7 Secrets To Financial Freedom Every Doctor Should Know

7 Secrets To Financial Freedom Every Doctor Should Know - F(1)

The more personal finance and debt free blogs I come across, the more I realize most doctors are striving to achieve financial freedom.

What exactly does this mean? In simple terms, a financially independent person has enough wealth to live on without working.

There’s an entire group of FIRE (Financially Independent Retire Early) people (like Physician On Fire) that have started a movement helping people achieve these goals.

They get to make life decisions without being stressed about money because they’ve prepared wisely. They control their finances instead of being controlled by them.

Now, you maybe asking yourself, “How’s this possible?

This happens by reaching a point in life where your income generating assets (cash flow) are able to pay your expenses. This income is also known as “passive income.”

My good friend’s site at Passive Income MD is dedicated entirely to this topic.

Are you ready to start living the life you want without having to work until you die?

If so, then let’s get started…

What Does Financial Freedom Mean To You?

Many people view financial independence differently. For example, some say they’d reached it if they achieved a net worth of $1 million. (Are you tracking yours with Personal Capital?)

Others need more than a million dollars as confirmed by a recent survey from Charles Schwab. They asked 1,000 Americans, “How much money would it take for you to feel rich?” Most felt it was in the neighborhood of 2.4 million dollars.

Have you ever wondered what it means to be free of money worries?

For yours truly, I picture a point in my life where I can continue to work (if I want to) without having to worry about expenses being paid.
As I continue writing about personal finance, retirement planning and debt-free living, I can potentially see my career shift to something that could continue helping people plan their financial future.
When you are financially independent, you have options.
Reread that sentence until it sinks in. The key word is….options.
I don’t know about you, but I like having options (especially in restaurants). 🙂
Others may view financial freedom as having:
  • Freedom to choose a career they love no matter the salary
  • Freedom to travel every year – cost doesn’t matter
  • Freedom to pay cash for large purchases (vehicles, boats, etc)
  • Freedom to help others that are in need
  • Freedom to retire 10+ years early

Doctors typically have higher incomes than the “everyday millionaire” that Chris Hogan’s new book, “Everyday Millionaires” highlights.

The average millionaire he surveyed (over 10,000) made less than $100,000 a year.

If they can do it on their income, you can too.

When you are financially independent, you have options. You don’t have to wonder if your bank account can handle replacing your hot water heater or buying groceries for a single mom who just lost her job.” —Chris Hogan

The 7 Steps To Financial Freedom Every Doctor Should Know

1) Think About Money The Right Way

In Jonathan Clement’s book, “How To Think About Money“, he states that most don’t ever reach their financial goals based on their thinking, or lack thereof.

His research made me realize that some of my goals that I thought would make me happy, wouldn’t after all.

Here’s a few of the books’ highlights that impressed me:

a) We tend to get more happiness when we spend on experiences vs stuff. To me, this translated into NOT being focused on acquiring things such as our “dream home” or “decked out bass boat.” Instead, focus on traveling with family and friends creating experiences that can be remembered forever.

b) Save everything you can early on so we can quickly buy ourselves financial freedom in our 40’s and 50’s. Some may not “buy” into this thinking, but in doing so, you give yourself options (there’s that word again) to continue working if you want or changing careers that you’re passionate about. You never know what life has in store for you.

c) Chronologically, retirement might be our life’s final financial goal, but we should aim to put it FIRST. Our life’s goal isn’t to get rich. Rather, it’s to have enough money to lead the life we want and hope for.

2) Set Goals & Dream Big

Before taking a trip, you’ve got to know where you’re going, right? A plan is needed in order to arrive at the desired destination.

During one of my recent coaching sessions with a private client, I asked, “What are you trying to accomplish?” He stated that he wanted to retire in his 50’s. I asked him how he was going to get there. He couldn’t tell me.

Do you think he’s going to accomplish his goal? Maybe, but he’d have a better chance if he develops a game plan.

Setting a goal to retire in your 50’s is a great thing to shoot for but it’s too vague. The more specific you can make your goals, the better.

A great book that can help with this is The Instant Millionaire.

It’s a fable about a young man on a journey to find out who he wants to be and how he’s going to make his living. His wealthy uncle refers him to a man that holds the secrets on how to attain financial freedom. When the young man gets to the instant millionaire’s mansion, the tale of wisdom and wealth begins.

It’s a great read and I don’t want to spoil it for you.

