Why is the general consensus don't buy a car straight out of residency?

[scoopdaboop]

For example. I'll have ~ 200k debt if I pay some interest during residency. A decent income of 375k is around 240k post tax. 20k a month. A 3 year loan pay off amounts to ~5600. so ~14k left over. 20 percent into savings minimum leads to 10k left over. ~5-6k for all bills. That's 4k left over. So 2500 a month for a car on a 3 year loan means you can get a car approx 90k worth (bit less), straight out of residency, assuming no down payment.... Am I missing something here?

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[lobelsteve]

If you are getting a 90k car to start, where does it go from there?
Bentley? Ferrari?

If you are a car guy, get a car./ Treat yourself. Parks and rec style.

 

[Propofool123]

Because it’s a depreciating asset and your spending habits/lifestyle choices in the first few years of attendinghood likely dictate your future lifestyle expectation and it can be a slippery slope.

That said - life is short. If you want a car, you’ve worked hard enough to enjoy it. Get the car.

 

[Peterluger]

Why a 90k? U can get a really nice bmw or mercedes for 40k less

 

[Laryngospasm]

Being a car guy myself I will give my opinion. Get it while you are young and enthusiastic and enjoy taking care of it. But I’m a yolo kind of guy so take that for what it’s worth. I now find the expensive cars a hassle with little kids and work all the time.

 

[Doctodd]

depends on where you live and what car. Almost all cars depreciate....some less than others. I drive a diesel truck and it holds it's value pretty well. Try to buy one for cash.

 

[scoopdaboop]

Ahh, so it's not a financial problem; well atleast in the specific case I mentioned, but more of a "don't go down a slippery slope" problem.

Why a 90k? U can get a really nice bmw or mercedes for 40k less

Well yea, you could, but everyone has that. Not a lot of people have a decent Porsche etc.

 

[SommeRiver]

Why do you need a 90k car as soon as you graduate? Why not pay your loan and live like a resident for a few yrs, start your nest egg, then buy the super expensive ridiculous car?

You buy that car straight out of the gate and your spending habits will forever follow suit.

 

[scoopdaboop]

Why do you need a 90k car as soon as you graduate? Why not pay your loan and live like a resident for a few yrs, start your nest egg, then buy the super expensive ridiculous car?

You buy that car straight out of the gate and your spending habits will forever follow suit.

Becuase, idk what type of program, I would want to do yet. If I do EM, i will likely do what you mention. If some 6 + year residency, i wanna splurge.

 

[Doctodd]

just dont let anyone see it, for you will be judged, especially as the foolish young dr who doesnt know how to manage his money while $200K in debt

 

[deleted131481]

Keep in mind car loan costs, increased repairs, and increased insurance you're looking at 2-5k more per year.

If the car really makes you that happy, go for it.

I'm not a car guy - I'd rather spend 20k on a car, go on 4 nice vacations for 5k each, and invest the other 50k over 20 years and be financially independent one year sooner (or take an extra few months of vacation).

 

[scoopdaboop]

Keep in mind car loan costs, increased repairs, and increased insurance you're looking at 2-5k more per year.

If the car really makes you that happy, go for it.

I'm not a car guy - I'd rather spend 20k on a car, go on 4 nice vacations for 5k each, and invest the other 50k over 20 years and be financially independent one year sooner (or take an extra few months of vacation).

Good point. I didn’t think about repairs other things you can do with money. I now have to make 500k atleast to live the affluent lifestyle

 

[SommeRiver]

Good point. I didn’t think about repairs other things you can do with money. I now have to make 500k atleast to live the affluent lifestyle

Dude...WTF are you talkin about?

Don't be the first yr attending driving the absurd car when everyone around you knows you're underwater in debt.

Are you a med student?

 

[scoopdaboop]

Dude...WTF are you talkin about?

Don't be the first yr attending driving the absurd car when everyone around you knows you're underwater in debt.

Are you a med student?

