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  • Starting out: Advice on Next Steps

    I'm a 38M coming up on first-year out as ER attending at octopod-like, far-reaching healthcare system in the Bay Area. Base salary is ~ $350k. Company offers qualified pension, contributions and pseudo-matched 401k at Fidelity. Non-academic institution with no PSLF or HSA options. (Yes, I had another career prior to medicine but I was an independent contractor and failed to save much. Water under the financial coulda-woulda-shoulda bridge. I also have too many advanced degrees -- but not one is in finance. Poor planning on my part.)

    My starting financial position:
    ===================
    1. Had not heard of WCI during residency. Paid down car and high-interest CCs; did not save for retirement.
    2. Unmarried w/o kids. No mortgage. No car or boat loans.
    3. Student loans originally ~ $500k. Now $450k.

    Actions taken this year:
    ===============
    1. Refinanced student loans: $300k with First Republic (2.2%), $100k with Sofi (4.125%) and kept the undergraduate loans with Navient (3.2%).
    2. Saved $25,000 for emergency fund and placed in Northpointe Bank savings plan (2%). Also parked another $25,000 there while waiting to figure out what to do with this extra money.
    3. Maxing out 401k to total of $55k (100% Fidelity Contra Fund, ER 0.38% vs Vanguard 0.32%). In order to hit this target this year (as I did not contribute to the $15,420 prior to June, I'm taking a hit on paycheck ~ $2570/month.
    4. Setup and funded back-door Roth IRA at Fidelity. Have yet to invest.
    5. Passed boards. (And that's what they call 'burying the lead'.)
    6. Joined WCI. Reading books and getting my learn on. Trying to be less of a financial noob.

    Areas involving "next steps":
    ==================
    1. What investments should I pick for the Roth IRA? Since it is post-tax monies, I should be investing in equities, yes?
    2. I would like to set up a taxable account this year. Any particular brokerage firm? This is where I should invest into bonds?
    3. Holding off thinking about a home until I make partner (votes at 2-year and 3-year, respectively). Company provides a zero-sum loan ~ $180k (crescendos to 5% at 5 years, then back to 0% at year ten) over 10 years for down-payment because - you know - the Bay Area.
    4. Partnership buy-in is graduated among three levels. Total buy-in is ~ $130k. This can be paid in cash (that's hilarious) or taken out as a 2% loan or a combination there-of. Company stock has allegedly grown at double-digits since a dip in the 1990s.
    5. My car is going to need to be replaced this year. My commute (for now) is about 100 miles per day. And I'm 6'5" so a lot of cars don't fit and trucks get shitty economy.

    With that as the backdrop of my situation, I need to figure out what to do with my money. Yes, I could pay down my loans faster but I'm concerned about this partnership buy-in coming up in 24 months, not to mention the likelihood of a newer (not new) car. While I could park the money in the high-growth savings account, that would net me ~ $2000 ($1000 per annum on starting balance of $50,000). Would it not be more prudent to place in taxable account(s) due to compounding? Any thoughts on where to go from here while maintaining a reasonable amount of flexibility but not obliterating the power of my money to start growing?

    Thank you for your 0.02!

     

  • #2
    That's a big emergency fund for someone with $450K in student loans. Do what you're comfortable with, but I might cut that back to $10K. I'm kind of anti-debt though.

    1. What does your written investing plan say? Sounds like you've got asset location questions so maybe this post will help:

    https://www.whitecoatinvestor.com/my-two-asset-location-pet-peeves/

    Bottom line, asset location isn't as big a deal as some people think.

    2. I like Vanguard. Yes, you can invest in bonds in taxable. Probably going to want a Cali specific muni bond fund like Vanguard's.

    3. Probably a good idea

    4. I like ownership

    5. Some Euro-style cars have a bit more room in them while still getting decent mileage.

     

    2% sounds better than your student loans, plus you don't need it for a couple of years. Why earn at 1% to save 2% later when you could "make" 4% on your student loans now? Money you'll need in a year or two probably shouldn't be in equities. Maybe a bond fund if you want to chase yield a bit.

    Classic new graduate cash conundrums. The way to get more cash is to live like a resident- work more, spend less and tick off these cash needs one by one.

     
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

    Comment


    • #3
      what are your 401k options. Contra fund is kinda an odd pick. it has historical significance, but not much else IMO.

      1) yes it should be all stock.

      2) any is fine. just pick one with no trading fees. no bonds go in your 401k. once that runs out of room then munis in taxable.

      3) sounds like you should hold off on a home.

      4) what do you get for that buy in? 3 years at 350K you should have it. however given loan rates at the time it may be less advantageous.

      5) why dont you rent something closer? i would spend money on that before a car. i also doubt your car NEEDS to be replaced. if you want a new car thats fine.

      Comment


      • #4




        5) why dont you rent something closer? i would spend money on that before a car. i also doubt your car NEEDS to be replaced. if you want a new car thats fine.
        Click to expand...


