Attendings, can you share how you paid off/are paying your debt?

[thepoopologist]

The best financial investment you can ever make is to marry a person who has similar financial goals as you. Otherwise, divorce can be extremely expensive that no matter how financial savvy you are, you'll always be behind.

I agree with avoiding private schooling, luxury cars, and compulsive online shopping.

Now regarding housing price, that really depends on where you live. My future job is located in a crap hole with trashy public schools. My options are to either send my kids to a private school (tuition is $30k/year) or live in a nearby affluent suburb where an average 4BR 2500sq foot house runs 700k in value. I'm choosing the later.

I agree. If they don't do well in school, you still have a 700k house in a good school district.

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[Splenda88]

Damn, you're making double what I could dream to make, nice!


Nice bro, glad things are moving along! I'm seeing the same issues with regards to school, cheapest I could get in a good school district big enough for my family is in the $700k range. Same houses were $500k 2 yrs ago, freaking CA...

Honestly, if you are saving (and ideally investing in retirement accounts) 10-20% of your income and another 10% are going to loans, you will be fine. Sure, that means living off of $75-$100k for even the lowest paid physicians, but that's way better than living like a resident. Most people can afford a mortgage, a car loan, occasional outing/vacation, and eating "out" once a week at a normal restaurant with that.

20-30% should be the goal.

Home price is freaking outrageous. Even if one puts 20% down on 700k home, the monthly payment (mortgage, tax, insurance and HOA) is still gonna be 3.5k+ month. I dont know if I can stomach a 3.5k+/month house payment.

 

[hallowmann]

20-30% should be the goal.

Home price is freaking outrageous. Even if one puts 20% down on 700k home, the monthly payment (mortgage, tax, insurance and HOA) is still gonna be 3.5k+ month. I dont know if I can stomach a 3.5k+/month house payment.

I mean 20-30% is great, but its not like you won't pay things off and have a nest egg with 10-20% saved and 10% to loans.

You're telling me man. Even the rent for a house is that high out there. At least this way, you might build some equity, but damn...

 

[Splenda88]

I mean 20-30% is great, but its not like you won't pay things off and have a nest egg with 10-20% saved and 10% to loans.

You're telling me man. Even the rent for a house is that high out there. At least this way, you might build some equity, but damn...

If rent is that high, of course it would make sense to buy instead.

People with household income of 120K cant even afford a home in most big cities now. That is crazy!

 

[hallowmann]

If rent is that high, of course it would make sense to buy instead.

People with household income of 120K cant even afford a home in most big cities now. That is crazy!

Man, the divide between people who had money invested/saved pre-COVID and those that didn't or were working paycheck to paycheck/ate through their savings after losing work has become a massive chasm. You've got people spending a ton because their money doubled buying houses, shooting the prices up, and you've got more and more people getting priced out of areas. The pandemic saw crazy rises in homelessness, and at the same time crazy increases in construction for the upper-middle class and up. Something's gonna give.

 

[Splenda88]

Man, the divide between people who had money invested/saved pre-COVID and those that didn't or were working paycheck to paycheck/ate through their savings after losing work has become a massive chasm. You've got people spending a ton because their money doubled buying houses, shooting the prices up, and you've got more and more people getting priced out of areas. The pandemic saw crazy rises in homelessness, and at the same time crazy increases in construction for the upper-middle class and up. Something's gonna give.

Maybe we need another housing market crash again like the 2007-2012 one

 

[hallowmann]

Maybe we need another housing market crash again like the 2007-2012 one

I think its more likely to be the stock market or inflation rather than housing market. There's not enough supply for housing for the demand. Unlike before where tons of people were buying to flip, now almost all people are actually buying to live there.

 

[thepoopologist]

Everyone is betting on a housing crash however when I went through the loan pre-approval recently for my build they wanted a financial colonoscopy including W2s for the last four years. After I reserved my lot, the builders increased the price of the remaining homes by 150k and there were people who bought those lots outright in cash. It means anyone who's buying actually has the means to, its not at all like 2008. If rates go up, I expect the price increases to slow down, not price decreases.

Anyways if day to day prices stay up, I'll have physical assets including my homes that'll go along for the ride. If they go down with the rate increases, my salary can still support the liabilities and I can enjoy buying groceries at normal prices again.

