Our Plan to Achieve Financial Independence in Our 40s, or Earlier!

With my struggles with continuing in medicine much longer, or at least full time, I quickly recognized how important financial stability is.

Besides a hit to your ego, fear of others’ perceptions of retiring early, one of the main practical setbacks to deciding to scale back on work when you want is the need to pay bills and to provide for your family’s future expenses.

When I learned about financial independence, which is the concept of having enough income, savings, or investments to cover your expenses without relying on a regular paycheck sounded so appealing and exciting. You mean I don’t have to work until 65 if our finances are in order?

I have spent the past several months learning about the way to achieve financial independence, and recognize it is very doable!

After reading many blogs and books such as the White Coat Investor, Financial Independence by Grant Sabatier, Mr. Money Mustache, and The Next Door Millionaire by Thomas Stanley PhD and William D Danko PhD, The Dumb Things Smart People Do with Their Money: Thirteen Ways to Right Your Financial Wrongs by Fill Schelsinger, my main takeaways and steps to plan financial independence are:

1. What does financial independence mean to you?
   • Will it mean working less hours at the same job or taking on a different job?
   • Does it mean traveling the world?
2. What are your annual expenses?
   • Look at your entire year’s expenses. Based on that, take your best guess to what it will be as you are living your financial independence life?
   • Do you want to pay for your children’s education? How much do you want to pay? (Fund a 4-year public school education? Fund a 4-year private school education? Fund private school from K-12?)
   • Do you need to/want to support your parents? How much will that expenses be?
   • Think about what actually makes you happy and be willing to put money towards that. Reshape your values to put money towards what really matters, rather than the image you feel like you need to keep up with.
3. Will you have any passive income streams? How much can that generate?
   • The easiest passive income stream to invest in is low cost ETFs. Keep it simple with the S&P 500, total stock market bonds, and possibly international stock market. The average rate of return is 7%/yr. The power is in buying and holding for as long as possible for it to grow exponentially.
   • Real estate is another great passive income stream.
   • Businesses such as online courses or content creation can eventually become passive income streams.
4. Learn about tax advantaged strategies. The biggest expenses for high income professionals are usually taxes.
   • Max out tax advantaged accounts (401k, 403b, backdoor Roth, HSA). Invest in 529 accounts how much you want to.
   • Learn about potential tax savings through business write offs if you own your own business.
   • Learn about potential tax savings through real estate investing.
   • Consider hiring an accountant that will not only file taxes but also help with legal strategic tax planning.
5. The amount you need left in the stock market to live off your dividends is 25-30x what you need annually through the stock market.
   • Ex: if you have 100k of passive income in real estate/online business, but you need 150k to live, you will need 50k x 25-30 = $1.25-1.5 million in the stock market.
   • Automate your investments.
6. Protect yourself from potential financial disasters.
   • Get term life insurance, own occupation disability insurance, umbrella insurance, and malpractice insurance with tail coverage.
   • You can stop term life and disability insurance after you reach financial independence.
7. Consider hiring a good financial planner to look over your plan, particularly if you are planning to retire early.
   • A good planner is one who doesn’t earn commissions from selling products. He/she also doesn’t take a percentage of your net worth but rather charges by the hour or by the project. You have the potential to lose millions this way.
   • The White Coat Investor blog has a lot of great vetted financial planner options.

One of my favorite White Coat Investor quotes is, “You can have anything, but not everything.” Planning to achieve financial independence really clarifies your goals and priorities in life, and helps you focus on what matters. Imagine, to spend time how you want to spend your time!

Excited about this journey and reaching financial independence! You can do it too!