For an audio version of this post, please click on the speaker icon (top left).
Due to unforeseen circumstances, Dr. Fawcett’s X-ray Beam interview had to be prematurely terminated yesterday.
Cory was kind enough to gown back up and place himself on the X-ray table today in order to complete the examination.
(If you need a refresher, please read Part I first.)
12) Is there a book or books that has made a major impact in your financial well-being?
There are two small books that I read many years ago that were the catalyst leading to my wealth today.
Common Cents: A simple plan for financial independence by Art Williams.
- This is a very short book, almost a pamphlet that was given to me when I was a broke College student in the 80’s.
- I read it and learned the power of compound interest.
- This is what led me to start my IRA the year I got my first paying job, as a surgical intern, in 1988.
- I began maxing out both my IRA and 401(k) each year, and didn’t stop until I hit financial independence.
- Because of this book, I was able to design a plan that would have me financially independent at age 50.
The second book was The Debt-Free & Prosperous Living, Basic Course by John M. Cummuta.
- This is the book that inspired me to pay off my $500,000 of personal debt as fast as possible in the 1990’s.
- I became debt free eight years after leaving residency when I paid my final house payment in 2001.
- With no interest compounding against me for the last 17 years, I have been able to save and invest a lot of money.
There are many other great books that have had an influence on me, but most of those came after these two books got the ball rolling.
13) Although a million dollar net worth is not what it used to be, it is still a significant milestone to hit.
How old were you when you broached the 7 figure net worth?
Did you do anything special to celebrate the occasion?
Did you expect to become a millionaire by that age when you first entered medical school?
I was 37 years old when I officially became a millionaire, six years after leaving residency.
My first year as an attending my salary was $100K and the second year I made $125K.
Then I became a partner and my best take home pay as a surgeon in small town Oregon was about $250K.
My company retirement plan contributions were made before this figure.
So I became a millionaire after having earned only about $1.5M on my W-2 up to that point.
My wife and I had been living on half of our income since we got married during my internship year.
So we had been putting away nearly half of our income for those years.
That high savings rate combined with the effects of compound interest made us millionaires at a fairly young age.
We didn’t do anything to celebrate becoming millionaires since that was not the milestone we were striving for.
We were in the process of becoming debt free at the time and were still about $200K in debt.
Our celebration point was two years later when we became debt free.
I did expect to become a millionaire in my late 30’s.
I had a plan in place for financial independence at age 50 so I was right on track.
14) Can you name 5 things that had the greatest financial impact on you that allowed you to become financially independent and retire early?
- I had a very frugal wife.
- We decided to live on half of our income from the time we got married, four months into my internship year.
- That high savings rate was a major factor.
- I learned from my grandmother the incredible power and value of owning real estate.
- That is actually owning individual properties, not buying REITs, or crowdfunding or any other real estate investing from a distance.
- We started purchasing apartment buildings when we became debt free.
- The real estate profits far exceeded the retirement savings plan from my surgical practice and our IRA’s combined.
- Becoming debt free early in life, which eliminated the effect of interest sucking away our wealth, was also a big impact.
- We saved a fortune by paying off our house early and turned those house payments into passive income producing investments.
- Buying a house that cost about 1.5 times my annual income and staying in that house for the last 21 years.
- Doctors lose a lot of money by house hopping and by buying too much house for their income.
- We paid off the house quickly and stayed in it for the long haul.
- I did not job hop.
- I stayed in my first job for 20 years before going part time.
- I detailed how expensive job hopping can be in my book “The Doctors Guide to Starting Your Practice Right”, where I showed the details of a friend who changed jobs at a cost of $175,000.
- Remember the rule of ones: “One house, one job, one spouse.”
- If you violate the rule of ones, it can be very expensive.
15) What is your advice to the medical student/resident/early physician who may be facing a monumental amount of debt early on in their career?
Start by reading my book “The Doctors Guide to Eliminating Debt” and follow the snowball method to put an end to your debt as quickly as possible.
Don’t ignore your debt.
Make eliminating debt your top financial priority.
Live on the income of the average American, about $50,000 per year.
Millions of other families live on that and so can you.
Pour that new high salary into retirement accounts and your debt, not new cars, vacations and buying a house.
You can do that later.
Getting out of debt is your number one priority.
When your debt is gone, you will be able to live a very comfortable life on your doctors’ salary.
If you let the debt linger, you will struggle financially for years.
