By Dr. James M. Dahle, WCI Founder
I woke up early one morning a few months ago worried about a financial situation. It wasn't my financial situation. It was yours. At least many of yours. And the more I thought about it, the more angry I became. By the time I drug my butt out of bed, I was furious. Truly. I'm mad at everyone in this situation. And I'm angry that nobody else is as pissed off about it as I am. So instead of eating breakfast, I'm sitting here ranting into the internet to try to get over it.
I had a colleague walk up to me at the hospital the other day. He said, “Hey, I'm reading your book. I didn't even realize that was you.” This has happened to me many times, and it is kind of fun to be “internet famous.” When you write a financial blog and book and share intimate details of your financial life with the world, others get very comfortable sharing theirs with you. Here are the basics of his story:
- 1-2 years out of residency in a lower-paying specialty with a stay-at-home wife and some kids
- Did an MPH, delaying his career by a couple of years
- Borrowed the full cost of attendance each year and most living costs
- Despite attending a relatively cheap school, finished residency owing $400K, 1/3 at 7.9% and 2/3 at 6.8%
- Working 25 days (12-24 hour shifts) a month including many nights/call
- Has a “local physician transitioning into finance” who has already given him a whole life insurance application he's filling out, calling it a “Life Insurance Retirement Plan (LIRP)”
Do you understand now why I'm so mad?
Get Mad at Debt
I'm mad at the doctor and his partner for not learning about finance earlier in life and for borrowing more than they knew they should have. I'm mad at his medical school attendings for not teaching him basic personal finance. I'm mad at his residency attendings for not teaching him basic personal finance. I'm mad at his medical school for jacking up the price of tuition. I'm mad at the government for funding stupid decisions. I'm mad at this other doctor who is an insurance agent masquerading as a financial advisor committing the equivalent of financial malpractice. And mostly, I'm mad at a system that is going to burn this doctor out before he ever gets back to broke. And I'm mad that this doctor, and probably many of you in the same situation, aren't nearly mad enough at the situation you're in. That fury will drive you to learn what you need to know about finance. It will give you the discipline you need to be successful.
It reminds me of Aragorn's conversation with Frodo about the ring of power in the Inn of the Prancing Pony:
Are you frightened?
Aragorn: You draw far too much attention to yourself.
Frodo: What do you want?
Aragorn: A little more caution from you. That is no trinket you carry.
Frodo: I carry nothing.
Aragorn: Indeed. I can avoid being seen if I wish, but to disappear entirely, that is a rare gift.
Frodo: Who are you?
Aragorn: Are you frightened?
Frodo: Yes.
Aragorn: Not nearly frightened enough. I know what hunts you.
I Know What Hunts You
Like Aragorn, I know what hunts you. It might not be a black rider, but it is equally dark. It is waking up five or 10 years out of residency, sick of working 70 or 80 hours a week, and realizing you can't cut back a bit without a dramatic change in your financial life, and you don't even like the financial life you have now. You still owe hundreds of thousands in student loans, own little of your house (and perhaps are even underwater), pay too much in taxes, and have built little wealth. Maybe your spouse wants to leave you because you're always fighting about money and he or she never sees you and you realize that this is what the next 30 years of your life are going to look like.
This doc I ran into in the hospital is a great doc! There are lots of great docs out there. They're getting chewed up and spit out. Is it partially their own fault? Sure. Is it partially a systems problem? Absolutely. But part of it is your problem and my problem. We've got to get this message out to our peers sooner. And we certainly can't be contributing to the issue by selling them crappy insurance they don't need while they owe hundreds of thousands of dollars at 7%-8%!
A Race Against Burnout
Many doctors think they have decades to pay off their student loans. They look at the burden and it looks like a mortgage. In fact, these days it may be even larger than the mortgage. But there is a huge difference. You can sell the darn house at any time and pay off the mortgage. You've taken a mortgage out on your brain and you better hope you can pay it off before someone forecloses on it. You don't have three decades. You've got five years. Ten at the most. Trust me. By then you will want to have that debt out of your life. You will want to cut back a bit from that crazy pace you agreed to after residency because it seemed so much easier than the 80+ hours you had been working. By then that $200K-$300K you're being paid won't seem like nearly that much money. And this career that you desired so much as a 20-year-old may feel like golden handcuffs 20 years later. You want to practice on your own terms, but you can't. Because of that stupid debt that felt like monopoly money back in med school.
How Fast Can You Pay Debt Off?
The first question I asked my colleague was “How fast can you pay the debt off?” He thought he could do it in three years, but I'm not convinced he has actually run the numbers. You know why? Because the figure he threw out later in the conversation ($5K a month) won't pay that debt off in three years. How do I know that? Because I've actually done the math. Think about it. $400K at 7% = $28K a year in interest. $5K a month or $60K a year would only put $32K a year toward that debt. At $5K a month, he'll still owe $300K in 3 years. You can do it more formally with a simple spreadsheet or financial calculator. The function you want to use is the “Period” function, often abbreviated NPER. It looks like this:
=NPER(Rate, PMT, PV, FV, Type)
- Rate is your interest rate—divide it by 12 to get the approximate monthly rate
- PMT (Payment) is how much you pay each month, always a negative number
- PV (Present Value) is how much you owe (a positive number in a debt situation)
- FV (Future Value) is how much you'll owe at the end, i.e. zero
- Type is whether you make the payment at the end of the month (0) or at the beginning (1)
Let's plug his numbers in:
=NPER(7%/12,-5000,400000,0,0) = 108 months, or 9 years.
Now, nine years isn't the end of the world. Sometimes people run their numbers and it's 20 or 30. But it certainly isn't five years, much less three. The depressing part is, if he had let the military pay for medical school, he would now only be 2.5 years away from having his debt paid off, and I can assure you they wouldn't have him working any more than he's working now. Can he keep up the pace he's at now for nine more years? Can he do it without being grouchy? Can he do it while still giving competent, compassionate patient care? I hope so, but I know there are a large percentage of docs that cannot.
My general advice is to come up with a written plan to get your student loans paid off within 2-5 years of residency graduation. If you can save for retirement and a down payment at the same time, that's great (and will help you lower your taxes and housing expenses), but being done with the student loans within five years takes priority. Not only does this allow you to get out of debt before it starts feeling like you're stuck, but it also allows you to get the very best terms on a student loan refinance, which is usually a 5-year variable rate. Let's say this doc makes a commitment to get his loans paid off quickly and so feels comfortable taking that 5-year variable. Maybe he gets it for 3%. How much would he have to pay to be done in three more years? (Remember he's already a couple of years out of residency.) How much to be done in five more years? Let's run the numbers. This time we'll use a related function called “PMT” which solves for the monthly payment.
