Living comfortable while paying back loans

[salsasunrise123]

Hello, so I was wondering if I could get some opinions on how likely it is to live a comfortable life as a physician while paying back massive amount of student loans. Post residency I will be paying back approx $4-5k/month in loans. My spouse (also a physician) will have no student loans. Our combined monthly income pre-tax will be between $40-50k/month. We want to live in a nice home preferably in a Philly suburb and have a comfortable lifestyle. We want to know if it will be possible to raise 1-3 kids, save for retirement, and do all those other "life things" that we've been putting on hold through school and training. I would really appreciate some legit advice and guidance. Thanks!

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[agammaglobulin]

So total income 600 pre-tax, lets say 400 post tax income. 60/yr loans, 120/yr retirement (20% income). Subtract other debts (cars, cards, etc). I'd guess somewhere around 200/yr or 16/mo after that. Looks like enough for 'the good life'. Not sure what housing is like out in Philly, if you will both continue to work full time with kids, etc but looks like you could find something nice that fits in your budget. If I were you, making as much as you're expecting, I'd 'live like a resident' (shout-out to WCI) for a couple years and get out of debt first.

 

[Plastikos]

Adjust your idea of comfortable/good life notably down for at least a few years. That 4-5k/mo is after tax so its incredibly painful. Also, welcome to taxes, your income will not be what you think it is. To give yourself a very good estimation take turbotax or whatever program you use and run your expected incomes through it with basic deductions, etc...that will give you a good idea of how much you have left over.

Subtract loans, retirement, health care, etc....then see what you have. Its a lot less than you initially think. Though with two incomes its easier to overcome, however the pressure to overspend is even worse as the feeling youre doing good is much much more prevalent and intoxicating. That said, a couple-three years of holding back and you'll be off to the races.

Dont fall into the deserving and waited so now its on camp, that doesnt end well. Buy yourself the white coat investors book and think of the future first.

 

[calvnandhobbs68]

The fact that anyone is even seriously responding to a question about whether someone can comfortably live on 400K a year post-tax is hilarious.

 

[Mad Jack]

Are you serious? Post-tax, you'll have (depending on specialties) 24-40k per month in spending cash. Your loans will be costing you 4-5k a month, leaving you with a paltry 19k-36k per month to live off of. To give you an idea of how much money that is, a 30 year mortgage on a million dollar home is roughly 5k a month, a loan on a luxury car is usually around $600-1,000/mo. You could have a million dollar home, two luxury cars, and still have a minimum of 12k a month left over. Now if you want to send your kids to expensive private schools, things get a bit more pricey, so I'd avoid it, if possible, by just living in a suburb with good public schools, as you'd be looking at $2,500/mo per child if you want to go private. But even if you did, AT A MINIMUM you'd have 4.5k left over for whatever, with a maximum of 22.5k if you're in higher paying speialties.

Keep in mind, this is with you doing stupid things with your money, like buying luxury cars, a million dollar home, and sending your kids to 30k a year private schools. If you aren't financially stupid and make better decisions than these, you'll have much, much more money left over. Enough to retire early or pay your loans down in short order if you do things right.

 

[Plastikos]

You say that, but you'd be surprised how many people manage to live right up to and beyond their paychecks, and can really underestimate taxes, etc...though I agree it should be very hard to do. Not a good sign when you're looking to live comfortably though, I lived comfortably in college (worked and lived on my own). Its like cycling, it never gets easier you just go faster.

I would do a defined benefit plan, max retirement, estate planning etc....

 

[Mad Jack]

You say that, but you'd be surprised how many people manage to live right up to and beyond their paychecks, and can really underestimate taxes, etc...though I agree it should be very hard to do. Not a good sign when you're looking to live comfortably though, I lived comfortably in college (worked and lived on my own). Its like cycling, it never gets easier you just go faster.

I would do a defined benefit plan, max retirement, estate planning etc....