        1) Working on it but I have a good deal where I'm at, prices are insane across the board (nice vs not, 1-bed vs 2-bed, garage vs none). Really no rhyme or reason to prices. People just fishing and seeing what bites. I showed up to an apartment (yes, a rental) with 50+ people at the showing/open house.

        2) Car definitely needs replacing. I work on my own cars, and I love this one. But she's eating synthetic oil (~ quart) every 1000 miles with no signs of head gasket leak or leakage in the system. Probably the piston rings. And I'm not going to try to rebuild an aluminum block. They warp too much. But that's a discussion for a different forum.

        Comment


        • #5
          I had a car that leaked a quart every 20 days or about 400 miles. Kept it going that way for 5 years. Just switch to non-synthetic oil so you save some money that way, maybe slightly heavier weight. I work on cars too. Two quarts of oil a month is much cheaper than buying a car.

          Comment


          • #6
            In the bay area, if you can move closer to work and not have a car at all that is something I would strongly consider. I know property market is crazy but hopefully that would be possible. 100 miles per shift is a lot of your time and energy.  Public transit with uber/lyft will likely be cheaper than owning a car and less stress.

            Otherwise I would echo what has already been said. Don't save for the buy-in given you can finance it at 2%. Reduce your cash on hand and pay down the highest interest rate loan (and keep fully funding all tax advantage accounts you can). Overall you are on the right path. Besides that do you have disability insurance?

            Comment


            • #7







              5) why dont you rent something closer? i would spend money on that before a car. i also doubt your car NEEDS to be replaced. if you want a new car thats fine.
              Click to expand…


              1) Working on it but I have a good deal where I’m at, prices are insane across the board (nice vs not, 1-bed vs 2-bed, garage vs none). Really no rhyme or reason to prices. People just fishing and seeing what bites. I showed up to an apartment (yes, a rental) with 50+ people at the showing/open house.

              2) Car definitely needs replacing. I work on my own cars, and I love this one. But she’s eating synthetic oil (~ quart) every 1000 miles with no signs of head gasket leak or leakage in the system. Probably the piston rings. And I’m not going to try to rebuild an aluminum block. They warp too much. But that’s a discussion for a different forum. ?
              Click to expand...


              im sure you saw this:

              https://www.nytimes.com/2018/06/30/us/bay-area-housing-market.html

              Comment


              • #8


                100 miles per shift is a lot of your time and energy.
                Click to expand...


                Agreed. And it's taking a toll. But I work on the south side of San Jose. So until I know whether I make partner at this site, I like staying positioned mid-Peninsula so if I had to get a new job/site, it wouldn't be that huge of an ordeal. Plus, I'm not the only consideration in that equation and her job is in South SF.

                 


                Besides that do you have disability insurance?
                Click to expand...


                I have the specialty non-specific through the company. And it's crappy. I now know that. I need to lose 5 lb quick (ugh...vegan, gluten-free diet) and apply. I have quotes from three of the companies on WCI. Just need to pull the trigger then ditch the company offering.

                Comment


                • #9


                  im sure you saw this: https://www.nytimes.com/2018/06/30/us/bay-area-housing-market.html
                  Click to expand...


                  No. But I am frequently reminded (by one particular interested party) that I should've moved to Manhattan -- or stayed in Chicago. But I came out here because I love California...and the prospect of the pension. Robbing Peter to pay Paul with regards to retirement and real estate out here.

                  Comment


                  • #10


                    Two quarts of oil a month is much cheaper than buying a car.
                    Click to expand...


                    Absolutely. I tried going to Royal Purple 10w30 which seemed to help a little, along with new PCVs with each change and even put in a oil catch can system. I carry a 5 qt in the trunk, but the consumption is getting worse. So fingers crossed she lasts because I'd rather not get something new. Too much blood, sweat and tears in her at this point.

                    Comment


                    • #11
                      Thanks, Jim. I just went ahead and skipped the bonds, put the extra monies from the ER fund to my taxable account with VTSAX. After transferring my Roth IRA from Fidelity to Vanguard, I invested in VTSMX (until next year when the balance goes north of $10k). Plan to diversify into VGTSX/VTIAX next year, as well. That rounds me out to 20% earmarked for retirement this first year.

                      Sounds like I'm no different from anybody else so time to get aggressive with the loans and knock down that giant balance to something a little less harrowing.

                      Thanks again for all your help. What you do matters, and this community is a testament to that.

                      FYI: It amazes me how many of my colleagues - young, seasoned veterans, PAs, NPs, RNs, everybody - does not know about any of this this - or very little. I'm recommending your book, forums, podcast to everybody. Even after the modicum of information I've learned here and through the resources you've guided me toward, I'm a relative "expert" - which is completely nuts and surreal. (With all my debt, I shouldn't be considered an expert on anything apart from getting into debt. Lol.)

                      Comment


                      • #12
                        I remember this time of my career pretty well since it was only a couple of years ago. It was crazy to me how my salary increased around 8x overnight and I still felt stretched thin. I did have about a two month gap in pay between fellowship and my first attending paycheck, so that stretched us a little thin and made for some stressful times for a few weeks.

