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An emergency doc's budget

Discussion in 'Emergency Medicine' started by The White Coat Investor, Apr 29, 2011.

  1. The White Coat Investor

    The White Coat Investor Practicing Doc and Blogger
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    We had someone come to my medical school once who outlined an ophthalmologist making $350K a year and spending $380K a year. I found it very helpful. I think some current students might find this enlightening as well. I remember thinking as a student how easy it would be to live off $50K so $200K must be cake.

    My wife and I don't consider ourselves big spenders and here is an example of a recent monthly budget for us.

    Gross Pay $17,647

    Fixed Expenses


    Mortgage $3180
    Other mortgage (still trying to sell it) $816
    Taxes (Federal, State, SS, and medicare) $3925
    Utilities $608
    Insurance (Life, disability, property, liability-not malpractice) $700
    401K $3406
    Charity $1990

    Subtotal of Fixed Expenses: $14,625

    Variable Expenses
    Gas $336
    Food $829
    Various other stuff such as entertainment, clothing, home furnishings, kids sports, gym memberships, "allowances", gifts, healthcare etc $1235
    Savings towards next car, next vacation, emergency fund etc $622

    Subtotal of Variable Expenses $3022

    Total Expenses $17647

    Notice the absence of student loan payments, car payments, and credit card payments.

    For four years out of residency (while in the military) we lived much more cheaply (only had about 60% of the income) and only recently upgraded to the "attending lifestyle." (Note the size of the last mortgage payment.)

    My point is that there is plenty of money if you do some planning and budgeting, but that it is very easy to spend 5 figures every month with little to show for it. Not to mention the only tax break you get is the cap on SS taxes-you're phased out of the earned income credit, the child tax credit, the student loan interest credit, and if some politicians have their way, soon the home interest deduction,the charitable contribution deduction, and the retirement savings account deductions.

    As a partner in a year or so, my gross income will be higher, but I'll also be covering my share of the overhead, malpractice, and my health and dental insurance premiums so I don't expect my take home to go up dramatically.

    Obviously, I could save less for retirement, have gotten a 30 year mortgage instead of a 15 year one, give less to charity, and hopefully soon have the old house sold (or put a renter in it), but you have to choose what life you want to live.

    Whatever you do, don't plan a dramatic upgrade to your lifestyle immediately upon leaving residency. It's much harder to cut back later. And don't take out any more loans than you need as a student or live beyond your means as a resident. All that debt will come back to bite you..
     
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    #1 The White Coat Investor, Apr 29, 2011
    Last edited: May 23, 2011
  2. Kaustikos

    Kaustikos Archerize It
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    Yikes are for all the red/bolded. I can see where you can cut back and live A LOT more comfortably... :eek:
     
  3. dchristismi

    dchristismi Gin and Tonic
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    Actually though...
    I'm in the same spot. I live pretty frugally, drive an 11 year old car. I buy my clothes at thrift shops and clip coupons. I don't go out much. (Working evenings does tend to crunch that...)

    I gotta say, those numbers are spot on, and ActiveDuty makes an excellent point about how it seems so easy to live off so much until you actually crunch the numbers. I had to do a detailed budget, breaking down every expense for my divorce lawyer and was surprised. And I spent half on my home what I was pre-approved for and didn't buy a new(-er) car.

    In my case, the "various other stuff" includes a $2K alimony payment and $1K in student loan payments. I also have a 15 year mortgage and a rental house I can't sell. (It's rented, though, so I just about break even on it.)

    We are all behind in saving for retirement, and this should be maxed out (16.5K/year into 401K and 457 each) for tax purposes. You can't cut that out.

    I've thought about moving into a smaller space, but with the market the way it is, it's not an option. My biggest splurge in my mind is my cleaning lady. But she keeps me sane. Necessary? Nope. But emotionally more healthy.

    I'm certainly comfortable, and I do travel, but I guess the main point is that going back to a resident or fellow's salary once you've adjusted to more is harder than you think. And that the expenses rack up a lot faster than you think they will. Especially once there are children in the picture. (My dogs are cheap - the cleaning lady is mostly for them!)

    Food for thought.
     
