deleted

[yanks26dmb]

I wouldnt include that. Most that retire early don’t want to sell their nice home in the city and move to rural America to pick up on that appreciation.

More common is trading in the $2 million 2-3 story home for a condo with an elevator that has high monthly fees for the amenities. The fees catch up on you. Once you live at the city center for 20 years, moving to an unknown area with more travel isn’t enticing to most.

Fair points. I guess I'm considering trading in the 3M home in Laguna Beach for the townhouse in Dana Point, or something like that. I don't know if those areas make any sense to you (or anyone else outside of SoCal) but that's the thought process I had. Rather than getting rid of the big house in Austin and moving to East Texas to save money. The latter would obviously significantly impact your lifestyle and QoL.

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[Merovinge]

Fair points. I guess I'm considering trading in the 3M home in Laguna Beach for the townhouse in Dana Point, or something like that. I don't know if those areas make any sense to you (or anyone else outside of SoCal) but that's the thought process I had. Rather than getting rid of the brownstone in Brooklyn and moving up to upstate NY where things are cheaper, as an example.

You might, or you might want a 3M house in Dana Point (inflation adjusted of course, so more like 4-5 mil when you retire if you are young). Most of the time people want more amenities when they get older and not less. You could be an exception for sure, but it's not typical.

 

[untapped]

I'm assuming you won't want to move from the house and neighborhood you've built memories in, especially if you prioritize premium location over square footage, like I do. My parents are empty nesters with the large house in the inland empire, and they've thought about selling to downsize to a townhouse in OC or LA, but at this point they're sort of entrenched in the area. I think they would have been happier if they just bought a smaller and more expensive home in OC/LA to begin with 30+ years ago, and financially they'd probably be ahead anyways with real estate appreciation. So from my personal experience, I have a strong distaste for living in worse places because it's a "better deal".

 

[psychmd03]

Hi, I was being absolutely too conservative. Decided against the 4k/mo house bc in reality we didn't love it. However, using the 2:1 ratio found a 2016 build with almost 5k sq feet not counting basement that is the first house I am like wow I could be there for good.

The bad news is with current rates my 30yr mortgage will be 6200/mo.... but for every 1% drop in rates it goes down 500 bucks lower.
Yearly spending will possibly go from 100k/year (2500 rent) to 150k (6200 mortage). Savings counting retirement will drop to 150/yr.
Will take some getting used to.

You should be just fine saving 150k a year for a decently early retirement and you can easily afford that house given those numbers.

 

[G Sheb]

Re: buying in HCOL area; in many ways that's a smarter investment. These houses/apartments sell overnight and you can rent them easily. Their value will also grow much bigger.
Based on how the economy has gone for the last several decades, food and housing prices are one thing you can probably safely bet will keep increasing. Real estate is also safer than stocks.
You would also easily beat the value per $ as opposed to renting. So your QOL will also improve.
You're not just buying a place to stay. You're also making a smart investment.
I'm not sure you could say the same thing if you bought a large house in a rural area or in the suburbs. In that case, yes, you better be careful with what you buy.

If you could buy while keeping at least 15-20% of your paycheck for savings, that's a total no brainer, especially if you're living in an expensive metro area. I was lucky to find a bank that will give a full loan for a relatively large mortgage a couple of years after residency, and I believe that's one of the best decisions I've made.

 

[jbomba]

Re: buying in HCOL area; in many ways that's a smarter investment. These houses/apartments sell overnight and you can rent them easily. Their value will also grow much bigger.
Based on how the economy has gone for the last several decades, food and housing prices are one thing you can probably safely bet will keep increasing. Real estate is also safer than stocks.
You would also easily beat the value per $ as opposed to renting. So your QOL will also improve.
You're not just buying a place to stay. You're also making a smart investment.
I'm not sure you could say the same thing if you bought a large house in a rural area or in the suburbs. In that case, yes, you better be careful with what you buy.

If you could buy while keeping at least 15-20% of your paycheck for savings, that's a total no brainer, especially if you're living in an expensive metro area. I was lucky to find a bank that will give a full loan for a relatively large mortgage a couple of years after residency, and I believe that's one of the best decisions I've made.

Exactly my thinking. I'm looking at spending 2-2.2M in a very high col area. But the neighborhood is great, the schools are great, the area is beautiful, and it's super convenient to a million things.

 

[G Sheb]

Exactly my thinking. I'm looking at spending 2-2.2M in a very high col area. But the neighborhood is great, the schools are great, the area is beautiful, and it's super convenient to a million things.

