Monitoring Financial Health: Total Term

by | | Retirement

Total Term

What is Total Term?

Total Term estimates the number of years you could live on your current net worth. Your net worth is everything you own (investments, house, cash, etc.) minus everything you owe (mortgage, student loans, etc.).

Net Worth / Annual Living Expenses = Total Term

Example: If you have a net worth of $1.5 million, and you spend $100,000 per year, your Total Term is 15. $1.5M net worth / $100K spending = 15. You could live for about 15 years on your assets, assuming no asset growth and no change in spending.

Your Total Term is made up of four elements: Liquid Term, Qualified Term, Real Estate Term, and Business Term.

Why is Total Term Important?

At the core, most people’s financial goals boil down to a personal version of “freedom” or “security.” Along the way, people naturally ask: “How am I doing?” “Am I on the right track?”

More concretely for ER docs: “When can I cut back on shifts?” “When can I start selling my nights?”

Total Term is your first, best lab result here. With one number, you can quickly gauge your current financial health, and your progress toward financial independence.

As with labs, you can monitor the change in your Total Term over time to see how quickly you’re progressing.

As with labs, you can dive deeper. Breaking Total Term down into its components – Liquid Term, Qualified Term, Real Estate Term, and Business Term – frames the health of your score. A good mix is best. If you’re too heavy on one type, there may be more work to do.

Total Term Ranges

Now that you know what Total Term is and why it’s important, how do you know if it’s enough? Here’s a closer look at what kind of security you can expect from each level of Total Term (Tt).

Tt ≤ 0 = Getting Started

We’ve all been there. Start where you are and make progress. A brand new ED attending with $500K of student loans has a negative Tt, but a bright financial future (even if they can’t see it yet).

Tt ~10 = Not Enough

You’ve worked hard to get this far. But you’re not ready to retire. The first 10 are the hardest 10 to earn, because the compounding effect of money hasn’t really kicked in yet.

You should have a solid emergency fund, a consistent savings plan, and organized finances. Keep building; you’re doing great.

Tt ~20 = Basic Retirement

For many people, a 20 Tt might be the starting point for a basic retirement. You’ve worked hard and made a lot of good decisions to get here. But retirement likely won’t be extravagant. For a lot of people, that’s OK.

In this situation, be cautious as you measure your spending and plan your retirement budget. One important consideration: Eventually, you may need to spend the equity in your home to meet your living expenses.

Tt ~30 = Very Secure

It’s best to have a Tt of 30 or more before you retire. You’ll have enough cushion to endure market fluctuations without making dramatic lifestyle changes or depleting your liquid assets.

Most people with a 30+ Tt will be able to pass on wealth to their heirs and charities if they maintain consistent spending patterns. As opposed to those in the 20 Tt group, you may be able to avoid using the equity in your home to retire comfortably.

Tt ~40 = Wealthy

A Tt score of 40 or more gives you enough cushion to spend more confidently on unique travel experiences, buy property, and give generously. People with a 40+ Tt can usually focus on significant charitable giving opportunities or estate planning for their heirs.

Age Ranges

Average Total Term scores and growth rates depend primarily on age, as shown in the following chart.

Age Range

Tt Score Range

Tt Annual Growth

25 - 35

< 5

0.5 - 1

35 - 45

5 - 15


45 - 55

15 - 25

1 - 2



2 - 4

If your Total Term is below average for your age, don’t fret. You can do a lot to improve it.

Improving Your Total Term

To improve your Total Term, increase your net worth and/or decrease your spending. There are four main levers you can pull.


One way to improve your Total Term is to increase your Savings Rate. Also, look at the underlying components of your Tt to see where you should increase your savings.


Another way to increase your Total Term is to reduce your spending (or Burn Rate). Annual living expenses is the denominator in the Total Term calculation. Even a small reduction in spending has a big impact.

Debt Reduction

Consider paying down debt faster (reducing your Debt Rate). This increases your net worth. You can also refinance debt to improve your cash flow. This gives you more money to allocate towards saving.

Income/Asset Growth

The last way to improve your Total Term is to grow your income and assets.

You can increase your income by working more at your main job, or picking up locums shifts. Then, use the extra cash flow to save more or pay down debt.

There are two ways to grow your assets:

Do you know your Total Term? Are you making enough progress each year toward financial independence? That’s where we come in. Schedule a FREE Financial Pulse Assessment™. This is a 3-step process to get clarity on your finances and “test drive” our services.

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