  4. OP
    OP
    The White Coat Investor

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    Wouldn't cutting back be by definition living LESS comfortably? (Aside from charitable contributions).

    Want to buy a townhome? Neither does anyone else.

    Our cars are 6 and 9 years old. Nobody in my group is driving what I would call an expensive car.

    I'm surprised you thought the $1200 in other expenses was a lot. I've still got 4 rooms in my house without any furniture at all. My wife and I went to the dentist this last month WITH insurance. X-rays, exam, cleaning, a broken filling, and one cavity each was something like $8-900 before insurance. I'm expecting a $400 reimbursement check from insurance. Haven't taken the 3 kids in yet. Life is expensive. As a student/resident we put a lot of expenses off "for the future." Well, the future's now baby. If you want to ever own some furniture, now's the time to start thinking about getting some. If you've been putting dental work off for a few years, now's the time. Clothes for 5 people? Gotta buy em sometime. And don't even think about cutting out the 401K unless you want to work until you're 85.

    P.S. My wife won't let me have a smartphone until we sell the townhome because the data plan is too expensive. I'm less than 5 years out of residency with no loans and a reasonably sized portfolio. If you think my budget looks bad you should look at the average doc's.
     
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    #4 The White Coat Investor, Apr 29, 2011
    Last edited: Apr 29, 2011
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  5. Neon Goat

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    My mom worked 31 years for a major retailer and raised us as a single parent. You give more to charity per month than she, my brother and I lived on growing up.

    Your contribution is very inspiring and a big part of why I'm walking this long road to get to where you are someday.
     
  6. TooMuchResearch

    TooMuchResearch i'm goin' to Kathmandu...
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    Added to my favorites for future reference. Just to keep me grounded.
     
  7. shopsteward

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    Riches compound in the same way that debt does. So with an attending's income, and assuming staying on the right side of the Micawber principle, a doctor will end up rich, but probably only when they are a lot older than initially they would like or expect. (This is also part of the "doctors used to be better off" point: people who qualified as doctors in past years are richer/working less than those qualifying now in significant part because of the passage of time in their lives, not because of economic circumstances when they qualified.)

    Rich is relative. Spend your time with people who have less than you do, and you will feel rich.
     
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  8. Venko

    Venko True to self
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    Excellent post idea ActiveDuty!

    I would add that if you live in a large city such as the one I do (Washington DC), the mortgage is grossly underestimated to be able to live in an 1-2 bdrm condo. I live outside the city and have to deal with a commute and it costs 2600 in rent.

    Also, at least in my current group the reimbursement is inadequate and only becomes substantial if you are higher up on the totem pole....

    My wife is an attending physician as well and we are able to put away about 20,000 this year in savings which is far less than we planned.

    Lastly, I would point out that roughly half (for easy math) the salary is gone in taxes and so people should plan on that too. CME costs money, board certifications and medical licenses cost money, and malpractice tail coverage which we will have to buy this year for my wife (PMR x1 yr) is over $6000 out of our budget...
     
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  9. OP
    OP
    The White Coat Investor

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    It's usually not that bad (unless you're adding in property taxes, sales taxes etc.) Especially if you can get a few deductions such as charity, mortgage interest, retirement plans etc. Maxing out retirement accounts cuts down on the tax bill quite a bit and I think I deducted about 1/6 of my income last year, about 3 times the standard deduction.

    I know a physician couple grossing 1/2 million and their federal tax burden is about $100K. Maybe another $25K in state taxes, $20K in SS and $10K in medicare.

    Your marginal rate may get pretty close to 50%, but your overall tax rate rarely gets above 1/3.
     
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  10. WilcoWorld

    WilcoWorld Senior Member
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    I'd like to combine/expand on two ideas that a few have already mentioned above:

    1 - Your retirement savings earn compound interest.
    2 - It's much harder to trim a budget than it is to increase your spending.

    Due to #1, the money you save for retirement early will be worth substantially more than the money you save later on in your career.
    In light of #2 - if one modestly increases his or her standard of living after residency, he can feel like he's living high on the hog, but still be putting a lot of money away. Once you have kids and the expenses start adding up, you can start putting a little less away to make up the difference. Thanks to #1, if you saved aggressively for 5-10 years before that you can afford to have a comfortable lifestyle and maintain a retirement account with smaller contributions, since it is already comfortably underway.