Agreed, as long as you can keep healthy savings. It's pretty much a no brainer otherwise.
The problem most people run into is that these are competitive markets and you're sometimes facing cash only competitors and it's hard to find the right space for something you could afford. Enter physician loans, which are a deal breaker and a huge benefit IMO.
I find this tool on the NYtimes is great to help you make a decision Is It Better to Rent or Buy? (Published 2018) .

 

[finalpsychyear]

Exactly my thinking. I'm looking at spending 2-2.2M in a very high col area. But the neighborhood is great, the schools are great, the area is beautiful, and it's super convenient to a million things.

The housing appreciation is probably much greater where you will be buying this so in 5 years the place will probably we closer to 3m minimum unless a crash? If that's the case not sure what the issue is. Problem in midwest where I am I see houses that were bough 1.1 m 10 years ago but they are now only worth 1.3-1.5m. The houses in the 400-600 ranges are the ones that have appreciated 50% in the last few years not the more expensive ones.

 

[mistafab]

The housing appreciation is probably much greater where you will be buying this so in 5 years the place will probably we closer to 3m minimum unless a crash? If that's the case not sure what the issue is. Problem in midwest where I am I see houses that were bough 1.1 m 10 years ago but they are now only worth 1.3-1.5m. The houses in the 400-600 ranges are the ones that have appreciated 50% in the last few years not the more expensive ones.

Main thing to keep in mind is that houses don't appreciate - land does. House and house quality is an additional value that slowly depreciates over time.

So the gorgeous house on a sizeable lot may be 1.1 mil, but the underlying asset (land) may double in value (150k->300k) and you won't notice much increase in the house price (1.1->1.3 mil). However, the crusted dumphole house on the same block worth 50k seems to have had a huge increase in value 150+50->300+50 over the same period.

This is especially true in the midwest where land is somewhat more available (outside of dense city spots like chicago). In dense cities, land is so scarce that the footprint of the mansion may be accruing massive land appreciation, so the value is driven up regardless.

 

[Merovinge]

Main thing to keep in mind is that houses don't appreciate - land does. House and house quality is an additional value that slowly depreciates over time.

So the gorgeous house on a sizeable lot may be 1.1 mil, but the underlying asset (land) may double in value (150k->300k) and you won't notice much increase in the house price (1.1->1.3 mil). However, the crusted dumphole house on the same block worth 50k seems to have had a huge increase in value 150+50->300+50 over the same period.

This is especially true in the midwest where land is somewhat more available (outside of dense city spots like chicago). In dense cities, land is so scarce that the footprint of the mansion may be accruing massive land appreciation, so the value is driven up regardless.

This is not always true although I do understand the point you are trying to make.

For a recent example building supply costs have increased significantly so a new construction home that cost 1 million might be 300k for the land, 700k for the construction costs and if it was built 3 years ago would be worth 800k for the construction costs in today's prices independent in any change of the land in value. That type of inflation fights against the depreciation of things being older in the house, although I will say regular maintenance/repair of a house is needed to keep its value rising in most instances.

 

[mistafab]

This is not always true although I do understand the point you are trying to make.

For a recent example building supply costs have increased significantly so a new construction home that cost 1 million might be 300k for the land, 700k for the construction costs and if it was built 3 years ago would be worth 800k for the construction costs in today's prices independent in any change of the land in value. That type of inflation fights against the depreciation of things being older in the house, although I will say regular maintenance/repair of a house is needed to keep its value rising in most instances.

I completely agree with this nuance.

 

[Stagg737]

Re: buying in HCOL area; in many ways that's a smarter investment. These houses/apartments sell overnight and you can rent them easily. Their value will also grow much bigger.
Based on how the economy has gone for the last several decades, food and housing prices are one thing you can probably safely bet will keep increasing. Real estate is also safer than stocks.
You would also easily beat the value per $ as opposed to renting. So your QOL will also improve.
You're not just buying a place to stay. You're also making a smart investment.
I'm not sure you could say the same thing if you bought a large house in a rural area or in the suburbs. In that case, yes, you better be careful with what you buy.

If you could buy while keeping at least 15-20% of your paycheck for savings, that's a total no brainer, especially if you're living in an expensive metro area. I was lucky to find a bank that will give a full loan for a relatively large mortgage a couple of years after residency, and I believe that's one of the best decisions I've made.

Agree with the rural aspect, but the right suburbs can sell faster than places in the cities themselves. Where I'm currently at, Redfin is saying average time a house is on the market is 14.5 days over the past 3 months, and Zillow is saying that over the past 6 months the average house goes to "pending" status 4 days after hitting the market. Both seem accurate from our recent house hunting experience here and there's 2 or 3 nearby town that are higher demand per our realtor.

