This month marks a big financial milestone for us as we (finally) have a positive net worth.
There hasn’t been any grand secret for us. We didn’t hit it big on leveraged positions on hot tech stocks. We worked hard in residency and obtained lucrative jobs and save more (a lot more) than we earn. We refinanced our student loans to very good rates. In an average month, here is our breakdown of our spending:
- student loan payments $12,500/mo
- mortgage payment $3,000/mo
- retirement contributions $7,500/mo average (401ks, Roth IRAs, HSA)
- 529 contributions $400/mo
There is certainly an element of luck. We have benefitted from fairly good returns in the market the past few years (although we’d benefit a lot more from a deep bear market as discussed in one of my favorite finance books). We are certainly grateful for our family’s good health (although we are well-insured against illness and death).
We haven’t deprived ourselves greatly to get to this point. We partake in selective extravagance – hiring a housekeeper to come twice a month, going on a few nice vacations, attending local sporting events, buying a nice (nicer than we needed) family vehicle. Like PoF, I can’t cut the cord. We bought a very comfortable home with room to grow into that we hope to own until our children leave for college (and plan to pay off in less than eight years). We have had two kids during this period and taken two sets of maternity and paternity leave and employed a nanny throughout. We could have taken jobs that earned even more and that were located in states with no/low state income tax but we picked a part of the country we love and a city with great public schools.
At times we are also selectively frugal. We don’t shop at expensive grocery stores and I use my old cell phone rather than constantly buying new ones. We grow a lot of our own food in our garden (which we mainly do because we enjoy it and not for financial reasons). I’m lucky enough to wear scrubs so I don’t spend much on clothing.
But by and large we have reached the conclusion that our path to financial independence will not be based on cutting out the occasional latte or some of the other extreme frugality espoused online, but rather will be paved by working hard, having a stable combined income in the 99th percentile for the country, and devoting a large percentage of our income to debt repayment and retirement savings. We are confident we will reach our goals by age 50 by making a lot of money, setting our investments on autopilot and forgetting them, and avoiding some of the common physician pitfalls of divorce, huge real estate losses, timing the stock market/day trading, failed side business, etc.
What are your keys to financial success?