No not to drive to work. Like to go eat out or somewhere. I have a decent car I can drive well into 2030

 

[thiswonthurtabit]

I think you may benefit from reading...pretty much anything about personal finance. White coat investor would be a decent place to start if only for the advice to "live like a resident for 3-5 years out of residency" If you do that the rest of your financial life will be pretty smooth barring 'wanting to live a 500k/year affluent lifestyle" whatever that means.

 

[SommeRiver]

I think you may benefit from reading...pretty much anything about personal finance. White coat investor would be a decent place to start if only for the advice to "live like a resident for 3-5 years out of residency" If you do that the rest of your financial life will be pretty smooth barring 'wanting to live a 500k/year affluent lifestyle" whatever that means.

A first year attending with a 90k car at home that he/she doesn't drive is a comedy bit written by a financial advisor with a sense of humor.

 

[lobelsteve]

Your money, your choice.
I had a 78 CJ7 in med school.
Bought a 2000 Altima in 2000 for graduation present to myself.
2003 I upgraded to a WRX, 2004 STI, 2007 STI. Had to get a Kia Forte coupe because the STI was in the shop so much. Ditched both for an Optima and a Nissan GTR in 2011. 2013 Jeep JK. 2020 Jeep Gladiator. And a few motorcycles along the way as well as the Superlite GT-R race car and a spec miata racer.

I spend weekends in the garage. What we do in the office defines us as physicians, what we do outside the office defines as as people. Make yourself happy. Don't work for retirement. "I'd rather die while I am living than live when I'm dead."

 

[scoopdaboop]

Ok even in my scenario, I don't see why a car is such a bad purchase. Yes, it's 2500 a month you can save with, but i'm already saving 4000, and I have 1500 left over? So what do people actually do with all their money? Just sit on it until their kids take over?

 

[DoYouEvenLiftBro]

This was a different post the OP had yesterday.........

“Hey, i'm 24. Will start residency at 27 for whatever specialty. I have no particular drawing or interest in any one specialty. My question is, what is the best specialty to make boatloads by the time I'm mid- late 40s, so I can retire by early 50s, then work part time as I see fit.”

 

[SommeRiver]

Ok even in my scenario, I don't see why a car is such a bad purchase. Yes, it's 2500 a month you can save with, but i'm already saving 4000, and I have 1500 left over? So what do people actually do with all their money? Just sit on it until their kids take over?

Please read Financial Boot Camp by James Dahle, MD.

 

[scoopdaboop]

Please read Financial Boot Camp by James Dahle, MD.

? saving money isn't this secret that only this guy knows about.

 

[SommeRiver]

? saving money isn't this secret that only this guy knows about.

Later bro...

 

[Doctodd]

Get a new Mustang GT or something....lots of fun for cheaper. 70-90k cars cost 4x as much to repair and 2x as much to insure.

 

[DOctorJay]

Scoop

Here’s your reading assignment for the weekend.

1. https://www.etf.com/docs/IfYouCan.pdf

2. Stock Series | jlcollinsnh

This is essentially the entire book The Simple Path to Wealth

Just rent a high end car a couple times a year on Turo to get your fix until you’ve paid off your loans at least.

 

[Agast]

Well yea, you could, but everyone has that. Not a lot of people have a decent Porsche etc.

How much for an indecent Porsche?

Save your cash so you can use it to buy into ancillaries/ASC shares/investments things that immediately increase your earning potential. If you’re over-leveraged it will be harder for you to get those things and you’re usually eligible after 2-3 years.

 

[painfree23]

For example. I'll have ~ 200k debt if I pay some interest during residency. A decent income of 375k is around 240k post tax. 20k a month. A 3 year loan pay off amounts to ~5600. so ~14k left over. 20 percent into savings minimum leads to 10k left over. ~5-6k for all bills. That's 4k left over. So 2500 a month for a car on a 3 year loan means you can get a car approx 90k worth (bit less), straight out of residency, assuming no down payment.... Am I missing something here?

