the budget of the "joneses" ?

[ballinsncbirth]

I have about 3 years out of residency , every doc i know, and all the online financial advice i read is centered on not becoming "the joneses" . You hear about these mythical "joneses" everywhere, spending money , big houses, living the life, lavish parties cars etcc..

I always swore i would not become one of them , but now than i am looking at my fianaces i am starting to wonder if i am one these "jones's" .

so heres a quick rundown of my financial hx, and budget

i am currently 32, have a son from a previous relationship, was able to pay back my debt first year, 120 med loans, car, private loans etc....
second year brought a boat, and moved to a rented house on the lake,
currently engaged to be married,

monthly budget
average gross income 40 k /month

13k immediately goes to tax account (no state income tax)

10 k a month living budget
3.4k rent (live in a nice place on the water, boat doc, >3K sq feet )
2k child support
600 daycare
460 boat payment (40 k loan)
446disability (15K policy)
360 health insurance
960 housing expenses, (140 cable, 300 lights, 140 pool maitenance, 120 water, 40 propane, 100 car insurance , 120 cell phone )
1-2 K entrainment/food gas and miscellanous ( grocieries, alot of eating out, movies, fishing trips with my son etc )

17 K savings/retirement
4K Sep ira (add another 4 at end of year to get up to max)
550 HSA family
13 K into savings account/taxable account

SO im not doing to bad, saved u 240 K in cash (60 k for 6 month emergency fund) ) with another 140 in retirement so far,

in april will be ending my 2 year lease, and now the future lady wants to buy a 1M dollar dream house on the water.. by that time should have another 100k in cash for a total of 340 ,

i look back at my days of college living 20 K a year (and feeling rich) and i think D@#$N where did that guy go ??

so what do you think, am i a "mr jones"? would a 1 million dollar house seal the deal of jones esq overspending
any other "jones's " out there? what is your budget like ?
do you plan on becoming a "jones" before you retire?

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[bashwell]

You're not a Jones yet. Not at least till you have similar neighbours to compete against. You need to start competing with your neighbours over what cars you're driving, how hot your wives or husbands are, what clothes or jewellery or other accessories they're wearing, which prep school the kids are going to, where you go on vacations, etc, then you'll be a Jones...maybe.

 

[DeadCactus]

More than half your post-tax income is going to savings. I think that excludes you from the Jone's category...

 

[goodoldalky]

in april will be ending my 2 year lease, and now the future lady wants to buy a 1M dollar dream house on the water.. by that time should have another 100k in cash for a total of 340 ,


so what do you think, am i a "mr jones"? would a 1 million dollar house seal the deal of jones esq overspending

If you buy a $1M house with 20% down you are looking at around ~6K/mo house payment for an 800K loan depending on rates and your property tax rate.

I would say you should make sure you are comfortable working the same amount you are currently working until the house is paid off, 15+ yrs. You're pulling in 500K right now which is not easy to do in EM.. depending on if you are locums etc... but if you pull the trigger on this you may not be able to cut back easily. I would be in favor of buying a house to build equity rather than renting however.

 

[DrDrummer]

What kinda shifts are you pulling for that income? In TX or some other EM Mecca?

Good job on the savings. I agree with everyone that if you keep that up, and keep being cognizant of what you're doing with your money, you'll do just fine.

 

[ballinsncbirth]

Thanks everyone. For the responses
I work in Texas .. Doing 14 shifts a month .. Just increased to 16 shifts to keep my savings rate the same after going on a couple vacations .. And for wedding planning stuff.

I keep going over the figures for the million dollar house .. And that would put my monthly budget somewhere at 12-14 k.... And drop my savings per month to around 10 k .. Which isn't bad but just feels wrong .......

Technically I could afford it ...even going by white coat investor (love that guy) of keeping the house payment less than 20 %... Doing 15 year would kick the payment up to around 6 k plus 2k in property taxes (only bad thing about texas)
8/9 K just seems crazy for a house ! Should I do a 30 year to keep the payment under 6 k ( I plan on moving and probably selling it in 10-15 years or so ...

 

[Birdstrike]

The biggest thing that weighs you down over the years and can make a high earner feel poor, is a huge house payment. Appears wealthy to everyone other than the guy responsible for the house payment for the next 360 months. When in doubt go smaller.

 

[goodoldalky]

Alright then, I'll tell you. 16 shifts for the next 30 years will probably make you lose your mind and it is unwise to buy a million dollar house.

You also are not totally prepared for the maintenance cost of the house and the astronomical cost of having kids with your new wife to be (if you choose to) in the context of having child support from a previous relationship. Your time will become increasingly occupied with non-work responsibility. Don't buy a million dollar house.

 

[DeadCactus]

You're in Texas, you can buy a mansion for a few hundred thousand. I can understand the temptation in a place like San Francisco or New York where that's the price for a basic home, but you're flush with far more reasonably priced alternatives...

 

[emergentmd]

I say you are in somewhat the same boat as I was in my early 30s. If I would do it all again, I would have done it differently

I made about 350K/yr pretax + 52K SEP with full benefits (insurance, med/mal) paid. Paid off my 100k Loan 1st yr.

This sure seems like alot of money but I have no clue where all of my money went. Maybe the 2000 stock market crash hit me, some bad investments, etc.

Although 30k/mo seemed like alot, but that is about 20K take home. I also have a million dollar home that I custom built, put in 300k towards the build. For some reason I never felt well off/financially secure until very recently. 20K seems like alot but

1. Mortgage+Prop tax + insurance on a 1 mil home/700K loan is still about 5.5k a month
2. Vacations - about 2k a month
3. Utilites 1k/mo
4. Car payments 1500/mo

That is 10k/mo minimal living expense

That leaves just 10k for food, private school, clothes, entertainement. Again, may seem like alot but it really doesnt.

Things that will really throw a wrench in your plans

1. Divorce BIG expense
2. Kids big expense
3. Furnish $1 mil home is EXPENSIVE.


If I had to do it all over again, I would have bought a smaller home. I am lucky that I have and will not ever divorce.

