Money
2017 was amazing year – personally and financially. In 2016, I ended with a negative net worth of -$92,000. Pretty typical for about a year after residency.
“I” became “We” in 2017 – We got engaged and had a baby. We also signed wills, power of attorneys, and health care proxies.
We ended 2017 with a positive net worth of > $500,000. This includes equity in a home. I still have those darn student loans – for now.
Our savings rate towards FI in 2017: 27% of gross income in the form of maxing out our retirement accounts, additional cash savings, extra payments towards my student loans and we paid off our car loan. I did not include employer match and contributions. Not too shabby!
What were my goals in 2016 and how did I do?
- Cross over into positive net worth – check!
- Knock out 50K of student loans (this is in addition to the min. payments) – close! I paid about $42,000 towards student loans in 2017.
- Max out all available tax advantaged accounts ($47K, not including employer contributions) – check!
- Start a taxable account – This didn't happen. Although I did contribute about $8,000 as after-tax non-Roth contributions towards a Mega Backdoor Roth IRA – even better than a taxable account!
How did your net worth grow in 2017?
Read MoreHappy New Year! I hope everyone had a fun and healthy holiday season. What a busy past few months – personally and financially – giving birth, being hospitalized, being on maternity leave and moving are a lot to deal with! With every turn of the year is an opportunity to reflect on what worked and didn't work the year before and to create some new goals. First, let's discuss how to create goals. I am always surprised how most goals are vague – “lose weight” or “learn more about finances.” These are great goals. But they aren't specific and not very measureable. You may be familiar with SMART goals:
- Specific
- Measureable
- Achievable
- Time-bound
- 84% of the entire class had set no goals at all
- 13% of the class had set written goals but had no concrete plans
- 3% of the class had both written goals and concrete plans
- “Lose weight” is now “I will lose 5 lbs by 2/1/18.” The plan: going to yoga classes 2x a week and running 2x a week.
- “Learn more about finances” is now “I will read The White Coat Investor book and The Millionaire Next Door by April 30, 2018.”
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 – “Hatton1” .
Tell us about yourself:
I call myself “Hatton1” on the White Coat Investor and Physician On Fire blogs. I am 60 and in the process of getting divorced as I write this. I live in the deep South in a low COL town. I actually grew up in the town I live in and have family here. I am an OB/GYN. I did OB 26 years. I went through one malpractice trial and won the case. I am doing just GYN 3 days per week with essentially no call. I own the practice. I could essentially retire any time but owning a business with employees is keeping me off the Obamacare exchange. Would I pick OB/GYN again? I really do not know. It is possible now to do shift work (hospitalist or laborist) which did not exist when I was doing OB. The lifestyle is brutal and stressful especially if something goes wrong! Per hour worked lots of other fields pay better. When I was younger I liked the excitement of a STAT c-section or a ruptured ectopic but I aged out of that. I suspect that lots of ER docs and trauma surgeons feel the same way.Did you graduate with student loans? How much & what are the interest rates?
I had $29K in student loans. I know you all hate me. I had an academic scholarship. My parents paid for undergrad and bought me a car. Medical school tuition now is ridiculous. I don’t know if I would've gone with today's prices. I can’t even remember the interest rate or payment because it was that insignificant.Financial aspects of marriage
Are you married?
I am legally married as I type this. I expect my uncontested divorce to be final in the next week or two. I had no prenuptial agreement. My state is not community property.If you are divorced – what have you learned financially from this, and what advice would you give to unmarried women planning to marry?
My attorney gave me the advice of not raising your spouses lifestyle to the “doctor” lifestyle. If you encourage them to quit work then if you divorce you may face alimony. In my case my husband is still working full time and I went to part time. I gave my husband my equity in a farm we bought which I really did not want anyway. It cost me $35k and $600 in legal fees. We married later in life and kept our finances separate.General Finances
What’s your FI (financial independence) number?
My financial independence number is 5 million. I hit this at age 56. In retrospect with what I now know about the FIRE movement I think I could've retired at about 45.What is your net worth?
I am now 60 with a net worth of ~ 7.5 million post divorce (Includes home equity).Are you DIY?
I handle my own finances. I used a commissioned stock broker for several years starting out.How did you get to FI and what does it mean to you?
I always filled my retirement accounts up and then filled up a taxable account. I have most of my retirement money in a SEP-IRA and some in a traditional IRA. I have converted a small amount to a Roth IRA. For what it's worth, most of my money is in a taxable account. FI means you can quit work or go part-time. It means no call or weekends. It means anything you want it to mean because you no longer have to work and put up with crap.One thing you regret:
Not buying an office building.Do you have insurance?
I no longer have disability insurance. I cancelled it mid-40s when I knew I had “enough .“ I have umbrella insurance ~2-3 million.Any parting words of wisdom?
My advice is basically grow into your income slowly. Do not keep up with the Jones. Dr. Jones is 75 and still working! I made a number financial mistakes along the way but came out ok. Basically learn about money or it will fritter away. I also recognize that I was very lucky. I became an OB/GYN when very few females were doing it. The demand was huge and I never had to market myself. Those days are gone and you will have to hustle to do well I think. Good Luck.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 “Hatton1's” story and I hope you did too. I think she may be the first woman physician interviewed here that has achieved financial independence!]]> Read MoreWelcome 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 – Cecilia.