Here’s a couple of points that tie into what we’re discussing:

  • Life gives you what you ask for! –> be clear!
  • Secret to getting what you want – by writing out clear goals with a deadline as specific as possible.

3) Stick To A Budget

It’s hard to gain financial independence without having control over money. By creating and sticking to a budget, you’re able to tell money what to do instead of wondering where it went.

Adhering to the principles of budgeting and controlling the urge to spend can play a major role in creating wealth. When you live according to your budget, you’re living within your means, and when you control debt, you’re keeping yourself from negative financial forces that can wreck your life.

If you’re married, a budget allows both of you to set monthly and yearly goals and also decreases the temptation to splurge (sorry). If someone purchases something not in the budget, then their spouse is there for accountability. “You spent $300 on deer corn? It’s NOT in the budget!”

A budget gives each dollar a name before the month begins to help track spending throughout the month. It’s hard to build wealth without a budget and unfortunately, too many doctors are living paycheck to paycheck without one.

4) Eliminate Debt…All Of It

Proverbs 22:7 states, “The rich rule over the poor and the borrower is slave to the lender.” That’s great advice whether you’re religious or not.

This is also one of the key principles Dave Ramsey states why we should avoid debt….like the plague.

My good friend and semi-retired physician, Dr. Cory Fawcett, wrote an entire book on debt called The Doctor’s Guide To Eliminating Debt.

A few debt facts for you:

According to a Pew Charitable Trusts report about Baby Boomers, they found that:

  • 47% have mortgage debt
  • 41% have credit card debt
  • 13% have school loans
  • 36% have car payments

Baby Boomers still have school loans? What gives?

This research should make you realize that if you don’t take care of your debt early on in life, you could end up like the average boomer.

If you’ve made mistakes with your finances in the past (like me), no worries. Better late than never to start cleaning up the mess on your way to financial independence.

I used Dave Ramsey’s Debt Snowball to become debt-free. If it works for you, great. If not, try something else but know this….if you owe money, your paychecks have someone else’s name on them.

If you want to reach your goal of financial freedom, you must have your full income at your disposal, not bits and pieces that are left over after paying credit card bills and student loan payments.

5) Focus On Short Term Savings

I rented an apartment during dental school and residency. If something broke, like the A/C unit or dishwasher, all I had to do was call the landlord for repairs.

Most doctors rent during training and then rush out to buy a house as soon as they get their first paycheck. Myself included.

I get it. Being cramped in an 800 square foot apartment ain’t fun. In our last apartment before we bought our home, it was amusing showing guests how I could stretch out (I’m 6′ 5″) and put one arm in bed room #1, one arm in bedroom #2, one leg in the den and the other in the kitchen.

Now you know why my wife was READY to get more space!

Once we bought our first (and still current home), I didn’t count on having to save money for emergencies until we had our first one.

Imagine if every time you had something break or an emergency (ex: kids ER visit), you had to pull money out of your 401(k) or put it on a credit card that carried a balance.

How would you ever get ahead if you kept borrowing money from your future?

You wouldn’t.

Hopefully because you’re reading this, you want to be financially free. In order to do so, you need a large cushion for all of life’s unexpected events it’s going to throw you.

Remember what the infamous Forrest Gump said:

My momma always said, “Life was like a box of chocolates. You never know what you’re gonna get.”

Studies show that 40% of Americans can’t cover a $400 emergency. It’s a good idea, before you start tackling your debt aggressively to start an Emergency Fund.

Once you’re out of debt, increase your savings until it can cover three to six months of expenses.

Our emergency fund is in Vanguard’s Prime Money Market Fund (VMMXX) which is currently paying 2.5%.

If you need help setting up other short term goals, read:

5 Easy Short Term Financial Goals 

6) Automate Your Savings

According to SmartMoneyMD, only 41% of physicians average less than $500,000 in retirement savings found in a Financial Preparedness Survey via the AMA.

Here’s something even more disturbing:

  • Of those surveyed, the majority (56%) under age 40 had an average retirement savings under $100,000!

Now that I’ve gotten your attention, it’s time to get serious about your investments and savings.

Let’s talk about a few key areas first…

a. Retirement

You’ve probably been told that you must pay yourself first. By doing this, you’re investing for the future right off the top, before you even look at living expenses.

Automation is the key because without automation, it becomes very easy to not save money and instead use it for an unnecessary living expense.

