Set It And Forget It

I am really lucky to have had a Dad who was an insurance salesperson and later a financial advisor.  From the time I was a kid, we had long talks about money and economics and saving for the future.  I had a university savings account from the time I was five, and half of my $2 a week allowance got put into it.  When I turned 18, my Dad gave me a $500 RRSP and a copy of The Wealthy Barber for my birthday, complete with the advice to always put 10% of my earnings directly into savings.

"Even when I'm a university student and I can barely afford to pay my tuition", I asked?

Yes.  Even when I was a university student and I could barely afford to pay my tuition.  Always.

Along with the recommendation to save at least 10% of my earnings, my Dad advised me to "set it and forget it".  Pick a good investment vehicle (or vehicles), set up a monthly direct deposit, and then almost never look at it.  Check it every 3-6 months to make sure the investment strategy is still sound, adjust as necessary, and then ignore it.  Don't get caught up in the day to day fluctuations in the market, which cause people to make damaging emotional decisions, and just focus on long-term wealth building.

This strategy served me well.  I followed his advice through my 20s, and by the time I started medical school at 29 I had a nice chunk of savings, which I kept for retirement instead of putting towards school.  And I kept up the 10% rule through medical school and residency, so even though I became a wild spending machine, I was still building some savings.  (Although not nearly as rapidly as I was building debt, sadly.)  The best part of the "set it and forget it" advice was that I could do just that:  forget it.  I included savings in my budget, they came out automatically, and I could rest comfortable in the knowledge that I was preparing for the future.

All of that changed when I became an attending.  As a fee-for-service physician, I was no longer earning a regular paycheque.  The amount I took home fluctuated wildly depending on whether I was on call, how busy my clinics were, and whether I took vacation.  This year, for example, there was a four-fold difference between my best and my worst paid months.  I'm not complaining at all about how much I am paid - it's wonderful to earn enough to save over 2/3 of what I'm earning without having to adopt Frugalwoods-level frugality - but I have struggled a lot with the variability of my income.

In good months, when I am earning and savings lots, I feel great.  In months when I'm not on call or I lose a lucrative Monday clinic to a long weekend, I feel anxious.  What if I don't save as much as I normally do?  What if this is the beginning of a decline in my income, and I'm not going to be in a position to retire in 5-7 years?  What if I burn out and can't keep working until I FIRE?

I hate it.  I hate that I'm earning way more than I need to live and yet I'm just as anxious about money as ever.  I've tried not looking at my net worth, and it did help to reduce my anxiety, but I'm not very good at ignoring my net worth on an ongoing basis.  I'm good enough at mental math that I can generally estimate my net worth even if I'm not looking at my spreadsheet.

I've been thinking a lot about this anxiety, and I realized that a lot of it stems from having set a very aggressive FIRE target for myself.  Based on the amounts I've been saving to date, I could retire on a reduced budget in about 5 years and retire more comfortably in about 7 years.  So January 1, 2025 has become my tentative FIRE date.  But that FIRE date requires that things stay essentially the same.  It doesn't allow me to buy a house, nor does it account for the very real possibility that physician payments may be cut, or at the very least will not increase at the rate of inflation.   It's an anxiety-provoking FIRE date, rather than a liberating FIRE date.

So this weekend, I came up with a plan.  I've figured out how much I would need to save to FIRE in 10 years, when I will be 50, and it is about 2/3 of what I've been saving to date.  I'm going to take that amount and put 75% of it into investments and 25% of it towards repayment of my line of credit, thereby reducing my remaining time to pay off the LOC to another 4 years.  (Initially it was supposed to take 10 years, but thanks to a lump-sum payment this year and increasing my repayment rate, I've cut that by almost half.)  In the past year, I achieved this level of savings in all but two months (both big travel months), so it is a comfortable amount to set aside.  And I know that it is enough, so hopefully I can relax more knowing that I am meeting good savings targets.

The funny thing is, it won't really change much on a practical level.  I'm not going to go out and blow the 1/3 that I had previously been saving, as I am pretty happy with my current lifestyle.  Any extra money will simply go into a high-interest savings account, where it will act as a bit of a cushion for the months when I'm spending more or earning less than usual.  When it gets too big, I can either put it towards more investments or use it to pay down the debt more aggressively.  I'm not really changing how much I'm spending and saving, but I'm hoping that a bit of financial hocus-pocus will allow me to stop thinking about it so much and just focus on enjoying life.