PGY4 resident in my 40s; kids; 30K savings; no debt; single income - advice?

[derekhbinah]

Hi everyone,

I'm a PGY4 psych resident at age 47 and I've just purchased the White Coat Investor and will be going through it this weekend.

I'd like some financial advice about how to apply the WCI book to my specific situation.

I'm married, have three young kids (ages 2-8), $30K in a BoA savings account, $1 million life insurance plan, no investments, no debt, renting a home, and my wife cannot work due to health issues.  For religious convictions, we have our two older kids in a private Jewish parochial school that costs about $10K per year per kid. We're currently going through about $7-8K per month in expenses, and we're currently getting help from family making ends meet with all of this, until I graduate. Our current goal is not to touch the $30K in the savings account, and absolutely not to take out a loan for extra cash.

After graduation, I'm considering applying for a VA outpt psych job, due to job stability, salary (isn't bad, as they start usually at 205-230K, depending where you are located), my interest in PTSD, lifestyle, and from what I've heard the VA has great benefits and health care.  At this point in my life, even though we're financially at ground zero, I really don't want to kill myself to chase the money (community jobs can go for well over >300K) for a few years, although I am thinking of it, and then perhaps to transition to the VA after that.

We're planning to move to an area with a lower cost of living (probably the MidWest, right now we're living on the east coast), that will allow us to find a decent house within our means, perhaps a slightly cheaper Jewish parochial school education for our kids through 8th grade, and save hopefully at least 25% of my income annually. I want to get to that "FU" level of wealth by age 67 (which for me is just 20 years away).  At least that's my initial thoughts on this.

Do any of you have suggestions how I, getting into this very late in the game, can best apply the WCI book to my specific situation?

Thanks so much!

Derek in Va

[Zaphod]

Welcome to the forum, glad you found it. All in good faith to help you out, but may sound harsh.

How come your expenses are so high? You're going to be in trouble reaching any of these goals unless you find out why you're spending so much and learn to become concerned about it. Hopefully some of these are less necessary than you think. You dont seem concerned at all you're spending like an attending with a residents salary. Kids in private school and borrowing to meet monthly costs (this is just crazy)? This is the typical situation that continues to get much worse with an increase in income.

If you want some of those things you mentioned you'll have to do some things you dont want to. Psych can do much better than what salary you posted with locums or other set ups. You dont have to kill yourself but a little extra is definitely warranted. You'll be shocked how little 250k is after taxes and other things, and the pressure you'll have to do more.

If you want to retire in 20 years you'll have to get spending under control and make a plan. Save more than the recommended 20%, work more, live less, or some combination of them. You can have it all but not right now.

[jfoxcpacfp]

I was with you until the very last sentence, @Zaphod.

Derek, I'm not sure you can have it all on your current trajectory, particularly retiring in 20 years. btw, it is great that you've been able to get this far with no debt, but you've sacrificed your retirement. Age 47, only one working spouse, and no savings says to me that you need to make some very important decisions immediately - so glad you have found your way to the forum and the book. While I appreciate very much your religious convictions, I'm not so sure your children will be as happy if they have to support you and your wife in your old age. Is there any possibility of home-schooling? It would be the same as your wife having a $50k/year job when you take taxes into account.

Psych lends itself to moonlighting quite well. Any possibility of tele-pysch? I'd also go for the job that pays the most for a few years and set the VA job as a future goal, maybe in 5 years when you've beefed up your financial situation.

Financial planning or at least a checkup would be incredibly beneficial. If you want to have a go at DIY, get a copy of The One Page Financial Plan and read it along with your wife. Good luck!

[MochaDoc]

Is your VA route motivated by plans to retire from there with a pension, lifetime health benefits, etc., after 20 years? If so, you need to apply for and secure that job immediately so the clock can start rolling. Prior to signing that contract, you should make sure the VA doesn't have a provision similar to Kaiser where all non-VA, clinical earnings are your employer's by default. Although this is the case with Kaiser, I doubt it is the case with the VA. After that, you should definitely look into extra income sources at the VA, i.e., admin roles that pay, and outside the VA, i.e., telemedicine, moonlighting, etc..

I think you can achieve your stated goals but you will have to act your career stage not your stated age.