I always account for taxes in my calculations.

If you live in a middle-class house (300-400k value), drive non-luxury or low-end luxury vehicles (30-50k value, or 60% of that if you're buying used), and send your kids to public school, you should be able to have waaaay more than enough money left over for whatever the hell you want (in my case, investing).

 

[sazerac]

You say that, but you'd be surprised how many people manage to live right up to and beyond their paychecks, and can really underestimate taxes, etc...though I agree it should be very hard to do. Not a good sign when you're looking to live comfortably though, I lived comfortably in college (worked and lived on my own). Its like cycling, it never gets easier you just go faster.

I would do a defined benefit plan, max retirement, estate planning etc....

There was a poster in here a few years ago who worked as an admin at a doctor's group. There was a payroll mixup, and everybody's 5-figure paycheck was going to be two weeks late just this one month. Her phone was ringing off the hook about upcoming bounced checks, mortgage default, missed boat payments, etc.

It was unreal just how little cushion the physicians had.

 

[Plastikos]

My friend is chief of his division at a hospital and sometimes fields similar calls when the checks are late (these are just call money checks no less), and these are from docs that are 20 years older who should have more than enough cushion to not even remember the check date. Its amazing how lackadaisical and basically how little attention is paid to basic finances by doctors.

Even his old partnership that dissolved and had a seemingly exceptionally successful owner who thought he was retiring is now looking for every penny. Those are lessons to be learned about paying attention, and these guys didnt have the astronomical debt or crappy inflation adjusted pay we do.

Im looking for a house right now, and am hoping to find something for a third less than my annual income, more money to invest and lots of cushion.

 

[pinbor1]

Just like many prior posters have noted, you can definitely live a comfortable middle to upper middle class lifestyle on your income while paying back your loan. The goal is to gradually grow into your income (and not grow all the way into it or over it). I would make sure to "pay yourselves" first. Maximize your retirement account, put money into savings, and a taxable investment account. Don't buy top expensive of a home, and don't fall into the rat race of comparing yourselves to the "Dr. Jones."

My wife and I are both academic physicians, and we do live a comfortable lifestyle with money left over if only one of us was working. We are well on our way of being able to retire. Unfortunately like Plastikos noted, there are many friends/colleagues that barely have anything saved up because their expenses are out of control.

I have a feeling you will be alright based on the fact that you are thinking about these questions. Good luck!

 

[DillonA002]

This is a bit awkward… I never went to college. But I am surrounded by the countless friends and relatives who are fighting this ever-crappy commitment of paying off student loans. You need to prepare a plan and work accordingly. When you two are working its possible to live a comfortable life while you are paying back your student loan.

 

[James Martin]

If you are student, take out the minimum amount you’ll possibly need on your student loans. Don’t be afraid to shop for clothes at Goodwill or buy your groceries at the low-end grocery store. Get your entertainment fix by participating in on-campus events and community events. Focus on the relationships you build, not the specific things you do or the stuff you accumulate.

Focus on debt freedom as a very early goal in your life. Cash flow is so important with regards to achieving your goals and having a big monthly debt payment just clogs up opportunities. Pay it down as quickly as you can, even if it means delaying some of your goals. Your ability to easily achieve those goals will be ramped up incredibly high through freedom from debt.

 

[W19]

The fact that anyone is even seriously responding to a question about whether someone can comfortably live on 400K a year post-tax is hilarious.

I thought OP was trolling...

 

[Merely]

It's pretty surprising and kind of saddening that two physicians are either so far removed from reality or just completely naive that they have to ask strangers whether or not they can live comfortably on an income that places them in approximately the top 1% of earners in the WORLD.

 

[W19]

It's pretty surprising and kind of saddening that two physicians are either so far removed from reality or just completely naive that they have to ask strangers whether or not they can live comfortably on an income that places them in approximately the top 1% of earners in the WORLD.

I don't think OP is serious!

