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Liquid Assets Transitioning Between Fellowship and Private Practice

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  • Avatar AnonymousNovice 
    Participant
    Status: Physician
    Posts: 3
    Joined: 08/06/2019

    Hi all,

    I’ve only drummed up the courage to take control of my finances within the past couple of months. Since then, I’ve devoured the original WCI, Boot Camp, numerous articles, the WCI podcast, and a couple other financial podcasts. I’ve also transitioned my checking and savings from BofA to Ally, applied for disability insurance through one of the recommended agents, and privately refinanced my substantial student loan debt through SoFi at a much lower rate. With an eye on the future, I’m going to continue following the “12 steps,” but I’m also hoping for some advice about what to do specifically regarding the transition between fellowship and private practice within the next year.

    The question(s):

    • Should I keep extra in liquid assets (e.g. my Ally savings accounts) in addition to my usual emergency fund as I prepare to transition to life as an attending? What for? How much?

    Important notes:

    • I’m a new parent with a bit of anxiety about running into unexpected costs related to my daughter.
    • My moving allowance will probably cover most of moving costs for the things I already own.
    • I’ll have a stable social situation at my new job – it’s a great private practice where I personally know people who are happy in an area with family and friends, so I’d feel comfortable buying a house if the right opportunity presented itself, but I’m also okay renting for a while. If I buy, I’ll use a “doctor” loan since I won’t have a full 20% down payment. If I rent, my current apartment’s security deposit should easily cover the next security deposit.
    • We’ll need a second car when we move. I’m planning to buy used, but probably a newer model with some of the driver-assistant technology for added safety as a paranoid new parent, so probably in the $15-20k range. With my available used car rate much lower than my student loan rate, I’d probably go for a 3-5 year term loan, but it’s not clear to me there’s much of a benefit to paying more than the 10% minimum down payment required by the lienholder (with nothing analogous to PMI).

    Thanks!

    AnonymousNovice

    #236903 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8142
    Joined: 01/09/2016

    Should I keep extra in liquid assets (e.g. my Ally savings accounts) in addition to my usual emergency fund as I prepare to transition to life as an attending? What for? How much?

    Click to expand…
    • Yes, until you know if you do or don’t need them for the next 5 years. It is far better to not do something and give up some relatively minor opportunity cost (which may turn out to be a benefit) than to follow your urge to DO SOMETHING and find out later that the DO should have been a DON’T.
    • Depends on your goals.
    • Depends on your goals and the amount of $ you need to set aside for them in the next 5 years.

    Congrats on the new baby and welcome to the gang!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #236919 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1863
    Joined: 02/11/2019

    Will you be without pay for a significant amount of time? That is a good reason to have extra cash around. It took me two months to get licensed in my new state. It was great to have the summer off but we also had a baby and little money to play with.
    Good luck.

    “Never let your sense of morals prevent you from doing what is right.”

    #236946 Reply
    Avatar AnonymousNovice 
    Participant
    Status: Physician
    Posts: 3
    Joined: 08/06/2019
    Will you be without pay for a significant amount of time?

    Click to expand…

    I’m starting July 2020, so no significant gap.

    Yes, until you know if you do or don’t need them for the next 5 years. It is far better to not do something and give up some relatively minor opportunity cost (which may turn out to be a benefit) than to follow your urge to DO SOMETHING and find out later that the DO should have been a DON’T.

    Click to expand…

    I guess the biggest opportunity cost for me right now is retirement savings – I don’t have much yet, which also gives me a bit of anxiety. That said, I’d rather err on the side of having extra liquid since I’m not 100% sure what the next year will bring and I plan to be smart about saving for retirement the following 30ish years.

    #236995 Reply
    Avatar AnonymousNovice 
    Participant
    Status: Physician
    Posts: 3
    Joined: 08/06/2019

    Follow-up question. Since I can withdraw Roth IRA contributions penalty-free, should I just max my Roth IRA and plan to pull some contributions back out if needed? I know conventional wisdom is not to touch your retirement accounts, but the alternative is keep the money in my Ally savings anyway. I can max a Roth IRA and still have a safe emergency fund, just not a lot extra for the transition.

    #239676 Reply

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