- August 14, 2023
- Posted by: legaleseblogger
- Category: Related News
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Hello everyone,
After many years of school/training, I am finally starting my first “real” job. I am excited to embark on this new journey and make the most of the opportunities it brings.
Background:
I am a 35-year-old single male living in a high-cost-of-living (HCOL) city in California. As a medical professional, I will be earning a salary of approximately $600,000 or even more per year. After taxes and maximizing contributions to my retirement accounts, my monthly take-home income amounts to around $25,000.
Furthermore, I have the potential to earn an additional $100,000 or more annually by taking extra calls. However, it is essential for me to carefully consider the impact on my work-life balance before committing to this option.
In terms of expenses, my rent amounts to $3,000 per month, which is quite significant. On a positive note, I do not have any outstanding car payments as I currently drive a reliable, 10+ year old vehicle that should last me a couple more years.
As for my financial assets, I have approximately $150,000 in cash sitting in a high yield savings account with a rewarding 5% interest rate. However, I also carry student loan debt amounting to $400,000. These loans have high-interest rates averaging around 6.5%. They are all federal loans, which means there may be opportunities for consolidation with private lenders once the current student loan pause ends in a month.
Considering my financial situation, I find myself uncertain about the most effective use of my savings and disposable income. Should I focus on aggressively paying off my student loans? Or should I consider investments? It is worth noting that buying a house is not a top priority for me, nor do I have immediate plans for starting a family.
In light of the complexity of my financial situation, I am wondering if AI Legalese Decoder can provide valuable assistance. This innovative solution uses advanced artificial intelligence algorithms to decode complex legal documents, including loan agreements and consolidation offers. By utilizing AI Legalese Decoder, I can gain a better understanding of the terms and conditions involved in consolidating my federal student loans with a private lender. This would enable me to make an informed decision regarding potential interest rate reductions and overall financial savings.
Thank you for your valuable input and guidance!
Edit: I appreciate all the replies received thus far. It seems that there is a consensus among the suggestions to aggressively pay down my loans. However, I am curious if this recommendation still holds true even if I were to consider consolidating my loans into a lower interest rate with a private lender? It seems that rates around 4-4.5% are currently available.
Furthermore, many of you have inquired about my monthly expenses of $7,000. To clarify, this amount is an average, as my monthly spending typically falls within the range of $5,000 to $10,000. The largest portion of my expenses is allocated to food since I do not cook and have all my meals delivered. Additionally, I enjoy traveling and take advantage of the 8-12 weeks off (unpaid) I receive each year by planning frequent trips. While this incurs significant costs, it brings me joy and serves as compensation for the limited opportunities I had to travel during medical school and residency. Lastly, dating is another substantial expense in my life, and as many can relate, it can be quite expensive.
Thank you once again for your insights and suggestions.
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****** just grabbed a
If you are single, I would take $100k of your $150k cash and knock your loan amount down to $300k….
…and then this amount, you can honestly pay it in a year. stay single for a year, you won’t even have to live that frugally – just stay extra busy (and take the extra call). Be done with this in a year and go live your life.
Congratulations on your hard work.
Pay off the loan fairly aggressively. While doing that, read [White Coat Investor](https://www.whitecoatinvestor.com/) and learn how to be wealthy.
You should have it all paid off in two years, and still be living very comfortably.
– take extra call
– pay it off in a year
– live good life
Paying off the student loans is a guaranteed return of 6.5%. Actually, more than that since your investments would need to yield that amount *after-tax* to be comparable.
Congrats dude! I’m the husband of a doc and we went through the transition from fellowship to grown-up job with generous salary two years ago. From what you’re asking I think you’re going to be in good shape regardless of how exactly you approach your allocations.
