Massive Debt and Nothing Saved for Retirement
There is a certain, perhaps large, percentage of doctors and others out there who are never going to have to worry about detailed estate plans. They're not looking for additional retirement accounts either because they're not maxing out the big obvious ones staring them in the face. Let me give you an example, with any identifying details that can possibly be used to identify this couple either eliminated or changed:
We both graduated from college and I worked for a short time before having a baby and wanting to stay home. We had a few more children. My husband decided that he wanted to go to medical school. He had always wanted to do that so he re-took a few classes at night to get ready for the MCAT and then started school when we had six children. He finished a family practice residency in 2010 and we stayed in the same $200K house and he began an attending job paying around $200K a year.
When he came out of residency I didn't think much about our debt thinking that our income would increase so much it wouldn't be a problem. We didn't upgrade to a bigger house. We did make some poor financial decisions in not watching our money more closely and buying two “newer”cars since both of our cars had over 200K miles upon finishing residency. We've since paid one off and owe $20k on the other. A few months ago, I realized that we really were not making a significant dent on our debt. He graduated with $440K in medical school debt and about $50K in credit card debt. I know it's a lot of debt and writing it down and coming to terms with it has been difficult. Right now we are down to $330K in medical school debt and $40K in credit card debt….
I think what FINALLY got my attention was that my husband and I are in our mid 40s, have saved nothing for retirement and have a bucket load of debt. The credit card flipping and figuring (to keep the interest rate low with 0% balance transfer deals) has been stressful. I do all the billing in the house and I have cut back on everything. I have figured out that we should be able to pay off all the credit card debt by next spring. In February I just started putting money in my husband's 401k plan. The hospital he works for only matches 1% so at this point we are putting in 2% to get the 1% match. I know that's pitiful but it's a start and I'm trying to focus on getting rid of the credit card debt….
So it gets better…We now have two children in college….
I have been very hesitant to get advice due to being afraid of getting taken advantage of and it's difficult because our situation is not typical. I am trying to educate myself and not only purchased your book but also Why Physician Loans Fail, Bogleheads Guide to Investing, Doctor's Eyes Only, and The Physician's Guide to Personal Finance.
Kids might not be cheap, but they sure are cute!
It's heartbreaking, right? Yes, they've made a few bad decisions, but they're pretty minor in the grand scheme of things and no different from what many of us have done. You can tell they're trying to do all the right things- pay off debt, save for retirement, help the kids with college, keep their living expenses down, drive cars until they have 200K+ miles on them, serve in an underserved specialty in an underserved area, live in a cheap house, avoid bad advice, and increase financial literacy. The main reason this couple is not only broke, but much worse than broke 6 years out of residency and in their mid 40s is that he decided after starting a family to go back to school to become a family practice doctor! What a terrible sin, right!
I gave them some advice that I hope was helpful and that I hope will be taken in the way it was intended, and I'm not going to reiterate it here as I'm sure most of you can see what it would look like. This woman thought her situation was unique. Unfortunately, it is FAR from unique. There is a large percentage of physicians out there whose financial picture looks similar to this. In fact, with the rapid rise in the cost of tuition, there may soon be entire specialties whose financial picture looks like this. The biggest service I can do for them is provide a little inspiration to take control and increase their financial literacy, point out student loan management options like refinancing and PSLF, and help them be frugal enough to build wealth and achieve financial independence by the end of their careers. Asset allocation and the best use of an HSA just don't seem all that relevant in the face of financial issues on this scale. There are doctors all around you in this situation who are afraid to ask anyone for help due to embarrassment or fear of being taken advantage of. Reach out! You can make a world of difference. You might not feel like you know a lot about personal finance, but if you've been reading here for long, you know more than 95% of your colleagues.
