$250,000 Debt, High-Income Potential, beginner starting from ZERO

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asdfgghk
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Joined: Thu Apr 23, 2020 2:03 pm

$250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Fri May 08, 2020 8:52 am

Relatively new here and just starting my journey to financial literacy. Been reading a lot during quarantine but its all theory until put into practice.

I'm late 20's. I just graduated medical school and owe $250k in loans (~3.5% interest). I start a 4 year residency training soon and will be making ~$57k/year. After that, I'll be making ~$250k a year in salary (before taxes).

-My training is in a very low CoL area, I can walk to work.
-No Spouse/Kids (don't care about 529 or other similar plans until I make a decent salary)
-I am an extremely frugal person with my money. I already live far below my meansand I don't plan on ever changing this regardless of income. I'm very content with little...so this will not be an issue (time-restricted diet, buy everything used, minimal A/C and heat use, unplug everything, cold showers,turn off shower while shampooing, etc)
-Got $2,700 to my name in Emergency Savings (about 3 months). Living with rents until my training starts during summer. In a savings account (poor interest..like 0.5%)
-I have no 401k or IRA.
-Employer offers 403b but no match. All I know is they offer "fidelity and non-fidelity funds from conservative short-term funds to aggressive stock mutual funds."
-No CC debt and always pay on time.

Any recommendations on a Gameplan and where to start (ie: index fund, IRA, chip away at my debt, etc)? I was planning on just going with Index funds until I figure out what the heck I'm doing. I checked Robinhood but I didn't see that many options...; Anything you wish you knew early on as a youngster/preventable mistakes you'd made.

Books I've read since quarantine:
Boggleheads Guide to Investing (2nd edition)
Boggleheads Guide to retirement planning
The Little Book of Common Sense Investing (John Bogle)
The smartest portfolio you'll ever know
Few Dave Ramsey books

Books to be read:
The White Coat Investor
The intelligent investor (sibling is reading my copy)


THANK YOU SO MUCH FOR THE HELP. YOUR KINDNESS IS IMMENSELY APPRECIATED!!!!

EDIT 1 (5/8/20)
1)I am in a specialty that is is lighter on the hours than other specialties (40-60hr weeks). I can't moonlight for first few years so barring another COVID-like event, the option to moonlight will be on the table.
2)Fellowship: Undecided...there is little to no bump in salary in this field. I'll re-evaluate in a few years.
3)My minimum payment will be $0 my first year since I will be doing either REPAYE or PAYE. I originally planned on REPAYE, but I am going to look more into PSLF in which case ill look into PAYE.
4)Interest is 6-7%...I originally had in mind REPAYE which would pay for 50% of remaining interest on payments so i just halved that number as a rough estimate.
5) I spent $~12,500 in living expenses last year(food, health, gas, etc). This number included traveling for interviews/board exams. I'm surprised it was this low with the edu expenses (but I lived in another low CoL area as well). I anticipate it to be similar or lower next year.

Thank you so much for all who replied, I am beyond appreciative. The shower comments gave me a good laugh :D
Last edited by asdfgghk on Sat May 09, 2020 1:53 pm, edited 3 times in total.

21&lewis
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by 21&lewis » Fri May 08, 2020 9:03 am

You have a "mortgage" but no house (eg; student loans). Figure out a plan to manage those. Specifically, read about PSLF, PAYE, RePAYE, and then read it again. Understanding your options to manage that loan burden will be your greatest asset in the short-term future.

magicrat
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by magicrat » Fri May 08, 2020 9:06 am

If I were you my priorities during residence would be:

1. Make minimum debt payments
2. Establish emergency fund
3. Max all tax-advantaged space. (403b, Roth IRA, HSA if you have one)
4. Invest in Hot Showers
5. Use any extra to pay down debt

I also suggest developing an Investment Policy Statement (see the Wiki), which will help you lay out your goals, risk tolerance, and plan.

Also beware insurance salesmen masquerading as financial advisors. They love to come after new doctors and sell all manner of whole life and annuity garbage.

After residence I would pay down the debt fast.

retired@50
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Location: Living in the U.S.A.

Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by retired@50 » Fri May 08, 2020 9:07 am

asdfgghk wrote:
Fri May 08, 2020 8:52 am
...
cold showers, etc
...
Any recommendations on a Gameplan and where to start
...
THANK YOU SO MUCH FOR THE HELP. YOUR KINDNESS IS IMMENSELY APPRECIATED!!!!
Please permit yourself the luxury of a hot shower.

Stay away from new financial start-ups like Robinhood, I'd suggest using Vanguard.

Stick to index funds, just like the ones recommended in all those books you've read.

The three-fund portfolio is always an excellent starting position, and, lacking a good argument to use something else, may serve you well for a lifetime.

https://www.bogleheads.org/wiki/Three-fund_portfolio

Regards,
This is one person's opinion. Nothing more.

bloom2708
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by bloom2708 » Fri May 08, 2020 9:07 am

I would probably but $6k in your Roth IRA each of the next 4 years. Vanguard or Fidelity.

Save up a 6-12 month Emergency Fund.

Put any additional savings you can muster in the pre-tax 403b. Pick a low expense ratio S&P 500 index or Total US index. 100% stocks.

Pay the minimum on the student loans for the 4 years. Don't forget to live some and have some fun.

Then, once your salary notches up, go hog wild on the student loans. Do that before you buy the new car or the big house.

You will be off to a great start and I'm guessing you can knock the loans off in 2-3 years once the higher salary starts.