Agreed, as long as you can keep healthy savings. It's pretty much a no brainer otherwise.
The problem most people run into is that these are competitive markets and you're sometimes facing cash only competitors and it's hard to find the right space for something you could afford. Enter physician loans, which are a deal breaker and a huge benefit IMO.
I find this tool on the NYtimes is great to help you make a decision Is It Better to Rent or Buy? (Published 2018) .

Physician loans make it silly not to buy if you're planning on being somewhere for more than 5-7 years and in a relatively cheap market. We put 0% down and our mortgage rate is still .3% lower than the average 5/1 ARM when we bought it with a longer initial fixed period. I'd be more concerned about doing this if you're living somewhere that's HCOL, as increased rates on an already high mortgage can be a killer.

The housing appreciation is probably much greater where you will be buying this so in 5 years the place will probably we closer to 3m minimum unless a crash? If that's the case not sure what the issue is. Problem in midwest where I am I see houses that were bough 1.1 m 10 years ago but they are now only worth 1.3-1.5m. The houses in the 400-600 ranges are the ones that have appreciated 50% in the last few years not the more expensive ones.

I think this is probably market dependent. Just looked up several houses valued around $2mil in my zip code and almost all of them were less than $1 mil prior to 2018 and a couple were $500-600k 10 years ago. I could see housing costs continuing to skyrocket in very desirable HCOL places where only the richest can keep up though.

 

[finalpsychyear]

Only in a physician website saving 150k/yr is not good enough.

The general public would think we are out of touch if they read this forum.

Hoping to be able to save/invest 100k/yr, which I think is great.

What do you think about buying a house overseas? For instance, my cousin has construction company in southeast of France (Lyon suburb), not too far from Switzerland (Geneva ~1.5 hr) and ~ 5 hrs from Milan (Italy)...beautiful scenery. He won't charge me anything EXTRA to build a 3BR/2BA house for about 400k (everything included).

Been there before and it's beautiful. Given the nature of my hospital medicine job, I can spend summer (-7 wks) with my kids there and the rest of the year it will be on Airbnb (which might bring a minimum 30k/yr). Would any of you entertain an offer like that?

I think you also have to consider that my savings rate is based on being able to walk away completely by 2030 which would be 14 years and touching mid 40s. House would not be paid off. Getting a 6% inflation adjusted growth who knows if that is even realistic but the numbers are drastic for every 50k shift. Even if i got a 6% inflation adjusted return, even saving a 100k/yr I would have 2.2m and no paid off house.

100k/yr : 2.2 at 6% inflation adjusted (i can hope)
150/yr: 3.3
200/yr: 4.4

Also, I wouldn't buy a house in france. How often will you actually spend a full 7 weeks. For me, I'd want the flexibility to travel to more places. Less hassle to just get a air bnb each time if you ask me.

 

[Splenda88]

I think you also have to consider that my savings rate is based on being able to walk away completely by 2030 which would be 14 years and touching mid 40s. House would not be paid off. Getting a 6% inflation adjusted growth who knows if that is even realistic but the numbers are drastic for every 50k shift. Even if i got a 6% inflation adjusted return, even saving a 100k/yr I would have 2.2m and no paid off house.

100k/yr : 2.2 at 6% inflation adjusted (i can hope)
150/yr: 3.3
200/yr: 4.4

Also, I wouldn't buy a house in france. How often will you actually spend a full 7 weeks. For me, I'd want the flexibility to travel to more places. Less hassle to just get a air bnb each time if you ask me.

You dont have to walk away completely. The beauty of medicine is that you can only work 6 days/month and make 100k+ per year.

I probably won't spend 7 wks there every year and if I don't, the house would be available for Airbnb. My net worth (NW) is not big enough now to do that anyway. Would probably do it if NW was 2+ mil.

 

[finalpsychyear]

You dont have to walk away completely. The beauty of medicine is that you can only work 6 days/month and make 100k+ per year.

I probably won't spend 7 wks there every year and if I don't, the house would be available for Airbnb. My net worth (NW) is not big enough now to do that anyway. Would probably do it if NW was 2+ mil.

Not saying I would be 100% retired. Still, I want to be in a position that I am only working for fun. Would be amazing to be in that position

 

[yanks26dmb]

Not saying I would be 100% retired. Still, I want to be in a position that I am only working for fun. Would be amazing to be in that position

Once my kid is out of the house I'm going to do something where I'm working 6 months a year and then spending the other 6 months abroad. I've always loved southeast asia...would be fun to spend half the year cruising around on motorbike, living a slower lifestyle, and keeping costs insanely low.

