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Loans and Locums, graduating in 2 mos

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  • Avatar MackTruckDO 
    Participant
    Status: Resident, Physician
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    Joined: 05/18/2019

    Hi All, looking for some general advice as I prepare to get my feet wet in this financial planning stuff. I’ll graduate from a Pennsylvania IM residency in <2 months with plan to do multi-state locums hospitalist work for the next year with the intent of finding an IM practice (completely unsure if private or non-profit) to join near family in Arizona, Nevada, or California. I plan to travel quite a bit globally and stay with friends/family when I’m not on a work assignment (no rent or mortgage) this year. I am single, have $390k (thanks DO school) in consolidated federal student debt with interest rates from 4.75 to 7.65% and have been on PAYE throughout residency, submitting paperwork annually for PSLF. I bought a house when I started training which I plan to sell (will make only $15-$20k off the sale) after boards in August. Otherwise no debt (though my mom is partially financially dependent on me, I give her maybe 20 k/year) and no savings. Given my uncertainty about my future practice, does it make sense to delay the refinance vs PSLF decision for a year while earning locums pay? Will the refinancing rates I am offered differ substantially if I apply before vs. after selling my house? When do I need to contact my federal loan servicer and let them know I’m now making lots more money than I used to (I don’t have to re-certify my loan repayment plan until January)? I think I had some retirement program that my employer contributed to during residency; is that something I need to cash out or otherwise do something with? Would also really appreciate referral to someone (?financial advisor ?accountant) who could complete my taxes in 3 states and tell me how to manage my finances as an independent contractor in locums. Does anyone do that on their own?

    #215457 Reply
    Avatar antheus 
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    Status: Resident, Physician
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    Joined: 04/18/2017

    It’s a tough call. On the one hand, $390k is a lot of debt to be forgiven. On the other hand, you’re only 3 years into a 10 year commitment for a program that may or may not exist in 7 years and you may or may not ultimately be eligible for even if you do jump through all the hoops. It also means that you’re constrained in picking your first job and, if you don’t like your first job, you’re similarly constrained in picking any future jobs. That’s a lot of ifs to base your future life around. I think PSLF makes a lot more sense for people in 5-6 year residencies/fellowships. In those situations the timeline is a lot more finite. PSLF may work out and the payoff would understandably be huge, but if it doesn’t work out for any reason you’ve lost a lot of time and paid a lot of extra interest on your loans. I’d say consolidating at a lower rate would probably be the safer bet but I’m interested to hear everyone else’s take on things.

    #215476 Reply
    jfoxcpacfp jfoxcpacfp 
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    Status: Financial Advisor, Accountant, Small Business Owner
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    Joined: 01/09/2016

    I think I had some retirement program that my employer contributed to during residency; is that something I need to cash out or otherwise do something with? Would also really appreciate referral to someone (?financial advisor ?accountant) who could complete my taxes in 3 states and tell me how to manage my finances as an independent contractor in locums. Does anyone do that on their own?

    Click to expand…

    @antheus makes some great points to consider on your PSLF decision. The future is unpredictable (duh – who knew 😉 ?) and you have many years to go with a mountain of debt.

    Strongly recommend you hire a CPA/planner with expertise in physician advice. You can find recommended tax strategists here and financial advisors here.

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

    #215504 Reply
    Avatar Peds 
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    More interested in your house numbers. Making 20K on what? Before/after commission? What was the overhead to own the past X years?

    #215508 Reply
    Avatar Tim 
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    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    More interested in your global travel plans. That sounds like fun. With $390k SL debt, do you have numbers for the lost income during your travel and how much you plan to spend? From a purely numbers standpoint, add that to the debt. It’s nice if you can afford it.

    If this was a “Can I Afford It” question, too many moving pieces, uncertain income stream, uncertain employment, a mountain of debt and shaky PSLF, the global travel is a no.

    Good luck with your locums and finding your practice. Time to get serious about earning and putting your financial house in order.

    #215528 Reply
    Liked by wonka31
    Avatar jacoavlu 
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    Joined: 03/01/2018

    Just a few thoughts.

