Scraping By On $500,000 A Year

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I come from humble beginnings, none of my family ever graduated college. I always thought most doctors were driving 40-70k cars (new MSRP price, not necessarily what they paid). Every attending in my parking lot drives a 1999 Honda Civic it seems, or something similar. One has an Aston. One has a Mercedes S Class.

I'm huge into cars, and racing. I guess I found it odd that doctors don't drive something newer and nicer. Even if they had no interest in cars as a hobby or passion at all, just because they have such a large amount of disposable income relative to the majority of the population/blue collar types.

I certainly won't be buying 20 Lamborghini's. But I'd like to eventually collect 5-10 cars to keep.

Large income but dropping. Less security of that income. Large amount of educational debt. Fewer years of earning any income do to time investment. Other priorities besides educational debt: lots of insurance, childcare, kid's education, a stay at home spouse to raise kids, in addition to the income being less secure, the work is less satisfying. So lots of us looking to work less or punch out completely sooner than what has been the norm in medicine. Cars and other toys just take a back seat for many of us.

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Why is leasing such a bad option? Especially if you have a substantial 1099 income? Leases offer you the ability to write off a lot of the lease.

You can write off business-use purchases, too.

But the bottom line is that lease terms and contracts overwhelmingly favor the car company. They are able to legally obfuscate the terms. Car companies make most of their profits off of financing, not the actual sale of the car. A lease is the ultimate in financing for them, since they get the car back every time and the contract guarantees they get it back with low miles and good condition. There is a reason car companies push leases so much. It's not becaus they're kind and want to give better deals to more people.

Leases are a way to trick people into spending more than they need to on something they can't afford.
 
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You can write off business-use purchases, too.

But the bottom line is that lease terms and contracts overwhelmingly favor the car company. They are able to legally obfuscate the terms. Car companies make most of their profits off of financing, not the actual sale of the car. A lease is the ultimate in financing for them, since they get the car back every time and the contract guarantees they get it back with low miles and good condition. There is a reason car companies push leases so much. It's not becaus they're kind and want to give better deals to more people.

Leases are a way to trick people into spending more than they need to on something they can't afford.

Plus if you go over your mileage agreement then you really get hosed. Then the dealer sells the car as certified pre-owned after some "150 point inspection" where you are essentially paying for an expensive warranty.

Buy used, build some repair money into the budget, and develop a good relationship with a mechanic or learn basic maintenance yourself. You can get some really nice cars for cheap this way.
 
Bottom line for leases vs buying (when one has access to 1099 business write offs)

Lease cars/suv less than 6000 gross pounds

Buy SUV (preferable less than 50k price tag) with more than 6000 pounds (bonus depreciation). Not as good as in good old days of hummer loophole but if U keepmur purchase price as low as possible. Buying 6000 pound SUV makes a lot of sense.
 
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As has been stated before, in general the most cost effective way to drive is to buy a lightly used model with a good history of reliability, take care of it, and drive it into the ground. Although there are exceptions, in general, leasing makes sense only if you like to change cars every few years (and are willing to pay for it) If you have the ability to write off a chunk of the lease for business, and need to or want to drive a more expensive car than you can afford to buy.

Some people get a lot of pleasure out of their cars. It's OK. Live a little. But realize it is a pure, discretionary, luxury expense.
 
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As has been stated before, in general the most cost effective way to drive is to buy a lightly used model with a good history of reliability, take care of it, and drive it into the ground. Although there are exceptions, in general, leasing makes sense only if you like to change cars every few years (and are willing to pay for it) If you have the ability to write off a chunk of the lease for business, and need to or want to drive a more expensive car than you can afford to buy.

Some people get a lot of pleasure out of their cars. It's OK. Live a little. But realize it is a pure, discretionary, luxury expense.

This is me. I like driving a new car every 3 years and don't want to fuss with car trouble and dealing with mechanics. More than worth it to me.
 
This is me. I like driving a new car every 3 years and don't want to fuss with car trouble and dealing with mechanics. More than worth it to me.
Yup. I asked my friend about maintence on cars and he doesn't have a clue what the maintence costs are. He keeps trading it it. He's gotten 3 Range Rovers every 3 years. He's purchased them used the 6000 pound deduction. But they have such high resale value. He comes out way ahead vs leasing.
 
