Finances and breakeven

[t510]

Did any of you non-traditional students calculate a breakeven when contemplating medical school?
If so, what did you worry about?
Maybe I'm overthinking things, but I've gone through these calculations a lot lately.

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[Bru]

If I had worried about when I was going to break-even relative to my previous career, I probably wouldn't have done it. The numbers also change quite a bit depending on what your path in medicine ends up.

Honestly, it usually isn't a logical, mathematical choice most non-trads make in going down this path.

 

[Dullhead]

^ agree with Bru - it probably is not a logical, calculated move that most non-trads make. However, I'm curious, OP, as to what you compared and the conclusions you have made, if you don't mind sharing.

 

[NonTrad16]

I'm <30, engineering degrees, and making crude estimates I landed at a break even point of mid 40s. It seems like a futile exercise... Sometimes the consensus on here seems bleak, and everyone's situation is different, so I tried to be conservative just to reassure myself.

 

[ddmbmom]

I'm not exactly sure if you guys are referring to financials here, but if you are, here's what I have to say about it.
1. I left a $50,000 career of 20 years.
2. I am taking out a $110,000 student loan for tuition and books and a personal loan of $20,000 for cost of living with a 7% interest rate.
3. If I pursue psychiatry, I will get a $50,000 tuition reimbursement for that health care shortage federal govt program thing which I have to do for 2 years then I can work for the hospital at $150,000/year salary.
4. If I pursue family practice, no tuition reimbursement but can work for the hospital at $150,000/year salary.
5. As soon as I start my physician job, if not sooner (as in during residency, because the residency I hope to get and am pretty sure I will get it since I have worked for them as a healthcare professional for the past 5 years, and this residency pays $50,000/year) I will start paying back at least my monthly loan payment of $1150/month, if not even more, like $1150/month.
6. It will take me a good 130 months (11 years) to pay it all off.
7. I will be 49 when I start my residency and 52 when I finish it. I plan to work at least 20 years so long as I remain in top notch health. So, when I am 63 years and older, I will be student loan free and can enjoy the income reaped from hard work in medical school and beyond.
8. I am different in so many ways than alot of you here and it doesn't matter so much to explain so many personal things, but one thing to note is my spouse is in a very secure profession and makes around $100,000/year so things like mortgage, children's expenses, groceries, gas, basic cost of living things are not things I have to take a loan out for.

Is this what you guys were referring to?

 

[ddmbmom]

I'm not exactly sure if you guys are referring to financials here, but if you are, here's what I have to say about it.
1. I left a $50,000 career of 20 years.
2. I am taking out a $110,000 student loan for tuition and books and a personal loan of $20,000 for cost of living with a 7% interest rate.
3. If I pursue psychiatry, I will get a $50,000 tuition reimbursement for that health care shortage federal govt program thing which I have to do for 2 years then I can work for the hospital at $150,000/year salary.
4. If I pursue family practice, no tuition reimbursement but can work for the hospital at $150,000/year salary.
5. As soon as I start my physician job, if not sooner (as in during residency, because the residency I hope to get and am pretty sure I will get it since I have worked for them as a healthcare professional for the past 5 years, and this residency pays $50,000/year) I will start paying back at least my monthly loan payment of $1150/month, if not even more, like $1150/month.
6. It will take me a good 130 months (11 years) to pay it all off.
7. I will be 49 when I start my residency and 52 when I finish it. I plan to work at least 20 years so long as I remain in top notch health. So, when I am 63 years and older, I will be student loan free and can enjoy the income reaped from hard work in medical school and beyond.
8. I am different in so many ways than alot of you here and it doesn't matter so much to explain so many personal things, but one thing to note is my spouse is in a very secure profession and makes around $100,000/year so things like mortgage, children's expenses, groceries, gas, basic cost of living things are not things I have to take a loan out for.

Is this what you guys were referring to?

Oops, number 5 at the end was supposed to say $1500/month

 

[t510]

The one thing that drives me crazy is that once you get into medical school you have almost guaranteed income (residency, etc).
My current career (I'm a professional)... I have seen too many people struggling and being bounced around from job to job. What happens if someone in my field can't find work after say age 50... that freaks me out.
I did calculations based on a certain take home pay, then doing a comparision of investing the rest with a 6% return. Obviously if I get a 10% return it would make medical school even less attractive. I'm 29 now, and realistically wouldn't even finish residency until 38 at the earliest... So that's like 10 years of saving in my current job assuming I can save money and be employed. I ran a bunch of different scenarios.

