Discover the Road to Financial Freedom

September 16, 2008
Stewart H.Welch III, CFP&#174


Physician's Money Digest, January31 2003, Volume 10, Issue 2

Spend some time at a bus terminal onan early Monday morning in Februaryand you're bound to hear a few gruntsfrom the crowd. Maybe someone willcomplain about the bitter weather orthe speed at which the 2-day weekendpassed. Most likely, though, most folkswill be too tired or uninspired to voicewhat they're actually thinking: I wish Ididn't have to go to work today.


Although life is most enjoyed whenyou actually like your job, or even love it,which hopefully most physicians do,most people desire the financial independenceto call the shots. But beingable to do what you want in life asopposed to what you have to do requiresfinancial power. And the only way youwill ever have total financial power is ifyou're financially independent. Whilethis process will take many years, knowingthat you are systematically movingtoward financial independence will giveyou motivation and self-confidence.

Interestingly, the terms financialindependence and retirement are notsynonymous. Retirement refers to thepoint in your life when you plan to quityour job. Financial independence, onthe other hand, is the point in your lifewhen you can retire if you want to. It'sabout having choices in your life. Andeverybody likes choices.

Financial independence is a worthwhilegoal. When you become financiallyindependent, you can pursue what reallyinterests you. So, if you had all the moneyyou needed, what would you do differently?Would you spend more time withyour family? Would you pursue a differentcareer? To motivate you and help youfocus clearly on this goal, write downwhat would be different about your life ifyou were financially independent. Ifyou're married, sit down with your spouseand develop common themes.


The accumulation of money requires2 elements, time and rate of return. Bothare critical. Giving money time to work isa key element in investing. Intuitively,you know that the sooner you start, thebetter off you will be. But what you maynot know is that by starting sooner youare much better off.


As an example, assume investor Abegan investing $4000 per year, but onlyinvested for 8 years. Investor B waited 8years to begin their program, but continuedto invest for the next 32 years.Both investor A and investor B earnedthe same 10% rate of return over the 40-year period. In the end, investor A onlyinvested $32,000 but ended up with over$1,000,000, while investor B invested 4times as much money but accumulatedless than $900,000. Whatyou do now is much more importantthan what you do later.

Rate of return is the amount that youearn on your money. It can be in theform of interest, dividends, or capitalappreciation. Again, intuitively youknow that the more you earn, the betteroff you will be. What you may not realize,however, is that a couple of percentagepoints of higher return makes a dramaticdifference in your future results.For example, if you earn 12% versus 10%over a 40-year period, you will accumulatetwice as much money. Take into considerationthat the best choice for yourlong-term power account is stocks orstock mutual funds.

So, how much money will you needto accumulate to be financially independent?Generally, you'll need between60% and 100% of your currentincome, adjusted for future inflation.For more precise calculations, go Click on "CoolLinks"at the bottom of the page, andthen click on "Retirement PlanningCalculator."The sooner you make theeffort to figure out how much you'llneed to become independent, the sooneryou'll find financial freedom.

Stewart H. Welch III,



Medical Economics.

Birmingham Post Herald

founder ofthe Welch Group, has beenrated one of the nation's topfinancial advisors by and He welcomes questions orcomments from readers at 800-709-7100 Reprinted with permissionfrom the .