 

[Merovinge]

Once my kid is out of the house I'm going to do something where I'm working 6 months a year and then spending the other 6 months abroad. I've always loved southeast asia...would be fun to spend half the year cruising around on motorbike, living a slower lifestyle, and keeping costs insanely low.

I'm tossing around the idea of moving to Maui and opening up a small B+B. See a few patients during the daytime hours, mix cocktails and talk with guests in the evening. It's weird to even think about and I certainly don't have my mind made up, but it's nice to have options.

 

[yanks26dmb]

I'm tossing around the idea of moving to Maui and opening up a small B+B. See a few patients during the daytime hours, mix cocktails and talk with guests in the evening. It's weird to even think about and I certainly don't have my mind made up, but it's nice to have options.

I love this. That sounds amazing.

Along that vein, I'd like to open a hostel somewhere in SE Asia and have weird nightly dance parties where I'm the old guy DJing in the corner.

 

[clausewitz2]

I love this. That sounds amazing.

Along that vein, I'd like to open a hostel somewhere in SE Asia and have weird nightly dance parties where I'm the old guy DJing in the corner.

And if you get trained in psychedelic-assisted psychotherapy you'll have the Full Moon Party set covered as well. Master a recipe for banana pancakes and you won't be able to turn the backpackers away.

 

[Merovinge]

And if you get trained in psychedelic-assisted psychotherapy you'll have the Full Moon Party set covered as well. Master a recipe for banana pancakes and you won't be able to turn the backpackers away.

I regret never getting to a full moon party in my hayday. Yanks let me know if you make that happen in 10-20 years and I'll be the old guy with ya.

 

[yanks26dmb]

I regret never getting to a full moon party in my hayday. Yanks let me know if you make that happen in 10-20 years and I'll be the old guy with ya.

This is what burning man is for now.

 

[Merovinge]

This is what burning man is for now.

San Fran tech bros bringing ultra luxury into a desert is what burning man is for now . My friends that went last year had a good time but I think it's a far cry from it's hayday.

 

[yanks26dmb]

San Fran tech bros bringing ultra luxury into a desert is what burning man is for now . My friends that went last year had a good time but I think it's a far cry from it's hayday.

To a certain extent. I've got a lot of artist friends who go out...still seems like it can be what you want it to. be in the right camp, with the right crowd, etc.

I do enjoy the smaller festivals much more though - lucidity in particular is pretty amazing.

 

[Splenda88]

Are we upper middle class or are we between the wealthy and the upper middle class?

I have a friend who is an engineer. His household income is ~140k, which is considered upper middle class. But the kind of thing doctors can do, for example spending $500/night in hotel for a whole week, I don't think my friend can do that.

I feel like doctors are in a different class (in between the upper middle and the wealthy). For instance, most of us can not flight first class to go to Europe which I think wealthy people should be able to do, but on the other we can spend money on some luxury items that the upper middle class can't unless they have been working for years and live well below their means.

I do NOT feel like I am wealthy with an earning of 405k from my job and another ~20k net from real estate last year.

 

[ObsequiousAplomb]

Are we upper middle class or are we between the wealthy and the upper middle class?

I have a friend who is an engineer. His household income is ~140k, which is considered upper middle class. But the kind of thing doctors can do, for example spending $500/night in hotel for a whole week, I don't think my friend can do that.

I feel like doctors are in a different class (in between the upper middle and the wealthy). For instance, most of us can not flight first class to go to Europe which I think wealthy people should be able to do, but on the other we can spend money on some luxury items that the upper middle class can't unless they have been working for years and live well below their means.

I do NOT feel like I am wealthy with an earning of 405k from my job and another ~20k net from real estate last year.

There isn't a single location in the US where board certified doctors aren't upper class. In some parts of the country even residents are upper class (especially if the spouse works / two resident homes).

In most parts of the US upper class has a lower bound of about $100k.

Nearly the entire country has a lower bound for upper class below $140k.

The fascination with the belief that someone making $200k or 300k or sometimes even 400k "might be something other than upper middle class" just shows how much people don't want to understand what upper middle or middle or upper class means beyond a knee-jerk reaction.

 

[Bartelby]

Although if class is defined by buying power the location you live makes a big difference. Making $300k in San Francisco, for example, you would need to stretch to even buy your own primary residence. It's hard to make the case that that is "upper class." $300k in a medium-sized city in Oklahoma, on the other hand, probably has you sitting very comfortably in the upper class or wealthy category.

But in general I agree that in most of the country $200k-300k is quite comfortable money even if you are the sole income earner. One of our superpowers as physicians (and especially as psychiatrists) is being able to earn those numbers in LCOL locations (in contrast to many high-paid professions that may be almost forced to congregate in cities that are hotspots for whichever particular industry).