    The thing is, EM still pays plenty well for docs to be for want of nothing (within reason), but one still needs to be smart and disciplined with money. Don't be the guy who buys a fancy new car the week after residency - you might feel cool, but you'll look foolish.

    But what might be the best retirement advice I ever got was from one of my old attendings, "The best retirement plan is to not get divorced."
     
  11. Dotsero

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    ActiveDutyMD these numbers are interesting.

    The 401K and charity are both good to have but are adjustable and are not a fixed debt.

    3180/month for a house is a choice. There are many options for housing that are far below this value (including buying less house and moving to another area, no way am I being held hostage by my house). Also the utilities seem really high. You also don't have to have 2 mortgages (don't move until you sell the other).

    Gas, 336. Drive less or get a smaller car (no more SUVs) and you could cut that in half.

    Your emergency fund is also variable and not a fixed debt.

    1230/mo for misc? Again, just my opinion, but WAY to high.

    This whole scenario just seems like there are many ways to reduce this and live comfortably and not be at the edge of your income.

    So here comes my rant (feel free to skip this and ignore):

    We don't have to "live like attendings" (whatever that is suppose to mean). We don't need to have a 3000 sq ft home to house 3-4 people and fill that place with furniture that costs $2000 per piece. You don't need to have 2 $30-40k cars to put in you 3 car garage. You don't need to live in the trendy neighborhood and have all the crap that goes along with that lifestyle (i.e. the pool, the hot tub, the supersized BBQ grill..). You don't need to take $10,000 vacations twice a year. But we choose to. Why? because somewhere along the line we bought into the idea that this stuff equates with success when in reality it enslaves you. You don't really own that stuff, it owns you.

    There are many ways to live well, and in my humble opinion happier, with a much lower budget. Hell you could eliminate the housing bill by moving to a smaller town and buying a modest house (3-4 bdrms) in a nice area with cash (or at least pay it off in a couple of years). There's $3000/mo taken off your monthly budget right there.

    Also they really need docs in these places so you really are making a difference.

    For what its worth...
     
  12. spyderdoc

    Physician Moderator Emeritus Lifetime Donor Verified Account 15+ Year Member

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    Good post AD. It truly is insane how high monthly costs can become. We are 9yrs out of residency. Our expenses are just north of $25k/mo. Of course we live in SF Bay area where the cost of housing is astronomical (15yr mortgage of 9k/mo, plus prop tax, insurance, etc). We own our cars outright and have no debt other than our med school loans and mortgage debt. Our other misc expenses include 2k/mo to kids education funds, preschool tuition, and a townhouse in SoCal that we rent out, but still costs us 1k/mo to own.

    Of course, we are maxing out on retirement fund contributions and (surprisingly) saving some money as well.

    As long as we keep funding kids college plans and pay off mortgage on time, we will essentially be "debt free" when I am 59, and hopefully I can cut back work since the kid's college should be taken care of with the money we are socking away now. I figure I'd rather "pay for it" now when I am younger than have to work harder into my 60's to pay their tuition.....

    Otherwise, we do not live extravagantly by any means.

    We looked at perhaps reducing some of our monthly expenses, but it is all so statistically insignificant ($10/mo here and there) that it doesn't seem that it would make any dent in expenses......
     
  13. WilcoWorld

    WilcoWorld Senior Member
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    Just to be clear - I wasn't meaning to criticize ADMD's budget. Saving $4k/mo when your post-tax income is about $13k/mo is pretty reasonable.
     
  14. Antibodies

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    What's the point? So you live very modestly. Buy Hyundais, get a $100k house in the middle of nowhere, take cheap vacations ... And what? You have tons of money for retirement. Not like you will spend that money during retirement (you lived modestly for 30 years, you won't just turn around and spend $10k on vacations). So where does the money go? You die with a big bank account. Kids get the money? Sure, they should get a bit, but they should also earn their own money.
    There should be a balance. You should save for retirement but you should also enjoy your life. Maybe life enjoyment for YOU is to live in a tiny house, take cheap vacations and drive old cars. But that doesn't mean others get joy from that.