We have friends aggressively hitting their loans because they just want them gone. One takes a lot of extra overnights and they hate it, and part of me really wants to ask if they hate the idea of their loans more than they hate the extra shifts, because they seem to really hate the shifts. We’re taking a slightly aggressive payback approach but leaving ourselves some buffer for the lifestyle creep, which is real, but it does make sense to try to get these high balance high rate (we have some at 6.8%) loans gone. The only financial reason to allocate money elsewhere would be you ~~felt~~ knew it would earn a higher than the rate of return than your loan’s rate.
Those of us that bought houses out of the gate have seen an appreciation in value even in a few short years, but I’m not sure this will continue to be the case in very short term. Definitely don’t build a house, unless you’re super committed to where you are. Remember that most docs (like 80%) change jobs in the first three years after training. Even if you think you’re going to be super happy, plan for this.
neurosurg? ortho? Don’t answer.
7k a month on a credit card??? Holy shit that’s like 3 months of me living comfortably all expenses included
Live off of $200K for a year or two and pay off all your debt
wut
pay off your loans in a year or two, three at the most.
don’t become a typical broke MD.
Take care of the debt obligations asap and 2-3 years and accelerate your retirement and investment options there after. Your journey to Wealth is clear but stay focused and disciplined.
Know that if you qualify for PSLF loan forgiveness you will need 10 years in an underserved area. Given your salary, you probably already have 5-6 years residency and most of it you werenÔÇÖt paying due to Covid forgiveness. Check into if this. It will be substantially less loans to pay if you qualify.
Quite spending $7000 a month on credit cards, pay off debt, live frugally, work extra till dept is gone, become a millionaire
Pay it off. Do it quick and live off the other $200k. Seems pretty obvious.
Pay someone for real advice, you have the money. Don’t ask reddit lol.
I agree with the general advice here which is to pay them down aggressively. You donÔÇÖt have to live like you are on a 60k resident salary but try living like you are on a 120k-200k salary then all the extra can go towards your loans
And congrats!
I make about 200k a year and with a family and home I can easily live off of that. I donÔÇÖt see why you couldnÔÇÖt pay that off in a year or 2.
Check out r/whitecoatinvestor
Live on half of what you make and pay down the debt aggressively.
What are you spending $7k monthly in Cc?
Year 1 pay off all debts. Year 2 and 3 save aggressively and buy a house or appartment with cash (can also skip this step) year 4-10 save aggressively and put it in index funds. Year 11 retire.
Are you aware that CA physicians are now eligible for public service loan forgiveness? I would consider this first before refinancing. If you are working for a for-profit entity that contracts with an eligible hospital, you are now eligible for PSLF.
Live like your broke and pay that shit off in a year or two.
Live on 200K and pay off your student loans.
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Work for one year, pay off your loans.
Work two more, then retire with more money than most people in the entire world.
Stop traveling and spending $300 a day on food and dating women who want your money.
Then you can enjoy your life and explore alternative medicine instead of worrying about your money that you canÔÇÖt manage anyway.
Does your job have the 50k per 2 year national health service Corp payback scheme? I think most hospitals do.
Why can you just cut back on your spending?
Personally IÔÇÖd rather sacrifice a social life for 2 years rather than spending 5+ years asking this very question
Real estate, stocks, you might as well just hire somebody fr
What’s the point of the high yield savings account when you’re paying 6.5 percent interest on your 400k loans? You might as well use the savings and knock down the loan balance. You’re bleeding money each month with the loans and hoping a savings account will help with pennies on the dollar?
The first couple of years keep living like a student. I had to do it for law school.
Hey OP
I’m a financial advisor, but not your advisor.
A couple ways to attack this – some have mentioned that you can take cash and pay down about 100k in principal and then attack from there. That’s a great way to get a jump start on it, since interest will cause you to pay a lot more. The interest rate should be fixed, and even 300k with 6.5% interest is a lot to pay, but far less than 400k with 6.5%. Your monthly payment there will probably be like 4500 a month at 400k before, and 3500 or so (estimates) after the 100k.