Tell us about yourself:
I have been pretty debt-averse my entire life, thanks to hearing my parents argue about money for my whole childhood (my mom, who trusts God and my dad to provide for us, would buy the things her 5 daughters needed, nothing exorbitant, but groceries for 7 are not cheap, and my dad would get mad about how much things cost…while he spent $70k a year keeping the family almond farm going!). My parents to this day have minimal retirement savings other than the land they own (50 acres in the California Central Valley), which is still mortgaged. They never really taught me to manage money, but it was always pretty apparent to me that spending more than you make is a bad plan in general. In any case, being debt averse and interested in many, many things (I changed my major 3 times in college and graduated with political science, psychology, a minor in neuroscience, and decided to go to medical school right before my senior year), it made a lot of sense to do an MD/PhD program (the ultimate decision-delayer for people who can't decide what they want to do!). I was fortunate enough to have my choice of several programs, and since I had been in California for my entire life, I wanted to see what life was like outside the state. I chose the University of Chicago. It was a long road, but I eventually got through my PhD after realizing halfway through that I really did not want to continue in basic science research! But I also did not want to accrue $100,000 in debt for the rest of medical school, so I stuck with the PhD. I finished medical school in 2007 and started a general surgery residency. This did not last long, as my contract was not renewed after my intern year. I was devastated. But it turned out to be the best thing that ever happened to me both personally and professionally. I was not ready to give up the dream of surgery, so I did a second year at the only other residency program in the area. I became very close to a co-resident, and he eventually introduced me to his identical twin, who became my husband. After I finished that second year, I had no residency position at all, so I was forced to evaluate my options and choose another specialty. It was very difficult to get back into a residency program – I spent two years working at an urgent care clinic in the Philadelphia area, and enjoyed it far more than I had thought I would. I knew I wanted a procedure-based but non-surgical specialty, and I hated spending hours and hours rounding on patients – so I considered both anesthesia and emergency medicine. I applied through the Match initially in anesthesia, and when I did not match that year, expanded to emergency medicine and anesthesia the second year. I thought long and hard about what I really wanted from a specialty, and finally chose anesthesia with plans to pursue critical care fellowship, since I really missed having my own patients. I was lucky enough to have made valuable connections in medical school; they helped me secure an anesthesia spot outside the match, which started 4 years after I had completed medical school and 2 years after I'd left surgery. By the time I finally finished my anesthesia residency, I had been out of medical school for 7 years; my peers who had started medical school at the same time as I had (in 1999) had been attending physicians for as long as 8 years. In choosing a specialty, you must decide procedure-based or clinic-based, primarily outpatient or primarily inpatient, flexibility with regard to family demands (although I did not think about this since I was unattached during most of this time), and whether you want to be primarily a consultant or “the” doctor for that patient. It's also very important to consider what life is like beyond residency – this is very hard to do when you have the limited perspective of a 3rd year medical student, but you really need to ask attendings what their lives are like several years out and how they are balancing everything. I have a feeling many medical students make the mistake of not thinking beyond residency. In my case, I knew I wanted to have some ownership of my patients and relationships with them that last longer than a few hours – anesthesia does not really offer this (unless you go into pain medicine). During my two years of surgery I had spent a great deal of time in the ICU, and I really enjoyed the challenges and rewards of caring for critically ill patients. As it turns out, critical care and anesthesia are also fairly well-reimbursed fields compared to primary care. I did not consider this aspect at all when choosing a specialty (I needed a residency, any residency!), but it was a very fortunate choice since it now enables me to work part time. The only caveat to this is that outside academic centers, it is difficult to find positions that allow one to do both critical care and anesthesia. So, I have two totally separate part time jobs at two different hospitals, and no benefits with either job. And in order to be part time, I work in an anesthesia group with very low reimbursement, such that my ICU time actually pays better (for example, the anesthesiologists at the hospital where I do critical care actually make slightly less than double what I make per hour for anesthesia). Nevertheless, I'm currently 1.5 years out of fellowship, working approximately 30 hours a week (in-house time; my actual “work” time involves a great deal of home call too, so I've just given the in-house time) between both jobs.Did you graduate with student loans? How much & what are the interest rates?
The ordeal of being forced out of residency training and spending time working would have been a financial catastrophe if I had had any loans other than a small amount from my undergraduate time. I went to a private university, graduated in 1998 with about $30K in loans, which were consolidated many years ago at a 2.8% interest rate. I'm not paying them off quickly because I can earn more than 2.8% investing, and I started saving for retirement very, very late. The time out of residency (prior to completing one) was a dark period in my life because there was no job security as a non- board-eligible physician (insurance companies will not reimburse for your care for the most part), and I had no guarantee that I would ever be able to secure another residency spot.Financial aspects of kids
When did you have them?
