Critique my Intern Year Finances

[dgu334]

As the final days of my PGY1 year close out, I've been reflecting on my first year with an employed salary.  During the 4th year of medical school, I've read WCI book over 3 times, browsed many financial forums online, and probably studied harder about personal finance/taxes/etc than I did for step 2.

As the medical financial gurus some of you are, can you please offer some insights into what I am doing right and what I can improve on?  For some background, I am a 26 year old single male, about to start PGY2 in internal medicine next week, 100% planning to go into heme/onc, principal loan amount at start of residency of just under 160k, now at a little over 170k total (including interest) but pursuing PSLF.  No car loans, no credit card debt.

Here is a list of the financial decision I've made this year:

1. Maxed Roth IRA for 2018 and Roth IRA for 2019 (did this on Jan 1) for a total of $11,500 contribution the past 2 years.  My total Roth IRA balance right now sits at about $25k as I previously contributed towards this ever since college when I worked summer gigs.

2. Decided to pick individual tech stocks to invest my IRA money into.  I know this was a rather aggressive/stupid decision but it is what it is.

3. Thought about but did not contribute towards HSA; the thought of having to wait till age >60 for my money back just didn't sit well with me

4. Thought about but did not contribute towards employer 401k (my hospital does not match); similar reason as above

5. Instead, put $10,000 in an individual taxable account and picked some individual tech stocks here as well.

6. My loans (a little over $170k total right now including interest) are at 5.6% interest rate with fedloans and I've on track for the PSLF program (saved paper copies of this year and last year's ECF forms, fedloans confirmed by $0 payments this year, and my next year's monthly payments are only $53)

7. Opened a ton of $0 annual fee credit cards last year and this year (total of 10 cards now) mainly to beef up my credit score for the future as my utilization ratio is now consistently <2% and the small signup bonuses are cherry on top.  I do not plan on opening any more cards at least for another 5 years.   Current credit score is in the high 700s.

8. Currently renting a studio apartment by myself.  I have the option of moving to my parent's house/live in their basement now that my schedule for PGY2 will be less hectic.  It would add 30 minutes to my current commute time of walking across the street to the hospital (30 seconds) and my hospital covers parking and I have a car.  This would save me at least  $1500/month.

One of the main things that I would like to work on this coming year is budgeting for food and other expenses.  There would be some months where I spend a ton of money but other months where I spend very little.  I don't go on fancy vacations or eat expensive foods.  I would like to work on getting a plan down so I can have my food/entertainment expenses kept at a relatively fixed range.

Thoughts?

[Peds]

dgu334 wrote:

can you please offer some insights into what I am doing right and what I can improve on?

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dgu334 wrote:

Decided to pick individual tech stocks to invest my IRA money into.

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not that.

dgu334 wrote:

Thought about but did not contribute towards HSA;

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thats fine

dgu334 wrote:

Thought about but did not contribute towards employer 401k

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thats fine

dgu334 wrote:

Instead, put $10,000 in an individual taxable account and picked some individual tech stocks here as well.

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never mind. the previous 2 choices were better.

dgu334 wrote:

My loans (a little over $170k total right now including interest) are at 5.6% interest rate with fedloans and I’ve on track for the PSLF program

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thats fine. depends where you stand after fellowship and what kind of job you get.

dgu334 wrote:

Opened a ton of $0 annual fee credit cards last year and this year (total of 10 cards now) mainly to beef up my credit score

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dgu334 wrote:

Current credit score is in the high 700s.

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not necessary. my credit score is better, with 2 cards, that i last opened >10 years ago.

now if you are mile churning then fine.

dgu334 wrote:

8. Currently renting a studio apartment by myself.  I have the option of moving to my parent’s house/live in their basement now that my schedule for PGY2 will be less hectic.  It would add 30 minutes to my current commute time of walking across the street to the hospital (30 seconds) and my hospital covers parking and I have a car.