Good luck on the journey!
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

infotrader
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by infotrader » Fri May 08, 2020 9:11 am

GIven your future earning potential, during residency:
Max Roth IRA, but contribute 0 to 403b.

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beernutz
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by beernutz » Fri May 08, 2020 9:14 am

asdfgghk wrote:
Fri May 08, 2020 8:52 am
Relatively new here and just starting my journey to financial literacy. Been reading a lot during quarantine but its all theory until put into practice.

I'm late 20's. I just graduated medical school and owe $250k in loans (~3.5% interest). I start a 4 year residency training soon and will be making ~$58k/year. After that, I'll be making ~$250k a year in salary (before taxes).

-My training is in a very low CoL area, I can walk to work.
-No Spouse/Kids (don't care about 529 or other similar plans until I make a decent salary)
-I am an extremely frugal person with my money. I already live far below my meansand I don't plan on ever changing this regardless of income. I'm very content with little...so this will not be an issue (time-restricted diet, buy everything used, minimal A/C and heat use, unplug everything, cold showers,turn off shower while shampooing, etc)
-Got $2,700 to my name in Emergency Savings (about 3 months). Living with rents until my training starts during summer. In a savings account (poor interest..like 0.5%)
-I have no 401k or IRA.
-Employer offers 403b but no match. All I know is they offer "fidelity and non-fidelity funds from conservative short-term funds to aggressive stock mutual funds."
-No CC debt and always pay on time.

Any recommendations on a Gameplan and where to start (ie: index fund, IRA, chip away at my debt, etc)? I was planning on just going with Index funds until I figure out what the heck I'm doing. I checked Robinhood but I didn't see that many options...; Anything you wish you knew early on as a youngster/preventable mistakes you'd made.

Books I've read since quarantine:
Boggleheads Guide to Investing (2nd edition)-about 100 pages to go (so far the best book I've read)
Boggleheads Guide to retirement planning
The Little Book of Common Sense Investing (John Bogle)
The smartest portfolio you'll ever know
Few Dave Ramsey books

Books to be read:
The White Coat Investor
The intelligent investor (sibling is reading my copy)



THANK YOU SO MUCH FOR THE HELP. YOUR KINDNESS IS IMMENSELY APPRECIATED!!!!
Can I ask what the minimum monthly payment is on your med school loans?
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers

lakpr
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by lakpr » Fri May 08, 2020 10:03 am

Given that you are a medical student and expecting steep increase in income after you complete residency, all your investments should be Roth while you are in residency.

That means Roth IRA and Roth 403b. Invest that into a 100% stocks portfolio for now. You have at least 30 years of investment horizon in front of you, no reason to not be 100% stocks at this time.

For sure max out the Roth IRA, and to the extent possible max out the Roth 403b. If you have Fidelity at your workplace 403b, that's excellent. Fidelity offers all the basic building blocks of a 3-fund portfolio at a very low cost.

mega317
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by mega317 » Fri May 08, 2020 10:33 am

I don't plan on ever changing this regardless of income
This is unrealistic. Contentedness with very little is going to feel a lot different when you see that first paycheck with like 15k after witholdings.
lakpr wrote:
Fri May 08, 2020 10:03 am
That means Roth IRA and Roth 403b.
Agree.

Resident probably don't need a big emergency fund since you have some solid job security, who is going to fire a 58k doctor lol?

The intelligent investor is a waste of time right now. Read everything on WCI's website especially on loans. You don't have to agree with it all but understand it.

Get disability insurance.

New residents have 100 priorities ahead of choosing specific investments.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

eagleeyes
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by eagleeyes » Fri May 08, 2020 10:34 am

1. Invest in Roth IRA first
2. Then add to 457 if possible.
3. If you think you might work for non profit, consider exploring the PSLF. The program is described in detail on white coat investor. Would look into it before the government closes/changes the program
4. Look into moonlighting if your specialty permits
5. Pay the minimum in loan payments for now
6. Rent don’t buy a house
7. Don’t refinance loans. You lose option to PSLF this way

9. Be the best at your specialty. Work hard at residency. This is your time to learn. Make the most of it. If there’s a scrubby procedure that nobody likes to do, be great and fast at it.
10. Learn to be fast and efficient seeing patients
11. Disability is good to have now. Get the max at your salary. Would recommend Lawrence Keller in white coat investor. Other options are also available on site

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ruralavalon
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by ruralavalon » Fri May 08, 2020 10:41 am

Contribute $6k annually to a Roth IRA at a low cost provider like Vanguard, Fidelity or Schwab. Invest in a very diversified stock index fund with a low expense ratio, like Vanguard Total Stock Market Index Fund (VTSAX).

Does your employer's 403b plan permit Roth contributions? What funds are offered in that plan. Please give fund names, tickers and expense ratios.

Does your employer offer a 457 plan too? Is your employer a government or government agency? Or is your employer a charity or non-profit? What funds are offered in that plan. Please give fund names, tickers and expense ratios.