                        You have a lot of the same fears/concerns that I had at that stage and you seem to be doing all of the big things right. I made a couple of “mistakes” at your stage though. I bought a house right out of fellowship (ended up being a good decision—is in an area we love and a house that is irreplaceable in terms of location/neighbors/neighborhood, and has appreciated almost $200,000 in the 4 years we’ve been there—we’ve had unsolicited offers by buyers and real estate agents to buy our house, and our neighbors just sold their house for $979,000) and I also purchased an expensive car (my old car was worth less than I would have cost to transport it across the country).

                        Now, about four years out, my student loans are paid off, my car is paid off, my house is 11 years from being paid off (no hurry to pay back a 2.6875% mortgage), my retirement accounts and kids’ 529 accounts, are growing, and I’ve got in excess of a 4- and almost 5-digit amount of money per month that I have to figure out what to do with. In other words, keep doing the big things right and on a few years it’s amazing how many of these problems just disappear.

                        In your shoes I would keep fully funding the retirement accounts (can’t get those contribution periods back if you miss them), buy a reasonably priced car (I’m 6’2” so I kind of understand your dilemma about smaller cars), and aggressively pay off the highest rate student loan (4.125% for sure, and probably the 3.2%). I wouldn’t save any money for the buy-in, since as you said it isn’t a guarantee and that money has better use now than having a 2% loan option maybe in 1 or 2 years. Just my thoughts. I’ll leave the car talk to the car talking people. Have you checked the flux capacitor?

                        Comment


                        • #13
                          Overall it sounds like you have your financial head on straight.  I think you should just save up a reasonable amount of cash for the car and buy something certified used so you no longer have to worry about it.  A Honda Accord or Toyota Camry should be able to accommodate your frame right?  I think they both come in a hybrid form so would be great with gas.  I don't think it makes sense to hold on to a car that's burning oil when you've got enough to worry about between driving 100 mi/day and working busy 12 hour ER shifts.  Just get yourself a dependable car with decent gas mileage and be done with it.

                          Once you have that problem fixed, I would move on to tackling those loans.  Hit the smallest balances first to free up cash flow, the interest rates are all essentially the same, so that's why I recommend that.

                          It's smart to NOT be thinking of home ownership now.  Instead, start putting a little money aside each month for that partnership buy in.  You're very fortunate to have that opportunity (hopefully).  I would just do an automatic withdraw to an online savings account and leave it there.  It can act as your E-Fund as well, so you already have $25k in it if you think of it that way.  Now you just need $100k more.  Over 24 months that's approx 4k/month or 2k per pay period.  Not hard to do with a 350k salary and no other debt.  The other option, since partnership is not guaranteed, is to just skip saving for the buy in and take the loan option when and if the time comes.  I don't think there's anything wrong with either strategy.  Whatever feels right to you is fine.

                          If you can stand working an extra shift every now and then for extra pay, you can still have a lot let over each month for debt pay off. I would skip the taxable account until you get a handle on that large debt burden.  It won't take you long to get rid of it if you're focused.  You and your significant other are in the best position of your lives to pay off that debt now.  Don't wait until you're 40+ years old, wanting to buy a home, and possibly starting a family? (forgive me for assuming if that's not something you want).  You'll be so glad to have it off your back in a few years or less.

                          Comment


                          • #14




                            what are your 401k options. Contra fund is kinda an odd pick. it has historical significance, but not much else IMO.
                            Click to expand...


                            FID Contra Pool CL 2 (large cap growth) --> ER 0.38%

                            Vanguard PrimeCap Adm (VPMAX) (large cap growth) --> ER 0.32%

                            BTC US Equity MKT (large-cap blend) --> ER 0.01%

                            FID LPS Pool Class 2 (mid-cap value) --> ER 0.45%

                            Russel Small Cap (small-cap blend) --> ER 0.00%

                            NT Intl FD (foreign) --> ER 0.12%

                            BTC Lifepath 2020 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2025 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2030 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2035 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2040 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2045 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2050 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2055 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath 2060 F (blended, asset allocation) --> ER 0.01%

                            BTC Lifepath Ret F (blended, asset allocation) --> ER 0.01%

                            TPMG Conservative (blended, asset allocation) --> ER 0.0073%

                            TPMG Moderate (blended, asset allocation) --> ER 0.0105%

                            TPMG Aggressive (blended, world) --> ER 0.02%

                            Russell Real Assets (blended) --> ER 0.03%

                            F.R. Fixed Income (bond, long-term) --> ER 0.00%

                            MIP II CL 3 (bond, stable-value) --> ER 0.32%

                            BrokerageLink

                            Comment


                            • #15
                              depending what funds are included in TPMG aggressive or Lifepath 2060 would be the way to go. im assuming you are 100% stocks. i think 100% of anything is not likely the correct path.

                              if you want real simplicity all you need is 80% BTC US Equity and 20% Russell Small Cap to recreate US Total Stock Market.

                              Comment

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