3-Year Scenario
Here's what the function looks like in a spreadsheet:
=PMT(Rate,NPER,PV,FV,Type)
Putting his numbers in:
=PMT(3%/12,36,400000,0,0) = $11,632
Is that a lot? It sure is. That's 50% of your gross income for a doc making $280K. If you're paying half your gross income, and a quarter of it is going to taxes, you're left to live on the other quarter (about $70K, just a little more than you made as a resident). And that's not even counting any sort of retirement investing, college investing, or heaven forbid whole life insurance premiums. In essence, you've already spent three years' worth of physician paychecks (i.e., three years of your life) and now you have to pay for it by essentially doing residency twice. The real sacrifice of becoming a physician isn't doing residency. It's doing residency twice!
5-Year Scenario
I don't actually know how much this particular doc gets paid. I hope it's at least $280K, but it might not be. Let's say the 3-year scenario is just impossible without selling the house and having his family leave him. So he opts for a 5-year scenario. What do those payments look like?
=PMT(3%/12,60,400000,0,0) = $7,187 a month.
That's more than he's planning to pay now, but not that much more. Especially if he can save the $18K/year insurance premium from the policy he's being peddled as a LIRP. $5,000 + $1,500 only leaves him about $700 a month to cut from their lifestyle. That's very doable with a few minor lifestyle changes. Eat out one less time each month. Go on one less vacation a year. Wait a couple more years to upgrade the minivan and you're there.
Get Out of Debt
It's time for you to get out of debt. Whether you're just finishing residency now or whether you're at that 5-10 year point and starting to feel a little crispy. Run your numbers. Refinance your loans. Quit worrying about the investing vs. loan paydown question and get it done. The cavalry isn't coming. You're on your own. There will be no white rider at first light on the fifth day. You don't get a pass on math just because you dedicated your life to healing the sick and injured. Get as mad as I am about your debt! Take control and seize the financial life you want and you deserve.
What do you think? How long should you take as a doctor to get out of debt after residency? How was your motivation to work long hours 5-10 years after residency compared to when you took out your student loans? Comment below!
I am right there with you, WCI.
On a personal note, I’ll pay off 200k in 20 months after finishing. I am pretty proud of that.
I get angry at the current situation, too, though.
I have a resident right now with 500k in debt. We have discussed his options at length, and he (unfortunately) was not doing PSLF during training. We discussed his other options and the amount of money it would take to get out from underneath that once he finishes.
The anger I have from being in debt at all after making a couple of stupid mistakes has inspired me to get this message out early and often. In fact, I talk to our first year med students next month on the topic. It’s part of their onboarding process. I am also lined up to talk to our fourth year med students at the end of the year.
Thank you for being a staunch advocate for shedding debt. I agree that people often don’t hate debt enough. I think Cory Fawcett’s book can drive that home for a lot of docs and it only takes a few hours or less to read.
Keep up the good work,
TPP
I am nearly debt free (12k left on the mortgage that I will be paying off this summer) with well over a million in investible assets. But I still wonder if I’m wrong!
My coworker (admittedly a higher earner- his wife earns well) keeps insisting I’m wrong. Says that it’s better to take on debt/leverage and invest in higher earning products (stock market, commercial real estate) rather than living debt free. He has a 500k mortgage in the US, 150k in student loans (2.25% interest rate), and over 500k in a mortgage overseas on what was supposed to be an investment property but is really a second home he uses a few weeks a year. He argues that the mortgage tax deductions and the low interest rate on his student loans mean it would be foolish to pay them off. He says he’s not stressed about his debt at all!
Am I crazy, or is he? Or is this a different strokes for different folks situation?
I don’t think there’s much wrong with leveraging a reasonable amount of debt and investing instead. But, it needs to be relatively small IMO. The danger with what your coworker is doing is of course that a stock market and housing market downturn will suddenly erase a large portion of his net worth. He’s over 1.1 million in debt. Not smart.
As Warren Buffet has said “when the tide goes out, you’ll know who was skinny dipping”
LOL! Good point! What if he gets sick or his wife loses her job? Love the quote, BTW.
What do folks on this board consider to be a reasonable amount of debt for leveraging?
Opinions on that are always all over the place. WCI’s forum members are much more debt averse than others (for good reason) so you’ll get a lot of people saying not to leverage any debt at all and others who might be comfortable with being debt free except a mortgage.
I think the biggest factor is whether or not you’re saving and investing rather than spending. A lot of people who say they are going to invest rather than pay off debt end up spending the money that would have gone towards debt and they don’t actually build wealth. If you’re disciplined and actually use the extra cash flow to save and invest, it’s hard to argue with the math (low interest debt is generally easy to “beat” in the stock market over many years). Like I mentioned below I’m considering holding on to a low interest 60k student loan, but who knows, I might even change my mind on that and just get rid of it. I’m just really anxious to build a taxable account up.
Great points. I only paid off my student loans (1.5% interest) because it was too difficult to pay off my investment property (Ocwen is impossible to deal with).
Another thing I’ve noticed, along with the failure to actually invest the difference, is that people like my colleague tend to buy stuff they enjoy (overseas house that can’t be AirBnB’d) and *think* it’s an investment when it’s actually a luxury item.
For sure, lots of people confuse consumption items with investments and homes (both first and second) are at the top of the list. Even if you rent out that second home during the year, chances are good you didn’t buy it as a pure investment and its investment merit isn’t very high.
Agreed. It took me a long time to realize this as it’s just not the way I think. I am still mystified by it.
I don’t doubt he’s not stressed. However, borrowing to consume (such as a second home) is a great way to stay poor.
A nice pro-debt argument is made in The Value of Debt series of books, but even there he is very clear that is only for some people, the terms must be quite good, and the DTI ratio should be limited. Read one of those to get the other side of the story. I reviewed one of them here:
https://www.whitecoatinvestor.com/the-value-of-debt-in-retirement-a-review/
But let’s be honest. The problem most docs have is NOT that they don’t have enough debt. They’ve got too much and they’re using it to consume, not build wealth, like your colleague.
Thanks! Added to my list.
Snowcanyon, great job in paying off that mortgage. You will struggle with the answer as to whether you are right or not, until you have done it. Then the answer will be clear. It is rare for someone to go back to the old way after tasting debt free. Almost everyone who argues not to pay off the debt, has not experienced what it is like to be debt free on their income. They just look at it as a math problem and believe it is too hard to pay it all off anyway.
You will be debt free, with a lot of money socked away and a huge amount being invested every month. You will be far better off than your friend who is over a million in the hole on stuff that is not “leveraged” to make him money. It is costing him interest payments every month. Keep up the good work. You will do well.
Would you contact me and let me know how you feel about this six months after you are debt free. I would love to hear what you think then. Then you can give your friend a copy of my book, The Doctors Guide to Eliminating Debt, and see if he will read it. You might just change his life.
Dr. Cory S. Fawcett
Prescription for Financial Success
Thank you. Best thing I have heard all day (and there’s been a lot of great stuff). My hunch is that you are right.
I am deeply inspired by both your experience and that of WCI- he hadn’t planned on paying off his mortgage so fast, but ultimately both you and he did and didn’t regret it. As WCI and others have said, it seems to only be the people who can’t pay off their debts that recommend not doing it, which I think is both true and telling.
Will be happy to let you know how I’m feeling in 2019. Now, if only we could figure out better health insurance for retirees….
Thank you.