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

mega317
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by mega317 » Fri May 08, 2020 11:14 am

eagleeyes wrote:
Fri May 08, 2020 10:34 am
1. Invest in Roth IRA first
2. Then add to 457 if possible.
3. If you think you might work for non profit, consider exploring the PSLF. The program is described in detail on white coat investor. Would look into it before the government closes/changes the program
4. Look into moonlighting if your specialty permits
5. Pay the minimum in loan payments for now
6. Rent don’t buy a house
7. Don’t refinance loans. You lose option to PSLF this way

9. Be the best at your specialty. Work hard at residency. This is your time to learn. Make the most of it. If there’s a scrubby procedure that nobody likes to do, be great and fast at it.
10. Learn to be fast and efficient seeing patients
11. Disability is good to have now. Get the max at your salary. Would recommend Lawrence Keller in white coat investor. Other options are also available on site
A couple quibbles. I'm not a big fan of moonlighting in residency. The potential earnings in most specialties is tiny compared to the future earnings and will not make a noticeable difference on the debt. Residency is hard enough and additional hours are more likely to lead to burnout and similar. And moonlighting has been cut everywhere as there are no patients everywhere except inpatients in hard-hit areas, so it might not even be an option.
Don't learn to be fast and efficient now. Learn to take the best care of the patients. As you get that down, it will ultimately lead to efficiency.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

eagleeyes
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by eagleeyes » Fri May 08, 2020 11:26 am

Mega,

Obviously learn to take best care of patients. That’s a given. If you are struggling at residency, shouldn’t be moonlighting. Probably need to do a chief year and Fellowship

The residents we see that have moonlighted appear to have a shorter ramp up time and are more efficient than those adjusting to a brand new job for the first time post residency. I can’t tell how many times a new attending gets tagged as being (rightfully it wrongfully) and the difference in perception by colleagues.

Sic Vis Pacem
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Sic Vis Pacem » Fri May 08, 2020 11:32 am

You've got White Coat Investor on your reading list; good.

Since you've got time anyway, go to his website and read it front to back. Read the comments. There is such a wealth of high-quality, tailor made advice on that site for someone in your position and disposition.

If you still have questions, come back.

Sgal8713
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Sgal8713 » Fri May 08, 2020 11:36 am

+1 on Roth IRA and Roth 401k. I am couple years out and paying those taxes at 12% are well worth the Roth growth. I also agree and reading more about the loan options, you will be 40% of the way to forgiveness by the time you are done with residency.

I have follow WCI closely for years and strongly encourage to read the books and blogs for straight forward thoughts/answers about our situation.

Remember for the next 4 years (and later): Head up, the work you will do is important. Be good.

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White Coat Investor
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by White Coat Investor » Fri May 08, 2020 11:38 am

asdfgghk wrote:
Fri May 08, 2020 8:52 am
Relatively new here and just starting my journey to financial literacy. Been reading a lot during quarantine but its all theory until put into practice.

I'm late 20's. I just graduated medical school and owe $250k in loans (~3.5% interest). I start a 4 year residency training soon and will be making ~$58k/year. After that, I'll be making ~$250k a year in salary (before taxes).

-My training is in a very low CoL area, I can walk to work.
-No Spouse/Kids (don't care about 529 or other similar plans until I make a decent salary)
-I am an extremely frugal person with my money. I already live far below my meansand I don't plan on ever changing this regardless of income. I'm very content with little...so this will not be an issue (time-restricted diet, buy everything used, minimal A/C and heat use, unplug everything, cold showers,turn off shower while shampooing, etc)
-Got $2,700 to my name in Emergency Savings (about 3 months). Living with rents until my training starts during summer. In a savings account (poor interest..like 0.5%)
-I have no 401k or IRA.
-Employer offers 403b but no match. All I know is they offer "fidelity and non-fidelity funds from conservative short-term funds to aggressive stock mutual funds."
-No CC debt and always pay on time.

Any recommendations on a Gameplan and where to start (ie: index fund, IRA, chip away at my debt, etc)? I was planning on just going with Index funds until I figure out what the heck I'm doing. I checked Robinhood but I didn't see that many options...; Anything you wish you knew early on as a youngster/preventable mistakes you'd made.

Books I've read since quarantine:
Boggleheads Guide to Investing (2nd edition)-about 100 pages to go (so far the best book I've read)
Boggleheads Guide to retirement planning
The Little Book of Common Sense Investing (John Bogle)
The smartest portfolio you'll ever know
Few Dave Ramsey books

Books to be read:
The White Coat Investor
The intelligent investor (sibling is reading my copy)



THANK YOU SO MUCH FOR THE HELP. YOUR KINDNESS IS IMMENSELY APPRECIATED!!!!
Residency priorities are:
1) Disability insurance
2) Term life insurance if anyone else depends on your income
3) A student loan plan
4) A written plan for your first 12 attending paychecks

Anything else is icing on the cake.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

mega317
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by mega317 » Fri May 08, 2020 11:46 am

eagleeyes wrote:
Fri May 08, 2020 11:26 am
The residents we see that have moonlighted appear to have a shorter ramp up time and are more efficient than those adjusting to a brand new job for the first time post residency. I can’t tell how many times a new attending gets tagged as being (rightfully it wrongfully) and the difference in perception by colleagues.
Who cares? That will all get sorted out quickly. What specialty are you in?
https://www.bogleheads.org/forum/viewtopic.php?t=6212

delamer
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by delamer » Fri May 08, 2020 11:48 am

I take you at your word that you are very frugal. However, you will have some expenses for rent/utilities, food, healthcare (including dental), clothing, minimum student loan payments, federal/state income taxes, Social Security/Medicare withholding.

So figure out what your annual expenses will be, subtract them from your $58,000 salary, and report back.

Rock-your-own-EE-uhm
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Rock-your-own-EE-uhm » Fri May 08, 2020 1:52 pm

At risk of beating the same drum, you are gonna need a long hot shower to wash off the hospital.

