You may ask why I decided to call myself The Frugal Physician on my way to blogging about money and financial independence. After all, "Frugal" isn't exactly a sexy word. It generally has the undertone of "cheap" or "cheapskate."
So, when I started brainstorming ideas for a website name, I was a little surprised that "The Frugal Physician" was available across all social platforms. (Turns out, I'm lucky the Physician on Fire didn't take it). But, really... how many physicians are willing to own frugality? In the physician world, big spending and lavish lifestyles are valued.
Well, I'm a numbers gal. So I'll just start with that.
How to Get Rich with Frugal Living
Example 1: Layla
Let's take Layla. She is in blue in the above graph. Layla is a primary care physician and makes an average salary of $200k/year ($140k after 30% taxes).
Layla is responsible so she will max out her 401k and invest $18.5k a year (that’s a 14% savings rate… above the US average of 5%). She would be spending $121k a year.
How much does Layla need to Retire?
Using the rule of 25 (25 x yearly spending), Layla would need $3mil to retire. To get to $3mil at this savings rate, she would need to work for fourty-five years!
Layla, like her peers, started her career at 30, so she is looking at a retirement age of 74 to support her lifestyle. Sure, she could take a pay cut at retirement and retire at 65. After all, her house will be paid off and her expenses will be lower in retirement.
At the age of 65, she would have $1.7mil. At a safe withdrawal rate of 4% in retirement, Layla would have a $70k a year income instead of the $121k.
If she only maxed her 401k, Layla would grind it out on the hamster wheel for 35 to 44 years, just to make sacrifices when she finally gets to retirement. That sounds like a pretty shoddy deal.
Example 2: Sarah
In contrast, let's take Sarah, a frugal physician. She's the lady in red. Sarah strives to save 50% of her take home pay. So, she maxes out her 401k at $18.5k/year and saves an additional $51.5k per year.
How much does Sarah need to retire?
She is used to living on $70k a year. To maintain that lifestyle in retirement, she needs $1.8mil to retire (compare to Layla's $3mil). If she kept up her savings rate for 35 years, she would have $6.5 mil at the age of 65.
If she worked 44 years like Layla, she would have $11.6 million.
But who needs that much money? What’s more important is that to get her early retirement number of $1.8mil, Sarah only needs to work for 16.6 years... MAX.
After age 46, Sarah will achieve financial independent and can maintain her same lifestyle of $70k a year off of the interest on her savings alone ...for the rest of her life.
Winning with Money
And that's the moral, folks: Frugal = Freedom. Two excellent F words.
Frugality gives you freedom to do whatever you like. Reach financial independence early and you have freedom to be a surfer beach bum, jazz musician, internet entrepreneur, juggler, underwater basket weaver...Whatever.
You could even continue at your job... but you don't have to. You are not beholden to anyone.
Why I Embrace Frugality
I want to be a Sarah. I would much rather take 17 years working full-time, rather than 45. Ain't no handbag, car, or house worth 28 years of my life.
Physicians need to own frugality and stop throwing their hard earned money away. We need to stop letting the advertising and the financial industry take us for a ride down poverty lane. Stop living for the expectations of others and start paying yourself first! I'm proud to embrace the term "frugality" and hopefully you can, too!
So, that's why frugality.
Ready to get Frugal? Check out these articles next:
*Smarter people than me have written about the 4% rule of retirement and how to calculate what you need for retirement. See here.
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Standard Disclaimer: Not meant as individualized financial advice. For entertainment purposes only.