Financial independence retire early (FIRE), physician wellness, and work-life balance are all buzzwords that people latch onto. The concepts are inter-related and are not new. Most physicians understand and can get behind wellness and work-life balance pretty easily. However, many struggle with embracing FIRE. Even though, it can help us fight burn-out. This post describes my introduction to FIRE, my two-left-footed dance with FIRE, and why I prefer to think of it as Financial Independence and RE-Focus.
Note: I originally wrote this post in 2017. It was one of my first. Looking back now, it made me cringe. So, I completely re-wrote it Sept 18, 2022 to include it in my basic financial curriculum.
I first learned about FIRE firsthand before it had a name.
My dad started me on planning for my retirement when I started university. In addition to getting packed off to school with tears, well wishes, and enough extra pairs of socks and underwear that I could go weeks between laundry – I also got a 3″ floppy disc. For the younger readers, the floppy disc was our equivalent of a USB key. A substantial upgrade from the cassette tapes and stone tablets that we used prior to that. On this disc was my budget in a Quattro Pro spreadsheet and it came with a copy of The Wealthy Barber by David Chilton.
The basic premise was to live within your means and save money for retirement right away so that you can maximize your retirement nest egg. There is a lot wrapped up in that single sentence. I got to see it in action through my parents who retired at 55 and my uncle who retired in his early 40s.
So, the concept of Financial Independence and Retire Early (FIRE) is not new. However, it has evolved and matured enough to have a catchy name, bloggers writing about it, and even a movie.
FIRE is a framework to build a stable financial platform.
I think of FIRE as having three main pillars that support living a balanced and happy life.
The Pillars Underpinning Financial Independence
One pillar is earning money, the second is spending money, and the third is investing money. Together these make up the financial independence (FI) piece. We earn money through using our human capital to work. We should spend wisely to maximize long-term happiness, but also spend less than we make. That gives us leftover financial capital to invest and grow more money.
The Financial Independence Platform
When your invested financial capital is growing enough to cover your cost of living for the rest of your life, then you are financially independent. Work is optional. There are some rules of thumb to know when you are there.
The Trophy That You Place Upon The Platform: Retire Early? Or Something else.
The stable support of those pillars forms the base that the retire early (RE) prize is placed upon. This is where FIRE and many people part ways. You don’t need to retire early just because you can. Many people, particularly professionals, find meaning through their work. Financial independence can change that relationship. It may even strengthen your career engagement when you can steer it in the directions that you want without worrying about the income. Financial independence also gives us more power to balance our career with the rest of our lives. That may translate into a longer career at a sustainable pace instead of an early flame-out.
I aggressively focused on the building my earning pillar.
As a doctor, I am a high-income earning professional. It was a long road to get there, and I accrued some debt along the way. It was about $100K in Y2K dollars. That works out to about $172K in 2022 dollars. During residency, I picked up a side gig teaching ACLS courses while my wife had started working as a career counsellor at the YMCA. That, along with living like students, allowed us to stabilize our debt.
Once I got my independent license, I was able to moonlight during my fellowships. That had vanquished our debt by the time I finished my sixth year of residency and started practice. I was fortunate to get a job right away, but it was piecemeal. I actually liked the variety that filling in service gaps in my three specialties gave me. Soon, I also spotted opportunities to work more and develop new services.
Soon, that resulted in as much work as I could handle. Eventually, that translated into a very high income when those services matured. Developing our clinical department was also a great return on human capital, by making our group’s quality of work life better, and social capital with objectively improved patient outcomes and experiences. A synergistic investment.
I oscillated wildly with the spending pillar.
I had an advantage coming out of the gates, because my wife and I shared financial values and had frugal upbringings. The medical student demographics when I attended med school also had very few students from affluent backgrounds. Less than a quarter of my contemporaries were lucky enough to have a beater-car. Only the older students, on their second career, had a house or condo. A handful could afford to travel on a plane for vacations. So, we did not feel like we were missing out by taking the bus/bike, renting a crappy apartment, and visiting family or camping for vacations. During our early student and resident years, we lived like students.
We lived like average Canadians during my first few years of independent practice and only needed to spend about 25% of our income to do so. We had bought a modest house. They cost way less back then, but interest rates were ~7%. So, we used our surplus to trash our mortgage in just under five years. While our modest upbringings were a major advantage while I was establishing my career, it left us unprepared for what came next.