My first was born during my fellowship and went to an excellent and very affordable home daycare about a mile from our house ($270/week). I specifically chose a fellowship program that did not have a significant in-house call requirement. The program also offered weekends off. This was extremely important in terms of work/life balance! My second child was born during the first year I was in practice. I knew after having my first child that I wanted to work part time, and I wanted to be in private practice rather than academics since I just do not do well at large academic centers with their combination of killer politics and enormous egos. Spending time with my children is my first priority (although working is sometimes easier!) They are almost 1 and almost 3, and will go to public school (our priority when purchasing a home was excellent public schools, so as a result we are in a half-million-dollar <1,000 sq foot condominium!). We were able to find an excellent sitter for them, who picks them up in the mornings on the days I work and cares for them in her home, with her own children and one other child. She works with my flexible days, and we pay her a guaranteed minimum every week (two days), with a small bonus for more than 3 days a week and an extra $20/day for pickup. We spend an average of $1800 a month for care at the moment. We were also fortunate that my husband's parents came from India for 6 months to help us when each child was born; neither had to go to daycare until age 8 months. We plan to have a 3rd child if we are able (I'm already 40!). We do not plan to fully fund our children's college educations; we are saving for state school for undergrad at the moment, which is $400/month/kid with any additional money from grandparents going in as well. We started each 529 account with the $3,000 gift from paternal uncle and grandparents. This is because we have been cautioned that you cannot borrow money for your retirement, but you can for education.Financial aspects of marriage
Are you married?
Yes. I married quite late in life as well – during my 3rd year of anesthesia residency, at age 36. We had many in-depth conversations about our goals and plans for life, including finances, before we got married. I tend to spend a bit more money than my husband, and enjoy eating out quite a lot more, but overall we are very much in agreement. He is a PhD trained software engineer, and came to the US in 2002. He has been saving money for retirement or a rainy day ever since then, even when he was a graduate student.Did you get a pre-nuptial or post-nuptial agreement?
My husband and I do not have a pre- or post-nuptial agreement; neither of us cares about money very much, and we trust each other completely. We would both just want the best for our children if we were to separate.Do you and your husband agree on finances?
We have full access to each others' accounts, although I do our financial planning. We never really combined accounts; when I was a resident and there was a large discrepancy in our incomes, we split expenses proportionally based on after-tax income. We have a single joint checking account which we use only to deposit checks with both our names on them; otherwise we pay set expenses from our individual accounts (he pays mortgage, property taxes, shared credit card bill; I pay kids' expenses, various insurances other than his life insurance, and transfer money to him if we have large purchases on the credit card, like plane tickets or new furniture).Are you the breadwinner?
Now, we both earn six figures – he is full time and I am part time at two jobs, and I expect to make somewhat more than he does this year for the first time. Last year I took 3 months of unpaid time off (a month total of vacation, 2 months of maternity leave), so I did not make as much as I will this year.Have you experienced a financial catastrophe?
My boss at the urgent care clinic (before anesthesia residency) was one of the least honest people I have ever known; the only bona fide financial catastrophe I have experienced was a baseless lawsuit he brought against me during my second year of anesthesia residency (for breach of a contract he'd tricked me into signing without realizing it). Hiring a lawyer for the suit, which dragged on for 6 months, set me back $35,000 – money which my fiance at the time ended up paying off for me.General Finances
I started my journey of learning about money management in my dark period between residencies, when a friend referred me to the book “I Will Teach You to be Rich”, by Ramit Sethi – I'd never realized personal finance could be so funny! Although it is not specific to physicians, the principles of the book are very accurate and based in how people really live, not how they think they should live or how they think they are living. From there, I worked with a financial adviser who collects residents via free dinners and offers them free advice during training, then wants 1.2% of AUM plus $2,400 to do a “life” plan once done with residency. I broke up with him after I realized the 529 he'd steered us toward for my firstborn cost ~6+% and a state plan I set up myself would cost about 0.3%. But I do credit him with helping me get life and long-term disability insurance, as well as pointing out the need for umbrella (and therefore high-limit home and auto) insurance. I've not yet needed to use my long-term disability coverage, and it is quite expensive ($4800/year for a $7,200 monthly benefit). I just don't want to take the risk of getting rid of it. It is cheaper, incidentally, if you pay for it annually rather than monthly (mine is about $20/month less).What’s your FI (financial independence) number?
I am still trying to figure out what our financial independence number is; probably somewhere close to $4 million, assuming we spend about 25-30 years in retirement and need about $150K/year. It is very difficult to know exactly what this number should be, since it depends on how old we are when we retire (husband wants to be done around 60, I am thinking perhaps 65, and we expect to live to be at least 90 since I have two grandparents still living in their early 90s), as well as what happens to Medicare in the next decades. If we are unable to gain insurance through Medicare, the numbers will be VERY different. It also depends on where we want to live and when/whether we end up buying a bigger house (anything in a good school district is about 1.5 million right now, and if we wait to buy, it will only go up).What is your net worth?