 

[SClENCE]

In all seriousness though... After you buy the nice house and car how can you possibly be spending 10k+ a month? What are these people spending the money on?

 

[The White Coat Investor]

The fact that anyone is even seriously responding to a question about whether someone can comfortably live on 400K a year post-tax is hilarious.

In all seriousness though... After you buy the nice house and car how can you possibly be spending 10k+ a month? What are these people spending the money on?

Yes, how can "these people" possibly blow through $10K a month. Well, let's look at this month's budget.

Taxes- $12,500

Oh, we're past $10K already. But let's keep going just for fun.

Mortgage- $2,900

Insurance- $1500 (it would be $1800 if you counted the $300 of property insurance built into the mortgage.)

Utilities- $500-800

Clothes, food, entertainment, vacations, household, everything else- $5000 a month

Investments (retirement, college savings, next car etc)- $15K a month

Charity- $3K a month

Let's see, we're at $40K a month already.

Even if you take out the "nice house" (bought for less than $500K, which buys you nothing in more expensive places in the country) and the "nice car" (a $4K Durango bought 5 years ago) it's still awfully easy to blow through $10K a month. Trust me. And my kids are in public schools, I have no payments beyond that mortgage, and my partners have no idea how I save so much. The world looks differently when you become an attending my friend.

And being the "top 1% in the world" isn't exactly elite territory. It's $34K a year. Residents are well over that. Those who live in glass houses shouldn't cast stones.

 

[The White Coat Investor]

Hello, so I was wondering if I could get some opinions on how likely it is to live a comfortable life as a physician while paying back massive amount of student loans. Post residency I will be paying back approx $4-5k/month in loans. My spouse (also a physician) will have no student loans. Our combined monthly income pre-tax will be between $40-50k/month. We want to live in a nice home preferably in a Philly suburb and have a comfortable lifestyle. We want to know if it will be possible to raise 1-3 kids, save for retirement, and do all those other "life things" that we've been putting on hold through school and training. I would really appreciate some legit advice and guidance. Thanks!

Yes, it can be done. The way it is done is by living similarly to how you lived as a resident for just a few more years after residency. Grow into that income slowly and there will be plenty to do all you want to do and more. But if you spend the money before you ever get there, even $40-50K a month can disappear very, very quickly. Make a plan and follow it.

 

[SClENCE]

Yes, how can "these people" possibly blow through $10K a month. Well, let's look at this month's budget.

Taxes- $12,500

Oh, we're past $10K already. But let's keep going just for fun.

Mortgage- $2,900

Insurance- $1500 (it would be $1800 if you counted the $300 of property insurance built into the mortgage.)

Utilities- $500-800

Clothes, food, entertainment, vacations, household, everything else- $5000 a month

Investments (retirement, college savings, next car etc)- $15K a month

Charity- $3K a month

Let's see, we're at $40K a month already.

Even if you take out the "nice house" (bought for less than $500K, which buys you nothing in more expensive places in the country) and the "nice car" (a $4K Durango bought 5 years ago) it's still awfully easy to blow through $10K a month. Trust me. And my kids are in public schools, I have no payments beyond that mortgage, and my partners have no idea how I save so much. The world looks differently when you become an attending my friend.

And being the "top 1% in the world" isn't exactly elite territory. It's $34K a year. Residents are well over that. Those who live in glass houses shouldn't cast stones.

I was referring to cases in which a person has 10k left over AFTER expenses and manages to spend it every month. This situation is realistic and common from my understanding but I still can't figure out where they can spend this kind of cash unless they are traveling. I am only a student but I still can't imagine being able to spend 5k a month on groceries/clothes/entertainment even with a family. Maybe it has to do with cost of living in my area or I am just naive but the potential to be able to spend at this rate scares me lol.

