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2019 Personal Finance Check-up

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  • Avatar Dilaudidopenia 
    Participant
    Status: Physician
    Posts: 188
    Joined: 05/22/2016
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    Hi all,

    Just looking for a general check-up of our personal finance situation.  I think I’m on the right path, but input is always greatly appreciated!

    General:

    -Me: 2nd year attending (EM), gross ~400k/yr 1099

    -Wife: 2nd year fellow (three year program, pediatrics), gross ~60k/yr W2 (hoping for ~200k/yr as attending)

    -Both of us are in our early 30s

    -First child on the way 🙂 – Luckily wife’s parent will be doing most of our child care which will be huge savings

    -Maxed out disability insurance, life insurance (2M 30 yr policies for each of us), 2M umbrella, have emergency fund

    -Live in a MCOL city, in what I consider to be high tax location.  This will be changing when wife finishes fellowship.

    Assets:

    Retirement:

    My Fidelity Solo-401k (maxed in 2017, 2018): ~$130k (blend of FSTVX, FTIPX, FSITX)

    My Roth IRA (maxed every year): ~$35k (VASGX)

    Her 403b left over from residency: ~26k (FNSDX)

    Her 403b during fellowship (maxed for first time in 2018): ~$22k (TCLPX)

    Her Roth IRA (maxed every year): ~$33k

    Cash:

    ~$170k in high interest savings account (I figure about 20-30k of this is emergency fund, with rest saving for down payment for house within next 2 years – saving about 5k/month to down payment)

    ~$20k in regular savings account for routine INs and OUTs

    Total assets: ~$400k

    Liabilities:

    -Me: ~$140k in student loans @ 3.1%; paying ~4k/mo

    -Wife: $200k+ in federal student loans, making minimal payments, on track for PSLF (yes, we are submitting the paperwork every year and her qualifying payments are being tallied; she will be remaining in academics)

    Questions:

    1) Asset allocation.  Right now am aiming for 90/10 with 30% of stocks in international (I have not re-balanced for 2019 yet).  I know about market timing etc, but I wonder if I should decrease the international allocation as it appears that US stock has been very much out performing international for over a year.

    2) I keep struggling with what is the appropriate amount for a down payment for a house.  Ideally would like to hit that number then redirect those funds I’ve been saving each month to my loans to expedite their pay off.

    Thanks for all your help!!!

     

     

     

    #186940 Reply
    Avatar EMPAC623 
    Participant
    Status: Advanced Practice Provider
    Posts: 28
    Joined: 11/15/2018

    If I were you I’d take my $170K savings and pay off my $140K in loans today. High interest savings is around 2/2.25? You’re paying 3.1 on loans so why save money when in reality you aren’t. Then you’ll have no student loans, $30K in savings and can now throw as you said total $9K a month back in. You’ll have your down payment and then some back when she’s done with her fellowship as you said you wanted to move then anyways. Plus no student loans gives you more cushion for when the kiddo arrives. And trust me, they are pricey things lol

    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3355
    Joined: 01/14/2017

    Hi all,

    Just looking for a general check-up of our personal finance situation.  I think I’m on the right path, but input is always greatly appreciated!

    General:

    -Me: 2nd year attending (EM), gross ~400k/yr 1099

    -Wife: 2nd year fellow (three year program, pediatrics), gross ~60k/yr W2 (hoping for ~200k/yr as attending)

    -Both of us are in our early 30s

    -First child on the way ? – Luckily wife’s parent will be doing most of our child care which will be huge savings

    -Maxed out disability insurance, life insurance (2M 30 yr policies for each of us), 2M umbrella, have emergency fund

    -Live in a MCOL city, in what I consider to be high tax location.  This will be changing when wife finishes fellowship.

    Assets:

    Retirement:

    My Fidelity Solo-401k (maxed in 2017, 2018): ~$130k (blend of FSTVX, FTIPX, FSITX)

    My Roth IRA (maxed every year): ~$35k (VASGX)

    Her 403b left over from residency: ~26k (FNSDX)

    Her 403b during fellowship (maxed for first time in 2018): ~$22k (TCLPX)

    Her Roth IRA (maxed every year): ~$33k

    Cash:

    ~$170k in high interest savings account (I figure about 20-30k of this is emergency fund, with rest saving for down payment for house within next 2 years – saving about 5k/month to down payment)

    ~$20k in regular savings account for routine INs and OUTs

    Total assets: ~$400k

    Liabilities:

    -Me: ~$140k in student loans @ 3.1%; paying ~4k/mo

    -Wife: $200k+ in federal student loans, making minimal payments, on track for PSLF (yes, we are submitting the paperwork every year and her qualifying payments are being tallied; she will be remaining in academics)

    Questions:

    1) Asset allocation.  Right now am aiming for 90/10 with 30% of stocks in international (I have not re-balanced for 2019 yet).  I know about market timing etc, but I wonder if I should decrease the international allocation as it appears that US stock has been very much out performing international for over a year.

