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  • New Member here: PartnerofPedsDoc

    Hello WC Investors!

    I’ve been a lurker on this site, as well as a few others about money management and retirement.  I’ve read the WCI book and now, I finally decided to post and participate in the conversation.  I’d like to tell you our situation and the plan we’ve created.

    We are very much the low income doctor in a high cost of living area.  My partner will be completing her residency in Peds and has accepted a contract starting in July! (Yay!)  We currently have no children, rent in California, debt of $450k, base of $150k + side income (moonlighting; my income of $20k) and emergency savings of $40k.  We are attempting to continue to live like a resident.

    Our $450k debt is a mixture of credit cards, personal ($25k) and student debt ($425k).  For the student loans that qualify, we will be doing public service loan forgiveness.  For the rest of the student loans that don’t qualify, we will refinance in July.  After we do that, we still start to do the following

    1. We our employers do not offer a company match/ retirement account/401k/403b/etc so we will start off by paying off high interest debts.

    2. Max contribution HSA if we get a high-deductible health plan.

    3. Max contribution to Roth/Backdoor Roth

    4. Pay medium interest debts unless in loan forgiveness

    5. Save up for a house down payment

    6. Invest in taxable account in risky investments

    7. Pay of low interest debts unless in loan forgiveness

    8. Invest in taxable accounts in low risk investments

    9. Ball out

    I two questions.

    Since we do not have a company retirement plan/ match through our employer, we are not putting away 18k per person each year.  Typically, putting money into this account would occur before maxing out an HAS/Backdoor Roth.  Should we still put away this $18k per person per year, even though we wouldn’t get a tax break, before we pay off medium interest debts/save up for a down payment for a house, or should we wait until step 6?  If we wait to pay off our debt, it may be 8 years before we start to invest in bigger sums (10k+ per person) of money into retirement accounts.

    Rent cost ~$2500 per month.  We are thinking of purchasing a duplex with a doctor’s loan if the price/agreement is right.  We will live in one place, rent out the other place.  As long as our rent does not increase significantly and we have an emergency fund to cover if the other place does not get rented, this seems like a great idea considering how much rent.  Roughly speaking, rent over 3 years would be 90k, plus we would still have to save money for a down payment.  Trying to save money while paying that rent does not make sense to me.  What do you think of this idea?

    I’d love your feedback.  Thanks in advance!

  • #2
    Well you are facing a lot of debt.  Pay off the credit cards ASAP.  Is the income w2 or 1099?  Why does your employer not have some type of retirement plan?  I would rent in your situation and payoff more loans rather than saving for a down payment.


    • #3
      Definitely prioritize paying off the credit cards and personal debt.  There's no way you're likely to consistently earn 16-30% returns in the market, yet you likely are paying 16-30% interest on the credit cards.  Pay off the balance in full each month.  Stop using the cards if you cannot pay off the balance in full each month.

      Public service loan forgiveness very well may be the way to go.  However, there's no guarantee that PSLF will still be around, much less in its current form, ten years from now.  I'd save enough in a taxable account to pay off the loans in ten years if PSLF goes away.

      Any reason to stay in California?  You don't have kids or a house yet.  Once you do have a house and school & care arrangements for the kids it can become more difficult to move.

      Geographic arbitrage for your partner and increasing income for you look like the best way to kill off that substantial debt.  Are you in school?  Do you anticipate a significantly higher income in the near future from your current work?

      If you aren't responsible for providing child care or looking after an ill or aged family member, there are a lot of things you could do that would pay more than $20K per year.  Truckers can make decent money, but they're away from a home a lot and I'd expect autonomous vehicles to take over a lot of those jobs in the next decade or so.  Skilled trades like plumbing and electricians are hard to outsource to China or India.  They also can make over $80K per year.  You could be your own boss, employ other people, and may find that much of the work is paid in cash.  Heck, based on the latest military pay tables, an E-2 enlistee makes $21,500 per year plus tax free housing and food allowances.

      It looks like there are a lot of things that the two of you could do together to slay this debt dragon in the next five to ten years.  Even if you have to live in a place that isn't your first choice or do work that isn't your long term dream job, it might make a lot of sense to get yourselves free from this substantial debt early and then focus on living where you want and pursuing your dream jobs in 5-10 years.


