Recently, my wife Selenid and I checked our financial plan for the first time in 10 months. And we realized something very exciting … our net worth was over $1 million. I am now officially a physician millionaire!
To understand what this means, let’s define net worth.
In very simple terms, net worth is equal to your assets minus your liabilities. Assets are anything you own that put money in your pocket. This includes things like stock or bond investments and cash-flowing real estate. Conversely, liabilities are anything that takes money out of your pocket. The most common liabilities are debt and non-cash-flowing real estate like primary homes.
What is interesting to note in this calculation of net worth is that your income does not come into play. You will not find income listed anywhere on any net worth calculator.
Our Net Worth Trend
At last check in April 2023, our net worth was roughly $792,900, which was a $400k increase from the previous check. And before that, we crossed the “0-line” to go from negative to positive. Seeing these additional increases has been amazing.
It has also served as a reminder that creating and following simple, healthy financial habits really makes a difference. That’s actually the main reason we track our net worth update.
Let’s take a look at my net worth trajectory since I started tracking it in June 2020 at the end of my training and the beginning of my financial education. You can see the graph of my trajectory here.
When I first started tracking my net worth update, things were bleak. In fact, this graph doesn’t include when I did a rough check in Spring 2020 and my net worth was >-$520k. I hated seeing these numbers. But it gave me a starting point so I could work to make them better.
Moral of the story? Personal finance is scary at the beginning. But looking the big bad monster in the face is the best thing you can do! You’ll realize it actually isn’t as scary and difficult as you thought and can start making positive changes.
You can see on the graph that I increased my net worth by a large amount before I even received my first attending paycheck in mid-August 2020. I point this out to show that no matter your situation, you can improve your net worth. Even if you are not looking at a big increase in pay like I was going from a trainee to an attending.
From October 2020 to November 2020, there was a big jump in net worth. This happened after we bought our first investment property and forced appreciation on it. I always say that real estate is a wealth accelerator, and this is proof.
After that, a long break before another net worth update check.
But after that last check in November 2020, we crossed the fabled red line of $0 net worth and got into the positive!
And now here we are. With another $300,000+ increase in net worth by following our written financial plan.
Looking at the graph, you will notice that the slope of the line did flatten out a bit. This is bound to happen from time to time. The economy has stalled. We have been mired in a bear-type market. But this really doesn’t matter. We are moving at a steady pace. And more importantly, we are well on our way to meet our financial goals and don’t need to stress!
My Assets and Liabilities
You can see our assets and liabilities here. Some of these numbers are obviously estimates, like our household items. I kept this on the conservative side. I even dropped the estimate down from the previous net worth update.
Also, this is a snapshot in time. That’s our cash and savings at that moment. Also at that moment, we had $3,000 on a credit card that we will pay off completely at the end of the month.
As far as assets go, our biggest ones are our primary home and our investment properties.
Now, I am totally on the side of saying that your primary home is not an asset. And we don’t treat it that way. But we do include it in our net worth calculations.
Investment properties are a different story. They have made a HUGE impact on our assets. Cash flow and forced appreciation resulted in home value gains of near $100,000 for at least three properties. However, we don’t even count the forced appreciation values in our net worth calculations. We just include the market values. We would rather under- than overestimate. Either way, real estate investing has been the single biggest positive influence on our net worth. And this doesn’t even count the tax benefits.
Our second biggest assets are our retirement savings. They’re relatively small but growing 11%. This is a huge improvement over the previous 7% and then 4% and 0% before that. The rest of our assets are relatively small potatoes.
As far as liabilities, our biggest ones are the mortgages on our primary home and our investment properties.
Next are our student loans. However, they are a much smaller percentage (15%) than previously as we continue to pay them down aggressively. Each month, we pay huge amounts from our 43%-50% savings rate to pay off my student loans. Each $1 we pay off is $1 that our net worth increases. Plus, in four months, my federal loans are scheduled to be forgiven via PSLF.
It also helps that we have no auto loans or other consumer debt. This is because we pay for every big purchase in cash after we have saved enough. Or we pay on our credit card to get points and then pay off the entire balance at the end of the month (or else the points aren’t worth it!).
The Arrival Fallacy
When I calculated our total net worth and told Selenid that we were millionaires, she just laughed. Her exact words were, “Well, it doesn’t feel like that!”
And it doesn’t. As a physician millionaire, I don’t feel all that different from before.
We still budget. We don’t splurge much. I still have massive student debt. At times we feel cash poor if we have a month with a lot of expenses.
It’s not like we imagined when we were kids and thought of being a millionaire.
And this could be a problem. Because it’s an arrival fallacy.
If we had told ourselves that we would be happy or everything would be fine when our net worth was >$1 million and I was a physician millionaire, this accomplishment would feel very hollow. Because it would not have met our expectations. And that is exactly what an arrival fallacy is. And this happens way too often to doctors.
Thankfully, that’s not what happened with us. Very little tangibly changed now that we are millionaires. But we didn’t expect it to. Our written financial plan calls for us to reach financial freedom in 20-plus years. And our goal nest egg is $5 million, not $1 million.
Plus we have a very strong “why” for achieving financial freedom. The goal is not monetary, but rather experiential. The money will give us our time back.
In fact, looking at our written financial plan, our goal was to become millionaires in 2033. So we are way ahead of schedule! Rather than an arrival fallacy, this exercise helped motivate us to keep going!
Takeaways
The bottom line (pun intended) is that looking at your net worth helps. You can analyze and see what you are doing. You can pick out the things that are making it better and choose to do more of those things. You can also pick out the things that are making it worse and choose to do less of those things.
As you continue pursuing financial freedom, I urge you to review/analyze your net worth at least a couple times a year. Remember: It’s your personal finance scorecard, and there are tons of online calculators to use.
Next, work to maximize your assets and minimize your liabilities. In addition, create and follow a financial plan.
Indeed, I attribute my net worth growth to two things: learning how the wealth building game works, and committing to the small financial habits that create big wins.
How has your net worth changed over the years? Share in the comments!
Jordan Frey, MD is a plastic surgeon in Buffalo, NY at Erie County Medical Center and the University of Buffalo. His clinical focus is on breast reconstruction and complex microsurgery. He is also the founder of The Prudent Plastic Surgeon, one of the fastest growing finance blogs. There, he shares his journey to financial well-being with a goal of helping all physicians reach financial freedom, practicing on their own terms.
Illustration by Jennifer Bogartz
