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Are you a high-income professional who likes their job but also wants to save money towards a life of financial freedom?
Maybe you need a little inspiration or some tactical advice on how to get there.
Enter Physician on FIRE, your friendly neighborhood physician who can give you the low-down on how doctors and other high-income professionals can achieve FI and lead a happy, balanced life.
If you’re not a high-income professional, don’t run away. We talk about optimizing for happiness in your life and tax hacks that apply to everyone too.
Other topics we dive into:
- Geographic Arbitrage
- Tax Reform
- Investing
- Optimizing for happiness
- Teaching the Norwegian army how to curl (?)
We had a blast with this one! Enjoy this chat with Physician on FIRE, and please subscribe to us in iTunes if you enjoyed it!
Show notes and links from today’s episode
- Physician on FIRE – his awesome blog
- PoF on Twitter
- Tax Reform for Physicians and Self Employed – PoF sharing the deets on the new tax law
- Mr Money Mustache
- Top 5 Reasons to Front-Load Your Investments
- Vanguard Backdoor Roth 2018
- White Coat Investor
- ERN: Our emergency fund is exactly $0
- Ep 30: Mad Fientist
- Ep 42: Michelle Schroeder-Gardner
- The Green Swan
- The Nordic Theory of Everything – book J is currently reading
- Coach Carson
Key takeaways from our chat with Physician on FIRE
1 – Don’t try to skip ahead in your life too much..
If you’re someone who always lives in the future, and you’re waiting for that moment when you hit your financial independence number, you’ll sacrifice many years of potential happiness along the way.
Stop.
There will always be periods of your life that you just want to skip ahead and pass, but then you’ll miss out on really experiencing your life.
Live each day to the fullest and optimize your decision-making for happiness – not the fastest path to a savings number.
2 – Geographic Arbitrage is where it’s AT for physicians..or anyone really
Location flexibility is HUGE. Like seriously, HUGE.
Certain areas of the country pay doctors more for certain specialties, and those areas are typically NOT the highest cost of living areas.
For example, an Anesthesiologist could make more money living in the midwest than a coastal city, allowing them to save much more.
YES – You can move to a lower cost of living area AND get paid more. Thanks, PoF for the tip!
J also brings up that location flexibility can benefit other professionals too.
Being willing to move for work can propel you to FI faster..but don’t do it at the expense of your happiness!
3 – Backdoor Roth IRA contributions can be a great tax saver..but easy to screw up!
If you are a high income professional, you may not be eligible to contribute the $5,500 to a Roth IRA.
You can instead contribute to a Traditional IRA and then convert that money to a Roth IRA.
Warning – you can accidentally mess up this process fairly easily..but there is huge financial benefit if you do it right.
Tips for the Backdoor Roth:
- You need to have a clean slate – zero balance – in a traditional IRA (for the tax year) before doing this
- Vanguard makes it easy to hit the “convert” button (they actually have a very prominent convert button)
- There is no special spousal IRA – but you can contribute $5,500 for your non-working spouse too
- Consult your tax advisor (we are not tax professionals!)
4 – Invest in a brokerage (aka taxable account) when you’ve already maxed out the tax-advantaged accounts
Physicians can be 10-years behind other professionals when they start saving and they may not have the years of tax-advantaged savings built up.
It’s really important to find vehicles to save money outside of your retirement accounts.
PoF recommends maxing out your tax-advantaged accounts and then saving in a brokerage or taxable account. He personally invests in low-cost index funds in those accounts.
(PoF doesn’t recommend keeping a massive cash balance, despite the guest post on his blog from VagabondMD).
Questions? Like or dislike? Leave us a comment!
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Physician on FIRE says
Thank you for having me on the podcast, J & Gwen.
If you’re ever up for a curling lesson, you know where to find me.
Cheers!
-PoF
snowcanyon says
Not everyone can relocate all their family and friends to a lower cost of living area. You didn’t move far away from your family (Texas, I’m sure, pays more). You went back to where you were from, and it happens to be cheap. I wouldn’t call that geographic arbitrage, but luck in having grown up somewhere cheap.
peony17 says
Mr. Mom? What is this, 1950? Let me guess…he “babysits” his kids as well.
And this is why some of us don’t live in flyover…
mp says
Food for thought: the only reason to consider term life insurance when you are single is that if you have future plans to have dependents (children, parents, siblings) you will likely be able to lock in a cheaper rate while you are younger and healthy whereas if you wait until you think you need term life, you may not be in the same state of health and it could be more expensive
mp says
food for thought: the only reason to consider term life insurance while you are single is the ability to lock in a cheaper rate while you are young and healthy if you may have future plans that include dependents (taking care of children, parents, siblings). It will likely be more expensive if you wait until you need it and you have developed a medical condition