The Fastest Way for Physicians to Achieve FIRE

What is the fastest way for physicians to achieve FIRE? As the website traffic grows, I have been getting messages with increasing frequency about FIRE. The messages tend to read something like this:

“Dear Motivated M.D. My wife and I are practicing clinicians who own our practice. How can we become financially independent and retire early? Can you direct us to someone who can help? Is it even possible?”

To be clear, this is a paraphrased message that I am condensing for efficiency, but they mostly read like that. Remember, I am not a financial professional. I am a full-time clinical physician who happens to have accumulated a wealth of knowledge and experience navigating my finances and simultaneously writing about them (as is my passion). The short answer is to direct these individuals to a financial advisor and hand them some personal finance books. Honestly, however, the idea behind achieving FIRE can be easy! 

The concept is quite simple… It just requires extreme dedication and self-control! As Jim Dahle often writes, 95% of physician personal finance… is just personal finance. There is very little that changes for doctors. So, for all those physicians wishing to reach FIRE, here is the fastest way for physicians to achieve FIRE. Enjoy!

What is physician FIRE?

As I often do, let’s start with the basics. What is FIRE? FIRE, or Financial Independence, Retire Early is a movement that began. The FIRE movement started sometime in the late 2000s, and I typically associate its uptake with the financial crisis of 2008. 

FIRE is a movement centered around achieving financial freedom and retiring from traditional work at an early age. FIRE is about having the financial means to pursue your passions and interests without being tied to a demanding job.  

Wanting to reach FIRE does not necessarily mean you dislike your job. I intend to reach financial independence as soon as possible. However, I am still determining if I would retire upon achieving this goal. I enjoy being a physician. However, I want the opportunity to practice medicine because I remain passionate, not because I am shackled to my career.

Student debt, cost of living, and lifestyle creep are all things that keep us hand-cuffed to our careers. Being in a financial situation where your lifestyle costs are covered by interest on your investments can allow individuals to pursue their passions, even if that means remaining in clinical careers.  

Why should physicians pursue FIRE?

So, given my previous rant, why should physicians pursue FIRE? Well, my friend, for a multitude of reasons. However, here are the big ones, in my opinion:

Escape burnout

For starters, burnout has become one of the more pressing issues facing healthcare professionals. Whether it availability bias or an epidemic; physician burnout continues to weigh heavy on the medical profession. Achieving FIRE may not correct all the etiologies of burnout, but not having to stress about a paycheck helps.  

Work on your terms

The next reason physicians should pursue FIRE is that it allows you to work on your terms. So often, medical careers have professionals feeling like a ‘cog in the machine.’ FIRE will enable you to better advocate for yourself and your career needs. If your employer cannot use your next paycheck as an incentive, they lose bargaining power. This can also be termed “F you money!”

Secure your future

Physicians have high earning potential, but they can also accumulate significant amounts of student debt. The pursuit of FIRE teaches physicians to manage their finances better, to live on less, and to help them build habits that will allow them to reach financial prosperity earlier in life.  

The fastest way for physicians to achieve FIRE

OK, without further ado, here is the step-by-step guide on the fastest way for physicians to achieve FIRE. This does not apply only to physicians. These same principles apply to all. Implement these six steps, and anyone can reach financial independence!

1. Determine your goals

Step number one is simultaneously the most important and the most overlooked. Before you can even begin pursuing financial independence, you need to determine your financial goals! This may sound ambiguous, but I sincerely suggest you stop and think about step number one.  

To help you begin to determine your FIRE goals, here are a few questions to ask:

How much money do you need to achieve financial independence?

When determining your goals, the first question is how much money you need to achieve financial independence. This can take the form of a lump sum (or nest egg amount), or this may take the form of annual living expenses.  

For example, let us look at Dr. Works-Hard. She is a physician who makes $250,000 annually. She has a stay-at-home spouse who is their childcare. After taxes, she takes home approximately $160,000. She keeps a transparent and comprehensive budget and knows they live on $120,000 annually. Using this overly simplistic example, one would conclude that she needs enough invested to have interest produce $120,000 annually. However, if she prioritizes paying off her home, she may only need $80,000 annually to maintain her lifestyle. If you factor in social security, this amount may fall even further.  

Thus, first, one must ask themselves how much money they need to achieve financial independence.   

When do you plan to retire?

The next question influencing the rate at which a physician reaches fire is when one plans to retire. Overwhelmingly, American-trained physicians often complete their post-graduate education in their early to mid-thirties. This only provides ten to fifteen years’ income for physicians looking to reach FIRE in their mid-40s. Physicians are significantly late to the game compared to others who entered the workforce at 18 or 21.  

Determining when an individual plans to retire early will significantly influence their savings rate and quality of life while saving. Determining this age is crucial as it will impact how you calculate your savings rate.  