Identify the Damage and then Solve the Problem
Now, if you're relatively new here, or if someone just forwarded this post to you, and you realize that your situation really doesn't look all that different from that of the couple above, take heart! You're not doomed to a life of debt and poverty. There is hope and everyone can improve their situation. But you have to start at the beginning, and the beginning is where you sit down, say to yourself that you're sick and tired of being sick and tired, and add up the damage. Take all your debts, all of them, and write them each down. Now, get online and look up the current balances and interest rates of all of them. Write those down next to them. Add it all up. Now, add up all the money in your checking account, your savings account, and any retirement plans you might have. Subtract the negatives from the positives. If you are like many doctors, that total may be -$100K, -$200K, or perhaps even -$500K. Now, you've seen the worst and know exactly what it looks like. It is no longer a boogeyman in the closet that is far worse in your imagination than it could ever be in real life. Admit you have a problem and figure out how big the problem is. Only then can you begin to solve it. Even though the problem technically isn't any smaller than it was an hour ago, it feels dramatically smaller now that you have quantified it. It will seem even smaller once you have a written plan to fix it.
What do you think? Are you in this sort of a situation? What did it feel like before you had a plan? How do you feel now that you have a plan? Do you know any colleagues in this situation? What can you do to help them? Comment below!
Wow!
I would always wonder about the old guys/gals in my wife’s med school class. By the time they graduate, get through residency, and start their practice, they’re only a decade or so away from what many doctors see as retirement age (or in a couple of cases, already in it). On occasion I would flirt with the idea of going to med school myself, but as I approach 30 I feel I’ve already missed my window. 😀
$440k in “medical school debt” + credit debt makes me think that this couple really indulged during his training. I remember encountering people who did this in law school, older people (anywhere from late 20s-40s) who were seemingly using education as an excuse to take a 3-year sabbatical to tap into six figures of “income” to supplement their lifestyles. One of them even picked up an MBA halfway through to extend his experience another year. They took out anything and everything remotely called a student loan to keep themselves afloat.
On the brighter side, I have several physician clients in their late 60s, 70s, who are still practicing and don’t plan to retire, despite being very comfortable financially. Sure, a few of them only go in a couple days a week, but they love what they do. Also, even with a whale of debt, having a physician income allows them the tools to take it on in substantial bites each month and it will ultimately be gone in relatively short order if they continue to make good progress.
It is possible this couple “indulged” but on the flip side, my husbands tuition ALONE was about $58k (and went up 4-7%) each year. I was lucky to find this site when he was an MS1, have been taught to avoid debt & live below your means, and we both went in with the attitude of taking out as little as possible. We even saved $10,000 before school … Yeah still came out with upwards of $350k. Just sharing so that people can understand a high amount of debt for Med school is easy to come by without any indulgences.
This is such a troubling post on so many levels. Yes I know people like this. They are embarrassed and resistant to change. I suspect that many other people that I know are like this as well. I only know a handful of docs that are really interested in finance. I think medical school tuition is way too high. What can be done about it? We all know that personal finance and loan management should be mandatory like basic math. I have recommended this site to numerous people over the last few years but no one has ever mentioned to me that went to it. On a more philosophical note as students get more and more debt burdened and PSLF goes away (I predict) more docs will pile into higher paying specialties. It is hard to find FPs willing to see medicare patients as it is. As more docs become employed by hospitals incomes will likely fall. Physician extenders will run things in primary care. I am glad I am nearing retirement. I hate to be pessimistic because I am usually optimistic. I am certainly willing to mentor folks. Eye opening post. Good one too.
I haven’t looked at med school admissions numbers (not even sure what’s available online), however if the trend continues I would imagine we will see the # of people applying to medical school go down. I think the folks coming of age coming off of a huge recession may be less welcoming of $400k in loan debt for a medical degree. I also think some schools will face a reckoning with their tuition, but who knows when that will happen.
Dermatology is hard enough to get into as it is — many of the high paying specialties now are already very competitive, so people turning away from primary care may just end up without a job if they don’t want to do family medicine or peds. What may happen is that more primary care job openings will have to step up and augment student loan forgiveness outside of the PSLF to keep people coming into those specialties.