    PS: Since you will have tons of money left over... can you pay my loans. Pretty please :)
     
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  15. DrMom

    DrMom Official Mom of SDN
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    Charity is personal choice, but if you consider your 401K as anything other than a fixed expense you're being foolish

    Depending on where you live that 3180 may not be much of a house. Also, if you can't sell your residency home that doesn't mean that it is wise to stay tied to it and not take a job in another area of the country.

    I live in one of the areas where gas is well below average cost and my husband and I spend more than 336 a month on routine driving. Yes, we have 1 SUV because I have to have a 4wd to get to work in bad weather, but the other is a fuel efficient car. There's no random cruising around town, this is all necessary for everyday life driving.

    Like retirement money, it is unwise to not regularly set aside at least a set amount of money in case of emergency. I can't tell you how many times in my adult life I've had sudden unexpected large expenses.

    1230/month for entertainment, clothing, home furnishings, kids sports, gym memberships, "allowances", gifts, healthcare, etc for an entire family is not unreasonable. How many kids do you have? I can tell you that my one teenager alone (one sport, random school events, church events, and day to day stuff) racks up a huge bill.

    There are ways to reduce almost everyone's budget, but I don't think ActiveDutyMD's budget is anywhere near as "out there" as you seem to think.

    I think ActiveDutyMD's whole point is that his family is not living extravagantly. I don't think he'd say they're doing without things they need, but I believe your assumption above is incorrect. I think you're grossly underestimating what daily expenses for a family can look like.

    Obviously, most families don't live on the kind of money that we make, but many of them are unable to save for retirement, save for their kids' college, or take even basic vacations. They also don't accrue the debt that we do.

    I went to med school late (well after I was a parent). I've lived for many years in a row on less than I now make a month. I've had to scrounge change to fill up my gas tank or get a McDonald's cheeseburger for my (then) young child. I know the other side well and my husband and I have worked hard to not stay there. I think nearly all of us recognize that we're not living on the edge like that and do appreciate what we have, have done, and have earned.
     
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    #15 DrMom, Apr 30, 2011
    Last edited: Apr 30, 2011
  16. OP
    OP
    The White Coat Investor

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    First of all, it's our budget, and we're very comfortable with it, and I don't really care what anyone else thinks of it. All the criticisms are valid. I COULD give less to charity. Charity and 401Ks AREN'T truly fixed expenses. I COULD have bought something less expensive than a 4400 square foot house overlooking the entire city only a few miles from a world class ski resort in the best school areas. But you know what, I like it. I could also have gotten a 30 year mortgage, but I like having a rate that after taxes is less than inflation. I could have stayed in the ghetto townhouse (shots fired 50 feet from the front door one night) until it sold. But you know what, I could afford not to. By the way, that was pretty low as far as our monthly gas bills go. We have two large SUVs and with gas climbing, well, they're pretty expensive to fill up. But you know what, that's what we always wanted, I bought them used for cash and we can afford to fill them up. I drove an $1850 beater for 4 years after residency. It didn't cost much to fill up. But I couldn't haul lots of stuff in it and it wouldn't get me to the ski resort on powder days. So I bought a $5K Durango. Maybe someday I can afford a hybrid SUV.

    I lived in college on less than $5K a year. We lived in medical school on something like $20K a year. We lived in residency off $40K a year (saving 20% of it). We saved 1/3 of our income while making $120K a year. We know how to live cheaply. We'd rather not. We're living well below our means. Our portfolio is growing each month. We're able to contribute towards those things we care about. The mortgage will be paid off in 14 1/2 years, before I turn 50 and I should be on track to retire within a couple years after that.

    But a few words of caution. The game is the same whether you're living on $20K, $40K, $120K, $200K, or $400K. The pieces are a little bigger, and you can move them around a little more, but without careful planning and judicious spending, you can be poor on any income.
     
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  17. DrMom

    DrMom Official Mom of SDN
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    Excellent point.
     