What lifestyle do you envision post-retirement?

The final question that is extremely pertinent regards the lifestyle foreseen in retirement. If you plan on having a more simplistic lifestyle post-retirement, this may help expedite FIRE. However, suppose you live a lavish lifestyle or plan to inflate your lifestyle post-retirement. In that case, you may already be impacting the age at which you can achieve financial independence. 

I am in no way saying you have to live without. For a physician who makes $250,000 and takes home $160,000 after taxes (again referring to Dr. Works-Hard as our example), that is still in the upper 10% of income in the United States. Physicians making $300,000 or more (somewhat common) are in the upper 5%. That is substantially better than most of the country, much less the world. Please be reasonable and set realistic expectations if you plan on expediting FIRE.  

2. Make a financial plan and stick to it

The second step regarding the fastest way for physicians to achieve FIRE is creating a financial plan and sticking to it. Now, this may be where you pause and roll your eyes. This is likely because you are a frequent reader and understand how important a financial plan is. However, for the uninitiated, financial plans are arguably the most important financial document you will create.  

I previously wrote a post on How to Write a Financial Plan. In it, I share my financial plan for all the world to see. By sharing this, fellow healthcare professionals can understand what a personalized financial plan entails. A well-written financial plan is meant to be a roadmap that helps you understand how you will prioritize your income to build toward financial success most effectively. It often outlines how you will prioritize paying down debt, maxing out retirement contributions, and your investing strategy.  

Further, financial plans are meant to be objective when the economic chaos we digest becomes overwhelmingly subjective. Regardless of the volatile market, if you use your money to execute your financial plan, you will be successful. Plain and simple. So, without further ado, make an honest and transparent budget, then write a financial plan. When pursuing FIRE, tailor your financial plan to support your retirement goals. If you need help, this may be an excellent time to seek professional help from a financial advisor.  

3. Live on half

Ahh, step three. Living on half sounds so simple, and it is… really… However, it is far from easy. 

For most individuals pursuing FIRE, this will be the most challenging step. To preface, saving precisely 50% is not the goal. The goal is to live on substantially less than you make. This amount may be 40% or 60%, but no matter the amount, it will be a significant portion of your income. This is really what it means to ‘live like a resident.’  

It is sound financial advice to live below your means. This is personal finance 101. However, for individuals looking to get rich slowly, generally, this means saving roughly 20% of your income, not half. However, saving a substantial portion of your income becomes critical when pursuing FIRE, especially for those looking to retire as early as possible. 

There are limited options if you are working to reach financial independence quickly. One is to make more money; the other is to save more. The sooner you optimize your savings and minimize your lifestyle, the sooner you can solidify FIRE. More on this below.  

4. Intelligently invest the excess

As I have alluded to above, there are few ways to achieve financial independence quickly. One option is to save more. I touched on this above. Learn to live drastically below your means, and this saves the rest. If you want to reach FIRE soon, the more you save, the better. The other avenue to expedite financial independence is to make more money. I will touch on this later in this article, but investing wisely is one of the many avenues to make more money. 

When I think about the average physician looking to reach FIRE, I imagine a full-time clinician with little time for investment strategy. I understand some individuals spend more time micromanaging their portfolio; however, most physicians lack this luxury. As such, there are some time-tested strategies. I always encourage busy healthcare professionals to start with the Three Fund Portfolio. I will avoid delving into the details, but this allows reasonable portfolio diversification (U.S. stocks, U.S. bonds, and international stocks). 

How you portion each out will vary depending on how risk-averse you are. However, with wise, simple investments that limit expense ratios and index the market, you are statistically likely to have good real returns while saving for FIRE. 

5. Find comfort in a modest lifestyle

Finding comfort in a modest lifestyle needs to be addressed as a step in achieving FIRE. This little detail is another that is commonly overlooked when it comes to FIRE. For physicians and doctors looking for the fastest way to achieve FIRE, part of that will be managing their lifestyle.  

As physicians, our profession is unfortunately held to certain societal expectations. Many, including family and friends, think being a physician means being rich. Simply by having a doctorate you are wealthy, right? Many mistake a high income for wealth. True, physicians often make healthy six-figure salaries, but it is becoming less common that this is synonymous with real wealth. Many need help understanding the crushing weight of six-figure debt, the lifestyle creep, and the burden of delayed gratification.  

Individuals who can find comfort in a modest lifestyle and save most of their income will set themselves up for early success. Just because we have the opportunity to live lavishly with our incomes does not necessarily mean we have to. Remember that the overwhelming majority of the world lives on less than we do.

Now, remember, I am not saying you have to deprive yourself. This article is meant to help discuss the fastest way for physicians to achieve FIRE. Living modestly is one of these avenues. If you wish to reach financial independence slowly or retire at an average age, you will likely not have to live quite so modestly. It is all dependent on your FIRE goals.  