I'm not sure exactly what our net work is but it is somewhere close to $1 million given my husband's 15 years of dedicated saving. The current plan is to save like crazy for another 7-8 years to try to hit $2 million, then reduce our contributions to more like 50K/year and buy a larger house, with extra payments to the mortgage if we can afford them. The flaw in all of this is that we will have to sell our current condo to afford a down payment, but we would prefer to keep it to make money. I will also very likely have to take a full time job since there will be simply no way to afford payments on a 1.5 million dollar mortgage (with $2,000+/month of property taxes) without a combined income of at least $500K – housing expenses will be $12,000 per month once extra expenses, insurance, and taxes are factored in. This compares to $2,900 a month on our tiny condo. Running those numbers makes me think perhaps we will just stay here forever and find a way to squeeze our hoped-for three children into our 2 bedrooms!How are you saving for FI/retirement?
Our savings goal at present is $100K/year (we were at about 90K last year, which was about 35% of post-tax income). This is a combination of a solo 401K for me (lower fees and up to 25% of net profits as the employer contribution, a better deal than the 401K offered by my W2 anesthesia position), my husband's 401K (with a paltry $3,000 employer contribution), backdoor IRAs for both of us, and his discounted employee stock purchase program (17,500/year). The remaining amount goes in taxable accounts (Vanguard brokerage account). I have a few individual stocks, but the vast majority of my portfolio is Vanguard index funds (I like the Target Retirement Date funds since they automatically rebalance as the target year approaches). I have a little money invested with Lending Club and Ariel Investments; the fees for the latter are quite high (about 1%), but their average returns are about 10%, so I figure it is worth a try for a few years.One thing you wish you knew/regret:
One thing I wish I had realized about marriage is that there is a tax penalty for it unless only one spouse works, since the total household income determines the tax bracket! We both have zero exemptions and extra withholding on our W2s, and I pay very large amounts of estimated taxes on my 1099 income because I do NOT want to be unpleasantly surprised by a large tax bill at the end of the year. Since I have been doing this we have gotten large refunds. My greatest financial regret is that I did not save any money during my MD/PhD years – I was earning a stipend for living expenses, and making extra money by doing TA-ships and working as a waitress…but I spent it all. I saved nothing until I started residency, and even then it was only about 5% of my paltry salary. I didn't even save much during the two years I worked in urgent care and earned $125,000 a year! On the other hand, doing MD/PhD has saved me from the crushing debt burden of most physicians, and I never had any credit card debt either. But the magic of compound interest is something I truly wish I had harnessed in my 20s instead of my late 30s.Any parting words of wisdom?
I feel thankful every day that I have finally achieved the dreams I had as a young woman – working part time, in both my chosen specialties, a mother, a wife, and in the area I'd always dreamed of – close to home but not too close. I hope that by participating in this series I have offered some insights that may be able to help others do the same.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 hope you enjoyed reading Cecilia's story!]]> Read MoreWe were at my parents' in NJ when the bleeding started. My first call to the on-call OB was met with reassurance. “One episode of bright red bleeding + clots is ok.” Except it quickly became 4-5 episodes in < 1 hour. The next call – “Go to the nearest ER.” Except that I wanted to be at my hospital with my doctors. I felt ok and the bleeding was intermittent so we took a chance and decided to head to Long Island. Google maps said it would take 1 hour. So off we went. We left Eggy home with grandma. We let my OB's office know we were on the way. I double diapered myself and brought chucks for the ride. I brought my donut pillow to sit on (3rd degree tear …). The last 20 minutes or so were scary. I started bleeding profusely and constantly. I bled through the two diapers, onto the chucks, onto the donut pillow, onto the seat and seat belt. I tell M he may get rich sooner than planned … But I feel fine. I check my pulse, seemed “normal”. We roll up to the ED entrance. The security guard immediately puts me in the wheelchair as blood is spilling out of the passenger seat. M goes to park. I get wheeled into triage and the nurse starts to do intake and looks at the blood pooling below me, “I'll register you later…” then wheels me into the ED directly into a trauma bay – “Crit B”. M parked and when he arrived at the ED entrance looking for me the guard says “Follow the trail of blood.” The usual happens. Vitals are taken. I'm slightly tachy. My BP is high as my body is compensating for the blood loss. 2 x 18 gauge IVs are placed quickly. Blood is sent. My on-call OB arrives. An ultrasound of my uterus is done. 1 unit blood was hung pretty quickly as I am whisked to the OR for emergent D&C for presumed retained parts. I wake up in recovery. I'm getting a second unit. Anesthesia did a great job as I remember nothing and have no pain. The NP examining me notices my engorged breasts and gets me a breast pump. I'm not sure how I managed to pump but I did (with assistance from M). I end up in recovery for several hours since a 3rd unit of blood is given. I finally get wheeled into a room at ~ 4am. Two weeks prior to this, Eggy was born. This sweet moment only lasted a few minutes as I started hemorrhaging after the placenta was delivered (yes I've had not one, but two hemorrhages). After a few minutes of skin to skin with Eggy, I suddenly feel very cold and shiver uncontrollably. Things are a bit of a blur but I remember the room being suddenly full of doctors and nurses – the “OB crash team” so to speak. Another IV is placed. I see M in the corner holding Eggy. I'm getting shots to stop the bleeding. M later tells me blood was pouring out and was all over the floor. I turned white including my lips. I received two blood transfusions. After 5 blood transfusion in two weeks, it seems like more blood is foreign than mine. A 10lb sand bag is placed over my uterus to contract it. These recent experiences taught me that life is precious. I'm grateful I didn't have a home birth (was never a “dream” of mine). I'm grateful for the doctors (shout out to my OB – good friend from medical school) and nurses that took care of me.]]>
Read MoreWelcome 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 – Rebecca.
