How much money do you need to live on?

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Strider_91

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Hi all,

I am extremely worried about my school loans. I have gone to a state undergrad and am going to my state med school but I still will come out school with a little less than 300k in debt when you factor in interest. I would join the military but I'm not medically eligible. I am freaking out trying to figure out what my life will be like trying to pay this debt off. I have been supported by my parents my whole life, even though they could not pay for my schooling so I don't really have a concept of what someone needs to live a comfortable life. I have no desire for super nice cars, or a boat or anything but I would definitely like a solid house one day and I want to save properly and plan for retirement.

Also, I live in the expensive northeast but am planning to move out west to a cheaper area.

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Well that's kind of a personal question. I've known some people happily living on $6,000 a year, but on the other hand our president-elect was once put on a restricted bankruptcy income of as low as $450,000 a month. For what it's worth, some recent study put maximum happiness at grossing $75,000 a year.

How did the numbers work out for you at the AAMC FIRST website I suggested in your other post? As a wild guess, I imagine with an income of $200,000 a year, your debt would set you back approximately $16,000 a year on the REPAYE plan. Can a person get by in the USA grossing $184,000, which is over double Peak Happiness Income, and over 3x the median household income in the United States? Again, that's kind of a personal question that only you can answer, because my answer might be different.
 
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Well that's kind of a personal question. I've known some people happily living on $6,000 a year, but on the other hand our president-elect was once put on a restricted bankruptcy income of as low as $450,000 a month. For what it's worth, some recent study put maximum happiness at grossing $75,000 a year.

How did the numbers work out for you at the AAMC FIRST website I suggested in your other post? As a wild guess, I imagine with an income of $200,000 a year, your debt would set you back approximately $16,000 a year on the REPAYE plan. Can a person get by in the USA grossing $184,000, which is over double Peak Happiness Income, and over 3x the median household income in the United States? Again, that's kind of a personal question that only you can answer, because my answer might be different.

I really don't have expensive taste, so I am sure I can make it work. The temptation to spend for me would come if I had a family, with the urge to give them the best things (this is a personal problem I'll work on).

So I used the calculator, taking out 39k a year, the total loan was 156k. For a standard 10 year plan it says that the total amount of the loan paid out would be 264,007$ paying 3,588$/ month or 43k/ year. Total interest paid says 108,007$. This doesn't make sense though because if paid 43k/ yr for 10 years I will have paid out 430,000.

Could this be because I put in that I'm doing a 5yr residency and it thinks I'm not paying during that time or something?
 
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I really don't have expensive taste, so I am sure I can make it work. The temptation to spend for me would come if I had a family, with the urge to give them the best things (this is a personal problem I'll work on).

So I used the calculator, taking out 39k a year, the total loan was 156k. For a standard 10 year plan it says that the total amount of the loan paid out would be 264,007$ paying 3,588$/ month or 43k/ year. Total interest paid says 108,007$. This doesn't make sense though because if paid 43k/ yr for 10 years I will have paid out 430,000.

Could this be because I put in that I'm doing a 5yr residency and it thinks I'm not paying during that time or something?
Something must be off, because if you were in the 10 year plan while in residency, you'd be paying basically all of your net income towards loans, with no money left over for food or rent. You might have selected a plan that put little or no money in during residency and then ramped up payments to get it all paid off by ten years from medical school graduation?

There are other options / tabs / checkboxes / scenarios you can select to explore the various plans like deferment during residency (probably a bad idea), PAYE (15% of discretionary), REPAYE (10% of discretionary), 10 Years And Done (rare but doable), as well as forgiveness options like PSLF (tax free @ 10 year), PAYE (taxable @ 25 year), REPAYE (taxable @ 20 year).

A common scenario is to see what happens when you enroll in REPAYE for both residency and as an attending and are not a candidate for PSLF. And then, assuming the payments appear quite low and manageable, you imagine what it would be like to throw even more money at those loans as an attending to get them paid off before you are 45 years old.
 
Something must be off, because if you were in the 10 year plan while in residency, you'd be paying basically all of your net income towards loans, with no money left over for food or rent. You might have selected a plan that put little or no money in during residency and then ramped up payments to get it all paid off by ten years from medical school graduation?

