Originally posted by NMH2001
I know that this topic has been beaten to death but are there a lot of people out there like me who will be in the 200,000+ debt range at the end of school? I am seriously considering going into a specialty beacuse I don't see how going into, say FP will get these loans paid back in under 20 years!
Any words of wisdom/encouragement would be great!!
First, I recommend you read the book "The Millionare Next Door". You'll feel comforted that wealth is built upon how you live your life and value money, not by how much you make.
Let's consider some calculations. FP on average, makes $136K/year (
http://stats.bls.gov/oes/2002/oes_29He.htm)
This is after malpractice and other business expenses.
Taking the deduction of ~$30,000 (this includes a mortgage for a $300K house, work expenses, taxes paid, etc...), a single person, self-employed making this much should take home about ($136K - $24K federal tax - $15,000 self-employment tax - ~$10,000 state tax.) = about $87K/year or $7250/month.
$7250/month
___________
-$2000 mortgage for the $300K home @ 6%, no down, 30 years, property tax
-$2000 student loan payment @ 4% 10 year plan
-$300/month medical/dental insurance (included in above deductions)
-$400/month work expenses (included in above deductions).
You're left with about $2500/month for food, car payment, savings, retirement savings, entertainment, clothing, etc....
The above is a rough estimate, but under the right financial budget and mindset, a FP can pay back $200K in student loans and still have a decent lifestyle. The real problem is saving for retirement. You'll have to force yourself to save as much as possible of the $2500/month for retirement, but after 10 years when the student loans are paid off, you'll have another $2000/month free to put towards retirement. In addition, you're going to have financial difficulty living in LA, New York, Chicago, or SF. Physicians who work in smaller towns/cities will definitely have more money than those who pick larger, over-saturated markets. Also, if you pick a state like FL or TX where there is no State Income Tax, then you'll have an extra $10,000/year.
My advice is the same as moniagrl's: don't pick a specialty b/c of money. If you do what you love, then the money is only a big bonus.
Regardless of specialty, you'll be able to pay off a big student loan debt.
I hope this helps.
Addenum:
I know someone is going to ask about retirement. Let's assume the average FP will be 30 when starting practice. You're able to set aside $200/month for 10 years, and then $2,000/month there after. Let's plan on retirement being at age 60.
With an average investment return of 6% (which is worse than the S&P 500 historically), at age 60 you'll have: slightly over $1 million
with 8% return, at age 60 you'll have $1.3 million
This is probably not enough to retire, but you'll also have to consider that you'll be able to sell your practice or you may work for another 5 years until age 65, which will allow the $1.3 million grow closer to $2 million. If you work in academics, then you'll probably have double this amount b/c most programs match dollar per dollar. If you work for the military, you'll have this amount AND your military retirement (currently worth about $1 million dollars alone for those serving 20 years).
You can play with this calculator:
http://www.bygpub.com/finance/InterestCalc.htm