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My M3 and M4 years require me to go to different hospitals and I got a barebones Mazda 3 demo. It's the same price as a loaded car that's 3 years old. Why they used a barebones car as a demo is a mystery to me. I hope to drive it to the end of residency. Then something similar. I paid for it it with a little help from family and a draw on my student loan. I'm living fairly cheaply otherwise so hopefully it will balance out. It was a cash deal at the dealer.


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My M3 and M4 years require me to go to different hospitals and I got a barebones Mazda 3 demo. It's the same price as a loaded car that's 3 years old. Why they used a barebones car as a demo is a mystery to me. I hope to drive it to the end of residency. Then something similar. I paid for it it with a little help from family and a draw on my student loan. I'm living fairly cheaply otherwise so hopefully it will balance out. It was a cash deal at the dealer.


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I thought you were referring to BMW M3s and M4s. Then I saw Mazda and woke up. But I think every medical student should get an M3 as a 3rd year and an M4 as a 4th year. Can Trump make this happen?
 
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I'll admit to being in the nice car camp. I lease.... It's technically a luxury brand but it's not a high end one. American made. Love it. Importantly, it's not flashy so I feel fine pulling up to work in it. It's the one discretionary spending issue which I just like to have. I will never go crazy and may "downgrade" next lease. In another few years I will consider buying a newly used, nice car and paying cash for it. Maybe in another 3.5 years or so. For now, my monthly expense (with family plan on vehicle) is very reasonable given the scope of things.

Reliability and handling in snowy conditions is a premium for me. This vehicle is excellent for that. So, I pay a little more a month for my ride. Again, to me, it's worth it, and I really love driving this vehicle. Very nice IMO.

Then again, I drove a basic, no frills, Ford Focus in residency.
 
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^I drive a 2011 Mitsubishi Lancer Evo AWD turbo now. Previous to that I had a 2005 Infiniti G35 with a supercharger making about 500HP. Before that I had a 1998 Pontiac Trans Am that made 500HP also. I thought about keeping my Infiniti, and purchasing a separate vehicle for the snow/winter driving up here in the Midwest, but realized my 10-15k budget could not get me anything I'd desire to drive instead of my G35. So the second vehicle would just sit and never get driven anyway. So decided to sell it to get into my 2011 Evo.
 
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I drive a BMW 2017 X5 and love it. I'm single with no responsibilities other then my own. If I had a family I would definitely drive something more affordable.
 
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My truck is a 2011 and still runs fine. I will get rid of it once it becomes unreliable. Those 529s aren't going to fund themselves and my wife has a very nice QX80 we take on trips of any distance.
 
another thread degraded

Heh. I agree. My favorite part is the "none of my family went to college" guy who wants 5-10 cars.

Back to the topic: the family in question isn't even close to living below their means. They've lifestyle-crept right up to their means, or beyond, and have no one to blame but themselves if they don't feel comfortable with what they're left with at the end of each month. The change in expectations when your income changes is powerful.

For my family, our costs are taxes (35-45% effective!) > housing > retirement savings > food > childcare > utilities & transportation > vacations, roughly. Each category has room where we could spend less or more. There are no fancy cars or jewelry or boats anywhere in our future; we are prioritizing housing (and education for the kids), retirement, and vacations, in a VHCOL area.
 
Is this somehow a better tax deal than the writeoff you can claim for buying a vehicle for business use?
Not that I am aware of, but I think that it is easier to write off part of a lease as opposed to part of an outright purchase. I think that is what the IRS mileage allowance is all about. Just not sure.
 
Not that I am aware of, but I think that it is easier to write off part of a lease as opposed to part of an outright purchase. I think that is what the IRS mileage allowance is all about. Just not sure.

U are allowed to write off mileage with outright purchase. That's a completely seperate topic. Cause u have option to write off actual car expenses (tire change, oil change, gasoline) or the standard mileage allowance.

Like I stated before. Lease for cars is better option to write off business expenses. But SUV more than 6000 pounds maybe better to purchase due to bonus depreciation.

Case in point (now that govt gives u bonus deprecation even on used SUV).

Buy used Range Rover sport 75k mid range hse model. Write off about 25k plus bonus deprecation (around another 15k) I don't have calculator on me.

