quick read
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One emergency physician who had a single-digit savings rate at age 50 increased it to 40% within a year and achieved financial independence after nearly 10 years.
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High earners often get stuck in the “emergency money problem”, where they spend everything they earn and lose years of compound growth.
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The solution requires ruthlessly prioritizing debt with interest rates higher than 7-8%, maxing out 401(k) matching, building an emergency fund, and automating index fund investments.
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It is not uncommon for middle-aged people to feel that they are not where they should be financially. “At 50, I didn’t know what a net worth was,” said Bill Yount, emergency physician and co-host of the Catching Up to FI podcast. “I didn’t know what a budget was.” He and his physician wife earned the income of two doctors for two decades, yet were living paycheck to paycheck.
Yount recently shared his story as a guest on the How to Money Podcast, where he reminded listeners that it’s never too late to get your financial house in order. High income without a plan creates what Yount calls an “emergency money problem.” This could mean years of compounded losses, savings rates in the single digits, and a retirement runway that keeps shrinking.
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Yount went from a single-digit savings rate to a 40% rate within a year, and achieved financial freedom almost 10 years after his wake-up call. He is candid that the compression is painful and it could have easily been spread over an entire career.
Consider this scenario: A family that takes home about $200,000 after taxes can increase its savings rate from 5% to 40%. This redirects approximately $80,000 per year into investments and loan payments. At 7% long-term equity returns, $80,000 invested annually grows to approximately $1.2 million after 10 years.
“Money in, money out, spend it first, save it later” is how Yount describes his lost 20 years. He came out of residency, from vacation to Jamaica, with $30,000 in credit card debt he felt he was entitled to – what he calls “rich doctor syndrome.” The solution came to a decision, in his words, “Nobody’s coming to save me. It’s on me, man.”