Financial situation after IM residency, my story

[jacksparrow82]

I don't know why I'm typing this other than because it may be a bit cathartic. But, perhaps it will help others learn from my mistakes...or make you feel better about your own situation? I'm 33 years old btw

I managed to rack up around 240K in student loan debts while going through college and med school. I borrowed the full amount each year and didn't bother making payments during residency. SO, I finished my IM residency with somewhere in the neighborhood of 260k in debt? Hard to say exactly, I didn't spend a lot of time looking at it.

I got a job as a hospitalist and started pulling in around 225k a year. My wife makes an additional 50k. We were living in a condo downtown at the time and were paying only about 1300/month with utilities, plus we had a couple of car payments and I had a couple of expensive hobbies. But, other than that we were able to save up 40-50k in the first year after I started working. I felt pretty good about that, but we had an itch to buy a house for some dumb reason.

So, we bought an old 1880's brick house downtown (huge, like 4400 sq/ft) that needed full restoration and started pouring money into it over the next 3 years. Paid 140k for the house and we've already put probably somewhere around 250k into it. So, we have close to 400k into it (we owe about 288 with our mortgage and home improvement loans).
The work is just about complete, but now we have very little savings other than our retirement accounts (only about 85K there) and about 10k in savings.

And needless to say I've barely made a dent in my student loans. That is what stresses me out the most. A financial advisor guy we started seeing doesn't seem that concerned about the debt and has encouraged us to start saving now. He wants us to have around 50-100k in savings, then we'll start tackling the debt I guess.

That's all fine sounding, but it assumes I continue to make my current income. The problem is I still haven't passed boards! I failed initially after residency because I didn't study like I should. Then I took a year off, bought the house and started working on it like crazy (doing a lot of work myself) and tried again with only 3 months of study time and failed again. I took an additional 2 years off (not sure why, still working on house and trying to enjoy life a little) and now here I am 4 years out of residency and I have 1 more year to pass before my current job takes away hospital privileges (they require board certification within 5 years of initial membership).

SO, needless to say my stress level is horrible and I'm not really enjoying things much right now. I have to try to either take this test again and pass or find some other way to continue to make what I make (locums seem like the only real possibility for a non-board certified IM doc). To add to all of that, I'm not even crazy about my career to begin with (I don't even know if I want to be a physician at all) and my wife wants to start having kids!!

What do you guys all think? Am I as screwed as I feel?

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[ResidentSensei]

Hi jacksparrow82,

I am a recently minted attending physician and I started working July 2013. I think I have done some things correctly, and of course I could have done somethings better. However, like many things, I think the first step is denial... which you seem to have been doing for the past few years. The next step (where you are) is acceptance.

Lets run some numbers real fast:

260k debt
275k gross combined salary
288k mortgage
85k retirement accounts
10k savings

Seeing all the numbers like that are cathartic in the sense that they should now be "real" to you. There are plenty of doctors who have or will save better or pay off their loans sooner than you, and there are also plenty who will take much longer than you.

The single most important question in order to optimize your savings plan is: What are the interest rates on your debt and mortgages? Hopefully they are less than 4%. If not, there is something that needs to be looked at further.

The next thing you need to do is you need an emergency fund. This is usually 3-6 months of monthly expenses. People who are more conservative prefer to have 9-12 months of expenses sitting in the bank. I think 10k is probably too low for you, so you need to calculate how much more you would like to save.

The house itch is an itch a lot of young doctors really want to scratch I think. Luckily your house was relatively inexpensive, even if the renovations were pretty expensive. Where I am you can't buy a house for anything less than 700k, which is one of the reasons why I am still renting. Whether you felt it was a good idea or not to renovate is now irrelevant. The money is already gone and the house is already refinanced. Just accept the 288k mortgage as it and try to enjoy the renovations you made to the house.

Would it have been better to pay off some more student loans? Probably. Can you do anything about it now? No. So once again, it's irrelevant. Find out the interest rate and then you can decide on a payment plan for it. How conservative or aggressive you can be will be likely based on the interest rate.

It's hard to say whether your financial advisor is giving you good advice or not since I don't know the interest rates on your loans. However, from what I can tell, they all read the same handbook of: 1) save more money -- 2) put your money into the investments I say to -- 3) take a % every year from your investments. I am generalizing here, but not harshly. That is how they make a living.

