half high income physician, half financial illiterate

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Topic Author
Bones_Jones
Posts: 126
Joined: Thu Aug 11, 2016 2:27 pm

half high income physician, half financial illiterate

Post by Bones_Jones »

My circumstances:

I'm a 44 year old physician. Last year was a challenging period for me. As a self-employed physician working for various telehealth companies, I faced significant setbacks:

1. I lost a highly lucrative telehealth job. It was paying me 550k a year.
2. Financial strain led me to attempt to sell my home, but when that failed, I resorted to a short sale.
3. My wife and I had approximately $410,000 in student loans, prompting us to opt for a debt settlement plan, which we aim to pay off within four years, settling about $240,000 of the debt. Credit already ruined because of short sale, so we've decided to do this. Interest on our student loans were in 7% range.

However, my situation has since improved. I secured a new job that offers substantially higher pay than the one I lost, projecting an annual income of about $800,000. Nonetheless, I lack job security due to being a self-employed contractor. The reason for my previous job loss was the company's struggles during the COVID-19 pandemic, leading to staff cuts, particularly among high-earning physicians like myself.

My current monthly income is approximately $67,000, and my expenses include:

1. Student loan Debt settlement fee: $5,200
2. Rent for a two-bedroom apartment: $4,000
3. Maxing out SEP IRA contributions: $5,500
4. Investing in an M1 stock account: $1,000
5. Contributing to a 529 college plan: $1,000
6. Supporting my parents financially: $6,000
7. Car payment for a 2012 BMW X5: $382 (down from $750 for a Lexus)
8. Funding a telehealth business I've started: $3,000-$4,000 for Google ads
9. Health insurance: $1,000
10. Malpractice insurance: $1,500
11. Living expenses $3000 ish (I have a 1 year old baby, 3 dogs, and my wife is sorta high maintenance)

Financially, I currently have:

- SEP IRA account: $500,000, primarily invested in META, APPL, MMM, TSLA, PYPL, JNJ, BABA, AMZN, MCD, and GOOG. It was much higher when TSLA was doing great.
- M1 account: $10,000, invested in VOO and the "Magnificent 7."
- Just started a college plan for my 1 year old son.
- Emergency funds: $45,000, with a monthly savings goal of $15,000-$20,000.

I do not have an HSA, nor do I have personal health insurance; only my wife and son are covered. However, I receive routine check-ups at no cost. I will open up HSA and will get an insurance starting next year. I missed the enrollment period.

Regarding housing, I've decided against purchasing a home for at least next 6-7 years, feeling secure in my apartment in Seattle, despite the city's safety concerns. We had a nightmare buying a home we didn't love. It was a disaster.

I am confident in my ability to retain my current job for a few years, but if I were to lose it, I could potentially return to a $250,000 income telehealth work as a backup. It would suck, but at least I'll always have a job. I hope for my business to eventually take off. If it doesn't work out then at least I didn't borrow any money to fund it.

In light of this overview, I welcome any advice or suggestions, including whether to continue with the debt settlement plan, which I feel somewhat conflicted about. Any input would be appreciated. I have this lingering feeling that I should have amassed a substantial fortune by now, yet I haven't. I started late. finished residency in 2016. This uncertainty leaves me feeling quite insecure, and all I desire is a simple life with enough wealth and contentment to retire comfortably. My primary wish is for nothing but the best for my child.
coalcracker
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Re: half high income physician, half financial illiterate

Post by coalcracker »

There’s a lot here, but I’ll start with one question and one suggestion.

Could you share how this debt settlement plan works? I’ve never heard of such a thing for student loans (I am a physician).

I was also close to a financial illiterate when I googled upon this website about a decade ago. You will get a lot of fantastic advice here, but I took about 3-6 months of reading on my own to get comfortable with most of the concepts. The Wiki here is a good start:

https://www.bogleheads.org/wiki/Suggested_reading
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KingRiggs
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Re: half high income physician, half financial illiterate

Post by KingRiggs »

Paging Dr. Dahle...

Honestly, you need to take a dep dive into the White Coat Investor website - tailor made for higher-earning professionals. They have great approved resources for student debt counselling, saving, and investing.

At your income level, you should be able to (in fact should have already) retired that student loan debt in short order and move on with your life.

Lots to unpack here. As a fellow physician, I wish you the best.
Advice = noun | Advise = verb | | Roth, not ROTH | | "Remember, there's always money in the banana stand." - George Bluth, Sr.
HeavyChevy
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Re: half high income physician, half financial illiterate

Post by HeavyChevy »

A fair number of physicians post here.

They are also aware of the site:

https://www.whitecoatinvestor.com/

Dr. Jim Dahle has great insite into the specific issues of high student debt followed by high income, etc.
"It's not the best move, but it is a move." - GMHikaru
Topic Author
Bones_Jones
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Joined: Thu Aug 11, 2016 2:27 pm

Re: half high income physician, half financial illiterate

Post by Bones_Jones »

coalcracker wrote: Wed Feb 07, 2024 6:57 am There’s a lot here, but I’ll start with one question and one suggestion.

Could you share how this debt settlement plan works? I’ve never heard of such a thing for student loans (I am a physician).

I was also close to a financial illiterate when I googled upon this website about a decade ago. You will get a lot of fantastic advice here, but I took about 3-6 months of reading on my own to get comfortable with most of the concepts. The Wiki here is a good start:

https://www.bogleheads.org/wiki/Suggested_reading
Thanks for the link!

Our student loans, which were consolidated with SoFi/MOHELA, are eligible for settlement since they were consolidated with a private company like SoFi. I've engaged the services of National Debt Relief to handle this process. i know people who has done this before.

https://www.nationaldebtrelief.com/
muffins14
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Re: half high income physician, half financial illiterate

Post by muffins14 »

I would pay an extra 1k to the debt rather than the M1 account.