Make the minimum payments.
Figure out if a loan repayment program will work for you and your specialty.
Fill the front door Roth bucket fully while you can.
Self preserve (this would include AC, heat, hot water, exercise, etc).
Control Spending (shouldn’t be a problem for you).
Join the best group you can find when you get done, even if they don’t pay the most.
Find a spouse if you don’t already have one that has similar goals, aspirations, and compatible proclivities.
Make a life mission statement before you have an investing plan.

“Living simply” can often be confused for living so frugally that it makes life complicated and painful. Saving the largest possible amount money is not the goal if investing success (or FIRE or retirement ease) is.

Also, don’t listen to the moonlighting comments. Moonlighting is totally dependent on the residency program and the type of moonlighting varies significantly.

GMan82
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by GMan82 » Fri May 08, 2020 2:44 pm

I usually tell my residents to be able to cover at least one emergency, like a car repair, new washing machine, or other unanticipated expense. Arbitrarily I chose to tell them to consider having about $1k as an EFund since their job is one of the most secure. That should of course change with the beginning of Attending years.

I agree with the WCI’s post above. It’s his advice that I followed through residency, adding in Boglehead’s during and after fellowship.

Your EFund is good. Next work on disability insurance. If you have no one who will depend on you (spouse, kids, maybe parents?) then life insurance isn’t needed. Otherwise cheap term is good. If your student loan interest rate is 3.5%, am I right in saying those are privatized loans and not federal? If those are private, are there any special residency provisions attached?

If you’re able, then starting a ROTH IRA and investing in vanguard funds or the equivalent is a good idea.

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Thrifty Femme
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Thrifty Femme » Fri May 08, 2020 2:56 pm

Contact Stephanie Pearson, https://www.pearsonravitz.com, to get disability insurance. Stephanie was an OB/GYN that tried to make a claim on her disability policy only to discover it was made of swiss cheese. She fought and won and now sells solid disability insurance. She mostly works with doctors but will work with non medical professionals too.

mega317
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by mega317 » Fri May 08, 2020 3:45 pm

Thrifty Femme wrote:
Fri May 08, 2020 2:56 pm
She fought and won and now sells solid disability insurance.
How does this work? Is she selling a different product than the usual DI from the big 5 (6?) companies?
https://www.bogleheads.org/forum/viewtopic.php?t=6212

wish
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by wish » Fri May 08, 2020 4:16 pm

You are on the right track with your investment studies.
If you are in a good immersive residency, really applying yourself there and doing you investment studies as an avocation should trump any moonlighting in the long run — both in satisfaction and and in long term financial outcome.
When I was a resident, moonlighting outside the system without approval was grounds for firing.

eagleeyes
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by eagleeyes » Fri May 08, 2020 5:36 pm

The moonlighting advice is more or less applicable to different specialties. ER and IM would be quite conducive to moonlighting.

I’d recommend moonlighting for a couple of reasons.

1. Community medicine doesn’t think or work like the ivory towers. Some people are in for a culture shock when they make the jump. Good to see how different attendings think and act

2. Working with different heath systems is helpful in making someone versatile. You learn different procedures at diff places. You learn areas where you might be weak

3. You get an understanding of business side of medicine. Without deeply understanding this side of medicine, you are truly sheep and easy pickings ripe for getting taken advantage of in private practice. Learn how your specialty deals with rvus and wrvus.

4. Obviously money in training is nice

Just my two cents.

JPM
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by JPM » Sat May 09, 2020 4:07 pm

First priority is to master the medicine as completely as you can. Any other priority pales in significance. That is your human capital and residency is when you begin to establish its value. The quality of your residency and your performance there determine what doors open for you for your next step in professional life be it practice, fellowship, or a chief year.

Moneywise, DI is first IMO especially if you are single with no kids. Everybody knows about our risk from Covid 19, but my fellow trainees got hepatitis, TB, and other infectious diseases from patients. Guys got concussed being sucker punched by psych patients. Kissing the floor during gunplay in the ER was not unknown. Things can happen and having the DI can help you get back into the game if you get something that takes time to put behind you. 403b Roth option if available (otherwise a personal Roth) is next. After that, matter of personal choice among paying down debt, piling up cash, taxable investments, etc. The way things look now, the stock market may be on sale for your entire residency and if so don't miss out on it.

I had a loan from a revolving fund so I paid it off during residency and fellowship with some moonlighting earnings, knowing the money would be loaned out to another needy student as soon as I paid it back. We had a sick kid born the end of junior year and so we were broke. There was no family in a position to help. The med school helped us out with that fund or I would have had to drop out with a year to go. The rest of the debt I paid off the second year in practice, but it wasn't much by today's standards.

aristotelian
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by aristotelian » Sat May 09, 2020 4:17 pm

infotrader wrote:
Fri May 08, 2020 9:11 am
GIven your future earning potential, during residency:
Max Roth IRA, but contribute 0 to 403b.
Depends on his tax bracket. I would probably max 403 (at least with marginal income in the 22% bracket) then pay down loans, then Roth. Even with tax free gains, 6.7% guaranteed is outstanding risk-adjusted return.