With our debt gone and the money rolling in, money did not limit our decisions. Living within one’s means is easy when you have considerable means. Everyone around us seemed to be living it up. So, we jumped on hedonic treadmill and dialed it up to 11. That was epitomized by my dirty little 10000 sqft secret. It was a dream for me to build a castle-like country estate. However, this was also a great example of how your goals can change. Fortunately, we reflected on the dollars go by.
As my kids approached high school, we sold the castle and downsized. That huge overhead cut, and freeing of the capital to invest, catapulted us into full financial independence.
I paid a lot of tuition learning to invest & improved to average.
My parents started me investing through my RRSP as soon as I started earning income as a teenager (there were no TFSAs back then or that would have been better). It was in high-fee mutual funds, but at least the habit was started. That head start was an advantage. When I started making doctor money, I read about investing, went through a series of financial advisors, and tried stock picking. I figured that I was smart, savvy, and wealthy. So, I should invest like it. None of that went particularly well, but it could have been worse.
I then discovered passive ETF investing. That improved my results substantially. I have gotten a pretty average return since. That is better than 90% of people that try to beat the market. I still can’t resist the urge to tweak. Investing satisfies that non-financial need for me, but I at least limit the adverse financial impact by getting the big stuff right and nibbling around the edges.
Finally, I had built my FI base. What now?
My circuitous journey to FI as a physician is a great example of how we can muddle our way through. My earning power as a physician helped me, but it also allowed me to paint over mistakes. I managed to achieve financial independence by my mid-forties. While I was flirting with burn-out at different points in my career, I did not want to retire. I felt that it was important for my kids to see me working and I hoped that my newfound financial power could change my career.
I struggled with the Retire Early part of FIRE . So, I redefined it.
Many professionals face an internal conflict when considering retiring early. We have invested much of our life-force into honing our trade and may have feelings of societal obligation. Our profession brings us status and has consumed so much of our focus that it is often a central part of our identity. I seriously considered retiring early because I was feeling burnt out. For me, that burn out was coming from negative messaging from our government at the time (you can probably sense that from my early blog posts) and I had to frequently deal with patients and colleagues frustrated by the healthcare system. Fortunately, there are other options besides traditional retiring early. Like working part-time or changing your practice to focus on areas you enjoy while jettisoning those that you don’t.
Even many of the FIRE promoters haven’t really retired.
Reading the blogs from many successful FI bloggers, they really aren’t retired in the sense that they just sit around on the park bench, feeding the birds, or talking about the weather and “kids these days”. They are living active, fulfilling lives and doing “jobs” they enjoy (like blogging), raising their families, volunteering in their communities, or travelling.
I’d rather think of RE as an opportunity to “RE-focus” how you spend your time.
Financial Independence is a tool. It enables you to move away from spending your time working for someone else to working towards your own goals more directly. The RE part should be a tool too. A cue to RE-focus and RE-define your goals as you move through life. Life is not static nor is our personal development.
Like flames, the Pillars of FIRE entwine and aren’t static.
If you focused solely on one of the pillars, the flames would consume you.
For example, if you focused all of your efforts on earning money, but you spend it all (a common problem for high-income earners) then you won’t have enough FI to RE-focus your time on important things.
If you forego all comforts to save money now, then you may be sacrificing too much for a future that may never come. How much you have to save to earn sufficient passive income depends on how you invest it.
Building financial independence, but not taking the time to recognize it and RE-focus, may mean that you are missing opportunities to adjust course to align with what you value most. It is an inter-related balance.
Fortunately, there is a lot of synergy between the pillars. For instance, hiking with your family preserves financial capital and builds both your human and social capital. It also models those things for your children and builds social capital. Choosing to learn new skills and do a DIY project with friends or family also builds multiple facets of holistic wealth simultaneously.
The amount of emphasis that you put into each pillar is also not static. It changes over time with your personal and professional life cycle. This has led to a number of different flavors of financial independence. Even if you did not discover the FIRE framework until later in life, it is not too late to use it to help move deliberately forward.
How will you dance with FIRE?
I hope that sharing my dance with FIRE helps you to understand the principles of FIRE as a tool. It can help you take control and move your life and career in a positive direction. Further, I hope that you have come realize that I did not get it perfect. I am still learning the moves.
How can you dance with FIRE?
- Learn about how to manage your finances both currently and for the future. That is what this site is all about. Work towards FI.
- Think critically about what is important to you and how that matches up with how you spend your time and money. RE-focus.
- Act on #1 and #2.
- Repeat. Personal and professional life is dynamic and your dance with FIRE will shift over time, like flames.
