Plenty of money gurus break down personal finance into 5, 7, or 10 phases. In my solicited opinion, there are only two phases – accumulation and maintenance. Anything shy of financial independence (FI) is accumulation. FI meaning the point where your investments forever cover your cost of living and earned income from a day job becomes optional.

Retirement is not an age, but based on FI. A rough approximation is a nest egg valued at 25x your cost-of-living equating to a 4% annual withdrawal. Read the full bit with nuances here! I digress by saying I would really appreciate both the education system and families teaching money through this lens.

After reaching FI, you enter the maintenance phase. The maintenance phase revolves around maintaining the principle of your nest egg. You have enough money to live off, so don’t mess it up. The linked article above gives some examples of how to make this approach work for you.

Through their 40s, many struggle to piece together a significant net worth. Debt is likely a consideration. Prioritization – New cars and a house. Delayed gratification does not find many 20-something-year-olds. Many never delay gratification. Most of you reading are in a high opportunity cost profession, which only further delays income and racks up the student debt. This is not inherently bad, but rather acts a powerful means that will either allow you to conquer obstacles or further harm your financial situation.

The Accumulation Phase

With the exception of a very few trust fund recipients, we all start our financial journey from $0. Many begin their CRNA journey deeply in the red. Especially with these 3-year doctoral programs, which regularly cost over $100,000 just for tuition. Consider living costs and interest, which are not as forgiving as past years. The bill for three years of doctoral anesthesia training could easily be $200K-$300K. Not to mention preexisting debt from an undergraduate program among other things. This is intimidating, but there is a solution.

Income

Wealth building at its simplest form equates to the following:

Money In – Money Out = Investable Capital

Income represents the “Money In” portion of the equation. Of all advanced degrees, CRNAs have arguably the highest return on investment. The investment is high. The income is amazing with the average totaling $193,000. Uncle Sam wants $50-60K leaving you with $140,000 or so. Pretty nice “Money In.”

The massive financial hole that school represents affords a skid loader sized bucket to fill it back in. No basic scoop shovels in the anesthesia game. The average earner making just over $50,000 annually doesn’t have this kind of buying power. Most people in general don’t have this buying power. Ever. Like never ever.

DQYDJ.com (Don’t Quit Your Day Job.com) reports this CRNA income to fall at the 88th percentile for HOUSEHOLD income. Not single earner, household. Omnicalculator.com agrees and goes farther to say it also represents the 96th percentile for single earners. If anyone can reach FI, CRNAs can do it. Even with the “sunshine tax” in desirable areas, CRNAs do not have a “Money In” problem.

Savings Rate

Aka “Money Out.” This is part II of wealth building and must work concurrently with income. It is not enough to make the money, but you must not set it ablaze. The most dramatic example is lottery winners. There are statistical discrepancies, but all sources agree that 30-70% of lottery winners file bankruptcy withing 3-5 years of winning their life-changing windfall. This is a “Money Out” problem. Nothing left to save and invest.

A Fox Business interview with Craig Brown, a sports business division partner, shared “a stark 78% of [professional athletes] will go broke after just 3 years of retirement.” Millions of dollars annually and the well dries up by their early 30s. Even tens of millions, no, hundreds of millions. It’s not enough to out earn stupidity. This is a “Money Out” problem.

It’s no secret doctors are notorious for being broke despite their amazing earning potential. I’m lumping CRNAs into this lay financial category for “high income medical professional.” Maybe you find/found yourself in this situation. We all know coworkers who are here. And that one who had martial difficulties. Or the one who built a $1M home for their unhappy spouse and kids yet is forced to work to pay the bills. There is nothing to be ashamed of. I remind myself regularly that folks make the decision that sounds right at the given time. All the aforementioned groups do not need ridicule, but a helping hand. Be that support person. They need to understand that sustainability requires more “Money In” than “Money Out.”

I’m not going to ramble on about lottery winners meeting David Blaine and having their winnings disappear. You can’t give people money and expect financial success.