 

[t510]

I could also get big raises in my current profession which isn't taken into account. However, you probably will have a lot more disposable income as a physician.
I'm not just worried about finances but it is obviously a concern.

 

[beebreezy]

Not sure if it's my age, but I'm not sophisticated enough to consider such things. It might be naive of me, but I don't see paying off med school debt on even a primary care doctor's salary as that daunting. To me, it's the job security that is one of the most valuable aspects of this path. I'm over playing the job market game.

 

[Meridian32]

t510 - you seem to be thinking carefully about the opportunity cost of a medical career, so let me tell you what I didn't know when I was in your shoes that I know now: you will probably feel the opportunity cost more acutely in your early-mid 30s than in your early-mid 20s.

Like you, I had a well paying career before med school. When I was accepted, I did the financial modeling you are doing now, decided everything looked good and went through four years of med school. In the last four years, I've also gotten engaged and married and we now have a 5 month old. We're currently moving to a city where my wife found her dream job, I matched to my dream residency and we have family nearby to help with our baby. Unfortunately, this metropolitan area is also one of the most expensive in the country, and even on our combined income we won't be able to buy a house here anytime in the near future. Other things we might like for our child, like a nanny or private school, may be cost prohibitive as well. Had I stayed in my prior career, I'd probably be less happy - but with 6+ more years of income/savings and no med school tuition to pay, all of these things would be affordable.

When I was still childless/unmarried and looking at my financial modeling spreadsheet, the numbers did not make it clear that I would now be feeling this acute sense of not being able to provide for our child as much as we would like - even though I knew in theory that I would probably be married with a child by this time.

One more thing - carefully consider whether 6-10% is a realistic rate of return assumption. If you are 29, I am guessing that your portfolio may never have lived through a significant recession, so don't forget that bear markets do exist.

 

[packersfans]

I did a calculation years ago (maybe 4-5 years ago). It had assumed that I would be starting medical school much earlier. Given the trajectory of salary I assumed back then it was a definite win to go to medical school. I think if I redid the calculation today, it may not come out ahead/even (my career success as an engineer had been much better than I expected). I still absolutely hate my job and look forward to quitting. Less than a month to go!!!

Edit: As someone above said, its hard to put a price on job security. If we hit another recession soon, which I think we will, my pay will definitely fold in half. A lot to be said for that.

 

[trev5150]

Running the numbers takes on a whole new meaning if you're utilizing any if your retiremant fund to finance your education. I'm anihilating mine.

 

[t510]

I could have written this. Two years ago when I decided to become a doctor, it was a financially sound move. Now financially, it seems insane because I earn more and will have fewer working years. However, I work in an industry that may experience a recession in the near future, and one where youth is highly valued, making me less employable as I get older anyway.

Why do you think it is insane? You will have a secure job / secure income.

t510 - you seem to be thinking carefully about the opportunity cost of a medical career, so let me tell you what I didn't know when I was in your shoes that I know now: you will probably feel the opportunity cost more acutely in your early-mid 30s than in your early-mid 20s.

Like you, I had a well paying career before med school. When I was accepted, I did the financial modeling you are doing now, decided everything looked good and went through four years of med school. In the last four years, I've also gotten engaged and married and we now have a 5 month old. We're currently moving to a city where my wife found her dream job, I matched to my dream residency and we have family nearby to help with our baby. Unfortunately, this metropolitan area is also one of the most expensive in the country, and even on our combined income we won't be able to buy a house here anytime in the near future. Other things we might like for our child, like a nanny or private school, may be cost prohibitive as well. Had I stayed in my prior career, I'd probably be less happy - but with 6+ more years of income/savings and no med school tuition to pay, all of these things would be affordable.

When I was still childless/unmarried and looking at my financial modeling spreadsheet, the numbers did not make it clear that I would now be feeling this acute sense of not being able to provide for our child as much as we would like - even though I knew in theory that I would probably be married with a child by this time.

One more thing - carefully consider whether 6-10% is a realistic rate of return assumption. If you are 29, I am guessing that your portfolio may never have lived through a significant recession, so don't forget that bear markets do exist.