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  18. WilcoWorld

    WilcoWorld Senior Member
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    ditto.

    double ditto, in fact.
     
  19. GoGetEM

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    This is great information. Thank you for posting!
     
  20. pseudoknot

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    You have two houses and donated 2k/mo to charity. You live extravagantly. That's no different than buying a Ferrari. And it's perfectly fine, because it's your money. But I don't see the point of this post at all, except to reinforce that as an attending you will have plenty of money to spend as you like.
     
  21. DeadCactus

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    It's nice to see some actual numbers to bring the whole financial prudence thing a little closer to reality.

    I think there's another point illustrated here as well though. There's a huge shift in perspective on living modestly as you progress into the realm of being an attending.

    Not that there is anything wrong with enjoying the fruit of your labor, but let's be real. When did things like a primo house, private school, fully-funded college educations for your kids, regular travel, and $3k a month for whatever you want (charity or otherwise) become modest?

    Sorry, folks. Modest is what we "struggle" through during residency when we make what the average US household makes. Yes that number doesn't include a late career start, average hours worked, late retirement savings, etc. It also doesn't account for how many of those households have multiple peopl working, how many hours of overtime are included, how many will actually retire outside of SS, etc. It's close enough though.

    Yes, you still have to be careful. But that warning doesn't do much if you don't admit that physicians are allowed a rather decadent lifestyle. I mean that's the real take home message behind the financial prudence as an attending concept: enjoy your success but beware of allowing yourself that indulgence that is one too many...
     
  22. Apollyon

    Apollyon Screw the GST
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    AT ALL? Really?

    Then, if you don't see the point AT ALL, then you really, really, really missed it, which I find hard to believe, as you are literate.
     
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  23. Renaissance Man

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    Agreed. I am only a college student (want to do EM after working in hospital for 2 years), but I found this post full of useful information. No one wants to ask a physician how much he/she makes or how they use this money, so this was really interesting.
     
  24. sideways

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    Moral of the story: don't give to charity.
     
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  25. mfrizzo3

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    [​IMG]
     
  26. Arcan57

    Arcan57 Junior Member
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    To put it in perspective, $1132 for misc is less than $40/day which is actually pretty frugal for a family. Having two houses temporarily is not uncommon for any physician that's had to move in the last few of years.

    In the transition to attending, it took 7 months to sell our residency house. We're transitioning again, out of necessity, and am hoping to sell our current house prior to the move. Given the economic climate, I'm not counting on it.
    Financial freedom is being able to carry an extra mortgage if necessary to pursue your dream job. And spending extra to have a home in a nice neighborhood has perks that are tough to quantify. If the public school system is good, then you don't have to pay $10k+/yr on private school. There's usually significantly less crime (a major factor in our current city), the commute may be better (our new house would cost $200k less farther out in the suburbs, but that would add 30-40 minutes to my commute), and there's better public amenities (nice parks that aren't over-run by drug dealers, good libraries, etc.) Also, it's important to differentiate between good and bad debt. A mortgage is usually classified as good debt, due to a relatively favorable interest rate and (more importantly) the tax deduction. Charitable giving also enjoys tax advantages (not that it pays for itself, but you're basically giving 33% more than if you had to use post-tax dollars). All in all, ActiveMD seems to have a pretty squared away budget given his priorities. The only thing I'd wonder about is the current size of his rainy day fund. If he's already built it up $632/mo is pretty reasonable. If he's running less 3 months reserve, then it may be worth while to up the contribution until he gets 3-6mo worth of expenses set aside in cash/short term CDs.
    If you hate what you're doing or trying to get out of high interest (ie credit card) debt, then the spartan lifestyle works really well. Otherwise, cutting to the bone simply for the sake of a larger number on your net worth is foolish.
     
    #26 Arcan57, Apr 30, 2011
    Last edited: Apr 30, 2011
  27. Chromatid

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    Yeah, a season pass to snowbird is like 1300bucks now, makes me wish I was a college student. However, powder in april is worth every penny. I'm guessing your in SLC. Good post, glad to see someone talk money. I have heard over and over how medical students and residents need more education in this department.
     