Alright, I managed to sell some investments at a loss in order to TLH (my main concern about losing my mini-mortgage aside from opportunity cost was the tiny tax deduction) and the money will be on its way to the credit union (best decision ever was to borrow from a credit union) and my mortgage should be paid off this week.
It feels amazing already. Now I work ENTIRELY for myself, my future, my dreams, my retirement, and maybe the taxman.
Loving it already….
Congratulations snowcanyon on paying off your mortgage. You will love life without a mortgage payment. I haven’t had one since 2001 and I don’t want to go back to having one again.
Dr. Cory S. Fawcett
Prescription for Financial Success
Congrats on paying off your mortgage.
I don’t think it is technically TLHing if you don’t rebuy a similar security, I think it is just selling at a loss.
Sure. I ‘m going to buy back the same fund in 30 days. Or I suppose I could open another fund and buy it right now, but that seems complicated since I don’t really want two versions of this fund.
Okay, that counts. It just sounded like you used the money from selling the fund to pay off the mortgage.
Hey, what are you, the TLH police :)?
I was just going to pay off my mortgage with my next paycheck, but decided why not get the tax deduction from selling at a loss, thus compensating for the tiny tax deduction I would lose for paying it off? This balanced it out.
I agree that any time you have a loss in a taxable account you should sell.
Yay! I did something right!
Now, about that second career, the one with no nights…
Congratulations Snowcanyon on making that choice. It is liberating. I paid off my last debt (my house) 25 years ago and never looked back. Just make sure you buy things cash and stash away as much for retirement as possible. Get ahead of the game enough and then you can start working part time and just choose the schedule you want and relax the rest of the time. Once you get the investment snowball rolling, don’t let it stop.
Keep reading here as guys like Dahl, Fawcett, Graham, POF, etc. have some really good stuff and I wish it was around during my entire career. Even though I made my share of mistakes along the way I managed to avoid the major pitfalls and therefore have accumulated a healthy nest-egg. Best thing going for docs is that we have the income to reach FIRE, as long as we don’t trip over our own feet.
As Dahl has written in the blog: One House, One Spouse, One Job is the best route.
Well, I paid if off two months ago and now I am debt free! Received the deed a month ago. DR. CORY S. FAWCETT WAS 100% RIGHT!
Even though I always had enough saved to easily pay if off at any time, I am feeling fantastic in ways I could not have imagined. I realize it was probably not the best financial move, and I would love a nicer place, but debt free life plus substantial savings is AMAZING.
Totally the right choice, and thanks.
Snowcanyon,
So glad you are happy with your decision. It’s pretty rare for someone to regret having become debt free.
Now you have created a new problem: What will you do with all that money you were paying on your debts? Your accounts will start growing and you will experience the ultimate first world problem. It will be fun finding the answer.
Dr. Cory S. Fawcett
Prescription for Financial Success
Congratulations on almost having your mortgage paid off. There is definitely a debate on whether you should pay off mortgage versus invest it. It was almost perfect timing (I’m a day late as post got published today) but please check out my newest post called “Every Blade of Grass” and see a real life example with my choice.
https://xrayvsn.com/2018/06/05/every-blade-of-grass/
My wife and I – a “pair of docs” – made a lot of the same mistakes as your colleague. We borrowed the full cost of attendance, didn’t pay on our loans in residency, and as a result we collectively had about $650k in medical school debt when we finally started earning money. We had a financial awakening and drastically rearranged some priorities in paying down these loans.
I actually want to thank you, Jim, for giving us the confidence that we can live like residents and get this done (while simultaneously saving towards retirement). I posted a panicked plea for help on Bogleheads a year or two ago, and your “You Got This, you’re on the right track and you’ll be fine” (in a nutshell) reply was such a welcome piece of moral support. I’ve learned from your website and from Bogleheads over these last couple of years, and now my wife (MrsPW) is a disciple of yours too and we’re tackling the whole thing together as a total team effort. We’re one of those families who owe you a huge debt of gratitude for putting this stuff out there. We can’t wait to come to one of your conferences in the future and thank you in person.
You’re welcome and congratulations on your success. It’s far easier to write a blog post telling you how to do it than to actually do it.
I know you strongly advocate against whole life insurance. I got one sold and I am wondering if it is any way better than others. The agent told me I can use it as retirement planning and can borrow from it at a low rate of 0.05%. The policy is VUL from prudential.
I wish it was so simple that I could give you a recommendation based on the limited information in your post. In the meantime, these posts may help:
https://www.whitecoatinvestor.com/variable-universal-life-insurance-as-a-retirement-account/
https://www.whitecoatinvestor.com/how-to-evaluate-your-own-whole-life-policy/
https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
I think you would be absolutely furious with me. When I did the residency route (graduated in 97 from med school) I did forbearance and deferment throughout residency and then refinanced the loans. Only after my divorce and financial awakening did I end up attacking the student loans (last payment was exactly 17 yrs to the day from med school graduation and almost 22 yrs from when I first signed the very first document).
I didn’t have the advantage now of a wci back then and there was absolutely no financial education. Medical schools need to make your book mandatory reading.
In the 1990’s and early 2000’s, docs could get away with what you describe and still come out just fine. The difference now is that students have way more debt and at way higher interest rates then ever before. It’s become a much more critical problem because $300k-500k of debt at 6+% interest is becoming the norm.
Young people are ABSOLUTELY INSANE to take out that many loans for any kind of higher education. There is a growing anti college movement, and I can only hope students can begin to realize that between the opportunity cost of college and student loans, many, probably most doctors would come out ahead as an NP with school paid for by the hospital.
I truly hope medschool applications plummet and that a serious anti medical school loan movement takes off.
I’m not sure I totally agree with you SnowCanyon…
I am a pediatric dentist that supported my self the whole way through college, dental school and residency. Came out $312k in debt (graduated in 2015). Made $520 my first year out and over $575k last year. Almost have my loans paid off and only my 2nd year out of school. It’s possible but you have to know what you are doing and if it is worth it!!!
I’d encourage people to HAVE A PLAN – I’ve been on top of it through the whole procedure – refinancing three different times : First at 4.5% with DRB, then 3.75% w SOFI then AGAIN with First Republic Bank at 1.9%.
I completely agree with you WCI! We all need to FACE the debt, get a plan and work through it. I love my job. I love my life and am so happy I do what I do!
I am a pediatric dentist with high debt. Where did you find a job with that income? I have extensive sedation training and can practice high volume. Would love some insight on where you are making such a high salary right out of residency.
Would love to know where and how you made so much as a pediatric dentist. I am working for peanuts and would love to do better, Im floating with 600k of student loans.
Working half corporate and half in private offices – don’t have to own my office and get the best of both worlds! Wouldn’t do it any other way!
Wow thats very impressive, did these places say that you would make that much? I only get offers for 900-1000 a day. I currently make only $950 per day. I have lots of zirconia crown experience, OCS, and infant frenectomies for breast feeding, I am used to working at high volume. How did you find these offices? Any advice?