I have no real big regrets b/c I feel secure at this time, but I definitely could have done it better.

 

[emergentmd]

You're in Texas, you can buy a mansion for a few hundred thousand. I can understand the temptation in a place like San Francisco or New York where that's the price for a basic home, but you're flush with far more reasonably priced alternatives...

a few hundred thousand will not buy you a mansion. 200K gets you a neighborhood where people make 50-90k/month. Making 400k/yr, your should be able to live in a nicer accommodations.

Did I really need a $1 mil home? No. Should I have bought something smaller, I think so. But I would not buy anything smaller than 600K

 

[ballinsncbirth]

I say you are in somewhat the same boat as I was in my early 30s. If I would do it all again, I would have done it differently

I made about 350K/yr pretax + 52K SEP with full benefits (insurance, med/mal) paid. Paid off my 100k Loan 1st yr.

This sure seems like alot of money but I have no clue where all of my money went. Maybe the 2000 stock market crash hit me, some bad investments, etc.

Although 30k/mo seemed like alot, but that is about 20K take home. I also have a million dollar home that I custom built, put in 300k towards the build. For some reason I never felt well off/financially secure until very recently. 20K seems like alot but

1. Mortgage+Prop tax + insurance on a 1 mil home/700K loan is still about 5.5k a month
2. Vacations - about 2k a month
3. Utilites 1k/mo
4. Car payments 1500/mo

That is 10k/mo minimal living expense

That leaves just 10k for food, private school, clothes, entertainement. Again, may seem like alot but it really doesnt.

Things that will really throw a wrench in your plans

1. Divorce BIG expense
2. Kids big expense
3. Furnish $1 mil home is EXPENSIVE.


If I had to do it all over again, I would have bought a smaller home. I am lucky that I have and will not ever divorce.

I have no real big regrets b/c I feel secure at this time, but I definitely could have done it better.

This is very helpful .. Let me ask you .. Did you do a 30 year ? Did it cost 300 to build total or you brought a million dollar house and put 300? Were you able to save like you would like ? How long ago was that ? How is it affecting your ability to retire

Luckily I will getting a prenup (fiancé is cool with it )
She doesn't want any kids (we'll see how that changes )
Brought enough furniture for my current rental along with fiancé stuff in storage that I could furnish it without any expenses


Anyone else get the million dollar house ? How do you feel about it ? How's the mortgage payment treating you ? Are you still able to save ?

 

[deleted547339]

This is very helpful .. Let me ask you .. Did you do a 30 year ? Did it cost 300 to build total or you brought a million dollar house and put 300? Were you able to save like you would like ? How long ago was that ? How is it affecting your ability to retire

Luckily I will getting a prenup (fiancé is cool with it )
She doesn't want any kids (we'll see how that changes )
Brought enough furniture for my current rental along with fiancé stuff in storage that I could furnish it without any expenses


Anyone else get the million dollar house ? How do you feel about it ? How's the mortgage payment treating you ? Are you still able to save ?

Only a resident, so obviously take this with a grain of salt; but I'm a big fan of dave ramsey - he would say that if you can't pay your house off in 15 years, you can't afford it. The lower your fixed expenditures, the "richer" you feel.

Don't be house-poor!

 

[The White Coat Investor]

I have about 3 years out of residency , every doc i know, and all the online financial advice i read is centered on not becoming "the joneses" . You hear about these mythical "joneses" everywhere, spending money , big houses, living the life, lavish parties cars etcc..

I always swore i would not become one of them , but now than i am looking at my fianaces i am starting to wonder if i am one these "jones's" .

so heres a quick rundown of my financial hx, and budget

i am currently 32, have a son from a previous relationship, was able to pay back my debt first year, 120 med loans, car, private loans etc....
second year brought a boat, and moved to a rented house on the lake,
currently engaged to be married,

monthly budget
average gross income 40 k /month

13k immediately goes to tax account (no state income tax)

10 k a month living budget
3.4k rent (live in a nice place on the water, boat doc, >3K sq feet )
2k child support
600 daycare
460 boat payment (40 k loan)
446disability (15K policy)
360 health insurance
960 housing expenses, (140 cable, 300 lights, 140 pool maitenance, 120 water, 40 propane, 100 car insurance , 120 cell phone )
1-2 K entrainment/food gas and miscellanous ( grocieries, alot of eating out, movies, fishing trips with my son etc )

17 K savings/retirement
4K Sep ira (add another 4 at end of year to get up to max)
550 HSA family
13 K into savings account/taxable account

SO im not doing to bad, saved u 240 K in cash (60 k for 6 month emergency fund) ) with another 140 in retirement so far,

in april will be ending my 2 year lease, and now the future lady wants to buy a 1M dollar dream house on the water.. by that time should have another 100k in cash for a total of 340 ,

i look back at my days of college living 20 K a year (and feeling rich) and i think D@#$N where did that guy go ??

so what do you think, am i a "mr jones"? would a 1 million dollar house seal the deal of jones esq overspending
any other "jones's " out there? what is your budget like ?
do you plan on becoming a "jones" before you retire?

$17K*12=$204K. Given your income of $480K, that's a savings rate of 43%. You're hardly the Joneses. Could you spend less? Sure. Can you afford to do exactly what you're doing and still retire early in comfort? Absolutely. Good job.

But pay off the boat. Come on. You're saving $200K a year. You can afford to pay cash for cars and boats.

 

[Arcan57]

Housing isn't a bad way to spend money but $1mil is on the high end for your salary. 14-16 shifts/month is going to be tough over 15 yrs and it's going to be stressful if you cut down or if your salary gets nerfed. For perspective, we bought a $900k house and total expenses for home ownership are running in the $120k range (15 yr old house with pool and multiple major systems needing repair in last two years). Take that plus private school tuition, federal taxes, life/disability insurance, nanny, and student loan payments, and that's around $370k to break even.

 

[Lord Humongus]

There is a lot of doom and gloom on here that physician salaries are on the block to get massive haircuts in the near future. The fact that doctors are nevertheless still confident enough to purchase million dollar homes that they'll be paying off for 10+ years makes me a lot more confident, lol. After all, actions speak louder than words.

