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Feedback and Advice, Please!

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  • billy
    it wouldnt have helped during contract negotiations- changing the 401k rules for your wife wouldve had to change the plan rules for everyone.

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  • Ozarka
    Thank you all for the responses thus far! The obvious consensus is to tackle the student loans which was also at the top of our list.

    To address some of the other far as why I'm asking for advice - while I feel like we're on a good path, I was also curious as to different approaches that some others have taken at this point in their life. I also like knowing others' perspectives as it may be something that I hadn't put much thought into. And yes, we don't discuss finances with friends so getting some feedback has been helpful.

    As for the 401k, we asked if we could contribute during the first year and just not receive the company match but the practice just referred to the plan documents that clearly said no participation until 1 year of employment. In hindsight, we should've addressed this during the contract negotiations. Will certainly look at the backdoor Roth.

    Thank you again!

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  • JBME
    I too would focus on those loans. Get them out of forbearance and pay them off ASAP. It's fine to have that much in cash to help you sleep but instead of taking the amount you want and putting it in taxable, put it to student loans. Try to entertain getting the emergency fund balance to $50k and putting $85k towards the student loans.

    You also need to set your wife up for the backdoor Roth IRA by getting rid of the $22k in her IRA. Even though she can't participate in the 401k now, is she allowed to transfer any money into it? She can put the $22k here. Or, since you're still in the year where your tax burden is relatively low, convert the $22k over to a Roth IRA and pay the tax.

    If you're looking for more-tax advantaged space, you seem savvy enough to figure out if your 401k allows for the megabackdoor Roth IRA, so I'd check into that.

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  • TXDoc21
    I would refinance the student loans. Perhaps you could fill out the application in November and drag your feet to see if the government extends the forbearance on the federal loans (see latest WCI blog post from the splash financial guy). Other than that I’m sure you could nitpick things here and there, but as long as you are doing something reasonable with your finances it should work. Pick a plan and stick with it.

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  • Jaqen Haghar MD
    I’d devote more to the student loan also. (Actually I’d prioritize it, but that’s just me). I’d pay 50-100% off tomorrow, and put every spare penny toward it and kill it. Then concentrate on the taxable account.

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  • tylerjw12
    Why do you still have student loans? Get it out of your life. That will definitely make you sleep better at night.

    I'm wondering why you are asking for advice. Do you feel you are behind anywhere? That you aren't saving enough? Or do you just want to discuss finances and don't have anyone else to talk to about it?

    I think you'd be surprised how many residents graduate with next to nothing in their bank accounts and a boat load of loans. Don't feel like you're behind. Keep the course, don't do anything colossally stupid, and enjoy your money a little bit. And keep reading WCI, but understand these folks are the cream of the MD / finance crop.

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  • Ozarka
    Sorry for the lengthy post! It was my attempt to be thorough!

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  • White.Beard.Doc
    Wow, that is a long, detailed post! It is great that you are putting a lot of careful thought into your finances.

    You might get more responses if you break this down into some shorter posts with your top question or two.

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  • Ozarka
    started a topic Feedback and Advice, Please!

    Feedback and Advice, Please!

    Hello all! I wanted to get some thoughts, feedback, advice on where we currently are and what we could do better going forward. What are some things that worked well for you and/or what would you have done differently at our age? Spouse and I are in our early 30s. We have a toddler and would like to have another child in the next year or 2. Spouse finished residency this past summer and is now in the first year of attendinghood (yay!). Our goal throughout residency has been to be financially responsible and save, but also enjoy life. While that will continue to be the goal, starting this new chapter also allows us to shift our financial plan a little bit. We've always been on the more conservative side when it comes to budgeting and saving. For some background on us, I've worked in finance for 10+ years and spouse is in field that allows excellent work/life balance and good pay. Growing up I've always been into all things finance and have been involved in investing/trading (I know, I know) since college. We're located in a L/M COL area (no state income tax) and will likely remain here for the next 7-10 years. We've toyed with the idea of moving after that period. Spouse is in a field that should be relatively easy to find another job should we move. With that said, here is where are currently are:

    My income: $133,000 - I do receive annual bonuses that have ranged from 15% - 30% of my salary. For our budgeting purposes, I don't include the bonuses. Raises will be minimal
    Spouse: $210,000 - Practice has said they've paid bonuses every year, but again, not including those. Spouse is only working 3 days and will add on another day when our child(ren) are older. At that point the additional day could bring in another $75k - $100k.

    Checking/Savings/Efund: $135,000 - I know this is a pretty sizable cash balance. Majority is in a HYSA or money market. Like I've said, we're on the conservative side and have leaned more towards a higher cash balance that helps us sleep at night. Looking to move a portion over to investing.