Competitive West coast corporate offices pay 35% of production. Don’t do any OCS as too unpredictable/too much time (could see 15 pts in time you’d do one OCS). Do lots of SDF, movies w N2O and in office GA. Refer if kid needs hospital GA (takes too much time when could be working in clinic producing way more). Private general dentistry offices split production w me 50/50. I’m also 32 yrs old and have lots of energy to see lots of kiddos.
Well if they ever need any help send me a message, thanks for the info!
I agree, my situation, which I thought was awful, was graduating with about $160k of original student loans. Hard to say how much the final damage was but when I used it in my blog for an example I estimated likely paid $600k total over the 22 years.
I can’t imagine what it would have been using today’s student loan amounts (and it is only getting worse)
That’s a long time, especially considering the low cost of medical school in the 1990s. I think mine was $8K a year in-state in 1998-1999.
I used to like you, but now the envy is just overwhelming… if I could have gotten tuition for $8k/yr instead of $50k, I probably could have convinced my folks to pay instead of begging from my kindly “Uncle Sam”. Then again, certainly explains why bonuses haven’t gone up in years, the value of the “scholarship” is much greater.
If it makes you feel any better, I sold 4 years of my life for about $40K in tuition and a $918/month stipend.
I totally agree! 15 to 20 years ago we had little education on financial literacy. Med schools should make wci book(s) mandatory!
Excellent advice. I hate reading about new physicians being taken advantage of but it seems to keep happening. Many recurring themes on the forum. The general advice is to avoid early lifestyle inflation, get a plan on your loans or even better borrow less, and do not buy a house for at least 2 years. Deeply indebted doctors is a huge problem for our country that most of society has not even thought about.
Once again a great article, particularly in regards on how the system is a problem, but does not excuse personal decisions. It is just ingrained in the culture of education now to borrow as much as possible. Medical school tuition rising is going to create problems, especially for lower income physicians. My wife’s medical school was private, and their mission was to train primary care to serve our state’s undeserved areas. Well their tuition was greater than 3x higher than my state public medical school that I went to. I assume the school is just banking on everyone perusing loan forgiveness? How do you expect doctors to take lower paying positions with more debt burden? She choose a well paying specialty fortunately, but it just shows how easily well meaning people can get sucked into this medical school debt vortex.
It took me a little over 2 years to pay off all my loans. I was lucky in that I had (barely) under 6 figures of debt when I finished training. Still lived like a resident for the first several years which helped immensely, and even now most people would never recognize me as a surgeon based on the house I live in and the car I drive.
The other thing that helped a lot is that I don’t have kids. I cannot imagine how difficult it must be to pay off a 400k debt when one has kids and a stay at home spouse during the first few years out.
What does a surgeon car look like?
BMW, Audi, and Mercedes seem to be very popular auto brands among my colleagues. I drive a Toyota that I’m very happy with.
Wow! Seems like the dentists need Mercedes and Tesla. Surgeons are so modest….
Thanks for your great work to keep telling the story, Jim.
As a business school grad who came out of school with $225,000 that we paid off in three and one-half years, I absolutely cosign everything in this post. And we did live on something like $60,000 per year while making nearly $200,000 to kill the debt in that amount of time. For those out there still working to slay the student loan beast: Press on. The juice is worth the squeeze. And thank you all for your work to heal the sick and injured!
Glad to see you fired up. And I agree. School loans are a burden and since I paid mine off I have been way more relaxed. funny how it can keep you mentally exhausted knowing you have to work for someone else just to pay down your education. Paycoffcthe debt as soon as possible!
Now you are singing my tune WCI. It’s time we stopped managing our debt and started eliminating it. I wish every doctor in debt would read The Doctors Guide to Eliminating Debt (on the WCI recommended reading list) and get a new attitude about debt. We as Americans have grown too complacent about debt. It has become a way of life. Money is being transferred right out of our pockets and into the pockets of the banks. That attitude has got to stop before we sink under the weight of our debt. We have developed Debtabetic Neuropathy (defined in the book) and are in desperate need of a cure. Fortunately, you gave the instructions for the cure in this article.
Thanks for standing firm against debt.
Dr. Cory S. Fawcett
Prescription for Financial Success
So my aforementioned colleague is incorrect? Barking up the wrong tree? In denial?
How would you define debt vs leverage? Is the latter acceptable?
Snowcanyon,
I replied above where you brought this up. Yes I think your colleague is in denial. You keep your course and you will have a great financial future.
Dr. Cory S. Fawcett
Prescription for Financial Success
Preach it brother!
I am now 7 years out of residency. Didn’t get this message until about the 4-5 year mark. After 2 years of turning my financial life around I’ve gone from over 260k of student debt, down to around 60k. I’m considering holding on to this one last loan because it’s 2.6% and payments are only 340/month. I’m finally able to contribute to a taxable account now so this will always be a source I could use to pay it all off in one lump sum if I get sick of looking at it. We’ve been maxing out our tax advantaged space for the last 2 years. Our net worth goes up every time I get paid rather than staying stagnant as it had for years. Our only other debt is our house which is a 15 year mortgage with 3.25% interest. Our mortgage is only 0.8X of our yearly income. We plan on paying it off early. All of this is a direct result of finding WCI and hearing the exact same message above. Getting angry about the debt and finally deciding to do something about it. The best part of this is that I no longer feel as burnt out at work because I know I can afford to find another job if I get sick of the one I have now. Before all of this financial reform, I felt trapped and was ready to throw in the towel.
Congratulations on your success! Great turnaround.
He’s been saved in time. Lucky
By “lower paying specialty” my guess is this physician is a hospitalist; primary care docs (also lower-paid) are discouraged from doing inpatient now, which is a shame. I learned a lot by rounding in the hospital but once the hospitalist model became the standard we were pushed into the office (rural can still do both if your spouse will allow it.)
With the current cost of attendance I don’t recommend medical school at all to end up doing family practice. Become an NP instead-you can work as a nurse to help pay for the master’s or DNP training and the training doesn’t take as long, so likely less to borrow. You won’t get paid quite as much as the PCP physician but that keeps you in a lower tax bracket. The employers hiring for primary/urgent care seem to be recruiting harder for NP’s and PA’s (at least where Iive.) Also if you become an NP you only have to pass one board exam for life (at least until the overlords in that field decide they want MOC.)
I managed to pay off my $60k in student loans within 6 years out while making around $110k per year-that was an average full-time PCP salary for the time . And about 2 years after that I was burned out, but thankfully able to reduce hours doing urgent care which extended my clinical lifespan. I had the “advantage” of the lower tax bracket, as well as lower tuition and COL, and a full schedule was considered 24-30 hours of appointments per week, not 36 as the corporate medical world demands now.
Those part-time gigs are now hard to come by, and being a physician carries little gravitas. You are a widget and are expendable-my NP colleagues are usually referred to as “Dr.” by our patients (who could care less about your title as long as you give them good, obsequious customer service.)
There is a reason so many colleagues have moved into administration, concierge/lifestyle, buprenorphine maintenance, Botox/fillers/laser, education, insurance, acupuncture, etc.
Just had a partner go do weekend Botox training.
