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  • #16
















    My wife and I started at -726k 7/2014. Should hit 0 7/2017. First of many big financial milestones to come.
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    Well done! Just think how quickly that is going to grow above $0!
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    Yea it’s amazing when compound interest is working for you instead of against you eh?
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    …but *is* it really compounding against them, though?
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    If you have debt you have some compound interest working against you.
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    I promise I'm not trying to be argumentative today...I guess the way you've phrased it is also technically correct (the best kind of correct!), but:

    I don't totally agree with the "compound" portion, at least not in the purest sense of the word. Other than the capitalization of accrued interest when refinancing (a one-time event, usually) and at a few other points in federal student loans, they are not compounding interest-upon-interest like the gains of an investment. This includes unpaid interest in income-driven federal repayment plans like RePAYE, PAYE, and IBR; the interest sits in a separate pile, so to speak, not bearing interest of its own, until it's either paid or something triggers capitalization (for instance, exiting the program, refinancing, losing partial financial hardship in PAYE, etc).

    Any loan on an amortization schedule with the payments made likewise doesn't compound. The interest accrues daily based on the principal at the beginning of the period, and is then paid along with some principal at the end of the period, and thus no additional interest is present to bear further interest.

    Basically, for someone's debt to be compounding, it would have to be in a situation in which it's not otherwise protected (like IDR for federal loans), not on an amortization schedule (like mortgages and most student/personal loans), and the payment doesn't cover accrued interest which then capitalizes (interest added to principal) which then bears interest upon interest (compounding). Credit cards can do this since their amortization schedules are wonky.

    So if you're missing payments, then yes, that's compounding. But for people to think "my student loans are compounding away at 6.8%!" is probably not really true in the pure sense. There might still be some interest that accrued and was capitalized at some point that's still in the loan, but it's not presently compounding anymore, and the equivalent rate at which it would have compounded is less than the APR (since it was simple accrual for a while before capitalizing). I could just be splitting hairs, too...

    All the same, I recognize that it's not really great to instruct people that their debts are not as horrible as they might perceive lest they become comfortable with debtor psychology.

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    • #17
      Okay, fair enough. Non-capitalized interest doesn't compound. But interest is still working against you, even if it isn't compound interest.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #18
        Took me 4.5 years to get there....then bought a house in November and dipped down to negative again. Finally the last 3 months i have been a positive net worth and it is growing exponentially. A combination of my own investment and a generous 401k match and I suspect I will be at a 100K positive net worth by the end of the year. From there, the sky is the limit.

        On a sad note, I was running my credit check yesterday (my Uber account got hacked in Russia). My initial school loan was for $154,000 but had ballooned to $180K by the time I started paying it as an attending (7 years post med school). 30K of interest for being lazy and not getting my act together in training. Not cool....

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        • #19
          We should be there later this year! I'm 3 years out of training, and my husband just finished his fellowship. He got all the advantages of an attending wife to start hammering at his student loans while his salary was still only 60k . At least that means that soon I'll get the payback of being part time! Ha

          It will feel great to finally hit a net worth of zero! Although the day I'm REALLY looking forward to is when the student loans are completely paid off but that won't be for a couple more years....

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          • #20
            Great news!  Big time congrats!  I can't wait to get there myself.

            Finished training 1 year ago also.

            I hit a nadir NW of -$427K 1 year ago. Total Debt $933K (Stud Loans, Mortgage & LeaseFleece)

            I haven't made as quick of progress due to family obligations, etc.  However, over the past year we are up by $66K.

            Considering everything we went through this past year, I'm pretty proud of that.  We also have a MUCH better financial plan moving forward than we did a year ago (when I was getting ripped off on a few whole life policies).  It's taken a little time to get things in order (and many hours on this site - Thanks Jim!), but we're getting there.  This next year should be significantly better.

            Also, we are about to buy a new (to us) vehicle for my wife (in desperate need) WITH CASH!  First time ever.

            It's amazing what a little financial knowledge/planning will do!

            Congrats again to OP!

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            • #21


              Took me 4.5 years to get there….then bought a house in November and dipped down to negative again. Finally the last 3 months i have been a positive net worth and it is growing exponentially. A combination of my own investment and a generous 401k match and I suspect I will be at a 100K positive net worth by the end of the year. From there, the sky is the limit.
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              Why did purchasing a house lower your net worth?  Are you including your mortgage but not the equity/home value?  Normally I would think you would include all or none related to the home. Unless you bought with 0% down or are underwater on the home, I wouldn't think your net worth would have dropped.