 

[The White Coat Investor]

I was referring to cases in which a person has 10k left over AFTER expenses and manages to spend it every month. This situation is realistic and common from my understanding but I still can't figure out where they can spend this kind of cash unless they are traveling. I am only a student but I still can't imagine being able to spend 5k a month on groceries/clothes/entertainment even with a family. Maybe it has to do with cost of living in my area or I am just naive but the potential to be able to spend at this rate scares me lol.

It scares me too. It's amazing how easy it is to grow into your income. I just went over our credit card statements from last month (we put everything on credit cards.) There are 110 entries. But trust it is very easy to blow through that kind of money. Eat out a few times, buy lots of groceries, drive two gas-guzzling SUVs all over the state, do some road trips etc. It's okay, it's an amount we can easily afford, but it would be painful to cut back for sure. At this point we pretty much buy whatever we want unless it involves very large purchases.

 

[W19]

@The White Coat Investor You better be a multi millionaire if you are spending that kind of money per month... I can't imagine spending more than 6k/month now even if I had a physician salary (~200k/year).

 

[The White Coat Investor]

@The White Coat Investor You better be a multi millionaire if you are spending that kind of money per month... I can't imagine spending more than 6k/month now even if I had a physician salary (~200k/year).

You think I have to be a multimillionaire to spend half my salary? On an annual basis, I pay 22-24% in taxes, another 7%ish to charity, and save something like 25-30% of it. So I'm spending 40-45% of my income. What percentage of your income do you spend?

And no, I'm not a multimillionaire yet, but perhaps next year if things continue as they have been.

I can't wait to see you come back to this thread in a decade and see what you have to say about spending $6K a month. You can't IMAGINE it? You don't have much of an imagination, do you?

Let me see if I can help you imagine it.

Let's say you have a family of four. You spend $1000 a month on food. You spend $1000 a month on health insurance. You spend $3000 a month on your mortgage. $500 a month on utilities. $500 a month on clothing, entertainment, home maintenance etc. And look, we haven't even talked about gasoline, car payments, student loan payments etc etc. And that's $6K after taxes, charity, college savings, and retirement savings.

Nor disability insurance, life insurance, umbrella insurance, car insurance, fire insurance etc.

 

[W19]

@The White Coat Investor $3000/month mortgage seems excessive to me... I am a non trad student. My household income before starting med school was between 110k-120k/year and our monthly expenses were less than 4k. My mortgage was around $1300 and I plan to stay in that house when I become an attending. We are a family of 4 and I think a 2,000 sqft home in a 'mid-to-upper' middle class neighborhood is good enough for us. Maybe things might change when I become a physician since I am not the only one making these financial decisions...

I don't normally count health insurance as an expense since it's taken out of my spouse paycheck, but I understand in reality it is... I excluded student loan when I used that 6k/month...

 

[dpmd]

@The White Coat Investor You better be a multi millionaire if you are spending that kind of money per month... I can't imagine spending more than 6k/month now even if I had a physician salary (~200k/year).

That is the point. You can't imagine it now, but it can be really easy to do if you gradually up spending in pace (or sometimes in excess) of your earnings. We pretty much put every expenditure on credit card (for the rewards, we never carry a balance unless we have an introductory 0% interest period) except for student loans, mortgage, and whatever need to be paid with cash. I think we tend to live pretty simply for the most part, but with recent trips, some projects around the house, and being lazy so doing a lot of eating out the last few credit card bills were around 6k. And that is for just the two of us (well my sister lives with us so not as costly as a kid but definitely not free). Thankfully I make enough that this isn't a big deal even with the amount i put away for retirement, but i can imagine someone who doesn't shop at the discount stores i do spending even more than that pretty easily

 

[W19]

That is the point. You can't imagine it now, but it can be really easy to do if you gradually up spending in pace (or sometimes in excess) of your earnings. We pretty much put every expenditure on credit card (for the rewards, we never carry a balance unless we have an introductory 0% interest period) except for student loans, mortgage, and whatever need to be paid with cash. I think we tend to live pretty simply for the most part, but with recent trips, some projects around the house, and being lazy so doing a lot of eating out the last few credit card bills were around 6k. And that is for just the two of us (well my sister lives with us so not as costly as a kid but definitely not free). Thankfully I make enough that this isn't a big deal even with the amount i put away for retirement, but i can imagine someone who doesn't shop at the discount stores i do spending even more than that pretty easily

I guess I might be wrong since I am not making that much money now... I think housing and cars are big expenses for the middle class and we always try to keep these very low...