6. Wait 10 to 15 years

Last but not least is the waiting game. The story’s moral is that no overnight way exists to reach FIRE. As I have described above, there are many steps and strategies to implement to expedite FIRE, but there is no real way to achieve it immediately. However, the more you save, the less you spend, the quicker you reach FIRE. Period. This is why all the prior steps are so critical. If you have clearly defined your FIRE goals, created a financial plan that efficiently pursues these goals, saved a majority of your income, invested wisely, and grown comfortable with a modest lifestyle, all you have left to do is wait a bit. Depending on your lifestyle in retirement, it may only be a decade away! 

Let’s check out an example.  

Dr. Works-Hard achieves FIRE (a case study)

Let us continue our example with Dr. Works-Hard. Let’s say that she plans to reach FIRE as early as possible. She has decided that her modest lifestyle is all that she needs, and she intends to stay in her home as long as possible. Again, she is a hospitalist and makes $250,000, and takes home approximately $160,000. She is incredibly motivated, and she and her husband decide to live on $80,000 annually. This is half her take-home pay and still above the U.S. median household income.  

Living on half

As such, she uses the $80,000 she saves annually to max out her retirement accounts. The remainder she invests. She sticks to the fundamentals and prioritizes all her investments into a simple portfolio called the Three Fund Portfolio (follow the link to learn more).  

Using the compound interest calculator and assuming she is 30 years old with ZERO savings, we can input a few parameters:

• Initial Investment: $0
• Monthly Contribution: $6,666.67 
• Length of time in years: 16 (I’ll explain why I chose this in a minute)
• Estimated Interest Rate: 6% (we will assume this is the real rate of return)
• Interest variance range: 2% on either side
• Compound Frequency: Annually

By inputting these values, you should receive a graph that looks something like this:

Now, I chose 16 years because with this real rate of return on her investments, at 16 years, Dr. Works-Hard will have amassed a nest egg of approximately $2,053,596.87. This number is important because it is 25 times her annual living expenses of $80,000. Again, this is a simple example and does not adjust to inflation completely, so please take this example with a grain of salt. But you get the picture.  

The miracles of compounding interest

If Dr. Works-Hard decides to save at this aggressive rate for 16 years, with a real rate of return of 6%, she will save over $2,000,000. After 16 years of saving, she will be 46 years old. If she retires and takes out 4% annually (or $80,000) until age 62 (the earliest age you can receive social security), assuming her real rate of return remains at 6%, then at age 62 her nest egg will be at $3,163,261.40! Her nest egg grew by $1,000,000, and she was able to retire 16 years ago! Even with a real rate of return of 4%, her nest egg would remain unchanged!

Factoring social security

Lastly, now that she is 62, she has decided to receive social security. Using the most recent data provided by the Social Security Administration for 2023, those who retire at age 62 can receive a maximum benefit of $2,572 monthly. So, at age 62, Dr. Works-Hard, now a seasoned veteran at retirement, receives social security. As such, she only needs to take out roughly $49,136.04 annually now that she gets social security. At this rate, assuming she lives to a spry 90 years old (without any significant lifestyle inflation), she will continue to build her wealth. Here is one final graph demonstrating what her nest egg will do over 28 years if she is only taking out $49,136.04 annually:

I literally cannot even make her spend all her money! By age 90, she will be worth well over eight figures! She will also have been retired for 44 years and can still provide her children with a generous inheritance! This is the miracle of compounding interest. Not bad… not bad at all.  

Ways to accelerate FIRE

I wish to briefly touch on the fact that there are factors that can influence the rate one achieves FIRE.  

Increase your income

One avenue to further expedite FIRE is to increase your income. This can include salary negotiation, bonuses, loan reimbursement, moonlighting, greater investment returns, or having a lucrative physician side gig.  

Inheritance

Though it should not be assumed that this will factor into your FIRE calculations, some individuals may receive substantial inheritances from their families. As such, if you can wisely invest this unexpected income, it can often significantly impact when one achieves FIRE.  

Save more than half

Last but not least, is to save even more! This may sound ridiculous at this point, but some individuals do this. Higher-paying medical and surgical specialties can often live on far less than half of their income and still lead a comfortable lifestyle… not lavish, but comfortable.  

Take home points

Reaching FIRE as a physician is an achievable goal. However, remember that the journey is just as important as the destination. By following the abovementioned strategies and remaining committed, physicians and healthcare professionals can gain control of their financial futures and attain the freedom to live on their own terms. I really think this is the fastest way for physicians to achieve FIRE. Start your journey to FIRE today and enjoy a brighter, more fulfilling tomorrow. As always…

Stay motivated!

The Motivated M.D.

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