Beautiful post Dr LD
Thanks for sharing. I’ve been here with LD since the beginning and have gone through similar dance moves, more mistakes with money than I care to admit, and am still on my way. Ditching the doctor mansion was the best thing for our family on many levels. I worry about my senior colleagues who seem to have no money…and am not sure how I could I’ve somehow outsmarted them…going DYI and ETFs have helped us amass reasonable savings with little effort. Hobbies have been fun but also very expensive at times and have set us back in the FIRE treadmill ironically. Thanks for the teachings.
Thanks for hanging in there Cowtown Cutter. Even through my pandemic hiatus. We all are going to make these mistakes. Recognizing them earlier helps alter the outcome. Hopefully sharing them helps those coming up. For those further along, it is harder, but they can still salvage it. I have met colleagues who had an epiphany in their late career and made it through. The bad thing about a high-income is that we can paper over problems. The good thing is that we have more financial horsepower fix them, if we recognize and focus on them.
“…For me, that burn out was coming from negative messaging from our government at the time…”
You are not the only one, and that negative messaging is still going on. We are not out of the woods yet.
Definitely. I think that I have gotten better at ignoring it. I was really immersed in my career and extracting myself has helped.
This was one of the more profound parts of the message. The governments attack on MDs in Alberta caused severe and lasting damage to the wellbeing of many of my MD colleagues (and myself), and immense burn out. It had almost zero to do with money sadly. Congrats LD for powering through, and for being able to compartmentalize the political BS, so as not to lose sight of the bigger picture.
I cringed when I saw that starting in Alberta. It was the same playbook that Ontario used around 2012-2015. It was very demoralizing for many of us. It took me six years to move past it – ultimately by decreasing my focus on medicine. Hopefully, Alberta gets back on course quickly or they will disengage their workforce that is already reeling from the pandemic fall-out. The only thing that stopped it in Ontario was eventual binding arbitration and decimation of the governing party. Fortunately, before the pandemic.
Good to see more posts on the blog. We vascilate between fatFIRE, FIRE, and slow burnout haha
One of the big decision is whether to bite the bullet and buy real estate on Vancouver instead of continuing to rent, without kids it’s not an absolute necessity but does change the lifetime accumulation one needs fairly dramatically.
Any thoughts on what % real estate allocation to primary residence for Canadian MDs considering FIRE (or any retirement really). Hear stories of cardio/neurosurgeons buying >6mil homes around here and I can’t figure out how they plan on pulling this off unless working to the grave
Great comment. First, be careful of what others do. Many people spend on consumption and don’t realize the trap until it is late in the game. Housing is no different despite Canadian popular culture. The big spender will look richer and are happy to show it – it makes them feel better about working to their grave. Real estate is an especially potent trap because of emotional/social pressure, a recent long and crazy bull-market, and it is leveraged investing which magnifies the return (or loss if the market changes). People also forget to account for opportunity cost of investing the money they trapped as a down payment, the maintenance costs (pay ~1.5%/yr now or discount that when you sell), taxes, and big transaction cost baked in when you buy/sell.
When I look at real estate, I consider it in two ways. Personal real estate is a consumption item and a financial asset. Pay what you can afford and meets your needs, whether that is buying or renting. Financially, there are calculators that compare the costs mentioned above. Favors renting right now. Long-term as an investment, personal real estate generally returns roughly inflation plus 0-1%/yr (multiplied by the leverage of your loan). Ben Felix does a great job giving the data behind everything I just said start about 20 minutes in this podcast. When you pay for the usage (whether renting or buying) that is what should make the decision. Basically, do you get more utility out of owning (can customize, flex on your friends, learn/teach maintenance skills, security of not getting evicted) or renting (more cashflow to use or invest, someone else is responsible for maintenance, you can move easily). Investment-wise, it is a good way to leverage-invest with a tangible asset and discipline to re-pay the loan and disincentive to impulsively sell. But, not a free-lunch when you account for everything and the decrease in diversification for the amount of money in one asset at one address.
So, when I consider what % real estate to hold. It is hard to say. Garth Turner has his rule of 90 which I like. Don’t hold more than your 90 minus your age in your house. As you age, cashflow will become vital as your ability to work wanes or disappears. The more you want to shift towards Fat-FIRE for spending or front-loading for early financial independence, the more important liquid assets (ie not personal real estate) becomes. We followed the rule of 90, but when I decided that I really wanted financial freedom, I downsized from a multi-million-dollar house (I did not make an inflation-adjusted cost-adjusted profit). For me, that means ~5-10% home equity now & Fat-FIRE capability at age 46. That would be almost impossible in a place like Vancouver or Toronto. I did move from the GTHA to a lower cost area which helped immensely.