This is Physician Finance Interview #14, which is part of a series of posts is published each Friday. If you’d like to read the other PFI posts, you can find them here.
The focus of the interview is to investigate how other doctors have handled their money, income earning potential, assets, debts, and much more.
Tag along as we discuss success, failures, and advice that I hope will prove useful to many! Please, leave comments below about the answers and your thoughts!
My questions are in bold. The answers then follow.
If you are a medical professional of any kind, email me if you are interested in being interviewed and sharing your stories and experiences. The questions below are emailed to the person being interviewed and responses are returned, formatted, and published.
Your Story & Background
1. Take a second to tell us about yourself so that others can see if their story relates.
I am a 38 year old ophthalmologist working at a private practice in Virginia. My husband, a high school science teacher, and we have been married for 18 years. We have no children by choice. I completed my fellowship just over 2 years ago.
2. What is your financial background?
I started reading a lot about personal finance during my graduate school years. I did a MD/PhD program where between year 2 and year 3 of medical school. Then, I took off 4 years to get my PhD.
We bought a house towards the end of year 2 of medical school. I read books to educate myself on the home buying process, which lead to reading more about personal finance and then investing. I started investing in individual stocks as well as index funds during graduate school.
3. Were you given a head start in the financial world in anyway? Let us know if the opposite is true, too.
My parents taught me the good financial habit of saving from a young age. By the time I was a pre-teen, I had to earn half of anything I wanted like a bicycle. I was taught to never carry a balance on a credit card (and to try to make money off using credit cards) and the importance of saving money and living frugally. What I wasn’t taught was how to invest the money that was saved.
By being in a MSTP (Medical Science Training Program) funded by the NIH, my medical school tuition was fully covered and I got a small stipend for living expenses. However, this took another 4 years of education and delayed earnings so it’s a plus and minus since I have other medical school classmates who paid off their medical school loans within the first 4 years of their practice.
4. What is your current net worth? List the assets that compromise your net worth.
My combined net worth with my husband is $1.07 million.
- Cash $364K
- Taxable brokerage accounts $80K
- Roth IRAs $334K
- 401K $45K
- 403B $268K
- HSA $4K
5. When you finished training how much student loan debt did you have?
I had no student loans from medical school. I paid off my student loans from undergrad during residency.
Dollars & Debt
1. List your current sources and size of debt.
I currently have an auto loan of $24,800 at 0.9% interest. I have the cash to pay off this loan but it’s making more by sitting in my bank account making 1.85% interest.
We paid off the mortgage of our house while I was in residency. Then we sold it when we moved for my first job. Currently, we are renting.
We have paid off my undergrad loans and my husband’s undergrad loans. We pay off our credit card balance every month.
2. If you had/have student loans, what is your student loan repayment plan?
No student loans.
3. If you have a mortgage, do you plan to pay it off early or invest in the market? Why? If you don’t, why did you decide to rent?
It didn’t make sense for us to buy a home when starting a new job at a new location until we were sure that we would want to stay for the long haul. We moved to Virginia for the job, and if the job doesn’t work out, there is no other reason to stay.
More than 50% of ophthalmologists leave their first job in less than 2 years (TPP: I think this is true for MOST specialities and is solid advice for any of the residents reading this blog – rent until you are sure you want to stay!). I figured there was no point in buying a house until I decide I’m ready to buy into the practice and become partner.
Income & Spending
1. What is your household annual income and will it be changing in the near future?
My base salary is $225K with a production bonus. My husband’s teacher salary is around $47K. We don’t have any side hustle income. I haven’t made production bonus yet but when I do, that money will be put aside to invest towards an early retirement.
2. Do you use a monthly budget or track your spending? List your major expense categories for each month in your budget/spending.
Our annual budget is $96,000 though we are pretty good at spending less than that. Last year, we spent $84,320.71. We track our spending with Excel spreadsheets. The numbers below are slightly rounded in some cases (ie. the insurance costs).
- Groceries $400/month
- Rent $1895/month
- Utilities $275/month
- Cellphone $80/month
- Household supplies $100/month
- Fun Stuff spending $100/month per person
- Gas $200/month
- Car payments $537.3/month
- Car Maintenance $1000/year
- Other Auto expenses (Parking, tolls, etc) $900/year
- Medical expenses (copays, medications) $100/month
- Car/Rental/Umbrella Insurance $2200/year
- Disability Insurance $6500/year
- Life Insurance $1300/year
- Services (lawn care, gym membership, haircuts, dry cleaners, etc.) $400/month
- Fun/activities/dining out $500/month
- Travel $20,000/year
3. Does giving to charity or causes you believe in play a part in your financial life? If so, what percentage of your annual income goes towards this endeavor?
We don’t donate large amounts to charity but give donations to NPR, my alma matter, and other institutions like our local library. It’s hard to know when donating to an organization that your money is going to be well spent.