 

[Birdstrike]

There is a lot of doom and gloom on here that physician salaries are on the block to get massive haircuts in the near future.

With the recent Medicare bill passed, stabilizing payments over the next ten years with slight increases, "massive cuts" are much less likely. They may decrease one specialty a little and raise another and vice versa, but if there is concrete evidence of major cuts coming, please post the information. I'm as quick as anyone to Paul Revere doom and gloom if its real, but with the ACA having been established for a few years and the Medicare fix on the books, I think what you're hearing is just baseline doctor-neurotic doom and gloom that you'll find out, never goes away. Look at the facts from afar, don't assume neurotic-physician doom and gloom is correct without doing your own analysis (which you're obviously doing). That being said, don't buy a $1,000,000 house, unless you're a two-doctor income family, have some huge inheritance or some other financial windfall out of the norm. Too big.

 

[Apollyon]

a few hundred thousand will not buy you a mansion. 200K gets you a neighborhood where people make 50-90k/month. Making 400k/yr, your should be able to live in a nicer accommodations.

Did I really need a $1 mil home? No. Should I have bought something smaller, I think so. But I would not buy anything smaller than 600K

Did you mean per year?

 

[GeneralVeers]

I used to be doom-and-gloom on salaries. There is now a huge shortage of EM-boarded physicians in many states and salaries have only gone up. When I started 6 years ago as an attending the best rates I could find for locums work were in the $200-220 range. Now that's considered low, and locums jobs at $300+ per hour can be found relatively easily. Currently I'd expect this trend to continue for the next 2-5 years. Beyond that anyone who says they know what will happen is wrong.

I am currently building a large house as well with mortgage > $1 million. It's for financial purposes, as you can deduct federal income taxes up to $1 million in home value, plus in my home state $500,000 in home equity is protected in the event of a lawsuit with damages.

 

[doctalaughs]

I have about 3 years out of residency , every doc i know, and all the online financial advice i read is centered on not becoming "the joneses" . You hear about these mythical "joneses" everywhere, spending money , big houses, living the life, lavish parties cars etcc..

I always swore i would not become one of them , but now than i am looking at my fianaces i am starting to wonder if i am one these "jones's" .

so heres a quick rundown of my financial hx, and budget

i am currently 32, have a son from a previous relationship, was able to pay back my debt first year, 120 med loans, car, private loans etc....
second year brought a boat, and moved to a rented house on the lake,
currently engaged to be married,

monthly budget
average gross income 40 k /month

13k immediately goes to tax account (no state income tax)

10 k a month living budget
3.4k rent (live in a nice place on the water, boat doc, >3K sq feet )
2k child support
600 daycare
460 boat payment (40 k loan)
446disability (15K policy)
360 health insurance
960 housing expenses, (140 cable, 300 lights, 140 pool maitenance, 120 water, 40 propane, 100 car insurance , 120 cell phone )
1-2 K entrainment/food gas and miscellanous ( grocieries, alot of eating out, movies, fishing trips with my son etc )

17 K savings/retirement
4K Sep ira (add another 4 at end of year to get up to max)
550 HSA family
13 K into savings account/taxable account

SO im not doing to bad, saved u 240 K in cash (60 k for 6 month emergency fund) ) with another 140 in retirement so far,

in april will be ending my 2 year lease, and now the future lady wants to buy a 1M dollar dream house on the water.. by that time should have another 100k in cash for a total of 340 ,

i look back at my days of college living 20 K a year (and feeling rich) and i think D@#$N where did that guy go ??

so what do you think, am i a "mr jones"? would a 1 million dollar house seal the deal of jones esq overspending
any other "jones's " out there? what is your budget like ?
do you plan on becoming a "jones" before you retire?

I'm in about the same financial situation as you (different specialty but similar income). Our house was about 700k though, no child support (married 2 kids though- expensive). We don't care about boats and cars but like to travel nicely - with a family of 4 we easily spend 15k/ yr on travel. With that plus school, disability/life insurance, taxes (I have state taxes), home maintenance/renovation (so much more expensive than I thought - think 50% of your mortgage) my savings rate is actually lower than yours.

Still, since I save 35- 40% of my income I don't consider myself one of the "Jonses." I dont regret any of the luxuries as long as I'm living well within my means, which is the key at any income level.

 

[emergentmd]

Did you mean per year?

Sorry,

I did mean a year. 200k homes is a shack in Cali but definitely not a mansion. 200K would get you a 1800sq feet home in a decent part of town. Trust me. If you are making 400K a year, driving a 50K car, and live across the street from someone making 70K with a beat up car/poorly maintained lawn, then you will be out of there in an instant.

 

[emergentmd]

This is very helpful .. Let me ask you .. Did you do a 30 year ? Did it cost 300 to build total or you brought a million dollar house and put 300? Were you able to save like you would like ? How long ago was that ? How is it affecting your ability to retire

Luckily I will getting a prenup (fiancé is cool with it )
She doesn't want any kids (we'll see how that changes )
Brought enough furniture for my current rental along with fiancé stuff in storage that I could furnish it without any expenses


Anyone else get the million dollar house ? How do you feel about it ? How's the mortgage payment treating you ? Are you still able to save ?

I custom built a house (double edge sword). Good is that I picked everything I wanted and all of my rooms fit our needs. The bad is a custom home always will cost more than you budgeted. My home costs a shade over 1 mil and put 300K during the build. Financed the rest. I love my home. We looked around for homes that fit our needs and could not find any. I do not regret it.

I did a 30 YR fixed. Why? B/c my rate is 2.5%. I have no issue with debt. I welcome debt that I can finance at 2.5%. My mortgage payment is less than 3k/mo. If I someone would give me a 10 mil loan tomorrow witha 2.5% 30 yr note, I would retire

1. the mortgage on my mil loan doesn't bother me. The property tax is what is painful. My taxes every year gets very close to my mortgage payments.
2. Prenup? I guess I am biased but I do not think this holds much water and unless you are a multi millionare, puts alot of strain on the marriage. Also, doesn't she get 50% of what you accumulate during the marriage?
2. Women changed all the time with kids
3.You will buy expensive furniture.

