Where do I start?

[Raymond Oliver]

I'm 34 years old, a 5th year neurosurgery resident (7 year program, will do a fellowship) and I'm in over my head:

Federal student loans: $370k (doing PSLF)

Private student loans: $27k at 6%

Credit card debt: $5k

IRA rolled over from 401k prior to medical school: $27k

Home mortgage: $124k, house just appraised at $290k

Monthly take home: $3800 ($3000 paycheck & $800 in rental income).

Fixed expenses: Mortgage: $980, HOA fees $260, PSLF payments $400, Disability insurance: $120, homeowner insurance: $120, Auto insurance $170, utilities & cell phone $300.

I have $1200 emergency fund saved up and I've been pouring all my excess income into the private student loan since that won't get forgiven with PSLF.

I have awful disability insurance because I have an incidentally found PFO on my medical record, so just minimal coverage is costing me $120 a month (no own-oc rider, either).

I can't shake the credit card debt because of all the traveling I do for conferences.  We are highly encouraged to present papers and national meetings, but don't get reimbursed for travel for many months.  I'll have to book the flights, conference fees and lodging months in advance, so I end up carrying those charges at 16% interest on my credit card.

I try to put a few dollars into that IRA here and there when I can.  Should I open a Roth IRA and fund that or keep paying down the credit card and private loan first?

Maybe it's the lifetime of training I've done, but I feel totally overwhelmed and like I'll never get out of debt.

[Complete_newbie]

You only have 27k of student loans. I would defer till end of residency/fellowship and it shouldn't balloon much. Redo once an attending. With your income you can pay it in like 2 months.

Concentrate 100% on becoming a great neurosurgeon - the money will come after you. Keep thinking of being thrifty but don't stress - you have ginormous income potential waiting around the corner.

Get a great disability insurance somehow. You worked too hard to not get some benefit.

[DMFA]

Raymond Oliver wrote:

I’m 34 years old, a 5th year neurosurgery resident (7 year program, will do a fellowship) and I’m in over my head:

Federal student loans: $370k (doing PSLF)

Private student loans: $27k at 6%

Credit card debt: $5k

IRA rolled over from 401k prior to medical school: $27k

Home mortgage: $124k, house just appraised at $290k

Monthly take home: $3800 ($3000 paycheck & $800 in rental income).

Fixed expenses: Mortgage: $980, HOA fees $260, PSLF payments $400, Disability insurance: $120, homeowner insurance: $120, Auto insurance $170, utilities & cell phone $300.

I have $1200 emergency fund saved up and I’ve been pouring all my excess income into the private student loan since that won’t get forgiven with PSLF.

I have awful disability insurance because I have an incidentally found PFO on my medical record, so just minimal coverage is costing me $120 a month (no own-oc rider, either).

I can’t shake the credit card debt because of all the traveling I do for conferences.  We are highly encouraged to present papers and national meetings, but don’t get reimbursed for travel for many months.  I’ll have to book the flights, conference fees and lodging months in advance, so I end up carrying those charges at 16% interest on my credit card.

I try to put a few dollars into that IRA here and there when I can.  Should I open a Roth IRA and fund that or keep paying down the credit card and private loan first?

Maybe it’s the lifetime of training I’ve done, but I feel totally overwhelmed and like I’ll never get out of debt.

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Hmm.  You're not doing awful.  How many PSLF payments will you have left once you're out of training?

I'd say to knock out CC loans first, that's p obvious since it's 16% capitalizing interest.

Your private loan is $27,000 at 6%.  How much longer do you have on it with your current payment schedule?  I can't imagine you losing much to interest on that, but it's a good area to start on.  Simple interest at that rate is probably not going to be more than you'll gain on equities in a Roth IRA, but it's a guaranteed gain.

At your current income level, the tax deduction from the traditional IRA is probably not going to be very beneficial.  However, it does reduce your AGI which reduces your federal student loan payment by a little bit.  Also, the presence of your TIRA prevents you from doing a backdoor Roth once your income is too high to do direct Roth contributions.  It doesn't make too much of a difference now, but it seems you will probably benefit more from Roth contributions at this point.

$1,200 won't do much for a significant emergency...won't do much for your other debts, either.