[Phoenixdown99]

As a member of the Jewish community, I can sympathize with the extreme costs of a Jewish education for 3 kids. Have you thought about cheaper alternatives, such as Chabad, rather than your current private day school?

I know some folks get together with other community families and higher a group private tutor for after-school Jewish studies.

[Phoenixdown99]

FWIW I work for Kaiser as a psychiatrist, make $300k, have great benefits and healthcare as well. The local VA pays 100K less. I work a few weekends every 2 months or so and take occasional call but it is not too bad. Kaiser also allows you to do research, but you must do it on your own time. I have a passion for helping veterans so I volunteer my time in that respect outside of work.

[Kamban]

derekhbinah wrote:

I’m married, have three young kids (ages 2-8), $30K in a BoA savings account, $1 million life insurance plan, no investments, no debt, renting a home, and my wife cannot work due to health issues. For religious convictions, we have our two older kids in a private Jewish parochial school that costs about $10K per year per kid. We’re currently going through about $7-8K per month in expenses,

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Don't take it the wrong way but you are putting in a lot of requirements that sound inflexible. Among those are the kids private education and the work for VA with its lower salary. Another two strikes are your age and spouse not working. And the costs per month are 7-8K.

Looking at its backwards if you earn $200K. Say all your combined taxes are 33% you lose 66K. That leaves 133K. And you have 8K in expenses per month which is 96K per year. That leaves you with only 37K per year to spend on other things.

What about your 3rd child when he grows up. If you put him in a Jewish school that is another 1K per month though you might get a discount if they are all in the same school ( we gave it when I was on board of a Private school). Say the car breaks down or you need a minivan or the health costs soar with more deductibles. And we have not touched on savings for college.

The only options I see are to increase your pay to $300K+ or reduce the expenses significantly. Kids going to a good public school in a LCOL will decrease your expenses considerably and and improve your net income. That is a decision only you can make.

[DMFA]

K, let's start with the good: no debt.  That's way better than most PGY4s are.  Mazel.

Now, let's go to the bad:

• $7,000-8000/mo in expenses.  Wow.  And only about 20-25% of that is your kids' school expenses (assuming $20k out of $84-96k).  Can you dissect that a bit, find anything that can be cut out of that?  I imagine your cost-of-living is pretty high for a five-person household on the East Coast.


• $30k in liquid savings. That's only about 4 months' worth should your income stop, and since your wife is unable to work, it's very vital.  If you're already dipping into other sources just to meet monthly expenses, it doesn't leave anything else for emergencies (home/car repairs, etc) even IF you still have income.


• You should make way more as a psychiatrist than $200-230k, even with good lifestyle.  You'll want to spend time with your 3 kids, obv.  But if you're unable to rope in your expenses, you may find yourself working more than you might otherwise like in order to avoid catastrophe.


• Prob not a lot of good and inexpensive Jewish day schools in the Midwest outside of Chicagoland area, but idk what exactly one considers "Midwest" - MSP, St. Louis, KC, Indy maybe?  That lack of competition might make finding one of your particular sect (if Modox, Ohr HaTorah, etc) a bit difficult and possibly more expensive.  Even Lubavitchers might need to telecommute.

I think you'll do fine, but the biggest focus should probably be:

1. Cutting back expenses


2. Disability and life insurance, esp if you're the sole earner for a household of 5


3. Using tax-advantaged retirement savings


4. More for emergency savings

B'hatzlacha!

[Zaphod]

jfoxcpacfp wrote:

I was with you until the very last sentence, @zaphod.

Derek, I’m not sure you can have it all on your current trajectory, particularly retiring in 20 years. btw, it is great that you’ve been able to get this far with no debt, but you’ve sacrificed your retirement. Age 47, only one working spouse, and no savings says to me that you need to make some very important decisions immediately – so glad you have found your way to the forum and the book. While I appreciate very much your religious convictions, I’m not so sure your children will be as happy if they have to support you and your wife in your old age. Is there any possibility of home-schooling? It would be the same as your wife having a $50k/year job when you take taxes into account.

Psych lends itself to moonlighting quite well. Any possibility of tele-pysch? I’d also go for the job that pays the most for a few years and set the VA job as a future goal, maybe in 5 years when you’ve beefed up your financial situation.

