The X-ray Beam: Dr. McFrugal (Part II)
For an audio version of this post, please click on the speaker icon (top left).
For those who missed part I of Dr. McFrugal’s X-ray Beam interview, please check it out here.
It is now 2:43 am.
I’m a bit sleepy-eyed because as an outpatient radiologist the work motto I try to live by is “Last to arrive, first to leave.” (I hope this sacrifice is not lost on my audience about how dedicated I am in bringing you the worthiest of content).
Dr. McFrugal glances over at the power meter.
There is an undeniable smile that is beginning to form on his face when he sees that the dials are spinning much slower than before.
It is indeed the off-peak electricity rate.
We are ready to resume….
11) In your blog you are known, quite fittingly, for your frugality, including taking part of the “Buy Nothing For A Year Challenge.”
First please elaborate on this challenge and how you are faring with it thus far.
Looking back, is there an instance where your frugality caused you to miss out on something that you now regret?
The “Buy Nothing For A Year Challenge” was popularized by The Happy Philosopher (who is another prominent physician blogger).
Several other bloggers also participate in the challenge.
To me, the challenge represents both a frugality and minimalism challenge.
The challenge is to buy no material stuff.
This includes clothes, electronics, toys, gadgets, or any items that aren’t absolutely essential in our lives.
The exceptions may include things like food, other consumable goods, experiences (such as travel), gifts, and material goods that we deem essential and actually need.
I think we are faring well in the challenge.
Fortunately, my wife is on board too, which makes the challenge a little easier.
The big ticket items that we bought include a new bed and a new car.
We also bought some baby-related goods.
There were several non-essential things that we did purchase, but it’s not a lot of stuff.
And for the few items that we did buy, we have a decent reason for each purchase.
One of the main points of the challenge is to be more mindful and intentional with how we spend our money.
Overall, I think we are doing pretty good.
So far, I don’t recall any instances in which our frugality caused us to miss out on something that we regret.
12) Is this self-imposed frugality something that is temporary so that you can turbocharge your path to financial independence and later loosen the purse-strings, or is this truly a lasting lifestyle choice that you will carry on through retirement?
Good question. [I know, right?]
To be honest, I’m not sure.
I have been relatively frugal throughout my life.
My wife too.
So it is likely a lasting lifestyle choice for both of us.
We are both people who don’t spend frivolously and in general, we don’t like to waste.
Yes, my wife and I are frugal, but we are in no way depriving ourselves of joy.
We are living the life we want to live.
That said, I can see us loosening up the purse-strings once financial independence is achieved.
This doesn’t mean I’m going to splurge on a Ferrari or a yacht.
And I can’t see my wife dropping thousands of dollars on a new bag and shoes.
We would probably just spend more money on what we truly value.
Maybe we would take more luxurious vacations.
Perhaps we will spend more money on the kids.
We would definitely give more to charity.
13) Asset allocation is considered an important step any beginning investor must determine but it can be highly individualized based on the investor’s personal risk profile.
Can you share with us your asset allocation and what influenced you in making this particular choice?
I’m relatively young and I have a high income that is certainly going to increase even more as I gain seniority in my medical group.
On top of that, I consider my position to be very stable and safe.
Because of this, my investment profile and asset allocation is relatively aggressive.
Currently, my asset allocation is:
45% US Stocks
30% International Stocks
10% US Bonds
I am not including the equity in our primary residence because I don’t consider it an investment.
If I included the equity, however, it would make up 40% of our net worth.
14) For a reader unfamiliar to your website, what are three posts you are most proud of that they can gain an insight about you and your philosophies?
This post is about how my travel experiences shaped me into the person that I am today.
Not only does this post have some cool travel pictures, it is also a brief introduction to some of our life philosophies which include: mindfulness, minimalism, veganism, environmentalism, and altruism.
This post describes how my wife and I practice what we call “conscious consumerism”.
It discusses the guidelines that we use for deciding if something is worth our time and money.
Every day we vote with our dollar and we try our best to make purchases that align closely with our values.
Therefore, conscious consumerism is a tool to help us buy only the things that bring us sustained value and happiness.
This post is a story of my frugal life as a resident.
In fact, I was so frugal that I didn’t just live like a resident– I lived like a starving artist!
The post describes how I found creative ways to save money, max out my retirement accounts, AND started paying off student loans.
I did all of this while earning a resident salary and living in Los Angeles.
Not bad, eh?
15) Is there a book or books that has made a major impact in your financial well-being?
When I was younger, I didn’t read a lot of books beyond the necessary reading required for school.
The first finance books I read that had a major impact in my financial well-being were:
Rich Dad Poor Dad by Robert Kiyosaki.