Tell us about yourself:
I’m an Internal Medicine physician turned Stay-At-Home/Homeschooling Mom. I met my husband the first day of intern orientation, and we are celebrating ten years of marriage (and four children) this year. Since we met while we were both in the military, we move where the military sends us, which included eight years in one of the most expensive cities in the country and now the past three years in a Southern coastal city with a moderate cost-of-living. I graduated from residency eight years ago, but I only practiced clinical medicine for five years after residency. I trained in the military and served my three-year military commitment practicing general Internal Medicine, during which period my first two children were born. At that point, I got out of the military and took a part-time civilian job for two years, until the military moved my husband (and the rest of us) cross-country when my third child was five weeks old. I planned to take an extended maternity leave to get settled and enjoy this time with my kids, but I enjoyed it so much that I never wanted to go back. We then added one last child to the mix and started homeschooling. This was not my original plan when I started my medical training, but being debt free has given us the freedom to make this choice. When I’m not making lunch, reading Charlotte’s Web, making salt dough maps, and exploring fractions, I read, knit, visit historical sites, and volunteer for far too many community organizations.Did you graduate with student loans? How much & what are the interest rates?
I had about $50k worth of loans from my first year of medical school (before I joined the military) that were consolidated at around 2%. My husband had no loans. I paid them off as quickly as I could, and finished paying them sometime before I graduated from residency. That may have been a financial mistake, given the low interest rate, but I wanted to be free of them.Financial aspects of kids
When did you have them?
We have four kids, ages 4 mos to 7 years. My first child was born about seven months into my first attending job, and the second child less than two years after that. I was active duty military and only entitled to six weeks of maternity leave, but it was fully paid at my usual salary. I had my third child at the end of my part-time work, with no benefits, and my fourth child while I was already a SAHM.Are you planning to fund their college expenses?
We feel strongly that we want to pay for four years of undergrad education for our four children because our respective parents did that for us. The finances on 16 years of college are daunting. We have 529 funds for each kid in each of the two states where we have a state income tax obligation and get a tax break. My husband transferred his post-9/11 GI Bill, which would cover the full cost of state school for one kid or about half the cost of private school for one kid, although that benefit is subject to political maneuvering and we are not counting on it. Knowing that we hoped for multiple children, we started funding the 529 account for my oldest as much as we could when he was born, and have been able to slightly increase the total amount saved with each kid, but our current contributions are only about double what we started, not quadruple. We currently save a little more than 10% of our take-home income for college and that puts us on track to be able to fully pay for all four kids for state schools. All the money in the 529s belongs to me, not to the child, and we treat it as a single pot of money to move among children as needed. We will reassess as they get closer to college and see if we will be able to pay for private schools as well, maybe via our taxable account, cash flowing from income, if grandparents offer any money – we’ll see, but even if we can just offer a state school, that would be fine.What are your child care expenses?
Childcare for the first two was initially on the order of $1800/mo for center-based infant care, until we were able to get them off the waitlist into the subsidized center on base. That was about $1000/mo for two kids, so a significant savings. Childcare once we had kids #3 and #4 is either really cheap (free!) or really expensive (the entire amount of my potential wages). We decided on center-based care because we were more comfortable with a group of caregivers instead of a single caregiver, cost, and the availability of on-base care with hours that worked well for our usual schedules.Financial aspects of marriage
How and why I became a SAHM – I had no flexibility with the length of my maternity leave or my work hours while I was active duty. When we learned that we would be moving cross-country with a 4.5yo, a 2.5yo, and a newborn, I decided to take advantage of the last year before my oldest would start kindergarten and keep everyone home with me and enjoy exploring our new city. It was significantly more satisfying (and more fun) than seeing patients and filling out pre-auths for generic drugs. While I liked practicing medicine before I had kids, I loved staying home with them. Part time work was not the best of both worlds for me; it just made me feel like a bad doctor and a bad mother. Once I paid for taxes and childcare and funded my retirement account, I was only bringing home about $500/month, which we haven’t particularly missed. I’ve managed to replace some of the solo 401(k) contributions by picking up some consulting work. Financially, staying home was a wash when we had three kids; now that we have four, I’m saving money by not working. Since I was already staying home, we decided to homeschool kindergarten to maintain flexibility in our family schedule when my husband was deployed. Homeschooling proved to be a wonderful fit for our whole family, meeting the academic and social needs for our children better than we feel any of our local schools would. At this point, with lots of soul searching, I decided that – barring a major change – I don’t want to return to clinical practice while my kids are young, so for a good decade or so. I maintain my licensure and board certification, but if I return to clinical practice, I plan to do a formal re-entry program. If we don’t need the money, I might become a park ranger instead.Are you married?