OP, what will be your tax bracket during residency?

lakpr
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by lakpr » Sat May 09, 2020 4:24 pm

aristotelian wrote:
Sat May 09, 2020 4:17 pm
OP, what will be your tax bracket during residency?
OP said their salary during residency is 58k per year. As a single, and assuming usual pretax deductions for health care and possibly employer provided insurance, that puts him into the 22% bracket by just a whisker

aristotelian
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by aristotelian » Sat May 09, 2020 4:41 pm

lakpr wrote:
Sat May 09, 2020 4:24 pm
aristotelian wrote:
Sat May 09, 2020 4:17 pm
OP, what will be your tax bracket during residency?
OP said their salary during residency is 58k per year. As a single, and assuming usual pretax deductions for health care and possibly employer provided insurance, that puts him into the 22% bracket by just a whisker
Ah, I missed that bit of info. I would be tempted to skip Roth and 403 and just pay down debt 100%, unless he plans to go for PSLF.

Topic Author
asdfgghk
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Sat May 16, 2020 2:07 pm

Thank you everyone for the great investment advice, it will be put to use. I am now at a cross road between PSLF or Not.

My debt isn't terrible (250k) and my anticipated attending salary should be about the same or higher. With my frugal lifestyle I can pay this off in a year or two and would likely have a higher salary in private practice than if I went PSLF. But paying off the debt right away comes at the opportunity cost of: investing more money, investing more earlier on, and securing a TSP plan.

If I were to pursue PSLF, I can save/invest (more) $ that would have otherwise went to loans during/after residency. I was planning on then working for the government which counts for PSLF (plenty of positions in the geography where I want to live long-term). I will get paid less but I'd also be given a TSP which seems to be better than a 401k in most instances and I get to keep that TSP for life and can roll over any future 401k funds even if I leave for the private sector.

Any thoughts/ball park estimates on which plan would be have me come out ahead financially?

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MillennialFinance19
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by MillennialFinance19 » Sat May 16, 2020 3:44 pm

asdfgghk wrote:
Sat May 16, 2020 2:07 pm
Thank you everyone for the great investment advice, it will be put to use. I am now at a cross road between PSLF or Not.

My debt isn't terrible (250k) and my anticipated attending salary should be about the same or higher. With my frugal lifestyle I can pay this off in a year or two and would likely have a higher salary in private practice than if I went PSLF. But paying off the debt right away comes at the opportunity cost of: investing more money, investing more earlier on, and securing a TSP plan.

If I were to pursue PSLF, I can save/invest (more) $ that would have otherwise went to loans during/after residency. I was planning on then working for the government which counts for PSLF (plenty of positions in the geography where I want to live long-term). I will get paid less but I'd also be given a TSP which seems to be better than a 401k in most instances and I get to keep that TSP for life and can roll over any future 401k funds even if I leave for the private sector.

Any thoughts/ball park estimates on which plan would be have me come out ahead financially?
You may be exaggerating how good the TSP plan is. It’s great, but shouldn’t be a huge factor in choosing federal employment in my opinion. There are a lot of good 401k plans out there.

lakpr
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by lakpr » Sat May 16, 2020 6:10 pm

Student loan debt of 3.5%, if you resolve to pay it down, is the equivalent of earning a 3.5% CD guaranteed. Given the bond yields right now around 1.6%, and the situation with Covid-19 that seems to cast a long shadow over near-term future market returns, and the austerity / opportunity cost involved in pursuing PSLF, my advice is to start paying down the loans as aggressively as possible. Your investment horizon will be delayed by an year or two, in the long run that really isn’t going to matter, and it really frees you up to pursue your goals : whether to follow money (nothing wrong with it) or follow service to fellow humans (same as PSLF route). Basically, YOU will be making that choice rather than someone making (or influencing) that choice.

I would also echo the advice from the previous poster. TSP is good, even excellent, but there are private 401k or 403b plans that come pretty darn close. One advantage that TSP does not offer is After tax contributions that can be converted to Roth 401k / Roth IRA; some 401k plans do. MBR is also gradually becoming more common

Topic Author
asdfgghk
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Sun May 24, 2020 12:41 pm

Any thoughts on parking and leaving $1000 each in a HYSA at BlueFCU and DCU (costs like $10 donation to open up an account)? The interest on the first $1000 is ~5-6%. Was considering just leaving $1000 in each. or would it be better to just invest this $2000 (1k + 1k) into like an index fund?

In terms of investing in a taxable account, should I use these investments to get a jump start to pay off my debt after graduating residency? Or just as a means of starting my investments, albeit very small, early??

I'm also torn between using extra money to chip at the loan versus to invest...gut says loan, brain (?) says invest.

Thank you everyone :)
Last edited by asdfgghk on Sun May 24, 2020 1:32 pm, edited 1 time in total.

Grt2bOutdoors
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Location: New York

Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Grt2bOutdoors » Sun May 24, 2020 12:59 pm

magicrat wrote:
Fri May 08, 2020 9:06 am
If I were you my priorities during residence would be:

1. Make minimum debt payments
2. Establish emergency fund
3. Max all tax-advantaged space. (403b, Roth IRA, HSA if you have one)
4. Invest in Hot Showers
5. Use any extra to pay down debt

I also suggest developing an Investment Policy Statement (see the Wiki), which will help you lay out your goals, risk tolerance, and plan.

Also beware insurance salesmen masquerading as financial advisors. They love to come after new doctors and sell all manner of whole life and annuity garbage.

After residence I would pay down the debt fast.
+1 And.....be wary of bankers, financial advisors, accountants, attorney's masquerading as financial advisors - anything they can do to sell you an investment plan to pay them fat commissions. Stay away from Edward Jones, even the discount brokers will try to steer you into a "managed" investment account - Wealthfront, Betterment, Blackrock, Fidelity, Schwab - there is no reason why you need to own more than 3-5 mutual funds or ETF's in your investment account. More does not mean more diversified, it just means more complexity. You can make do with a domestic broad based equity index fund, perhaps an overweighing of a particular asset class or sector of your choosing, an international fund, a bond fund, perhaps a money market fund for immediate liquidity. Outside of that, a checking account and a savings account (or not).

