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How much should salary factor into job decision when you have a lot in loans ?

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  • Avatar finance dummy 
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    Joined: 09/20/2019

    I am in my last year of residency in a procedure based specialty and deciding between two job offers. One offer stands out but what gives me pause is the missed financial opportunity of the job that pays more. I have not made great financial decisions thus far due to my own ignorance – 275k student loans (but no other debt), no investments, small retirement account, small savings. I’ve only made 30 “qualifying” PSLF payments despite 5 years of repayment. I am unmarried, no kids but would like to consider these in the next 5 years.

     

    Job A: MCOL, much better location, stimulating environment with motivated colleagues, anticipate great job growth potential. Less call but long days.

    Salary: $300k (< 25% MGMA), 8% employer contribution, PSLF qualified, can bonus but anticipate no more than 30k yearly

    Would be very happy with job, satisfied with salary.

     

    Job B: LCOL, less desirable location, great colleagues, anticipate good patient volume but less stimulating environment

    Salary: $425k (50-75% MGMA), 3% employer contribution, PSLF qualified, can get retention-incentivized bonuses of another > $150k (commit > 4 years, but not sure I can)

    Would be satisfied with job, very happy with salary.

     

    I don’t have a “FIRE” mentality in that I may be happy working indefinitely. I love what I do and (right now) don’t see the appeal in retiring early. If I had a billion dollars, I would still go to work. That being said, I do like to feel that I am being fairly compensated in light of my loans etc, which I have not been diligent about managing in the past. I am leaning toward Job A, but worried about the “missed financial opportunities” that Job B would offer. Is the substantial difference in salary enough to go with Job B? There is also the possibility that Job A turns out to be not-so-amazing.

     

    Would be great to hear any thoughts from this community! Thanks for reading!

    #248171 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 894
    Joined: 03/09/2017

    Chances are either job will not turn out to be what you think it is and your priorities will change. I’d take the money and kill it for a few years. Find a partner (if you wish) and then move where both of you wish to establish a family. At that point you will be loan free, with a solid foundation for retirement savings. Would pslf be worth it for you? I’d definitely run the numbers

    Avatar JWeb 
    Participant
    Status: Physician
    Posts: 125
    Joined: 02/21/2017

    Take whichever job will make you happier. Only you know how much 125K a year means to you.

    It doesn’t make sense to me why there is such a discrepancy in salary. Often times the larger starting salary is making up for “something” in a surgical specialty.

    #248201 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 394
    Joined: 06/10/2019

    B sounds better to me. Why are you leaning towards A? That was not clear to me. You just eluded you would be happier with job A is that because of less call, if so you have to decide if less call is worth giving up $125K/year. What’s wrong with location B – rural or bad weather, or suburban and you just prefer bigger city? How about looking for an offer C that may provide the best of both worlds? You should have another 8 months or so before completing training. Generally low COLA means higher physician salaries and lower living expenses so I went with low COLA personally. Some prefer to pay more premium for location in terms of lower income and higher non-discretionary expenses.

    You’re currently single without kids. Location doesn’t have to be permanent if either scenario doesn’t work out. Save and invest as much as you can now because it’s easier before marriage/kids. Live like a resident until you feel your financial habits have improved. You can easily pay off your student loans within the next 5 years, wouldn’t it be great to start married life debt free and with a lot of cash or investments on hand?

    Also, if you’re unsure regarding location. I strongly recommend you rent until there is more clarity regarding job/location longevity on your end. If you upgrade a vehicle, don’t go crazy. Avoid lifestyle creep, easier to do when you’re still single.

    Also, do some reading regarding contract negotiation so you get your best deal, but on the flip side as a single person start with the attitude that you are going to work hard and prove to the employer you deserve a premium for good reason (work ethic, student loans, commitment to the team, etc.), so the math ultimately works for both of you.

    Ultimately you have to decide what aspects of an offer you prioritize. Good luck!

    #248203 Reply
    Liked by billy
    Molar Mechanic Molar Mechanic 
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    Is there any place you can live within 30-45 minute commute of B that you’d find stimulating.

     

    If the salaries were equal, but you had to write a check for $500 every morning when you show up for work at option A would you still take that job?

    #248208 Reply
    Avatar Tim 
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    Status: Accountant
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    Joined: 09/18/2018

    Compensation, location, and job.

    In the comp, no mention of any negotiations yet. These can be significant, would job A at $375k change your mind? You sound like you want job A but a little more money.

    You mentioned being single, my point is the location can make your preference change substantially. There is little that comp and job can do if your personal life is isolated. Just be aware. Sounds like you have a to balance the pluses and minuses.

    Usually the better choice is “where you can see yourself long term”. You can take job A and payoff loans and accumulate assets but be perfectly satisfied. You can take job B pay things off faster and be happy or miserable. That last word is not worth the money unless you have the attitude of crushing it simply to payoff the debt.

