Money

Interviews with real women physicians -DAWN

Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired from their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially!  So let's introduce our next woman physician rockstar – Dawn.

Tell us about yourself:

I’m a 44 year old anesthesiologist living with my husband, almost 3 year old daughter, and almost 10 year old whippet dog in Salt Lake City, UT. I’ve lived in Salt Lake for 17 years, initially drawn here by a passion for rock climbing and outdoor sports, but my husband and I are originally from Arizona. We met in college and both pursued engineering degrees. After some experience working as engineers, we both decided to take different paths (he chose JD and I chose MD).  I’ve been an attending anesthesiologist for over 7 years now. My practice is unique in that I am a non-academic faculty member of a large group at an academic hospital. I do all my own cases and see a wide variety of patients, but I have no call, weekend duties, research, or administrative duties. I also provide anesthesia for our university fertility clinic, a “side gig” which is near and dear to my heart because I was an IVF patient at the same clinic! I currently work two full days in the OR and 1-2 mornings a week at the fertility clinic.

Did you graduate with student loans? 

My husband and I were both fortunate to have full-ride scholarships to a state university for our undergraduate degrees. He also attended the same state university for law school, where the tuition was heavily subsidized because his father works there as a professor. I attended a state university for medical school and did take out some loans, but my husband was working as a lawyer during that time so he was able to provide a majority of the financial support

How fast (or not) are you paying them off?

Upon finishing residency, I had a relatively low amount to pay off. Despite a ridiculously low interest rate, I paid the loans in full within a few years of working as an attending.

Financial aspects of kids 

When did you have them?

For years my husband and I spent all our free time rock climbing and traveling, and we weren’t sure that we wanted to have children. That changed somewhere mid-residency, around the time that I turned 35. Suddenly, we felt differently about wanting to add to our family. Only I was experiencing some unusual symptoms and hadn’t had a period in over a year, all of which I attributed to the stress of being a resident. To make a long story short, I embarked on a diagnostic odyssey that lasted several months, included FMLA time, and culminated in the finding of a large pituitary adenoma. After resection (still during residency), complications, ICU stays, going on lifetime pituitary hormone replacement, and in vitro fertilization, I finally had my “miracle baby” at age 41!

Are you planning to fund their college expenses?

Although we were quite late at becoming first-time parents, we felt very mentally – and financially – prepared for the arrival of our daughter. In fact, around the time she was born, we started reading about the Financial Independence movement and realized that we were already financially independent. We were living well below our means and were used to flexible spending – being able to modulate our lifestyle and live cheaply if necessary – from many periods on the road as climbers in our twenties. In addition, we have a relatively frugal do-it-yourself type of outlook on most things.

Regarding our daughter, we opened a Utah 529 Plan at her birth, and we’ve been funding it modestly ever since. We also encourage our parents to give money to her 529 instead of giving cash (or other) gifts whenever possible.

We could put more into her 529 each year, but we currently elect to fund it with the minimum yearly contribution necessary to get tax credits and invest our money in other ways. Although we see the importance of the 529 fund, we don’t plan to send her to private schools and we don’t plan to demand that she attend university. With the vast entrepreneurial opportunities brought by the explosion of the internet and social media, she could end up finding something she loves to do without a college degree. By that time, there should be a considerable chunk of $ in the account, but we hope to teach her lots of lessons about financial responsibility and value along the way. Both of us attended public schools and state universities for all of our education, and in the end, we had the same (or better) career opportunities as those who spent tens of thousands of dollars on their respective degrees.

What are your child care expenses? Are your kids in private or public school? What is the cost including after care if needed.

Although my husband and I both work part time, we spend money on opportunities for our daughter to have abundant social interactions with other children and adults. She currently attends one conventional full-day preschool daycare program two days a week and one decidedly unconventional outdoor play-based preschool two half-days a week. We love that she gets this mix of home time and away time, and we were never interested in hiring a nanny who is with her all day, every workday. Mornings when I work in the OR can be fairly hectic, so we also hired a regular babysitter who comes to our house for two hours on those mornings. She plays with, feeds and dresses our daughter before taking her to her preschool. It’s so helpful!

My husband and I both try to make our days off coincide with my daughter’s half-day outdoor preschool. That way, we get some personal time to spend alone or with each other while she’s playing in the forest. Also, we are very savvy about using our gym’s short-term daycare hours on the other days of the week. For all these permutations of childcare, I estimate that we pay about $1000-1200 per month. Every penny is worth it. Eventually as she gets older, we hope to convert all her preschool time to the outdoor play-based program, as it is more in line with our educational values. We also plan to unschool her when she reaches elementary school age, while continuing to expose her to whatever sports or artistic programs she takes an interest in.

Financial aspects of marriage

Are you married?

I’ve been married to my husband for 19 years, and we started dating near the beginning of college. We’ve truly “grown up” together and become more aligned in our values over the years.

We have separate bank accounts. We dated for a long time before getting married and just never merged the accounts. There’s no regimented system, but we transfer money back and forth between accounts and take turns paying for various expenses depending on account balances. He makes more money than I do, but as an owner of his own law practice, his income is quite variable. He also allocates retirement money differently than I do, given that he is a business owner and I am a W2 employee. While we decide on big-picture money management issues together, he actually manages all of our finances in a Quicken program that combines all of our money transactions. He also does the taxes every year.

Do you and your husband agree on finances?