Also stop messing around with “the magnificent 7” and individual stocks. You need to simplify your life, not try to watch financial news and pick stocks.
Crom laughs at your Four Winds
muffins14
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Location: New York

Re: half high income physician, half financial illiterate

Post by muffins14 »

Bones_Jones wrote: Wed Feb 07, 2024 7:12 am
coalcracker wrote: Wed Feb 07, 2024 6:57 am There’s a lot here, but I’ll start with one question and one suggestion.

Could you share how this debt settlement plan works? I’ve never heard of such a thing for student loans (I am a physician).

I was also close to a financial illiterate when I googled upon this website about a decade ago. You will get a lot of fantastic advice here, but I took about 3-6 months of reading on my own to get comfortable with most of the concepts. The Wiki here is a good start:

https://www.bogleheads.org/wiki/Suggested_reading
Thanks for the link!

Our student loans, which were consolidated with SoFi/MOHELA, are eligible for settlement since they were consolidated with a private company like SoFi. I've engaged the services of National Debt Relief to handle this process. i know people who has done this before.

https://www.nationaldebtrelief.com/
Was this actually a good idea? What is the effective rate you are paying for having done this?
Crom laughs at your Four Winds
tenkuky
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Re: half high income physician, half financial illiterate

Post by tenkuky »

Seeing that you are self-employed and presumably getting a 1099 from the telehealth gig, don't forget to factor in estimated tax payments along the way as expenses (unless you are having taxes deducted as a W-2 but even then you probably need est taxes).
And honestly, going "down" to 250K a year job may suck to you, but it is world's above many others and even many academic physicians.
You will make do, just need a hard look at expenses, agree with above that stock speculating is unwise.
Borqa45
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Joined: Tue Jan 16, 2024 10:02 am

Re: half high income physician, half financial illiterate

Post by Borqa45 »

Bones_Jones wrote: Wed Feb 07, 2024 6:00 am My circumstances:

I'm a 44 year old physician. Last year was a challenging period for me. As a self-employed physician working for various telehealth companies, I faced significant setbacks:

1. I lost a highly lucrative telehealth job. It was paying me 550k a year.
2. Financial strain led me to attempt to sell my home, but when that failed, I resorted to a short sale.
3. My wife and I had approximately $410,000 in student loans, prompting us to opt for a debt settlement plan, which we aim to pay off within four years, settling about $240,000 of the debt. Credit already ruined because of short sale, so we've decided to do this. Interest on our student loans were in 7% range.

However, my situation has since improved. I secured a new job that offers substantially higher pay than the one I lost, projecting an annual income of about $800,000. Nonetheless, I lack job security due to being a self-employed contractor. The reason for my previous job loss was the company's struggles during the COVID-19 pandemic, leading to staff cuts, particularly among high-earning physicians like myself.

My current monthly income is approximately $67,000, and my expenses include:

1. Student loan Debt settlement fee: $5,200
2. Rent for a two-bedroom apartment: $4,000
3. Maxing out SEP IRA contributions: $5,500
4. Investing in an M1 stock account: $1,000
5. Contributing to a 529 college plan: $1,000
6. Supporting my parents financially: $6,000
7. Car payment for a 2012 BMW X5: $382 (down from $750 for a Lexus)
8. Funding a telehealth business I've started: $3,000-$4,000 for Google ads
9. Health insurance: $1,000
10. Malpractice insurance: $1,500
11. Living expenses $3000 ish (I have a 1 year old baby, 3 dogs, and my wife is sorta high maintenance)

Financially, I currently have:

- SEP IRA account: $500,000, primarily invested in META, APPL, MMM, TSLA, PYPL, JNJ, BABA, AMZN, MCD, and GOOG. It was much higher when TSLA was doing great.
- M1 account: $10,000, invested in VOO and the "Magnificent 7."
- Just started a college plan for my 1 year old son.
- Emergency funds: $45,000, with a monthly savings goal of $15,000-$20,000.

I do not have an HSA, nor do I have personal health insurance; only my wife and son are covered. However, I receive routine check-ups at no cost. I will open up HSA and will get an insurance starting next year. I missed the enrollment period.

Regarding housing, I've decided against purchasing a home for at least next 6-7 years, feeling secure in my apartment in Seattle, despite the city's safety concerns. We had a nightmare buying a home we didn't love. It was a disaster.

I am confident in my ability to retain my current job for a few years, but if I were to lose it, I could potentially return to a $250,000 income telehealth work as a backup. It would suck, but at least I'll always have a job. I hope for my business to eventually take off. If it doesn't work out then at least I didn't borrow any money to fund it.

In light of this overview, I welcome any advice or suggestions, including whether to continue with the debt settlement plan, which I feel somewhat conflicted about. Any input would be appreciated. I have this lingering feeling that I should have amassed a substantial fortune by now, yet I haven't. I started late. finished residency in 2016. This uncertainty leaves me feeling quite insecure, and all I desire is a simple life with enough wealth and contentment to retire comfortably. My primary wish is for nothing but the best for my child.
You will get 90% of financial literacy by just doing these:

1/ Live way below your means
2/ have 6 months of emergency fund in money market VMFXX the settlement fund or high interest savings accounts.
3/ max out all tax advantage accounts
4/ open a taxable brokerage account
5/ for 3 and 4 invest 75% index equity (like S&P 500 e.g. VOO, VTI or equivalent) and 25% bonds (e g. BND or equivalent.)
ScubaHogg
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Re: half high income physician, half financial illiterate

Post by ScubaHogg »

To channel my Dr Bernstein, take your financial life at least half as seriously as your medical training and you’ll be fine

Some quick hits:

1) at $800k you should pay off all your debts within two years. Seriously. In two years you’ll make $1.6M. You can pay off less than $500k in debt by then

2) where are you renting a 2 bedroom apartment for $4k?! Are you still doing telehealth? Why such a hcol?