Being married and having finances is the key to our financial lives, especially as a one-income family. This is the only marriage for each of us, and the only children we have are ours together. We met at intern orientation, and married just over a year later. We were both military physicians of the same rank, without significant assets and with only a relatively small amount of debt from medical school and a car loan.Did you get a pre-nuptial or post-nuptial agreement?
We lived in a community property state and did not get a pre-nup or a post-nup, for both religious and practical reasons.Do you and your husband agree on finances?
We combined all our (non-retirement accounts) since we married and consider all of our money “ours.” Originally we shared responsibility for paying bills and managing money, but I took over all the financial management during my husband’s first deployment, and I have continued to manage all the finances since then. In general, we have similar (but not identical) attitudes towards spending and saving. We used to budget by the method of “pay ourselves first” and then save whatever was left-over at the end of the month, but started formal budgeting prior to my getting out of the military. We use YNAB (You Need a Budget), and now that we account for every penny, we allocate each spouse a personal/hobby budget that rolls over from month-to-month. I do about 80-90% of the spending since I do all the spending for the household and 5/6 of the people in it. My husband likes to complain about his “allowance,” but admits that he is in agreement with the plan and just likes giving me a hard time about it. My husband does not participate in the day-to-day budget reconciling or financial management, but we sit down for budget meetings every 1-2 months.General Finances
What’s your FI (financial independence) number?
We haven’t fully determined our number. There are several big unknowns that won’t be determined for the next 4-10 years, such as where we’re going to live when we get to pick instead of the military, and whether or not my husband stays in long enough to qualify for a pension. Our expenses will likely not decrease significantly with retirement, and may even increase. We currently have no health care expenses, we are not yet building equity in our forever home, and a good portion of my husband’s compensation is a tax-free housing allowance. Our annual expenses, after taxes and retirement contributions (but continuing college savings) are right around 100k, so at 25x expenses, our number would be 2.5mil, which does not sound like enough money to me at all. At 40x expenses, the number is 4mil, which sounds more reasonable. I will not consider us FI if we aren’t able to pay for college for the kids, and probably wouldn’t feel FI, regardless of account balances, until all the kids are through college and financially independent themselves. The kids should all be through college a few years before we hit age 60, but we are on track to have the money a good 5-10 years before that. We’ll have to see.Who handles the finances in your relationship? Are you DIY or do you have a financial advisor?
We have always done it ourselves. We both started with a solid grounding in the basics of saving and investing from our parents, but I’m more interested in the topic than my husband. Generally, I keep an eye on things and do the research and then we discuss before making any commitments. Because we started young when things were simple, as we’ve added complexity with more marriage, more investments, children, 1099/Schedule C, homeownership, etc., I’ve only had to learn one or two more things per year to manage the finances and do our taxes.What is your net worth?
Our net worth, including an estimated $50k of home equity is about $950,000. If I could include the 529 accounts, it’d be a nicer, rounder number with an extra zero.How are you saving for FI/retirement?
My dad gave kitchen-table lessons about the merits of passive low-cost indexing from the time I was about 10 or 12, and we have continued that trajectory. We essentially have a Bogleheads 3-fund portfolio replicated across 2 TSP accounts (government 401k), 2 Roth IRAs, 2 SEP-IRAs, and 1 solo 401(k). We max out my husband’s TSP at 18k/yr, both Roth IRAs (we are comfortably under the limit for being able to make direct, instead of backdoor, Roth IRA contributions), and have SEP-IRAs from prior 1099 work. I contribute all my consulting money, minus required FICA taxes, as my employee contribution to my solo 401(k), and may max it out this year although I haven’t made enough to do in prior years. We have a decent taxable account, but have only been able to contribute to this irregularly as our family and expenses have grown. All told, depending on how much 1099 income we have in a year, we are saving 38-45k/yr in retirement accounts, which is 25-30% of our pre-tax income and puts us on track to retire between 50 and 60, depending on what we decide our FI number is. Our asset allocation is 60% domestic stock, 30% international stock, 10% bonds, and 0.5% REITs. The REITs are new in my new solo 401(k), and I’m still contemplating whether I think the added diversification is worth the loss of simplicity, which is why I’m not including it in any rebalancing, just adding my solo 401(k) money there. I rebalance annually in March, and generally rebalance by changing the allocations for incoming new money rather than selling and buying, unless there’s a variance of more than 5% from my target asset allocation.One thing you wish you knew/regret:
We are not interested in real estate investing and have no interest in being absentee landlords, but bought a house when we moved to this duty station. Knowing what I know now . . . houses are expensive. And while it hasn’t been catastrophic, it’s mentally stressful to worry about moving given that we will be on the military’s time frame and not our own. We may end up “diversifying” into real estate whether we like it or not.Do you have insurance?
We have life insurance on both my husband and myself, although less than many doctors. Our only debt is a mortgage that would be more than covered by the sale of the house. We figure we are self-insured for the first $1 million, and have 30-year policies for another $1 million on my husband and $750k on myself. We made these calculations based on three kids so should probably revisit them now that there is a fourth. Our calculations assume that I would return to work after 1-2 years if we did not have my husband’s income. We do not have disability insurance as my husband is still active duty and it wasn’t on my radar before I stopped working all together. We will have to reexamine that when he’s getting out of the military, but it would be less of a concern if he has a pension. We carry the rest of the usual insurances – auto, home, umbrella.What does FI/retirement mean to you? What does it look like?