At first, my husband and I had very different views about spending. Overall, we agreed on the larger financial priorities, but I was much more of an emotional spender and he very logically saw money as “life energy” early on – before it was trendy. I wrote extensively about this in a recent post on my blog; my conversion to a more minimalist/valueist spending style didn’t happen until I became a mother and saw the simplicity and decreased stress that it brought to our household.

Are you the breadwinner?

Interestingly, we’ve taken turns being the “breadwinner” of the household. I made the money straight out of undergrad that allowed us to buy our first home while he was in law school. Later, the tables turned when I was in medical school and he was establishing himself as a lawyer.

Have you experienced a financial catastrophe?

When I was fresh out of undergraduate school working as an engineer, I made the mistake of succumbing to lifestyle inflation and spending most of my earnings rather than saving them. I elected to rent an expensive apartment and spent lots of money on clothes – things that don’t matter as much to me today. I had a 401k with corporate matching, but I didn’t even come close to maximizing my pre-tax contributions. I wish I had done this and continued to “live like a college student”, because that fund would be worth a lot more today (20 years later)! Now I make the maximum contributions to my retirement accounts and never even see the money before it’s allocated.

While I’ve been fortunate to not suffer a financial catastrophe, I have experienced a significant health crisis (see above). It changes your outlook on everything in your life – what’s important to you, how you want to spend your time, your money, etc. Because of my tumor, I no longer qualify for individual disability insurance, but we basically self-insure. We’re flexible enough in our spending to be able to deal with such a financial loss. We self-funded $50k in IVF fees over a threeyear period by being financially flexible and cutting back on some unneeded expenses.

General Finances

What’s your FI (financial independence) number? 

We consider ourselves FI by the 4% rule with a very reasonable yearly living amount, but neither of us are actually retired. We both enjoy our respective work in the capacity that we’re currently doing it – very part time and with ample vacation sprinkled in. The one thing we’d like to do in the near future is travel more with our daughter. My husband’s work is completely location-independent, but mine currently is not. So I might be adjusting things soon to accommodate for that. This may mean taking a sabbatical from my current position, going seasonal, or doing some locum tenens work. Also, I hope to grow my blog and social media presence, and potentially do more writing and speaking gigs.

What is your net worth?  How are you saving for FI/retirement?

Overall, our asset allocation is roughly 60% equities, 30% real estate, 10% cash. Simplicity is my theme word; it’s what I’m constantly striving for in many areas of my life, finances included. We are completely debt free, we self-insure for life and disability, we recently downsized our living space and also sold one of three properties. Most of our money is in the VTSAX index fund, and we don’t look at the gains and losses too frequently.

What does FI/retirement mean to you? What does it look like?

I see our FI as a combination of good financial decisions, high income potential for both partners from a young age (given that we started out as engineers), and the ability to spend flexibly. Not everyone will have all of these factors in their FI equation, but figuring out your financial strengths and weaknesses can help to clarify and refine your own path to FI.

Any parting words of wisdom?

Spend time reflecting on your values, and talk about them openly with your family. Keep things simple in all aspects of your life, including your finances.

Tell readers a fun/random fact about you 

When I meet people, they always want to know how tall I am. I’m 6’1” with no shoes on. And I have rock climbed in seven different countries.

And finally, where can people connect with you?

I blog at PracticeBalance.com. I’ve been writing more about money issues (mainly the mindset side of things) after meeting Bonnie this year, so check out my most recent posts and then work backwards from there to read about wellness, work-life balance, parenting, anesthesia, infertility… you name it. I’m also on Instagram @PracticeBalance, Twitter @DLBakerMD, and Facebook as Dawn Baker.

And … that's a wrap! If you're interested in doing this please send me an email – I'd love to hear from you!

I'm so excited more women physicians are blogging about money and living a life of their own choosing. Definitely head over to Dawn's blog!]]>

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A Conversation With My 1998 Self

2018 Me Has A Conversation With 1998 Me: Me on Money, Investing, Family, and Career – Part 1 This is a guest post by “Vagabond MD,” well known to those in the physician personal finance community. He is a 53 year old radiologist who recently emerged from burnout and currently works part time. He is married an attorney and has two children – one in college and one in high school. 2018: Dude, you were a total idiot for buying that fancy Euro car right out of training, on credit (of course!), before receiving your first paycheck. Bad on you! 1998: Hey, man, give me a break. I always wanted one and could finally afford one. 2018: No way, you could not afford it. You could afford the payments, not the car. Big difference. 1998: Nobody buys cars outright. Everyone makes payments, right? 2018: Well, the last six cars you (I) purchased were with a check. 1998: Really? Wow, I must have made a lot of money and saved some of it, too. 2018: About a year ago you read, “The Millionaire Next Door”, and it changed your life. 1998: True dat. I was on course to be a UAW (Under Accumulator of Wealth), and I turned that ship around. 2018: Keep turning it, bro. Here’s something else you should know. This investment and mutual fund “hobby” you are enjoying is actually making you poorer, not richer. 1998: How can that be? I am researching and discovering the stocks and funds and trading strategies that are going to make me wealthy by the time I am your age. 2018: No, that’s what you think. But not how it works. You would be much better off learning about index funds and low cost buy-and-hold investing and shoveling as much excess income into these funds as you can. Forget about the hot manager (Van Wagoner), the value manager (Whitman), and any investment that begins with the word, “Janus”. 1998: Index funds, at Vanguard, with that weird Bogle guy, right? Nobody really believes that crap. Van Wagoner Emerging Growth was up 74% last year. I want some of that action! 2018: Van Wagoner Funds have been dead and gone for over 15 years. That kind of investing never works in the long run. Hardly anyone even remembers yesterday’s star managers. Everyone with half a brain is using index funds…and they really do work to build wealth, over time. 1998: Hard to believe, but okay, if I drop the investment hobby, what should I do with my free time? 2018: Study Italian Renaissance art, cook meatless paella, and learn to do some stuff around the house. All of them are more enjoyable and will serve you better than trying to pick future investment winners. 1998: Meatless paella? Am I still a pescatarian? [caption id="attachment_2498" align="aligncenter" width="300"] Meatless Paella[/caption] 2018: Yes, but now you are cheating because the word, “pescatarian” will not be known to you for a few more years.]]>