 

[ObsequiousAplomb]

Although if class is defined by buying power the location you live makes a big difference. Making $300k in San Francisco, for example, you would need to stretch to even buy your own primary residence. It's hard to make the case that that is "upper class." $300k in a medium-sized city in Oklahoma, on the other hand, probably has you sitting very comfortably in the upper class or wealthy category.

But in general I agree that in most of the country $200k-300k is quite comfortable money even if you are the sole income earner. One of our superpowers as physicians (and especially as psychiatrists) is being able to earn those numbers in LCOL locations (in contrast to many high-paid professions that may be almost forced to congregate in cities that are hotspots for whichever particular industry).

Here's how much money it takes to be considered middle class in 20 major U.S. cities

There are countless definitions of "middle class." See which incomes qualify as middle class in the largest U.S. metros based on one calculation.

www.google.com

According to that article, income above $232k would still be upper class in SF.

How Much You Need To Be ‘Rich’ in 10 Major US Cities in 2023

Some cities require a lot more money.

www.google.com

This one give similar numbers

Are you in the American middle class? Find out with our income calculator

About half of U.S. adults lived in middle-income households in 2018, according to our new analysis of government data.

www.pewresearch.org

And this one

The 10 US cities with the largest share of upper-class residents

A recent report from the Pew Research Center highlights the 10 areas with the largest upper-income populations.

www.google.com

And this one

I didn't pick and choose. These are all the top results when googling "upper class income by city."

 

[Splenda88]

Here's how much money it takes to be considered middle class in 20 major U.S. cities

There are countless definitions of "middle class." See which incomes qualify as middle class in the largest U.S. metros based on one calculation.

www.google.com

According to that article, income above $232k would still be upper class in SF.

How Much You Need To Be ‘Rich’ in 10 Major US Cities in 2023

Some cities require a lot more money.

www.google.com

This one give similar numbers

Are you in the American middle class? Find out with our income calculator

About half of U.S. adults lived in middle-income households in 2018, according to our new analysis of government data.

www.pewresearch.org

And this one

The 10 US cities with the largest share of upper-class residents

A recent report from the Pew Research Center highlights the 10 areas with the largest upper-income populations.

www.google.com

And this one

I didn't pick and choose. These are all the top results when googling "upper class income by city."

Well, I can't travel 1st class to Europe with my family; therefore, I don't think I am "upper class."

 

[finalpsychyear]

Are we upper middle class or are we between the wealthy and the upper middle class?

I have a friend who is an engineer. His household income is ~140k, which is considered upper middle class. But the kind of thing doctors can do, for example spending $500/night in hotel for a whole week, I don't think my friend can do that.

I feel like doctors are in a different class (in between the upper middle and the wealthy). For instance, most of us can not flight first class to go to Europe which I think wealthy people should be able to do, but on the other we can spend money on some luxury items that the upper middle class can't unless they have been working for years and live well below their means.

I do NOT feel like I am wealthy with an earning of 405k from my job and another ~20k net from real estate last year.

When 6-7% return on my portfolio gives me avg salary for my field I may feel like i have entered the wealthy territory. Till then upper middle class which I am very appreciative to be.

 

[Splenda88]

When 6-7% return on my portfolio gives me avg salary for my field I may feel like i have entered the wealthy territory. Till then upper middle class which I am very appreciative to be.

Well, you will need a portfolio of 5 mil which can be achieved in 15 yrs since psych docs can make bank right now if willing to put the hours.

 

[Bartelby]

According to that article, income above $232k would still be upper class in SF.

Fair enough, it sounds like upper end of the $200-300k falls into an "upper class" designation pretty much anywhere. I think what I am getting at is more of my own made up idea of "upper class" for a given area.

From personal experience living in a HCOL area, money has not been a big worry. My household income is well over the $300k mark and high enough that I would consider myself wealthy, but even at this income level if I purchased a 2,000+ square foot home in a nice neighborhood/school zone with a reasonable commute it would suck up most of the household's monthly income. I ended up choosing to live in a much more modest home in a mediocre school zone (think 6/10 Greatschools). I am still saving at a significant rate with a goal of FI; if I ditched that goal I could afford the nice home but again would have pretty minimal savings.

I'm sort of skeptical that someone earning $232k in SF could afford to own a nice home in a great neighborhood that is comfortable for a whole family, have a nice car, spend freely on hobbies, send their kids to private school if desired, and feel good enough about their retirement / rainy day fund savings rate. If you have to sacrifice at least one of the above, that's not catastrophic but it doesn't quite fit with my own conceptualization of "wealthy." In these HCOL areas anyone newly moving in also has to realize their income will not be an apples to apples comparison with their neighbor's for quality of life because many people bought long ago when prices were a lot lower, and housing is probably the biggest pain point in these expensive locations.