  28. HankReardon

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    Yeah... that 10% to charity helped give it away. Now - a season pass to Brighton or Alta would cost you less money get you more fresh love every year anyway.

    - BTW, this was a helpful thread. I found it amusing how many people were willing to bash the portion of budge this guys spends on his kids. Until you have kids (and a spouse for that matter) don't feel like you can pass judgement on how somebody wants to provide for their family.
     
  29. Apollyon

    Apollyon Screw the GST
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    The more I think of it, your post sounds like Soviet communism - atheistic communism. You actually state that someone giving liberally to charity is extravagant? Really?

    Really?
     
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  30. GeneralVeers

    GeneralVeers Globus Hystericus
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    Pseudoknot needs to donate all of his money to charity and/or the Federal government and provided receipts as proof before he can declare the lifestyle of others "extravagant".

    BTW what's the point in spending 11 years in school/residency, racking up tons of debt, and going through all the stress if you can't have a little extravagance?
     
  31. zoondel

    zoondel SDN Lifetime Donor
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    Apparently it's a crime to live "extravagantly" after you've donated 11+ years of your life to helping others, while simultaneously deferring the earning/saving potential of those years, and spending 60-80+ hours a week away from friends and family just so that, when you're finally a "real doctor," you can be berated by patients, politicians, and posterior-thorax-puncturing-with-a-sharp-object students in your own profession what a terribly greedy, materialistic wastrel you are for wanting life to ease up a bit so you can spend more time with your kids now that they see you for more than a few minutes per day.

    Deep breath . . .
     
  32. DeadCactus

    DeadCactus SDN Lifetime Donor
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    You really don't understand how having $2k a month to literally give away is far from meeking out a humble living? From a financial perspective, who the hell cares if he's giving away $2k a month or paying off his Ferrari? It's a large sum of money being thrown into an indulgence, however noble it might be, purely at his whim and desire. You guys are confusing financial modesty with modest belongings.

    And I don't see anyone complaining about it. You can spend $2k a month on hookers and blow if that's what blows your skirt up and I doubt anyone would come here and tell you that you haven't earned the right to splurge. What do you want, though? Students to bow down to a modest financial plan where someone literally gives away more than most students are living on?

    No one's disagreeing with a physicians right to enjoy what he or she has earned. They're disagreeing with the notion that someone with $17k a month in expenses has tightened up the purse string. Yes, $350k/yr can disappear surprisingly fast and it's important for people to understand that before they fall to deep into the trap. That doesn't mean $350k isn't still a luxurious income...
     
  33. suckstobeme

    suckstobeme Member
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    ActiveDuty-
    I liked your post. Just became an attending 9 mos ago, so I'm still trying to figure out the whole money situation. I just got to the point that debts are paid and put together a decent emergency fund. Honestly, I wish more people would post what they do with their money.
    So I was wondering, does your wife work, too? The reason I'm asking is because you're able to put a ton away in your 401K, no? I thought the limit was like 16,500 this yr. If you put away 3k/month you will be like at 36k. Are you getting all your contributions in at the beginning of the year? What's your secret?
     
  34. pseudoknot

    Physician PhD Faculty Lifetime Donor Verified Account 15+ Year Member

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    1. You like to throw around the word "communism" in contexts that suggest you don't really know what that means. Perhaps you ought to read a bit more about that.

    2. Extravagant may have been a poor choice of words. I think it's great that ActiveDutyMD gives so much to charity, stocks up his 401k, and so forth. It sounds like he is a great person who is very responsible with his money. My issue is with the part where he says he doesn't think he's a big spender, and the tone of the post that seems to imply that you can barely get by on 200k/year. I see a lot in that budget that is purely discretionary. Again, I don't think there is anything wrong with that. But the guy gives to charity as much as I have to live on in a month. That's not being frugal.
     
  35. Apollyon

    Apollyon Screw the GST
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    Now that's a rarity [/sarcasm] on SDN - a condescending, idealistic med student. The guy has more than you. Period. Just because he gives the same amount to charity that you have on which to live monthly is immaterial. Has no bearing. If the guy has enough to save - every month - that is extravagance, because you are (apparently) either remarkably frugal, cheap, miserly, or living hand-to-mouth, and you are applying your standards to his budget.