The money donated to the Red Cross to help Hati is an example why I am leery of donating money to big organizations. I have a Warren Buffet view on charitable giving. I want to accumulate wealth, then figure out something meaningful to do with that wealth that will make a lasting positive impact.
I would also like to do medical mission trips in the near future. The Himalayan Cataract Project was one of the inspirations for my path toward ophthalmology.
Saving & Investing
1. Do you have an emergency fund? Why or why not?
We don’t have a specific emergency fund but we do have a lot of money in “cash.” Most of it is in a Money Market Account. Part of the reason for having so much cash is the sale of our house and the possible need for the money to put a down payment on a new house and also have money to buy into a medical practice.
2. What percentage of your income do you save towards retirement/investments each year? How did you determine this level of saving?
We made a goal of saving at least 20% of our gross income towards retirement back when I started learning about personal finance, which we did through my medical training. Now that I’m making an “attending income.” we max our 401K’s/R03B and HSA accounts every year. We also max out the backdoor Roth IRA.
Other than our big travel budget, we try to not increase our cost of living significantly from when I was in medical training despite the higher income. We do eat out a bit more often and spending more money on fun activates, like glass blowing classes. We try to spend our money on experiences and not material items.
The disability and life insurance are also increase in our expenses compared to medical training.
3. You mentioned your assets above. What is your investing philosophy?
I am a passive index fund investor and follow the teachings of John Bogle. I do still have some individual stocks from my graduate school days, some of which have done very well. Real estate is also something I have invested in the past but do not currently do so.
4. If you could tell other doctors about one thing you’ve learned about saving and investing, what would it be?
Live below your means and don’t outspend your income as soon as you start making “real” money. As little as we feel like we are paid during residency, residents generally make the same as the average American household.
5. If you have kids, are you saving for their college education? For those without kids – Do you anticipate having to care for anyone in your family or are you already doing so? How does this impact your retirement planning?
No kids. Luckily my parents have planned for their own retirement and are unlikely to need financial support (for which I am truly grateful).
Retirement Goals & Gaffes (Mistakes)
1. What is “your number” and your age that you feel will allow you to retire? How’d you arrive at this number; give us some details.
I plan to FIRE when I hit “the number.” The number fluctuates between $3M and $4M depending on how I’m feeling about working. This is calculated assuming a 3% withdrawal rate to give between $90K to $120K of income a year.
2. How much will you be spending annually in retirement? Give us some details.
I estimate we need $50K/year plus the cost of health care plus how much we want to budget for travel. This assumes we own our primary home with no mortgage.
I’m really conservative and want to withdraw 3% annually instead of the 4% most people talk about. By retiring earlier, the money has to last longer. Certain expenses, like health care costs, could continue to sky rocket which could mean really needing more for retirement. I also anticipate traveling more, but hopefully being more efficient about the cost of travel than I am now with limited weeks of vacation.
I’d like to eventually do more real estate investing and have passive income from real estate to fund retirement.
3. If you have already retired, tell us about it.
I wish I had something to share here.
4. If you plan on retiring early (before age 65), how do you anticipate handling health care costs?
This is one of topics that stresses me most out for planning for early retirement. Since my husband loves his job as a teacher, I joke with him that I’ll retire early and he can continue teaching to provide us both health care.
More seriously, I’m currently taking a medication that is very expensive so I will need health insurance with good prescription coverage in retirement. I’m hoping our country will wake up and develop a comprehensive health care system instead of the current broken system we have now. I’m not holding my breath though.
Advice & Farewell
1. What advice would you give to The Physician Philosopher readers who may be a younger (or current) version of you?
Don’t put off saving for retirement and spend time to learn about personal finance and investing. Put as much money as you can into your Roth IRAs as soon as you are able to. Avoid big costs, like buying a big house or expensive car, until you have your financial life in order and know that it is well within your means to make these purchases.
2. What is the toughest challenge facing physicians who are just finishing training?
The toughest challenging is probably learning how to manage finances. Most physicians have large amounts of debt (student loans), have delayed saving for retirement, and go from the modest income of medical training to a much larger income without really having a plan for that money.
3. What is the top financial mistake you see your colleagues making that you would advise our younger physicians and trainees to avoid?
Waiting to save for retirement and lifestyle inflation.
4. What are the top two-three resources you would recommend to a reader outside of The Physician Philosopher website (book, blog, podcast, etc)?
5. What questions do you have that TPP readers might be able to answer?
What is the best way to keep/invest a large sum of money for a down payment on a house and towards buy-in to a practice but you are not quite sure when it will happen? After being in my current practice for just over 2 years, I’m not sure I will be staying so the cycle starts again of finding another practice, and probably another 2 years before I know if I want to stay.