It hasn’t happened yet. My daughter just started med school this year and the competition for admission was fierce. There were 5-6,000 applicants to each school she applied to.
5-6K is always a little misleading as it seems like there are that many people trying to get maybe 100-200 spots. In reality most people apply to 10 or even more schools, so it’s more like 500-600 people trying to get into those spots, making it a 1:3 or 1:5 ratio. Some schools will be more and some less.
Not saying it’s easy, but I always chuckled when the applications came in because everyone got the call back to send more info, along with a $100 check for the second round application…
I believe the numbers are still around 1 out of 3 applicants gets in somewhere. Having been on the Utah SOM admissions committee, I can tell you we saw 200-300 fully qualified candidates a year for 100 spots. A few that we offered admission to turned us down, but that’s still less than half the qualified folks. And that doesn’t even count those with terrible grades, MCAT scores, inability to interview etc.
Interesting data and good points. After researching the numbers further I found that there was around 100,000 applications nationwide and about 45% acceptance rate. When I look at the admissions data on the University of Wisconsin school of medicine website it states that approximately 5000 students applied and 150 were enrolled.
Love the post WCI. You are right, often times we get bogged down in the details instead of seeing the big picture. Quantifying debt and spending is key because it gives a clear picture of the financial damage that is being done, and provides clarity on what the next step should be. When a bad situation turns to a complete disaster though is if this doc ever gets to a point where he burns out on medicine. It’s much more manageable with a higher degree of financial freedom.
Late start + huge debt + low paying specialty is really tough to dig out from. The problem is no one tells you this going in, most of us just naively assume things will work out because “all doctors make a lot of money”.
I think you nailed it. No one seems to be giving any financial advice prior to the huge loan burden and specialty choice. I recently talked with a patient who had decided to go to law school because the loan burden who be less than med school. (Her mother is a lawyer so this does make some sense.)
I’m shocked a pt whose mother is a lawyer would let her go to law school. Their loans might be only 2/3 of MDs, but their median income will be 1/5 or less. Maybe her mother runs a law firm and could have a job lined up for her, but without those kinds of connections law students are screwed. Google “Law School Scam” for some “there but for the grace of God go I” relief (or schadenfraude)
I think the young lady decided to be a lawyer herself not her mother. Some lawyers do very well. Some have trouble finding a job. My point was the level of educational debt will be less.
+1 I would take that with a grain of salt. I find it difficult to believe that someone who has legitimately been on the path to medschool with good grades in science, history of volunteering, good MCAT score, etc suddenly switched to law, especially for something as small as the loan burden. You can easily sign up for the LSAT and go to law school; med school takes a lot more effort.
I have heard many, many people say “oh yeah I was gonna go to med school” or “I thought about going to med school” but in reality they never took a real biology class or any of the other basic steps toward medicine.
Exactly. If you ask an Intro Bio 101 class who’s going to med school you get about 85% hands raised, do this in a 200 or 300 level class the numbers drop off significantly, either people don’t want to do that much more school or they know they won’t get in with their grades. But the new freshman is an optimist. These people that drop out of going to med school are probably the same people you hear saying that 20 years later.
I’ll bet this is more common out here on the east coast. Salaries are lower than in other parts of the country especially for the lower paying specialities. Cost of living is higher. I think it would be interesting to have “real world” look at what $150,000 looks like for someone with a 600,000 home, and 400,000 in combined educational debt. I bet that’s the reality for many folks out here.
Great post.. unfortunately 90% of this is behavior and 10% is math.. as Dave would say! We were in serious debt too 3-4 years ago with probably 200-300k. Completely and utterly had no financial literacy! New cars, house, student loans, properties… etc. Luckily no credit card debt. For the past 1-2 years.. debt free but the house and only intentionally not paying it off as Im putting everything into a taxable account. You need to have a good budget and be extremely intentional! Motivation I believe is also key… IF folks are in the place of severe debt.. not to despair. In addition to keeping up with the WCI and PoF… I would seriously listen to Dave Ramsey’s podcast everyday as he was very motivational.. the folks he had on the show were also very inspirational as he had folks who were making a LOT LESS money and still became debt free. As physicians.. we have no excuses.