 

[Splenda88]

Fair enough, it sounds like upper end of the $200-300k falls into an "upper class" designation pretty much anywhere. I think what I am getting at is more of my own made up idea of "upper class" for a given area.

From personal experience living in a HCOL area, money has not been a big worry. My household income is well over the $300k mark and high enough that I would consider myself wealthy, but even at this income level if I purchased a 2,000+ square foot home in a nice neighborhood/school zone with a reasonable commute it would suck up most of the household's monthly income. I ended up choosing to live in a much more modest home in a mediocre school zone (think 6/10 Greatschools). I am still saving at a significant rate with a goal of FI; if I ditched that goal I could afford the nice home but again would have pretty minimal savings.

I'm sort of skeptical that someone earning $232k in SF could afford to own a nice home in a great neighborhood that is comfortable for a whole family, have a nice car, spend freely on hobbies, send their kids to private school if desired, and feel good enough about their retirement / rainy day fund savings rate. If you have to sacrifice at least one of the above, that's not catastrophic but it doesn't quite fit with my own conceptualization of "wealthy." In these HCOL areas anyone newly moving in also has to realize their income will not be an apples to apples comparison with their neighbor's for quality of life because many people bought long ago when prices were a lot lower, and housing is probably the biggest pain point in these expensive locations.

I agree with you.

I don't know if one can consider him/herself "upper class" in a VHCOL area if they can't even afford a regular home like the one below.

1262 Notting Hill Dr, San Jose, CA 95131 | Zillow

1262 Notting Hill Dr, San Jose CA, is a Single Family home that contains 1918 sq ft and was built in 1990.It contains 4 bedrooms and 3 bathrooms.This home last sold for $1,740,000 in May 2023. The Zestimate for this Single Family is $1,901,800, which has increased by $20,327 in the last 30...

www.zillow.com

 

[Mad Jack]

No, it just means that you need to be able to produce two years of tax returns and/or bank statements demonstrating income over a longer period of time. So it's going to be very difficult to qualify for one immediately.

Physician loans can get you a lot of exceptions. I got a loan on a house with zero income and just a copy of a one-year contract. Might cost you extra interest though, depending on the company

 

[G Sheb]

"Wealthy" I think means private schools, expensive vacations/hobbies, new expensive car+covered parking, flying first class, saving generously for retirement, liivng in a prime location..etc
Even 400K in a HCOL would definitely not cut it.
Now if it's a 2 physician household it might.

But you absolutely do not need to be 'wealthy' to do all of the above but without the same luxury. Might be better that way to keep you grounded.

 

[Merovinge]

"Wealthy" I think means private schools, expensive vacations/hobbies, new expensive car+covered parking, flying first class, saving generously for retirement, liivng in a prime location..etc
Even 400K in a HCOL would definitely not cut it.
Now if it's a 2 physician household it might.

But you absolutely do not need to be 'wealthy' to do all of the above but without the same luxury. Might be better that way to keep you grounded.

To me "wealthy" is anyone that does not have to work for a living, where they go to sleep at night and their money makes more money such that they can live their lifestyle without concern. This is basically the 0.1%.

Doctors are at the very top of the working class to the way I see it, although completely understand why people would disagree. We make enough money to mostly do anything we want but no where near everything we want. Your biggest concern as an MD is not getting your yacht between Capri and Nice unless you started your own company or are one of the few docs who are the CEO of some huge healthcare company.

 

[hamstergang]

Upper class is always defined as being able to afford to do just a little bit more than the person doing the defining.

 

[untapped]

Upper class is always defined as being able to afford to do just a little bit more than the person doing the defining.

I think I read somewhere that people at all income levels imagine that 30% more money would be what makes them happier. I'm curious for those trying to make 500k+, how that lifestyle compares to what their childhood was like.

 

[Merovinge]

I think I read somewhere that people at all income levels imagine that 30% more money would be what makes them happier. I'm curious for those trying to make 500k+, how that lifestyle compares to what their childhood was like.

There is classic hedonic adaptation/treadmill, it's virtually impossible to fight it if you ever get used to the luxury. We deal with this by spending far far below our means. Economy flights exclusively, book a hotel 5 minutes from the beach rather than on the beach, drive a 40k car instead of a 80-120k car, costco napa wine, not winery napa wine. Spend 2 nights at the fancy resort and then stay somewhere at a modest price for the rest of the trip. Not afraid at all to spend on things that bring value (lawncare, cleaner, babysitting, exotic travel but on a reasonable budget) but pretend the rest of the money doesn't exist.