 

[SLC]

Nice bro, glad things are moving along! I'm seeing the same issues with regards to school, cheapest I could get in a good school district big enough for my family is in the $700k range. Same houses were $500k 2 yrs ago, freaking CA...

It’s not a lot better here in Utah. $810k for a modest sized home where I just moved to.

 

[Calizboosted76]

It’s not a lot better here in Utah. $810k for a modest sized home where I just moved to.

Dont even get me started on central Florida. My Mom and her husband are looking for a 3 bed 2 bath home and everyone wants $300k+ for a home around 1200 sq ft.

People down here are renting little **** box houses for $2200 a month. It is absolutely insane.

 

[Neopolymath]

WCI acolytes have a lot to say on home buying that makes sense as generic advice but one thing they never mention is that buying a home locks you into a long term price point for shelter. Every time this happens the renters feel the squeeze waaaay more than the people with a 30 year mortgage. Forget the hedge against inflation and equity building blah blah that finance wonks want you to worry about. Not having rent increase every year, having to move due to landlord changes, and having all kinds of problems and settling for a really mediocre situation makes it worth it to bite the bullet and get off the ride. Settle for an ok house and then forget about it until you need/want to move. That alone is worth the potential small risk you lose some money in the end.

 

[Postictal Raiden]

WCI and Ramsey often give impractical advice.

Buying a house is almost always the right decision (as long as it’s within your budget Ofc). Like mentioned above, your mortgage payment is fixed while rent continues to increase. Some of your mortgage payments go into building some equity and real estate almost always appreciates in value.

The biggest financial mistake I ever made is not purchasing a house when I started residency (thank you, WCI and Dave). Had I done that, I would be six figures richer.

 

[Splenda88]

WCI and Ramsey often give impractical advice.

Buying a house is almost always the right decision (as long as it’s within your budget Ofc). Like mentioned above, your mortgage payment is fixed while rent continues to increase. Some of your mortgage payments go into building some equity and real estate almost always appreciates in value.

The biggest financial mistake I ever made is not purchasing a house when I started residency (thank you, WCI and Dave). Had I done that, I would be six figures richer.

Made the same mistake as well. Now I realize that the the upside far outweighs the downside because once you are an attending, even if you move, you will be able to cover the mortgage for couple of months until you find a property manager to manage/rent the house for you. Covering the mortgage only will net you $$$ in equity.

I should have never made that mistake because I know how profitable is it having someone else (a renter) covering just the mortgage. I have made a a 400k+ profit in 10 yrs after investing 40k only.

Dave Ramsey's advice is mostly for people with low income, and people that are compulsive spender.

Real estate investment is more about gaining equity than cash flow IMO.

 

[Ho0v-man]

Wish I could buy a house for residency. Don’t really see how anyone can afford it.


Does it actually make sense to buy if you have nothing for a down payment? Feel like I won’t even build enough in equity to neg the closing costs of selling it by the time I leave.

 

[Calizboosted76]

Wish I could buy a house for residency. Don’t really see how anyone can afford it.


Does it actually make sense to buy if you have nothing for a down payment? Feel like I won’t even build enough in equity to neg the closing costs of selling it by the time I leave.

Make purchaser pay closing costs 👀

 

[Captain_Falcon]

Ehhh most villages/townships have Sellers' responsible for closing costs. Because of this, buyers will be much less likely to negotiate with the seller. This allows the buyer money to furnish the place and do immediate fixes if needed. From my personal experience as a buyer and seller within a few years time, my wife and I wanted to put as little down so we could use savings to furnish. And when we were selling it not but 3 years later and asked for closing costs, every buyer interested balked at that.

Ultimately, even if you do end up having to pay out of pocket for closing costs in 3-6 years time -- just view this as the money you would have had to spend on renting. Overall, you will assuredly come out ahead as a house/condo/townhome in residency isn't going to be anything extravagant with a heavy price tag so the closing costs shouldn't be an inordinate amount to cover

 

[hallowmann]

WCI and Ramsey often give impractical advice.

Buying a house is almost always the right decision (as long as it’s within your budget Ofc). Like mentioned above, your mortgage payment is fixed while rent continues to increase. Some of your mortgage payments go into building some equity and real estate almost always appreciates in value.

The biggest financial mistake I ever made is not purchasing a house when I started residency (thank you, WCI and Dave). Had I done that, I would be six figures richer.