3) $6k/month for your parents when you are literally buried in debt and making short sells is generous. Said differently you can’t afford this. Not even close.

4) stop wasting time with your taxable brokerage and 529s. When you aren’t buried in debt all that will come out okay.

5) is now the time to be dropping $4k a month on google ads? You obviously have a skill set that is highly employable. What are you hoping to gain?
There are more things in Heaven and Earth, Horatio, than are dreamt of in your Expected Returns
Topic Author
Bones_Jones
Posts: 126
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

muffins14 wrote: Wed Feb 07, 2024 7:24 am
Bones_Jones wrote: Wed Feb 07, 2024 7:12 am
coalcracker wrote: Wed Feb 07, 2024 6:57 am There’s a lot here, but I’ll start with one question and one suggestion.

Could you share how this debt settlement plan works? I’ve never heard of such a thing for student loans (I am a physician).

I was also close to a financial illiterate when I googled upon this website about a decade ago. You will get a lot of fantastic advice here, but I took about 3-6 months of reading on my own to get comfortable with most of the concepts. The Wiki here is a good start:

https://www.bogleheads.org/wiki/Suggested_reading
Thanks for the link!

Our student loans, which were consolidated with SoFi/MOHELA, are eligible for settlement since they were consolidated with a private company like SoFi. I've engaged the services of National Debt Relief to handle this process. i know people who has done this before.

https://www.nationaldebtrelief.com/
Was this actually a good idea? What is the effective rate you are paying for having done this?

I lost my job, and despite attempts, my house wasn't selling. With a mortgage of $12,000 and a monthly student loan payment of around $8,500 (mine was like 7.5%, hers were 6% range), I faced the risk of ruining my credit through a short sale. Remembering a similar situation in my 20s with credit card debt, I decided to take what seemed like the easier path out. It's embarrassing, but I've found myself in similar financial struggles before.
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KingRiggs
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Re: half high income physician, half financial illiterate

Post by KingRiggs »

Agree with above post.

If you're working telehealth, move to Topeka, Kansas or somewhere more affordable.
Your financial ship is in danger of sinking. Time to cut the aid to your parents (at least to the tune of $6k/month!), stop funding 529s (cash flow college later or take out loans then). Concentrate on your core skills and trim the extra "stuff" (Google ads for whatever).

You are in this tight spot because you didn't "live like a resident" for a while after training and pay off student loan debt. Time to swallow that bitter pill now...
Advice = noun | Advise = verb | | Roth, not ROTH | | "Remember, there's always money in the banana stand." - George Bluth, Sr.
Jack FFR1846
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Re: half high income physician, half financial illiterate

Post by Jack FFR1846 »

1. Student loan Debt settlement fee: $5,200
2. Rent for a two-bedroom apartment: $4,000
3. Maxing out SEP IRA contributions: $5,500
4. Investing in an M1 stock account: $1,000
5. Contributing to a 529 college plan: $1,000
6. Supporting my parents financially: $6,000

7. Car payment for a 2012 BMW X5: $382 (down from $750 for a Lexus)
8. Funding a telehealth business I've started: $3,000-$4,000 for Google ads
9. Health insurance: $1,000
10. Malpractice insurance: $1,500
11. Living expenses $3000 ish (I have a 1 year old baby, 3 dogs, and my wife is sorta high maintenance)

Cross out expenses as above. Dogs are the way to show others you're rich. (from old time agriculture where animals who don't produce are simply signs of wealth). If the wife is high maintenance, cut her off from any source of money unless she's working and spending only her earned money. Your parents need to figure out how to live without you. I know in many cultures, it's expected that kids will support parents. Are they in the US from a low cost country? Send them back to the low cost country where they can support themselves. I don't have my mom move to Beverly Hills and support her. She's in a low cost area in a low cost condo. You can do the same. College and retirement plans can wait until you are out of debt completely. What are your goals? A house? Well, that's not going to happen as you're going.
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Topic Author
Bones_Jones
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

Thank you for all the insights.

I'm seriously considering prioritizing debt elimination over investing in M1 and college plans. so adding 2k to debt settlement payment will speed things up.

However, concerning Google Ads...

Having worked in telehealth for five years, I understand its lucrative yet highly competitive nature. It's tough out there with thousands of applicants vying for positions, and many companies resort to hiring RAs or offering lower pay.

To ensure my survival in this industry, I've ventured into establishing my own telehealth company, investing $30k to develop the platform and obtaining the LegitScript certificate. However, for this venture to thrive, advertising is essential. After all, having a fantastic website means little if no one knows about it.

I'm willing to give it a shot for a year or two. If it doesn't pan out, so be it. At least i didn't borrow money. But if it does, I can see myself fully dedicated to growing this business, especially once I've achieved debt freedom.

I realize that the time to act is now, especially considering the current landscape heavily favoring telehealth.
muffins14
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Re: half high income physician, half financial illiterate

Post by muffins14 »

Bones_Jones wrote: Wed Feb 07, 2024 7:39 am
muffins14 wrote: Wed Feb 07, 2024 7:24 am
Bones_Jones wrote: Wed Feb 07, 2024 7:12 am
coalcracker wrote: Wed Feb 07, 2024 6:57 am There’s a lot here, but I’ll start with one question and one suggestion.

Could you share how this debt settlement plan works? I’ve never heard of such a thing for student loans (I am a physician).

I was also close to a financial illiterate when I googled upon this website about a decade ago. You will get a lot of fantastic advice here, but I took about 3-6 months of reading on my own to get comfortable with most of the concepts. The Wiki here is a good start:

https://www.bogleheads.org/wiki/Suggested_reading
Thanks for the link!

Our student loans, which were consolidated with SoFi/MOHELA, are eligible for settlement since they were consolidated with a private company like SoFi. I've engaged the services of National Debt Relief to handle this process. i know people who has done this before.

https://www.nationaldebtrelief.com/
Was this actually a good idea? What is the effective rate you are paying for having done this?