Thanks for sharing. I agree that a daily dose of Ramsey can really help you clean up your debts.
Anecdotal story that many people don’t get that I will tie into this post:
When I was nearing the end of my medical school days, I was bemoaning my approaching $200k student loan debt plus my fiancee/now wife’s additional $200k student loan debt. An endocrinologist who was a very good mentor told me not to worry about money. He said if you could buy a machine (ie MD degree) that prints money, it wouldn’t matter how much it cost because that machine would just print that money. A la, it doesn’t matter how much medical school loan debt you rack up because you’ll be making so much it won’t matter. I’ve had other residents also tell me they’re borrowing from their future self not to pay off their student loans now.
This mindset reminds me of this couple’s plight. It seems like all the spending and debt they racked up would be paid down by that larger salary, therefore justifying going back to medical school. What this couple and my mentor didn’t realize is that these money machines/MD degrees have only so much money they can produce in a single year. If you have lots of expenses (e.g. 6 kids in a HCOL area), you’re going to have a hard time paying down huge debt even with a $200k salary. This is what most people don’t understand. I didn’t walk out of residency with a high salary. I came out with a high salary, high negative net worth, and about 10 years behind in saving for retirement/kids college/etc. Fortunately, I’ve found sites like this, so I can translate my high salary into high net worth and early financial independence.
Exactly. And while that salary looks great on paper, a significant portion is taxes right off the top. Its not the same as when you imagine it. That first checks taxes shocks everyone.
Great point. At the risk of making too broad a generalization, this is somewhat a product of how medicine is like an exaggerated version of inter-generational economic dynamics playing out across the workforce. e.g. Was it helpful at all for some young med students and residents to get career and financial advice from their baby-boomer mentors, who made more money than younger generations can expect, experienced impressive overall market returns throughout their careers, had lower educational costs, and therefore felt less of a sting from financial mistakes they made over the years? Can you blame some students for thinking that the formula was: medical degree = big house + nice car? I certainly heard my share of stories from older attendings about investing in art galleries, buying big boats, and living in the most expensive urban neighborhoods. To some extent it went to my head too – I sometimes think of how different my assessment of my career and finances currently is from what I used to imagine as a med student, but that turns out to be a good thing.
Completely agree . . . I think your mentor was passing along terrible, but extremely common, financial “wisdom.” And I’d add that even if the “salary” has stayed flat, wRVU valuations have not kept up with inflation, therefore everyone took a relative pay cut. When I get asked these questions (unless I am going to sit down with the person and help them go through their financial plan) I always encourage them to immediately begin following and learning from the WCI website.
I give the rotating medical students and all of the new residents some financial education as they come through. I also refer them to Bogleheads and WCI, and occasionally MMM.
The vast majority of physicians are well ahead of the general population in the end even considering the mountain of debt. I doubt our plight gets much sympathy.
You are right, which is all the more reason to have a plan. No one will feel sorry for you if you make 6 figures and have nothing to show when you are 70 years old…
First, I want to thank you and the people who contribute and comment on this blog. My current and future financial situation would be so bleak without you all.
I’m a 38 year old EM doc one year out of residency. I am single and don’t have kids or pets. I finished residency with no retirement funds, $25k in personal loan debt, $12k in credit card debt and $500k in student loans. Sounds totally ridiculous right?!
Thanks to this blog, at 1 year into attending life, I have completely paid off the personal loans and credit cards as those high interest accounts were enemy #1. I then consolidated my student loans over 3% with Commonbond at a 10 year variable rate of 3.06%. At this point my individual 401k, Backdoor Roth IRA and HSA are maxed out and I began putting additional funds into Betterment, Wealthfront and dabbling in individual stocks though Robinhood.