That's around a $42k deduction (14k tax savings)

Drive SUV for 3 years (its likely worth $50k trade in 2020). My friend got 54k for his trade in of his 2014 Range Rover sport she hr got for 74k in 2014. These are real prices I'm quoting.

Anyways. Ur total cost of ownership for 3 years is roughly (75k minus 14k business.). 61k net cost.

Trade in 50k.

So total ownership is 11k total over 3 years!

Vs leading SUV $1000/month x 36 months. That's $36k. Write off 80%. 29k deduction. So around 10k tax savings.

Total cost of the lease over three years is around $18k

So buying Range Rover sport is cheaper than leasing it over 3 years.
 
This is so interesting. There are many people who are living comfortably with 200,000.00 annually. I think you need to prioritize when it comes to spending. Prepare meals at home and take a lunch kit to work. Cut down on the entertainment for now. Focus more on what is impo
Scraping By On 500K A Year | Financial Samurai

Taxes are too high for salaries. Reminds me of Robert Kiyosaki, Rich Dad Poor Dad, saying get out of a job and create a business.

This is so interesting. There are many people who are living comfortably with 200,000.00 annually. I think you need to prioritize when it comes to spending. Prepare meals at home and take a lunch kit to work. Cut down on the entertainment for now. Focus more on what is important for a healthy lifestyle.
 
This is so interesting. There are many people who are living comfortably with 200,000.00 annually. I think you need to prioritize when it comes to spending. Prepare meals at home and take a lunch kit to work. Cut down on the entertainment for now. Focus more on what is impo

Or $50K or $80K? $200K is well above average, you should be living comfortably at that level.
 
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Heh. I agree. My favorite part is the "none of my family went to college" guy who wants 5-10 cars.

Back to the topic: the family in question isn't even close to living below their means. They've lifestyle-crept right up to their means, or beyond, and have no one to blame but themselves if they don't feel comfortable with what they're left with at the end of each month. The change in expectations when your income changes is powerful.

For my family, our costs are taxes (35-45% effective!) > housing > retirement savings > food > childcare > utilities & transportation > vacations, roughly. Each category has room where we could spend less or more. There are no fancy cars or jewelry or boats anywhere in our future; we are prioritizing housing (and education for the kids), retirement, and vacations, in a VHCOL area.

For me also taxes (~13k/mo) > savings (10k/mo) > housing (~4k/mo) > vacations/travel (3k/mo average) > food/entertainment (3k/mo) > transportation (less than 500/mo -cheap cars bought w cash and kept 10-15 yrs) > childcare (zero- wife stays home).


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I thought you were referring to BMW M3s and M4s. Then I saw Mazda and woke up. But I think every medical student should get an M3 as a 3rd year and an M4 as a 4th year. Can Trump make this happen?

When i was in med school, BMW 3 were the most common cars med students drove... kind of shows how many med students have well off parents
 
When i was in med school, BMW 3 were the most common cars med students drove... kind of shows how many med students have well off parents

Or irresponsible parents. The type of car you drive and get your kids has little correlation with financial security/ resources once you get beyond about 150k /yr. You wont believe how many nurses drive BMWs and Mercedes.


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Or irresponsible parents. The type of car you drive and get your kids has little correlation with financial security/ resources once you get beyond about 150k /yr. You wont believe how many nurses drive BMWs and Mercedes.


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well nurses are pretty well off... they dont have the 200k+ debt, and got much shorter education. Their paycheck is also pretty high. I consider 150k to be pretty well off. Median household income is like 50-60k?
 
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well nurses are pretty well off... they dont have the 200k+ debt, and got much shorter education. Their paycheck is also pretty high. I consider 150k to be pretty well off. Median household income is like 50-60k?

I didn't say nurses were not well off or that 150k wasn't a very good income.

However, if you are spending 50% of your pre-tax annual income on a car (that serves the same purpose as something you could buy for 10%), that's probably unwise financially.

Almost everyone at my workplace drives a nicer can than me, and most make less than 1/5 of my income.


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I didn't say nurses were not well off or that 150k wasn't a very good income.

However, if you are spending 50% of your pre-tax annual income on a car (that serves the same purpose as something you could buy for 10%), that's probably unwise financially.