So where is the balance between “Money In” and “Money Out?” Depends on your goals. The public averages a 5-10% savings rate. This is bad. Don’t use broke people as a benchmark. Financial advisors recommend 15%+. Also, bad. Don’t use average people as a benchmark. Some gurus recommend 20-25%. Reasonable and sustainable. As a member of a highly respectable profession with an amazing income, this is punching at your weight.

I want FI and the ability to buy time and options. I vote for >50% or the most you can handle. Inspirational. Taxes are a big factor for CRNA incomes so that “50%” may be of your net income. That’s fine. FI after just a short while. It means you live on less and save more. That’s how to get the financial ball rolling to begin accumulating wealth.

Investments

As CRNAs, we all earn good money. Not a problem. Savings rate is individualized, but manageable. So what to do with the money not set ablaze? The “Investable Capital.” Don’t overthink it. Financial advisors complicate this topic and don’t have any better results to show from it. Unless you are Jim Simons, mathematician and founder of Renaissance Technologies. Which is a massive hedge fund that averaged annual returns of 67% before fees and 40% return AFTER FEES over 3 decades. A bunch of nerdy mathematicians joined together and created brilliant algorithms. I’m guessing your finance guy wasn’t working with Jim Simons, so not in the same class. My advisor wasn’t either, so we part ways over 180 basis points (1.8%).

Anyway, leftover dollars need to find their way into a few avenues with this general prioritization. Have an emergency fund. Pay down high interest debt. Maximize tax advantaged accounts. Put the rest into a brokerage. Invest in broad market, passively managed index funds wherever possible. If you want details, I have some blog posts linked. I’m available for financial coaching, which will lead to a personalized plan, a newfound battle buddy, and an enthusiastic cheer leader celebrating your progress.

If you invest in these index funds, expect 6-12%, likely 8-10% over the course of a career. Time is on your side, so start early. Compounding interest is the 8th wonder of the world. We think linearly and compound interest works exponentially. Play around with a compound interest calculator sometime to see how $2,000 per month will bloom over 30 years.

Just eliminate the high interest debt. Minimize tax burden by investing in your 401(k) and HSA. And invest anything left over in a brokerage account.

The annual returns and asset allocation of investments becomes way more important during the maintenance phase of wealth management. Lets say you have $100,000 and the market returns a MASSIVE 30%. That’s great. Compound interest resulted in a $30,000 net worth increase. Not life changing. You could easily invest $3,000 per month of that $140,000 we discussed previously into a fund. See $36,000 of growth on top of the $30,000 return.

Wealth accumulation is all about maximizing the difference between “Money In” and “Money Out.” Pick up shifts, locum, take more call. Manage expenses. After years of consistent investments, your portfolio will grow to $1M…$2M…$5M…$10M and beyond. A 30% return on a $5M portfolio…Feels good to see a 2-comma net worth increase for the year. LIFE CHANGING. Probably not if your net worth is over $5M, but it creates a nice parallel structure (parallelism) from the above example. Grammar. For the accumulation phase, be consistent. Let annual returns help you along the way. It will add up.

Manage Liabilities

“The things you own end up owning you” – Tyler Durden (Fight Club)

Money doesn’t buy happiness. No. Materialism doesn’t buy happiness. A transient dopamine release during a credit card transaction leads to happiness now and disappointment later. This idea of managing liabilities during the wealth accumulation phase only increases the slope of your net worth trajectory. Back to “Money Out.” This is easy for me to say because as I age, material possessions have lost their importance. I’m not a “car guy.” A big house isn’t important. Clothes shopping is the bane of my existence.  

My liabilities are experienced based. Many surveys show spending continues to increase happiness when used for experiences. My wife and I love to try new eateries. This is the one place we have few limits. Find ONE vice and go for it. It keeps life enjoyable. A life worth living is not all about saving money. You just can’t have your cake and eat it too.

We try all kinds of foods, especially those I don’t cook at home for aromatic reasons – looking at you curry. We don’t go to exclusively high-end restaurants. Quite the contrary. The local “hole in the wall” eateries have been some of the best. An adventure.