Who builds a million dollar home and have 200K furniture?

 

[SoCuteMD]

I was just thinking about my lifestyle now as compared to previously:
1) Rent is now mortgage. Cost is about double (from 1250 to 2350). Utilities about the same, maybe a little more. House is much bigger than what I used to rent, but well within line of what other young attendings around here own. I furnished it slowly - financed some of it at 0% interest and paid it off in 6 months. Bought some other nice pieces after a few months of working/saving.
2) Student loan payments - not as burdensome as expected. Making good progress and have a solid plan.
3) Food/entertainment. Less than previous as I now have a SO who cooks. Also, he's self-employed so he covers all of our dinners out and I buy most of the groceries. We don't drink much, so that keeps costs down.
4) Travel - one vacation this year. Nothing crazy. Would like to spend more in this category next year!
5) Clothing/shopping - this is where I notice a difference. I used to buy maybe one nicer expensive item a year. This year I bought a nice piece of jewelry and an expensive purse. Both still well within my budget, but not things I would have even considered a year ago. I also don't really bargain shop any more. I used to wait for a sale, watch for promo codes, etc. Now I just buy it.
6) Bought a new car a year ago - nothing fancy, but brand new. Similar to what I drove before (but new). Paid it off a few months ago. Now saving so that I never have to finance another car.

 

[emergentmd]

Spending money when and how much is such a double edge sword to me. Unless you are in both ends of the extreme (broke or miser), there is nothing wrong with your decision.

My two choices in life

1. No private school, No big trips, no new cars, buy a 400K home. I am 41 and if I did this, I would have alot more savings. My house would be paid off. I would have no debt

2. Private school, spend prob 20K on vacation a year, 2 Brand new cars both paid off this yr, buy a 1 mil home. Have 700K note (only real debt)

I chose choice 2. I regretted it somewhat since buying my the 1 mil home. But right now, I am happy with that choice. I enjoy my home immensely. Is it worth the extra 40K I put into the home? I think so. Why am I finally happy with my choice?

1. My only debt is my home. I enjoy my pool, media room, work out room, game room. Hard to put a price on this.
2. I finally feel comfortable from a monetary standpoint. I have no issues with going to a 200 meal, a 10k Vacation, or even getting a 100K tesla soon. I am finally where I make more money than my needs at this time. I can easily save 100K a year without even breaking a sweat.
3. My income ONLY coming from work for 2015 will be close to 500K working 14, 9 hr days a month. Add cash flow from my rentals and I will be pushing 600K. I could easily make 600K from just work next year working 16 days a month.

I think I would regret it today at 41 making 500K and Looking back not having the luxuries that I have today. But this is only b/c I know where I am today. My decisions could have easily backfired if things did not work out as well in the past 10 yrs.

 

[Brigade4Radiant]

How often do you stay at your house? How long would your commute be? If it's just a house for three people I think a 500k house would be reasonable. It's up to you but you don't want to be in a position where you HAVE to work 14-16 shifts. Are the shifts 8 hour or 12 hour?

 

[deleted109597]

I also don't really bargain shop any more. I used to wait for a sale, watch for promo codes, etc. Now I just buy it.

This is actually truly a way to be satisfied with something you buy. If you're always looking for bargains, your recent purchase suddenly loses luster when it's cheaper 4 months later. If it's within reason, buy it. Don't haggle. Tip well, buy the occasional souvenir for the kids, eat out at nice places.
Most of us will never make "stupid" money, but we make enough to be comfortable, even if we buy million dollar houses.

Whatever you do, don't do serial marriages. This will take your money in a heartbeat.

 

[Janders]

It all depends. A million dollar house, if you're putting 200-250k down, can be had on a 30yr note for $4-4.5k/mo including property taxes and home insurance depending on your location.

That is a lot of money. But, say, you bring in $20k after tax and after fully funding your 401k / etc each month. It would be a reasonable expense, assuming you get pleasure from it.

That said, if you can be equally/nearly happy in a 500k house, DO IT. You'll retire earlier, have more toys, etc...

 

[ballinsncbirth]

$17K*12=$204K. Given your income of $480K, that's a savings rate of 43%. You're hardly the Joneses. Could you spend less? Sure. Can you afford to do exactly what you're doing and still retire early in comfort? Absolutely. Good job.

But pay off the boat. Come on. You're saving $200K a year. You can afford to pay cash for cars and boats.

Ha white coat I knew you'd say that ! But yea I plan on paying it off in one big check after I buy my house .. Just putting the savings toward a down payment

Spending money when and how much is such a double edge sword to me. Unless you are in both ends of the extreme (broke or miser), there is nothing wrong with your decision.

My two choices in life

1. No private school, No big trips, no new cars, buy a 400K home. I am 41 and if I did this, I would have alot more savings. My house would be paid off. I would have no debt

2. Private school, spend prob 20K on vacation a year, 2 Brand new cars both paid off this yr, buy a 1 mil home. Have 700K note (only real debt)

I chose choice 2. I regretted it somewhat since buying my the 1 mil home. But right now, I am happy with that choice. I enjoy my home immensely. Is it worth the extra 40K I put into the home? I think so. Why am I finally happy with my choice?

1. My only debt is my home. I enjoy my pool, media room, work out room, game room. Hard to put a price on this.
2. I finally feel comfortable from a monetary standpoint. I have no issues with going to a 200 meal, a 10k Vacation, or even getting a 100K tesla soon. I am finally where I make more money than my needs at this time. I can easily save 100K a year without even breaking a sweat.
3. My income ONLY coming from work for 2015 will be close to 500K working 14, 9 hr days a month. Add cash flow from my rentals and I will be pushing 600K. I could easily make 600K from just work next year working 16 days a month.