I lost my job, and despite attempts, my house wasn't selling. With a mortgage of $12,000 and a monthly student loan payment of around $8,500 (mine was like 7.5%, hers were 6% range), I faced the risk of ruining my credit through a short sale. Remembering a similar situation in my 20s with credit card debt, I decided to take what seemed like the easier path out. It's embarrassing, but I've found myself in similar financial struggles before.
A $12000 mortgage is very high. How much was this house? How much did you have left in liquid savings after you bought it?

I think you need to think deeply about some personality trait of expectations that lead you to spend beyond what is prudent.

Similarly, does your wife work? It’s possible that could add some income stability in the event of job loss.

Build security first, luxury later
Crom laughs at your Four Winds
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hand
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Re: half high income physician, half financial illiterate

Post by hand »

Bones_Jones wrote: Wed Feb 07, 2024 6:00 am
In light of this overview, I welcome any advice or suggestions, including whether to continue with the debt settlement plan, which I feel somewhat conflicted about. Any input would be appreciated. I have this lingering feeling that I should have amassed a substantial fortune by now, yet I haven't. I started late. finished residency in 2016. This uncertainty leaves me feeling quite insecure, and all I desire is a simple life with enough wealth and contentment to retire comfortably. My primary wish is for nothing but the best for my child.
Good on you for taking a clear look at your financials even when things haven't gone perfectly.

Good news is that you're way ahead on the hardest thing for most people to change - income, and will undoubtably end up in a good place no matter how many mistakes you make along the way as long as you keep working.

Fundamentally, your financials read as if you have a spending problem - like you are spending what you think someone with an $800k income *should* be able to spend, rather than what you can afford and what will build towards your personal and financial goals.

You have a ton of income, but not enough to do all of the following:
  • Pay off student loan debt
  • fund a business
  • support your parents
  • Pay a loan on a 2012 BMW
  • Save for your kid's education
  • Have a high maintenance spouse
  • gamble on individual stocks

While it may feel like you're behind (and you're not really compared to the vast majority of people), the answer isn't to add risk by swinging for the fences (individual stocks, bootstrapping a business etc.). There is a secure path to success for you by getting back to basics and taking pride in consistently hitting a bunch of singles: Get your spouse on board with financial security for the long term, take control of your lifestyle and spending, address the debt, and invest consistently in low cost diversified index funds.

These are all steps you are certainty able to do on your own with a couple hours of learning (and a lot of effort to break 44 year habits). That being said, perhaps worth considering a fee only "financial trainer" to help you set goals, set up a savings plan and investing strategy, and drive accountability.
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Wiggums
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Re: half high income physician, half financial illiterate

Post by Wiggums »

You show $32,582/month expenses on $67,000/month income.

That leaves $384k to pay down debt. I would stop the $1k/month each to M1 and 529. Your focus should be on the elimination of debt.

Is the google ad expense ($4-$5k/month) related to your $800k income or a side business? I was not sure.
"I started with nothing and I still have most of it left."
Topic Author
Bones_Jones
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

The house, purchased at 2.3 million, saw a 15% down payment to toilet... including half contributed by my parents. one of the reason i assist them financially each month. Additionally, my wife no longer works following the arrival of our baby. i don't want her to work actually. i'm home 100% of the time, so i like my current life style.

we lived in 1 bedroom apartment last year which was $2300. moved to 2 bed room because of baby.


No, I won't move to other states... I just can't see myself living in Kansas...




I'll increase debt settlement payment to 7-8k to speed things up and won't do M1 or college funds. will try to reduce living expenses.
muffins14
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Re: half high income physician, half financial illiterate

Post by muffins14 »

Wiggums wrote: Wed Feb 07, 2024 8:17 am You show $32,582/month expenses on $67,000/month income.

That leaves $384k to pay down debt. I would stop the $1k/month each to M1 and 529. Your focus should be on the elimination of debt.

Is the google ad expense ($4-$5k/month) related to your $800k income or a side business? I was not sure.

I think the 67k income is pre-tax (800k/12), so they are effectively paycheck to paycheck except for the 6k individual savings and 1k 529 plan
Crom laughs at your Four Winds
A-Commoner
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Re: half high income physician, half financial illiterate

Post by A-Commoner »

Hi OP,

Fellow physician here.

You are working Telehealth yet live in a very HCOL. Why not move to a LCOL area?

I assume you are a radiologist (a specialty which is suited to Telehealth and still command high incomes).
Topic Author
Bones_Jones
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

My friends and family reside on the West Coast, and I'm not fond of relocating frequently. I currently hold state licenses in WA, OR, and CA, as well as additional ones on the East Coast. While I grew up in the South, I've grown fond of my current location. I also used to live in Wyoming. sorry, that's just not my thing. I like civilization.

Additionally, residing in the Seattle area offers the advantage of not paying state taxes.
tashnewbie
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Re: half high income physician, half financial illiterate

Post by tashnewbie »

Jack FFR1846 wrote: Wed Feb 07, 2024 7:49 am 1. Student loan Debt settlement fee: $5,200
2. Rent for a two-bedroom apartment: $4,000
3. Maxing out SEP IRA contributions: $5,500
4. Investing in an M1 stock account: $1,000
5. Contributing to a 529 college plan: $1,000
6. Supporting my parents financially: $6,000

7. Car payment for a 2012 BMW X5: $382 (down from $750 for a Lexus)
8. Funding a telehealth business I've started: $3,000-$4,000 for Google ads
9. Health insurance: $1,000
10. Malpractice insurance: $1,500
11. Living expenses $3000 ish (I have a 1 year old baby, 3 dogs, and my wife is sorta high maintenance)
I largely agree with this, although I can see some merit in the SEP IRA contributions because they reduce your taxable income and you're in the 37% fed marginal tax bracket. And I can understand that people love their pets, but I wouldn't get any more until you have your financial house in order.

