Welcome to another Dr. PayItBack monthly checkup! I use this space to remain accountable to our expenses and goals, track net worth and debt, and muse on what was done well and what can be improved.
May was a month largely spent treading water. The market dipped another 6% but clawed it all back, we are finalizing the purchase of our home, and we’re shoring up plans for a number of trips over the next several months. The good thing about automating your financial plan is that even when it feels like you aren’t doing much, your money is working for you in the background.
Budget/Cash Flow
Lifestyle creep is insidious. In my first year out as an attending, our average monthly spend was right around $8,000. The second year it was $9,200. And so far this year it is just under $10,000. Now to be sure, some of this is inflation. But it is a reminder that even without a conscious decision to loosen the pursestrings, it tends to happen all of its own. This month is our lowest-spend month since November of last year, but it would have among the highest in 2019-2020.
I think I know at least one culprit.
We didn’t have any unusual one-off outflows this month, which allowed us to keep things otherwise under control.
PayItBack Progress
My interest rate has now increase almost 7x since the end of last year. As the rate increases and the balance decreases, it becomes harder and hard to justify keeping it around. Still, I don’t plan to prioritize it until the rate exceeds 4%, especially as that will also be the rate on our mortgage.
Net Worth
As mentioned above, the S&P was essentially flat in May. All things being equal, I don’t mind a flat market this early in my career. In fact, if it wanted to stay flat for the next 5 years and then make up all the gains in the following year or two I’d probably be able to retire immediately! It’s fun to watch the numbers go up every month, but cash flow is the main thing that really matters right now.
Financial Independence
In addition to using this nice applet — which basically takes the last year of spending and compares it to the estimated growth of your investment portfolio — I’ve been running the numbers using my own calculations as a bit of a sanity check. And I’m pleased to say that they come out about the same, within a year or so.
This shows how my time from FI has decreased since I became an attending. Obviously this will naturally decrease by one month per month as time passes and I get closer, but it has gone down much faster than that. The underlying calculation uses an estimated 4% inflation rate, and it predicts that in about 9 years I should have a portfolio of $6,000,000, which would amount to $4,200,000 in today’s dollars (for an annual spend of about $130,000 per year, using a safe withdrawal rate of 3.3%).
Financial Goals for 2022
1) Max out 403b: $20,500 of $20,500 (100% done) ✅
2) Max out backdoor Roth IRAs: $12,000 of $12,000 (100% done) ✅
3) Use taxable brokerage in addition to 1) and 2) to save $120,000 total for retirement: $60,000 of $87,500 (68.6% done)
4) Max out 529s for state tax benefit: $16,000 of $16,000 (100% done) ✅
5) Continue to pay minimum on student loan as long as rate remains <4%
6) Finalize estate documents ✅
7) Purchase a house
Food/going out is by far my worst budget offender. I guess I just prioritize going out for a few drinks after a long day over having a nicer pair of pants that I’ll wear for five years. I don’t know why I am the way that I am.