    2) I keep struggling with what is the appropriate amount for a down payment for a house.  Ideally would like to hit that number then redirect those funds I’ve been saving each month to my loans to expedite their pay off.

    Thanks for all your help!!!

     

     

     

    Click to expand…

    Looking good.  Don’t adjust your asset allocation because of something that’s happened of late.

    Try to save 20% if you can.

    What is your spending?

    Congrats on the new addition coming!

    #186944 Reply
    Liked by docnews
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2510
    Joined: 01/03/2017

    1. Past returns aren’t indicative of future performance. With that said, you could make the argument that you have plenty of international exposure with a total stock or S&P fund.

    2. I’d stop saving for a down payment on a house and direct that money towards your loans. You can always qualify for a physician loan with no PMI and it sounds like you’re going to be moving to an even lower cost of living area.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #186945 Reply
    Liked by docnews
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 439
    Joined: 06/12/2017
    First child on the way – Luckily wife’s parent will be doing most of our child care which will be huge savings

    Click to expand…

    Congratulations!

    Her 403b left over from residency: ~26k (FNSDX) Her 403b during fellowship (maxed for first time in 2018): ~$22k (TCLPX)

    Click to expand…

    I would look into whether she can rollover her residency 403(b) into the new fellowship 403(b), so it doesn’t become an issue down the road, unless the fellowship 403(b) has really bad investment options.

    Wife: $200k+ in federal student loans, making minimal payments, on track for PSLF (yes, we are submitting the paperwork every year and her qualifying payments are being tallied; she will be remaining in academics)

    Click to expand…

    Just keep on top of this and make sure all payments are being recorded to comply with PSLF requirements.

    1) Asset allocation.  Right now am aiming for 90/10 with 30% of stocks in international (I have not re-balanced for 2019 yet).  I know about market timing etc, but I wonder if I should decrease the international allocation as it appears that US stock has been very much out performing international for over a year.

    Click to expand…

    I see no issues with your asset allocation, especially if you’re comfortable with it.

    2) I keep struggling with what is the appropriate amount for a down payment for a house.  Ideally would like to hit that number then redirect those funds I’ve been saving each month to my loans to expedite their pay off.

    Click to expand…

    If you know how much you’d like to spend on the house, I would advise a down payment of 10% to 20% of your purchase price. But, keep in mind that you’re unlikely to get a mortgage rate as low as your current student loan rate. So, putting more down on the house may be a better option.

    From what you laid out, you and your wife are killing it! Keep up the good work.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #186946 Reply
    Liked by docnews
    Avatar Kamban 
    Participant
    Status: Physician
    Posts: 2357
    Joined: 08/01/2016
    -Live in a MCOL city, in what I consider to be high tax location. This will be changing when wife finishes fellowship.

    Click to expand…
    2) I keep struggling with what is the appropriate amount for a down payment for a house.

    Click to expand…

    Number one will dictate what you need to save for 2. If moving to new area then live for a year and make sure that you like it before buying a house. If in the same jobs but different location, then 2x rule is a good starting point.

    #186947 Reply
    Liked by ENT Doc
    Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 373
    Joined: 10/29/2017

    Going against the grain, say get the cash applied in one way or anther.  Paying loans isn’t a bad choice, though 3.1% is barely over inflation, and can be invested with predictably (not guaranteed) better returns.  How much stress do these loans cause?

     

    It sounds like y’all are moving after fellowship.  Don’t bother to save for the down payment now.  2x new jobs in a new city?  That screams renting.  Leaving a new job and city is hard.  Leaving a new job and a new city while struggling to sell a house you lived in for 9 months is incredibly painful.  Personally, I had great success with an 80/10/10 loan.  I had a 80% traditional loan, a 10% 2nd mortgage at a slightly higher rate, and a 10% down.  I paid that 2nd mortgage off in about a year and never had PMI or tons of cash sitting around.

    #186951 Reply
    Avatar Xeno 
    Participant
    Status: Physician
    Posts: 128
    Joined: 01/24/2016

    I’ll add my $0.02. I would think $30k to $100K is plenty to keep in the high-yield savings account. Here’s how I figure:

    You can easily put down 10% and get a 15-year fixed mortgage with very low PMI (~$70/mo for the first ~30 months as an order-of-magnitude estimate on a 90% LTV $450K mortgage on a $500K house). You can also do the 80/10/10 approach outlined above and pay off the 10% HELOC in under 12 months for a fairly low total cost in interest. You can also rent for 6-18 months and build up your down payment fund if it needs to be bigger. If you’re currently paying $4K/mo toward the loan and saving $5K/mo, then once the loan is paid off, you can be saving $9K/mo toward a down payment.