I don't understand why you'd have a loan on a 2012 BMW. You could take that money and buy a brand new Honda or Toyota that would have a lot less maintenance hassle and last longer. Maybe you consider those brands beneath you.

I don't know anything about the debt settlement plan, but you should ask around on White Coat Investor. From my view, you have the income to completely pay off your student loans within 2 years. I don't think you need to get fancy or cute with settlement plans to eliminate them.

Stop playing around with individual stocks. Use broad market funds like VTI.

Do you have adequate term life insurance for you and your wife? Do you have own occupation long term disability insurance?

Those seem critical in your situation as you are the sole income-earner.
Topic Author
Bones_Jones
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

X5 was $18k considerably cheaper than brand new honda/toyota. i was actually looking for used highlanders or pilots, but those were 30k+. I need an SUV due to having 3 dogs. interest rate is 2.7% so i couldn't complain. i purchased 5 year warranty for 5k at least i don't need to worry about it for next 4 more years.

i was driving lexus suv and was paying 750 a month...

i was very close to buying my wife Tesla, but i dodged a bullet because before I pulled a trigger i received a call saying sayonara. that would've been another disaster. it was model X she wanted. :oops:
muffins14
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Re: half high income physician, half financial illiterate

Post by muffins14 »

Bones_Jones wrote: Wed Feb 07, 2024 8:58 am X5 was $18k considerably cheaper than brand new honda/toyota. i was actually looking for used highlanders or pilots, but those were 30k+. I need an SUV due to having 3 dogs. interest rate is 2.7% so i couldn't complain. i purchased 5 year warranty for 5k at least i don't need to worry about it for next 4 more years.

i was driving lexus suv and was paying 750 a month...

i was very close to buying my wife Tesla, but i dodged a bullet because before I pulled a trigger i received a call saying sayonara. that would've been another disaster. it was model X she wanted. :oops:
Stop buying things while you are in debt. You had 400k in student loans and bought a house w 12k mortgage, had a 750 car payment, and were about to buy a Tesla model X. You need to focus on delayed gratification
Crom laughs at your Four Winds
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TomatoTomahto
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Re: half high income physician, half financial illiterate

Post by TomatoTomahto »

I am curious about $6k per month supporting parents. Are they in a care facility, or are they overspenders/undersavers?
I get the FI part but not the RE part of FIRE.
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Bones_Jones
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

$6k is allocated to assist in paying off their mortgage within 3 years. They aided me with the down payment on my house, hence my financial support for them. Additionally, they supported me throughout my residency, and even borrowed parent loans during my college years. I feel a sense of obligation to reciprocate their support.

While this assistance is not intended to be permanent, I plan to continue until their mortgage is fully paid off. If circumstances allow, I aim to provide ongoing support for as long as I am able to.
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TomatoTomahto
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Re: half high income physician, half financial illiterate

Post by TomatoTomahto »

Bones_Jones wrote: Wed Feb 07, 2024 9:58 am $6k is allocated to assist in paying off their mortgage within 3 years. They aided me with the down payment on my house, hence my financial support for them. Additionally, they supported me throughout my residency, and even borrowed parent loans during my college years. I feel a sense of obligation to reciprocate their support.

While this assistance is not intended to be permanent, I plan to continue until their mortgage is fully paid off. If circumstances allow, I aim to provide ongoing support for as long as I am able to.
I should have included a “better” option than the two I posted. :oops: Good on ya, nothing wrong with gratitude, but you do need to trim your spend.
I get the FI part but not the RE part of FIRE.
delamer
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Re: half high income physician, half financial illiterate

Post by delamer »

A few random thoughts:

If you dropped dead tomorrow, what would happen to your wife, son, and parents? You make $67,000/month and you don’t have heaith insurance NOW? That’s just idiocy.

And you need life insurance too.

Nothing about how you’ve conducted your career and finances is congruent with your expressed desire for “is a simple life with enough wealth and contentment to retire comfortably.”. If you have the skills to earn $800,000/year, then you have the ability to find a more modestly paid but more secure job. Your goals can be met with a job at half the salary.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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climber2020
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Re: half high income physician, half financial illiterate

Post by climber2020 »

Every recommendation you've been given, there's an excuse why you can't do it. What areas of your current spending are you actually willing to cut?
Bones_Jones wrote: Wed Feb 07, 2024 6:00 am I have this lingering feeling that I should have amassed a substantial fortune by now, yet I haven't. I started late. finished residency in 2016.
This has nothing to do with why your net worth is so low relative to your income. You're spending too much money. Had you taken care of your business the first few years out of training you could be spending freely by now, but you didn't, so you have to either cut back now or be okay with working until you're super old (I know plenty of these people and you don't want to be like them).
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Re: half high income physician, half financial illiterate

Post by muffins14 »

Bones_Jones wrote: Wed Feb 07, 2024 9:58 am $6k is allocated to assist in paying off their mortgage within 3 years. They aided me with the down payment on my house, hence my financial support for them. Additionally, they supported me throughout my residency, and even borrowed parent loans during my college years. I feel a sense of obligation to reciprocate their support.

While this assistance is not intended to be permanent, I plan to continue until their mortgage is fully paid off. If circumstances allow, I aim to provide ongoing support for as long as I am able to.
Is their principal and interest = 6k, or are you paying extra to close the loan early?

Consider paying the bare minimum now to focus on your own loans, then pay their mortgage later.

It doesn’t make sense to pay off their low rate mortgage just so you can pay a possibly higher rate on a car loan.

Does your debt settlement fee have an interest rate or is it just a fee?
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er999
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Re: half high income physician, half financial illiterate

Post by er999 »

Like others have said, you have a spending problem. Income is great and you are in a much better income situation than the average physician. Even though you say you started late in 2016, that’s still 7 years of high income work and for every year you work at that level it’s like 2-3 years of income for the average doctor.