    As said above, are you going to give away every dime you make, or live like a hermit and sock away nearly every cent you will ever earn?

    (And a cursory search reveals 20 posts with "communism" or "communist" by me over the last 8 years...not my favorite topic. But today IS May Day - workers of the world, unite!)
     
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  36. OP
    OP
    The White Coat Investor

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    Sounds like you got the point of the post to me. I'm certainly not claiming to be living cheaply these days.

    I find I can buy anything I want, but not everything I want.

    P.S. I really love all these negative comments. They sound EXACTLY like what younger me would say to current me.
     
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    #36 The White Coat Investor, May 1, 2011
    Last edited: May 1, 2011
  37. OP
    OP
    The White Coat Investor

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    Wife doesn't work. My 401K contribution THIS YEAR is $16.5K. Once I hit partner, the limit of the 401K/profit sharing plan is 20% of my income up to $49K. Since I'll be the owner and the employee, $16.5K of that is the employee contribution (can be Roth) and $32.5K is the employee contribution (cannot be Roth.) So obviously, at $3-4K a month, I'm frontloading my contributions this year. I've been doing this since getting out of residency. I also front load Roth IRA contributions (now backdoor Roths via the 2010 loophole since I make too much to do direct contributions) by putting in $5K for me and $5K for my spouse on January 2nd every year. Later in the year I put savings toward 529s for the kids, building emergency funds etc.

    Our group also has a defined benefit plan I'll become eligible for after 18 months. It is structured as a defined benefit (pension) plan so I don't control the investments in it, but upon retirement can roll it into an IRA if I like. That allows me to shelter up to $36K more a year. I doubt I'll be able to max out all these accounts, but there is little reason for me to save in a taxable account with all these tax-advantaged accounts available to me.

    Roth IRAs $10K
    401K $49K
    Defined Benefit $36K
    Total $95K

    Tax savings of maxing them out- ~$30K a year

    The truth about emergency funds is that you don't actually need them after a while. I mean, I've got a years worth of expenses in Roth contributions that can be withdrawn at any time without tax or penalty.
     
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  38. suckstobeme

    suckstobeme Member
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    What's the 2010 Roth IRA loophole? I thought we made too much for Roth IRAs that had tax-free earnings.

    I apologize in advance. I'm a novice when it comes to investments/IRAs and such.
     
  39. WilcoWorld

    WilcoWorld Senior Member
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    Something similar can be said for disability insurance. Early on, a specialty specific plan is a good choice, because you don't have much saved and you have a lot of earning potential. But once you've been saving for retirement long enough that your nest egg is substantial, and you don't have as many potential earning years left it stops being sensible to keep paying for a premium disability plan. This is why at about 50 I intend to switch to whichever cheapo plan my employer is offering at the time.
     
    #39 WilcoWorld, May 1, 2011
    Last edited: May 1, 2011
  40. WilcoWorld

    WilcoWorld Senior Member
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    If you put your money into a traditional IRA you can immediately convert it into a Roth thanks to a tax loophole that started in 2010 and has been kept open.
     
  41. MossPoh

    MossPoh Textures intrigue me
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    Good post and a proper reality check. People never seem to acknowledge that one's standards of living tend to increase with their income. Could you hoard all your money by never donating, drive a used kia, live in a 1100 sq ft house in a sub par neighborhood and have your vacation days at the public pool? Sure you could. You'd have a lot saved up. Congrats. I personally want my family to live reasonably, but in a level of comfort representative of the work invested. I know there are people that work their arses off their entire life and don't have that luxury, but that's life.

    The point wasn't to analyze the budget and come up with a better strategy. The point was to simply get a better idea of where the money can go. You don't have to use that as your template when you're making money. You can spend all your money on ice cream, porn and precious moments figurines if you want. That is your call.
     
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  42. dchristismi

    dchristismi Gin and Tonic
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    Roth question again. And maybe I should ask my accountant rather than youse guys...