I’m taking the February bar.
Maybe I’ll get to help your colleague set up his LLC? ?
I think it depends on where you live to determine if going into primary care makes more sense as an MD than a NP. I am 2 years out of residency in FM and will likely make about 320-350 this year and really enjoy my practice. Also the going rate for loan forgiveness is around 100k
You’re killing it as an FP making $350K! Nice work. Not sure what you mean by your last sentence.
Most if not all the hospitals in the area give 100k the day you sign towards your student loans. It was very helpful as a new residency grad with 200k in loans. Cutting it to 100 let me pay it off in a little over 1 year (“only” made 250 my first year). Also the joneses are much easier to keep up with here.
What area is that? I’ve got a lot of readers I need to send there.
Rural Midwest. I have had colleagues from residency go to rural Wisconsin, Iowa, Illinois, and Missouri all with similar offers as long as they were in rural areas far enough away from big cities. Admittedly I am not sure that I will be able to keep the pace and hours that I currently work forever but it’s nice to do while I am young and can take advantage of compounding interest for more years.
I’m glad rural is paying you well-it’s hard work even though it’s good experience. I spent 4 years in a rural area but that was >10 years ago and not in the Midwest. Averaged about $120k/yr with a $10k stipend from the hospital for student loans.
I graduated in 2013 and moved to the great state of Texas for loan repayment. At that time they paid 160k over 4 years. You can also make great money without killing yourself. Best decision I made after residency! I worked extra, made great money, paid no state income tax and had Texas cover most of my loans. I was able to later move to my (I mean my wife’s) desired location. I think as a PCP it is not difficult to get loan repayment if you are willing to budge on location and some locations have great loan repayment if you look.
Budging on location gets you a long way in physician finances.
The hospitalists I know who are working as much as described above are making 400-500k/yr. Granted, that’s Midwest, but still in big cities
Agree, going rate where I live for hospitalists is $1500/shift. Working 25 shifts a month (insane, recipe for burnout IMO) gets you close to $500k/year if you able to swing it. I took “lower paying specialty” to mean FP, maybe psych or ID.
“Working 25 shifts a month (insane, recipe for burnout IMO)”
Oh, you mean like residency? Sorry it made me laugh.
Yes, that’s exactly what I mean.
My husband (a lawyer) and I hit zero net worth before I started residency through a combination of hard work (I’m an MD/PhD and he worked at a big law firm) and good luck (we sold our house in 2015 in a HCOL area for 6 figure profit after owning <3 years). We reached six figure net worth during my residency in NYC with 3 small kids.
I always laugh a bit when I read posts about geographic arbitage because my husband's salary is 3-5x higher in a big city like NYC and we have access to a lot of affordable child care arrangements, free summer activities for kids in the city etc, car optional. Also, a small house in a desirable HCOL area can appreciate quickly if you buy the smallest/cheapest house there. A lot of readers on your site would be surprised by how much we have saved as a family of 5 in nyc while having a relatively good quality of life.
But not everyone is in law. Docs in NYC get slaughtered. Why would you laugh when docs universally get paid more in less desirable areas? You may not be the breadwinner, but most physicians are.
Being a one income household is a luxury. In the northeast, two income households are the norm and one needs to consider both incomes combined when choosing geography. My fields’ attending salary is about 20% lower in the northeast than other places but a lot of other professions (law and finance come to mind) make much more $$ here so our combined household income is still high here compared to rural areas.
I see many attendings complaining about how broke they are but many of them are sending their kids to private schools in NYC (>60k/year), live in luxury buildings, have 2 new cars, etc. We utilize high quality public schools, live in a modest bldg, have one used car (a luxury in NYC!) etc.
All i’m saying is that if you love rural areas and/or are the breadwinner then that’s one way to meet financial goals. I am adding the perspective that one can do well financially in a HCOL area in certain circumstances as well and I feel like that perspective is missing on this site.
I think most physician finance websites are (reasonably) focused on physicians who are the breadwinners. You will absolutely do better as a doc in a LCOL area if you are the breadwinner. There is simply no financial advantage as a physician breadwinner to living in NYC, SF etc. Sure you can send your kids to NYC publics, but it’s still more expensive than living in Iowa and sending your kids to a good publics there.
Of course law and finance people do well in NYC. No one is arguing against that. Everyone knows that. Of course in your situation you will do very well, but yours is the second income. You are not the main wage earner. But docs do not do as well as in rural areas. You would be singing a different financial tune if you were a two doc family or if you were the breadwinner. I’m not saying you couldn’t make it in NYC, just that it wouldn’t be as remunerative.
FWIW I grew up in NYC and attended NYC publics! As a doc and nurse family, it is actually cheaper for us to live in the West and fly back to NYC frequently. The 20% salary cut combined with higher housing, taxes, and food costs make living in NYC a luxury that would really interfere with our financial goals and that would amount to essentially a 50% pay cut.
I think we are saying the same things. Physicians don’t do as well financially in NYC as rural areas. It’s just that physicians don’t exist in a vacuum and not all of them are married to other physicians or breadwinners. Plenty of nonphysician jobs literally do not exist in rural areas.
There are benefits to apartment living like walking commute, less space creates less desire to buy more stuff bc theres nowhere to store it. You also have to accept that NYC is also full of legit rich people and virtually none of them are physicians and you’ll never be able to afford the things they do.
We live in a walkable area and have less space than an average apartment. No subway, but that has gone so far to hell I don’t see it as a plus anymore. It’s true there are jobs beyond BigLaw and Finance that exist only in NYC- Broadway, publishing etc and it’s important to realize you CAN save money in NYC. I honestly think this is a harder issue for people who move there as adults and are bedazzled. Folks I grew up with had little problem with debt. If I moved back to NYC, though, I am fairly certain I would not practice clinically- the liability and headaches just aren’t worth it there, so I would try hard to transition to finance or consulting.
I 100% agree on the insane wealth in NYC, and also on the insanity of sending kids to private school, especially in NYC where they really cater only to wealthy donors. All that money could be compounding….
Your perspective is unique, would love to hear about it in a post if Jim is inclined. 😉
Always love guest posts from regular readers. Guidelines are here:
https://www.whitecoatinvestor.com/contact/guest-post-policy/
I’ll have to think about it.
In short, for female physicians I think a lot of it boils down to having an all-in partner and not keeping score. I did more of the childcare in medical school while my husband worked big law so we could kill our educational debts. My husband then worked part time from home and was the primary parent when I was a PGY1-2 and we were ok in NYC on just my resident salary because we had no debt. Now he’s working more but my hours are better so I do more of the chores and coordination of children. There has not been a point when we have been able to divide things at home 50/50 but we have always felt like equal partners if that makes sense.
Absolutely makes sense. I can totally relate.
I feel the same anger when I talk to residents and find out their debt load. The “system” is placing these young docs in a position financially that sets them up for a life of indentured servitude, learned helplessness, burnout, and depression. And outside of education like you provide, I don’t know how to “fix” the system, because no piece of it has any vested interest in acting any other way. To top it off, most of the mentors/attendings who are teaching the students and residents did not have to deal with huge student loans, so this is not on their radar or personal to them .