              I'm fortunate to have had a low loan burden, and our net worth has been aided with my wife (a non physician) working part or full-time essentially our entire marriage (married 2006, started internship a few weeks later).  Of course we've paid a ton in daycare costs, so it isn't all gravy.  She isn't a super high earner (RN then NP), but it still contributes to the bottom line.

              We hit net worth of zero rapidly, and looking just at investment accounts, we're closer to 7 figures than 5 figures; it's a bit higher if you include home equity.  I think that's fairly good for an academic pediatrician a few years away from turning 40, but in hindsight we probably could have done even better early on.

              Investing in our Roth IRAs through the recession certainly helped.
              An alt-brown look at medicine, money, faith, & family
              www.RogueDadMD.com

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              • #22


                Why did purchasing a house lower your net worth?  Are you including your mortgage but not the equity/home value?  Normally I would think you would include all or none related to the home. Unless you bought with 0% down or are underwater on the home, I wouldn’t think your net worth would have dropped.
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                Because we borrowed more than the equity we have in the homes. For example, say we borrowed 300, on a 350k home. I owe 300, but only have 50k in equity, so -300, + 50 (and presumably -50 in down payment/closing costs, etc). Are you suggesting that one's net worth isn't really negative because the house has value, even if you owe on it?

                While we have a pile of student loans, our mortgages are why our net worth is significantly negative.

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                • #23


                  Because we borrowed more than the equity we have in the homes. For example, say we borrowed 300, on a 350k home. I owe 300, but only have 50k in equity, so -300, + 50 (and presumably -50 in down payment/closing costs, etc). Are you suggesting that one’s net worth isn’t really negative because the house has value, even if you owe on it?
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                  That is exactly what I am suggesting.  I generally just leave my home out of my networth equation because it's not really an asset I would access outside of some desperate circumstance.  If I was underwater on the home then I would add that underwater portion the debit column regardless though.

                  However when I do include it in my net worth, I consider the mortgage in the debit column and the home value or purchase price in the asset column (I generally aim for somewhere in between the two since home value is a fuzzy thing -- Zillow can't really predict my sale price).

                  That 50k in equity is meaningless to most people unless you're going to sell the home, because for most people that's how you would access that equity.  So in that case I think you then would be considering the entire sale price (minus realtor expenses etc) in the asset part of your net worth.

                  So to me it's the entire home value (minus your mortgage) or nothing in your net worth calculation, should you choose to include it at all.

                   
                  An alt-brown look at medicine, money, faith, & family
                  www.RogueDadMD.com

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                  • #24
                    Im skating on the zero bound this year but too much is tied up into the market to consider myself fully at zero. Hopefully happens this year, once total amount over crosses some arbitrary nominal amount that a standard correction, typical bear market would mean is still at zero.

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                    • #25
                      Closing costs, etc cost money. Inspections. Moving. All of these things take little chunks out of the net worth.

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                      • #26




                        Closing costs, etc cost money. Inspections. Moving. All of these things take little chunks out of the net worth.
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                        Overpaying for the house can take a major chunk out of your net worth too.
                        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                        • #27
                          Very true. Over paying for a home is a big mistake....did it once and hopefully did not do it this time. Also if you leave sooner then expected, then you are likely to loose a chunk of your net worth.

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                          • #28
                            Home equity is fairly easily accessed via a Home Equity Loan or Line of Credit (or reverse mortgage for older folks)

                            Whether it is advisable to do so is another story 

                             

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                            • #29
                              Wow. Just wow. You win some kind of prize or something. And congrats on paying it off!!!

                              My wife and I are finished training just before the student loan debts started to skyrocket (well, I did anyway). I finished with ~$80k in student loans which I consolidated at 1.6% back in 2005. Paying $350/ month on automatic. I don't think anyone will give me money that cheap ever again. Have about $59K left. My wife finished in 2009 and private consolidation was dissolved already. She had $80k in loans and we paid then off in less than 2 years. So, she is debt free. We both had full scholarships to med school.

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                              • #30


                                Home equity is fairly easily accessed via a Home Equity Loan or Line of Credit (or reverse mortgage for older folks)
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                                Sure, but I don't consider the ability to take out another loan part of my net worth.

                                If that's the case then I could add up my credit card limits and my ability to get a personal loan and business loan and second mortgage etc to my networth.
                                An alt-brown look at medicine, money, faith, & family
                                www.RogueDadMD.com

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