It’s really a simple concept, but most won’t do it because they think it’s going to “cost” them too much because they’re “just getting by” as it is.

If your employer offers a tax-favored retirement account such as a 401(k), take full advantage of it first. Most offer a match on your contributions so why throw away free money?

How much should you save? At first, shoot for investing 15% of your income. This is a good place to start, but once you’re debt-free, max out all company plans before investing in taxable accounts.

b. College

Once you get to the point where you’re saving 15% towards retirement, it’s time to open a kid’s college fund. Two of the most popular accounts are the 529 plan and Education Savings Account (ESA).

If you want to learn more about both accounts, read:

Coverdell ESA vs 529 – What’s The Best To Save For Kid’s College?

c. Mortgage

Once you’ve fully funded your emergency fund with 3-6 months of living expenses, investing 15% towards retirement and saving for kids’ colleges, it’s now time to get rid of the mortgage.

This is another area that you can automate too. All of the payments that used to go towards your now paid off consumer debt can be applied to your mortgage. If you follow this plan, expect to be completely debt-free including the house in 9-11 years.

7) Ignore Mr. & Mrs. Jones

Unfortunately in today’s world, social media can keep you from enjoying financial freedom.


Keeping up with the Joneses has risen to a new level, as we’re able to broadcast our purchases instantly to our friends, family and neighbors.

When the classic book, “The Millionaire Next Door“, was published in 1996, social media wasn’t around.

The millionaires featured in the book didn’t have to deal with the pressures of social media.

Today, people don’t think twice about posting pictures of their purchases & vacations which makes it harder, for many, to keeping their focus on financial independence instead financial hardship.

Building wealth means ignoring what others are doing, which is much more challenging today than in the past.

Last But Not Least

The only way you’ll ever achieve true financial freedom is by being content with what you have (no matter how much or little).

We’ve all been given gifts and studies show that we are the happiest with those that meet our basic needs such as:

  • food
  • clothing
  • shelter

Practicing gratitude with what you already have will help change your outlook on life.

Generosity should be the foundation of your financial plan.

Proverbs 10:22 states, “The blessing of the LORD brings wealth, without painful toil for it.”

This past Christmas, my boys and I volunteered our time by serving meals for the needy at a local restaurant. They quickly realized that the gifts that they’d opened only an hour or two earlier didn’t mean much compared to the 1,000+ people that were standing in line for food.

Time Matters

making-dinnerOur most precious asset is our time. A few things you can do to with yours to help others is:

  • Bring your family to a local shelter or soup kitchen to serve meals
  • Tutor or coach under-privileged kids
  • Bring groceries to the elderly at nursing homes
  • Volunteer at your church

The list is endless. If you’re scratching your head trying to figure out how you can serve, simply use the gifts that God gave you.

Ask yourself what you’re good at and use that gift to help.

  • Can you do yard work?
  • Are you good at doing your taxes?
  • Can you cook?
  • Can you sew?

You know yourself better than anyone else.

My dad owns a hardware and can fix anything. He serves others by helping when things break around the house.

Whether you can help out a lot or a little, it doesn’t matter. You doing so is contributing something positive to someone else’s life.

When I first started helping others, I found out rather quickly that this helped me out more than them. Giving does something to a person that no amount of money can do. It works on your heart and makes you realize that any problems you maybe having are tiny compared to other people’s problems.

Now that you have a plan, you’re ready to take action in the right direction.

Join the Passive Investors Circle


  1. I’m a primary care doc, have been in practice 10 yrs, I put 10% toward my 401k each month and have 600k saved so far, also another 200k in stock investments and 529 for both kids. But I still have 130k in student loans (2.9% interest) and 300k house mortgage. I’m on track to pay these off over the next 10 yrs. My hubs is a teacher and we try to live within our means, our mortgage is the biggest expense. Would you recommend trying to pay off debts faster and scale back on savings for a bit? Appreciate any insight you may have!

    1. Hi SS: I, for the most part, followed Dave Ramsey’s Baby Steps while getting out of debt. It looks like you’ve skipped around a little bit but are still doing a GREAT job. I would throw ALL extra $$ you can at the student loans. Put the 529 contributions on HOLD until the student loans are cleaned up. After the student loan debt is gone, congratulations, you’re consumer debt-free.

      Feel free to contact me at that point and we’ll feature your story on the Debt Free Docs series.