Another option is to look at, if your budget allows it, paying an extra 2k to the payment each month, after putting 100k towards it, will save you 47k in the long run and get payments done 4 years earlier
*all this is depending on some specifics of your loan that may not be mentioned, such as early repayment options, length of loan, etc
Awesome. I would max out all your retirement options then aggressively pay down that loan.
In your situation, think about what you want out of retirement and work backwards from there. If you choose a frugal lifestyle, you could seriously retire in 6-10 years and never have to work again.
My household makes $520k/y, but our expenses are around $90k in a HCOL area ($4500 rent). Remember that it’s not about how much you make, but how much you save.
You’ve worked hard this whole time, what’s another 1 1/2 years.
Pay it all off and then ball out.
Can you reduce spending? 7k per month not including rent or car payment – every dollar you can reduce that can go towards student loan balance (think of it as a guaranteed 6.5% rate of return)
Take $100k out of savings and pay down your student loans. IÔÇÖm wondering what you are spending $7k/month on? At some point you need to open an investment account and you should also be doing a back door Roth. It doesnÔÇÖt seem like much but youÔÇÖre young and that money will grow nicely with no tax.
Congrats! CanÔÇÖt say what you should do, but for me, step 1 would be to move out of California (and not to NY or NJ). IÔÇÖd move somewhere with lower cost of living and lower taxes and higher quality of life, even if it meant earning less.
Definitely payoff your loans this year as some else mentioned. The big thing for you will be to ensure after this is paid off that you invest. You are likely ÔÇ£behindÔÇØ on Retirement savings but with your income you could essentially surpass 99% of people your age in a single year and be in the .1% in under 3 total years after paying off debt
Edit: after doing some math a year May be challenged at 50% taxes (state plus federal) with a spend at 120k a year but youÔÇÖll be good in a year and a half or max 2 years.
everyone’s encouraging you to pay off your loans… but I’d separate them out.
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Assuming a 6.5% average (with high interest rate) — I’d guess there are some below 6, and others above.
​
I’d separate them out, and start aggressively paying off those at the high end. However, there are a few HYS accounts that have upwards of 5% yields…. assuming you have loans below 5% to average 6.5, I’d recommend parking money there. Paying off those loans first would net you losing money in the long run.
There are a number of people saying to get rid of all of your debt, first thing and not to split money with investing. I’d not recommend this. Holding debt for a high salary person isn’t a huge downside, you just want to reduce it quickly upfront, then manage it moving forward. You’ll be expecting salary increases, so the debt will seem like less in the future and you’ll have more power to pay it down as your career peaks.
Refinance your student loans if a good rate comes up in the future, the rate is pretty high now, but just keep watching it.
Continue maxing out your 401k, and take some money to invest. You’ll probably want to start in the stock market, since it’s passive and start buying blocks of stock, say $5k at a time. You’ll make some mistakes so don’t go big at first. Keep an emergency fund, probably $50K will do you and don’t make any big monetary life changes just yet. Eventually, you’ll be in a position to make an investment in a business (maybe your own private practice) – if this is your goal, then investing will far outweigh debt repayment.
You’ll have some spare cash coming in that you’re not using above your emergency fund, take a reasonable amount and pay extra on your student loans, an extra few thousand every once in a while. 6.5% is a lot of interest, but it’s a declining compounding debt, whereas the investment money is an appreciating compounding. Repayment structures are set ludicrously high, so that you pay mostly interest, getting some principle payments in early is a decent ROI.
You have two options: enjoy your life making $600k, or use the free time you now have to learn about investment and use your money to invest.
If you want to enjoy your career, which I would do, just save $50k in savings and put the rest to student loans.
My friend who’s an ER Doc loves money, so he learned about the stock market and thinks that his investment strategy is higher than his student loan rate. So if his student loan rate is 6.5%, he thinks he can earn from investment higher than 6.5%, so he pays the minimum for student loans and puts it all in the stock market.
What bank gives you 5%,
I wonÔÇÖt leave until you tell me
hey
lovely blog hope all is well
happy blogging.