    Once you convert to a Roth, then you can't contribute to that one any longer right? So are you opening up new accounts every year to roll into Roths, or is there some way to combine them. I knew about the loophole, but 17 different Roths with 5K each just sounds silly.

    In my state, I can contribute an additional $16.5K to a 457 plan, which is a pretax "delayed compensation plan," so I can withdraw it after retirement at a lower tax rate.
     
  43. Flushot

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    First off, thank you ActiveDuty for posting your expenses. It's a great discussion and I'm also glad you added more to the story with your most recent post.

    I have to ask though, would this situation be drastically different if you were not married and children were not part of the picture? I'm asking as a single 2nd year racking up a grotesque debt and for that reason, I have no intention of marrying and having children by the very minimum of 10 years, if at all.

    The thing is I imagine cutting major costs by living in a studio apartment or with a roommate even after residency and being responsible for your own expenses, like utilities and food. I mean, my utilities now don't go above $100 (not having a TV at all helps), and I'm happy with that.

    I hope that your budget is a nice lesson to those who might be in your situation soon but for others, they can make a choice now. If getting married and having kids is something that has to be done, wouldn't it be more than reasonable to put it off several years?
     
  44. OP
    OP
    The White Coat Investor

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    A 457 is nice if your employer offers it. If your group has a 401K/profit sharing that allows $49K there is no point to a 457. Most people with 457s have a 403b and work in academia and no 401K.

    You don't need 17 different Roths. You put the money in a traditional IRA each year. It isn't deductible of course because you make too much. The next day, you roll it into your Roth IRA. Repeat next year with the same 2 accounts. It's really easy. Don't know how long the loophole will stay open, but I'll use it while it does.
     
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  45. OP
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    The White Coat Investor

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    That's very optimistic to think you'll be able to tolerate living in a studio as an attending, single or not. I don't know anyone who does, but perhaps you can.

    If marriage/kids is something you want, I wouldn't avoid it for monetary reasons. You obviously will make enough to pay back your loans AND support a family. I was married when med school started. We thought we were smart to put the kids off until after graduation but I had lots of classmates with kids. Not that big a deal if that is the lifestyle you want. If not, well, you'll have more money to blow on coke, hookers, and taxes.

    But yes, my situation would be drastically different without kids. I'd probably have a 3 bedroom townhouse with a garage, maybe 1500 sq feet, do a lot more traveling, drive a nicer car, have nicer skis, and put more toward retirement (and a lot more toward taxes of course.)
     
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  46. link2swim06

    Physician 10+ Year Member

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    Question about your budget...so your total gross for the year is $211,764


    I calculated you working 48 weeks a year, and found a 27 hour work week assuming (getting paid $160/hr, which is conservative estimate anyhow, right?)

    I am not insulting your budget, just saying if my calculation is right a 27 hour work week is not much more than 2 12s a week right? I mean conceivable you could work another shift a week and pull in a other 100K a year. Also if you wife worked that could possibly be more income.

    My point is not that your missing out on money, but I assuming this is a point where free time is more important than the extra money, and that maybe you have a sizable opportunity to make a lot more if you want to work more?
     
  47. pratik7

    pratik7 Senior Member
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    your numbers are off. 160 is not conservative especially if you are not independent contractor. most people outside of academics work more than 27 hours a week..usually closer to 35-40
     
  48. link2swim06

    Physician 10+ Year Member

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    I have read multiple times here that $200/hr is very obtainable.

    According to 40 hours a week, I calculate $110 per hour. I have heard of moonlighting jobs paying more than this. I am missing something?
     
  49. Dr.McNinja

    Dr.McNinja Nobel War Prize Winner
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    I disagree. While every place is different, my gross is $288,000 (projected) at 120 hours per month, which is about 27 hours per week.
    If he's pulling that working 40 hours a week then he is obviously on a partnership track where his income will eventually be higher.
     
  50. xaelia

    xaelia neenlet
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    $203,980 for 112 clinical hours a month + academic commitments.

    Pretty sure I'll be plenty busy even if that sounds light.

    The thought of working 40 hours a week in a standard busy community ED makes my spleen cringe.

    Thanks for the budget, right around mine - luckily I don't have such unpredictable expenses (children).
     
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