    The upside to paying down the 3.1% loan is that not paying 3.1% in interest is roughly equivalent to earning 4.5% on your savings. Suppose you paid $100K toward your loan on 1/1/19 and continued your otherwise scheduled payments. At the end of 2019, you have paid $3,100 less in interest, or have an extra spendable $3,100. You would need to earn a >4.5% pre-tax return on $100K to have the same net result, because $4,500 in interest will get taxed at 24% marginal federal income rate + 3.8% NIIT + your marginal state income tax rate. If your state income tax rate is greater than 3.2% (and I suspect it is because you call it a high-tax area), then your net proceeds on $4,500 of interest income would be less than $3,100.

    I think it’s a more complex choice between borrowing at 3.1% to invest in stocks or real estate, but a guaranteed short-term return of 4.5% or higher is very appealing to me.

    #186997 Reply
    Drop it into MD Drop it into MD 
    Participant
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    Use that money to pay off your loans!

    Don’t buy a house until you have 20% saved!

    You are wasting your early years paying debt that would be better in the market!

     

    It is funny that you can get such good advice that is all correct.  It is nice when all decisions are good decisions.  You are doing great. Have a plan to get rid of the loans by 5 years and put 20% towards retirement.  The rest is gravy.  Do what makes you happy.  Except do not change AA because of recent history.

    #187006 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2287
    Joined: 05/01/2017
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    I’d be out of (your) student debt by dinner time.

    #187007 Reply
    Avatar climbhigh 
    Participant
    Status: Physician
    Posts: 48
    Joined: 02/22/2016

    My two thoughts:

     

    1. I would take the cash and pay off student loans before saving for down payment on house. You’ve got 1.5 years until she finishes training, then you’ll be moving locations (if I read correctly). After you move I’d rent for at least 1-2 years, so that means you are 3-4 years away from buying a house and needing that money. Pay off the loans first, and you’ll quickly be able to save for a down payment later.

     

    2. I’m not too familiar with PSLF, but with a combined household income of $600k will you really be able to take advantage of it? Seems to me with that kind of income and her only having 200k in loans, I’d just pay off her loans and be done with it.

     

    When your income I would think that in 5 years you could easily have all the loans paid off, and a down payment saved for a house that will give you a conventional 15-yr mortgage with 20% down..

    #187024 Reply
    ACN ACN 
    Moderator
    Status: Physician
    Posts: 607
    Joined: 01/08/2016

    We had $75k saved in a downpayment and I just used it to pay off my student loans @4.1%.  So now we are starting our downpayment over again.  However, the only loan we have left is a car loan at 0.9% which I’m paying the min.’

     

    So, I’d pay off the loan with the cash saved.

    If you're ever having a bad day, just remember in 1976 Ronald Wayne sold his 10% stake in Apple for $2,300.

    #187038 Reply
    Avatar HandFellow 
    Participant
    Status: Physician
    Posts: 184
    Joined: 01/18/2016

    I wouldn’t be sitting on so much cash.  I don’t understand the desire to buy a fancy house without children.  Just rent and be happy.  Rent an amazing place and let your cash work for you in some ways.

    #187247 Reply
    Jaqen Haghar, MD Jaqen Haghar, MD 
    Participant
    Status: Physician
    Posts: 194
    Joined: 07/27/2017

    Questions:

    1) I know about market timing etc, but I wonder if I should decrease the international allocation as it appears that US stock has been very much out performing international for over a year.

    Click to expand…

    If you want to do some market timing…..  this is generally the exact opposite of the type of timing you would want to do.  It would be chasing the higher yield, kind of the opposite of year-end rebalancing into the under performing asset class.

    I would, overall: 1) Have a healthy emergency fund 2) Max-out tax advantaged accounts 3) Aggressively attack student loans 4) Save 20% down payment on a house.  In that order.  But that’s just what I would do.

    #187256 Reply
    Avatar Dont_know_mind 
    Participant
    Status: Physician
    Posts: 886
    Joined: 11/21/2017

    I didn’t look at your AA in retirement accounts but overall it seems you are at least 50% cash. And 340k student loan debt. Net assets 60k, which is still 50% cash. It seems to me your cash allocation is high for your age and life stage.

    #187266 Reply

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