I think I would regret it today at 41 making 500K and Looking back not having the luxuries that I have today. But this is only b/c I know where I am today. My decisions could have easily backfired if things did not work out as well in the past 10 yrs.

This is exactly where I am .. And i feel I am at a crossroads between living pseudo lavishly and continuing the "delayed gratification plan" i have been doing my whole life , when I paid of all my debt at 29 it felt good for awhile .. But then I thought ...well what's next !

I feel we only get one life and what scares me is not being unable to retire when I'm 45 ,or not having some huge nest egg when I'm 65 ... What scares me is "living only for retirement" , sacrificing today in hopes to somewhat reap the benefits for tomorrow ...and then dropping dead at 65 with some huge savings, or being to sick/old to throughouhly enjoy that money

I wonder at times when I'm 70 will I cherish the memories of a million dollar lake house, boating/ fishing with my son in my backyard , jet skis and nice cars .... Or laugh hysterically through deep throated coughing fits at those " money wasting docs " while I furiously check my huge bank balance several times a day in my thousand dollar top of the line hospital bed ,riding expensive decked out scooter , at the most luxurious nursing home in the world telling everyone that I'm a multimillionaire thanks to my awesome savings plan !

 

[Birdstrike]

to retire when I'm 45

For every 100 doctors or doctors-in-training that I've heard talk about "retiring at age 45" there's maybe 1 that I've ever seen do it. In fact, I can't even think of one. I know of plenty that have left their specialty or left medicine entirely to continue working at something else. But retire at 45?

It just doesn't happen. Most rationale, brain-active, healthy 45-year-olds have zero desire to actually truly retire at age 45 to begin with, let alone be financially able to do it. In fact it's profoundly abnormal to feel you must retire in the prime of your working life. If you feel that way, you probably should get out of doing what you're doing now. Why wait until 45?

Here's a radical and groundbreaking thought:

How about choosing a career that you can actually imagine doing past 45, without having to place outrageous and unrealistic financial pressure on yourself to get out of by age 45?

 

[Birdstrike]

Double post

 

[emergentmd]

Ha white coat I knew you'd say that ! But yea I plan on paying it off in one big check after I buy my house .. Just putting the savings toward a down payment


This is exactly where I am .. And i feel I am at a crossroads between living pseudo lavishly and continuing the "delayed gratification plan" i have been doing my whole life , when I paid of all my debt at 29 it felt good for awhile .. But then I thought ...well what's next !

I feel we only get one life and what scares me is not being unable to retire when I'm 45 ,or not having some huge nest egg when I'm 65 ... What scares me is "living only for retirement" , sacrificing today in hopes to somewhat reap the benefits for tomorrow ...and then dropping dead at 65 with some huge savings, or being to sick/old to throughouhly enjoy that money

I wonder at times when I'm 70 will I cherish the memories of a million dollar lake house, boating/ fishing with my son in my backyard , jet skis and nice cars .... Or laugh hysterically through deep throated coughing fits at those " money wasting docs " while I furiously check my huge bank balance several times a day in my thousand dollar top of the line hospital bed ,riding expensive decked out scooter , at the most luxurious nursing home in the world telling everyone that I'm a multimillionaire thanks to my awesome savings plan !

Life is short. You never know when and where you will be in 20 yrs... heck even 10 yrs. This is my story and why i feel the way i feel now.

1. I grew up as a immigrant, poor. Paid for everything myself. Lived poorly. Med school consisted of living in an efficiency, window AC unit TEXAS. Old car with AC barely working in TEXAS (I bold texas for a big reason.... Think 100 degree summers and sweating in car). Food consists of $1 totino pizza and rice spread out over 2 meals, frozen TV $1 a pop with rice spread out over 2 meals. I prob spent less than $3 a day on food. I could have taken out $10k more a yr in loans but didn't. I would have had an extra $40K in debt (150 k vs 110K). Looking back that 40k would have allowed me to live much better that I could have paid off in 2 months.

THINK ABOUT THIS. 2 months of work now for 4 yrs of much better living.

2. Residency..... Not much different than med school. Picture living just alittle better, car alittle better, food alittle better.

Start as an attending and this mindset is very difficult to change BTW.

I know this may not be popular to the Money conscious people but everyones situation is different. Yours much similar to mine. Our Jobs are SUPER secure. I would say about as secure as you can get. I could find 100 jobs in texas tomorrow. My current life attitude is this

1. Your best times in life is your 20's-30's. We have already given up our 20's. Why sacrifice your 30's?
2. Set an amount to save that will make you happy and this will allow you to spend the rest without any guilt. If its 100k, then do it. You will have alot more to spend
3. Don't worry about finding sales, coupons, whatever. I used to do this and buy stuff I don't need. Spend more time looking for something than its worth saving $10 bucks, etc. nothing wrong with a $200 meal, nothing wrong with a 10k vacation, nothing wrong with a new car vs old. You have worked hard, you deserve it. I have always bought a new car since being an attending. Nothing too expensive with the most being an X5. But my next will be the top of the line Tesla. I deserve it. I am 41 and still can enjoy it. Why would I ever want a Tesla when I am 55?
4. Protect yourself just in case something happens with your health. Get an Own occupation disability policy, term life policy to protect your family, emergency fund, 529 for the kids, Umbrella insurance policy, passive income etc. I have all of this. If I can never work b/c I had a medical catastrophe, then my disability will be able to support my lifestyle. Term life to protect my family if I die. Umbrella just in case someone sues me. Passive income (for me rentals) for extra income. I hope to have $200K in passive income in 5 yrs.

Dont stress out saving every penny, cut every corner. I look at it this way. I can moonlight any time I want at 5k a shift and that is likely more than what i can save cutting all corners. That is 10 hrs of work that will save me alot of penny pinching tendencies. So I rationalize alot. $200 meal is 30 min of work. My wife loves purses. Think 3-5K a purse. Alot of money, took alot of time to get over, but I rather work 10 hrs to bring joy to her than have to be stressed out of it. Don't get me wrong. She may buy one every 2-3 yrs.