There are other options / tabs / checkboxes / scenarios you can select to explore the various plans like deferment during residency (probably a bad idea), PAYE (15% of discretionary), REPAYE (10% of discretionary), 10 Years And Done (rare but doable), as well as forgiveness options like PSLF (tax free @ 10 year), PAYE (taxable @ 25 year), REPAYE (taxable @ 20 year).

A common scenario is to see what happens when you enroll in REPAYE for both residency and as an attending and are not a candidate for PSLF. And then, assuming the payments appear quite low and manageable, you imagine what it would be like to throw even more money at those loans as an attending to get them paid off before you are 45 years old.


Yeah I think I figured it out. With doing a straight 10 year plan I'd be paying 24k/ year from my first year of residency which I feel like is doable if I am married without a kid (I am a little non trad and in a serious relationship). My wife would be making about 60k/yr. Either way, the world does not seem as gloom and doom as I thought when I miscalculated my loan as being 240k they day I leave school when I was only borrowing 39k/ year for tuition. The total amount paid would be around 240k on a 10 year plan which I can live with.
 
Do the things suggested, live like a resident once graduated, and in school do what you can to reasonably limit overall debt burden. Remember with every frivolous purchase that you'll be paying that back with time and frugality in the future. Easier to deny yourself things now.
 
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Hi all,

I am extremely worried about my school loans. I have gone to a state undergrad and am going to my state med school but I still will come out school with a little less than 300k in debt when you factor in interest. I would join the military but I'm not medically eligible. I am freaking out trying to figure out what my life will be like trying to pay this debt off. I have been supported by my parents my whole life, even though they could not pay for my schooling so I don't really have a concept of what someone needs to live a comfortable life. I have no desire for super nice cars, or a boat or anything but I would definitely like a solid house one day and I want to save properly and plan for retirement.

Also, I live in the expensive northeast but am planning to move out west to a cheaper area.

First of all, the fact that you are seriously worried about it now as a medical student means you're already a lot better off than many people in your situation. I know I wasn't worried about it when I was a student because I was blissfully unaware of the consequences of having that much debt. So, pat yourself on the back and breathe a sigh of relief. You are going to be fine!
With that being said, you will need to be willing to make some sacrifices for a few years in order to get rid of that debt quickly. When you start residency, the first thing you should do is save up a few months expenses as an emergency fund to prevent you from needing to go into any more debt should unexpected expenses come up. Don't rack up any credit card debt and live below your means. Focus on your studies, work hard, and land yourself a good job. Don't worry much about your loans during those years. I would look into refinancing them if they are high interest rates though. Read up about it on this site: whitecoatinvestor.com (there's a ton of great stuff on that site btw)
Then, when you get done with residency and you start your first job, plan on continuing to live like a resident for at least the first few years. During that time carefully budget your monthly expenses and save everything else. Start maxing out your 401K contributions each year and put everything else into paying off your student loans, starting with the highest interest rates first. Work extra shifts, earn productivity bonuses, quality bonuses, etc, etc. Rake in as much cash as you can and throw it all at your debt. It won't take you long at all to pay off 300K if you do this. Especially if you end up going into a high paying specialty.
You mentioned that someday you'd want a house. You will have no problem saving up for a down payment on a nice house. You could start putting money towards that each month when you start working as well. Set up a separate savings account for that purpose and have $1000 automatically taken out of each check and placed directly into that account. At the end of your 3 years you'll already have $36K+ in that account and you can easily add more to it once you're done throwing money at student loans.
How much do you need to live? Well, if you're single, not much honestly. If you live somewhere cheap (like 800/month) and don't have a car payment (buy something cheap and used, but not so cheap that it's a money pit for repair costs) you could probably get by on $2000/month? It all depends on how thrifty you are and what your spending habits are. Don't make yourself miserable though. Budget for a modest vacation and going out occasionally.
An example, if you're making say 240K a year it won't be hard to put 10K a month towards loans if you're careful about your expenses. (assuming 20K per month pretax, automatically deduct 6% towards your 401K, then depending on taxes in your area, you might get to keep 65% of your paycheck?, that leaves you with 12,220/month after taxes). Even if your monthly expenses are 3K/month, you'll still be able to put over 9000/month towards loans. That will take less than 3 years to pay off 300k. Obviously all of this is highly hypothetical, but from personal experience those kind of numbers are not unrealistic. And of course if you land a job in Ortho or another high paying specialty, you'll have a lot more than 12k a month after taxes to play with!
 