I feel my financial situation is still rough since my net with is a big negative but I can’t imagine where I would be without WCI. Thank you again.
Lastly, to those struggling, you can do it! Educate yourselves, make the list as he mentions above and come up with a solid game plan. I does not need to be complicated or even time intensive.
Good for you. I was in a similar position when I came out a few years ago. Do take advantage of being single without kids to really get ahead while you’re the only one making the decisions and having needs.
Congrats on how you are doing. Be cautious with individual stocks especially with the market at all time highs. You seem to have much better uses for those dollars. Read Devil Take the Hindmost before you go too far down the individual stock road.
+1, especially when you don’t really have money to blow, or are still in debt, even if it’s good debt.
Just some clarification…how did you not have any money saved from 22-30? You were in med school/residency from 30-37 right?
Also, 500,000 in loans?
College: (12,000+15,000)*4=108,000
Med school: (32,000+15,000)*4=188,000
Loans accrue but unless you have many dependents your 50,000 gross residency salary should have kept your net worth at the same negative 350,000 or so figure.
Good job getting your finances in order though….
Bear in mind that so many details have been changed that the original person emailing me months ago may not even recognize the situation, so don’t expect a response to any direct questions.
I had a complicated course. Undergraduate studies were not science based so I had to do a post-bac pre-med program for 4 years and it was very expensive. During that time I had a full time job to cover my living expenses but it was low pay and didn’t go very far. I followed that up with going to one of the most expensive medical schools in the country. My debt skyrocketed but if I had the choice to do it all over I would. Life is awesome right now and the finances will be just fine.
I spent all my saved money interviewing and moving around for residency/fellowships (likely 10k from college while working 98-02, and 15k or so from residency). Oh, if I could go back in time and slap myself. Now, I had a family that was a qualified excuse to not have much left over…but I really was just ignorant and in denial. Forebearing and deferring at high interest rates of the years past can allow those loans to get big quick (along with 7yrs training). It definitely happens.
I knew that this was going to be a horror story when I read, “…then started (med) school when we had six children.” The person who makes this colossal miscalculation and then goes into family medicine is destined to struggle for a long time (unless there is wealth or resources from an independent source). The math just does not add up.
I remember a guy in residency who had gone to a Caribbean medical school and wanted to do Ortho, but he was having a hard time getting a spot so he just kept bouncing between prelim internships. We were his second and when he left he was heading for his third. He was married with young children. That’s 3 years he could have spent finishing residency and making a decent living to support his family. I just can’t understand how people make such risky and very consequential decisions.
Wow. I wouldn’t call these poor decisions “minor”. Having six kids without first having in place the means to properly support them is a catastrophic mistake. In theory, they could live on $50,000 a year and pay off their debt by the time Japan sinks into the ocean, but we know that will likely not happen since they are probably accustomed to a certain level of Doctor lifestyle.
Though extreme for most, this family is a good candidate for the Mr. Money Mustache lifestyle.
Although the first reaction is to gasp in horror and judge, I applaud her for realizing and most importantly owning their mistakes and their hard work and steps to dig themselves out of the hole. At one point or another, we all had an “aha” moment when we realized we weren’t doing what needed to with our financial lives and turned the corner. Some have been lucky enough at that low point to find themselves with only small financial mistakes or merely licking the wounds of missed opportunities. For this family, unfortunately, “aha” happened much much later, but thankfully it did happen! This situation is typical and I would venture to guess that more people in this situation go on living irresponsible financial lives resulting in bankruptcies and having to rely on others’ hard earned money to bail them out via government support. If that wasn’t bad enough, even the worse consequence of not turning the corner is the legacy and lack of financial education and responsibility passed down to the 6 children that would likely compound the issue with each generation.
i think this couple and many other similar ones did a few things right
1. their heart has been in the right place, serving their community
2. they have built their children one of the greatest inheritance there is, siblings
i agree that the first step is adding up the damage
then setting goals and plans to accomplish them.
downsizing is really not as bad as we all think, upgrading is not as great as we believe.