    One point, no mention of the employment turnover or history for either one. Consider where you would be at the end of each contract and what your options would be. Don’t rely on MCOL and LCOL. Run the numbers for how you plan to live in each location, including taxes. Good luck getting job A’s comp up to where you want it or is acceptable. Firm offer is the best negotiation tool you can find.

    #248217 Reply
    Avatar afan 
    Participant
    Status: Physician
    Posts: 105
    Joined: 05/07/2017

    Assuming that the income figures reflect your final negotiations and will not improve. Also assuming the figures are all quite solid, no wishful thinking of inflated estimates on either job.

    As a single person I would put satisfaction with where you live high on the priority list. Although A pays less, it pays more than enough for you to pay off your loans and accumulate savings. Not as quickly as B but it will happen. But you need to be happy when you are not at work. You would like to find a partner, so the prospects for that may depend on where you live.

    Depending on your field and circumstances, could you boost income by taking more of the “less call”? Or doing more shifts?

    I knew younger doc who took a job in the middle of nowhere. High pay and limited hours, because it was in the middle of nowhere. Worked out a schedule where he worked like a dog for a week then took two weeks off. He would spend those 2 weeks in a major city that was a few hours drive from nowheresville. Had a good time in the city and got a lot of money while working. Kept it up for a few years while, I assume, he knocked down his debt. Then moved to an ultimate lifestyle job. Great hours in a vacation spot paradise. I assume less money but he had set himself up financially for the few years he spent on the weird schedule. He was in a field that permitted this kind of flexibility. If you have to build up a patient pool and referrals then this may not be such a great idea.

    #248220 Reply
    CordMcNally CordMcNally 
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    Status: Physician
    Posts: 3033
    Joined: 01/03/2017

    Income is still going to be important no matter what job you take. Even if you absolutely love your job, it’ll wear you down if you are chronically underpaid.

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

    #248224 Reply
    Liked by SLC OB, Zaphod, Tim, Craigy
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 1286
    Joined: 01/26/2017

    I am in my last year of residency in a procedure based specialty and deciding between two job offers. One offer stands out but what gives me pause is the missed financial opportunity of the job that pays more. I have not made great financial decisions thus far due to my own ignorance – 275k student loans (but no other debt), no investments, small retirement account, small savings. I’ve only made 30 “qualifying” PSLF payments despite 5 years of repayment. I am unmarried, no kids but would like to consider these in the next 5 years.

     

    Job A: MCOL, much better location, stimulating environment with motivated colleagues, anticipate great job growth potential. Less call but long days.

    Salary: $300k (< 25% MGMA), 8% employer contribution, PSLF qualified, can bonus but anticipate no more than 30k yearly

    Would be very happy with job, satisfied with salary.

     

    Job B: LCOL, less desirable location, great colleagues, anticipate good patient volume but less stimulating environment

    Salary: $425k (50-75% MGMA), 3% employer contribution, PSLF qualified, can get retention-incentivized bonuses of another > $150k (commit > 4 years, but not sure I can)

    Would be satisfied with job, very happy with salary.

     

    I don’t have a “FIRE” mentality in that I may be happy working indefinitely. I love what I do and (right now) don’t see the appeal in retiring early. If I had a billion dollars, I would still go to work. That being said, I do like to feel that I am being fairly compensated in light of my loans etc, which I have not been diligent about managing in the past. I am leaning toward Job A, but worried about the “missed financial opportunities” that Job B would offer. Is the substantial difference in salary enough to go with Job B? There is also the possibility that Job A turns out to be not-so-amazing.

     

    Would be great to hear any thoughts from this community! Thanks for reading!

    Click to expand…

    your write up doesn’t give enough insight as to why you are leaning towards the first job therefore nothing constructive to advise you…

    #248284 Reply
    Zaphod Zaphod 
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    Status: Physician, Small Business Owner
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    Joined: 01/12/2016
    Splash Refinancing Bonus

    You think you dont care about pay now, but make <25% for what will certainly be above 25% amount of work and you’ll start caring fast and will likely eat at you.

    Thats a big difference before considering any bonuses which just make it worse.

    #248291 Reply
    Avatar Brains428 
    Participant
    Status: Physician
    Posts: 457
    Joined: 11/09/2017

    Getting paid the 25% after the fact because you didn’t know better is one thing. Getting paid 25% from the get go is another. Also, it seems like there is little ability to increase from that starting point.

    What are the population dynamics of MCOL and LCOL. I think it’s assumed that LCOL is middle of nowhere, but it could be a city of 3-500k people. It might not be NYC, but it’s more than enough to find someone to have fun with. You also have 8.5 months left of training, you never know what can happen during that time.

    Any details on vacation time? 5 day work week every week or some random 4 day weeks?