Where u getting 375k starting out of residency?

Also is “savings” the same thing as retirement? You don’t want a emergency cash fund? What about saving for a down payment for a home?

 

[Ronin1]

Why wait til you get out? I bought one my last year of residency by picking up a moonlighting shift once a month to cover the payment. It was only a corvette though but it was Miami in the 90s

 

[Mad Jack]

Going to be a lot harder to enjoy a nice car as you age, buy it now

 

[drusso]

For example. I'll have ~ 200k debt if I pay some interest during residency. A decent income of 375k is around 240k post tax. 20k a month. A 3 year loan pay off amounts to ~5600. so ~14k left over. 20 percent into savings minimum leads to 10k left over. ~5-6k for all bills. That's 4k left over. So 2500 a month for a car on a 3 year loan means you can get a car approx 90k worth (bit less), straight out of residency, assuming no down payment.... Am I missing something here?

FIRE!

FIRE movement - Wikipedia

en.wikipedia.org

 

[Ferrismonk]

I still drive a 2011 Fiesta several years after fellowship. I get tons of compliments on it because it's lime green. Don't waste your money on something that will lose tons of value if you still have debt.

And you should be aware that getting $375K right out of training is NOT the norm.

 

[scoopdaboop]

I still drive a 2011 Fiesta several years after fellowship. I get tons of compliments on it because it's lime green. Don't waste your money on something that will lose tons of value if you still have debt.

And you should be aware that getting $375K right out of training is NOT the norm.

Why is it not the norm if you do something other than say FM/Peds/ID. Can't a radiologist/even pain med/ anesthesiologist sign on for a contract that will put them in 400k range? Then after partnership in some specialties > 600k?

 

[Baron Samedi]

The doctors I know with that kind of lifestyle are still grinding in their later years-- not because they want to but because they have to.

Different people find happiness in different ways. For me, financial freedom and having the future ability to work as much or as little as I desire gives me happiness. If you're okay having a cloud of debt hanging overhead and find happiness in buying an expensive car, go for it. Its your money, do what you want with it.

 

[Dave1980]

if you want a 90k car you earned it and can afford it.

 

[lobelsteve]

So if a young doc wants a nice car now, he is irresponsible and forever doomed.

Got it.



Fully disagree.

 

[Dave1980]

So if a young doc wants a nice car now, he is irresponsible and forever doomed.

Got it.


Fully disagree.

I'm with you. I can't stand the "live like a resident for a few years and pay off all your debt". Sorry but we're all going to have more than enough money to pay off debt, go on vacations, live in a nice house, drive a nice car (if that's your thing), and retire nicely.

 

[hyperalgesia]

Ok even in my scenario, I don't see why a car is such a bad purchase. Yes, it's 2500 a month you can save with, but i'm already saving 4000, and I have 1500 left over? So what do people actually do with all their money? Just sit on it until their kids take over?

I would wait til you have a PROVEN INCOME before I take on debt for frivolous things. If you can't pay off the debt with your CURRENT INCOME, I would never do it.

I've known people who did this and things happened and things changed and they were left, holding onto a ridiculous purchase, and struggling to pay it off. Few sights are more pathetic.

 

[Status Sciaticus]

Dude...WTF are you talkin about?

Don't be the first yr attending driving the absurd car when everyone around you knows you're underwater in debt.

Are you a med student?

What is he/she has no loans?

OP, get whatever makes you happy.
Most of what I read here just boils down to living frugally? for what? kids? F$$k that. Youre not guaranteed old age or kids.
The only thing to consider is that the cost of your hobby will not take away from your ability to pay your bills/mortgage.

 

[Bostonspine]

Sounds like your still in training if a Porsche is you dream car then at least hold off on the Multi-million dollar home. Upside you can drive you Porsche to job number 2 if things don’t workout... make sure have a emergency fund prior to buying the Porsche...