 

[doc05]

@The White Coat Investor $3000/month mortgage seems excessive to me...

$3000 a month for a mortgage is on the low end for a nice house in an affluent suburb of a major city.

 

[dpmd]

@The White Coat Investor $3000/month mortgage seems excessive to me... I am a non trad student. My household income before starting med school was between 110k-120k/year and our monthly expenses were less than 4k. My mortgage was around $1300 and I plan to stay in that house when I become an attending. We are a family of 4 and I think a 2,000 sqft home in a 'mid-to-upper' middle class neighborhood is good enough for us. Maybe things might change when I become a physician since I am not the only one making these financial decisions...

I don't normally count health insurance as an expense since it's taken out of my spouse paycheck, but I understand in reality it is... I excluded student loan when I used that 6k/month...

I think he lives in an area where thst kind of house you describe is pricey plus i could be wrong but that might be a 15 yr mortgage and it might include escrow impounds

 

[dpmd]

I guess I might be wrong since I am not making that much money now... I think housing and cars are big expenses for the middle class and we always try to keep these very low...

Well, my mortgage is about 475 because i stayed in the house bought in residency plus the rate is low (but variable so i plan to pay it off early when rates rise) and housing is cheap here. Also, cars are paid off (although bought new which isn't the most frugal way but at least they weren't extravagant models). So even with that these past few months my expenses have been over 7k/month. So imagine what adding some car payments and a real mortgage would do to that.

 

[W19]

$3000 a month for a mortgage is on the low end for a nice house in an affluent suburb of a major city.

...

 

[W19]

Well, my mortgage is about 475 because i stayed in the house bought in residency plus the rate is low (but variable so i plan to pay it off early when rates rise) and housing is cheap here. Also, cars are paid off (although bought new which isn't the most frugal way but at least they weren't extravagant models). So even with that these past few months my expenses have been over 7k/month. So imagine what adding some car payments and a real mortgage would do to that.

Wow... That is a heck of a lot of money since you don't have car(s) and rent/mortgage expenses... As I said already, I might be wrong. I guess one can't think of these big expenses when they are poor...

 

[dpmd]

Wow... That is a heck of a lot of money since you don't have car(s) and rent/mortgage expenses... As I said already, I might be wrong. I guess one can't think of these big expenses when they are poor...

Yeah, most people don't pay a a few thousand for a trip one month, then put a down payment on new drought friendly landscaping the next, followed by another trip, then have the hubby decide to get some new threads including a suit just before that trip. Since we might go on another trip next month then the landscaping will start I don't see things going back down to my more typical 2k for a while. But the point is that you can easily spend a lot so the key is to prioritize based on your needs. Achieving rapid financial independence is important to me (so I could retire even if i don't decide to) so I try to keep fixed expenses low (keeping cars until they are dying, not rushing to upgrade to a fancier house, reasonable cell phone plan, etc) so that even if I spend extra some months (on experiences and things with long term value primarily) I am still progressing towards that goal and I know I can spend less the next month if needed.

 

[The White Coat Investor]

@The White Coat Investor $3000/month mortgage seems excessive to me... I am a non trad student. My household income before starting med school was between 110k-120k/year and our monthly expenses were less than 4k. My mortgage was around $1300 and I plan to stay in that house when I become an attending. We are a family of 4 and I think a 2,000 sqft home in a 'mid-to-upper' middle class neighborhood is good enough for us. Maybe things might change when I become a physician since I am not the only one making these financial decisions...

