This month marks the end of my first full calendar year as an attending. I did a retrospective post not too terribly long ago reviewing my first 12 months in this job, but I thought it would be interesting to carve things out for Jan-Dec, especially as 2020 has been such an inauspicious year. There will therefore be a good bit of overlap, but I believe that the trends are informative nonetheless.
In 2020 we increased our net worth by a frankly staggering $275,000. Not too shabby on a gross pay of $390,000, and a total take-home of about $270,000. I did receive an inheritance when my father passed away in the summer amounting to $48,000, but clearly the vast majority of these gains came from methodical saving and investing. Embarrassing as it is to admit, it’s hard for me to stop looking at the chart and the work that it represents.
If there is one way that 2020 changed the way I manage my money, it was though its demonstration of the importance of a robust emergency fund. I had gone through all schooling and training living entirely on loans and cash flow. Why not? What could be more secure than a job in medicine? In March and April I felt the very real fear of prolonged furlough or worse, as elective procedures were shut down across the country. Fortunately this ultimately manifested only as a temporary pay cut, but the anxiety was very real.
I made the decision to keep a three month emergency fund, which I have maintained. Separately, we have started saving for a house downpayment, and we are in the market for something in the $350-450k range (and accordingly a 70-90k downpayment).
To accomplish all this, our cash holdings have ballooned by $102,000.
This is one of my favorite charts, because it really shows the importance of not panicking in a downturn and staying invested to capture the upside. We have invested a total of $49,500 in various accounts this year (403b, Roth IRAs, taxable brokerage, 529s, kids Roth IRAs) which means that nearly half of our gains have come from growth rather than contributions.
These gains total $86,000.
Along with hoarding cash, I made a big effort to deleverage as a hedge against potential job loss. All of our credit balance had been carried at 0% interest, but it was simply time to get rid of it and start paying for things with existing funds. Don’t get me wrong, we absolutely are still using a number of credit cards for their rewards and benefits, but we are staying paid in full.
In 2020 we reduced our outstanding credit card balance by $21,000.
In 2020 we finished paying off our two cars, and I don’t plan on ever carrying a car loan again. Otherwise our payments toward our student loans remained slow and steady, keeping us on track to have them paid off by 5 years out of training. Why the lack of urgency? Since the COVID crash rates have plummeted, and our loans currently have interest rates of 0.22% and 0.66%, respectively.
Despite making only minimum payments, our we have decreased our loan burden by $58,000.
Finally, we saw a small net worth boost of $9,000 from paying off some federal taxes that had been under-withheld. I had kept these as a liability on our balance sheet, so it didn’t tank our net worth when the money left our bank account.
As with the last of these updates, a balanced approach between saving, investing, and debt payment has been a winning strategy in 2020. Hopefully in the next year COVID starts to become a memory, and our success will continue to grow!