Anyhow, not to be so verbose, but I am in the mindset of YOLO. You only live once. But I am in a position that I can firmly believe this. I am 41 with over $1 mil in assets (not including home), $100K in passive income, Make 400K+ a year, and Hope to add a FSED this coming year.

And I hope to retire in 5 yrs. Not 45 but 46-47. But retiring to me means working 4-6 dys a month. I still love EM and want to keep my skills/mind intact. To me 5 dys a month working is Retirement. Not bad working 5 dys a month and pulling in 200K a year.

 

[had2piknowEM]

Ha white coat I knew you'd say that ! But yea I plan on paying it off in one big check after I buy my house .. Just putting the savings toward a down payment

Look at it this way, the interest on your boat loan is likely more than the interest you're getting on all the money you have in a savings account, unless you have all your extra money in an investment account with high returns. So you're in essence losing money by not paying off the boat loan, by saving it for a future mortgage downpayment (again only if you have it saved in a plain savings account).

 

[ballinsncbirth]

For every 100 doctors or doctors-in-training that I've heard talk about "retiring at age 45" there's maybe 1 that I've ever seen do it. In fact, I can't even think of one. I know of plenty that have left their specialty or left medicine entirely to continue working at something else. But retire at 45?

It just doesn't happen. Most rationale, brain-active, healthy 45-year-olds have zero desire to actually truly retire at age 45 to begin with, let alone be financially able to do it. In fact it's profoundly abnormal to feel you must retire in the prime of your working life. If you feel that way, you probably should get out of doing what you're doing now. Why wait until 45?

Here's a radical and groundbreaking thought:

How about choosing a career that you can actually imagine doing past 45, without having to place outrageous and unrealistic financial pressure on yourself to get out of by age 45?

i think you missed the point of that post..... i dont wanna retire at 45.. done feel the need to retire at 45.. and couldnt fathom doing so even if i had a billion dollars.... my point was people who "live fo retirement" and stress over everything they buy with "this will add X days to retirement" ..
i have no probolem working into my 60's "albeit at that time i mean 4-5 shifts a month .. my point is will i really care when im 70 and probably cant walk up a flight of stairs .. that my porrtfolio is 8 mill instead of 4 mill... or wiill i remember living in a nice boathouse on the lake

Life is short. You never know when and where you will be in 20 yrs... heck even 10 yrs. This is my story and why i feel the way i feel now.

1. I grew up as a immigrant, poor. Paid for everything myself. Lived poorly. Med school consisted of living in an efficiency, window AC unit TEXAS. Old car with AC barely working in TEXAS (I bold texas for a big reason.... Think 100 degree summers and sweating in car). Food consists of $1 totino pizza and rice spread out over 2 meals, frozen TV $1 a pop with rice spread out over 2 meals. I prob spent less than $3 a day on food. I could have taken out $10k more a yr in loans but didn't. I would have had an extra $40K in debt (150 k vs 110K). Looking back that 40k would have allowed me to live much better that I could have paid off in 2 months.

THINK ABOUT THIS. 2 months of work now for 4 yrs of much better living.

2. Residency..... Not much different than med school. Picture living just alittle better, car alittle better, food alittle better.

Start as an attending and this mindset is very difficult to change BTW.

I know this may not be popular to the Money conscious people but everyones situation is different. Yours much similar to mine. Our Jobs are SUPER secure. I would say about as secure as you can get. I could find 100 jobs in texas tomorrow. My current life attitude is this

1. Your best times in life is your 20's-30's. We have already given up our 20's. Why sacrifice your 30's?
2. Set an amount to save that will make you happy and this will allow you to spend the rest without any guilt. If its 100k, then do it. You will have alot more to spend
3. Don't worry about finding sales, coupons, whatever. I used to do this and buy stuff I don't need. Spend more time looking for something than its worth saving $10 bucks, etc. nothing wrong with a $200 meal, nothing wrong with a 10k vacation, nothing wrong with a new car vs old. You have worked hard, you deserve it. I have always bought a new car since being an attending. Nothing too expensive with the most being an X5. But my next will be the top of the line Tesla. I deserve it. I am 41 and still can enjoy it. Why would I ever want a Tesla when I am 55?
4. Protect yourself just in case something happens with your health. Get an Own occupation disability policy, term life policy to protect your family, emergency fund, 529 for the kids, Umbrella insurance policy, passive income etc. I have all of this. If I can never work b/c I had a medical catastrophe, then my disability will be able to support my lifestyle. Term life to protect my family if I die. Umbrella just in case someone sues me. Passive income (for me rentals) for extra income. I hope to have $200K in passive income in 5 yrs.

Dont stress out saving every penny, cut every corner. I look at it this way. I can moonlight any time I want at 5k a shift and that is likely more than what i can save cutting all corners. That is 10 hrs of work that will save me alot of penny pinching tendencies. So I rationalize alot. $200 meal is 30 min of work. My wife loves purses. Think 3-5K a purse. Alot of money, took alot of time to get over, but I rather work 10 hrs to bring joy to her than have to be stressed out of it. Don't get me wrong. She may buy one every 2-3 yrs.

Anyhow, not to be so verbose, but I am in the mindset of YOLO. You only live once. But I am in a position that I can firmly believe this. I am 41 with over $1 mil in assets (not including home), $100K in passive income, Make 400K+ a year, and Hope to add a FSED this coming year.

