Recipe for Financial Independence

crispydoc Uncategorized 10 Comments

Every now and again I succumb to sappier impulses. It must have been from watching too many reruns of When Harry Met Sally back in the day. Forgive the indulgence!Makes 1 heaping serving of financial independence.

Cooking time: Approximately a decade and a half after residency, depending on student debt, specialty income, and spending.

1 jar of resident lifestyle preserves
1 strong work ethic

1 aggressive savings rate
2 helpings of delayed gratification
+/- 1 partner on board with financial goals


Whether this recipe turns out sweet will depend largely on the preserves of your resident lifestyle: continue to drive a beater, and rent an apartment instead of buying a house.  Expose these preserves to extremely low expectations and minimal envy, as contact with the wrong peer ingredients can unexpectedly simmer to a boil, resulting in a bitter final product.

After whipping your debt briskly into submission with steady, even strokes over the first 5 years of earning attending level income, you’ll find your net worth transitioning from an alarming red negative value to a translucent broke intermediate stage and eventually into the black, a satisfying color that ultimately results from steadfastly blending your work ethic with your aggressive savings rate.

Set aside a small bowl of your net worth for your emergency fund, and chill for later use. Taking the remainder of your net worth, divide it among two large pots.

The first pot will be your retirement savings stew, a slow-cook component chemically altered by the invisible microorganisms of compound interest, which cause it to rise and expand. Although it will appear depressingly empty when you start cooking, adding to it in annual increments is likely to fill the pot completely over several decades. You may include a melange of ingredients such as 401k, profit-sharing, defined benefit (a.k.a. cash balance), health savings account, Roth, and backdoor Roth accounts. Don’t forget that a side hustle with a separate income may qualify you to add an additional 401k, filling the pot more rapidly for the motivated entrepreneurial chef.

In the second large pot, allocate assets into your taxable account. This pot will serve multiple purposes as it fills up. For the would-be homeowner, it will become the starter from which you will make the downpayment on a home (or better still, pay cash for one). For the parent, it will help to fund a 529 plan for a child’s education. For the early retiree, it will likely serve as the dough that feeds your family from youthful retirement until age 59.5, when you can start feeding at the hopefully overflowing pot of retirement stew.

Watch for the inflection point when the physical strain of stirring your financial pots changes from tar-like viscosity that hinders your movements to a liquid  consistency that offers minimal resistance as your pots expand and fill rapidly. Thanks to compound interest, both pots will grow considerably faster than you might have imagined.

A savvy chef will utilize the same limited ingredients to yield more servings through efficient advance planning and waste reduction.  

Ability and willingness to manage a portfolio without paying fees to a financial advisor; investing in extremely low-cost, passively-managed index funds; creating a reasonable asset allocation that properly reflects personal risk tolerance; and distributing assets tax-efficiently among taxable and retirement accounts will increase yield considerably.

Buen provecho!

Comments 10

    1. Steve,
      You’re on the nose. It’s uncanny how, having maintained the discipline to enforce delayed gratification over a decade of rigorous schooling, many docs compete to indulge every appetite simultaneously once they score that first big money paycheck. Those able to keep the habit (strong correlation with those later able to “stay the course” during bear markets) enjoy a far less stressful practice of medicine and a more balanced lifestyle.
      It’s no small day when a varsity player stops by to visit the JV dugout – thanks for visiting my site!

  1. What’s your view on +/- 1 partner on board with financial goals? I find that being single, is hard to juggle both income growth and expenses reduction at the same time, so I need to choose to focus on one side of the equation.

    1. Lyn,
      Your point is well-taken. The dating scene can be a resource sink – limiting time available to put toward career advancement and undermining expense reduction. I’m removed enough from the dating game that I may be giving outdated advice, but I’ll risk it. If I were starting from scratch, I might try to meet people with shared interests that are lower cost – more time at Sierra Club hikes and less in bars.
      My wife says she used to minimize time and financial commitment by only having first blind dates over coffee. If she got a good vibe, she’d linger and arrange a follow up dinner. If it went poorly, she could extract quickly with only a couple of bucks lost. Picnics in the park during warm weather might be more reasonable follow-ups than swank foodie destinations, and cost is better controlled.
      There’s no easy solution, but what with the interwebs and all kind of forums (fora?) like Bogleheads and Mr. Money Mustache, who says frugal romance can’t blossom at a meet up via one of those channels?

  2. I’m in a different medical field and was chatting with the intern doing his clinical rotation within my department. I offered to talk to him about financial guidance near the end of his time with us. It is what I do with my Interns and he was quite eager and we will have to follow up for a long talk. But first thing I told him was to not get used to his first paycheck. To give himself a few more dollars each month than he had been living on but to stick with his current budget to keep the focus on paying off that student debt, maxing his retirement and saving for emergencies. I’ve found they think maxing their retirement is just putting away what the employer will match and no concept of emergencies. I thought my former classmates were idiots for running out and buying that brand new shiny car once we were licensed. I had the last laugh when they were still paying on their car loans and my student loan in three years.

    1. Debbie,
      Keep tuning those interns into the financial realities of modern medicine. As you observe, it’s the doc behind the wheel of the beater who enjoys financial security down the line. The house of medicine, when based on a high cost lifestyle, is indeed a house of cards.

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