    My 401k balance is roughly $190,000. With spouse starting, I've increased my contributions to the maximum. Employer matches 50% up to 8%. Invested in target fund and total stock market
    My Roth IRA: $7,000 invested in total stock market
    Spouse's Traditional IRA: $22,000 - majority in total stock market. Remaining is in individual stocks that we've sold on the way up and sitting on "let it ride" shares
    Spouse's 401k - not eligible until 1 year of employment (so Fall 2021). Hate that we won't get the tax advantage here. Will also max out when eligible. Employer matches 50% up to 5%.

    $145,000 between various brokerages - only $70k currently invested. One brokerage is strictly VTI which hasn't been touched. Remaining is split among SPY, QQQ, and individual stocks. The balance invested has been more and it's been less over the months...Like I said earlier, I've been more of an intermediate term trader vs. long term investing (probably to a fault). While we've done pretty well, I am *hoping* to change that more towards long term investing moving forward.

    Equity of about $130,000, conservatively. Refinance appraisal had our equity at $150,000.

    HSA – currently at $13,000 through employer. I contribute the maximum and some is invested. Goal here was to get the tax advantage and build it up to cover our out-of-pocket max (which it currently covers) should something happen.

    Currently $300,000 loan at 2.75% fixed. Just refinanced from 3.99%.

    Med School Loans
    $140,000 through Govt. We consolidated all the loans a few years back. Interest rate is around 5%. We're currently paid ahead by about $7,000 as we were putting a little more than the standard payment each month. Loan is currently in forbearance given the pandemic.
    No other school related loans.

    Income Protection
    I have life and AD&D through my employer. Life insurance is about $1.4MM and AD&D is $1.2MM. Have LTD that's also subsidized by the employer.
    Spouse: LTD 60% of salary through employer and also have an own occupation policy. Combined those come out to slightly more than current monthly take home. Spouse also has 2 term life policies in place, 10 year $1MM and 20 year $2MM.
    No short-term disability policies given our typical cash balance.

    Monthly Cash Flow
    Net after deductions and taxes $17,500
    Expenses (mortgage, insurance policies, day care, loans, extra, etc.) $10,000
    Majority of the remaining $7,500 will go to taxable and some to cash for upcoming expenses/vacations/etc.

    Plan Going Forward/Thoughts
    • Move $35,000 to taxable to bring the efund balance down to $100,000 (I know, 10 months is probably excessive but it helps us sleep at night)
    • The $35,000 will bring the taxable to ~$170,000. Plan is to get $120,000 in index ETF (likely SPY) that will continue to be contributed to for long term growth and $50,000 for various individual stocks
      • The remaining monthly cash will go into SPY. We'll have various expenses along the way but the goal would be to get at least $60k - $75k contributed to taxable throughout the year.
      • As for SPY vs. the other ETFs, I prefer the liquidity, tighter spread, and potential for covered calls. I don't plan on moving in and out, but the having those additional aspects over the others is appealing to me. Also, all retirement accts are currently and will stay in total stock market.
    • Kid(s) will attend public school once elementary comes around
    • Cars are currently paid for. Mine is 12+ years old so will likely be upgrading mine within the next year. Nothing fancy. Will likely finance if the finance deals of < 1% loans stay around.
    • Once spouse is eligible for 401k, we'll be contributing approx. $50,000 annually (max contributions + employers match) to 401ks
    • Continue to max out HSA pre-tax contributions
    • Refinancing the student loans seem to be a prudent idea now. Thoughts?
    • We should probably be doing Backdoor Roths, right?
    • Will likely open up 529s for the tax-free growth but no current tax deductions given our state
    • Majority of any bonuses will go to taxable or "slush fund". Again, these bonuses aren't contemplated in the figures above.
    • I feel pretty good (I think) about ~$100,000+ annually being saved between retirement and taxable accounts
    • We don't have a certain age or goal to retire by. We both enjoy our fields of work and they both offer great work/life balance so will likely ride it out as long as we can.
    For those who use ETFs in their taxable with monthly contributions, do you just buy on the day the money is available? Would love to hear thoughts in this regard. I understand the automatic investing nature that mutual funds provide takes this out of the equation but I prefer ETFs and don't mind having to manually do it - just more curious on others perspectives (buying on a certain day, buying on a down day, etc).

    While some better decisions could've been made along the way, I feel like we've done a decent job up until now; but honestly have no idea as we don't really discuss finances with our friends or others that are similarly aged. In the end, our main goal is be financially responsible but not to the detriment of enjoying life with our family.

    I would love some feedback, constructive criticism, insight into where we can improve. What would you have done differently in your 30s? What are some things that have worked well for you over the years? Thanks in advance!