  2. Could you please advise about the 15% investment towards the retirement ? An avg physician who’s salary is 200k, can put only 9% ( 18k) in 401k. Where to invest remaining 6%? Thank you

  3. Great article! thanks.

    Why would someone put money in the Vanguard Money Market account for a rainy day when they could put it in the Vanguard Total Bond Fund and trade much better returns for a single additional day of liquidity (and minimal additional risk)? The numbers in 2019 to date favor the MMKT fund but if you look over the last decade the opportunity costs for that single day of liquidity seem way too high . Shy of ransom I just can’t see where a day matters that much. Is there any year in the last decade that it would have been smarter to have your rainy day fund in the MMKT fund for the previous decade than in the Total Bond Fund? Any future scenarios that might favor the MMKT for the long haul (which is what Vanguard is all about)? What am I missing? Thanks again. Well thought out and referenced article.

    1. Dirk, Thanks for the comments….but I think you’re missing the BIG picture. In order to begin the journey to financial freedom, setting up an emergency fund is a MUST. Truthfully, it really doesn’t matter what it’s in, it could be in a Folger’s coffee can in your backyard, it doesn’t really matter. The point is to set one up in some type of account and don’t touch it UNLESS you have a true emergency.

      Buying your neighbor’s used bass boat does NOT count as an emergency (unless the fish are biting)!

      Bottom line: Nearly 1/4 of Americans (57 million) have NO savings to handle emergencies.

      Check out this article from CNBC for more details. https://www.cnbc.com/2017/06/20/about-57-million-americans-have-no-emergency-savings.html

      1. Jeff,
        I think I did miss your bigger point, as I suspected. Thanks.

        Your article was timed perfectly because I have been pondering how to distribute the 40% of my “safe” money now that I am 59 1/2, and how to make it super simple for my wife should I pass or for both of us as we get older and more feeble. I have come to realize that the savings account that my rainy day fund has been in is sort of stupid. It hasn’t cost me 10″s of thousands of dollars but perhaps thousands in the returns the bond fund would have provided over a few decades.

        The question is why you or I might choose a money market account you mentioned or 2.2% interest banking account for our rainy day fund since you and I already have it saved and deployed somewhere? It is starting to seem to me the simplest, highest return solution for a rainy day fund that MAY need be used some day is the Vanguard Total Bond Fund. You give up a day of liquidity but look what you get in return. The super conservative rainy day bond fund should outpace inflation over the decades it is providing a safety blanket for life’s unexpected emergencies. Money Market funds don’t historically keep up with inflation.

        I thought that there might be a more nuanced answer I was missing why your rainy day fund is in a Money Market account. It is a compliment to your writing style that I wanted to dig down a bit.. Clearly we are both doing better than we would with the Folger’s can or bass boat rainy day fund.

        Please keep up the concise helpful writing style. Thanks.

        1. I’m a practicing orthropod, age 65, I recognize that it is very important to fund ALL of your tax deferred options (401K, Roth or conventional IRA) to the max starting as early in your career as possible. I would argue to do this before prepaying your mortgage, as mortgage interest is tax deductible. Certainly if you sleep better at night, pay down your mortgage as well.
          Asset allocation between stocks and bonds is key. Once you have accumulated over 6 months living expenses in an after tax bond account, you can skip the money market – use the bond account for emergencies. Buy no load stock mutual funds you never sell.
          I highly recommend reading “The Bogleheads Guide to Investing”, followed by “The Four Pillars of Investing” by fellow physician William Bernstein. Both are masterpieces.

  4. If u want a simple plan and u plan to invest for 10+ years, just put in etf spy or index 500 and don’t look back. Use Schwab, Fidelity, or Vanguard and don’t hire an advisor ( except Ricedelman.com)

  5. I think this is a great roadmap. And I agree with Marcus its not hard to do an ETF through something low cost like Schwab, Fidelity or Vanguard. Clearly pay off all consumer debt first and maximize your work 401k/403b (18500 I believe and 24500 beginning the year you turn 50). And if you have a 457b as well max that out. Then look at your 529s. If after you pay your monthly mortgage (I agree I would not rush to pay it off especially if you have a low rate and since its deductible), pay yourself in terms of max our retirement funds, and contribute to your 529s and still have money left over than an ETF is best no advisor needed. I track my returns and expenses and net worth with Personal Capital and after paying my mortgage and into my 403b 457 and 529s put money into ETFs with Vanguard.

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