I don't normally count health insurance as an expense since it's taken out of my spouse paycheck, but I understand in reality it is... I excluded student loan when I used that 6k/month...

Mortgages are so location dependent, it can seem very bizarre what other people pay. For example, in the Bay Area it isn't unusual to have a $1.5-2M home. A 15 year fixed mortgage at 3.5% on a $1.5M mortgage is almost $11K a month.

My own mortgage is a 15 year fixed, 2.75% on something like $360K. With escrows it's $2850 or so.

If you live in Indianapolis, perhaps you could get a $200K 30 year fixed at 4% ($950 a month.)

And yes, things will change when you become a physician. When your spouse sees $20-30K being put into your bank account every month, he or she might not think that 2000 sq ft home is "good enough" for you anymore.

 

[The White Coat Investor]

I think he lives in an area where thst kind of house you describe is pricey plus i could be wrong but that might be a 15 yr mortgage and it might include escrow impounds

Sure, it's pricey. It's a 4400 sq ft mansion with a 100 mile view with the 3rd highest scoring elementary school in the state down the street. A 2000 sq ft home isn't "good enough" for us anymore. The home I lived in for my first four years of attendinghood was 1600 sq ft though.

 

[The White Coat Investor]

I don't normally count health insurance as an expense since it's taken out of my spouse paycheck,

That's nice. I don't count student loans because I don't have any. Everyone's budget looks different. Everyone's income looks different. To be successful you have to work with what YOU have. The only reason I'm sharing any of this is for those who have never made $200K or $400K or $600K to realize it isn't quite as blissful as you might think it would be when you're living on $20K or $50K.

 

[dpmd]

Sure, it's pricey. It's a 4400 sq ft mansion with a 100 mile view with the 3rd highest scoring elementary school in the state down the street. A 2000 sq ft home isn't "good enough" for us anymore. The home I lived in for my first four years of attendinghood was 1600 sq ft though.

The other funny thing is how someone living in a small apartment can't fathom finding 2000 sq ft not enough, but you accumulate stuff to a point just above the square footage you actually have. Luckily I don't have to deal with a spouse who thinks about what is "good enough" but then again there are no kids to consider. Still, I am starting have little thoughts of getting a bigger place (with my sister in one bedroom and the cats occupying the other room we have no guest room and my parents like to come to visit). Funny how things evolve.

 

[W19]

Sure, it's pricey. It's a 4400 sq ft mansion with a 100 mile view with the 3rd highest scoring elementary school in the state down the street. A 2000 sq ft home isn't "good enough" for us anymore. The home I lived in for my first four years of attendinghood was 1600 sq ft though.

I meant to say a 2000+ sqft (I think it is 2200) is 'big enough' for us...

 

[W19]

The other funny thing is how someone living in a small apartment can't fathom finding 2000 sq ft not enough, but you accumulate stuff to a point just above the square footage you actually have. Luckily I don't have to deal with a spouse who thinks about what is "good enough" but then again there are no kids to consider. Still, I am starting have little thoughts of getting a bigger place (with my sister in one bedroom and the cats occupying the other room we have no guest room and my parents like to come to visit). Funny how things evolve.

You are a lucky fellow...

 

[dpmd]

You are a lucky fellow...

Well, I am a lady so that might have something to do with it.

 

[Smart Money MD]

Wow... That is a heck of a lot of money since you don't have car(s) and rent/mortgage expenses... As I said already, I might be wrong. I guess one can't think of these big expenses when they are poor...

It's very easy to plow through a solid five-figure monthly salary once you start earning it. As previous posts have listed, if you choose to live in SF, SoCal, or any other big city, you can easily burn through $5k just on a mediocre rental. If you get the $1.5mil SoCal house on a jumbo mortgage, expect to be paying $10k+ a month. Don't forget, you get a swimming pool that you have to maintain year-round for another $3-5k a month. Sending your 4 year old to baseball camp or karate class? Put that on the credit card too (oh yeah, don't forget that you have to pay for an entire year's lessons in advance!)

