COMMON SENSE TO BECOME FINANCIALLY INDEPENDENT

Editor’s Note: This is a guest post by a fellow Wealthy Mom MD that goes by the alias Hatton 1 in the online world. This female physician is the blogger behind doctoroffinancemd.com and now part-time GYN who has achieved Financial Independence.

Miss Bonnie asked me to provide some pearls for achieving financial independence.  Who am I? Why am I qualified to give advice? I am a prolific poster on the White Coat Investor forum.  If I was saying stupid things I would have been shot down a long time ago. I also run a blog called DoctorofFinanceMd.com.  My main qualification is that I have been FI for years.  I am OB/GYN. I was able to stop delivering babies about 5 years ago and do GYN part-time.  

The younger you have your “AHA MOMENT” and start paying attention to money and finance the easier your journey will be. 

The only real difference between finances now and when I went to medical school/residency is the student loan burden. I would add that salaries are inflation-adjusted much higher now immediately out of residency to partially compensate for this.  I think learning every detail about your loans and different payback possibilities is incredibly important these days. I also think when you are a resident you need to live like one and minimize living expenses that you are borrowing!

Do not buy a house when you are a medical student, resident, or new attending!

I know you want one. This is one of the biggest mistakes you can make financially. It is really dumb if you have $500k of student loans.  You will find in life that there is always someone who will loan you money when you have MD (or DO) after your name. You have to continue to delay gratification if you want to achieve FI.  If you are young you may not yet realize that your first job is likely not forever. It really complicates your life when you are contemplating a job change. I know this because I bought a house as a new attending.  I was lucky to sell it quickly but it was luck and I made no money on the deal. The rule of thumb is not to buy unless you plan to be there for 5 years.

"You will find in life that there is always someone who will loan you money when you have MD (or DO) after your name. You have to continue to delay gratification if you want to achieve FI." Share on X

The smartest thing that I ever did was front-loading my retirement investments. 

What do I mean? I filled up my retirement space early every year then I dumped lots of money into a taxable account.  I started doing this at 31. By 45, I was working 3.5 days per week and paid off my house. The key principle is funding your accounts at a young age so you can benefit from compounding.  A taxable account is very flexible. You can put anything you want in it. You can access it at any age. You need some level of self-discipline to not raid it, however.

Whatever type of retirement investments are available to you is what you need to learn about.  Become an expert on your accounts. Quit worrying about stuff that does not apply to your situation.  For example, I know I cannot do a backdoor Roth IRA contribution because I have a large SEP/IRA. I do not want to pay a large amount of pro-rata rule taxes so I do not stress over the steps to do a backdoor Roth.

Choose what you worry about. 

Life insurance (if you have dependents), disability insurance, and umbrella insurance all are very important.  Quit worrying about losing a malpractice case greater than your policy limits.  

Be very careful about associating with Doctor Jones.

Who you associate with can really derail your path to FI.  I would recommend reading The Millionaire Next Door series of books and thinking about them.  Decide what is important to you. I see a lot of doctors derail their personal finances when they start trying to keep up with other very wealthy families they meet either at a country club or private school.  You can do these things but just be careful.

I personally do not invest in crowdfunded real estate, apartment buildings, bitcoin, timber, gold, silver, hard money loans, leveraged ETFs, VIX, or “angel” investments. 

I invest in stocks, bonds, REITs, and MMFs. Boring. Investing should be BORING. Over time boring investments will make you kinda rich. Guess what I am doing in about 10 days?  I am paying cash for a house. If you follow my advice you can also.