I mean its not always a good decision to buy and depends on the length of residency and the housing market. In fact for residencies of 3 yrs, closing costs alone may end up resulting in losing money if the market is cold. There is a reason that those better to rent vs buy calculators exist.

The thing is certain markets are almost always going to appreciate in value. Buy a house that doesn't require a ton of maintenance, where your mortgage is close to (like within 10% of) rental cost, and where it seems you'll be there for 4+ yrs. In those situations its rarely a bad decision to buy a house in residency.

If I finished residency at 3 yrs, I would have barely broken even, but literally the last 1.5-2 yrs have been insane for the housing market basically everywhere. I do think WCI tends to err on the more conservative/safe side with regards to this and there are more situations where buying a house in residency makes more sense than not.

Made the same mistake as well. Now I realize that the the upside far outweighs the downside because once you are an attending, even if you move, you will be able to cover the mortgage for couple of months until you find a property manager to manage/rent the house for you. Covering the mortgage only will net you $$$ in equity.

I should have never made that mistake because I know how profitable is it having someone else (a renter) covering just the mortgage. I have made a a 400k+ profit in 10 yrs after investing 40k only.

Dave Ramsey's advice is mostly for people with low income, and people that are compulsive spender.

Real estate investment is more about gaining equity than cash flow IMO.

1% rule is important to think about though. I don't know if I'd truly make money off renting out my current house where I am, but I'm debating keeping my home for renting as more of a fallback for my family if something happens to me.

As a physician you're 100% right that you can float, rent, or ride out dips in the housing market without necessarily losing money, its just a question of whether other investments would provide better yield.

Wish I could buy a house for residency. Don’t really see how anyone can afford it.


Does it actually make sense to buy if you have nothing for a down payment? Feel like I won’t even build enough in equity to neg the closing costs of selling it by the time I leave.

Physician loans. I have friends that have put like 5% down or less, no PMI, and if they do longer fixed mortgages the monthly payment really isn't bad. Given the current interest rates on mortgages, I would strongly consider buying if you know you are going to be somewhere for ~4 yrs.

 

[Postictal Raiden]

With physician loans you can get away with putting nothing for down payment and still not endure a PMI.

My friend just bought a house in SoCal for 850k with zero down thanks to physician mortgage.


I agree with you @hallowman. You need to stay in the house long enough to make up for the closing costs. However, for most people, buying a starter house at the start of residency should be a net positive decision. Besides, other than med school and residency, when are you guaranteed to stay in the same area for 3-7+ years?

 

[xffan624]

Wish I could buy a house for residency. Don’t really see how anyone can afford it.


Does it actually make sense to buy if you have nothing for a down payment? Feel like I won’t even build enough in equity to neg the closing costs of selling it by the time I leave.

I bought in residency but I had a VA loan which meant I could buy without a down payment and not have to pay a PMI. The seller paid my closing costs so I pretty much paid nothing and was able to keep my meager savings for emergencies/house costs. I also planned to stay in the area after residency. Happy with my decision so far with no definitive plans to move (I probably will sometime in the future. My neighbors are mildly annoying and I would love a place on the water but those places are pretty pricey). VA loan definitely makes home ownership a much more achievable objective with a 50K salary.

 

[Ho0v-man]

Did not know I could avoid PMI with a physician loan. Thanks y’all.

 

[thepoopologist]

Average ortho makes 650k. I started below that, but ramped up within months to be there. I make more than that now.

I totally missed this. In three years time I will have payed off my loans by borrowing money from DarkHorizon

 

[Postictal Raiden]

I totally missed this. In three years time I will have payed off my loans by borrowing money from DarkHorizon

Or you could work his hours and make more money as a cash-based psychiatrist

 

[ortnakas]

For what it’s worth, when we bought our house in 2018, we got a better deal with a regular loan and PMI than the physician loan offers we received. This isn’t to scrap the idea of physician loans entirely because for some they work out great- just saying it’s not the only option out there.

 

[SLC]

WCI and Ramsey often give impractical advice.

Buying a house is almost always the right decision (as long as it’s within your budget Ofc). Like mentioned above, your mortgage payment is fixed while rent continues to increase. Some of your mortgage payments go into building some equity and real estate almost always appreciates in value.

The biggest financial mistake I ever made is not purchasing a house when I started residency (thank you, WCI and Dave). Had I done that, I would be six figures richer.