 

[Ligament]

I have some wealthy patients who can no longer get in and out of their expensive sportscars. They waited a long time to build wealth and but cannot enjoy some of the things they can buy with it. That said; a car is a depreciating asset, only spend money on it if you understand that and get happiness out of it. Also, don't bank on having enough money to retire. Incomes going down every year for 30 years now. Its no longer a sure bet and has not been for a while.

 

[SommeRiver]

What is he/she has no loans?

OP, get whatever makes you happy.
Most of what I read here just boils down to living frugally? for what? kids? F$$k that. Youre not guaranteed old age or kids.
The only thing to consider is that the cost of your hobby will not take away from your ability to pay your bills/mortgage.

He has loans genius...No debt, buy whatever TF you want.

If you are underwater with student loans, you have a negative net worth.

Doesn't matter what your income is until you're out of debt other than your home (non depreciating item).

Add 90k to your student loan debt of 200k, and you're at 290k BEFORE you buy a house. That 90k car will cost far more than 90k at the end of the day, and your student loan will cost far more than 200k at the end of the day.

I'm sure you're going to take out a physician home loan (just a hunch) of around 650-750k (whatever the max is of course), and then you'll be in the hole nearly a million dollars.

A financial advisor would laugh in your face if you told them all this BS.

Doctors are the most financially illiterate people in America. Real estate agents and financial advisors all have tons of hilarious stories about physicians losing money and don't get me started on physicians who try to start separate small businesses or invest in commercial real estate.

 

[Ferrismonk]

You can get whatever tf you want, but just don't count your chicks before they're hatched. Pay off your debt first then get the toys, or don't, your decision. But if you don't, you're making clear where your priorities lie.

I'm a fellowship trained anesthesiologist and don't make 400K. Sure I could, but that's not the norm right out of training. Once you have partnership, ASC shares, other investments, etc, sure you can make tons, but that's not a salary. You can also make tons by getting a sweet deal or working your butt off, but that's not usually right out of training either. Also realize that your income will go down for the same amount of work over time.

I can also tell you that every new grad who shows up in the doctors parking lot with a >80K sports car gets laughed at in the doctors lounge. They'll all know you're irresponsible and a showboat.

 

[DOctorJay]

I had a nice response written and then it disappeared.

You can wander into debt but can’t wander out.

Just save 20% of your gross salary in 401k/403b, 457 if it’s a safe option for you, backdoor Roth IRA, and taxable account. Then literally spend the rest on whatever you want and don’t go into more crazy debt. You’ll likely be able to retire very comfortably in 20 years.

Great article on WAR here:

Saving Money. How Much is Enough? The 30% Rule - The Physician Philosopher

What percentage of your annual income should you be putting towards your financial goals each year? If you haven't answered this question, you probably should. The 30% Rule can help guide you.

thephysicianphilosopher.com

 

[hyperalgesia]

For me, the MINIMUM requirement would be you are CURRENTLY earning enough to survive with ALL loan payments and living expenses. Without that, just based on some hopeful future salary, you are likely to become a statistic.

 

[lobelsteve]

For me, the MINIMUM requirement would be you are CURRENTLY earning enough to survive with ALL loan payments and living expenses. Without that, just based on some hopeful future salary, you are likely to become a statistic.

Not enough. Plan must include ability to pay current expenses, over pay on loans, and possibly pay down mortgage. Then you have the money for the hobbies.

Mortgage at 3% is a bad idea to pay off early due to opportunity cost of investing money elsewhere. But some of us (me) are too risk averse and the psychology of being with a debt is disproportionately weighing on our psyche. So if i am not on track to pay me 30 yr mortgage in 10 years, I have to pull back on hobbies. I moved to a new house a year ago and have it 40% paid off.

 

[hyperalgesia]

Not enough. Plan must include ability to pay current expenses, over pay on loans, and possibly pay down mortgage. Then you have the money for the hobbies.