Maybe we need a revolution in student loan debt servicing mirroring what Jack Bogle did to reduce costs in investing. Unless the current student loan vendors are already nonprofit, or unless the rates available for refinancing truly are reflective of default risk etc. Because I can’t see how the med school tuition will ever go down, or length of med school or residency shortened. And physician payments are not rising to meet this tuition/debt inflation.
I am thinking we are becoming obsolete. Why use docs when PAs and NPs can do it for less? Young people need to realize this and move with the times. Medical school was a great idea in the twentieth century. Not so much now with increased debts, declining reimbursement, liability, insane contracts, CMGs etc.
I wrote a whole book chapter about it called “The Big Squeeze” back in 2014. The book continues to be the best seller in its niche. I agree that there is no incentive for anything else to change, although some of the culpability lies with medical school administrators.
And this is why I bought a crate of your books to gift to every graduating resident and Fellow at the local residency program again this year. Trying to get the message out!
Why is everyone so eager to focus on debt? Certainly every situation is different
I focus on income – growing top line. Every day!
My med debt is 3.25% and I’m not worried about it
Throwing my money in income producing real estate & renting to residents where I did my residency.
‘Debt is bad’ maybe for some but my energy is on growing top line and passive income & not focused on throwing everything on debt
I hardly think “everyone” is focused on debt. I think there are far too few people focused on their debt, thus the purpose of the post. If you’re putting a large percentage of your income toward wealth building activities, we can discuss the merits of paying down debt vs investing and the benefits of leverage elsewhere. This post is for people who think it’s fine to just run around their whole career owing money on their student loans. It’s not.
You would likely enjoy The Value of Debt book.
I’ll check it out
And agree with sentiment that far too many colleagues sit on their debt for too long
I’m pushing because I want FIRE by 50 – which I define as ability to cut back to 25% FTE at age 50 remaining $ coming from passive real estate . (yes I realize noting is ‘passive’ but it beats night shifts!)
Just Sayin
Curious to know what you do with real estate and how you do it. Obviously that’s a broad question but do you have any recs on how to get started? Resources that you use? Books you’d recommend?
One plug for WCI
used SoFi link and refinanced into 5 year ARM – saved me ~2k/year and will be paid off in 5 years
No fees
SoFi is amazing!!!!
thanks WCI!!!
Did you really mean ARM? I guess you might, SoFI does do mortgages, but mostly they do student loan refinancing. ARM = Adjustable Rate Mortgage.
Mortgage on the brain – just closed on a rental property yesterday when I wrote the comment
LOL
As someone who is very much like the anger-generating doctor in the post, I’ll take a small break from looking sheepish in the corner and add a couple of thoughts.
I borrowed more than I should have as a medical student, and will readily accept my role in screwing myself over. However, I would also like to emphasize that the my medical school was definitely not blameless. My third year tuition alone was 35,000 dollars, just for tuition, not counting any fees, insurance or other school related cost.
Mind you, I was an in state student at a public university. I had two residency classmates who’s entire 4 years was less than my third year alone. In what I’m sure is pure coincidence, the school was constructing a brand new dental sciences building during my time there. I still fly into a rage when they send me a letter asking for money.
Second, there are more resources than ever available to empower docs to take control of their financial lives. I was in my second year of private practice when I realized we were in trouble. But simply Googling around a little led me to some excellent resources (this site was one of them) which gave me the tools to turn things around.
Its been less than two years and we (my wife and I) have made real progress in paying down our debts. Better yet, there has been an absolute explosion in physician personal finance sites, even in the last two years since I’ve been lurking around this forum. I even started one myself. All these new sites mean there are more of us than ever getting the word out to our colleagues, which will hopefully lead to situations like the one described in the post being less and less common.
Now I’ll just creep back into the corner and hide until WCI has finished cooling off.
-Ray
Agreed on the explosion of doctor financial sites. I know of 5 that were started in May alone.
I also appreciate that you recognize that yea, the system sucks, but you’re also culpable and willing to take personal responsibility for that.
I agree. You are mad, but he is the one who should be.
I have always been debt-averse and I’m so glad. It saved me a lot.
Interest comes to me, not the other way around.
I recommend paying student loans in 2-3 years and any other debt (e.g. mortgage in 5-7). It isn’t easy but is doable for most.
Most of the residents I know are going the PSLF route. I can’t blame them, but I hate to see it take ten years. That is a long time!
I’m consoled by the fact that, so long as you make payments starting as an intern, PSLF kicks in within 3-7 years of finishing training. That’s an awful lot like the 2-5 live like a resident period I recommend.
They told me the way I consolidated disqualified me from PSLF – would have saved 40k+
I am an associate program director for a radiology residency program and this article really hits home. Many of my residents don’t realize the consequences of not getting rid of the 3,4,and 5 hundred or more thousands of dollars that they have currently. They think it is no big deal. But, it becomes a very big deal as you said when they realize they have tons of other expenses to pay for and their lifestyle is not what they expected. I feel really bad for this next generation in the expensive northeast where I live. They will be indentured servants for the rest of their lives. My recommendation: move out if you have such debts and go to the Midwest!
>My general advice is to come up with a written plan to get your student loans paid off within 2-5 years of residency graduation. If you can save for retirement and a down payment at the same time, that’s great (and will help you lower your taxes and housing expenses), but being done with the student loans within 5 years takes priority.
We can all agree that you should be allocating as much as you can toward your student loans. But ignoring tax advantaged accounts (401K, IRA) until your loans are paid off will not maximize your lifetime net worth, which should be the goal regardless of how much debt you are in. This forum has a tendency to respond emotionally to debt (see current post), which it should be approached and reduce d in a rational way. Ignoring your early career tax advantaged retirement space for 3-5 years is pretty foolish as that money will grow the most over the course of your lifetime (and you can never get it back). You will have to contribute way more money in a taxable brokerage years later to make up for both the lost time in the market and the marginal tax rate, which is an opportunity cost that shouldn’t be ignored.
Here’s some math to back this up:
Let’s say you owe $350K at 4% after refinancing. If you make what Dr. Dahl or or the Physician Philosopher does, this is no problem to knock this debt out in 1-2 years. But if you’re in a lower paid specialty, the target of paying off your loans in 3-5 years may mean you can’t contribute to tax advantaged retirement accounts for those years.
Now, if you were to contribute an unimpressive $18,500K to 401K and an additional $5,500 to a backdoor Roth = $24,000/year, you would accumulate $138,000 over 5 years (assuming 7% return), which would in turn grow to $380K if left untouched for 15 years. Those contributions would only “cost” you ~$1430/month from your student loan repayment schedule (after accounting for pretax 401K contribution), extending the loan repayment period from 5 years to 6.5 years, and increasing total payment amount from $386K to $398K (difference of only $12K).
Even after accounting for the $5K/mo surplus you’re able to save from years 5->6.5 under the fast repayment plan, you’re still a solid ~$240K behind after 15 years of compounded returns due to missing out on your early tax advantaged contributions.
