Help creating a plan of attack

[bristol_HI]

Hello everyone! I am relatively new to WCI community and can't seem to be able to create a plan of attack when I graduate my residency. Here is my "unique" situation. I would appreciate any advice on "what would you do if you were in my shoes".

About me: 3 kids ages 8,5,2. I am an anesthesiology resident and mostly a sole breadwinner. Also support my mother who lives with me on and off and helps take care of kids when she is here.  Husband takes care of the kids and household most of the time and has a small business from home. We rent and own two clunker cars, so by all means we live like residents right now.

Right now our income is my resident salary, moonlighting income, and husband's small income for a gross total of $95K per year.  I am graduating this year and here is the financial situation we will find ourselves in comes July:

My job is private practice. 3 years to a partnership with an income of $310K the first year, $325K the second year, $350K the third year. $15K buy-in and anywhere between $410K and $450K once I'm a partner. 401K match up to 18K per year plus they max it out to $56K if the group remains profitable.

Husband brings 12K-15K per year.

Our debt: my loans are $150K currently in deferment, which I will hopefully refinance at 4-5%. My husband's loans are $50K at 5% which we are currently paying out.

We need to upgrade cars because ours will not live another year. We are getting a used van and financing 20K at 2.6% for 5 years and a small used sedan of some sort for which we will hopefully pay no more than 7K.

We will reside in Hawaii and will rent a small townhouse with monthly rent $4.5K. We also have to send kids to private schools as Hawaii has absolutely no public schools that are in any way decent and we are looking at tuitions of 20K per year per kid while having 2 kids in private schools for the first 3 years, and all three kids in private schools for the next 6 years.

When I put our budget together I don't have enough money to save anything for retirement. I'm not even dreaming of vacations or buying a house. How would you budget?

Living in Hawaii is not negotiable. Private schools are not negotiable either.

Any advice would be greatly appreciated.

 

[ENT Doc]

You've created a lot of rigid constraints. But I think you should still be able to save for retirement when you're an attending, no? Your after-tax income should start around $250k. The expenses you list (and assuming other reasonable spending) should still allow for savings. Or are you referring to now? Basic thoughts - locums/moonlighting when off shift if allowed, getting your mom to help more and get your husband earning more. It's going to come down to making more, being frugal, and tax efficiency with the above constraints.

[Donnie]

If you can't find room for saving then you are spending too much money.  You are setting yourself up for $140k of fixed costs ($55k housing, $60k tuition, and $25k student debt), which is very high given you are making ~$200k after tax.  That leaves you with about $60k to cover food, clothes, insurance, cars, vacations, etc. and savings. Using a 20% guideline, you should be savings about $60k a year, so you are not in a great spot.  A budget is not going to help you.  You need to reduce spending on the big items like rent and education, otherwise you will never become wealthy.

[SValleyMD]

wow, between hcol rent, private school, 200K+ in loans, and caring for a parent, Seems like something would have to give.

So I’m not helpful at all but wci saying of “you can have whatever U want but not everythjng u want” seems to come into play.

Avoid burnout and play for the long game

[nolamd84]

Post your budget for some critiques

[Army MD Spouse]

I think you get to pick either living in HI or private school.

By my calculations your first year of attending hood looks like this:

Gross: $325,000 (you plus $15k husband)

401k -$18,500 (assuming you need to max this out to get the match, plus you need to be doing this to help with taxes and get retirement going)

Taxes -$84,590 (assuming standard deduction and 3 child tax credits, HI state income tax, SS, and Medicare)

Net Income: $212,909

Rent: -$54,000

Student Loans -$45,300 (assuming combined $200k at 5% on a 5-year payback)

Leaves $127,909 left before everyday living expenses or tuition. And this is only saving 5.7% towards retirement, which is inadequate. Even if you save just 15% (instead of 20% WCI recommends), you'd have to subtract another $30,250, leaving just $97,659. If you pay for two kids at $20k, you'd need to live off of $57,659 for utilities, food, gas, car maintenance, kids' activities, etc. Is that realistic in HI? None of this includes money towards replacing the clunkers either.

I think you need to look at increasing income (husband or you through moonlighting) or you need to look into putting your kids in public school (or homeschooling). Or leave HI and live somewhere with lower living costs and cheaper taxes. You can have anything you want, but not everything you want. Even when you make $325k a year.