Financial planning or at least a checkup would be incredibly beneficial. If you want to have a go at DIY, get a copy of The One Page Financial Plan and read it along with your wife. Good luck!

Click to expand...

Ok, can have a lot, given time/age constraints. OP didnt seem to have any crazy lifestyle plans or expectations.

[MPMD]

DMFA wrote:

K, let’s start with the good: no debt.  That’s way better than most PGY4s are.  Mazel.

 

Click to expand...

That's way better than most PGY4s who are 32, he's 47. I mean at this point he's broke.

Like others I am nervous about the interest in a relatively low paying psych job and also have questions about how easy it's going to be to find the kind of education you want to provide for your kids without really breaking the bank.

I can see a moderate, comfortable retirement at 67, I cannot see "FU money" as the OP stated he desired.

 

[Peds]

if you are agressive, you can get FU money in 20 years. except that will be retirement age. which still counts!

there is no other way to prove the religious exposure to your children other than 10k/year/kid?

[Hatton]

I think you need disability insurance ASAP.  You are lucky your family can help you.  I think you really need to track your expenses and see where the money goes.  Start a spreadsheet or use mint or personal capital. What about moonlighting now.

[q-school]

i hope original poster takes all the suggestions in the right light.

everyone is trying to help you, especially, since you asked how to apply the wci principles to your own life.

i concur with the previous posters that your expenses are high for your goals.  you either need to make more or spend less or hopefully both.  i think if you are single income you need to up your disability and i'm not sure where you are with life insurance.  critically important (imo) because your wife can't work due to health issues (i'm sure it is stressful and sorry for this)

i think FU numbers are much harder with pensions.  although the value of the pension can be calculated mathematically, i think it is hard to know how it affects your choices and behavior.  once you get to the pension, and especially when it has COLA and survivors benefits, it can really possibly affect your investment strategy as well as comfort with debt.  what you think is important may vary with time.   how important it will be to help your kids out (as your family helps you out) may be something you have to consider.

really, although uncomfortable, the biggest thing that is under your control right now is spending.   respectfully, i don't think you can have it all without some serious reflection.  however if you can simply get that spending under control, you can have every single other thing you mentioned.

best of luck.

 

[wideopenspaces]

Fellow psychiatrist here. You should check out the VA in other locations. In salt lake, outpatient pay is 230k right now ( and will probably increase soon) with 20k bonus ( that everyone gets every year) plus 30k/ year for 4 years ( for student loans but since you don't have those you just get it as take home pay). After 3 or 5 years you are vested in a pension. The other docs are awesome, the schedule is amazing, very little call and excellent opportunities for moonlighting. And there's a Jewish school for k-8. I think that would put you in a very reasonable financial situation, although if I were you I probably wouldn't buy a home. Anyway, you need to look around more because you can certainly make more than you think and still have a good lifestyle. But you need to make sure not to inflate your spending upon graduation because you're already living like an attending.

[derekhbinah]

 

Thank you all very much for your great replies!  So, from what I”m gathering, and this is before I’ve read the WCI book ,is that:

1) it’s more reasonable with my situation at age 47 to shoot for a moderate, comfortable retirement at age 67. FU money situation is much less likely.

2) We’ve got to significantly cut back expenses, down to $5000/month (?). Think about ways to limit tuition expenses for Jewish day school (from a financial standpoint, totally realize that it’s nuts, just from our own faith perspective, it’s something that we’d deeply regret if we didn’t do it. wiggle room on it is thereby limited.)

3) immediately get Disability and life insurance

4) look into tax-advantaged retirement savings

5) look for ways to increase income.  If I decide VA (for pension after 20years, benefits), then signif supplement with locums, moonlighting, telepsych. Or think about a higher paying position 300Kplus

6) relocating to a more favorable area, practice wise and cost wise, is a good idea. I’ve looked at MSP, KC, St Louis. Thanks about the tip on Salt Lake, I’ll look at it!

Do you all have any suggestions regarding how long we ought to wait prior to buying a home?  Right now we’re renting a three BR, 2.5 bath house for about $1800 per month.

Also, one idea I have is maybe to get into the local VA here, optimize spending and income as outlined above, save up for a year or two, then make a more decisive relocation elsewhere.

Thanks again for all your input!  Can’t wait to start reading WCI book, should be coming in mail tomorrow.

Best,

D