financial independence”.

To avoid the odd numbers, I think that at a bare-minimum you should celebrate when you get to half a million in net worth.  This is the point where your money starts to work for you in the market.  In fact, if your entire net worth came from investments, you’d be earning $30,000 to $40,000 annually if you got only 6-8% in the market.

7) $1,000,000 in Assets

If $500,000 is sweet, then surely a cool million is even better right?

This is where things start to get silly.  If you earn that same 6-8% in the market we discussed above, with $1 million now you are earning more in a year than you made during your entire year working as a resident physician ($60,000-$80,000).

Let that sink in.  You are earning more money by doing nothing than you earned working 80-100 hour work weeks for 48 weeks of the year.  This is what time in the market does.  It’s also why you should start saving as soon as you can.

8) Mortgage Paid Off

Integrity WealthIn many of my financial talks, I ask people to raise their hand if they own a house or a car.  Many put their hands up.  I then ask how many of them have made their last payment. After that, about 75% of the hands fall, to which I usually say, “If any of you are confused about who owns your house or your car, all you need to do is stop making payments and the bank will gladly remind you of who owns your stuff.

I say this in jest and it usually gets a good laugh from the audience.

All joking aside, this is one of the moments that I look forward to the most in our journey.  The point at which we can say that we actually own our home seems like a big deal!  This is one we will celebrate right.

9) Lean Financial Independence 

Lean Financial Independence (FI) has a variety of definitions.  I’ll throw out another.  The point at which your basic needs (food, water, shelter, utilities, etc) are covered is the point at which you are technically financially independent.

It’s the point where you no longer need a paycheck.  And whether you plan on getting their through investment savings, passive income, or the hybrid model of financial independence I promote – getting to this point is a big part of the journey.

10) Fat Financial Independence 

Fat FI is the number at which you can not only cover your basic needs, but it is the point at which you can also take all of those luxury trips you’ve planned for your retirement.  In other words, this is “more than enough” FI.  While Lean FI might be 25 x your current annual spending, this is likely closer to 30-40 x your annual spending.

At this point, you’ve achieved all that you could hope to achieve on the personal finance journey.  Of course, this assumes that you’ve been giving to charity and others who need it along the way.  If you are waiting until this point to give, you likely never will.

Take Home: Milestones to Financial Independence

Hopefully, you had some fun either looking forward to the milestones you will soon achieve, or looking back on the ones you have already conquered.

Each of these ten milestones to financial independence are worth celebrating.  I’d love to hear about the order in which you achieve them.  And what you did to celebrate the occasion!

What do you think about these milestones?  Did I miss any?  What would you have added or subtracted?  What did you do to celebrate these milestones on your journey?  Which was the biggest deal?  Leave a comment below.


15 thoughts on “10 Milestones to Financial Independence Worth Celebrating”

  1. One of the things I wish I had done was track my net worth better earlier on because I have no clue when I crossed from negative to positive (it definitely occurred in the period right after my divorce).

    The last true net worth I had before the divorce was -$789k in Nov 2009 (3 months before I filed for divorce). That wasn’t even my max recorded negative net worth ($845k). Then my next true financial picture was +722k (3/2015). So somewhere in between I crossed a few milestones.

    I did celebrate crossing 7 figures a year later and haven’t looked back since 🙂

    I’ve pretty much hit everything on the list with maybe the #10 exception, though it wouldn’t shock me if people consider I have already.

    • That’s some impressive progress, x-ray!!

      I have tracked it quarterly, but I don’t keep as good of an eye on our day to day bank account as I should. In fact, I found out recently I still have a private loan from med school that has a required $100 monthly payment. Fortunately, it is only like $6500, but still annoying.

  2. We finished residency with a networth of negative 450k and proudly got back to broke to this year! We are now + 50k so I guess that is a 500k swing in networth since 2014! We still have those loans though and are going to by a house so…the networth is about to take a beating.

  3. We were and still are in a high cost of living area. But I didn’t move that networth needle on my own. My wife is a physiatrist so used to make more than me when working full time. Now I make the big bucks since she only works 2x per week. I know, the name of my site is a bit misleading in this respect. I’ve thought about a name change to be more transparent but have some sunk costs to deal with.

  4. 8 is slated to occur in the next 1-2 years after/with a planned downsize.

    9 is in the books.

    10 is 7-10 year goal.

    This is all accelerated in the last 3 years since a late wake up and a fortuitous geo arbitrage that was based on a pre wake up gut feeling that the plan-less hedonic treadmill would kill me in the saddle.

  5. Don’t rush to completely pay off student loans as long as they have a reasonable interest rate. They are likely your oldest line of credit and have a significant positive impact on your credit score. Pay off most of them, sure, but getting to zero doesn’t actually help you in the long run.

    • I disagree with this view. Having debt normalizes going further into debt. What’s to stop this line of thinking from encouraging you to finance “low interest rate” cars for the rest of your life to build credit?

      In the end, you don’t need good credit when you start paying for everything with cash. And there are other ways to maintain good credit lines (like using a credit cards with cash back and/or rewards and paying it in full each month) that don’t cost you interest.

  6. We have become lean
    financially independent several years ago. It was because of many factors. We have avoided debt. Keeping a loan to build your credit score makes no sense. Being in debt does not make you financially independent. Avoiding debt, paying off all debt as quickly as possible does. Our last milestone that contributed the most was no mortgage. Since investing our mortgage payments our net worth has improved immensely. It is up to you to become financially independent. Contentment is the key to wealth.

  7. Hey! I’m wondering a rough order of magnitude of how long it took to get from one goal to the next. It may be more transferable to measure time as a percent of the time to get to 500k. Like maybe it’s half the time to get from 500k to 1m than it took to get from zero to 500k? Then how long to lean financial Independence? Then how long to fat financial Independence?

    • You know, that’s a great question. Given that I haven’t gotten to a net worth of $500K yet, I cannot tell you. It took us about a day after graduation from fellowship to gain forward momentum, ten months to pay off $100,000 in student loans, and about 20 months to pay off the rest.

      Our goals are to get to lean financial independence in 12 years from being done with training (finished at 32, get there at 44-45), though we might get there a lot sooner depending on how things go.

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