    “No rent or mortgage” is jumping the gun a bit since you still own the house.

    Are you actively looking for a job in the southwest now? If not, why not?

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #215531 Reply
    Liked by Tim
    Avatar MackTruckDO 
    Participant
    Status: Resident, Physician
    Posts: 3
    Joined: 05/18/2019

    Thanks for all the input! Another sneaking thought in the back of my mind is going back to do a critical care fellowship in a couple of years which makes the pslf vs refinancing decision even harder. Though, like you, I am leaning toward biting the bullet and refinancing.

    Jfox – do I need a financial planner AND a tax strategist? 

    As far as the house, bought it for $175k with a physician loan right when I moved to my new city for residency, was cheaper than renting and the ex sig other really wanted it. Mortgage + escrow stuff is about $1k/ month. I think my principal remains $163 and I’m planning to sell for $200. After city taxes and realtor commision expect $15-20k back. Some people have suggested keeping the house and renting it out. But I’m not sure about that. I think I’d probably be able to rent for $1800/month. After paying some real estate company to manage it and fixing all the stuff that the renters would likely break, I don’t know if the math makes sense. Thoughts on this appreciated as I haven’t put much more thought than “it’s too complicated and probably wouldn’t work out financially”.

    Regarding travel, I’m pretty cheap. I stay in hostels, mainly hike, and buy food at the grocery store. The most expensive part is getting there. I’d love to spend a month in SE Asia (Cambodia, Laos, Thailand) and plan to also spend a month in France staying mostly with friends who I’ve met on previous travels. I think I can afford it, especially if I get rid of mortgage/rent and just store a couple of boxes of keepsakes in my brother’s storage unit. Locums will pay for housing while I’m on assignment. And actively looking for a good travel credit card. 

    I am not looking for a job in the SW at this time. I found it was too overwhelming searching for a job on the other side of the country while actively completing training. What if the practice I sign onto is abusive? What if the city is a big disappointment? Plus I’m not really sure which city I want to live in, so I’m thinking some time in locums will help me figure that out.

    #215565 Reply
    jfoxcpacfp jfoxcpacfp 
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    Jfox – do I need a financial planner AND a tax strategist?

    Click to expand…

    That is such a good question and a frequent point of confusion. A financial planner/firm with specific expertise in student loan planning is probably where you need to start. A planner will help you bring together the items you’ve already articulated: of supporting your mom, paying off debt v. PSLF, how much you need to work to reach both short- and long-term goals, and the impact of going back into training for a critical care fellowship (how much you should save, prioritizing your use of after-tax earnings on various goals, etc.) otoh, you’re going to need a CPA to help you with planning and tax filing for the IC business and coordination of multi-state tax filing.

    Financial planning includes tax planning, but it is more “big picture” (i.e. the tax aspect includes setting up the solo-k, backdoor Roth, how much to save for taxes, etc) but doesn’t get as granular as the CPA will. Your CPA relationship will involve intra-year tax projections, entity advice, planning for home office (not for you, of course, staying with friends, but you probably will have some OOP costs for those visits you’ll need to consider), tracking expenses, how to manage recordkeeping, etc. The two disciplines somewhat overlap but one is looking at your goals/spending/saving and integrating them with your resources throughout your life (financial planning) while the other (CPA services) is more concerned with specific details within each individual tax year and optimization of your taxes for the current year and possibly integrating the next few years when making such decisions as how to depreciate assets, how to deduct vehicle expenses, DAF planning, etc.

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

    #215573 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    The most precious asset you have is your human capital.
    Just a hint, if you want to use locums in your search, you might want to consider where you want to flop (Az, Nv, Ca) or land, or work. If Pa. is where you are licensed, the plane flight won’t get any shorter, the toxic practices won’t get any better, the cities won’t change. Good luck with the licenses if that hasn’t started.
    Why do you need a credit card? More debt? Maybe things will workout in Pa. Not sure the procrastination on the employment. I’m sure you can figure that one out. Probably not from Asia or France. How long is your first contract? No answer needed. $20k from a house that you plan to sell in August so that’s not available. Paycheck stops < 2 months, how are you paying for the 2 or three state licenses and when? Don’t forget your mom depends on you. How are you going to pay a CPA and a CFP . Without an income plan, no taxes and no loan repayment plans needed. Maybe you have EF, but you still need to focus on getting a job.

