net worth

2017 Wrap-up

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? 

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Making the Move to a Lower COL

Sometimes, 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!]]>

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Surviving $350,000 of My Biggest Financial Mistakes

I've estimated that these mistakes have cost me at least $350,000. Meaning that if I didn't make them, I'd have at least that much more money saved. Big sigh.

Here are the biggest financial mistakes I've made and survived to date:

#1. Cashing out my old work's 401(k) plan & selling company stock

I started a coveted job at Morgan Stanley in 1999 right after college. It was the height of the tech boom. My starting salary was $50,000 + a small guaranteed bonus. (I made the same as a resident in 2012!) My first 6 months was in London with all expenses paid.

I was an ex-pat there – meaning I was paid my U.S. salary but received free housing (picture beautiful 2 bedroom, 2 bath furnished apartment with marble bathtub, heated towel stand across the street from Hyde Park, neighboring the Grosvenor House) and a generous cash per diem. I did not have to spend any of my actual salary to live in London.

Now I don't totally regret this part – I was able to explore Europe on the weekends – weekend trips to Paris, Spain, Amsterdam. Priceless. Back then, friends and family from NYC could visit me in London for less than $400 roundtrip.

Plus, I had access to a 401(k) plan for the four years I worked there. I'm pretty sure I didn't max it out, but I still had a nice chunk in that account.

Still, I cashed it out in 2004. Yup, it gets worse. In addition to a company match, we also got free stock as part of our retirement plan. I sold it.

#2. Barely saving despite high earnings as a 22 year old

I listed my starting salary in mistake #1. About 1 year later, I got a $22,000 raise and a $25,000 bonus. This meant I hit 6 figures at the tender age of 23.

My only wish is that I had some savings to show for that! I lived paycheck to paycheck despite a high income. I guess I can blame NYC.

#3. Racking up $20,000 in credit card debt before starting dermatology residency

Yeah …. someone went a little nuts during intern year in NYC. I had awesome clothes, though. I paid it all off before graduating residency. Thankfully, I no longer carry any credit card debt and pay off cards in full every month.

#4. Not funding a Roth IRA until 2014

The Roth IRA was enacted in 1997. I've been earning money since at least 1992, so I'm not even counting opportunities to fund a regular IRA prior to that!

I actually never heard of the Roth IRA until sometime during residency so I feign ignorance prior to that. I couldn't imagine forking over $5,500 a year as a resident, but I totally could have.  This is especially true because I moonlighted most of residency.

#5. Not paying off student loans during residency

Every year during internship and residency I meticulously applied for deferment or forbearance on my student loans. Isn't that what everyone does? Apparently not.

By the end of residency in 2015, I had almost $50,000 of interest capitalized onto my loans.

Surviving My Biggest Financial Mistakes

You can always earn more income, but you can't create more time. That's why some of these financial mistakes really sting.

Despite these awesome mistakes, I should be able to reach Financial Independence within 15-20 years and pre-Financial Independence within 10 years or less.

Feel free to share your mistakes below!]]>

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Milestone reached ! My Net Worth is Zero

The White Coat Investor recently wrote an article about the financial milestones one should celebrate. Reaching net worth zero is milestone #1 on his list of 14 worth celebrating. So yep, you read that right and I'm proud of it! I no longer have a negative net worth. It took me about 2 years out of residency to reach this: I finished residency in June 2015 with a net worth of negative $207K which included about $210K in student loans. I finished 2016 with a NW of – $92K. Now I am at $0! I still have student loans but my retirement accounts + cash savings now equal my student loans. I made a conscious decision to not delay retirement savings due to my extra late start to attending hood at age 38. I could not afford not to start building up my nest egg to pay off my student loan debt quickly. Here are some of the other milestones I have reached: # 5 – Retirement Portfolio of $100K I reached this earlier this year. It does feel good to see 6 figures in them. Especially when your student loan debt is still 6 figures. # 7 – Buy Your First New Car With Cash Sort of. When I moved back to NYC from California, my parents let me take over a lease which had 1.5 years left. That lease ended last December. M happened to have a car that he no longer needed for his work commute. He still owed about $10,000 on it. I paid it off and now I drive it to work. Win/win. To complicate things even further, M & I have just recently considered our finances combined. We work with a financial planner and we plan (and she guides us) as if we are married. So, from now on, I will discuss our combined finances. In that case, we have achieved: # 6 – $500K Net Worth Our combined NW just passed $500K earlier this year. This is largely due to equity in his condo. M likes to joke he is the one keeping our NW positive. True for now ;). Although we aren't married, we have signed paperwork (wills, etc) that essentially bind us together. We also operate as a family now with Eggy due soon. What milestones have you reached this year? Make sure you celebrate them!]]>

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2016 Wrap-up

I am 1.33 years out of residency. Using White Coat Investor's net worth formula, I ended 2016 not up to par:

Expected Net Worth of a Doctor (ENWD) = Average Post-Residency Income X Years Since Training X 0.25

= + $93,100

or is it this equation from his actual book:

ENWD = Salary X Years in Practice X 0.3 – 200,000

= – $88,280

At the end of the day, Net Worth = Assets – Liabilities.

2016 ended with: – $92,000

But what that negative number doesn't reveal is that I had:

$10,000 cash savings

$85,000 retirement accounts

and of course, student loans, at $187,000.  I finished residency with $200,000 in loans.

I did not count my very small 529 account.

My 2016 savings rate was 27.4%. I included retirement savings, cash savings, and extra payments towards student loans.

2017 Financial Goals:

  • Cross over into positive net worth
  • Knock out 50K of student loans (this is in addition to the min. payments)
  • Max out all available tax advantaged accounts ($47K, not including employer contributions)
  • Start a taxable account

M and I hired a financial planner just before the New Year and we are excited to start planning!

How did your net worth grow in 2016? Comment below!

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