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Pearls From #FinCon18

This past weekend over 2,000 like minded people converged in Orlando, Florida for #FinCon18. A place for financial bloggers, podcasters and influencers to meet “in real life” and exchange ideas and encourage each other to keep on spreading the message of financial freedom!

My favorite “online celebrities” were walking around, like Mr. Money Mustache, Jean Chatzy of Her Money, and even Joshua Becker of Becoming Minimalist!

My favorite part of the conference was hanging out with my fellow #FinConDocs! Close to 25 of us were there. How often do you get to hang out with doctors of other specialities who are financially like minded? These are my people! And the list of #FinConDocs keeps growing – some have said, or rather lamented about this. Ugh, ANOTHER copycat doctor finance blog? I beg to differ! There aren’t enough! Until every doctor is taking care of their finances there is more work to be done. Every one of us has a unique voice and not every doctor will connect with us.

Just some awesome #FinConDocs hanging out: Nii Darko of Docs Outside the Box podcast, his wife Renee Darko, Peter Kim of Passive Income MD, Carrie Reynolds of the Hippocratic Hustle Podcast, David Draghinas of Doctors Unbound podcast, Victor of 39point6 and Dr. Nikki of The Female Money Doctor (representing the UK!).

I learned a TON (and my to do list has ballooned by 1000000%). Here are some of the pearls I learned:

“Businesses die by suicide, not by murder”

LOOOOVE this quote. When we collaborate and support each other’s work, we ALL win. Cultivate a mindset of abundance not scarcity. I love that there are so many physician voices in the finance space. I love even more that there are more women physicians creating great content.

“Gratitude, not attitude”

Andy of the Marriage, Kids & Money podcast gave me this tip. He interviewed Rachel Cruze (daughter of Dave Ramsey) about gratitude at #FinCon18. Start the day writing at least two things you are grateful for. I’ve struggled to make this a daily habit for decades. This habit keeps your mind open and generous.

Outsource!

When I first started this blog I never thought I would get to a place where I would need help to manage it. FinCon taught me the value of having a virtual assistant to assist with the “the scut” so I can stay focused on creating content.

Find your niche, the specific the better!

Emma from Wealthy Single Mommy gave one of the closing keynote talks on tips for finding your avatar and niche. The more specific the better! This niche does not mean you’ll only get those exact readers! Emma caters to professional single mom but she also attracts married women (who may be angry or contemplating divorce and …isn't there a single mom in all of us?) and men. When I first started this blog I worried that my niche of women physicians was too small but it’s actually perfect.

Did you attend #FinCon18? Share a pearl below!

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Facing FIRE Burnout

Physician burnout is on the rise, but I’d like to discuss a different type of burn out that I recently experienced. Specifically, I found myself facing FIRE burnout.

The Start of FIRE Burnout

Once I drank the financial independence Kool-Aid, I wanted to get there … yesterday. I found myself feeling envious and jealous of others who have achieved FI or those that are already able to work less. Must be nice, I'd think.

Impatience spurred lots of number crunching to see if I could somehow get around the fact that time is a pivotal part of compound interest. No matter how I ran the numbers, the truth is inescapable. There's no way around it.

Enjoying the Journey to FI

The goal of a FI is definitely a worthy one and en vogue according to the NY Times. However, like all goals, it is not about the goal itself but about the journey. Why is it so important to enjoy the journey? Because tomorrow is never guaranteed.

Sometimes you need to be personally reminded that tomorrow is never guaranteed.

A very important person in my life passed recently. Someone that truly helped sculpt who I am today. I didn't even know he was gravely ill. He never got a chance to meet Eggy.

These moments always cause the world to stand still. They prompt self-reflection and remind you to be present. They remind you that life is not a series of curated Instagram images. Life is now.

Life is what happens to you while you are busy making other plans – John Lennon

Final Thoughts on Facing FIRE Burnout

So, I am learning to enjoy the FI journey. Perhaps the best part of the journey is meeting other like-minded folks. They are truly a wonderful and supportive community. There may not be a perfect cure for burnout on the road to FIRE, but learning to enjoy the journey is a start.

Rest in peace, my friend.