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personal choice. not so much financial.

dgu334 wrote:

Thoughts?

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maxing out the rIRA is the minimum for residents, so good job. next step is making it to 20% of income which is tough but seems like you are there.

you dont get rich by what do you in residency. drop the stock picking and get back to medicine.

[Panscan]

Why are you doing taxable when you have 401k available? Even with no match you should do 401k. You should do hsa. You're not going to wait till 60. You will have Healthcare expenses before that. Pay for them with pretax money.

I also don't understand why you're loans went from 160k to 170k in 1 year. Aren't you in repaye? The subsidy should be covering half the interest if your payment is 0 or near 0, so you should have added like 5k total in interest as your effective interest rate is basically halved.

Drop the individual stocks. Otherwise doing well.

I'd probably rather spend 1500/mo, live across the street my myself than live with my parents. Ymmv. You are doing well enough financially where I don't think you need the money but obviously almost 20k is a lot of money.

[hightower]

dgu334 wrote:

As the final days of my PGY1 year close out, I’ve been reflecting on my first year with an employed salary.  During the 4th year of medical school, I’ve read WCI book over 3 times, browsed many financial forums online, and probably studied harder about personal finance/taxes/etc than I did for step 2.

As the medical financial gurus some of you are, can you please offer some insights into what I am doing right and what I can improve on?  For some background, I am a 26 year old single male, about to start PGY2 in internal medicine next week, 100% planning to go into heme/onc, principal loan amount at start of residency of just under 160k, now at a little over 170k total (including interest) but pursuing PSLF.  No car loans, no credit card debt.

Here is a list of the financial decision I’ve made this year:

1. Maxed Roth IRA for 2018 and Roth IRA for 2019 (did this on Jan 1) for a total of $11,500 contribution the past 2 years.  My total Roth IRA balance right now sits at about $25k as I previously contributed towards this ever since college when I worked summer gigs.

2. Decided to pick individual tech stocks to invest my IRA money into.  I know this was a rather aggressive/stupid decision but it is what it is.

3. Thought about but did not contribute towards HSA; the thought of having to wait till age >60 for my money back just didn’t sit well with me

4. Thought about but did not contribute towards employer 401k (my hospital does not match); similar reason as above

5. Instead, put $10,000 in an individual taxable account and picked some individual tech stocks here as well.

6. My loans (a little over $170k total right now including interest) are at 5.6% interest rate with fedloans and I’ve on track for the PSLF program (saved paper copies of this year and last year’s ECF forms, fedloans confirmed by $0 payments this year, and my next year’s monthly payments are only $53)

7. Opened a ton of $0 annual fee credit cards last year and this year (total of 10 cards now) mainly to beef up my credit score for the future as my utilization ratio is now consistently <2% and the small signup bonuses are cherry on top.  I do not plan on opening any more cards at least for another 5 years.   Current credit score is in the high 700s.

8. Currently renting a studio apartment by myself.  I have the option of moving to my parent’s house/live in their basement now that my schedule for PGY2 will be less hectic.  It would add 30 minutes to my current commute time of walking across the street to the hospital (30 seconds) and my hospital covers parking and I have a car.  This would save me at least  $1500/month.

One of the main things that I would like to work on this coming year is budgeting for food and other expenses.  There would be some months where I spend a ton of money but other months where I spend very little.  I don’t go on fancy vacations or eat expensive foods.  I would like to work on getting a plan down so I can have my food/entertainment expenses kept at a relatively fixed range.

Thoughts?

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1. Great job! I wish I had contributed to a Roth during my college/med school years

2. Now would actually be a good time to rebalance to index funds if you're interested in going that route

3. HSA's don't require that you wait til you're 60 to use them.  You can use them immediately for any medical expense.  I actually highly recommend you contribute to one if you have it available to you. They are triple tax advantaged.  They reduce your taxable income immediately, they can grow tax free, and as long as you use the funds for medical expenses, the funds are NEVER taxed.  With the ever rising costs of medical care in this country even WITH insurance, an HSA is a must IMO if you're young and healthy and can afford to contribute to one.