I think the problem is there are so many wealthy people in Seattle it is easy to spend money, and even at $800k / year you can’t compete with people who have had millions in stock options. Perhaps your wife has friends that run in that crowd? Is that a motivation for individual tech stock purchases?

Your proposed budget seems fine since you are still able to save $20- $30k / month or so, so just make sure to actually save or use that money for debt repayment, give it time, and you should be fine in 5 years if you keep your lifestyle constant. Seems fine to invest in your business since you are doing better income wise that most doctors so might have more business savvy.
muffins14
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Re: half high income physician, half financial illiterate

Post by muffins14 »

er999 wrote: Wed Feb 07, 2024 10:18 am

Your proposed budget seems fine since you are still able to save $20- $30k / month or so, so just make sure to actually save or use that money for debt repayment, give it time, and you should be fine in 5 years if you keep your lifestyle constant. Seems fine to invest in your business since you are doing better income wise that most doctors so might have more business savvy.
I don’t think there’s 20-30k savings.

They save 5.5k in the IRA and 1k in 529 plan and 1k in M1. “Just” 7.5k monthly savings rather than 20-30k.

At minimum I think they can:
Redirect 2k from 529 and M1 to the debt, if there is an interest rate.

Redirect some of parental support if it is pre-payment of mortgage principal, and pay off debt/car
Crom laughs at your Four Winds
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HMSVictory
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Re: half high income physician, half financial illiterate

Post by HMSVictory »

Doc I'm going to write a script for you that is going to be full of tough medicine. The sooner you take action the better.

You have been living like a rich doctor when in fact you are broke. Until you confront this reality you are going to continue to drown.

You are going to have to have a very difficult conversation with the "high Maintenace" wife.

You need to stop all investing, dramatically cut expenses and be totally debt free in 12-18 months. You will have to scale your lifestyle back by about 1/3 to accomplish this or else you are going to be screwing around with this anchor around your neck for decades. The BMW needs to go. Today - it gets sold and you start driving a 1996 Toyota Camry (or some other cheap car). You aren't going on vacation. Ever. You aren't eating out. You are going to be living like a college kid while making $800k. The more serious you get the faster you can clean this up. Once you have all of the debt zeroed out (paid off) you can start adding back in some lifestyle and build wealth.

Many docs are looking rich but in reality, they are flat broke. You can be different and build true wealth.
Stay the course!
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Bones_Jones
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Re: half high income physician, half financial illiterate

Post by Bones_Jones »

I'm not sure about downgrading to a 1996 Camry, but I might be able to persuade my wife to go back to a one-bedroom apartment. Honestly, we don't need two bedrooms since the baby sleeps with us anyway.

i know you guys are against on investing, but Maxing out the SEP IRA is a priority for me as it helps reduce my tax burden.

I've been following Ramsey but implementing it is quite challenging.

One lesson I've learned from my mistakes is that I definitely don't need a $2.3 million house. i'll inherit the house from my parents anyway, so i won't be buying a house anytime soon. paying 12k mortgage was pain even if i felt i had means to do it. i was naive to think that house will appreciate so much that i would be able to payoff student loans with equity. that was actually the reason i bought the house in the first place.

I've managed to save $15-20k per month over the past few months and replenish my depleted emergency fund. I plan to continue saving at this rate and increase my monthly contributions towards paying off the debt. Instead of the projected 4 years, I aim to clear it in 2 1/2 years or so.

Additionally, my income is not fixed. If I put in more hours, I can earn more. Since I work from home and have the flexibility to work from anywhere, I don't feel like a workaholic. Despite working seven days a week, I spend a lot of quality time with my wife and son, which brings me happiness. There was a time when I thought I'd never have the opportunity to spend time with my family and would be stuck working non-stop at the hospital. However, I've changed, and I can't go back to that lifestyle.


Thank you once again for all your input. I truly value your comments. Although I was initially hesitant, I'm grateful that I opened up. It's helped me realize that I need to make some difficult decisions moving forward.
muffins14
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Re: half high income physician, half financial illiterate

Post by muffins14 »

Bones_Jones wrote: Wed Feb 07, 2024 10:58 am I'm not sure about downgrading to a 1996 Camry, but I might be able to persuade my wife to go back to a one-bedroom apartment. Honestly, we don't need two bedrooms since the baby sleeps with us anyway.

i know you guys are against on investing, but Maxing out the SEP IRA is a priority for me as it helps reduce my tax burden.

I've been following Ramsey but implementing it is quite challenging.

One lesson I've learned from my mistakes is that I definitely don't need a $2.3 million house. i'll inherit the house from my parents anyway, so i won't be buying a house anytime soon. paying 12k mortgage was pain even if i felt i had means to do it. i was naive to think that house will appreciate so much that i would be able to payoff student loans with equity. that was actually the reason i bought the house in the first place.

I've managed to save $15-20k per month over the past few months and replenish my depleted emergency fund. I plan to continue saving at this rate and increase my monthly contributions towards paying off the debt. Instead of the projected 4 years, I aim to clear it in 2 1/2 years or so.

Additionally, my income is not fixed. If I put in more hours, I can earn more. Since I work from home and have the flexibility to work from anywhere, I don't feel like a workaholic. Despite working seven days a week, I spend a lot of quality time with my wife and son, which brings me happiness. There was a time when I thought I'd never have the opportunity to spend time with my family and would be stuck working non-stop at the hospital. However, I've changed, and I can't go back to that lifestyle.