Almost everyone at my workplace drives a nicer can than me, and most make less than 1/5 of my income.


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they probably have a lot of money saved =) stocks have been skyrocketing in the last few years
 
I didn't say nurses were not well off or that 150k wasn't a very good income.

However, if you are spending 50% of your pre-tax annual income on a car (that serves the same purpose as something you could buy for 10%), that's probably unwise financially.

Almost everyone at my workplace drives a nicer can than me, and most make less than 1/5 of my income.

A lot of the OR staff have 2 jobs. Typically three 12hr shifts. They go and do 2 or 3 more shifts at another hospital.

Considering they have a pension and way better benefits than you, you are the lowest paid.
 
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A lot of the OR staff have 2 jobs. Typically three 12hr shifts. They go and do 2 or 3 more shifts at another hospital.

Considering they have a pension and way better benefits than you, you are the lowest paid.

Sure ;). I could buy a rolls royce wraith which would be using about the same reasoning financially but I have no plans to do so.


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Not that I am aware of, but I think that it is easier to write off part of a lease as opposed to part of an outright purchase. I think that is what the IRS mileage allowance is all about. Just not sure.

Why is there any discussion about writing off car expenses?

Unless your car expenses (for qualified business purposes) are astronomical, with the income that most anesthesiologists make, it is impossible to get any real deduction for our car costs/mileage. At least that is my tax situation. I plug in all my mileage and all my costs and then nope - you make too much money and dont qualify for a deduction because your auto expenses are less than X% of your salary. My understanding is that you can only deduct the amount over that x% of your salary, can someone explain how they are actually deducting?
 
A lot of the OR staff have 2 jobs. Typically three 12hr shifts. They go and do 2 or 3 more shifts at another hospital.

Considering they have a pension and way better benefits than you, you are the lowest paid.

A pension? Where on earth do OR staff get pensions these days?
 
I didn't say nurses were not well off or that 150k wasn't a very good income.

Almost everyone at my workplace drives a nicer can than me, and most make less than 1/5 of my income.


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You'll be smiling to yourself when you don't sweat an unexpected expense that stresses them out or being able to send your kid to any college that they/you want to go without them going into debt or go part time in your 50s. (provided you do a few other things right)
 
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The bigger subject should really focus on wealth vs income. This is why I hate it when elite "wealthy" liberals like George Soros and now to a certain extent Nancy Pelosi say we should raise taxes to help the poor.

Cause Nancy pelosi and George Soros "wealth" doesn't get touched while the "rich working class" get nailed with higher taxes on Earned income
 
That would be where I work and many other places.

Cept the overwhelming majority of the places where the staff gets a pension so do the physicians (think VA, academics, kaiser etc), so your logic doesn't hold.


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You'll be smiling to yourself when you don't sweat an unexpected expense that stresses them out or being able to send your kid to any college that they/you want to go without them going into debt or go part time in your 50s. (provided you do a few other things right)

Yeah thats what I think. If you drive a BMW 7 series that's fine, but don't complain to me that college is too expensive or you can't retire early enough. I drive a reliable but cheap car, but my kids college will be paid for in cash and my house will be paid off before they even get to college.


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Cept the overwhelming majority of the places where the staff gets a pension so do the physicians (think VA, academics, kaiser etc), so your logic doesn't hold.


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Except I don't get a pension.
 
Why is there any discussion about writing off car expenses?

Unless your car expenses (for qualified business purposes) are astronomical, with the income that most anesthesiologists make, it is impossible to get any real deduction for our car costs/mileage. At least that is my tax situation. I plug in all my mileage and all my costs and then nope - you make too much money and dont qualify for a deduction because your auto expenses are less than X% of your salary. My understanding is that you can only deduct the amount over that x% of your salary, can someone explain how they are actually deducting?
That's for W2 income. If you're an LLC, it's a different story as you're just writing it off through your "business".
 
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Cept the overwhelming majority of the places where the staff gets a pension so do the physicians (think VA, academics, kaiser etc), so your logic doesn't hold.


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Pensions aren't as great as they used to be. Much more employee contribution required.

Case in point. Pre Dec 31 2012. Federal employees contributed only 0.8% of their post tax income to their pension. After 20 years. U get roughly 20% of ur average of ur high 3 years pay.