I just refinanced $200k+ over 9 years. Paying 2500/mo and putting another 1500/mo towards student loans. I'm in the middle of the income bracket for docs (300k?) Should have them paid off in 4-5 years. If you make an effort to do it it'll happen over time. Some people are able to be more aggressive than I am with my loans, but I'm trying to save some money away to buy a home, pay for kids school, etc.
 
Gross income of 200,000 yields roughly 136,000 in net income depending on your state taxes and how much you can deduct.

136,000-16,000=120,000.

Please calculate the net present value (NPV) with an appropriate discount rate to see if a future 200,000 in gross salary 7+ years in the future is worth it.
Can't beat the numbers. Calculate opportunity cost of not making money for 4 years and the loan burden also. Your mileage may vary.

That is not a realistic take home pay, even if single and getting zero deductions (ie, no 401k, etc...) living in Cali it would be around 140k. In reality it should be a good bit higher as you should be putting money away tax deferred into retirement and if lucky an HSA.

Its also no guarantee they only make 200k, honestly you have to choose a specialty that makes it hard to crack 200, and even then there should be ample opportunity to increase your pay somehow.
For your NPV it has to be compared to whatever else type of career they choose not simply not making money. Its impossible for someone to choose the appropriate discount rate as its very biased and we dont know the future anyway. Most people will simply plug and tweak the numbers until they get the answer they want.
 
I'm incorporating FICA, federal, state taxes. Everything.

My only point was that the 200,000 (or whatever amount you want to put in) remuneration of an attending physician isn't as much as people think it is. California would be a good amount less. The effective state tax rate for a CA doctor is like 8%.

Also in many parts of California the cost of living is about 50% higher than the national average. The original poster was quite confused in comparing gross income instead of net income; that was my main point.

One of my friends tried to claim that an attending job in CA paid way more than I would ever see in VA. Which is probably true, but my response to that was 'sure, but what about taxes and cost of living?' Add to,that that I'd have to go through the hassle of moving out there in the first place, dealing with the CA medical board, etc, etc... didn't seem worth it for the job she was encouraging me to apply to.
 
https://smartasset.com/taxes/california-tax-calculator

I just put in 200,000 gross for southern california. Net income was 130k. Effective state taxes were 7.85 percent.

The only reason I put in 200k was due to the OP using that figure. You can deduct a lot but only to a certain extent. Guys like the white coat investor pay a relatively low effective tax rate but he's also donating a lot of money.

CA is expensive and in certain parts like san fran I've heard of pediatricians being paid a lot less to work there, like 95k! Add a cost of living of 185 or whatever and I hope your parents paid for your med school!

Those are good general points as many have never had any taxes so dont understand the reality of that and go wow! 200k...yeah, not really. However, I make quite a bit more than that in Cali (not in a HCOLA, you do have to be mindful after all) and think my state tax comes to an effective of 6.8% or something. I am self employed so have more options for tax deferral than some and less than others. But even after maxing out everything I can I have substantially larger taxable income than the example. If I set up a defined benefit plan next year I could have 100k+ of simply tax deferred retirement(instead of the 60k with just 401k/hsa). There are lots of things to be done (depending on employment status, whats available etc...).

If you take a low paying specialty, high loan burden and move to San Fran...well you understand the trade offs much more than a patient does the risk/reward when they sign consents. You can do many things, just usually not all at once.
 
As others have said, just the fact that you are freaking out about how much money you are borrowing from someone else is a good sign and puts you ahead of most people our age. The trick for you now is turning that anxiety and fear into a productive outlet- learning about finances. You can do little things to earn more money and spend less now, but, by in large, the best thing you can do for your future now is EDUCATE YOURSELF on the world of money, personal finance, and investing :)
 
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