Thank you once again for all your input. I truly value your comments. Although I was initially hesitant, I'm grateful that I opened up. It's helped me realize that I need to make some difficult decisions moving forward.
1) Moving from a 4k 2 BR to a 3k 1BR isn’t the answer here, your savings can come from elsewhere. In particular I can't see asking my wife and newborn to downsize to a 1BR save 1k-1.5k while I was simultaneously spending 1k on "buying the magnificent 7" and spending 6k on my parents and 3-4k on google ads.
2) you did not, in fact, have the means to afford the 12k mortgage, as evidenced by your current situation. Understanding why this was true might be an important learning for you, to avoid making similar future risky decisions.
3) don’t assume your home will ever give you a real return. Treat it like a place you live that might, hopefuly( keep up with inflation
Last edited by muffins14 on Wed Feb 07, 2024 12:08 pm, edited 4 times in total.
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tashnewbie
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Re: half high income physician, half financial illiterate

Post by tashnewbie »

delamer wrote: Wed Feb 07, 2024 10:06 am A few random thoughts:

If you dropped dead tomorrow, what would happen to your wife, son, and parents? You make $67,000/month and you don’t have heaith insurance NOW? That’s just idiocy.

And you need life insurance too.
I forgot about the fact that OP doesn't even have health insurance. I agree that is INSANITY!!

OP - as I mentioned and want to highlight again - please ensure you have adequate term life insurance on you AND your wife and you need own occupation long term disability insurance.
tenkuky
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Re: half high income physician, half financial illiterate

Post by tenkuky »

HMSVictory wrote: Wed Feb 07, 2024 10:41 am Doc I'm going to write a script for you that is going to be full of tough medicine. The sooner you take action the better.

You have been living like a rich doctor when in fact you are broke. Until you confront this reality you are going to continue to drown.

You are going to have to have a very difficult conversation with the "high Maintenace" wife.

You need to stop all investing, dramatically cut expenses and be totally debt free in 12-18 months. You will have to scale your lifestyle back by about 1/3 to accomplish this or else you are going to be screwing around with this anchor around your neck for decades. The BMW needs to go. Today - it gets sold and you start driving a 1996 Toyota Camry (or some other cheap car). You aren't going on vacation. Ever. You aren't eating out. You are going to be living like a college kid while making $800k. The more serious you get the faster you can clean this up. Once you have all of the debt zeroed out (paid off) you can start adding back in some lifestyle and build wealth.

Many docs are looking rich but in reality, they are flat broke. You can be different and build true wealth.

And a spoonful of sugar to make that medicine go down...
You came to the right place with folks who want to help, are knowledgeable to do so, and while you may perceive it as harsh, they are interested in your success as a community.
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Re: half high income physician, half financial illiterate

Post by Katietsu »

1. Go get health insurance now not next year. Look in to options for acquiring a real insurance policy. But, at minimum, you can purchase a short term coverage policy that does not cover pre existing conditions.
2. Get term life and own occupation long term disability insurance in place if you do not have it.
3. I would stay in the 2 BR.
4. Can you contribute less to your parent’s mortgage for the time being? I recognize your valid reason for doritos. But are you paying more than the mortgage for someone else while being in a debt repayment plan?
5. Stop M1 and 529 investing.
6. Put the SEP in a broad based index fund. Even the talking heads on financial TV recommend having that base before you stock pick. Bogleheads just generally avoid stock picking regardless.
7. You feel you are not going into debt for your side hustle. But, from my perspective, you are since the money for Google Ads could be used to reduce your debt burden. If you continue to do this, recognize that informed consent would include the possibility of never seeing any profit.
8. The $3000 a month in other life spending actually seems quite reasonable if it is really only $3000. I would want to track that maybe by using a separate account for those expenditures.


You describe yourself as financially illiterate. Have you considered the possibility of any other personal factors? I would self reflect about some of the seemingly rash decisions and question whether any other life changes would help.
A-Commoner
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Re: half high income physician, half financial illiterate

Post by A-Commoner »

If you’re going to live in a VHCOL you might as well buy a house instead of rent, given your income is high enough to cash flow the mortgage. The reason is that houses in VHCOL seem to appreciate faster gaining you more equity. Thats been my experience anyway, living in Los Angeles. Our house here has doubled in value over the last 7 years.

Not sure why your house in Seattle didn’t appreciate that much over the last few years.
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Re: half high income physician, half financial illiterate

Post by ScubaHogg »

Bones_Jones wrote: Wed Feb 07, 2024 8:46 am My friends and family reside on the West Coast, and I'm not fond of relocating frequently. I currently hold state licenses in WA, OR, and CA, as well as additional ones on the East Coast. While I grew up in the South, I've grown fond of my current location. I also used to live in Wyoming. sorry, that's just not my thing. I like civilization.

Additionally, residing in the Seattle area offers the advantage of not paying state taxes.
This is melodramatic. The choices aren’t “downtown Seattle” or “the Yukon Territory”

If you want to know why you’ve had the problems you’ve had despite a laughably high income this attitude is almost certainly a big part of it
There are more things in Heaven and Earth, Horatio, than are dreamt of in your Expected Returns
ScubaHogg
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Re: half high income physician, half financial illiterate

Post by ScubaHogg »

Jack FFR1846 wrote: Wed Feb 07, 2024 7:49 am 11. Living expenses $3000 ish (I have a 1 year old baby, 3 dogs, and my wife is sorta high maintenance)

If the wife is high maintenance, cut her off from any source of money unless she's working and spending only her earned money.
At $3k/mo in a chop for basically everything is very reasonable. The wife is not the problem here. And she is raising their child. Even calling things “her money” and “his money” is probably wrong from a legal sense (and definitely wrong from a “I want a healthy marriage” sense)
There are more things in Heaven and Earth, Horatio, than are dreamt of in your Expected Returns
ScubaHogg
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Re: half high income physician, half financial illiterate

Post by ScubaHogg »

tashnewbie wrote: Wed Feb 07, 2024 11:30 am
delamer wrote: Wed Feb 07, 2024 10:06 am A few random thoughts:

If you dropped dead tomorrow, what would happen to your wife, son, and parents? You make $67,000/month and you don’t have heaith insurance NOW? That’s just idiocy.

