[Editor's Note: Today's WCI Network post comes from The Physician Philosopher. It's been about 5 years since I wrote 14 Financial Milestones Worth Celebrating so it's time again for a reminder to celebrate the financial wins along your journey!
To that end, if you follow us on any of our social media outlets, you've probably seen our new #LiveLikeAResident campaign — celebrating the huge financial wins of our WCI community as they slay their student loan debt in 2-5 years.
Today we want to give a shout out to Doctor Elizabeth Lavery and her engineer husband who paid off $175K in student loans in only 2 yrs 9 months!
“When we got married right after residency, we continued to live in the townhouse my husband could already afford on his salary alone. I continued to drive my 10+ year-old Corolla until both the student loans were gone, and I was able to pay cash for my next vehicle.”
Living like a resident really does work! Tell us your story at www.whitecoatinvestor.com/debtfree!]
It is my firm conviction that a financially independent physician is a better doctor. Financial independence does wonders to treat and prevent burnout. That said, focusing too much on the goal of financial independence can also cause major harm. It magnifies the parts of the job that we hate, and can throw our work-life balance off-kilter. For this reason, it is important to enjoy today. One way we can do this is by celebrating the milestones to financial independence.
If you are short on milestone ideas, this post is for you. And with each goal, I want you to celebrate your accomplishments in a way that will build permanent memories.
The Ten Financial Independence Milestones
Though these milestones are listed in numerical order, they don’t have to happen that way. For example, you might accomplish number 5 before you accomplish number 4.
That said, each goal is important and worthy of celebrating! Let’s get to it.
1) Positive Momentum
While I prefer the avalanche method to paying down debt, the snowball method does involve nice imagery. In order to tackle our debts, we need to get the snowball moving downhill. In other words, the first step is simply positive momentum.
Just like a snowball rolling downhill, the first step worth celebrating in the journey towards financial independence is gaining positive momentum. In the life of most young medical professionals, this usually happens at the end of training.
When you finally finish that long road and experience your first attending paycheck, this is certainly a cause worth celebrating. Just don’t forget to use The 10% Rule to keep that celebration in check! This is not your permission to allow massive lifestyle creep.
What did I do? The dumbest financial thing one can do. I financed a naturally aspirated, V-8 four-door sedan with a corvette engine and a stick. Oh, and we bought a country club membership. Basically, I am a walking stereotype. But that’s how we spent our 10% increase before I traded that car to buy a new truck in cash.increased our net worth $250,000 in one year.
2) $100,000 in Student Loans Paid Off
If you are in the 20% of medical students who graduate with no medical school debt, you get to celebrate this one early. For the rest of us mere mortals, paying off this mountain of debt is a big deal.
However, even if you are hammering away at your debt, it will take some time. And that can be discouraging. So, I encourage you to celebrate the moment when you pay off six figures of student loan debt. That is a big frickin’ deal.
3) Zero Dollar Net Worth
Going from broke to woke was one of the more exciting moments of our journey so far. While it wasn’t quite the same as paying off our $200,000 in student loans, it felt great!
What I am talking about is the moment when the person pan-handling on the streets no longer has a larger net worth than you, the doctor. Getting your net worth back to zero is a huge moment. Take it from someone who started with a net worth of less than (-)$207,000 when he started.
When you get back to broke, go do something nice for yourself. Just don’t make it too fancy. Otherwise, you’ll be back to that negative net worth! Around the time we got to a zero dollar net worth, we celebrated with a Disney cruise a few months later with our two oldest kids and some of our close friends.
4) Student Loans Paid Off!
This one felt like a giant burden had been lifted off my shoulders. It also did a lot to mend my burned out soul. What a big moment in our journey towards financial independence. It also did a lot to continue our positive momentum. Paying off $200,000 in 19 months proved that we could accomplish our financial goals if we put our minds to it.
And, boy oh boy, did we celebrate this one. What did we do? Well, we bought a house.
I’d be lying if I told you that sending a giant check towards our student loans (composed primarily from our prior home sale) at the same time we bought a house wasn’t stressful financially.
The lesson here? Don’t be me. Celebrate kicking those loans in the teeth with something a little more reasonable than a new mortgage!
5) Paid for Car with Cash
As mentioned above, Kristen and I decided to finance that Chevy SS out of the gate. I don’t recommend that for anyone, but I’d be a total hypocrite if I didn’t admit to doing it.
Then, after two years of having to find a ride to work every time it snowed, I bit the bullet and bought a Ram 1500 in cash. While I thought about rolling a few suitcases in there and paying in $1 bills, I felt like that probably wouldn’t be the right thing to do.
Instead, I put what I could on my American Express Platinum card to get the points, and wrote a check for the remainder. It was an even trade +$3500 for the new truck. Even this car guy learned that some things in life don’t make you happier – including buying more expensive stuff.
6) $500,000 Net Worth
The next step on the journey to FI worth celebrating might actually come before this one: when you get to a six-figure investment total. However, if I added that step, this post would not be a well-rounded “10 milestones to financial independence”.
To avoid the odd numbers, I think that at a bare minimum you should celebrate when you get to half a million in net worth (we were SOOOO close at 30 months after training).
This is the point where your money starts to work for you in the market. In fact, if your entire net worth came from investments, you’d be earning $30,000 to $40,000 annually if you got only 6-8% in the market.
7) $1,000,000 in Assets
This is where things start to get silly. If you earn that same 6-8% in the market we discussed above, with $1 million now you are earning more in a year than you made during your entire year working as a resident physician ($60,000-$80,000).
Let that sink in. You are earning more money by doing nothing than you earned working 80-100 hour work weeks for 48 weeks of the year. This is what time in the market does. It’s also why you should start saving as soon as you can.
8) Mortgage Paid Off
In many of my financial talks, I ask people to raise their hand if they own a house or a car. Many put their hands up. I then ask how many of them have made their last payment. After that, about 75% of the hands fall, to which I usually say, “If any of you are confused about who owns your house or your car, all you need to do is stop making payments and the bank will gladly remind you of who owns your stuff.”
I say this in jest and it usually gets a good laugh from the audience.
All joking aside, this is one of the moments that I look forward to the most in our journey. The point at which we can say that we actually own our home seems like a big deal! This is one we will celebrate right.
9) Lean Financial Independence
Lean Financial Independence (FI) has a variety of definitions. I’ll throw out another. The point at which your basic needs (food, water, shelter, utilities, etc) are covered is the point at which you are technically financially independent.
It’s the point where you no longer need a paycheck. And whether you plan on getting there through investment savings, passive income, or the hybrid model of financial independence I promote – getting to this point is a big part of the journey.
10) Fat Financial Independence
Fat FI is the number at which you can not only cover your basic needs, but it is the point at which you can also take all of those luxury trips you’ve planned for your retirement. In other words, this is “more than enough” FI. While Lean FI might be 25 x your current annual spending, this is likely closer to 30-40 x your annual spending.
At this point, you’ve achieved all that you could hope to achieve on the personal finance journey. Of course, this assumes that you’ve been giving to charity and others who need it along the way. If you are waiting until this point to give, you likely never will.
Take-Home: Milestones to Financial Independence
Hopefully, you had some fun either looking forward to the milestones you will soon achieve, or looking back on the ones you have already conquered.
Each of these ten milestones to financial independence are worth celebrating. I’d love to hear about the order in which you achieve them. And what you did to celebrate the occasion!
What do you think about these milestones? Did I miss any? What would you have added or subtracted? What did you do to celebrate these milestones on your journey? Which was the biggest deal? Leave a comment below.