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High income early in career

Home Mortgages and Home Buying High income early in career

  • Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 408
    Joined: 10/29/2017

    Short answer, aside from spending like an NBA lottery pick, it doesn’t matter what you do.  Barring self destruction or poor health, you’ll live an incredible life.

    In reality, my advise is to maximize tax advantaged savings, and create a timeline that you are comfortable discharging the student loans.  You want those gone because in a worst case scenario, they will follow you through bankruptcy or whatever.  Create a plan to get rid of the mortgage.  Personally, I refi’d my mortgage to a 7/1 ARM and it seems convenient to kill the mortgage by that 7 year mark.

    Beyond, that, try to keep lifestyle inflation pegged to net worth.  My rough goal is to grow my net worth far faster than my spending till I get to that 25x spending number, then try to keep them more aligned.  That way, I can feel comfortable dropping life and disability insurance but still feel that I am “bulletproof” in a worst case scenario, and my life is mine to decide what to do with, even though I’ll expect to keep working.

     

    Edit:  I wouldn’t save a dime for a buy-in.  Time the student loans to disappear around the time of the buy in, then just redirect that monthly payment, plus a bunch more.  Pay the debt in 2-5 years.

    #229448 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3339
    Joined: 09/18/2018

    No, no.
    2 out of 3 ain’t bad.
    Risk is 3 parts.
    Ability and capacity to hand risk you answered.
    #3 is do you need the risk? With your shovel there is zero need for leverage. Payoff your debts and then what? Seems like you can figure than one out without leverage. Patience is a virtue. Congrats on the success.

    #229464 Reply
    White.Beard.Doc White.Beard.Doc 
    Participant
    Status: Physician
    Posts: 964
    Joined: 02/06/2016

    The house at 1MM is fine because it is 1X income.  I would agree that refi to a 7/1 ARM at around 2.5% interest would be reasonable, with a plan to pay it off in 7 years before the reset on the interest rate.  We did that and it worked out great.  It would only take perhaps 100k (20%) of your annual savings to get on that schedule with a paid off million dollar home in 7 years.

    Continue maxing all tax deferred space, and do a backdoor Roth each year.  Good job on that.  Roth will be great for you as your tax bracket may always stay high with extreme wealth in the future.  That is where we are, with tax rates that will continue to be high, including in retirement, due to high net worth and passive income.

    As far as investing, a balanced approach is generally best.  Some to student loans, some to emergency/investment opportunity funds in savings, and some to stock index funds.  Savings for that buy-in opportunity in 1 to 2 years might be better in safe vehicles like high yield savings, CDs, treasuries, or tax free munis depending on your state tax situation.  You would hate to invest hundreds of thousands of dollars in the market and have the buy-in opportunity come up at a time when the market is down 50% and you are forced to sell.  On the other hand, if you decide to invest all that money in the market and things are down when the buy-in comes up, then you could take out a loan at that time for the buy-in.  However, taking on more debt when your investments have tanked doesn’t feel good psychologically.

    You have several reasonable choices here.  In my view, it would be best for you to do some balance of all three options for your excess cash each month, including loan pay down, safe savings, and also significant investment in the market with your taxable account.

    #229482 Reply
    Liked by ddswifey, q-school
    q-school q-school 
    Participant
    Status: Physician
    Posts: 2640
    Joined: 05/07/2017

    you have more options than most.  you have to decide on a philosophy.  do you want to take a chance to have 30 million?  do you want passive income?  you have the resources to have enough real estate to truly layer the work so it is passive to you.   or you can invest in index funds and hit reliable singles and still retire rich with more than 10 million at 45.

    it doesn’t really matter what you do, but there is a good chance how you feel five and ten years from now may be different than you feel now.

    good luck!  congrats on creating options.

     

    #229488 Reply
    Liked by ddswifey

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