Disclaimer -- I said one vice, but this is an infrequent one that comes from our discretionary spending. We also prioritize meeting with friends and family. How cliché. But we live 1400 miles by car to our closest family and long-time friends. It is important to meet up every now and again. This involves many more expenses, and we accept that.

And I can’t forget “Mrs. dance mom” that works as a secretary of sorts in preop. She does the scheduling and prepares the patient charts. When she brings in a basket full of cake pops as a fundraiser for her daughter, you and I both know she is leaving with an empty basket. An experience for someone else that I will gladly support.

It pains me to see new graduates accepting a position and loading up the “Money Out” side of the equation. Buying a “CRNA size house” and a new SUV. Two week vacation after boards. Decrease net worth by picking up these big-ticket items too soon. Pay off the high interest debt FIRST. Build an emergency fund FIRST. At least take advantage of the employer retirement match FIRST. Call me what you will, but it’s tough to argue moving into the CRNA lifestyle too soon doesn’t blunt your accumulation of wealth. This really deserves its own blog.

Lifestyle Expectations

Expectations are my final wealth accumulation factor. Again, these 5 factors work together. FI can be achieved without all of them, but I would suggest at a minimum giving each a consideration.

You have expectations. Your family has expectations. Finance is not an individual sport. You need a battle buddy! Ideally, your significant other is in you corner with this finance stuff. Talk it over. Have shared goals. Agree on monthly spending. Agree on who gets a new 4Runner first and what that time frame looks like. How do we save the money for such a purchase? “Money In” may be fixed depending on your jobs, but “Money Out” is something you have almost complete control over.

If you are a hard-core saver and investor, but your partner has other ideas, things won’t work. Your plan won’t work. Your relationship won’t work. Your marriage won’t work.

Let’s say you have a health concern (be that of your own or aging parents). Maybe you fear the future state of CRNAs in the everchanging anesthesia provider jungle. You want FI in 10 years. You need a spouse, friends, family, and battle buddy that support this. If they don’t; (re)consider the relationship. Maybe you just can’t talk finances. Maybe you can’t hang out and attend certain outings any longer. Maybe you meet family pushback because they think you should be living differently.

My wife and I agreed on a house in a safe neighborhood. It’s more than what we need, but location was our priority here. We agreed on 1 reliable vehicle, which is my 2010 pickup. Soon to be a (relatively) new 4Runner. Probably a 2020 or so. We agreed on a comfortable middle class living spending about $6,000ish per month. We agreed overtime now supersedes overtime later. Make the most of those 13 weeks off and locum. Increased “Money In” same “Money Out.” Boosts our monthly investments and covers the monthly $23 to keep The Financial Cocktail afloat -- while still buying a 4Runner. Talk about blessings. Earn and save now – allow compounding interest to work for us in the coming decades.

I’m not the only one who thinks this way:

Scott Galloway, Stern School of Business professor among other things, speaks to working hard in your 20s and 30s so you can coast in your 40s and beyond. Your 40s are for spending time with your kids and aging parents. If your parents are 70 and you only see them twice per year, average life expectancy predicts you will only see them 20 more times before they pass. This resonated with me. He tells youngsters to make the move to a big city, climb the corporate ladder, put in the hours, and save the money. That is the way to buy time and live life on your terms.

Throughout most of my life, I have “put in the hours” to maximize “Money In.” And yes, it cost me relationships of all kinds. Moving for my current critical access job strained many relationships. Fortunately, my wife and I are on the same page. Work hard and efficiently now to be set up for life. Pass on the big house. Pass on the quarterly vacations. Pass on the designer attire. Save and invest like making it to your child’s soccer game depends on it.

Maybe FI is not your priority and that’s fine. Working until 60 or 70 while living in the moment may be for you. There are absolutely merits to living while young and able. I could use my 13 weeks off to do some serious traveling. Regular cross country road trips. Endless opportunities. However, if you set a trajectory for FI later in life and the unexpected happens, it’s difficult to recover.

Have open financial conversations with those close to you. Build a support system. Set expectations aligning everyone’s efforts. Live life the way you want to live.

Only time will tell if I regret my financial decisions. Ask me in 10 years.