How to Become Financially Independent Spending More Than $200k a Year - Passive Income MD

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How to Become Financially Independent Spending More Than $200k a Year

August 29, 2017 • 6 Min Read

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In all my time writing this blog, I’ve avoided using a lot of concrete numbers when it comes to my own financial situation. I’ve been hesitant to put it all out there, but with this post, the time has finally come. Right to the point, our family expenses currently total up to more than $200,000 a year.

(Pause for dramatic effect)

I’m not sure how you feel about that number, but for me, it can be quite embarrassing–especially when I see people like Mr. Money Mustache or Physician on Fire, throw out annual expense numbers like 40k or 60k. I had to take a step back and really examine things – are we just being overly extravagant?

I needed to know why, exactly, these expenses are so large. So I broke our entire budget down to figure out the biggest factors.

My Big Annual Expenses

First, there's the high cost of living in our area. I'm sure Miss Bonnie MD gets me on this one. Expenses directly related to housing account for roughly 40% of our total spending.

Second is the fact that we hire help for childcare. My wife doesn’t work full-time, but we need help for the times when she does work. That expense can add up.

Third is the cost of preschool for our children. Brace yourself; it’s over $1600 per month which works out to nearly $20k a year. Yes, that number does sound ridiculous, but believe it or not, we went with one of the cheaper ones in the area.

Coming in strong for fourth is student loan payments. It’s not overly extravagant, but between my wife and I, we owe six figures in student loan debt (not uncommon for our profession). We're extremely lucky though that we were both able to consolidate our loans at very low interest rates (<3%).

Fifth is health insurance. Being my own corporation means that I pay it all on my own. People who are nearing or shooting for financial independence worry about how they will pay their health insurance. I'm already paying for it so I'm used to figuring it as an expense.

Sixth and finally, donations to charity. I don’t really consider this an “expense,” because we give willingly, but at least 10% of our income goes to worthy causes. This is important to us, and something we won’t be changing.

Adding It All Up

When you combine all of these large items (plus all the other small things that come with living), it comes out to more than $200,000 per year.

And yet, if you look at my income report, we’re fast approaching what I consider Financial Independence – from medicine, anyway. I expect to fully hit that point in the near future, and at that point, I could retire from medicine and nurse my investments, passive income sources, and side gigs instead.

With six digits worth of expenses every year, how am I able to do this and still have a good amount to put towards investments? The answer couldn’t be more simple. My income exceeds my expenses. This is a direct result of my multiple streams of income. Indeed, even if I quit medicine altogether, I’d still have an income strong enough to support my family.

That’s an awesome feeling.

Okay, okay, so there are other things to consider besides regular expenses. What about the kids’ college, for example? Or some unexpected event?

Well, I do expect my sources of income to continue to multiply and increase. And even when I hit financial independence, I plan on working in a part-time capacity for as long as my health will allow (and as long as I enjoy it). I only expect to continue to add to my net worth from that point on.

How I'm Making It Happen

As I mentioned before, I could be truly financially independent right now (if I move). However, my wife and I are not willing to do that at this point in our lives. We love where we live too much.

So with that in mind, these are some of the things that play a part in my personal journey to being financially independent – even while spending more than $200k a year.

  • I have additional sources of income, preferably passive income sources. Now, “passive” doesn’t necessarily mean you’ll never have to put any work in. It means you put more work in front and reap ongoing benefits into the future. Even with real estate crowdfunding, which is extremely passive, you still need to do a little due diligence on the front side.
  • If necessary, I could reduce my expenses. At this point, I could downsize my house and move a little bit out of the area if needed. I live in a very desirable neighborhood and the price per square foot is on the high side. We also aren't extremely frugal when it comes to eating out or trips. Definitely room for improvement.
  • I've been very aggressive about putting my money to work, even early on in my short career. My initial goal was to put my money into cash flowing investments like real estate investment properties and crowdfunding. This takes time, but I’m starting to see the dividends. I plan to continue to be aggressive by saving quite a bit and just throwing that into investments.
  • It helps to have a high-paying specialty. I can’t discount the benefit I’ve received from working in one of the higher paying specialties in medicine.
  • I have a life partner who works. I’m where I am because of my wife and her ability to bring in enough money to cover around 40% our expenses. She’s doing it in a sustainable way, with a great work-life balance.
  • Lastly, I'm smartly insuring against a huge unexpected event, like a disability, so it isn’t able to derail the whole plan.


The whole point of this post is a simple one – it's not impossible to become financially independent if your expenses are in the six digits. (I'm not an advocate for high spending, I just believe it's sometimes a by-product of where you live.) It's possible to live the way you want to, all while maintaining a good work-life balance. If you have enough streams of income (ideally passive ones, you know me), you can afford to enjoy your life now and in the future.

Disclaimer: The topic presented in this article is provided as general information and for educational purposes. It is not a substitute for professional advice. Accordingly, before taking action, consult with your team of professionals.

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