How is your journey to FI going? Are you feeling any FIRE burnout? Comment below!]]>

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Part 2 of Making A Million Dollar 18-year Bet

This is Part 2 of Making A Million Dollar 18-year Bet, a guest post by Platinum Sponsor Johanna Fox of Fox & Co. Wealth Managementt, a fee-only financial planning firm. Start as early as you can As Bonnie says, compound interest is the 8th wonder of the world – you want to make it work in your favor. If you can afford to begin at birth, choose the most aggressive portfolio possible and contribute at least enough to get your state’s annual income tax break. Learn the rules in your state, too: some states allow tax breaks for contributions to other states’ plans and the cutoff for contributions vary: 12/31 in some states and 4/15 in others. Even if you can only afford to fund a minimal amount at birth, start with something as long as you are not compromising your retirement goals. In the Varkeys’ case, assuming 7.5% average return, choices include (not considering the time value of money):

  • Frontloading the 529 with $108,859 (because they are allowed to frontload $75k/person, they can split the gift and fully fund college). OOP savings = $384,801
  • Contribute $27,500/yr to the baby’s 529 for 5 years. OOP savings = $351,660
  • Make monthly contributions of $818/mo. for 20 years. OOP savings = $297,380

Use ESAs for lower grades

Our couple hopes to send their children to private high school. In this case, we recommend they add Coverdell Education Savings Accounts (ESAs) in addition to 529s. ESAs are often overlooked because:
  • Contributions are limited to $2k/yr per child and
  • Those with income over $190k are phased out from contributing (but you can get around this).
But by saving $2k/yr/child in an ESA from birth and averaging 7.5% growth annually, your ESA would be around $50k when your child is 14. Why is this important? Because under the new tax law, 529s can be applied to private school K – 12, but only up to $10k/yr [Editor's note: Some 529 plans aren't allowing this 529 K-12 withdrawal at all or require tax recapture ]. An ESA would be a nice complement to the 529. But what about the income limits? Anyone can contribute to the ESA – even the child herself. You simply gift $2k into your child’s UTMA each year and transfer it to the ESA. To avoid the UTMA, gift $2k to a trusted family member in a lower tax bracket and let them make the contribution.

Underfund your 529s and ESAs

This may sound contrary to the key principle “start as early as you can”, but please bear with me and it will make sense. My goal is to use up all of the money in your tax-blessed accounts. Otherwise, in general, you’ll pay a 10% penalty on funds you withdraw that are not used for approved education costs. There are exceptions to the 10% penalty, such as if a child gets a scholarship, but not for just having money left over. Of course, you can pass account leftovers down the line to younger siblings, and we plan to do that, but I’m trying to keep it simple – say, you don’t need as much because your children decide to start out at a community college or want to go to a state school with a best friend, or, even worse, follow a boyfriend or girlfriend there. How can you possibly plan for that? To mitigate that risk, we recommend that about 75% of projected expense goes into ESA/529s, with the remaining 25% going into a taxable investment portfolio. When following this recommendation, start the taxable account only after you have funded the 75% in 529/ESAs, which will maximize your tax-free funding. If you end up needing the taxable account, you’ll be able to take advantage of lower long-term capital gains and dividend rates. If you don’t need the taxable account for education, voila! Can you say “beach home?” So what about med/grad school – what should the Varkeys do? At this level of income with 3 children, they will probably need to raise their family in a LCOL area of the country, plan to work extra shifts for a few years (if that is an option), determine to be extremely frugal, or save to fund a less expensive college experience – after all, they are saving for 6 educations. Possibly forego the private high school. Or they could save only enough for 50% of med school (1.5 educations instead of 3.) Remember, planning is about prioritizing how to allocate limited resources to achieve your goals. We’re back to priorities – what are your priorities about lifestyle and education? It’s very important to get those figured out in the beginning rather than simply saving what’s left over in your bank account each month. For example, one of our clients in this very situation has opted to set aside enough for med school for one child using the 75%/25% rule. If one or both of the other two siblings also decide to be physicians, then we are planning to have enough saved in a taxable account to also send them. This couple lives fairly frugally and in a LCOL area.

Finally, invest aggressively if you can self-fund

Here’s the way I look at it – if you can cash flow the early years, particularly private K – 12, then you should keep your savings invested in a well-diversified equity portfolio up until the time you need it. If the market is down, we would plan to pay cash for private high school in this situation. If the market is climbing, we’ll liquidate enough of the 529/ESAs to pay the tuition annually. The 75/25 rule comes in handy again to prevent you from over-saving. And, of course, you can allocate your own savings any way you want: 60/40, 80/20, and so forth. By thinking through your choices, resources, and priorities, and then following your plan, you will have a much clearer path to saving for huge expenses that seem too far away to even think about when your children are young. I hope this information has been helpful!]]>

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Making A Million Dollar 18-year Bet

… (or Smart ways to fund your children’s education) This is a guest post by Platinum Sponsor Johanna Fox of Fox & Co. Wealth Managementt, a fee-only financial planning firm. Until recently, she was also our financial planner. Saving for college is on the minds of most of our clients since around 75% either have young children, are pregnant, or both. The amount you need to save for education depends upon the choice of college, how many children you have, how much your funds grow, and the percentage of college, grad school and/or med school you want to fund. For a family with even two young children, you can easily looking at a need of $1M – $2M by the time they are ready to start college, especially if you plan to fund post-grad. Of course, that’s not even considering private school for K-12. Planning ahead and doing it right will both save taxes and increase your long-term net worth. But planning so far into the future for little creatures with minds of their own is a daunting and expensive challenge. To explain how to build an education savings plan for your own family, let’s review a case study. I’ve built a composite family, the Varkeys, using details from several clients’ plans:

  • Dual physician family earning $680k/yr with children ages 2 and 6 plus another on the way
  • Want to save enough for 4 years at Georgetown University, their dad’s alma mater, and maybe medical school.
  • Hope to send children to private high school @$15k/yr/child.
  • Student loans of $150k, refinanced @3.875%
  • 2 mortgages: $850k on a $1.3M house and $450k on a rental duplex
  • One spouse has access to a 401k and the other has access to a 403b/457b combo, and they both do annual backdoor Roth IRAs.
  • And by the way: they hate debt
Let’s get some perspective about sending a child to Georgetown (or a similar school): the cost of attending today is $69,313/yr for tuition, books, room and board, and other expenses. By the time the baby attends, it will cost the Varkeys $493,660 in future dollars. This requires a plan! While we would need a lot more information to fully develop a financial plan, we’re using this case study to focus only on some key principles to consider when planning for education.