      • #4
        I would try to find a better paying job. My nanny is being paid $15/hour, 40 hour a week for a total of her take home of $31,000 (It costs me more than $31,000 because of paying my share of taxes).  This is in a low COL area, friends of mine in San Francisco were paying the nanny $50,000/year. Being a nanny is not necessarily a glamorous profession but people like me are willing to spend money on it.

        For you, being married/partnered to a pediatrician that would probably even bump your employability and possibly you could make more.  If you have a college degree that also adds to ability to negotiate for more income. My nanny has a four year degree in the liberal arts.  Furthermore if you found a physician who has a crazy call schedule and were willing to do odd hours for babysitting/nanny you could make even more in a high COL area.  If you are willing to clean the home and offer to do that they will also likely increase the salary.

        With your partner being a pediatrician she might even know of people looking for childcare.



        • #5
          That is a lot of debt.  I would consider moving to an area for max income for a little while to get rid of that and get your net worth into the positive.  I would prioritize as follows:

          1. Look for a different job elsewhere.  Rent cheaply and live like a resident (more than you have been).

          2. Seek to increase your income from the $20k you're at now.

          3. Pay off the personal/credit card debt ASAP - like eat Raman Noodles starting tonight

          4. Refinance the student loans as soon as you are able

          5. Pay off debt quickly, but this will depend on how you refinance and if you're in a loan forgiveness program.  As a sidenote to this, consider joining the Indian Health Service, military, or serving in an underserved/rural area to get your spouse's loans paid off.

          6. Your investment plan should take into consideration #1 and #5, and I would do asset allocation as one step, not as different priorities (don't invest in stocks first then something else then bonds - do your stock/bond asset allocation at the same time).



          • #6
            Your partner is close enough to graduation to raid the emergency fund and pay off the cc debt. You're probably stuck for now in HCOL CA if that's where your SO has a contract. I've seen many people do well with a duplex arrangement, but the thought of taking on more debt is frightening. Rent for at least another year until you can sort out your situation and your SO can better determine if this is the job for her.

            That's quite the debt load for Peds, but I couldn't find how much qualifies for PSLF. Maybe it will work to her advantage with a $150k/year salary. Look for IC from moonlighting and set up a SOLO-k. I'd probably recommend at least part to Roth at her tax bracket.

            What is Ball Out?
            My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
            Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients


            • #7

              What is Ball Out?
              Click to expand...




              • #8
                I thought I posted in this thread but it seems to have floated off in cyberspace. 


                • #9
                  You are potentially in trouble!  Strongly consider PSLF or other loan forgiveness or repayment.  Strongly consider increasing your income above $20k.  Strongly considering moving out of CA (ok I know you won't haha).

                  Also you did not post the interest rates on your loans making the first question difficult to answer.


                  • #10
                    Hey, you are posting here, and clearly thinking about things, so good work on that.

                    Get a plan and do it, and start attacking the debt, and the next chapter of life.



                    • #11

                      I thought I posted in this thread but it seems to have floated off in cyberspace. ?
                      Click to expand...

                      Yeah, definitely have seen some posts drop off.


                      • #12
                        Mine did, too. I even had a usual "I just threw up in my mouth a little bit" moment. Oh well.

                        With that small income, California taxes and cost of living, and that mountain of debt, I don't see you getting to #6-9. Why can you only earn $20,000/yr? Are you completely certain there is literally zero employer retirement account, or just no matching? Anything you make can go into an individual 401(k) if you're self-employed. She can also moonlight and do the same.

                        Imo you need to earn more, be taxed less, and spend less on living. Fortunately, you seem both reasonable and determined, so you'll probably do just fine. :-)


                        • #13
                          Yes my posts are not posting and like button is not working from my IPAD.  My laptop is working ok.


                          • #14
                            Like button seems to be working. Are your posts from TODAY not working, or you just lost something you posted on Sunday or Monday?
                            Helping those who wear the white coat get a fair shake on Wall Street since 2011


                            • #15
                              Testing. Like is working. I will see if the post posts