4. If no match, 401k dollars are not particularly important to you at this stage.  When you're an attending making big bucks, they are important, even without a match because they reduce your taxable income

5. I would prepare to move funds out of the IRA before you start work as an attending.  If you want to be able to contribute to a backdoor Roth IRA in the future, you can't have any dollars already sitting in an IRA

6. Best of luck with PSLF, so far a 1% acceptance rate.  Have a back up plan.

7. That's fine I guess

8. Yes, rent until your loans are paid off and you're certain you like your new job as an attending.  If you can live with parents for free (and actually put up with it), then yeah, save that money!

Look into learning to cook for yourself on your days off (if you get any).  Freeze/refrigerate leftovers for the week.  That can save you a lot of money on food and it's fun (at least I really enjoy it).

[Kamban]

dgu334 wrote:

6. My loans (a little over $170k total right now including interest) are at 5.6% interest rate with fedloans and I’ve on track for the PSLF program (saved paper copies of this year and last year’s ECF forms, fedloans confirmed by $0 payments this year, and my next year’s monthly payments are only $53)

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If you are going into hem/onc and unless you plan to be in academics, you will go into practice in the community, either with a PP group or a hospital employed group. The income for such physicians are in the 400K range. I  doubt if you will save much with PSLF. And be prepared that PSLF might not pan out and have a back up plan for paying off the loans.

[JBME]

you're doing pretty good considering your age. Your Roth contributions are great.

As others have said, stop with the stock picking and stop investing in a taxable account. Instead you should use your HSA and 401k. If your 401k has a Roth 401k option, use that instead. It gives you more roth money and this pot is separate from your Roth IRA.

As for stopping the stock picking and finding out what you should do instead, this should really help you:

https://www.whitecoatinvestor.com/150-portfolios-better-than-yours/

[Faithful Steward]

dgu334 wrote:

2. Decided to pick individual tech stocks to invest my IRA money into.  I know this was a rather aggressive/stupid decision but it is what it is.

5. Instead, put $10,000 in an individual taxable account and picked some individual tech stocks here as well.

5. Instead, put $10,000 in an individual taxable account and picked some individual tech stocks here as well.Click to expand...

This is my biggest issue. You have a portfolio that is not diversified, at all. As a physician, you don't have to hit a lot of home runs in your portfolio, all you have to do is not make any monumental mistakes. Individual tech stocks as your entire investment strategy could be a monumental mistake.

dgu334 wrote:

3. Thought about but did not contribute towards HSA; the thought of having to wait till age >60 for my money back just didn’t sit well with me

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Your thinking is a little short-sighted. If cash flow is not an issue, I'd fully fund the HSA.

dgu334 wrote:

4. Thought about but did not contribute towards employer 401k (my hospital does not match); similar reason as above

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Not funding your 401(k) in favor of funding a taxable brokerage account is sub-optimal. I'll leave it at that. I can't help but wonder if the inability to plow all your 401(k) contributions into individual tech stocks didn't factor into this decision.

 

Overall, you're doing okay. But, I think you need to gain a better understanding of tax-efficient investing and diversification. If I were grading you I'd give you a C+. If you were to get a well-diversified portfolio and utilize your 401(k) instead of a taxable brokerage account, that grade would change to an A.

[ENT Doc]

dgu334 wrote:

2. Decided to pick individual tech stocks to invest my IRA money into. I know this was a rather aggressive/stupid decision but it is what it is.

