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  • Preparing for attending life... Please advise!

    Hi WCI forum

    This is my first post but I have some general questions about financial strategies going forward. First thank you Jim. I had about $10,000 in credit card debt as a resident and was basically ignoring anything financial. My wife had me listen to a couple of podcasts from WCI and I fell in love with how simple you made finance seem. The podcast led to me reading your book and a couple of other financial books, yada yada yada, now I kind of find this stuff interesting but more importantly realize well how important it is.

    I am currently a fellow (PGY6) with 1.5 years of training left.

    I anticipate 280-400K as an attending (depending on academic vs private practice) once I graduate.

    My wife (married one year ago) is a hospitalist and earns about 280K per year.

    I have 160K in federal student loans (6.8%). I have paid off my credit card debt and started contributing to my 401K (as a fellow its not matched).

    With the help of my wife we contribute about 4K per month to my student debt.

    We are trying to refinance my loans (variable rate with her as cosigner - 2.8%, hoping though for 3-4% without cosigner as we are not willing to cosign as she would be stuck with my loans in the event of my disability)

    We are likely moving after I graduate (1.5 years) and the plan is to buy a home after the first year of trying out the new job (2.5 years from now).

    My wife maxes out her retirement accounts already and has about 90K sitting in her savings account. I don't want to use her cash on hand to pay off my loans necessarily (in case of death/disability it just gets forgiven as of now - I know it sounds morbid). I think we both like the security of her not being tied to my loans. Our goal is to pay it off within the first year of me being an attending mostly because the idea of debt is eating at me (although I realize investment yields probably would beat a low interest student loan or mortage).

    My big question though is if we plan on buying a home in approx 2.5 years what should she do with the 90K in cash on hand... Sit on it? Invest in taxable accounts (take the risk of short term market instability) and then withdraw for a down payment? I feel torn b/c I know its bad to sit on cash for 2.5 years since its not keeping up with inflation.

    I would appreciate any other advice or strategies given our current situation (safe ways to invest short term (2-3 years) and keep up with inflation).

    Bob

  • #2


    My big question though is if we plan on buying a home in approx 2.5 years what should she do with the 90K in cash on hand… Sit on it? Invest in taxable accounts (take the risk of short term market instability) and then withdraw for a down payment? I feel torn b/c I know its bad to sit on cash for 2.5 years since its not keeping up with inflation.
    Click to expand...


    In the short term, defined as < 5 years, your priorities are liquidity and safety. The risk of investing when you need the $$ in 2.5 years is not worth the possible growth.

    When Low Interest Rates are OK
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #3
      why bother to refi? you said you're doing $48k/year towards loans on fellow + hosp salary and your salary is going to more than double?

      even if you stay at $4k/mo you'll be out of student debt in 3 years. more realistically you could probably finish them off in your first year of work.

      Comment


      • #4
        I’d consider refinancing now and taking out a life insurance policy in order to protect your wife in case you pass away.

        Comment


        • #5
          As jfox mention, there's nothing wrong with holding onto cash for 2-3 years if you expect to need it for something like a house down payment. I definitely would NOT put it in a taxable account to invest.  Just park it in an online savings account and let it earn 1.4% or whatever the going rate is.

          I agree with your plan to pay off the debt asap. You guys are doing great now and once you start earning you guys will be rock stars.

          Comment


          • #6




            I’d consider refinancing now and taking out a life insurance policy in order to protect your wife in case you pass away.
            Click to expand...


            Unless they have a kid, why life insurance. His wife is a hospitalist who makes good money on her own. The premiums can go towards loans or investment.

            Comment


            • #7


              My big question though is if we plan on buying a home in approx 2.5 years what should she do with the 90K in cash on hand… Sit on it? Invest in taxable accounts (take the risk of short term market instability) and then withdraw for a down payment? I feel torn b/c I know its bad to sit on cash for 2.5 years since its not keeping up with inflation.
              Click to expand...


              You need to get a few things in order before that

              1. Where are you going to settle. How much do houses cost and how much are you willing to buy a house for.

              2. What will be your total income for both of you.

              3. Is paying off the loans more important than the house.

              4. Will this be a doctor home.

              6. Will you have other expense like a kid, new car, new furnishings etc.

               

              Then figure out if you want that 90K in a high yield account versus investing it now and saving for house downpayment later on.

              Comment


              • #8
                I think he as implying to have his wife co-sign the loan for the lower interest rate and then just take out a cheap term life policy that would cover the cost of his debt should he pass away.

                Comment


                • #9
                  I'd use the wife's cash on hand to knock out a large chunk of loans and then start saving up for a down payment on the house. If you're looking to invest the money, I see a guaranteed 6.8% return with no risk. That sounds like a pretty good deal to me.

                  Comment


                  • #10
                    You both make good money.  The odds of both of you getting injured/disabled is very small.  That said, it is likely reasonable to have 3-6 months in an emergency fund.  If you can live on 5K per month that's only 30K.  Use the other 60K to attack your loans at 6.8% interest.

                    I am in a very similar boat.  I had at 180K in debt at the end of training.  I max out my 403B (including employer match and contribution), my wife's governmental 457, and do a backdoor Roth for us (total 11K). Every other bonus after that has gone to our loans and we pay 5K per month scheduled now after paying 4K for the first six months.

                    That said, we are paying off our 180K debt on one physician salary and a part time teacher's salary in two years.  We will be buying a house when our emergency fund (30K) is equal to our remaining debt so that additional bonuses can be saved for a down payment.

                    Comment


                    • #11







                      I’d consider refinancing now and taking out a life insurance policy in order to protect your wife in case you pass away.
                      Click to expand…


                      Unless they have a kid, why life insurance. His wife is a hospitalist who makes good money on her own. The premiums can go towards loans or investment.
                      Click to expand...


                      My recommendation for life insurance was in reference to the OP's concern regarding sticking his wife with non-dischargeable student loans if he passes away.

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                      • #12
                        Even a lot of the private refinancing companies have policies that debt is discharged upon death. So I think this is less of an issue, but some companies (commonbond, for example) seem to have stronger language about this than others (SoFi, for example).

                        TPP

                        Comment


                        • #13


                          My recommendation for life insurance was in reference to the OP’s concern regarding sticking his wife with non-dischargeable student loans if he passes away.
                          Click to expand...


                          Sorry I did not get that earlier. Maybe another reason to not have her cosign any of his high interest accounts and reginance only in his name and use her money to pay off maybe 80K of the 160K loans he has in his name

                          Comment


                          • #14
                            Op, you appear to have a large concern on disability and death so health maybe an underlying issue or fear of one.

                            If so, it's better to get a robust insurance now in both disability and term life to balance out that concern and protect future earnings and debt protection. That would be the best use of short term cash in overall asset management IMHO.

                            After that, a durable emergency and transition fund in cash equivalents not related to Bitcoin. And build up the kitty for the house in two years.

                            If all goes as hoped and no illness or event comes to pass, your dual income will blast through the loan in 1-2 years post fellowship without blinking.

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