Pay particular attention to mortgage bankers/brokers who will tell you as a doctor you are entitled to a special doctors mortgage where you can basically borrow the entire purchase price of the home. That's great, but it's not great if you make $250K and borrow $1 million - then the house will own you as opposed to you owning the house. You don't want to become house poor. The same goes for buying an automobile - cars depreciate in value, buy a reasonable one if you need a vehicle - either a lightly used 2-3 year old vehicle or a new one that doesn't cost 51 grand or more, you can find some really nice rides in the 30-50K range, really nice ~ then prepare to drive it for at least 10 years. That is how you keep your money as opposed to others who would like to have you part with it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 22549
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Location: New York

Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Grt2bOutdoors » Sun May 24, 2020 1:03 pm

asdfgghk wrote:
Sun May 24, 2020 12:41 pm
Any thoughts on parking and leaving $1000 each in a HYSA at BlueFCU and DCU (costs like $10 donation to open up an account). The interest on the first $1000 is ~5-6%. Was considering just leaving $1000 in these?

In terms of investing in a taxable account, should I use these investments to get a jump start to pay off my debt after graduating residency? Or just as a means of starting my investments, albeit very small, early??

I'm also torn between using extra money to chip at the loan versus to invest...gut says loan, brain (?) says invest.

Thank you everyone :)
Money is money, last I looked there are no $50 bills hanging off of trees, but it appears you've found one - so take it!

How much is the interest rate on the loan? The loan interest rate is a guaranteed return. The market - offers no guarantee but it does offer the hope of large returns. If you were to invest, I would fund a Roth IRA with the money. Then you can say you've started your retirement savings, are investing and you are paying off your student loans - win, win!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
asdfgghk
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Sun May 24, 2020 1:30 pm

Grt2bOutdoors wrote:
Sun May 24, 2020 1:03 pm
asdfgghk wrote:
Sun May 24, 2020 12:41 pm
Any thoughts on parking and leaving $1000 each in a HYSA at BlueFCU and DCU (costs like $10 donation to open up an account). The interest on the first $1000 is ~5-6%. Was considering just leaving $1000 in these?

In terms of investing in a taxable account, should I use these investments to get a jump start to pay off my debt after graduating residency? Or just as a means of starting my investments, albeit very small, early??

I'm also torn between using extra money to chip at the loan versus to invest...gut says loan, brain (?) says invest.

Thank you everyone :)
Money is money, last I looked there are no $50 bills hanging off of trees, but it appears you've found one - so take it!

How much is the interest rate on the loan? The loan interest rate is a guaranteed return. The market - offers no guarantee but it does offer the hope of large returns. If you were to invest, I would fund a Roth IRA with the money. Then you can say you've started your retirement savings, are investing and you are paying off your student loans - win, win!
Every loan has a different interest rate based on the semester I took it out (range: ~6-7.5%). I believe I can pay them off individually based as I feel (ex: 18,000 @ 7.5% vs 12,000 @ 6%, etc). Under the payment program I have ("REPAYE"), I'll be paying $0 for the first year and 50% of remaining interest is paid off by government every month. The following years the mimimum payment will be no more than a few hundred.

So the interest rate is 'lower' than the stated since a large portion is subsidized.

Tellurius
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Tellurius » Sun May 24, 2020 1:48 pm

The Intelligent Investor is a trap.

Written for a different time, in different circumstances (it was written in 1949). It makes you think you can actually pick some stocks.

Best to avoid. I fell into the trap for a few years, before I discovered Bogleheads.
La nuit semblait profonde. L'hiver interminable.

TheNightsToCome
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by TheNightsToCome » Sun May 24, 2020 1:56 pm

First, do invest in hot showers.

Second, I have been accused of being a super saver (in a pejorative sense) by posters on the White Coat Investor site (saved over 88% of income after taxes last year), but I didn't do one minute of moonlighting as an IM resident, and I ran up credit card debt during my last residency year so that I could jet to Miami for weekends with my wild-child girlfriend, among other wise financial choices (no irony, I'm serious).

Residency is hard enough (at least IM residency in the days before limits on hours). Work on being good at your job, and grab any good time you can have while you're young. Your youth is priceless. I'd trade my net worth to have mine again.

Given your head start on your financial education and your natural tendency to save, you are going to have a high net worth by the time you are 40. You can focus on more important things now.

potatopancake
Posts: 26
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by potatopancake » Sun May 24, 2020 6:32 pm

Is there data about the value of LTDI during residency? I'm considering it. However, I have received advice from multiple attendings about getting insured the final year of residency, not sooner (ie, pgy-1).

Topic Author
asdfgghk
Posts: 18
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Sun Jun 21, 2020 2:23 pm

ruralavalon wrote:
Fri May 08, 2020 10:41 am
Contribute $6k annually to a Roth IRA at a low cost provider like Vanguard, Fidelity or Schwab. Invest in a very diversified stock index fund with a low expense ratio, like Vanguard Total Stock Market Index Fund (VTSAX).

Does your employer's 403b plan permit Roth contributions? What funds are offered in that plan. Please give fund names, tickers and expense ratios.

Does your employer offer a 457 plan too? Is your employer a government or government agency? Or is your employer a charity or non-profit? What funds are offered in that plan. Please give fund names, tickers and expense ratios.