     

    #248297 Reply
    Liked by Zaphod, Tim
    Avatar finance dummy 
    Participant
    Status: Resident
    Posts: 6
    Joined: 09/20/2019

    Thank you all for weighing in – your comments have been very helpful! Yes- these are post-negotiation numbers. I interviewed at 4 other jobs, but narrowed it down to these two. I probably didn’t elaborate enough on the two options.

    Job A is at an academic institution. Even if the job turns out to be less than ideal, the affiliation with the university and colleagues would likely be an advantage for future academic jobs. The city is fun and close to major airports. I would have 3 colleagues in the same field as me working in same hospital system. About 5 years ago, this institution had 2 faculty leave due to non-promotion and stagnant salary. This is a slight concern, though I feel I can take it as I go. There was also a period of rapid expansion into nearby outpatient centers, which frustrated some faculty due to the sudden increased burden of driving. I am less concerned about this as they have pulled out of a lot of those sites since then. I currently do not have any close friends or family in this city though, and that is a dilemma. I will not have a support system immediately nearby but could hop on a short plane ride home or drive ~5 hours. I would definitely rent for the foreseeable first few years.

    Job B is at a well-established hospital system in the midwest. I would be practicing at one of their rural affiliate hospitals. There is a medical school and residency, but both are predominantly located at their main site, so I would only be pseudo-academic. I am not sure if that will hurt if I try to go back into pure academics in the future. Teaching and research opportunities would be more limited without substantial effort. The setting is a bit isolated but once you get to know people, you know them pretty well. A close family friend works at the same hospital, and I could network through him. Airport is 2 hours away and is small. No direct flights except to major US hubs. An option is to “kill it” here for ~2 years, but then I would not get any of the benefits (match is not vested until 3 years, no retention bonus, etc) except for the discrepancy in the salaries and cost of living which would be approximately $75k in post-tax dollars annually. Also options for rental properties are limited, so may force me to buy.

    As an aside, family friend chose Job B setting because he is married with two young kids, wife works from home, and they wanted first and foremost to be financially independent.

    The main reasons I am entertaining Job B still is that 1) I am not tied down to location/job from spouse/kids so maybe this is the time to earn a large salary and save 2) It’s not a bad job overall 3) I could quickly be integrated into social scene through family friend 4) I have previously made choices with complete disregard for how much it ends up costing me financially, and I’m regretting the vast quantities of money I have lost or failed to claim, especially in light of my loans and financial insecurity. It could be worse though, I could have pursued more training and continued on a resident/fellow salary, right?

    If I pursue PSLF, it will ultimately save me around 60k, so not a ton, but still seems worthwhile.

    Goal is of course to be happy in and out of work. My gut instinct is still for Job A for the “value” that comes with being in that environment, location, etc. There is also something to be said of that feeling of being committed and fully invested rather than going into a job thinking it may be temporary.

     

     

     

    #248300 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 3033
    Joined: 01/03/2017

    After your explanations, I kind of get the feeling that you don’t see either job as truly being long term options. If that’s the case, I would chase the money while trying to find a job I viewed as long term.

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

    #248304 Reply
    Liked by Brains428, Zaphod
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6327
    Joined: 01/12/2016

    Job A is at an academic institution. Even if the job turns out to be less than ideal, the affiliation with the university and colleagues would likely be an advantage for future academic jobs.

    Click to expand…

    I read this as experience in terrible job gives good ability to obtain future terrible job.

    In all seriousness, this place sounds like a nightmare that jumps from one disastrous large move to another and would likely be all around terrible. You’re also kind of discounting it and approaching like a resident, which you are, but you will most certainly not be and that mindset will be gone and all the sudden the new responsibilities and realities will make what seems like a “good enough” pay seem horrific and terrible.

    How serious are you about academics? I cant believe the way people allow themselves to be treated at these places.

    #248305 Reply
    SLC OB SLC OB 
    Participant
    Status: Physician
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    Joined: 06/23/2018

    Income is still going to be important no matter what job you take. Even if you absolutely love your job, it’ll wear you down if you are chronically underpaid.

    Click to expand…

    You think you dont care about pay now, but make <25% for what will certainly be above 25% amount of work and you’ll start caring fast and will likely eat at you.

    Thats a big difference before considering any bonuses which just make it worse.

    Click to expand…

    This is SO true! When you are underpaid, you FEEL under valued (even if it is not all about the money)… be careful.

    Since the HIGH salary is in the LCOLA, it will likely be more than $75K after taxes, as housing, food etc. will be cheaper too.

    I could quickly be integrated into social scene through family friend

    Click to expand…

    Not sure your buddy will have a ton of time with wife, two kids and a full time job. But anywhere you will be with new colleagues and if the medical staff is nice, you should be fine.

    Good luck!

    #248311 Reply
    Liked by Tim

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