There was a time when people would retire with a million dollars in their bank accounts and call it an achievement. Today, the million-dollar American dream has exploded all over the place. To begin with, it’s not a dream or coveted privilege anymore, but a necessity.
Making a million-dollar is the first stepping stone to wealth. And once you have made your first million, making 10 or 100 million becomes relatively easy.
Most people think it’s easy to build a multi-million dollar asset as a physician. But that’s not entirely true. Most physicians are high earners yet not rich enough to retire and live off their savings. According to statistics, around 50% of physicians in the US retire with less than a million in their bank. So, it’s important for even physicians to discipline their finances to achieve a truly wealthy status or financial independence.
Here are a few tips to help you make your first million and repeat the process until you have sufficient wealth to retire with and even pass on to the next generation.
1. Managing Your Student Loan
A majority of physicians graduate with a massive student loan debt. If you have a federal student loan, you can consider a refinance or apply for forgiveness or income-driven repayments. Refinancing medical school loans can reduce your interest rate and extend the repayment tenure, making it easier for you to pay off your loan without having to compromise your lifestyle.
2. Save Early And Invest
With your student loan out of the way, the next step is to keep a certain percentage of your income aside, say 10% or 20%, and invest these savings in a low-risk portfolio. A conservative approach would be to save 15% of your income every month. The only caveat is you should not touch these savings for at least ten years.
Let’s run the numbers for you.
For instance, you start making $10,000 a month as a physician in your 20s and invest $2000 every month in a low-risk instrument with a return of 8%. With your discipline and power of compounding, you will have $336,800 in your 30s.
As your income grows, you can increase your monthly contribution in the same proportion and easily make your first million before you turn 40. Your first million in the right investment instrument can multiply quickly with more aggressive compounding.
3. Seek Employer Benefits
If you are working for someone, you can benefit from employer-offered investment schemes, such as 401(k). Combining your 401(k) with the above-mentioned saving and investing plan can help you achieve your FIRE(Financial Independence Retire Early) goals early on.
We know that it’s easier said than done for physicians, as they have certain standards to maintain and look presentable. But there are certain areas where you can cut corners without compromising your comfort. This brings us to the final point.
4. Spend Wisely
Should you spend wisely and save for the future or blow up your savings because you live only once? – every high-earner’s dilemma. So, here’s the thing.
Keeping up with the Joneses can lead you into a downward spiral of financial worries. If your next-door neighbor has a Mercedes, you don’t have to follow in their footsteps. A Toyota Camry is as comfortable as Mercedes C Class, only cheaper and low maintenance. Showing off can cost you big time. No one really cares about what you drive or how many diamonds you have on your Rolex. All that matters is your net worth and financial freedom at the end of the day.
Sunset Days Of Retirement Spending
By the time you retire, you will have a multi-million dollar portfolio(cash and assets combined). You can also explore equity release options to make your retirement days lavish and stress-free.