trimming off the fat and focusing on saving and paying down is actually incredibly rewarding and freeing. when we look at the rest of the world and how $38 can support a child’s every need, i find it hard to spend than to save.
those of us who are fortunate like myself to have learned a few things from WCI early on (in med school) and benefited to become debt free or on the way to early financial independence, it behooves us to reach out and help our colleagues.
and for our colleagues who are in financial struggles, please don’t feel shy, ask for help. we walked in the same shoes, faced the same challenges (high tuition, high interest, kid, etc.), and have only managed a little differently, leading to different results. we’d be more than happy to share our experiences and words if you’d like.
don’t despair, you’ve accomplished much harder things in life already such as med school and medical practice, and raising a family. money matters are simple and its just a matter of using a few old principles.
6 CHILDREN!!! NO COMMON SENSE
What number of children is okay with you? I know lots of docs with 4-6, and a few with 8-11.
Cryptic as usual…I didn’t read Ken’s comment as a number of kids issue. Rather, how do you have that many kids and decide to go back to medical school with a stay at home spouse? Even if that isn’t what Ken meant, I think it poses an interesting question.
I had a classmate who went into FM who started school with 6 kids and a less than supportive husband. She finished and matched too. Of course, in-state tuition at the time was $10-13K a year.
Interesting life choice. Any chance she’d write us a post?
Dunno. Not sure I can even identify her any more. I’d have to search my email.
I wondered about the life choice as well. Six kids is tough. I think a guest post from someone who went to med school as a second career would be interesting.
#3&4 on the way with pending arrival. Having multiple kids doesn’t mean one has no common sense. I think those who have the McMansions or luxury cars, exhibit much less common sense. A family will give much more fulfillment and satisfaction and happiness than any big expensive “gotta have” item. Just my 2 cents and my world view.
I dont think either has less common sense, just different goals and outlooks. If I could get them at 18 months or so I’d take 4-6, maybe more if I could give them back at 13…seems every time you turn around they are so much older.
while i i have not managed to provide my kid with a sibling… (relationship issues and residency sometimes feeling like single parent and have been single parent through part of med school), i do think siblings are a wonderful gift to our kid(s), better than material inheritance.
i applaud anyone in medicine who manage to raise a wonderful large family! that’s amazing.
To play devil’s advocate, I think they will be ok: They worked for awhile before deciding on medicine and chose FM–therefore, I presume he found a career that he enjoys. They have the gift of children. They sound like life is pretty good, even with the debt. So, if income 200k/yr, put away 50k in retirement, take the remaining 150k at 20% tax, minus say 40k for loans, gives about 7k/mo in income. Yes, they can do some fine tuning. There will be no early retirement, they will not be self-funding private school, they will not be taking annual trips to Europe, they won’t be drinking 50 year old single malts…but let’s face it: when combined with a happy family, this is wealth for the vast majority of humans on the planet.
I think I agree the most with this comment. As long as the husband enjoys his job/career now and wasnt just in medicine to make a ton of $$, they will eventually come out ahead. Granted, he will be working for a long time and they will need to continue to live and retire on a middle class income (gasp!), but if this is the path he chose and enjoys then it is still a career and life worth lived. I would still rather be in their position than working in a job I hated for 40 years just to have more $$ to retire. I think this is a tough concept for many docs to grasp because let’s be honest, most of my classmates grew up in at least upper-middle class homes-many/most went to name-brand, expensive undergrads, had decent cars, nice new clothes for their 3rd and 4th year rotations, nice apartment/condos in school, and their lifestyle largely has crept up from there. This family doesn’t have that and as long as they aren’t trapped in the Keeping up with the Joneses mindset, they will be ok.
I would definitely recommend some moonlighting/locums work on the side at this point and just dump all of that directly into debt. The snowball will eventually occur….
I agree. I was going to post something similar.
They have already paid down 1/4 of the student loans and 1/4 of the credit card debt, along with a car loan. They are moving in the right direction.
