I received this question privately on QuantiaMD and removed identifying details. I already gave the doc a response (see below) but I thought it would be helpful for him to hear from other forum members on the same issue. Remember this is a real person who is really reading this, so be kind even if you have to give tough advice. While it seems lots of forum members have their financial act together, this sort of question is not unusual at all in my email box or from people at conferences I speak at.
Here was my response:
What would you say to this doc?
I'm a doc with a salary around 300K, I have about 400K in student loans. I'm paying about 3500 per month. I have a lot of other expenses-kids' tuition, car payments, life and disability insurance, kids college fund. So pretty much living paycheck to paycheck. Can you recommend what to do financially?
Here was my response:
I'm not sure there is any nice way to say this, but it is ridiculous for any American to be living paycheck to paycheck on a $300K salary. Common among docs? Absolutely. But still ridiculous. You grew into your income way too fast and before even paying off your loans. You win the spending/saving battle with the big items- housing, transportation, educational costs etc, not the lattes. So if you want to get serious about fixing your financial situation, that is the place to start.
I typically recommend docs live a lifestyle similar to that of a resident for 2-5 years after residency, at least until the student loans are gone. In your case, that means living on $50K a year, paying perhaps $100K in taxes, and throwing $150K a year at those loans. At that rate, the loans are gone in about 3 years. At that point, you can increase your lifestyle quite a bit, making sure to carve out at least 20% of your gross salary to put toward retirement.
But it is a lot harder to not grow into your income than it is to cut back your lifestyle. For example, if all you had were $50K in gross income, you likely would be living in a different house, driving a different car, and the kids would be in public schools, no?The other alternative for student loan management, of course, is PSLF, but you have to be employed by a 501(c)3 and you had to make a bunch of tiny payments under the IBR or PAYE program in residency for it to work out. So that might mean a job change.
There is no easy fix here. Spend some time on The White Coat Investor blog and forum and you'll meet a lot of people who can help you learn more and provide motivation to do what needs to be done if you're serious about fixing your finances.
What would you say to this doc?
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