We are not FI, but we are on track. I call my stay-at-home/homeschooling life a “sabbatical” from medicine, but financially I think of it as taking some of my retirement years now, while I am young and while my children are young and at home. Our days are full – but joyful – and I feel very lucky to have this time to raise my children, explore our area, support my husband’s difficult schedule, bake muffins, and read good books. I left clinical practice at age 33, and I anticipate returning to paid employment in some capacity in my mid-to-late 40s and work 10-15 years. Whether or not I’ll return to medicine depends on a number of financial and non-financial factors, but I’m really considering the park ranger idea.Do you give to charity? If so, where and why?
We give regularly to charities including our church, our almae matres, and various charities that meet basic human needs like food, shelter, and clean drinking water. This is a line item in our budget, about half of which goes to regular contributions to our church and the local food pantry, and the other half we donate in larger sums as we see fit. In December, we take whatever is left and divide it up for the children to decide which charities they would like to support and we help them find and research charities working in areas that interest them. We also observe a Lenten fast where we eat more simple meals and give up treats (like ice cream and Amazon Prime), and donate the extra money that frees up in our budget.Any parting words of wisdom?
Although we are a dual-doctor couple, our finances more closely resemble those of non-doctor professionals than those of most doctors. We didn’t have significant loans, we started earning a decent salary at age 26 right out of medical school, and has increased more-or-less linearly to a low six-figure salary. We paid off our debt and started saving and investing within a few years. We did not max out all out of retirement accounts every year (hindsight!), but we were at that point by about age 30. Like many non-doctor professionals, we have benefitted significantly from income smoothing, earning the same amount of money across a longer time period. There was one year we were (barely) in the 28% tax bracket, but every other year of our married lives we’ve been in the 25% tax bracket. Our annual income is a fraction of many of our peers, but this does two things: 1) it prevents lifestyle inflation so it keeps our FI number lower (as a multiple of lower expenses) and 2) we got an 8-10-year head start. We live (and enjoy) a decidedly middle-class lifestyle rather than a “doctor” lifestyle – We have a nice house with a nice yard, but it’s 30 years old. I drive a new Honda Odyssey, my husband drives the 11yo Volvo sedan that I bought when I graduated from medical school and only has air-conditioning sometimes. We get our movies from the library and occasionally Redbox. I’m still wearing several pairs of shoes I bought over ten years ago. I sew patches over the torn knees of my boys’ pants and hand them down to the next kid. I even wash and reuse Ziploc bags. We are frugal and aim to keep expenses down so that we can spend our money on things that matter to us – date night, all the books we want, swim and piano lessons, at least one nice family vacation a year, a few long weekends, and several other trips to visit family. The power of compounding: Here’s my Vanguard balances graph (numbers removed) over the past 10 years. This is our taxable account, but our Roth IRAs show a similar graph. We married in 2007, finished paying off our loans, and started investing in 2008. The green is contributions, the blue is investment returns. We have now hit the tipping point where our compounding is really compounding on itself – you can see that we’ve continued to make contributions at a much slower rate than before (4 kids!), but that the investment returns keep going up.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 Rebecca's story and I hope you did too. Definitely a different life than most women physicians.]]> Read MoreBefore any big change in your life (hello, moving!), it's important to get your finances in order. We consider the cost of a move, and we compare our current salary with our future position. But what about saving for your future? It's probably not on your mind when you're thinking about moving. But for my recent move, a Mega Backdoor Roth IRA was something important to consider.
our move to a MCOL. I had less than 2 months before my planned maternity leave to figure out how to make sure I was maximizing benefits, particularly my work-sponsored retirement accounts.
My Work-Sponsored Retirement Accounts
To recap, here are the retirement accounts I have through work:
- 403(b) – I max out my contribution at $18,000 and receive a generous employer contribution + match. I am currently 40% vested in employer contributions.
- Private 457(b) – I max out my contribution at $18,000. There is no employer contribution.
- Cash Balance Plan (aka small pension) – Unfortunately, I am 0% vested, so I will lose it all.
In addition to these work retirement accounts, my Roth IRA for 2017 was funded in January.
Planning Ahead for a Move
Since the leave was planned well before our move to a MCOL, I had already increased contributions to my work's 403(b) and 457(b) so that my contributions would be maxed out by the end of September.
I was unable to get a straight answer from HR if I can continue to make contributions when short term disability pay kicked in for my maternity pay, so I played it safe. I also could not get a straight answer if I would continue to get employer contributions plus the match match if I front loaded the 403(b) and 457(b).
Thankfully, the employer contributions + match have continued!
Now, I will be separating from my job (I am employed until the end of December), some things will change. I am starting a new job in 2018 that only offers a 401(k). That means I'm losing my 457(b) and cash pension plan.
Because of that, I decided to take advantage of the Mega Backdoor Roth IRA (linked to excellent article by Mad Fientist).