If we actually saved 20% and spent the rest, life would look a lot different than our childhoods but I don't think I would be any happier. Expect to be much happier having the flexibility to work/not work by mid 40's.

 

[jbomba]

There is classic hedonic adaptation/treadmill, it's virtually impossible to fight it if you ever get used to the luxury. We deal with this by spending far far below our means. Economy flights exclusively, book a hotel 5 minutes from the beach rather than on the beach, drive a 40k car instead of a 80-120k car, costco napa wine, not winery napa wine. Spend 2 nights at the fancy resort and then stay somewhere at a modest price for the rest of the trip. Not afraid at all to spend on things that bring value (lawncare, cleaner, babysitting, exotic travel but on a reasonable budget) but pretend the rest of the money doesn't exist.

If we actually saved 20% and spent the rest, life would look a lot different than our childhoods but I don't think I would be any happier. Expect to be much happier having the flexibility to work/not work by mid 40's.

Saving 20% gross is actually a really good goal. If you were able to achieve that and have bills covered you'd be in a great financial position.

 

[Splenda88]

Saving 20% gross is actually a really good goal. If you were able to achieve that and have bills covered you'd be in a great financial position.

it's probably over 25% for me now if 401k/IRA/HSA investments are included. It unfortunately will go down to ~15% once I start paying back student loan.

 

[Merovinge]

Saving 20% gross is actually a really good goal. If you were able to achieve that and have bills covered you'd be in a great financial position.

Oh I agree it is a good goal and people are doing great that are doing it. We save like 40-45% gross depending on the year but obviously everyone's life and financial situation is different and I wouldn't want people trying to do a specific thing, just about what is right for you and your family.

 

[Splenda88]

Oh I agree it is a good goal and people are doing great that are doing it. We save like 40-45% gross depending on the year but obviously everyone's life and financial situation is different and I wouldn't want people trying to do a specific thing, just about what is right for you and your family.

Wow. That is remarkable.

 

[Merovinge]

Wow. That is remarkable.

Dual MD household, 1 kid only, cheapish hobbies, reasonable size house. When I was paying off my loans the rate was definitely lower, but now post-tax we save $2-3 dollars for everyone we spend.

 

[G Sheb]

There is classic hedonic adaptation/treadmill, it's virtually impossible to fight it if you ever get used to the luxury. We deal with this by spending far far below our means. Economy flights exclusively, book a hotel 5 minutes from the beach rather than on the beach, drive a 40k car instead of a 80-120k car, costco napa wine, not winery napa wine. Spend 2 nights at the fancy resort and then stay somewhere at a modest price for the rest of the trip. Not afraid at all to spend on things that bring value (lawncare, cleaner, babysitting, exotic travel but on a reasonable budget) but pretend the rest of the money doesn't exist.

If we actually saved 20% and spent the rest, life would look a lot different than our childhoods but I don't think I would be any happier. Expect to be much happier having the flexibility to work/not work by mid 40's.

Yep. Ski 3 full weeks a year but fly basic economy (which is frankly kinda the same if you’re not going first class ), stay in air bnbs instead of ski in ski out, take snacks with you instead of getting ripped at the resorts lol.
I ain’t complaining.

Important to keep things in perspective. I think one can live on a part time salary of 200k very very comfortably if they decide to downsize and live in lcol. Very few can make that choice.

It’s also fairly doable to save 40-45% as a physician couple. Sharing the mortgage/rent is a big plus.

 

[jbomba]

Dual MD household, 1 kid only, cheapish hobbies, reasonable size house. When I was paying off my loans the rate was definitely lower, but now post-tax we save $2-3 dollars for everyone we spend.

I am a one physician household, cheap hobbies (aside from non-luxury international travel and restaurant dining), aiming to save 30% gross. I am estimating ~750k beginning this summer/my first year out of residency plus another 100k from my spouses job, so total income of 850k. Unfortunately our home is going to be a huge expense as it is in a very hcol area.

 

[Merovinge]

I am a one physician household, cheap hobbies (aside from non-luxury international travel and restaurant dining), aiming to save 30% gross. I am estimating ~750k beginning this summer/my first year out of residency plus another 100k from my spouses job, so total income of 850k. Unfortunately our home is going to be a huge expense as it is in a very hcol area.

You're doing great, keep it up for 5 years and you'll have a lifetime of foundation setup.