And you need life insurance too.
I forgot about the fact that OP doesn't even have health insurance. I agree that is INSANITY!!

OP - as I mentioned and want to highlight again - please ensure you have adequate term life insurance on you AND your wife and you need own occupation long term disability insurance.
Dear god. This is madness if true.
There are more things in Heaven and Earth, Horatio, than are dreamt of in your Expected Returns
CookieDough
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Re: half high income physician, half financial illiterate

Post by CookieDough »

You've already gotten great advice.

I'd add that this is about the order in which you set your priorities. With your earning potential, you actually can have it all, just not right now. It's about strategy and timing, not deprivation.

Debt increases the same way that investments increase. It compounds over time. Paying off debt *now* frees up money that you can use later to buy investments that will start to grow. And then you can buy all the nice things you're used to, without taking on debt.

I highly recommend that, in addition to coming as close as you can to living like a resident until your debt is gone and you've got a solid investment portfolio, you get used to the idea of never borrowing money for *anything*. If you want to buy a nice car, or vacation, etc., just save up for it. Get used to delaying gratification. Seriously, with your income, saving for things won't take you long.

You would likely also benefit from some serious conversations with both your wife and your parents, laying out that you need to make some *temporary* changes in order to secure the lives you want for all of you.

If you had lived like a resident initially and paid off your debt, and then saved up and invested in a sizable investment portfolio, you could actually be supporting a pretty lavish lifestyle now while your net worth goes up and up. It's not too late to get there, to live the life you want and spend the way you want, after you've taken care of business.

Also -- buy health insurance. Buy life insurance. Getting free check-ups is great, but if they find something expensive, you're screwed. Investing in your own health financially is important not just for yourself but for your family's financial future.

In 5 years, you could potentially be back to the same level of spending, but with an increasing net worth instead of a dwindling one.
Big Shon
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Re: half high income physician, half financial illiterate

Post by Big Shon »

At age 44, you have 3 dogs and 1 child. I just don't get scenarios like this.
clip651
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Re: half high income physician, half financial illiterate

Post by clip651 »

Big Shon wrote: Wed Feb 07, 2024 5:54 pm At age 44, you have 3 dogs and 1 child. I just don't get scenarios like this.
Dogs are likely older than the 1 year old kid. And we don’t know how long OP has been married, how many kids they want, the age of the wife, etc. No idea why out of all the issues in the OP this is what stands out to you as odd?
snowday2022
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Re: half high income physician, half financial illiterate

Post by snowday2022 »

Nice thread for illustrating that although BH makes it seem otherwise, getting personal finance right in order to be wealthy is actually pretty hard. OP is very smart, hard working, entrepreneurial, motivated, and yet nearly broke despite a 1% income.
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Re: half high income physician, half financial illiterate

Post by muffins14 »

A-Commoner wrote: Wed Feb 07, 2024 3:25 pm If you’re going to live in a VHCOL you might as well buy a house instead of rent, given your income is high enough to cash flow the mortgage. The reason is that houses in VHCOL seem to appreciate faster gaining you more equity. Thats been my experience anyway, living in Los Angeles. Our house here has doubled in value over the last 7 years.

Not sure why your house in Seattle didn’t appreciate that much over the last few years.
Buying a house too soon is what got them into this mess
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Gradient Descent
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Re: half high income physician, half financial illiterate

Post by Gradient Descent »

A-Commoner wrote: Wed Feb 07, 2024 3:25 pm If you’re going to live in a VHCOL you might as well buy a house instead of rent, given your income is high enough to cash flow the mortgage. The reason is that houses in VHCOL seem to appreciate faster gaining you more equity. Thats been my experience anyway, living in Los Angeles. Our house here has doubled in value over the last 7 years.

Not sure why your house in Seattle didn’t appreciate that much over the last few years.
That is absolutely the last thing OP should do.

OP needs to:
1) Get health insurance
2) Get life insurance
3) direct all savings toward debt repayment

Nothing else matters until those are resolved.
WeakOldGuy
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Re: half high income physician, half financial illiterate

Post by WeakOldGuy »

KingRiggs wrote: Wed Feb 07, 2024 7:44 am You are in this tight spot because you didn't "live like a resident" for a while after training and pay off student loan debt. Time to swallow that bitter pill now...
I spent a number of years about a decade or so ago doing credentialing of both professional degree and residency programs. I was the token "clinician" on the credentialing team to balance out the academics. We spent lots of time with students in the degree programs and Docs doing their residency. Very few actually lived a "student" or "resident" lifestyle. Unfortunately, many racked up huge amounts of debt that somehow didn't magically go away when they achieved the "Dr." title. So the OP is not in an uncommon, if unfortunate, situation. The answer is to just pay off the dang loan and move on. No excuse with that type of income.
On investing; I have lots of questions, many opinions, and little knowledge. A dangerous combination. Be warned.
A-Commoner
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Re: half high income physician, half financial illiterate

Post by A-Commoner »

muffins14 wrote: Wed Feb 07, 2024 7:22 pm
A-Commoner wrote: Wed Feb 07, 2024 3:25 pm If you’re going to live in a VHCOL you might as well buy a house instead of rent, given your income is high enough to cash flow the mortgage. The reason is that houses in VHCOL seem to appreciate faster gaining you more equity. Thats been my experience anyway, living in Los Angeles. Our house here has doubled in value over the last 7 years.

Not sure why your house in Seattle didn’t appreciate that much over the last few years.



Buying a house too soon is what got them into this mess

The problem is not that he bought a house. The problem is he bought a $2.3 million house on a $550k income. He could have gotten a $1m to $1.5 million house.

There’s a huge viable middle ground between a $2.3 million house and a 1 bedroom apartment. It’s amusing to see the OP’s thought process swing between these 2 extremes.
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