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First step, realize the mistake.  Second step, correct the mistake:  sell and buy a diversified portfolio per your asset allocation.

dgu334 wrote:

3. Thought about but did not contribute towards HSA; the thought of having to wait till age >60 for my money back just didn’t sit well with me

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As others have said, you don't have to wait until >60.  But what do you think your IRA/401k money is for?  If cash flow isn't an issue, fund the HSA.

dgu334 wrote:

4. Thought about but did not contribute towards employer 401k (my hospital does not match); similar reason as above

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Contribute to this.  Who cares if they don't match?  You reduce your taxes.  As long as you aren't collecting a pension or retire when RMDs are starting to be due this is a clear arbitrage decision - save on >0% taxes now, draw down at 0% on the margin.

dgu334 wrote:

5. Instead, put $10,000 in an individual taxable account and picked some individual tech stocks here as well.

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Just stop.  Can I ask how you read the WCI 3 times, studied personal finance harder than step 2, and are still doing individual stock investing?

dgu334 wrote:

8. Currently renting a studio apartment by myself. I have the option of moving to my parent’s house/live in their basement now that my schedule for PGY2 will be less hectic. It would add 30 minutes to my current commute time of walking across the street to the hospital (30 seconds) and my hospital covers parking and I have a car. This would save me at least $1500/month.

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Do you want to be MFJ at some point?

dgu334 wrote:

One of the main things that I would like to work on this coming year is budgeting for food and other expenses.

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Yes, work on a budget so you can accomplish some of the above saving/investing goals.

[wa2106]

You saved $20,000 in a year on an intern salary.  You're beating 99% of your peers.  If you've read the WCI book 3x you'll remember that savings rate matters FAR MORE than return so stop reaching for return with individual stocks.  It's a waste of your time (that you could be spent studying medicine) and even if you add 2% to your return it matters almost not at all at this point in your career.

On that note, no way would I ever live with my parents during residency or commute 30 minutes and definitely not both.  Convenience is well-worth spending your money on.

[Dreamgiver]

Not much to add to the excellent advice you got above. Sell the individual stocks in the IRA (is it Roth or traditional) and buy good index funds. If it is a rIRA convert it to roth now. Look into Roth 401k contributions through your employer. If you are healthy I would not shy away from HSA but you might not have any money left for that.

[snowcanyon]

I'm mystified at how you decided to invest in individual tech stocks after reading WCI three times. Maybe time for a fourth read or a conference?

Otherwise you are doing great. Many years out, I'm so glad I started a Roth during internship and continued faithfully. I would do 401k instead of taxable, and once again nix the tech stocks.

[Brains428]

I don't really understand why you'd wait on PSLF. You could keep your loan balance near where it is currently (or even decrease it if so desired) and then wipe it out in 24 months.

Does the 401k not provide a match?

Does your home program have a fellowship? Can you moonlight?

If you're cool with living with family, that's great savings. If it's going to be used to artificially inflate lifestyle (I know someone looking to finance a CPO Audi living at home with no savings...), then maybe just continue to pay your own bills.

 

Oh, and you're light years away from where I was as a PGY-1/2. Just avoid those individual stocks unless you're savvy enough to do it.

 

[Tim]

You didn’t mention EF nor fellowship plans.
A taxable account in tech stocks is NOT a place for safety. You have a built in EF with parents so close. Best to put an EF in place and fellowship and potential relo.
THAT needs to be safe, MM or like Ally, not tech stocks.
You passed on decisions for tax benefits on 401k and HSA. “It is what it is” does not mean it’s ok. You KNEW better but didn’t listen to your knowledge. Fix the mistakes and stop passing off less than optimal decisions. When you know something is not the best option for you, don’t do it. Stash your EF (whatever you come up with in safe assets, invest in just an S&P or total index..
Congrats on the savings rate, now simply follow your brain in managing the savings. The mistakes are huge now. They could be very expensive if you don’t fix the decision process.

[Lordosis]

Rather then a taxable account full of tech stocks I would be paying down my loan.

Sell those puppies while you are at 0% cap gains!

[jacoavlu]

13 replies some with questions and no return from OP. Seems to be a pattern. Closing this down, OP feel free to PM me if you want to participate and open this back up.