Almost every doctor who has come to me for financial coaching has expanded their lifestyle before conquering their debt.
Don’t be that doctor.
16) Prior to officially retiring, did you have an annual retirement spending goal that you were aiming for?
A target net worth?
Did you have a particular exit strategy after achieving these goals?
I didn’t have a spending goal, I had a passive income goal.
There were two things I wanted in place before I retired.
- First, my real estate cash flow needed to exceed my annual expenses.
- That would allow me to live on just my passive income.
- Second, I wanted my retirement account to exceed $1,000,000.
- This would give me an additional $40,000 a year income to provide an extra cushion.
- Anything I got from social security would be gravy.
My retirement plan hit its goal first and kept growing.
Then I waited for my passive income from real estate to hit its mark.
After that, I began the process of readying myself for retirement.
I choose to spend 3 years working part time and slowing down gradually until I reached the point I felt ready to stop working completely.
That extra three years of part time work also boosted my retirement account and my passive income to well above the numbers I had set.
17) Another trend that is sweeping the physician blogosphere is the concept of FIRE (Financial Independence/Retire Early).
What are your thoughts on this?
And what in particular caused you to leave the medical profession earlier than a more “traditional timeframe”?
I am not a proponent of FIRE.
I am in favor of achieving FI (Financial Independence) as soon as possible.
But the RE (Retire Early) is not something I encourage.
Most of the people who talk about RE are doing so because they are unsatisfied with their job.
I think it is better to make changes to your job so that you enjoy what you are doing and want to practice medicine as long as you are physically capable.
I feel the shift from owning your own practice to becoming an employee is a big drive for FIRE.
Employment is not as satisfying as owning your practice.
So I believe doctors today are less satisfied with their career.
They work for big hospitals whose main goal is the bottom line, not doing what is best for the patient.
Some people think I retired early, at 54.
But to me, I retired later than my original goal.
My plan, before I even finished medical school was to be financially independent by age 50.
I expected to retire at that age and do some other things with my life besides work for a living.
I did reach FI by age 50, but I was not really ready to retire.
I told my partners I was going to retire and one of them asked me what I would retire to.
All the doctors he knew that retired without a plan were back to work in 6-12 months.
So I set out to formulate a plan for the second half of my life.
I worked part time helping out critical access hospitals that only had one or two surgeons.
These surgeons, who were on call 24/7, needed relief from their hectic schedule to turn off their pager and recharge.
It was during this time that I started writing my books to help physicians have a better life through bettering their finances.
I figured that sharing my knowledge in my books could benefit more people than operating on patients one at a time.
I wrote “The Doctors Guide to Smart Career Alternatives and Retirement” for those doctors who wanted to get out of clinical medicine.
In this book I gave many good options to extend a doctor’s career.
First, by fixing the things in their practice that are making them want to leave.
Second, by finding non-clinical alternatives that will build on the skills they already possess.
And if those don’t work than to show them how to retire.
One concept I wish I could spread is to have every doctor work part time for 2 or more years after they leave their practice to help out in the rural areas, then the rural doctor shortage would be greatly improved.
Their retirement plan would get a little more time to grow during those 2 years and they could ease out of practice slowly.
Since I left medicine at age 54, some feel I did FIRE. But to me, I was simply following my life plan.
18) What is your greatest fear, if any, you have in retirement, and are there any ways you are addressing this?
Even with my belt and suspenders two pronged approach to retirement, having both passive income and a nest egg, I still worry about running out of money.
It is not rational.
When I was thinking of leaving my job, my wife kept reminding me that we indeed had enough money to live the remainder of our days without another paycheck.
I could see it on paper, but I was still uneasy.
I don’t think there is a way around that.
The future is unknown and it always will be.
But whatever the future holds, I will be financially better off than 99% of retirees.
When John D. Rockefeller was thought to be the richest man in the world, he was asked how much was enough? He said “Just a little bit more.”
If the richest man in the world didn’t feel like he had enough, I suppose it is not that big a deal that I keep wondering if I have enough.
I know I have enough, but it still haunts me at times.
Again thank you so much for your time answering these questions and being placed under the “X-ray beam.” I look forward to your continued posts and wish you much success.
If you are interested in checking out previous individuals that were brave enough to expose themselves to the beams of the X-ray, please check them out here.
(and if you haven’t already, please consider subscribing to this blog so that you will never miss another post again. It brings a lot of happiness to me seeing my subscriber list steadily growing-Xrayvsn)
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