Prioritize

One of the biggest challenges of planning is prioritizing how to allocate limited resources to achieve your goals. The first rule in saving for education is not to sacrifice your own future: there are no scholarships for retirement and you will not be doing your children a favor by providing for nice educations at the expense of having to rely on them in retirement. However, you may be able to forego some retirement savings in the near term in favor of early education savings, and then get back on schedule. So, if your projections show that you will be able to skip a few years of 457b and backdoor Roth IRA contributions and have a few million dollars left at death, and that’s the only way you can fund your education accounts, then we might consider frontloading education to launch early tax-free growth and then return to maximizing all retirement space possible. Save for school or pay off debt? Since the debt feels so burdensome, I wouldn’t have a problem attacking the student loans heavily for 3 years but not the mortgage or rental interest. The reason is that student loan interest is not deductible, and lingering student loans are oppressive to many graduates because it represents nothing tangible. The interest on the mortgage is deductible as an itemized deduction and the interest on the rental will be deductible at some point – either when their rental begins to show a profit or when they sell it. And having tangible assets that are appreciating in value mitigates the emotional aspect of paying for “nothing”. Note: If you have access to an HSA, I would not forego contributing – ever (but that’s another article.)]]>

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Interviews with real women physicians – Eliza

Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired from their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially! 

So let's introduce our next woman physician rockstar – Eliza from Minimal MD.

 

Tell us about yourself:

I'm Eliza from Minimal MD. I love my life as a 35 year old retired dermatologist, living in the Midwest with my husband and two kids. I'm really into minimalism and travel.

Did you graduate with student loans?

Yes, I went to a private medical school. The total payback over a ten year term was projected at $250,000, including interest with rates of 1-9%.

I paid off my first small loan during my intern year to avoid the terrible 9% interest rate. Then I got serious about the loan with the next highest rate. I graduated from residency in 2012, and made my last loan payment in April of 2017.

Financial aspects of kids

I had both kids during residency.

The out of pocket cost for two kids at our on campus daycare was $2,400 a month. Luckily, they had a financial hardship program. It brought the cost for our first child down from $1,200 to $400. The amount varied every few months. As soon as I graduated, I went to a part time position, working 2.5 days a week.

We tried a highly rated Montessori school for our daughter. It was $9,000 for a half day program that didn't really meet her academic needs. That disaster, on both the educational and financial fronts, has made me really skeptical about paying lots of money for private school tuition. I think carefully now about the opportunities I could provide with a similar amount of money.

We currently live in an area that doesn't even have private schools. Most recently, we have decided to homeschool because I really like the flexibility to be able to travel with the kids now that I am retired. We will take off for several weeks at a time to explore the U.S. or Europe.

Financial aspects of marriage

I am very happily married. My husband is loving his career right now, so he continues to work. Retiring early isn't for everyone. Luckily, he is a teacher, so we have been able to just relax and travel together all summer.

What financial mistakes have you made?

I've already mentioned the private school fiasco. Our second big financial mistake was living apart during five of our early years of marriage. Having separate households and commuting frequently across the country is not a way to build wealth. For the record, it isn't a fun way to parent two small children either.

Our next mistake was regarding our home purchase. When we bought our first home, we wanted to live in a certain public school district. We also wanted a fenced in yard for the kids and a basement to protect us from tornadoes. The only house that fit those specifications was a 4,700 square feet custom built home. We had no money for a down payment because we spent so much paying down my student loan debt, so we financed 100% of the purchase price and took an adjustable rate loan.

In addition to the loan terms, the house was a lot to take care of and many repairs were more costly because of the size of the home.

The saving grace to the situation was that we then bought a home well within our price range. We took on only 25-33% of the loan that the bank would have allowed us to qualify for. Also, rather than accepting the loan as a part of life, we paid as much as we could each month and knocked out the entire mortgage in 2.5 years. We moved recently and used the equity from the first house to pay cash for a smaller home.

What’s your FI (financial independence) number?

We used the general advice of 25x yearly expenses to achieve financial independence. I don't include home equity or the 529 account money in that number.

Do you have disability insurance?

I did have own occupation disability when I worked. I have cancelled that since the policy only applied when I was working anyway and was the largest line item in our monthly budget. I also canceled my husband's primary life insurance this year since we are financially independent. We do have some other umbrella and supplemental life insurance policies that are just so inexpensive that they barely register. I'm constantly adjusting the coverage.

If you are FI or “retired” – what are you doing?

I left my clinic job in June 2017 and have spent the last year traveling with my homeschooled kids across the U.S. and to England, France, Iceland, Scotland, Sweden, and Denmark. To keep my license active and engage with peers, I have done some free skin cancer screenings and locums work averaging one to two days a month. I've also downsized from the 4700sf house to a 1350sf house plus basement on 5 acres of forest.

With so many changes this year, I'm still adjusting and growing into this phase of my life. You can read more about my minimalism, financial story, and travel experiences at MinimalMD.com, or connect with me via Facebook.

And … that's a wrap! If you're interested in doing this please send me an email – I'd love to hear from you!

I totally agree that minimalism and simplifying life has great rewards. Kudos to Eliza for achieving FI!]]>

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I Fired My Financial Advisor

Fire Your Financial Advisor course.