Disability is a huge pain to get a decent policy if you have a condition like PFO.  I am in the same boat for Crohn's.  Any half-decent policy is way too expensive, excludes disability caused by that condition, usually has prolonged waiting periods, only covers a fraction of income, and probably doesn't have extremely important components like FPO rider, COLA rider, etc.  Ensure you are working with an experienced operator specifically versed in situations similar to yours.  I used Larry Keller (Physician Financial Services) who advertises on this site to look for policies for me and my wife.  Several others also advertise here as well.  Obv as a neurosurgeon you'll want to protect that income as much as you can, and the physical skill set it requires is one that will really require own-occupation and specialty-specific, so it's very important to find the best policy you can...if possible.

[G]

Fellowship?  The difference in two years of attending salary is what, $1M after tax?  More?  Your loans and mortgage will be gone with that assuming you keep living like you are doing.  However, could also be worth every penny.  As noted by CN, you are about to hit log-phase in your asset growth.

I'd be surprised if you couldn't find a reasonable own-occ disability policy.  Talk to Larry, one of the advertisers on WCI.

Could probably nitpick the expenses (that seems like a lot of insurance and HOA fees for a 300k house), but the it's certainly not worth the hassle of selling/moving while a resident.

Do you have a 401k?  If you get a match, I'd max that.

I'd probably pay off the credit card first, then IRA, then private loan.  Too bad you can't tell the attendings to F off with their chest-thumping (at the expense of the housestaff's net worth).  Maybe you can pay it forward someday and sponsor a travel grant.

[jhwkr542]

Agree with the disability insurance. Not having own occ really limits the utility of the insurance to point is it worth having? Throw extra money at the cc debt, that takes ultimate priority. I equate credit card debt to an ultimate debt emergency. If you can't afford what you have already purchased, things are dire. That mortgage and monthly HOA are a little crippling given your take home pay but probably not much to do about it now. That car insurance seems high too. Expensive car or too much coverage? Really though, you just need to tread water until you get a bigger shovel.

[Raymond Oliver]

Thank you all so much.  I feel a little less like I'm drowning now.

I agree buying the house probably wasn't the smartest move, but with renting out the room, I'm only paying about $560/mo including the insurance and HOA.  It's also appreciated 50% in 5 years, so I got lucky.  Car insurance is for liability only.  I've been driving around with no bumper and shattered rearview mirrors for a while now.  It's a 2006 Honda Civic that's paid off and going on 200k miles.  I'll run that thing into the ground.  The emergency fund is mostly in case she breaks anything critical.

Fellowship is a must.  I want to do pediatrics (which will actually lower my pay, but I love it).  After that, I'll have around 30 PSLF payments to make.  Those will hurt but it will all be worth it if it gets wiped clean.

The disability insurance does worry me.  It's infuriating that something which is present in 30% of normal adults is holding me back.  I even got my cardiologist to write a note stating it doesn't significantly increase my risk of stroke or disability.

 

Anyway, thank you all again.  This is a great site and amazing forum.  I've been spreading the word big time.

 

Edit: oh and that $27k loan, I have a while left on it.  It's for a masters degree I got during residency so I'm just starting to pay it off now.  Maybe not the best choice either, but at least I didn't blow it on a car or something, right?

[Hatton]

Great post.  I agree work on the cc debt first.  I think it is almost criminal that your program essentially requires you to travel to conferences on your own dime when they know what they are paying you.  This is just adding to the stress and burnout of being a resident. I hope some of the academic docs read this post and address this problem.

[jhwkr542]

Is that $170 for car insurance for 6 months then?

[Kamban]

As said earlier on, pay as much as you can towards the credit card every month. That is a 16 % return that you are paying to the CC company. Is there any way you can wipe it off clean and not have any credit card balance at the end of each month.

Maybe it is time to let your institution know that you will not be going to as many meeting unless they pay you back right away and not make you carry balance on CC card.

[jfoxcpacfp]

Don't stress over that which you can do nothing about (the 2 years remaining, the PFO). You need to be focused now. You are nearing the end of a grueling marathon but 2 years will go by quickly. Keep your eyes focused on the prize and know that you will look back in 5 years with a sense of victory and accomplishment.

Agree with DMFA to knock out the CC debt first. The Roth is not your priority at this point - you will catch up. Next year (the year before the year you finish training) would be a good time to considering converting the TIRA into a Roth. Or split 50:50 between this year and next. That will catch you up on the Roth contributions. Instead of putting $$ into an IRA, in fact, divert to pay off that CC debt.