Take home message for me: Have your money work for you by owning assets and not liabilities.)
The Automatic Millionaire by David Bach.
Take home message for me: Get rich slowly by automating your savings and watching your wealth grow with the magic of compounding interest.
The 4-Hour Workweek by Tim Ferriss.
Take home message for me: Time is our most valuable asset, our money can go further in other places through geoarbitrage, we can improve efficiency with the Pareto principle.
Take home message for me: Live like a resident when you first start, avoid lifestyle creep, learn about financial literacy, become a DIY investor.
16) If you had a time machine and could go back to any point in time and change just one thing, what would it be?
I would change nothing.
Going back in time would create a time paradox which could cause a chain reaction that would unravel the fabric of the space time continuum and destroy the entire universe!
Okay, so I just quoted Back To The Future. 🙂
But in all seriousness, I wouldn’t change a thing.
I’m happy with who I am now.
And if I were to change something in the past (even something seemingly insignificant), I wouldn’t be who I am today.
I like the quote: “Yesterday is history. Tomorrow is a mystery. Today is a gift, that’s why they call it the present.”
I try not to dwell too much on the past.
Thinking about the past is only beneficial when learning from past mistakes or reminiscing the good times.
I never worry too much about the future either; we don’t have complete control over future outcomes.
The only guarantee we have is the present moment, so I try my best to be present and live in the moment.
17) Your personal financial journey involved the impressive feat of paying off your medical student loans within 3 years of finishing a residency and fellowship despite taking significant time off to travel.
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?
My advice would be to keep expenses very low and avoid lifestyle creep like the plague.
Doing this will allow you to put more money into repaying student loans.
Every little bit counts.
It may seem like a daunting task at first, but you just have to do it.
Seeing your loan balance dwindle down is such a great feeling.
To accelerate the process, consider moonlighting or picking up extra shifts.
That’s what I did.
You can still have fun (and travel too!) on a budget.
Free or cheap entertainment can always be found.
And travel expenses can be significantly reduced using travel hacking strategies.
As long as you live far below your means, it’s okay to have fun.
If your student loan balance is extremely high, perhaps public service loan forgiveness should be considered.
18) Can you name 5 things that have had the greatest financial impact on you?
Frugality and being a natural saver
Minimalism and avoiding frivolous spending
Having a high income
19) Another trend that is sweeping the physician blogosphere is the concept of FIRE (Financial Independence/Retire Early).
What are your thoughts on this and do you see leaving the medical profession earlier than what has been the traditional timeframe?
I think that financial independence is something that every physician (and everybody in general) should strive for.
If I continue in this trajectory, I am likely to be financially independent in 5-6 years.
I don’t plan on retiring super early.
I see myself leaving the medical profession in 20 years when I’m 55 years old.
Not super early, but definitely earlier than the traditional time frame.
20) Do you have an annual retirement spending goal that you are aiming for? A target net worth?
What would be your exit strategy after achieving these goals?
My annual retirement spending goal is at least $150,000.
It is about twice the amount of our current living expenses.
Taking into account inflation at an average of 3%, an annual spending of $150,000 in 20 years seems about right to me.
My target net worth would be $5 million or more.
There are several reasons why I would consider retiring when I am 55 years old:
- With 25 years of service, I would receive a defined benefit pension payment equivalent to 45% of my annual salary for as long as I live.
- By the time I retire, this pension income alone could be worth more than $150,000, which is what my goal for retirement spending would be.
- This pension is one major benefit of where I work.
- Retiring at 55 years old or older would make me eligible for lifetime medical insurance coverage for my wife and I at no additional cost. (another perk of my work)
20 years from now, my children would either be done with high school or finishing up soon.
They will hopefully grow up to be responsible adults who wouldn’t have to rely on us as much.
Therefore, my wife and I will have more freedom to be location-independent and have the option to slow travel and/or live abroad.
21) What is your greatest fear, if any, you anticipate in retirement, and are there any ways you are addressing that now?
I don’t anticipate worrying about running out of money or not having sufficient medical care.
If all goes according to plan, my pension income will likely be more than sufficient for our retirement spending needs.
When you factor in my wife’s pension (yes, she gets a pension too!), social security benefits, retirement accounts, investment income, and our overall frugal lifestyle… I am 100% confident that we will not run out of money during retirement.
My wife and I have a healthy diet and lifestyle that will hopefully allow us to live a long and healthy life.
In addition to this, we will have lifetime medical coverage.
Therefore, healthcare is not something that we are worried about either.
My greatest fear in retirement is not adequately preparing my children for financial security and freedom.
Hopefully I can address this by being a good role model for my children.
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.
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Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
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