Part 1 covered the license designations an FA can and should have.

Part 2 covered how FAs should get paid.

Part 3 – What's the difference between a financial advisor and planner?

Part 4 – How to find and vet a financial advisor

Part 5 – I fired my financial advisor

Johanna and I separated after about two years of working together. Before I go into why, I thought I would first discuss why a financial blogger would hire one in the first place. I mean, if I am giving information shouldn't I know what I am doing and not need one?

Why I Hired a Financial Advisor

Curiosity … and blog research!

I noticed that the other finance blogs were mainly (perhaps all?) staunch DIY and anti-FA.  Curiously, many also give advice about financial advisors yet have never worked with a true financial advisor or planner. So, I became curious and thought working with one would be great research for my blog and I may learn a thing or two!

Afraid to make any more big mistakes

I finished residency at age 38 with ~$200,000 in student loans and barely $1,000 in retirement accounts. That was a huge hill to climb. I could not afford to make any more big financial mistakes if I ever wanted to “retire”.

Combining finances

Things were getting serious with M. Although I felt pretty comfortable managing my own money, managing our money made me feel a bit uneasy as making mistakes would now affect two instead one.

What I Loved About Having a Financial Advisor

During the time that I worked with a financial advisor, I actually realized there were some great benefits. Here's what I loved:

Systematically going over our financial houses

The part of reviewing finances that takes the longest (at least for us) is gathering lots of important documents, scanning them, then uploading them into a secure website for them to review. These include all of our insurance policies, retirement plans, etc.

Our planner made sure we were adequately insured. Perhaps one of the most important things we accomplished was getting our estate plan done: wills, power of attorneys, and health care proxies. Too often this becomes a non-urgent to-do item that never gets done and then it is too late.

Advice (duh)

Johanna and her team had their work cut out for them. Their brand new clients get engaged then pregnant and then decide to move cities with new jobs. All of this happened within half a year!

I was unemployed for about 16 weeks during my maternity leave. Additionally, I was freaking out about not bringing in any money while I watched my checking account only go down. Lots of impulse shopping on amazon.com didn't help either. Perhaps it was all postpartum hormones but Johanna had to talk me down a few times. Having someone you trust say “you will be ok” is and was priceless.

The big picture

We discussed our goals and dreams. After all the information gathering, we received snazzy reports and graphs comparing different scenarios (renting vs. buying, etc). I also learned that we would and could reach financial independence a lot sooner than I thought.

Why I Fired My Financial Advisor

I guess you could say I am a true DIYer. Honestly, I love creating and updating spreadsheets with our numbers. I love crunching the numbers. And I am comfortable managing our money.

Our FA custodied some of our accounts and I did not like not being able to manage them myself. I suspect most people who hire FAs want to delegate these tasks. And perhaps lastly, I drank the FIRE Kool-Aid. We are currently optimizing and minimizing our expenses to reach FIRE. All of these factors combined meant that it was time for me to fire my financial advisor.

What Should You Do?

There are two schools of thought when it comes to money. Some people prefer to DIY their own finances. Other people choose to work with financial advisors.

There are so many variables to consider when choosing which path to take. If you do decide to work with an advisor, make sure you pick an advisor that you can trust. Working with a fee-only financial advisor is one way to ensure that your planner has your best interests in mind. Also, remember that your relationship with that advisor doesn't have to last forever.

What did you think? Were you surprised that I fired my financial advisor? Have you worked with a financial advisor? What worked and didn't work? 

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Guest Post: Independent Contractors and The New Tax Law

This is a guest post from Platinum Sponsor Anjali Shah, CPA, CFP of FIT Advisors. She is a fee-only financial advisor with a decade of experience in tax consulting and financial planning. She founded FIT Advisors to empower Gen X professionals to discover and reach their life goals while building a stable financial future. Anjali understands the needs of physicians (she is married to one) and how to plan for their busy and evolving lives. To learn more, set up a free initial consultation. With the new tax law, more and more physicians may be exploring opportunities as a 1099/independent contractor instead of an employee. The article below goes through the recent tax law changes and things to consider between an independent contractor and employee.

What changed with the new tax law?

The short answer to that is a lot! Specifically, the new tax law made changes to how pass through entities (partnerships, LLCs, S Corporations) and C Corporations are taxed. Pass through businesses may deduct up to 20% of their business income on their individual tax return. The new deduction provides some tax relief to small businesses, but unfortunately, it limits the deduction for certain service related businesses. These service related businesses include the fields of health, law, consulting, financial services, etc. The new tax law carved out engineers and architects from this limitation. Unfortunately that means most, if not all, medical professionals will be subject to the limitation. How does the limitation work? The deduction is limited based on a threshold amount – it starts at $157,500 for an individual and $315,000 for a married couple and fully phases out once income hits $207,500/$415,000. Even though the limits are for a single vs. married person, it is still assessed at the business level. Thus, high earning dual income households may be able to get the deduction depending on how much business income there is. The deduction is taken on the individual tax return, not the business return. On the other side of the business spectrum, corporations are now taxed at a flat 21%. Great! Why don’t I just incorporate as a C corporation? The tricky part about C corporations is that they are taxed twice – at the corporate level and then any profits that are distributed to the owners are taxed at capital gains rate. The new tax law still retained the higher capital gains rate of 20% and the net investment income tax of 3.8%. Thus, depending on what your tax brackets are you may be paying 44.8% (21% at the corporate level, 23.8% capital gains rate) while the top federal individual income tax bracket has come down to 37%.