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
@ruralavalon and anyone else willing to offer their opinion! (it would be greatly appreciated)

Name (ticker)= P/E ratio; Turn Over%
JH DISCPL VALUE R6 (JDVWX)= 0.71%; 88%
JPM MIDCAP VALUE L (FLMVX)= 0.86%; 13%
VANG MIDCAP IDX INST (VMCIX)= 0.04%; 15%
LOOMIS SM CP GRTH N (LSSNX)= 0.82%; 67%
VANG INST INDEX PLUS (VIIIX)= 0.02%; 4%
TRP MID CAP GROWTH (RPMGX)= 0.74%; 22.8%
GS SM CAP VALUE INST (GSSIX)= 0.97%; 47%
FID INTL INDEX (FSPSX)= 0.035%; 2%
VANG SM CAP IDX INST (VSCIX)= 0.04%; 16%

FID INTL DISCOVERY K (FIDKX)= 0.66%; 28%
FID GROWTH CO POOL (???)= 0.43%; 17%

METWEST TOT RTN BD P (MWTSX)= 0.37%; 405% (not a typo)
VANG TOT BD MKT INST (VBTIX)= 0.035%; 31%

All say "no additional fees." I am not an expert, but are there other factors that should be considered outside low P/E and maybe turnover? I read high turnover is bad, so I guess how does one balance that with the P/E?

Any recommendations? I bolded the one's that I thought looked the best due to (ofc I could be wrong and good chance I am) the lowest P/E and Turnover rates.

Outer Marker
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by Outer Marker » Sun Jun 21, 2020 2:49 pm

With low starting salary in residency and no employer match, you're probably better off contributing to a Roth vs. the 403b.

If you were to contribute to the employer plan,

80% - VANG INST INDEX PLUS (VIIIX)= 0.02%
20% VANG TOT BD MKT INST (VBTIX)= 0.035%

NxNW
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by NxNW » Sun Jun 21, 2020 3:20 pm

I think disability insurance is worth it for piece of mind. I know two residents who became disabled during training (large program and 10 year sample size). Disability insurance is pricier than hot showers, but if you have to choose go with DI.

User avatar
calvin+hobbes
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by calvin+hobbes » Sun Jun 21, 2020 3:40 pm

Definitely lock in that disability insurance, it’s much cheaper when you’re young and healthy and you hang on to it for your career.

Also another vote for maxing the Roth IRA instead of the 403b. Do that and continue to live below your means, focus on your training, solicit good advice when it’s time to job hunt and you’ll be alright.

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ruralavalon
Posts: 18501
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Location: Illinois

Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by ruralavalon » Mon Jun 22, 2020 10:47 am

asdfgghk wrote:
Sun Jun 21, 2020 2:23 pm
@ruralavalon and anyone else willing to offer their opinion! (it would be greatly appreciated)

Name (ticker)= P/E ratio; Turn Over%
JH DISCPL VALUE R6 (JDVWX)= 0.71%; 88%
JPM MIDCAP VALUE L (FLMVX)= 0.86%; 13%
VANG MIDCAP IDX INST (VMCIX)= 0.04%; 15%
LOOMIS SM CP GRTH N (LSSNX)= 0.82%; 67%
VANG INST INDEX PLUS (VIIIX)= 0.02%; 4%
TRP MID CAP GROWTH (RPMGX)= 0.74%; 22.8%
GS SM CAP VALUE INST (GSSIX)= 0.97%; 47%
FID INTL INDEX (FSPSX)= 0.035%; 2%
VANG SM CAP IDX INST (VSCIX)= 0.04%; 16%
FID INTL DISCOVERY K (FIDKX)= 0.66%; 28%
FID GROWTH CO POOL (???)= 0.43%; 17%

METWEST TOT RTN BD P (MWTSX)= 0.37%; 405% (not a typo)
VANG TOT BD MKT INST (VBTIX)= 0.035%; 31%

All say "no additional fees." I am not an expert, but are there other factors that should be considered outside low P/E and maybe turnover? I read high turnover is bad, so I guess how does one balance that with the P/E?

Any recommendations? I bolded the one's that I thought looked the best due to (ofc I could be wrong and good chance I am) the lowest P/E and Turnover rates.
Your employer's 403b plan offers many good index funds with very low expense ratios. You are fortunate.

In selecting funds to use strive for a combination of both broad diversification (to decrease risk) and low expense ratios (to increase your net returns). In general use index funds if possible.

In my opinion in your employer's 403b plan these are the better funds to consider using:
1) Vanguard Institutional Index Fund Institutional Plus (S&P 500 index fund, > 80% of U.S. stock market) (VIIIX) ER 0.02%;
2) Fidelity International Index Fund (developed markets only) (FSPSX) ER 0.035%; and
3) Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.035%.

Does your employer's 403b plan permit Roth contributions?

In your situation (low tax rate, modest earnings currently, large earnings later) Roth contributions will be better than traditional.

Make sure you buy some "own occupation" disability insurance.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
asdfgghk
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Tue Jun 30, 2020 9:20 am

Turns out my employer offers no ROTH 401k, only ROTH TSA. Does this change how I invest the money? (eg: maxing out ROTH IRA before maxing out ROTH TSA) All I know is that normally, a TSA in a retirement account is redundant and not the best investment (I think).

Thanks for sticking with me guys/gals!