Mortgage at 3% is a bad idea to pay off early due to opportunity cost of investing money elsewhere. But some of us (me) are too risk averse and the psychology of being with a debt is disproportionately weighing on our psyche. So if i am not on track to pay me 30 yr mortgage in 10 years, I have to pull back on hobbies. I moved to a new house a year ago and have it 40% paid off.

I'm with you. I can't even get the nerve to take out a mortgage. As soon as I hear the voice of a banker on the phone I get instant cold feet. I'm thinking about buying a cheap condo with cash.

 

[DokterMom]

Get a used Porsche for $30-50K. They're not hard to find and every bit as much fun to drive. The bit about new cars depreciating quickly is no joke.

 

[Status Sciaticus]

He has loans genius...No debt, buy whatever TF you want.

If you are underwater with student loans, you have a negative net worth.

Doesn't matter what your income is until you're out of debt other than your home (non depreciating item).

Add 90k to your student loan debt of 200k, and you're at 290k BEFORE you buy a house. That 90k car will cost far more than 90k at the end of the day, and your student loan will cost far more than 200k at the end of the day.

I'm sure you're going to take out a physician home loan (just a hunch) of around 650-750k (whatever the max is of course), and then you'll be in the hole nearly a million dollars.

A financial advisor would laugh in your face if you told them all this BS.

Doctors are the most financially illiterate people in America. Real estate agents and financial advisors all have tons of hilarious stories about physicians losing money and don't get me started on physicians who try to start separate small businesses or invest in commercial real estate.

Well I have no loans left so guess im not net negative.
Nah not going to get a physician loan.

 

[NITRAS]

Why is it not the norm if you do something other than say FM/Peds/ID. Can't a radiologist/even pain med/ anesthesiologist sign on for a contract that will put them in 400k range? Then after partnership in some specialties > 600k?

Pretty much most jobs will have a build up of income. Production takes a little while, and billing properly and efficient work takes a bit coming from residency. As an example my income went up 50% in the first 3 years. It took time for quality metrics, and revenue goals to be hit.

Moving jobs is expensive, and you should expect to cost you $$ when you do.

I'm with you. I can't stand the "live like a resident for a few years and pay off all your debt". Sorry but we're all going to have more than enough money to pay off debt, go on vacations, live in a nice house, drive a nice car (if that's your thing), and retire nicely.

Student loans that are very large can be stretched out to decades if they are not focused on. The OP's budget is pretty simplistic. A person who buys a $90k car will have monthly bills way more than $6-7k/month. My bills are $6k-$7k/month. . . and I have a fairly conservative house and no other payments.

I'm still driving the same 2012 Nissan Frontier that I bought in residency. (I shouldn't have bought new then, but I'll you live and learn). My wife got a Subaru Impreza. The whole nice car thing doesn't appeal to me. I have plenty of friends that have nice cars.

 

[SommeRiver]

Well I have no loans left so guess im not net negative.
Nah not going to get a physician loan.

Net worth = Assets - Debt

Student loans are one debt, mortgage is another, cars, home repair loans (finishing that 2000 SF basement is gonna be 40k), practice loans, etc.

Not having student loan debt merely erases one debt, which by itself may not push you into the positive.

Besides, I wasn't speaking about you in the first place. I quoted you, replied to you, and then I directed my post at the OP, hence the very specific numbers I used. Ex - The 200k and 90k...

A brand new car as a 1st yr attending for 90k! Hahaha...A caricature IMO.

 

[Status Sciaticus]

Net worth = Assets - Debt

Student loans are one debt, mortgage is another, cars, home repair loans (finishing that 2000 SF basement is gonna be 40k), practice loans, etc.

Not having student loan debt merely erases one debt, which by itself may not push you into the positive.

Besides, I wasn't speaking about you in the first place. I quoted you, replied to you, and then I directed my post at the OP, hence the very specific numbers I used. Ex - The 200k and 90k...

A brand new car as a 1st yr attending for 90k! Hahaha...A caricature IMO.

Lmaoo if you want to live with the 'live like a pauper' mentality, go for it.