And I hope to retire in 5 yrs. Not 45 but 46-47. But retiring to me means working 4-6 dys a month. I still love EM and want to keep my skills/mind intact. To me 5 dys a month working is Retirement. Not bad working 5 dys a month and pulling in 200K a year.

i feel exactly like this... i can save 100 k a year fairly easily even if i brought the big house.. and spurged a bit . at 32 i should be about where you are with 1 million in assets in 10 years...
what i dont want is to die with a huge bank account ..
.i definently have a max disability , health insurance, life insurance, and keep a 1 year emergency fund in cash (thanks with help to white coat investor)
but my conondrum is what to do with all the money i have left.. keep a strict and earnest saving and investment plan .. pinching every penny to be that much closer to to the golden heaven of retriement ,

I always jokingly tell people my retriement plan is to be dead by 75 .. and if i live longer than that .. then mainline ectasy and cocaine just to see what all the fuss was about (never have done drugs)

Look at it this way, the interest on your boat loan is likely more than the interest you're getting on all the money you have in a savings account, unless you have all your extra money in an investment account with high returns. So you're in essence losing money by not paying off the boat loan, by saving it for a future mortgage downpayment (again only if you have it saved in a plain savings account).

the interest savings between a 4% boat loan and saving account is minimal in the amount of time i plan to pay of the boat.. i plan on writing a 40 k check next year after i have brought the house and everything cools off... technically i could do this now.. as i have enough for a 1 million dollar downpayment now and 6 month emergency fun within 2-3 monhts.. i am saving to be able to buy a 1 mill house.. the boat payment doesnt hinder or help really... its just what i planned to do ...

 

[The White Coat Investor]

One thing that is probably worth discussing here is the fact that over the last decade or so EM has moved from having salaries/income closer to that of primary care doctors to that of surgeons. Part of this is surgical incomes falling as they move from practice owners to employees and part is just from more nebulous factors such as a demand for residency trained EPs, the use of scribes and mid-levels, increase in acuity in our EDs etc. But on a personal finance level, it means that doing things like saving $100K a year while still having a pretty awesome lifestyle is possible for us where it isn't for the typical primary doctor making $200K. In fact, lots of pediatricians see starting offers in the $120K range. Some can't even make standard student loan payments, much less save $100K a year.

For the amount of training, and actual hours at work, EPs are extremely well paid amongst physicians. That opens up all kinds of opportunities such as part-time work, early retirement, side businesses, and/or fancy schmancy lifestyles including million dollar lake houses and wakeboats.

It's fine to spend a significant portion of that income. Just be smart about how much. Find a balance and moderation and remember it is far easier to grow into your income slowly than to dial it back later. Due to the behavioral effects of the hedonic treadmill, if you aren't continually increasing your standard of living throughout your life, you may feel poor despite having an income that is a multiple of the average American household income. And, of course, there is really no excuse not to be putting away something like 20% of your gross toward retirement each year of your career.

 

[GeneralVeers]

If you max out your 401K or SEP IRA every year over a 20 year career you would have $1 million saved up. With compound interest that figure is more like $3-5 million depending on returns. If you have $3 million in the bank, you could withdraw $100K every year for 30 years. So it's very easy to have some sort of financial security by ONLY maxing out your 401K.

 

[fzwarrior]

Do you think compensation will continue to be this good in the future for em? Just seems like it is such a hot field right now and I'm wondering if supply will surpass demand eventually.

 

[Arch Guillotti]

If you max out your 401K or SEP IRA every year over a 20 year career you would have $1 million saved up. With compound interest that figure is more like $3-5 million depending on returns. If you have $3 million in the bank, you could withdraw $100K every year for 30 years. So it's very easy to have some sort of financial security by ONLY maxing out your 401K.

Can you clarify your math?

The contribution limit for a 401K in 2015 is $18,000.
If you are age 50 or older you can make a catch up contribution of an additional $6000.

In your 20 year scenario assume 5 years X $18,ooo = $90,000
15 years x $24,000 = $360,000

These figures do not account for changes in the contribution level that the IRS may enact nor do they account for an employer match but it is still nowhere close to a million dollars.

 

[Arcan57]

Can you clarify your math?

The contribution limit for a 401K in 2015 is $18,000.
If you are age 50 or older you can make a catch up contribution of an additional $6000.

In your 20 year scenario assume 5 years X $18,ooo = $90,000
15 years x $24,000 = $360,000

These figures do not account for changes in the contribution level that the IRS may enact nor do they account for an employer match but it is still nowhere close to a million dollars.

SEP contribution limit is ~50k/year.

 

[GeneralVeers]

SEP contribution limit is ~50k/year.

Right. This year I believe it is $54K. Every 10 years would be ~ 540K, and over 20 years would be ~ $1.1 Million

The 401K individual contribution is $18K, however your employer should be able to contribute bringing your total up to $50K per year.

 

[turkeyjerky]

Can you clarify your math?

He's using the contribution limits for a self employed or IC position, which has much higher limits than employed positions.

 

[Arch Guillotti]

Right. This year I believe it is $54K. Every 10 years would be ~ 540K, and over 20 years would be ~ $1.1 Million

The 401K individual contribution is $18K, however your employer should be able to contribute bringing your total up to $50K per year.

Fair enough.

I would like to know what investments you have to get you to 5 million dollars though.

 

[ballinsncbirth]

I used to be doom-and-gloom on salaries. There is now a huge shortage of EM-boarded physicians in many states and salaries have only gone up. When I started 6 years ago as an attending the best rates I could find for locums work were in the $200-220 range. Now that's considered low, and locums jobs at $300+ per hour can be found relatively easily. Currently I'd expect this trend to continue for the next 2-5 years. Beyond that anyone who says they know what will happen is wrong.

I am currently building a large house as well with mortgage > $1 million. It's for financial purposes, as you can deduct federal income taxes up to $1 million in home value, plus in my home state $500,000 in home equity is protected in the event of a lawsuit with damages.

what do you mean "deduct federal income taxes up to a million in home value" ?
I assume you mean deducting the property taxes?

another question about 15 vs 30 year mortgage. At what interest rate would you pull the trigger and do a 30 year instead of 15 .(if at all) Right now I am getting interests rates 3.4-3.7.
also do you factor in interest rates when you plan on selling the house in 10-15 years... ie if you knew for sure you would sell the house in 10 years would you still get a 15 yars? or would that make the lower payment of the 30 year more enticing?

no matter what I decide I want to keep my total house plus mortgage plus insurance less than 6K a month ..(to save at least 15 K a month with sep ) pretty easy on a 20 year note, somewhat impossible on a 15 year note for a mill home.

 

[GeneralVeers]

You can deduct from your Federal taxes the mortgage interest up to a value of $1 million. Anything more than that you cannot deduct.