    #215574 Reply
    Liked by jacoavlu
    wonka31 wonka31 
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    Status: Physician
    Posts: 701
    Joined: 03/24/2018

    I’d make this decision without the fellowship idea in mind, I think you’re adding in an unnecessary variable. My gut feeling is that when you’re out, it will be very difficult to go back and do a fellowship. It’s not that you can’t do it, but going back to 60-80 hours/week to earn less money when you’ve been doing 40-50 is a big hurdle. Your life will be different. You may also have a significant other, kids, realize that working 80 hours/week isn’t for you anymore, etc.

    #215575 Reply
    Liked by Tim
    Avatar jacoavlu 
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    Status: Physician, Small Business Owner
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    Joined: 03/01/2018

    You have $400k loan debt, no job lined up, and plans to spend two months out of the country

    I’m sorry I don’t think you can afford it. And you’re not making yourself more attractive to a future employer.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #215576 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2860
    Joined: 01/03/2017

    You have $400k loan debt, no job lined up, and plans to spend two months out of the country

    I’m sorry I don’t think you can afford it. And you’re not making yourself more attractive to a future employer.

    Click to expand…

    #YOLOgeneration

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

    #215577 Reply
    Dreamgiver Dreamgiver 
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    Status: Physician
    Posts: 871
    Joined: 03/09/2017

    Sorry, I am going to be brutally honest here. 400k in debt, your mom depends on you, and you want to play teenager traveling Europe?! Yes you need a CPA and a student loan consult. And you need to get a job now and start making money. You are currently accumulating about 2k a month of non-deductible interest. If that does not get your fire going, I don’t know what will. Taking time off right after residency is not the best choice to develop your green skills. You will need to study and pass boards asap, not develop gaps at the beginning of your employment history. If you want to practice in the SW you need to hit contacts now, network, go out and visit practices/hospitals, talk to people, impress them. It takes months to get hired assuming you get the job, then months to get privileged. Here is your dose of reality. You are setting yourself up for a lifetime of financial struggles. Correct it now and a few years from now you will be able to do everything you want to do without financial repercussions. Now it is not the time.

    #215586 Reply
    Avatar Tim 
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    Status: Accountant
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    Joined: 09/18/2018
    #215590 Reply
    Liked by CordMcNally
    Avatar MackTruckDO 
    Participant
    Status: Resident, Physician
    Posts: 3
    Joined: 05/18/2019

    I know this forum is for people who value financial stability above all else but some of this is not helpful, just unconstructive bullying. Some of you are helpful. Fortunately I already paid for boards and will sit for the exam in August. As far as my travel plans, good point about employment gaps; I will keep it in mind. The attractive thing about locums is that I can work 14 shifts straight at the beginning of a month, travel for a month, and work 14 shifts straight at the end of the next month. Maybe take a few days off and then get back on schedule. I’ve been told by other locums docs that they actually give their locums agencies their credit card numbers. Their hotels and flights during assignments are billed to the docs personal credit card and immediately reimbursed by the locums agency. This way, the docs just pay off their credit card bill every month and end up with lots of rewards points to use on personal travel. I’m between the chase sapphire reserve and the amex platinum card. I definitely don’t carry balances on credit cards.

    Luckily, I already have my licenses in 3 states, one was paid for in exchange for a contract to work 18 shifts in any state over the next calendar year with one of the locums agencies. That’s a nice perk. Since I’m planning on doing full time locums anyway, the 18 shift requirement doesn’t feel like a big deal. Depending on how things go, I may ask them to reimburse me for the cost of one of my other licenses. I agree I need to start looking for a permanent position in the Southwest, thanks for the fire. And hopefully will be able to establish with a CPA and a financial planner within a month or two of starting work.

    #215602 Reply

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