This was very insightful -thank you. It sounds like things are going really well. Good to hear. You should be very happy about having a secure job income. I was a physician I wouldn't be too worried about spending money on things like private school, nice neighborhoods, etc. You mentioned that I should consider the 6% - I agree 100% .

 

[keitaiKT]

t510 - you seem to be thinking carefully about the opportunity cost of a medical career, so let me tell you what I didn't know when I was in your shoes that I know now: you will probably feel the opportunity cost more acutely in your early-mid 30s than in your early-mid 20s.

I so agree with this. In my twenties when I started this, the idea of buying a house/mortgage/nanny or daycare didn't even cross my mind. This stuff becomes a lot more important in your thirties when everyone around you is doing it. It's not to say that you will regret your decision, just that the priorities change.

 

[DocWinter]

As a current medical student in my early 30's - YES, I did do a calculation and NO, I didn't come out way ahead in the end, but I am doing it anyway and love my trajectory. Many factors, and job security is already mentioned, but I was making 50K a year working a hard job that was wearing my body down and I couldn't stand desk jobs/sales or sitting around in a tie and a phone. If not medicine, I would have stayed blue collar because I like the activity and hands-on work. It's good to know I can still be hands on and not kill my back and knees one day.

It really stung this 1st year not having the cash flow from a good job and watching the $$ pile up. If you can truly say to yourself "I'm not in it for the money", and believe that, then go ahead and do it. If you are thinking of that cash at the end, don't head that way because in my short experience finishing up 1st year, it's downright painful to walk this long, long road and watching friends/family moving up and having things that you know you'll not have for another 3-7 years, plus all the reduced stress. The stress is a big deal...

 

[QofQuimica]

Did any of you non-traditional students calculate a breakeven when contemplating medical school?
If so, what did you worry about?
Maybe I'm overthinking things, but I've gone through these calculations a lot lately.

No, you're not overthinking it; other people are underthinking it. If your main concern is to come out ahead financially, and especially if you're over age 40 when you start down this road, you're likely better off staying in your current career. Don't forget that you also have to factor in the loss of your future salary increases and retirement benefits (ex. 401k matches), not just your current salary/what you lose while in school/what you have to borrow. Your taxes will also go up considerably. I know, I know, first world problems and all, but suffice it to say that even in a tax-free state, I still wind up giving close to half my paycheck to Uncle Sam when it's all said and done. (Probably have to pay AMT this year.) So keep in mind that you're only taking home around half the amount listed on your contract, too.

Also, people tend to greatly underestimate the lifestyle creep that happens to attendings. For the vast majority of young docs, with that new six figure salary comes a new six figure yearly budget. In fact, it's not uncommon for docs to be living paycheck to paycheck, just like most other Americans who earn considerably less money do. I have plenty of colleagues who spend everything they earn as fast as they earn it, and then put the rest on credit. (And lord knows there will be all kinds of folks coming out of the woodwork looking to extend you as much credit as you want once you're done with training.) So far, I have resisted the pressure to "live like a doctor." A year out of residency, I still live on ~$2500/month including paying for my niece's college fund. So yeah, it's possible to "live like a resident" when you're an attending so that you can pay off all your debt and/or save up a bunch of money. But it is definitely not the norm. And odds are good that you won't be one of the few of us who are actually doing it.

 

[plukfelder2017]

-this is completely dependent on your entrepreneurial capacity along w/ your specialty of choice. If you go into EM for instance and start picking up extra shifts within your physician group you could easily be pushing 350k+. As you start becoming a senior member of your physician group you are also eligible for a slew of perks including the opportunity to build additional equity. if you take on a role within the board of directors you also have additional opportunities. if you have entrepreneurial capacity getting a few physicians together to pick up a multi-unit building or investing in vetted startups would yield big bucks in the long run. again becoming a physician provides you w/ many more perks than your hospital/physician group acquired base salary. it just requires a little bit of ingenuity and the ability to remain liquid at the right times. this means that you probably want to educate yourself regarding possible investment opportunities in the interim. great place to start would be w/ the warren buffet shareholder letters and moving from there. those letters are the equivalent of an mba and will give you a solid idea of the financial market place.
-in addition, an intelligent financial decision would be to prolong marriage until after you exit residency.