The worst part about it is that this actually happens. Your neighbors in your new $1.5mil subdivision do it. The system perpetuates and you end up working your entire career to sustain this sort of lifestyle.

 

[SClENCE]

It's very easy to plow through a solid five-figure monthly salary once you start earning it. As previous posts have listed, if you choose to live in SF, SoCal, or any other big city, you can easily burn through $5k just on a mediocre rental. If you get the $1.5mil SoCal house on a jumbo mortgage, expect to be paying $10k+ a month. Don't forget, you get a swimming pool that you have to maintain year-round for another $3-5k a month. Sending your 4 year old to baseball camp or karate class? Put that on the credit card too (oh yeah, don't forget that you have to pay for an entire year's lessons in advance!)

The worst part about it is that this actually happens. Your neighbors in your new $1.5mil subdivision do it. The system perpetuates and you end up working your entire career to sustain this sort of lifestyle.

These areas just seem like a giant rat race to me. People earning 6 figure income are living pay check to pay check/in debt because its the the culture of the economy. Don't get me wrong - I'm all for buying a really nice house and car but it's the lifestyle/culture of some of these urban areas that I just don't understand. Why spend an extra million dollars to put your house up in a row with 100 others ones that look just like it when you could put it on 20 acres outside of a small town for half the money?

 

[Merely]

That's nice. I don't count student loans because I don't have any. Everyone's budget looks different. Everyone's income looks different. To be successful you have to work with what YOU have. The only reason I'm sharing any of this is for those who have never made $200K or $400K or $600K to realize it isn't quite as blissful as you might think it would be when you're living on $20K or $50K.

You live in great excess. Stop.

 

[Plastikos]

Ha. It is hilarious to read students/residents amazement at how one could spend so much money so quickly. It happens. Every year I look at my tax return and am amazed at how much I made, and what it felt like we had in reality.

First taxes become significant, for people that dont actively work to figure them out or live in high income tax states you will lose around a 1/3rd of your income immediately. You arent "making" your salary in the same way you do in residency. Next, if you have student loans this can be significant and is 100% post tax so tack that extra 1/3rd amount you have to make to paying them. You are out a decent amount already.

Then comes the stuff you have more control over, home, cars, food, etc....many people hurt themselves here yes, but its usually due to not appreciating the impact of the first 2 issues and thinking they actually have a whole lot more money than they do. This leads to underfunding their retirement and voila, under accumulators of wealth.

Even for people that consider themselves frugal and focused your regular bills creep up a tiny amount at a time and together become more, eg, you no longer can stomach mad dog 20/20 and buy slightly nicer wine, that adds up. Healthier food choices, more expensive. Im constantly asking my wife how on earth we spend so much on groceries, chill on the wine, but we other wise eat very healthy and a lot of produce which adds up and isnt worth cutting out. Even if you're not going crazy the quality of little things likely creeps up over time.

The good news is if you're smart and dont put yourself into too large a hole early on where youre beholden to debt or a job you dont like. Things can then turn around rapidly after living in an intentional manner for the first couple years. For example, instead of going for the amount of house our lender/realtor approved and wanted us to buy we will be closing in a few days on a house that is about 2/3rds my annual income and will be transitioned into a rental in 2 years (5 if I can get the wife to love the low low mortgage).

 

[dpmd]

Ha. It is hilarious to read students/residents amazement at how one could spend so much money so quickly. It happens. Every year I look at my tax return and am amazed at how much I made, and what it felt like we had in reality.

First taxes become significant, for people that dont actively work to figure them out or live in high income tax states you will lose around a 1/3rd of your income immediately. You arent "making" your salary in the same way you do in residency. Next, if you have student loans this can be significant and is 100% post tax so tack that extra 1/3rd amount you have to make to paying them. You are out a decent amount already.