Does it make sense to become an independent contractor instead of an employee with the new tax law?

The answer to that really depends on a number of factors. The first item to keep in mind is that independent contractors do not receive benefits. If you are an employee, your employer may provide health care coverage, disability, retirement plan contributions and more. As an independent contractor, you pretty much pay for everything out of pocket – but you can take a lot of the expenses as a “business” deduction to offset your income. It is important when deciding between 1099 vs. W-2 offers, to negotiate a higher rate (hourly/RVU based) as an independent contractor since you receive no benefits. The second factor to consider is whether you have the diligence to ensure your taxes are paid in for the year. When you are an employee, your employer will withhold taxes on your behalf and remit it back to the IRS. The IRS requires every taxpayer to pay their taxes in throughout the year – whether through withholding or estimated tax payments. As an independent contractor, the burden falls on you to ensure this is done. The other tax implication of an independent contractor is self employment tax. Self employment tax is comprised of Social Security and Medicare – the total rate is 15.3%. This is assessed on top of your regular income tax. As an employee, you are only required to pay half of this amount and your employer covers the other half. As an independent contractor, you are technically both the employer and employee so you pay the full amount albeit you receive a tax deduction for one half the amount. This can be a sizeable tax hit that needs to be factored in. The last item to consider is whether your income will be below the threshold amount for the pass through deduction. As discussed above, once income from the business exceeds $157,500 for a single person or $315,000 for a married couple the deduction begins to go away. For many physicians, their incomes will be higher than the threshold amounts so the benefit may go away entirely. If you are not able to get the pass through deduction there are still benefits to being an independent contractor – running expenses through the business, ability to contribute more to a retirement plan, flexibility on hours/shifts, etc.

I want to be an independent contractor but my future employer won’t allow it, why?

You’ve decided to take the route of independent contractor but your employer won’t allow it. You may wonder why…it seems easy enough. Unfortunately, the employee vs. independent contractor designation is an area the IRS highly scrutinizes. Further, the penalties for getting the classification wrong are cumbersome so for many employers it might be easier to just classify workers as employees. The IRS lays out a framework of what may designate a worker as an employee versus an independent contractor. Unfortunately, there is no magic formula. As stated on the IRS’s website “There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.” Let’s look at a few of the factors the IRS considers when making the determination. The IRS looks at whether an employer has the right to direct or control how a worker does work. What exactly does this mean? For example, is there written instructions as to when and where work should be done, what tools to use, tasks to be performed, etc i.e., employee handbook. Other items include whether an evaluation system is in place to measure the work and if the job provides training to its worker. If one or more of these facts are present, it is likely the worker is an employee and not an independent contractor. The IRS also examines the financial aspects of the role. Examples of this include whether the worker is reimbursed for expenses incurred on the job or does the worker get a guaranteed amount of payment on a regular basis? These factors point to an employee. An independent contractor, on the other hand, usually only gets paid on the hours worked and is free to seek out other business opportunities even while working for the employer. An interesting rule is that written contracts are not sufficient to determine a worker’s status. If your employer puts together a contract with language that states you are “an independent contractor, responsible for paying his or her own self employment tax” it holds no weight. The IRS is not required to follow the contract and instead will look at the relationship between the worker and employer. Part of looking at the relationship is whether the worker receives benefits, is their job permanent or does it end after a specified time and is the worker provided services that are key to the business. If you are currently an employee and want to make the switch to independent contractor with your current employer, the case is stacked against you so you may need to seek out a role elsewhere. As mentioned earlier, the tough part about these rules is that there is a lot of ambiguity. Thus, employers may take the safe route by classifying workers as employees.

Now what should I do?

When deciding between various job opportunities, it is important to put each job on equal footing. Start with the W-2 role and list out the income items – salary, bonus, CME reimbursement and employer retirement plan contributions (this is any match or profit share). Next, put a monetary value to the benefits you will receive – health insurance, holiday/vacation (remember as an independent contractor you don’t receive any paid time off) and self employment tax savings. Finally, if there are any other benefits your employer offers, add that in – disability, life insurance, etc. Add everything up and compare that to what you would receive as an independent contractor. Many people are surprised by the numbers so it is helpful to line up the roles from a monetary perspective. Make sure to also consider the non financial aspects of a role since those can be just as important! Anjali Jariwala is a CPA and CFP®. She founded FIT Advisors to provide comprehensive Financial Planning, Investment Management and Tax Planning services. She uses an innovative business model that is evidence-based and aligns closely with the needs of physicians.]]>

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Interviews with real women physicians – Teddi

Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired from their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially!  So let's introduce our next woman physician rockstar –Teddi.

Tell us about yourself:

I’m almost 34 and am a community based academic Emergency Medicine attending. I’m from a blue-collar background in Oklahoma. Worked full time and moved out in high school and barely graduated. Became an ICU nurse. Applied to 1 med school and was accepted (University of Oklahoma), had a big chip on my shoulder, and went into General Surgery at Northwestern in Chicago. Met my husband who’s an academic Neuroradiologist while we were both in training. I found new perspective about the balance that I wanted in my life. I quit for that reason and many more. During my PGY3 going to PGY4 year I lucked out into a spot in emergency medicine at the same institution. I did not consider the financial impact at the time, but I ended up with shorter training, no fellowship and a specialty with reasonable pay. Now I’m loving my 0.8 FTE ER nocturnist life and have a little 3-year-old daughter. We live super local and frugally because I want riches and financial independence in like 3-5 years. I’ve been investing small amounts since college, but got really into personal finance as I finished my training. I like to learn absolutely everything about a subject, so definitely can be pushy with my excitement in my activities. I love to travel and traveled extensively, pre kiddo, but we all go somewhere on a plane every month or so. I love hosting elaborate get togethers, so am working towards a dream home as soon as I can convince my hubs. Cook at least 5 nights a week and am an avid city gardener. I’m not really crafty, but more of a person that thinks they can learn anything and don’t like to pay for something I can do myself. I think financial literacy is very important and we’ve been short changed during our medical training, so I try to get the word out as best I can.

