Can You Afford to Retire? Part One: How much do you need?

Can You Afford It? How Much Is Enough?

Are you thinking about retiring from Optometry? Can you afford it? How much is enough? Rather than give you a number on how much you need to retire, let’s just talk about some general financial facts about optometry, and retirement.

I Prefer The Following Definition

We hear the term a lot, but what does it mean to be independently wealthy? It often brings to mind  being born into “old money” or hitting it big in the stock market, but I prefer the following definition: “Possessing enough wealth that one does not need financial support from others or income from employment”. In other words, the time to retire.

True Wealth Comes From Having A High

In terms of wealth, unlike rank and file employees, as a business owner and professional you should be thinking not about your salary – not how much you take home, but how much you’re put away. And about your net worth. That’s everything you own – all your assets – minus everything you owe. True wealth comes from having a high net worth.

Portfolio Income Usually Comes From

The IRS categorizes income into three broad types: active, passive, and portfolio. It defines passive income as only coming from two sources: rental activity or “trade or business activities in which you do not materially participate.” Portfolio income usually comes from money you have invested in the stock market.

You Can Make Money Having Other

You can make a nice living as an optometrist, but there is a limit to how much you can earn doing eye exams and selling glasses. There are only so many hours in a day, and only so much profit you can make. You can make money having other doctors working for you, but that still requires your  active involvement. I like to think of optometry money as your family’s operating income – pay the mortgage, utilities, tuition, etc. It doesn’t allow you to become financially independent.

Both Passive And Portfolio Income Allows

True wealth comes from growing your money outside of optometry. Both passive and portfolio income allows your money to grow without your direct involvement. Unlike income derived from doing eye exams, it has nothing to do with the number of hours you work, and to a greater extent, is limitless.

That Is The Tough Part

The key is to have the discipline to move as much of the active income you get from your optometry practice into investments, whether that be real estate or the stock market. And of course that is the tough part. We’ll talk about that in part two.

John Scibal
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