Yes, we purchased in residency, made a tidy (nearly 6 figure) profit 3 years later that allowed us to start attending-hood with enough to put ⅓ the value of our then new home into a down-payment. That home then doubled in value and we were able to sell and buy our current home, which was north of $800k with a 50% down payment.

Money payed toward a mortgage is almost always recoverable in an emergency; money payed to rent is gone forever.

 

[Candidate2017]

Or you could work his hours and make more money as a cash-based psychiatrist

Actually, most cash psychiatrists can meet or exceed ortho income at 30-35 hours/week. The problem is the higher a psychiatrist can charge, the more likely they are to choose to work 1-2 days/week.

 

[Mad Jack]

Not an attending yet, but I can answer some of your questions since I have already signed a contract and know how my budget is going to look like.

-your starting indebtedness.
High 400s

-If and how much you paid in residency and how much you earned.
None so far; initially due to too low of an income for being a med student the year prior, then working half the year, then COVID
However, very soon I'll start making PAYE calculated payments 200-300 monthly

-Salary as attending.
Mid 300's. possible high 300's with bonuses

-What your minimum payments were if that’s what you did or are paying.
Planning to continue paying the bare minimum (through REPAYE)

-What other programs/methods you used to pay off loans.
Most jobs in my fields, at least in the geography I'm looking into, don't qualify for PSLF unless I'm willing to take a massive pay cut (work at the VA or at a fully academic institution). Many "non-profit organizations" like Kaiser and HCA have a strange hiring set up that make it impossible to qualify for PSLF.
Therefore, my approach is to do REPAYE and hope to 1) my income continue to grow to a point that the calculated payment is high enough to make a large dent into the debt 2) whatever remaining balance after the 25 years is forgiven without taxation

I realize many people don't agree with my approach. Many economically savvy people would tell you to "live like a resident" until your loans are paid. I could do that and be done in less than 4 years, but I'm not interested. I'd rather invest my money and watch it grow. Besides, I'd hate that sometimes in the near future a bill passes that forgive all federal loans and I miss out.

I highly recommend REPAYE vs PAYE, as it halves interest that is more than your minimum payment. This can be a lifesaver with large balances

 

[Mad Jack]

Everyone is assuming that mortgages are better than rent, but right now housing prices are quite inflated. I'm going to wait for the next housing crash/crisis to buy, as current market dynamics are unsustainable. A retraction in housing prices will likely leave a lot of those in expensive houses deep underwater. I may buy a cheap house, but a forever home in an expensive neighborhood will be among the hardest hit in a down market

As to my own debt, I plan on paying down 50k of principal a year until it reaches 280k and my minimum payments will be more than any interest accrued. At 440k in loans, that amounts to a few years of slightly leaner spending, after which I'll pay the minimum and try to do PSLF but even if PSLF doesn't work out I'll be fine payment-wise and finish off the loans after around 20 years. The extra money not being thrown at principal will be invested.

 

[SLC]

Everyone is assuming that mortgages are better than rent, but right now housing prices are quite inflated. I'm going to wait for the next housing crash/crisis to buy, as current market dynamics are unsustainable. A retraction in housing prices will likely leave a lot of those in expensive houses deep underwater. I may buy a cheap house, but a forever home in an expensive neighborhood will be among the hardest hit in a down market

As to my own debt, I plan on paying down 50k of principal a year until it reaches 280k and my minimum payments will be more than any interest accrued. At 440k in loans, that amounts to a few years of slightly leaner spending, after which I'll pay the minimum and try to do PSLF but even if PSLF doesn't work out I'll be fine payment-wise and finish off the loans after around 20 years. The extra money not being thrown at principal will be invested.

I agree in part with the logic, but with the inflation we’re seeing, real estate and other solid re-sellable commodities (even with the insane prices we’ve had) might be the best place to sock money away right now.

 

[Mad Jack]

I agree in part with the logic, but with the inflation we’re seeing, real estate and other solid re-sellable commodities (even with the insane prices we’ve had) might be the best place to sock money away right now.

Honestly I think there is no safe place to put money right now. If inflation stays at 6% and your real estate assets depreciate by 30% three years from now, you'll have lost an enormous amount of money. Stocks are also overvalued. We're really due for another 2008

 

[thepoopologist]

We're either crashing at some point or we're headed into gilded age territory.