What is a Mega Backdoor Roth IRA?
You might be wondering what exactly is a Mega Backdoor Roth IRA?
It is the ability to contribute an additional $36,000 a year into a Roth IRA. This is in addition to the regular or backdoor Roth IRA of $5,500 annually.
I knew this was an option through my work's 403(b) since they allow non-Roth after-tax contributions (aka NRATs). This is not the same as being able to contribute to a Roth 403(b) or 401(k). These contributions are in addition to my $18,000 employee contribution. You can contribute NRATs up to the total limit of $54,000 (for 2017).
Obviously, I want the free employer contribution + match, so I am limited to contributing an extra ~ $15,000 in after-tax contributions. But if you have no employer contribution then you can contribute the difference of $54,000 less $18,000, or up to $36,000.
Understanding Mega Backdoor Roths and Taxes
One caveat is that you want your plan to allow in-service distributions, meaning that you can move the NRAT portion of your 403(b) or 401(k) out of the account and into your Roth IRA. Some plans let you do this quarterly or annually. Mine only allows this upon job separation.
This is not a deal breaker, but this means that I will owe taxes on the gains only. One will still owe taxes on the gains with a quarterly or annual in-service distribution, but it will have less time to make gains, so they should be minimal.
Why This Money Move Was Right Before Our Move
I did not contribute to this in the past since I'm still paying down student loans. But now that I am leaving and losing a good amount of tax-advantaged space with the new job. It made sense to “fill up” this bucket before my move.
Final Thoughts on Mega Backdoor Roth IRAs
To summarize, here is how to tell if you are eligible for a Mega Backdoor Roth IRA. Ask yourself these questions:
- Does your plan allow non-Roth after-tax contributions?
- Does your plan allow in-service distributions? How often?
- If yes to both – you are lucky! And have an additional potential $36,000 to contribute to your Roth IRA
If you're eligible to contribute or you want more information about a Mega Backdoor Roth, make sure you swing by the Mad Fientist's article. Whether a Mega Backdoor Roth is the right financial move for you or not, before you move to a new city or simply change jobs, make sure that you think about your future money situation, too.
Have you heard of the Mega Backdoor Roth IRA? Comment below!]]>
Read MoreSometimes, the right money move means an actual move. Here's everything you need to know about making the move to a lower COL based on my very own move.
Considering the Possibilities
I put in my 90-day notice at my job (my first job out of residency) the end of September. This nicely coincided with my maternity leave, so I won't be returning. M also gave notice around the same time. Why? M was offered an opportunity he (we) couldn't refuse.
Except the job was not in NYC or within commuting distance. Let's just say my initial response was “Hell No” as a New Yorker. Our first trip to Philadelphia together–aka the “I need to convince Bonnie trip”–didn't end well.
At first, I was excited. Philly is a lot like Brooklyn (Shhh, I've been told they don't like to hear that!). But then, as the day wore on, I was sad about leaving my friends and my life here.
I was a wreck.
Exploring New Opportunities
However, it became clear to me this was a job he could not turn down for his career. So, I figured, at the very least, I should check out the job market for me and see what turned up. There was no shortage of opportunities for me. I looked into both private and academic positions.
For a number of reasons (new addition to family being a top one), I decided to leave academics and join a private practice. The deal was clinched when M said “we can retire 5 years faster.”
I found a job that I am excited about. It doesn't hurt that both M & I will also be increasing our incomes significantly and living in a lower COL area. I took advantage of the job and location transition to take an additional month of maternity leave bring the total leave to 16 weeks.
Not quite LCOL, but for us New Yorkers, Philadelphia is a significant drop in COL. So we are practicing a bit of geographic arbitrage.
So here is what I learned from by making a move to a lower COL:
#1. Don't be afraid to see what else is out there.
Explore options job wise. Obviously, I knew I was making less being in academics AND being in NYC (doctors get paid less here…). But until I saw the numbers in front of me, it didn't feel real.
#2. Don't be afraid to move.
Moving is one of the top stressful events for adults (and children). I could see us living in NYC for the foreseeable future. Once I ran the numbers living in Philly vs. NYC (incorporating our new higher salaries, less taxes, less expensive childcare), it really was a no brainer. At the very least, it can't hurt to try!
Both WCI and Physician on Fire espouse living in a lower COL to get you to FI faster. I finally listened to them.
Thankfully, my parents live in New Jersey, so Philly isn't that much further away. Also, they can still be quite involved with helping out with our newborn.
#3. Sometimes you just gotta do what's best for the family.
We would've been “fine” staying here for a while or forever. I'd be lying if I said the cost of childcare (and private school if we went that route) in NYC didn't cause some heart palpitations, though.
Both of us have lived in NYC for several years and were open to trying something new.
NYC won't be going away if we want to come back.
Final Thoughts on Making a Move to a Lower COL
It's hard to give up what you know, what feels familiar, and what you call home. However, if you're feeling a pinch financially or want to accelerate your FIRE journey, a move to a lower COL area might be the right decision for you.
Have you moved to a lower COL? Comment below!]]>
Read MoreWelcome 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 – Diana .