I’m very much aware of the math and I have no doubt that your math is correct. And I’m a big advocate of maxing out your retirement accounts AND having your student loans paid off in less than five years by living like a resident until they’re gone.
However, if I had to choose between being rid of my loans in 5 years and maxing out my retirement accounts (and I think few doctors HAVE to make this choice despite how many want to make it to enable higher spending) I’d choose the first despite the math. Three reasons, but the last is the real reason.
# 1 Market returns aren’t guaranteed. The math always assumes a higher rate of return on the investment than the debt, but that return doesn’t always show up. The risk-adjusted return differential isn’t quite so impressive.
# 2 Behavior matters more than math in getting wealthy and those who have the discipline to pay off debt seem to be those who have the discipline to save enough to become wealthy. Most of those who say “I’ll carry this debt and invest instead of paying it off” really don’t in my experience. Sure, they invest some, but they also spend more than the person focused on eliminating debt.
# 3 I’m convinced that still having student loan debt hanging over your head at mid career increases burnout, suicide, and unhappiness. I don’t know that I’ve seen any high quality data on this, but I have no doubt that it is a real contributor after interacting with thousands of docs. Having the debt gone improves mindset and provides choices that just having a bigger 401(k) and Roth IRA don’t provide.
I really do think that if you took two 40 year old docs and gave one a $500K student loan and a $750K 401(k) balance, and the other one a net worth of $0, that the second one would be happier and be a better spouse, parent, and doc, math be darned.
Here’s an interesting post on KevinMD on the topic: https://www.kevinmd.com/blog/2015/03/medical-student-debt-lead-suicide.html and an excerpt:
It’s up to you. It’s your life, your choice, your consequences. But I don’t personally find wiping out average student loans on an average doc income within 5 years while maxing out retirement accounts to be particularly challenging. Run the math.
$250K income.
$250K loans.
$30K tax-advantaged space.
Pay $75K in tax.
Live on $75K.
Put $30K toward retirement accounts.
That leaves $70K to put toward the student loans. At 4%, that wipes them out in a little under 4 years.
That is very well said Jim. It’s more than numbers and math.
Dr. Cory S. Fawcett
Prescription for Financial Success
I think #3 hits the nail squarely on the head. Being heavily indebted makes people feel trapped. They feel stuck in a job that is burning them out, unable to leave for a happier situation because of their debt. Unable to cut back and spend time with kids, spouse, friends, hobbies because of debt. Unable to get off the treadmill of 60-70 hour weeks because of the fear of a lower income and inability to pay their debt. Unable to switch careers to something that may be more fulfilling because of debt. The worst part is that medical school debt becomes controlling even before you finish; the amount of debt is such that dropping out is not an option, because the only way (barring an entrepeneurial lightning strike) to pay back the debt is to work as a doctor.
This is spot on, and exactly what I preach to my residents and young colleagues.
TPP
When you finish residency you aren’t working for yourself – you’re working for your mortgage, your car payment and your student loans.
Debt is an anchor. Being debt free is freedom.
When I discovered WCI in 2011 it motivated me to pay off $225,000 in student loans in 18 months. I’ve never once regretted that decision.
Did anyone read the WSJ article on the orthodontist in Utah that owes over $1 milllion in student loans from USC dental school and subsequent orthodontic residency?
https://www.msn.com/en-us/money/careersandeducation/mike-meru-has-dollar1-million-in-student-loans-how-did-that-happen/ar-AAxNjSr?li=BBnbfcN
There are so many moving parts to discuss.
Curious what advise we might have for him. He has to start somewhere, no?
I sent him a copy of the book, coupon codes for both online courses (free), and a letter inviting him to dinner. He lives just a few miles from me. We’ll see if he responds. Dave Ramsey also invited him out.
Most drastic fix is sell everything, move somewhere cheap to live where he can get paid much more, and live like a resident. But honestly as bad as his student loans and lifestyle spending, the main problem is his income. If he triples his income, neither his lifestyle nor his debt is that big of a deal.
Dental school is the new law school- they are popping up everywhere and charge outlandish tuition rates. I agree the poor fellow got taken, but he sure didn’t make it easier on himself or his family.
How could he decide to have kids while in school accruing debt with no plan? And even more insane they upgraded to a two bedroom and bought a Mercedes and that he did a crazy orthodontics “residency.” The 340k was doable, but he really lost his mind. He has a family!
I feel terrible for his children as they will probably have to bail him out, and he really thought about his own dreams and didn’t seem to think of them at all, and still isn’t with his insane 25 year repayment plan. I’m sure that he is simply overwhelmed, but he really needs to put his kids first. At least stop the Panda Express lunches.
Sure, he made some bad decisions, but I wouldn’t put too much blame on him. I mean, haven’t we all made some bad decisions? I hired a fee-based advisor. I bought whole life insurance. I believed a recruiter’s lies. I bought a house twice when I shouldn’t have. I got swindled by an appraiser I made the mistake of trusting.
He came out of undergrad debt-free. That’s a great move. He’s only got two kids- that’s hardly crazy. I mean, I had one before the end of my intern year and lots of my med school classmates had kids. He bought used cars. He lived in a family member’s basement to save money for over a year. They rented a relatively cheap place for Southern Cal. I mean, I did a rotation in Irvine 5 years earlier and rented a room that was 2/3 what they paid for their apartment. A room. An unsecured room. Where the landlord urinated on my bed and kept my deposit.
Panda Express isn’t bankrupting him and neither is the Tesla. This is the natural consequence of going to an expensive dental school in a high cost of living area and then an expensive residency in a high cost of living area and paid for it all (including living expenses) with student loans and then deferred loans until he could get his income going.
There are tons of other docs out there in a similar place. They just weren’t willing to have a WSJ reporter over to the house. This is the way it is now and I know it’s hard to relate for those who graduated in the 2000s, much less the 1990s or 1980s, but it really is the way it is for those who don’t come from money.
Right, although I think the undergrad was his parents’ doing. You do make an excellent point that the loan situation really changed around 2009 and the interest rates went crazy.
The best move he could have made would be to do EXACTLY what you did and join the military. I agree it’s not crazy to have two kids or six or ten, but it’s certainly rough to put them through this. I still feel bad for them.
How would you counsel him? I think the poor fellow is so awfully bad with money that he would probably do best in something like the military where they just might pay off his loans for him.
Does the military do orthodontics? Not sure that would have worked with his career goals. I guess he could have had them pay for dental school, did four years as a generalist, and then done a civilian ortho residency. I had someone email me this week with that plan- but he was still taking out another $200-300K in loans to do that.
Joining the military now isn’t going to help Dr. Meru.
Yes, the military is just not an option now.
How would you counsel him? Leave corporate dentistry and do PSLF? Try and get a higher paying job? I believe most of the higher paid orthodontists own their own practices, which doesn’t seem to be an option for him. Move from his fancy doctor house? Encourage his wife to earn a high dollar amount? Join the reserves/IHS/whatever else will repay his loans?
Do you know of any 501(c)3 orthodontist jobs? I don’t.
