“One house, one spouse, one job.”
That is one of the basic tenets of financial teachings by the FIRE (Financial Independence, Retire Early) community, and its rationale is wonderfully summarized here by White Coat Investor. Even if one’s goal is not to retire early, it is wise to follow.
Last week, I began this journey with Part One. Please continue to follow this story as young, naive Xrayvsn proceeded to commit financial cardinal sin by two main components of this primary FIRE doctrine.
Mistake #1 (One Job):
When I graduated medical school near the top of my class I had the ability to pretty much choose any specialty I wanted to go into. I had rotated through many specialties, but there was a draw towards surgery.
I believe I went into that specialty for the wrong reasons. My family and friends considered surgeons prestigious. In fact, I took it a step further and said I wanted to be a cardiothoracic surgeon because it even upped the prestige.
My mother in fact would brag to her friends that her son was going to be a heart surgeon.
I ended up matching at my first choice and, in my head, I was well on the way to get the girls and money as a young, up-and-coming surgeon.
I was set and already envisioned the life ahead.
Soon reality began to set in. The portrayals of surgeons on TV failed to mention what a truly demanding lifestyle, both in training and as an attending, a surgeon faced.
I am not a morning person, and yet I was going into the hospital and doing the rounds on patients before the OR started at hours that morning people would complain about.
And just because you got in early did not mean you left early. This was before the 2003 federal regulations that required residents to do a maximum of “only” 80 hours in a work week. I logged some rotations in my 2nd year that totaled over 120 hrs/week for 3–4 weeks straight.
Approaching the second year of general surgery residency (PGY2) I noticed a change in my personality.
I no longer had a semblance of my former self (the one that was happy go lucky) and often became terse and abrupt with any personal interactions with family members and friends.
The nail in the coffin was that I began to realize the attendings I was training under did not have a significant improvement in lifestyle either. When there was an emergency surgery in the middle of the night, they too would be dragged in to perform it.
I made the heart-wrenching decision that the surgical life was not for me.
“Don’t cling to a mistake just because you spent a lot of time making it”- Aubrey de Graf
I felt embarrassed to even mention it to my family members who just a few years ago I was boasting to about being the next big heart surgeon.
My mother didn’t help at all when I said I wanted to change my career path and become a radiologist when she replied, “Is that still even a doctor?”
To her defense, sometimes after discussing a fluoroscopy study with a patient directly, the patient would reply, “Thanks, but when will the doctor look at it?”
I applied and got into a radiology residency program and although I had already completed two years of residency, I could only get credit for one. I completed four more years in radiology and then proceeded to finish a year of fellowship in interventional radiology.
Estimated Hit to Net Worth:
1) Conservatively estimating 1 year of potential attending salary lost by not going directly into radiology in the first place: $220k
2) Moving expenses likely tacked on an additional $5k
Superpower Take-home points:
- Do not succumb to Sunk Cost Fallacy
- Although this example is meant to provide an example of a mistake, I also like to think it also exemplifies a decision that markedly changed my life for the better.
- Rather than continue finishing the 5-year surgical program I was currently in because I already finished 40% of the training already (the sunk cost) and be miserable, I made the difficult decision of “cutting bait” and pursue an endeavor that has brought me far more happiness than I ever could have achieved in a profession I was ill suited for.
In the grand scheme thing of things, the next mistakes are relatively minor, but I would be amiss to not include it in my trial by fire financial education.
Mistake #2: Bad Investing
In my 3rd year of radiology residency (PGY IV) on one of the rotations I was in, I was essentially one on one with an attending radiologist.
During our down time he spoke of how he was reading up on investing and said that he was confident that he could make money investing based on his newfound knowledge.
To be honest, I was so naive I am not even sure what the product he was investing in was. But to the best of my ability, I think it was in futures (vaguely recall it might have been in grains).
He showed graphs of how these investments had amazing returns and then asked if I would like to invest as well. He said he had a brokerage account and that if I wanted in, I should give him $1,000 and he would deposit it and invest it for me.
I’m shaking my head as I type this now, but younger Xravysn just bought into this without question and without doing further research.
To make matters worse, I didn’t even have $1,000 extra to invest at the time. I used a credit card access check to come up with the entire amount.
Later in the year I asked this attending whatever happened to our investment, and he said “Oh, we lost it all.” Again, I implicitly trusted him. Not once during the process did I see the brokerage transactions confirming my initial investment or the eventual total loss (if indeed that did occur).
I blew another wonderful opportunity to turbocharge my retirement accounts by choosing not to defer any money throughout my residency, foregoing the great retirement vehicle called the Roth IRA (which allows one to put after-tax money into a retirement account which would then grow tax free).
Given my lower income tax rate as a resident this would have been a great opportunity to have income tax arbitrage (put money in at a lower tax rate and withdraw it tax free when I would presumably be at a much higher tax rate).
Alas, when I finally did decide to fund a Roth IRA (my fellowship year which also was the last year of opportunity to fund a Roth, as I would soon eclipse the maximum income restrictions), I again did not do any research but listened to my CPA. They referred me to a financial advisor that promptly put me into a 5% front-loaded mutual fund with a fairly high expense ratio (I believe approaching 0.8%)
Estimated Hit to Net Worth:
Investment: $1,000 initial investment plus $30 check fee and subsequent interest. Again a guess, but likely $1,100 before it was paid off.
Roth: Assuming invested maximum Roth (1998–2001 at $2,000/yr and 2002 at the new limit of $3,000/yr) would have had $11,000 of principal money. Estimating a 6% rate of return from 2003–2018 this would have worth around $26,000 + loss from front loading
Superpower Take-home points:
- If you do not understand a financial product stay away from it.
- People in positions of supposed trust can still betray you or not have your best interests in mind (the only person who has that is YOU).
- If there is a very predictable salary path (such as the leap from a resident’s salary to an attending’s salary), take advantage of retirement vehicle opportunities that will be lost due to income threshold limits imposed (Roth IRA).