I won’t criticize them for having 6 kids. More power to them! But they shouldn’t expect to be able to pay for all of the tuition or grad school. The kids will have to do it on loans, although maybe if he practices long enough he can catch up.
If you start practicing in your 40’s, then retiring in your late 60’s is “early retirement”. Maybe some Ramsey and MMM will help ( even though I have big issues with both of those guys).
The problem here is something WCI alluded to in an email: You can be financially comfortable earning a primary care salary, or with a big house, or with lots of student loans, or living in a high COL area. What you can’t do is all of those things. This family will have a tough row to hoe with high loans, lots of kids, a late start, and a primary care practice. But I think in the end they will be ok. But I agree, no big vacations to Europe and Asia ( especially with 6 kids!), no boats, no toys.
If I were the wife in this scenario, I would give serious consideration to going back to work myself. Two incomes will clean up the finances here so much faster, especially if the husband moonlights. He should give serious consideration to taking a position with a higher salary and/or better retirement plan. It really just depends on how serious they are in cleaning up their finances. Their numbers look dismal to me given his late start and no savings from whatever he did before medicine. What if an early retirement happens not by their own choice, but by circumstance like a health crisis? I wouldn’t count on frugality alone to change their situation.
Also…I’d be sure they are each covered with a good term life policy and him with a disability policy. Get rid of credit card debt and the car loan ASAP. How/why did they pay off 110K in student loans and keep those debts? I would favor getting retirement savings going over debt repayment in this case. I’d refi any mortgage out to 15 years and plan on 20 years for student loan repayment. Pick your poison on how to achieve that timeframe with student loans. I wouldn’t be quick to give up the benefit of student loans being forgiven at his death though. Those refi choices should help cash flow. But, I wouldn’t actually take that long to pay them off. I’d pay down house before loans in this case with money left after chunking a good amount into retirement. Retiring 65-70 should still be possible.
I agree that this situation is far from unique. I think we just never hear about it because those doctors just end up never retiring, and working until they die. So we just never hear from them.
I think the first step is acceptance.
First, I congratulate you on bringing down the medical school debt by ~$100k since finishing. That is great. However, please get rid of your credit card debt as soon as possible. “Juggling” it through balance transfers is not optimal, and as you alluded to, probably stressful.
Ok, now consider yourselves in the same plan as “Early Retirement”, meaning a 35 year old young attending trying to retire at 55. This will give you a baseline for your 20 year plan (starting at 45 and retiring at 65).
Agree with “G” in putting away 50k+ away toward retirement, some toward loans ($40k if possible), and live off the rest. I am hoping you are in a low COL area and either own or have loan payments on your $200k house. Once the loans are gone, add more to the retirement pile.
As for the children in college, I hope it’s a state college and doesn’t cost too much. Even if it is a state college, you may need to consider -not paying- for college for your children, otherwise putting 6 kids through college on a single salary will be difficult. This concept may be difficult, especially if your own parents paid for your college. However, the financial burden of putting 6 kids through college will make it difficult to retire in a reasonable time frame.
The first step is acceptance. Now you can move forward.
-Sensei
All the WCI comments & suggestions should help this family a great deal. Getting through med school/residency with 6 children shows they have a lot of energy and motivation. I agree with Dr Mom that two incomes could help decrease the debt more rapidly. Starting a financial blog might be a good way for the wife to earn money and allow her to work from home. I know it’s a crowded field but people love seeing other’s financial numbers and enjoy seeing other’s financial journey. I think she would get a lot of support and ideas from people commenting in her blog and cheering her along. The six children are a built in fun comic relief for a blog. Even if she makes a fraction of WCI or MMM blogs, it could still be helpful. Also reading MMM (as several others have already suggested) could help her trim her expenses. I suggest the early years (2011-2013) of MMM posts as he is leaning more towards environmental causes and socializing with CEOs for the last couple years. Good luck family! Since you were able to finish med school and residency with six kids, then erasing the debt and saving money should be doable in good time.
while i i have not managed to provide my kid with a sibling… (relationship issues and residency sometimes feeling like single parent and have been single parent through part of med school), i do think siblings are a wonderful gift to our kid(s), better than material inheritance.
i applaud anyone in medicine who manage to raise a wonderful large family! that’s amazing.