My suggestion was posted up above, move to someplace cheaper where he can earn more, downsize his lifestyle spending, refinance whenever possible, and send the lender huge checks. He probably will need to open his own practice which likely involves more debt in order to get that DTI better.
I have no idea if the IHS has orthodontist jobs, but they certainly have general dentistry, which might be a better gig, at least financially. Apparently orthodontists don’t earn money like they used to now that there’s Invisalign and the field is quite saturated. If he can stand doing general dentistry, I would look there. They have loan repayment in most cases that’s renewable annually and it’s also PSLF-eligible.
In all honesty, he’s getting a decent deal right where he is. Fancy doctor car, fancy doctor house in a fancy doctor neighborhood, fancy patients, and Uncle Sam will cover most of the debts except that pesky tax bill, but he should be able to save to cover that.
I dunno, saving up an extra $700K on a $225K salary isn’t insignificant.
It takes $10,500 a year over 25 years compounded at 7% to reach 700k. This shouldn’t be a challenge. He’s getting a great deal. Living a fancy lifestyle and only needs to spend $1500 or so a month on loan payments and less than $1000 a month compounded to pay off his loans. Still keeps doctor house, doctor car, doctor vacays etc. The taxpayer is the one who is getting the short end in this deal.
I don’t read the situation quite like that. I have a sense that he figured out how to work the system to finance a rather opulent lifestyle while ignoring his debts (one commenter linked his instagram feed – multiple lavish snowboarding trips within the last 6 months). Oh and he works part time. Meanwhile, I drive a hatchback, I choose NOT to go snowboarding in BC, I choose NOT to take overseas vacations, etc. in order to pay off my obligations early. Dude has no shame, and little evidence of sound judgment.
If you’d been snowboarding in BC before, you might prioritize it more in your financial life. 🙂
I thought he was a sponsored athlete anyway, so perhaps he isn’t paying for those trips. I dunno.
Heh. Been skiing in UT (Snowbird), and honeymooned in Banff, so I hear you. However, unlike Dr Meru, I am also practiced in the art of delayed gratification. I’ll be heading out there again once I’ve killed my debts (3-4 years).
I hear you. See you in a few years.
Agreed, he’s working the system hard while living way higher on the hog than the rest of us. A genius.
He is only paying ~$1500 a month on his loans. To pay his 700k in taxes, he only needs to save $10500 a year over 25 years compounded at 7%. So he really is only spending $28500 a year to pay off his insane loans. That’s not a huge amount. He earns $225000 a year, so conservatively $146000 a year after taxes. $28500 a year to the loans, $20000 to retirement. Guy doesn’t work that hard and is living it up. Agreed on the feed: https://www.instagram.com/michaelmeru44/
The only people who are really on the hook here are the taxpayers. He’s shameless, and could give a master class to the rest of us on how to work the system while seeming like a hapless victim. Sign me up, I guess!
What’s fraudulent? This is the way PAYE works. Is applying for food stamps or Medicaid that you qualify for fraudulent? PAYE makes a lot of sense at DTIs of 4+. It’s hard to get excited about boosting your income when 10% of it goes to additional student loan payments and 30%+ of it goes to the taxman. I just hope he’s actually putting $10,500 away on the side for the tax bill.
No fraud. Just working the system, and it’s brilliant, it’s just funny that people see him as the victim when I’m sure he’s laughing all the way to the bank and on all his fancy trips.
I bet if he works just a tad more he can save the 10k a year.
Genius, as I said.
I am a 41 yo Interv Cards in the south making ~$550k. We are a one income household and I have been out 3yrs (late start, lots of training). I max out all retirement accounts, back door Roth (me and spouse), Mega Back Door Roth (~30K, 1st yr doing so), $10K per month in brokerage accounts (just past 6 months), and $1000 per month in 529. I owe $180k in student loans at 3.75% and $400K mortgage at 4%. Currently have $450K in retirement, savings, and investments. Networth $400k. We are not frugal, but don’t spend loads either ( bought used vehicles, I do my oil changes, budgets for Christmas, etc..).
I have gone back and forth with paying off debt with an angry fervor versus a slower, middle of the road pace while being able to save and invest – same old story. My current plan is to be able to retire in 10-12 yrs – likely will just change paths but stay in medicine. This goal has set the pace on paying off my mortgage and student loans – 6 yrs for student loans, 10-12 yrs for mortgage (from now). I still lean to paying off debt faster by using quality/productivity bonus money to help accelerate payoff off of the student loans.
Long story short, like many things in life, extremes are not usually the best. Because of my income, I have more options. But, because of my 10yr goals and late start, I have fewer options.
If I can have a balanced portfolio of stocks, bonds, and real estate, then there has to been a reasonable income to debt ratio (and even indexed if the debt is used to grow wealth like income property). The advice is sound, but must be tailored to the situation and goals.
Seems like you’re in a reasonable place to me. But surely you recognize that you’re way ahead of the typical doc, right? Despite your slightly non-traditional start.
One month ago, we finished paying off my husbands medical school (and a little undergrad) debt. I haven’t crunched all the numbers yet, but I know it was just over $300,000 when he finished residency in 2014.
We refinanced 3 times in 4 years. Twice with SoFi and once with First Republic Bank as interest rates dropped. FRB even refunded us the interest we paid over the last 2.5 years for paying off the loan in under 4 years (!).
Thank you, WCI, for caring enough to get mad – and to share your wisdom. You saved us a ton of money with the SoFi! I felt fear when I learned how much medical school was going to cost my husband early in our dating relationship. I remember feeling out of breath when I saw all those zeros. We were careful, frugal, and still had $300,000 to pay off.
Today I’m in shock that we paid it all off. I look forward to having the extra $3k each month to save and for security. I feel a little better knowing my husband could drop a few more hours from his schedule each month if he wants to. He talks of dropping from 36h to 24h a week occasionally to see me and our 1.5 year old more. He’s only 4 years from residency so your comments on the burden of debt and burnout are spot on! It’s nice to know he has a choice to do that anytime if he wants to.
He’s excited to buy a new bike (n+1) – we agreed he could spend the returned interest on a new commuter bike :).
Thank you.
Doing stuff like buying a bike makes me feel rich, and that allows me to be frugal elsewhere.
You are rich 🙂
Yes, but there’s a difference between being rich and feeling rich. Described here:
https://www.whitecoatinvestor.com/10-ways-to-feel-rich/
The forum that post is based on is hilariously reminiscent of the endless SDN threads of “I have 275/270 board scores, AOA, research and poop rainbows, do you think I have a chance at matching XYZ specialty?!” Got a good chuckle out of the people wondering if they’ll be “OK” retiring on 15+ million without any debts.
Way to go! I love hearing the success stories of tackling the mountain of debt!
Isn’t one of the biggest obvious things missing here? When you pay off your loans you won’t get them in the divorce? Almost every doctor I have read about gets the loans in the divorce. This should be an even bigger reason to have the first dollars get the one-sided debt gone. With debt added in, I think most doctors get way less than 50% in a divorce.
Excellent point.