Then comes the stuff you have more control over, home, cars, food, etc....many people hurt themselves here yes, but its usually due to not appreciating the impact of the first 2 issues and thinking they actually have a whole lot more money than they do. This leads to underfunding their retirement and voila, under accumulators of wealth.

Even for people that consider themselves frugal and focused your regular bills creep up a tiny amount at a time and together become more, eg, you no longer can stomach mad dog 20/20 and buy slightly nicer wine, that adds up. Healthier food choices, more expensive. Im constantly asking my wife how on earth we spend so much on groceries, chill on the wine, but we other wise eat very healthy and a lot of produce which adds up and isnt worth cutting out. Even if you're not going crazy the quality of little things likely creeps up over time.

The good news is if you're smart and dont put yourself into too large a hole early on where youre beholden to debt or a job you dont like. Things can then turn around rapidly after living in an intentional manner for the first couple years. For example, instead of going for the amount of house our lender/realtor approved and wanted us to buy we will be closing in a few days on a house that is about 2/3rds my annual income and will be transitioned into a rental in 2 years (5 if I can get the wife to love the low low mortgage).

I find the 2 buck wine at walmart is actually quite tasty, but i know what you mean. I am not going to get mad at my husband if he get starbucks and take out whenever he feels like it or if he comes home from the grocery store with steak and shrimp. He sacrificed a lot and put up with a lot during this process so it is only fair he gets some benefit from our drastically improved finances. But then the food expense is going to be a whole lot bigger than most people would thnk. The trick is to not let that attitude push you into really big things (like a fancy new car with the first paycheck) without planning for the big picture.

 

[Plastikos]

Yep, its all about the big picture.

One of the first things I did was make a spreadsheet with income, taxes, bills, savings, etc...then I projected out a 20 year stream of how much free cash flow would be generated (without adjusting for inflation, pay down, etc..). It was really eye opening to look at it in terms of you have X lump sum of money after obligations...whats important and how do you allocate it?

 

[dpmd]

Yep, its all about the big picture.

One of the first things I did was make a spreadsheet with income, taxes, bills, savings, etc...then I projected out a 20 year stream of how much free cash flow would be generated (without adjusting for inflation, pay down, etc..). It was really eye opening to look at it in terms of you have X lump sum of money after obligations...whats important and how do you allocate it?

@Stroganoff loves spreadsheets. I have slowly added more categories to mine. It started out as just a way to track my student loans in 2007 (nice to see the balances fall) and now has all my accounts and mortgages (past and present) so each month i update it and get to see my net worth. I can also look back and see the trend which i use to forecast when i might reach my happy number (another few yrs if things keep going as they have been)

 

[SClENCE]

I use personal capital it's pretty cool and is able to track every account I have, even my student loan

 

[Plastikos]

I do the same. Each year has a tab, its so nice to flip through it and see your progress. I love spreadsheets, so useful.

Personal capital is annoying in how hard they try to work you over to get control of your portfolio. Im sure its nice otherwise.

 

[The White Coat Investor]

You live in great excess. Stop.

Come back when you're ten years out of residency and we'll chat and see who's living in greater excess.

 

[W19]

You live in great excess. Stop.

He got other source of income... But no way a regular MD/DO can live that large without going broke!

 

[The White Coat Investor]

He got other source of income... But no way a regular MD/DO can live that large without going broke!

No way? I've got news for you. There are plenty of individual docs who have an income just from medicine similar to or higher than my combined medicine/website combined income. And that assumes one of the spouses isn't working. It is not unusual at all for a two-professional couple to have an income of over $500K a year. A recent survey of my specialty listed an average income of $375K and the 90th percentile was in the $500K range.

If you will get rid of your debt and jump start your retirement savings by living like a resident for a few years after residency, you too can "live large" later (whatever that means.)