With an increasing family size, economies of scale begin to kick in. Having 6 children would be tough if the children were very young with both spouses working and having to pay for day care, but that gets a bit better once they’re in school. Having already had six children means that they are probably older now and in school.
I travel in large family circles, and in my neck of the woods, most large families live on an annual income of 50-70K. It’s quite doable. I don’t think the problems of the couple from the original post are insurmountable. It does mean that he’ll probably have to work longer than if he had gone to medical school just out of college.
I think many physicians with one or two children, spend far more money on their children (along with most other life’s expenses) than most families do, making the post sound scarier that it actually is.
Very few doctors are like you WCI, with knowledge and passion about the science of medicine and the science of personal finance. Many people that get into medicine do so because of wanting to help people while also having a challenging / rewarding profession. Like teaching, that’s not conducive to being mindful of money
Doesn’t mean they should retire poor or have to worry about money during their careers. A little financial literacy early on, no matter how painful to acquire, goes a long way.
This doc should work on his offense. $200k is at the very low end of the spectrum for physician pay. Typical for Family Medicine? Yes. But I know many family medicine physicians and internists who have made the transition to Emergency Medicine without additional training. It may not be possible at Level 1 trauma centers, but many rural Emergency Departments are staffed with non-EM trained physicians.
He could probably double his take home pay by making the transition and picking up extra shifts. He may not be in medicine for the money, but it is obvious that money has become a major issue for the family.
Best,
-PoF
No man, $200Kish is average. You and I are blessed in many ways. Anesthesia is near the top and EM is about in the middle. But the numbers of family docs, internists, pediatricians etc keep the average much lower than you might think.
http://www.theatlantic.com/health/archive/2015/01/physician-salaries/384846/
I am a CPA, but have a side business creating excel spreadsheets for companies and individuals. The attached spreadsheet is something I created for a company, but have modified it slightly to help anybody with a list of debt.
It is fairly simple:
Enter your debt information on the calculator tab: Starting Date (date you “Add Up The Damage”),Balance, Original Balance, Interest Rate, Payment (suggested minimum, but can be current), Custom (this is a ranking of debt payoff order 1 is 1st debt to pay off, 2 is 2nd, 3 is 3rd, etc. It can also be used in reverse. 1 is last debt to pay off, 2 is 2nd to last,3 is 3rd to last, etc.)
Pick a Payment Option: Debt Avalanche – Payoff highest interest rate to lowest interest rate, once 1st debt is paid off, that payment automatically gets applied to the 2nd debt.; Debt Snowball – Payoff lowest balance to highest balance, once 1st debt is paid off, that payment automatically gets applied to the 2nd debt.; High-Low – Custom order, starts with highest number to lowest, once 1st debt is paid off, that payment automatically gets applied to the 2nd debt.; Low-High – Custom order, starts with lowest number to highest number, once 1st debt is paid off, that payment automatically gets applied to the 2nd debt.;
Optional – Choose an extra payment on the Payment Schedule Tab (Row 14). The extra payment option is why I suggest the minimum payment on the calculator tab.
The Calculator Tab has a Debt Profile so you can see a summary of your debt, how much interest you will pay over your payoff cycle and the date you will be debt free, it also has a section to track your credit score. On the Payment Schedule Tab, you are able to see when an individual debt will be paid off and when a snowball will be applied.
The spreadsheet is locked. You or anyone you share it with will be able to use it for its intended purpose, but not be able to view or edit the formulas.
https://www.dropbox.com/s/roujmvtvz5r31et/Debt%20Reduction%20Calculator%20WCI.xlsx?dl=0
Please let me know if you have any feedback.