The PSLF is a real biggie. The  opportunity to get a big chunk of debt forgiven overshadows most of what you're worrying about. Quit worrying it might go away. Again, you can't do anything about that. If you're still concerned when you start making real money, you can allocate some savings to a taxable account to be tapped if necessary. By then, it won't matter as much at your income level.

Might want to do a little moonlighting and set up a 401k to roll the TIRA into. otoh, I'd rather you convert as much as possible into a Roth while you're at this tax bracket that you will never see again. Make lemonade.

[EDDOCMOM]

This too, shall pass.

I may have some more insight into your situation as my dear friend is currently a Peds Neurosurgery Fellow (and the field being so small I'm sure you know her) and we recently discussed her finances in depth.  I agree with the not fretting about things you can't change - your three years left of residency/fellowship will go by more quickly than the prior 5 and the end is in sight.

Work on limiting use of your credit cards - I totally get the travel/reimbursement thing and that can be difficult but cutting out other lifestyle things can help too.  It's a real balance of feeling like you "deserve" things since you work so hard, but you've also not got much free time to spend $$ anyways.

Don't worry about the retirement until you've got more spending $.  Once you make the high 6-figure salary you will max out your retirement and other investing.  Since you'll likely be moving for fellowship I'd also plan on selling the house and renting for fellowship - you'll be approached during fellowship about buying a Million $ McMansion as soon as you graduate - DON'T!  Use your first attending year to Clean. This. Up.  Seriously - one year with an attending take-home is going to make a huge difference.  It's ALL GONE if you go 2 years living frugally.  THEN you can enjoy the fruits of your labor, max retirement and invest heavily (to make up for the ~20 working years you've missed out on compared to others) and be sensible.

I agree with others to really dig into disability insurance, and if you've got anyone counting on you, life insurance too.

Good luck!  I'll be thinking of you.

[Raymond Oliver]

Wow, so much great advice and positive feedback.  Thanks again.

I did a balance transfer for the credit card to one with 0% interest for 15 months.  I should be able to pay that down before then.  I wish I could tell them no more conferences, but that would run against my career aspirations.

The $170 is per month for car insurance.  I pay around $850 every 6 months with State Farm, and yes, I have a spotless driving record (I do have roadside assistance in addition to liability coverage).  I'm guessing I should shop around a bit...

I'm worried about converting the TIRA to a roth.  Won't I have to pay taxes on all that money if I do that?  It sounds like that would be around $10k in taxes.  Would I be able to use the money from the new roth to pay the taxes, or will I get an early penalty?

[globe22]

Definitely shop the car insurance.  I have Geico for my car and my wife's with more coverage than you and a good driving record as well and we pay 366 for 6 months coverage.  With a car that worn and older your insurance should be cheap.  Could easily save you 1k for the year which could cover some of those travel expense costs. Hope this helps and best of luck!

[jfoxcpacfp]

Raymond Oliver wrote:

I’m worried about converting the TIRA to a roth.  Won’t I have to pay taxes on all that money if I do that?  It sounds like that would be around $10k in taxes.  Would I be able to use the money from the new roth to pay the taxes, or will I get an early penalty?

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Can you stay in the 15% bracket if you convert over 2 years? That's 37% - I didn't realize you were in such a high bracket as a resident or I wouldn't have recommended. Don't recommend using $ from the Roth to pay the taxes if you can help it. You will not be penalized for any of your original contributions you withdraw from the Roth so, yeah, I suppose you could look at it as a way to get 3 years of contributions into a Roth, net, or 4 years if you just take out $5k to pay taxes. Might be an option if you look at it that way...

[Kamban]

Raymond Oliver wrote:

I’m worried about converting the TIRA to a roth. Won’t I have to pay taxes on all that money if I do that? It sounds like that would be around $10k in taxes. Would I be able to use the money from the new roth to pay the taxes, or will I get an early penalty

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I am also surprised that on a salary of $3000 per month you are in a tax bracket that cost you $10K taxes on a $27K Roth conversion. Double check those figures.

Maybe in the last year of residency / fellowship you can do the rollover since you might never be in that tax bracket as an attending or even after you have retired.