[ajm184]

Not sure if my thoughts make much difference as your description is of a budgeting issue:

I get your husband is taking care of the children at this point, but only the youngest is at home full time currently.  If you mother is in good health, I would consider having her live with you to take care of the kids during the day (make sure school lunches are packed for the older ones, pick up/drop off, and caring for the youngest).

This will free up your husband to generate additional income by either growing/engaging in his existing business or getting another job/income.  In my mind, especially in a HCOL area, you cannot afford to have your husband generating his current income level.  50k to 60k gross p.a. would be a minimum target given the circumstances. As he has 50k of loans, hopefully they are educational in nature and he is able to turn his education into a viable income.

This approach will be hard on you, your husband, and mother, but even though your income is substantial you cannot support all of these 'obligations' on your own.

 

[LizOB]

When you can't save 20% for retirement on a $300k+ income, the amount of income is not the problem.

Agree that you can have anything you want but not everything at the same time

[q-school]

well if truly non-negotiable living in Hawaii and private school, then get ready for long career (nothing wrong with that), encourage husband to find more lucrative work (nothing wrong with that), and you will be fine.  not as wealthy as most here, but fine.  as long as you both stay healthy, etc etc.

but, most doctors in Hawaii that i personally know own a house that is frequently well in excess of 1 million dollars.  (technically all the doctors i know, but I'm sure there are some that don't).

i disagree with some of the posts.  the amount of income is the problem, given the fixed variables that you present.

HCOL plus multiple kids in private school plus super high state tax rate.  nothing wrong with it, just not the most common path on this board.  plenty of people who make similar decisions and live nice upper middle class lives.

 

[jpa]

If your husband is planning on staying home, would you consider homeschooling your children? I was homeschooled K-12--obviously not a good fit for every family.  However, with online/distance learning curriculums, most children thrive at home until 3rd/4th grade and will enter private school ahead of their peers due to the 1-on-1 attention.  By then, student loans could be paid off, and a lot more cash flow available.

 

Homeschooling has evolved tremendously in the past 20 years.  From religious to non-religious, conservative to liberal, there's a curriculum available for everyone now.

[Zaphod]

jpa wrote:

From religious to non-religious, conservative to liberal, there’s a curriculum available for everyone now.

Click to expand...

That sounds dystopian. I will continue to avoid knowing much about the homeschooling world, but if true, what a disservice.

[Sneezy]

I wonder about the $4500 for housing .

Looking on Zillow there are houses with 4 and 5 bedrooms for rent for significantly less than that (accepting I don't know anything about Hawaii).

If the kids are going to private school, it does't matter which district you live in and if spouse isn't really generating income he should be able to drive kids to/from school activity

If you could cut rent to $3000/month that would free up 18k for 401 which would be matched 100%.  If, as you say, there is a good change the group will top this up to 54k you will be saving >15% of your gross income which is perhaps not ideal, but not so bad.  As salary increases you could save more/increase loan payoff.

Agree with others that a bit of increased income would help a lot

[DCdoc]

The 491k of 50k+ is already 10% of your salary and way more than most people save. This is a 1% problem. Even if you only save another 5% (20-25k) from your 120k leftover (after housing and private school) that gets you to 15% saving $75k per year. It’s dosble becAuse you’ll ultimately be earning a ton of money. Some people will obviously suggest cheaper housing, lower cost of living or public school but Even with everything you outlined you’ll have 120000 left over after setting aside 50k in 401k. You might not be able to retire early, and that’s a sacrifice you’ll need to accept if you want private school and hcol but you can still save a ton of money.

[Eye3md]

Hawaii is a ridiculously expensive place to live. My wife and I visit there once a year, and I always dream of living there, until I start adding up the cost of that. Houses that would costs $100,000 (where I live) cost $600,000 in Hawaii. My income would have to triple in order for me to have the same lifestyle. Gas, food, taxes, everything else is more expensive there.

[wideopenspaces]

Unless your children are physically unsafe in their elementary school I have a hard time understanding why you can't at least do public school for elementary. With your mom and husband being at home, surely they can supplement and teach your kids basic math and reading. Research shows that it's what is happening at home that determines academic success in those early years.

As others have mentioned, there is no magic solution here. Something has to give. Good luck making some decisions.