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ruralavalon
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Location: Illinois

Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by ruralavalon » Tue Jun 30, 2020 9:43 am

asdfgghk wrote:
Tue Jun 30, 2020 9:20 am
Turns out my employer offers no ROTH 401k, only ROTH TSA. Does this change how I invest the money? (eg: maxing out ROTH IRA before maxing out ROTH TSA) All I know is that normally, a TSA in a retirement account is redundant and not the best investment (I think).

Thanks for sticking with me guys/gals!
Is this a 403b plan?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

gr7070
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by gr7070 » Tue Jun 30, 2020 9:53 am

I can't recommend enough to give yourself a fun money allowance. Money you must spend - on fun things!

I'm a natural saver, minimalist, though not quite as frugal as you. My wife and I gave ourselves an allowance. It's not a huge allowance.

Mine ends up building and building. So I've bought a number of nice, fun things (including guys trips, guitars, bikes, etc.) I am certain I would have never bought without it.

I am better off because of this! You need permission to spend and enjoy (some) money. Extreme frugality is not a positive. I hope you'll learn this before life passes you by.

liynus
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by liynus » Tue Jun 30, 2020 10:51 am

The game is all about protecting your future high earnings.

1) disability insurance. It’s sooo expensive compared to the percentage of your salary now. You will wonder why you bought it when your co residents don’t have it. It’s the safe although not glamorous bet. Find a good broker, post again when u get details of plans, to understand why one is cheaper than the other. Keep in mind the cost of it ~ 3K looks really different than 3k in 8 years. ~3-5k/yr
(As an aside I only had the group disability when I was training, that might be good enough but then get your own policy before you leave to lock in a good rate and increases. If your training program does not have disability policy then you def need one)

2) find a good wife life partner socially and financially compatible with you. You are poor now. If someone takes you now they are more likely to build a future with you warts and all. #1 costly boglehead mistake is divorce.

3) own your speciality. Consider if you like anything with higher pay to work ratio and work for it. IM residents who matched into allergy/cards/gi are much more ahead than rheum/endo/nephro. I have good friends in all but don’t be mistaken that higher salary = more work. It means more competition for the spot but financially reaps rewards. Of course doing a job you love over 30 yrs is >>>> than burning out in high pay speciality in 5-10. But the high salary does give you many more options.

I’m in favor of moonlighting super scared when I started but it was easy easy money. You just do the same job but you get paid!!! You suddenly realize your worth, it grows independence but you have a support system. Do it once to try out you’ll realize soon if you want to continue. Just don’t over do it at expense of health or family, (def saw colleagues drive nice cars while doing too much moonlighting) however if u got free time it’s like studying for free. Be aware of your limitations was the important part of moonlighting glad I did it while still training.

4) good student loan plan. Also be aware that plans change your PSLF plans may not happen if you want that high $$$ private practice job. That’s ok. Just plan as much as you can

5) Life insurance if you have kids. if you don’t then don’t bother. Again check if your work gives you one. ~300-800bucks per year

5) Roth if no match, 401k if good picks, or Roth IRA. Why doesn’t your residency have a match? Your income bracket is so low that you will never match it in your working life time that’s why a 401k without a match benefit is not as good as a Roth. This is so low because the rest matters much more.

Sleep eat poop survive thrive
Name of the game is to get out alive without too much damage.

ef11
Posts: 272
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by ef11 » Tue Jun 30, 2020 12:59 pm

You are at the right place at the right time, the beginning of your career.

I am 31 and have been here for 8 years (when my career started) and it has allowed me to reach the $1 MM mark quicker than I thought possible.

Listen to the people on this forum and stick to the plan, you will thank yourself later.

Great job on the books you have read. I really liked "A Random Walk Down Wall Street" but it is a somewhat lengthy and detailed read. Very good though.
45% Vang Inst 500 IDX ER .01% | 10% Vang Inst Ext Mkt ER .04% | 25% ACWI EX US IMI NL R ER .10% | 10% Vang Total Bond Market ER .03% | 10% Fidelity MSCI Real Estate ER 0.084%

FishTaco
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by FishTaco » Tue Jun 30, 2020 4:21 pm

OP- if I were in your shoes, I'd spend a good amount of time learning the ins and outs of PSLF and do a little modelling as to what your income will be like over the next decade whether you choose to go PSLF or not. With your crazy low expenses, you could contribute both to IRA and 403b and get into a very low tax bracket where some of your subsidized interest would be paid and your monthly loan payment would be very low. You should also be able to deduct some of your student loan interest - this will not be available to you once your income jumps.

In addition, you will find that you will run out of tax-advantaged investment space once you start getting the attending paycheck so that space is crucial while your income stays low. If I could do it over, I'd make every effort to max out my retirement contributions during residency even if it meant I went into a little debt that I paid off at the end of residency.

I went the academic route and although my co-residents mostly make more than I do, no one has a better quality of life than I do. It really depends on what you value with your life.

Topic Author
asdfgghk
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Re: $250,000 Debt, High-Income Potential, beginner starting from ZERO

Post by asdfgghk » Sat Jul 04, 2020 11:57 am

ruralavalon wrote:
Tue Jun 30, 2020 9:43 am
asdfgghk wrote:
Tue Jun 30, 2020 9:20 am
Turns out my employer offers no ROTH 401k, only ROTH TSA. Does this change how I invest the money? (eg: maxing out ROTH IRA before maxing out ROTH TSA) All I know is that normally, a TSA in a retirement account is redundant and not the best investment (I think).

Thanks for sticking with me guys/gals!
Is this a 403b plan?
*403b. Not 401k, sorry!!!!

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