Did you graduate with student loans? 

I had around $237,000 at 6.8% from medical school. Nursing school was essentially free. Had made several years headway into PSLF and was kicked out on a technicality that I didn’t understand at the time. I finished training in 2016. Spouse had around $300k at 1.8%. He finished training in 2012. We didn't even keep track at first as we paid them, but from late 2015 to NYE 2017, paid off all of the remainder of initial debt around $550,000.

Financial aspects of kids 

When did you have them?  

Had my daughter during my second year of Emergency Medicine residency (PGY-5), which was rough, and I wouldn't recommend. Planning on having a second, which will greatly affect our home capacity and probably child-care costs.

Are you planning to fund their college expenses?

We plan on paying for most, if not all. I hated starting life so in debt. Started saving the annual max last year when our daughter was 2, so only have to save for another couple of big years, then we hope the market takes care of the rest.

What are your child care expenses?

We pay $1300/mo. for 3 day a week daycare and then frequent babysitting.

Financial aspects of marriage

Are you married?

Yes we are married.

Did you get a pre-nuptial or post-nuptial agreement?

No, didn't even really consider it but both were in massive debt.

Do you and your husband agree on finances?

We are both very motivated to see some money accumulate in our bank account, but do go about things differently. He found the blogger Mr. Money Mustache first, but was already an anti-consumer and rides his bike to work. My husband prefers to play it safe with investing, and is tough to make plans with since he could live in a shack and be a radiologist forever on a w2 salary. It helped to get used to living on a fraction of my spouse’s new attending paycheck while paying down loans and using my resident salary to help fund retirement accounts early. Then we saved 100% of my new income for over a year that I’ve been out of training.

Have you experienced a financial catastrophe?

Our house caught fire my second year of EM residency, but we were able to spend about 50k above the 400k-600k insurance claim to renovate it to our liking. It was very stressful at the time, but no real financial hit. Two years of a gut renovation later- we have a great townhome.  

General Finances

What’s your FI (financial independence) number?

We haven’t decided. I feel pretty financially independent now without debt other than our mortgage. Maybe around 2.5 mil if we wanted to quit working completely.

Who handles the finances in your relationship? Are you DIY or do you have a financial advisor? 

I handle the money and we have a CFP that sold us our insurance and disability, but doesn't manage our investment accounts. We also have a CFP/CPA that does our taxes and gives us annual strategy/pep talk that is extremely helpful.

What is your net worth?  

$1.1 million. We include retirement accounts and the equity that we’ve paid into our mortgages

How are you saving for FI/retirement?

Other than destroying debt with gazelle intensity – we currently have two 401(k)s, two Roth IRAs and two 457(b)s plus I have a solo 401k. We both get almost the full employer match allowed. I started a custodial account last year that we contribute to after our 529 contribution goal is met. Then we have a taxable account that I contribute to every time I make a wise financial decision like cleaning my own house or grooming my dog, etc. 90% index funds plus individual stocks. I have one 6-unit rental property that was amazing income during residency but lately has been just breaking even. We also pay extra on our mortgage every month. Now that we are done with loans, we will be ramping up our FIRE savings to work however we find most enjoyable.

One thing you wish you knew:

The power of compound interest. I had student loan money sitting in a no interest savings account for like 5 years, accumulating 6.8% interest in debt. I used the money for a fancy wedding, fancy cars and multiple European vacations before I thought about financial independence. You can never out earn bad spending habits!

Do you have insurance?

We are probably over insured, and now have to figure out how to back down a little since our debt is more manageable. We have disability, life, auto and umbrella insurance.

What does FI/retirement mean to you? What does it look like?

One, I love to entertain and hope to have a beautiful home somewhere that is probably not Chicago one day. Two, I would like to contribute more to the future of medicine and to support women advancing in politics. I think having money lets you be totally free.

Do you give to charity? If so, where and why?

I got extra interested in personal finance around the time that our current president unexpectedly took office. I’ve been concerned about the decrease in public funding of charities, so right now I donate all the profit from one side gig to different charities each month. I hope to be able to make more meaningful change when I am done with the child-creating and wealth-building phase of my career. I don’t think our taxes are required to pay for everything, so I don’t mind funding some things privately.

Any parting words of wisdom?

When considering a job, things that can be readily measured get too much attention, for example, salary and vacation time. Aspects that are hard to evaluate like an interesting work environment, stress and morale are more important. Have a longer, more productive career without burnout. You can live well in an expensive area if you balance a short commute and manageable job so that you don’t have to subcontract out all the adulting (cooking, cleaning, grocery shopping, parenting) of your life. My take is to skip the fancy car, house and country club but consider living somewhere great that your day-to-day is really full of vibrant people and activities.

And … that's a wrap! If you're interested in doing this please send me an email – I'd love to hear from you!

I loved reading Teddi's story and I hope you did too. I couldn't agree more with her advice about seeking a long career without burnout.]]>

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