 

[jbomba]

Regards to savings, I will put a plug in for defined benefits plans. My accountant helped get me set up but if you are doing 1099 work +/- self employed private practice it makes a lot of sense. Depending on age you can tax defer a significant amount. It starts around 125k/year and goes up each year you age. If you can find work for your spouse within your business entity, they can also have their own defined benefits plan allowing you to save a huge amount of money pre-tax.

 

[untapped]

I am a one physician household, cheap hobbies (aside from non-luxury international travel and restaurant dining), aiming to save 30% gross. I am estimating ~750k beginning this summer/my first year out of residency plus another 100k from my spouses job, so total income of 850k. Unfortunately our home is going to be a huge expense as it is in a very hcol area.

I think it's inspiring to see others make a great income in psychiatry and I'll be following your progress. It's interesting how 2 psychs in the same city (LA) can plan on having very different incomes (My 300k vs. your 750k) and still be able to live well. I love how flexible psychiatry is in terms of work options and income titration. I have a friend in the area in cosmetic dentistry who makes over a million a year, with a beautiful place in newport beach and drives a 100k+ car. Sometimes I get jealous of what he has but then I realize I wouldn't swap places with him. Different strokes I guess.

 

[Stagg737]

Fair enough, it sounds like upper end of the $200-300k falls into an "upper class" designation pretty much anywhere. I think what I am getting at is more of my own made up idea of "upper class" for a given area.

From personal experience living in a HCOL area, money has not been a big worry. My household income is well over the $300k mark and high enough that I would consider myself wealthy, but even at this income level if I purchased a 2,000+ square foot home in a nice neighborhood/school zone with a reasonable commute it would suck up most of the household's monthly income. I ended up choosing to live in a much more modest home in a mediocre school zone (think 6/10 Greatschools). I am still saving at a significant rate with a goal of FI; if I ditched that goal I could afford the nice home but again would have pretty minimal savings.

I'm sort of skeptical that someone earning $232k in SF could afford to own a nice home in a great neighborhood that is comfortable for a whole family, have a nice car, spend freely on hobbies, send their kids to private school if desired, and feel good enough about their retirement / rainy day fund savings rate. If you have to sacrifice at least one of the above, that's not catastrophic but it doesn't quite fit with my own conceptualization of "wealthy." In these HCOL areas anyone newly moving in also has to realize their income will not be an apples to apples comparison with their neighbor's for quality of life because many people bought long ago when prices were a lot lower, and housing is probably the biggest pain point in these expensive locations.

I think this is where I'm at as well in terms of what "upper class" means. Outside of a small handful of very HCoL areas, a single physician's salary puts one solidly in the "upper class". I'm fairly frugal, but also realistic. If you can afford to drop a couple hundred dollars for a date night every week or order those $15-20+ cocktails with dinner without worrying about the bill, you're solidly in the upper class.

"Wealthy" is a whole other level that I agree is mostly the top 0.1% and some things that we used to think of as being for the "upper class" (like flying first class) is now reserved for those living even higher/wealthier lifestyles than that.

Wow. That is remarkable.

Agree with above that 40% or more of gross savings is obtainable for many physicians if they want it, but will point out this is where geography matters more as G Sheb referenced.

Our household income is <$300k/yr and we will probably save around $60-70k this year. We could probably double that fairly easily if we lived more inline with my lifestyle which is more like a resident, but my wife is a bit of a spendthrift. We just bought a house that's about 20 yo, ~4k sq ft, we've probably dropped about $20k in new furniture, lawn mower, swing set, etc, go out to eat/order out at least 3x per week, and have our kid doing several programs a week (tumbling, soccer, swimming, etc) along with private daycare. We haven't traveled much, but plan to once our jobs slow down a bit more and we get a few more things ironed out.

I could (fairly easily) find a job in our area that would boost our gross income to at least $500k+ and we could sock away $225-250k/yr and not change our lifestyle. We have what I consider an upper class lifestyle, but if we lived in a higher CoL area we definitely could not live like this and reasonably save for retirement.

 

[forchinet121]

I think it's inspiring to see others make a great income in psychiatry and I'll be following your progress. It's interesting how 2 psychs in the same city (LA) can plan on having very different incomes (My 300k vs. your 750k) and still be able to live well. I love how flexible psychiatry is in terms of work options and income titration. I have a friend in the area in cosmetic dentistry who makes over a million a year, with a beautiful place in newport beach and drives a 100k+ car. Sometimes I get jealous of what he has but then I realize I wouldn't swap places with him. Different strokes I guess.

The poster you quoted isn’t making 750k that is what he’s projecting to make so I would take it with a grain of salt as well, making money is not easy and there’s always give and take, you will be sacrificing something for the extra money and the wisemen throughout history tell us it’s probably not worth it