Right now I am doing 30 year fixed at 3.75%. After the mortgage interest deduction it brings your effective mortgage rate to about 2.5% which is barely above inflation. Essentially it's free money.

At average annual return of 5% over 30 years (approximately the statistical average over the last 30 years), that $1 million in retirement easily becomes $3-5 million. Compounding interest works in your favor. At $5 million saved you could easily take out $250K per year over 20 years and never run out of principle. To me that is economic security.

 

[The White Coat Investor]

A few minor corrections/contentions from these last few posts.

The annual contribution limit for a 401(k)/Profit sharing plan, individual 401(k), or SEP-IRA for 2015 is $53K if you're under 50.

Adjusting everything for inflation, using a 5% real return and a $53K real contribution each year, after 20 years, you can expect a portfolio of $1,840,120.35 (run it yourself with Excel =FV(5%,20,-53000,,1) )

A "standard" withdrawal rate is 4%, not 5% (which may work, but significantly less safe), so you could expect a $1.8M portfolio to provide an income of about $74K a year, again adjusted to inflation.

That same example ($53K a year, 5% real returns) run out for a more standard 30 year career gets you to $3.7M or $148K a year.

As far as investments likely to get a 5% real return over the next 30 years, it's going to have to be a portfolio fairly heavy in risky assets like stocks and real estate.

 

[Mad Jack]

At your current rate of spending and saving, you could retire at 45 and never work again.

FIRECalc Results
Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

Because you indicated a future retirement date (2027), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 12 years of preretirement plus 40 years of retirement, or 52 years.

FIRECalc looked at the 93 possible 52 year periods in the available data, starting with a portfolio of $240,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 93 cycles. The lowest and highest portfolio balance at the end of your retirement was $240,000 to $41,475,416, with an average at the end of $15,329,342. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 52 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

 

[GeneralVeers]

A few minor corrections/contentions from these last few posts.

The annual contribution limit for a 401(k)/Profit sharing plan, individual 401(k), or SEP-IRA for 2015 is $53K if you're under 50.

Adjusting everything for inflation, using a 5% real return and a $53K real contribution each year, after 20 years, you can expect a portfolio of $1,840,120.35 (run it yourself with Excel =FV(5%,20,-53000,,1) )

A "standard" withdrawal rate is 4%, not 5% (which may work, but significantly less safe), so you could expect a $1.8M portfolio to provide an income of about $74K a year, again adjusted to inflation.

That same example ($53K a year, 5% real returns) run out for a more standard 30 year career gets you to $3.7M or $148K a year.

As far as investments likely to get a 5% real return over the next 30 years, it's going to have to be a portfolio fairly heavy in risky assets like stocks and real estate.

I wasn't too far off at $3.7M over 30 years. That is definitely a generous enough amount that most people should be able to live off of it for 20-30 years and not have to live in poverty.

Also you are correct that assets would likely be riskier, however the generally accepted wisdom is that early on you have higher return but more risk, and then gradually rebalance it into bonds and safer assets closer to retirement.

My real life example: I've been practicing for 7 years. I've maxed out my 401K and my SEP IRA for each and everyone of those years. My portfolio is valued at about 450K. At 1o years I should be at about 642K in savings. All of my budgeting and financial decisions are based on being able to max out that 401K/SEP IRA..... NO MATTER WHAT

 

[The White Coat Investor]

I wasn't too far off at $3.7M over 30 years. That is definitely a generous enough amount that most people should be able to live off of it for 20-30 years and not have to live in poverty.

Also you are correct that assets would likely be riskier, however the generally accepted wisdom is that early on you have higher return but more risk, and then gradually rebalance it into bonds and safer assets closer to retirement.

My real life example: I've been practicing for 7 years. I've maxed out my 401K and my SEP IRA for each and everyone of those years. My portfolio is valued at about 450K. At 1o years I should be at about 642K in savings. All of my budgeting and financial decisions are based on being able to max out that 401K/SEP IRA..... NO MATTER WHAT

I think that approach will serve you well. Most Americans and most doctors aren't even doing that much. And if you get to the point where you would rather save more than spend more, you can always use a taxable account.

 

[emergentmd]

I wasn't too far off at $3.7M over 30 years. That is definitely a generous enough amount that most people should be able to live off of it for 20-30 years and not have to live in poverty.

Also you are correct that assets would likely be riskier, however the generally accepted wisdom is that early on you have higher return but more risk, and then gradually rebalance it into bonds and safer assets closer to retirement.

My real life example: I've been practicing for 7 years. I've maxed out my 401K and my SEP IRA for each and everyone of those years. My portfolio is valued at about 450K. At 1o years I should be at about 642K in savings. All of my budgeting and financial decisions are based on being able to max out that 401K/SEP IRA..... NO MATTER WHAT

I have maxed my SEP for 15 yrs. I have a large 6 Figure ROTH from a conversion. I also agree that maxing this out alone should put you in a nice retirement. Only problem is you never know when they next crash would be. If it crashed right before you retire and lose 60%, that would suck. Diversify

 

[GeneralVeers]

I think that approach will serve you well. Most Americans and most doctors aren't even doing that much. And if you get to the point where you would rather save more than spend more, you can always use a taxable account.

I saved up a large sum in my taxable account over 5 years. I used the majority of it for a down-payment on the new home. Again, the large mortgage is for the tax benefits, and as a homestead to protect assets. Theoretically, though not guaranteed there should be ROI on the home as well.

 

[deltamed]

$17K*12=$204K. Given your income of $480K, that's a savings rate of 43%. You're hardly the Joneses. Could you spend less? Sure. Can you afford to do exactly what you're doing and still retire early in comfort? Absolutely. Good job.

But pay off the boat. Come on. You're saving $200K a year. You can afford to pay cash for cars and boats.

Is the sep ira available only if you are an independent contractor or your group set it up? What about if you are an employee of a large system? I never understood while small business owners could shelter 50k or more whereas employees only get to shelter 17k (plus any match thats available)