The board certification is an important matter. You know the most about your specialty right after finishing residency. As you well know, how we practice medicine is not exactly the same as the questions we are asked. Medicine is never as black and white as a multiple choice question. This places you at a significant disadvantage. Talk to your hospital and/or other hospitalists. Try to work out a schedule such that you have enough time to study for the boards. At this moment in time, there is nothing more important than passing it, this like Step 1 all over again. Live and breathe the test and pass it. None of the above matters if you can't secure your pay check.

The other questions about life satisfaction and wanting to be a hospitalist or physician at all require a long discussion with your wife. Maybe consider going back to do a fellowship in an area of interest or something of that nature. Additionally, there are other jobs out there that an MD can be used for, but it will require a big life change. The kids are also a discussion between you and your wife, and planning changes based on whether you stay in medicine or leave it.

With all the above said. You aren't "screwed" necessarily. You just have a lot of things to take care of. Big boy money, big boy toys, big boy problems.

-Sensei

 

[jacksparrow82]

Thanks for that thoughtful response. I appreciate your feedback. I think I have realized that I need to just pass these darn boards so my options remain wide open. There is no shortage of jobs in my field as long as I'm board certified. It will make my life a lot easier in that regard and will give me the option of working part time in the future and pursuing something else if I choose. I've got roughly 10 months of time to study for the Aug 2016 boards. I believe I can pull it off, its just a matter of discipline at this point (My score was close last time and like I said I only studied 3 months and it wasn't more than 1-2 hours a day, if that).

As for the student loan interest rates, about half of my loans are less than 4%, many as low as 2.6% (I fortunately consolidated right before the big hike in rates during my second year of med school). The other half vary from about 5% up to 7.25% (I have about 35K in the highest rate). My mortgage is at 4.3% (240k there and the rest is a private loan from my in laws which is 5% and will be paid off in about 6.5 more years).

My wife and I have really decided to take control of our spending in the last couple of months since meeting with the financial advisor. No more buying anything we don't have cash for and if we want something we have to find the money for it without tapping into savings. She is taking an active role in regulating our spending (keeping an eye on what we're buying, setting budgets, etc). This is new for us. In the past she's just left it up to me which we are now realizing was not smart. Since she's been cracking the whip the last couple of months we're already doing a lot better.

Again, thanks for your feedback. It makes me feel better knowing that we're not in as bad of a position as I thought.

 

[sweetlenovo88]

You have come to a point to where you see something has got to change. That is good and you now have the motivation to really do something about it. Study and pass the boards, make a plan to pay off the debt and stop the bleeding into the house and lifestyle.

You will then feel you are in control instead of just riding the waves as they come. You can do it

 

[Mman]

Your main priority right now has to be passing boards. That's it. That's your financial priority. Because if you don't, your future income is going to take more of a hit. Do whatever it takes to pass the boards and then worry about tackling debt and saving money.

 

[QofQuimica]

As others have said, first get serious about boards. Take a prep course, buy a question book, whatever you have to do, and pass the darn thing. I went through a prep book and a question book for my prep, which was adequate, but be honest with yourself about whether you're really self-motivated enough to self-study. If you're not, then spring for the course. You're a smart guy; you know you can do this.

Then it's time to get serious about your debt. You're right to be nervous IMO, and the reason why you feel that way is because you know you're over-leveraged and one job loss away from your entire house of cards falling down. That's a scary feeling. I don't know why your advisor is being so blase about it, because debt is a serious albatross weighing you down. Having all that debt will negatively affect your ability to do anything else you want to do, like start a family, retire, travel, etc. Whereas, I can tell you from experience that the day you pay off your last loan is like every Christmas, birthday, and anniversary you've ever had all rolled into one. It's the feeling of freedom. Have a talk with your wife about cutting back your lifestyle for a while (edit: sounds like you've already started doing this from your second post). Read Dave Ramsey's book and the Mr. Money Mustache blog for ideas on how to change your lifestyle to become debt-free. Then come up with a plan for the two of you and make it happen.

Best of luck.

 

[thesauce]

OP, I'll echo what others have said: passing boards is #1, 2, and 3. Don't even take a break to read the financial blogs right now. Study, study, study. That's it. Period.

 

[Johnny Appleseed]

If I may ask, when you say you make $225,000 per year, is that before or after taxes? I don't have many insights, but I did just finish a finance class and with roughly $600,000 of debt and a salary of $275,000 per year, you are far from screwed. I know people with the same amount of debt at high interest rates and a far lower income. You are not as screwed as you feel.

Regardless of whether or not you want to be a physician, you should still be one. At least until the debt number is lower. A doctor once told me, "you don't have to love your job, you just have to like it. Especially if it pays the bills."

Thanks for your post though, it will definitely help me as I move forward.