So to make it easy for math calculations.
0.8% x $300k annual Va income equals $2400 annual contribution x 20 years equals $48k total contrition for a pension worth roughly $60k a year plus other benefits like health. Not bad.

But a new employee has to contribute almost 6x as much. So now same income has to contribute $13200 a year (4.4%) x 20 years for same exact $60k a year pension. $264k total contribution required over twenty years.

As u can see. The newly employees are almost essentially funding their own annuity over 20 years. Except the Feds are backing it up. I would have to collect on the benefits for at least 10 years to get better return than if I were to buy my own annuity privately. If I were to die. My spouse would get only 50% of the payout. Which means she would have to live for 20 years to get any better return than over a private annunity.

States pensions like California in the past were much more generous. Like workers got 50-60% of their top pay for retirement. They have multiplier of 2-2.5% vs the Feds at 1%

But the defined benefits days are getting worst and worst with govt.
 
The bigger subject should really focus on wealth vs income. This is why I hate it when elite "wealthy" liberals like George Soros and now to a certain extent Nancy Pelosi say we should raise taxes to help the poor.

Cause Nancy pelosi and George Soros "wealth" doesn't get touched while the "rich working class" get nailed with higher taxes on Earned income
What do you suggest, a federal property tax on net worth?
 
What do you suggest, a federal property tax on net worth?
Yes. If the elite liberals want to put their foot where their mouth is. They would suggest that. That's why the elite liberals are so scared of bernie sanders.

France has a wealth tax.

Any little tax revenue helps? Right. Of course many rich French citizens escaped the tax by going over to Monte Carlo to evade the wealth tax.

It's all a game.
 
What do you suggest, a federal property tax on net worth?

Easy- capital gains tax should never be higher than income tax rate. Lower income tax or raise capital gains rate.

When you have massive wealth its already easy to get more. We should not make it even easier.

I'm also against abolishing the estate tax entirely. By definition, you are only benefitting a few thousand ultra-rich families to raise it much more than 5-10 million.

I'm pretty conservative overall but I don't see why there's so much support for policies that will benefit physicians minimally but ultra-wealthy massively.


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What do you suggest, a federal property tax on net worth?
less govt spending, less taxes

Easy- capital gains tax should never be higher than income tax rate. Lower income tax or raise capital gains rate.

When you have massive wealth its already easy to get more. We should not make it even easier.

I'm also against abolishing the estate tax entirely. By definition, you are only benefitting a few thousand ultra-rich families to raise it much more than 5-10 million.

I'm pretty conservative overall but I don't see why there's so much support for policies that will benefit physicians minimally but ultra-wealthy massively.


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It's not very conservative to want to take people's stuff just because you think they have too much
 
France has a wealth tax.

Any little tax revenue helps? Right. Of course many rich French citizens escaped the tax by going over to Monte Carlo to evade the wealth tax.

It's all a game.
Getting a pad in Monaco for tax purposes is kind of expensive.
Lot's of French in Brussels though 1h15min by train from Paris, no wealth tax and no taxes on capital gains if the stock has been held more than 6 months ( i think the rule is new it used to be none)
 
Easy- capital gains tax should never be higher than income tax rate. Lower income tax or raise capital gains rate.
You mean lower, right?

Are you ok with all home sellers paying 35% tax on their capital gains?
 
You mean lower, right?

Are you ok with all home sellers paying 35% tax on their capital gains?

That's the way it used to be before Clinton 42 signed the housing bill in 1997. part of what lead to the housing crash was the change in laws that allowed homeowners to just keep the cash from any profit (if they lived there for 2 out of the 5 years) tax free up to $500k per couple/250k for single. And if u moved within that 24 month period. The profit was pro rated.

Before the 1997 tax law. U had to roll over the gains from the home in order to avoid capital gains on a home (primary homes)

Don't think for a second that law change didn't contribute to the housing boom and crash. It made a huge difference being able to "upgrade" a home. Keep the spare cash. Put very little down on the next home with hope of it appreciating as well.
 
You mean lower, right?

Are you ok with all home sellers paying 35% tax on their capital gains?

Yeah I meant lower. I'd rather they lower highest income tax to, say 20% and increase the capital gains to, say 25% but yes, I would be ok paying a higher rate on my house profit then my paycheck.


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