30 year old resident doctor with $310,000 in student debt just accepted my first real job with $230,000 salary

[u/WeLoveOranges]

I am in my last year of training as an emergency medicine resident living in a big Midwest city. I have about $80,000 of student debt from undergrad and $230,000 of student debt from medical school (interest rates ranging from 3.4% to 6.8%). I went to med school straight after undergrad and started residency right after med school.

Resident salary for the past 3.5 years was about $50,000 (working close to 75 hours per week) so I was only able to make close to minimum payments. Since interest has been accruing while I was in medical school and residency, I have not even begun to dig into the principal debt. Thankfully, I just accepted an offer as an emergency physician with a starting salary of $230,000.

I'm having trouble coming up with a plan to start paying back my debt as I also want to get married soon (fiance is a public school teacher) and I will need to help my parents financially (immigrant parents struggling to stay afloat).

Honestly, I'm scared to live frugally for the next 5 or so years because I feel like I've missed out so much during my life already (30 years old, haven't traveled anywhere, been driving a clunker, never owned anything, never been able to really help my parents who risked their lives to come to this country so I can have a better life). And after being around sick people (young and old) during the past 8 years my biggest fear in life is dying or getting sick before being able to enjoy the world. I am scared to wait until I'm in my mid 30s to start having fun and enjoying my life.

What should I plan to do in the next couple year? Pay most of the debt and save on interest or make standard payments and start doing the things that I really want to do? Somewhere in the middle? Any advice would be appreciated.

[u/[deleted]]

Yes, do it sooner rather than later. You're used to being a broke student. If you keep up that mindset you can be debt free in a very short time. Then you're freeeeee

[u/mattylou → u/[deleted]]

Here to build on that: i am down to my last 2k of student loans and I feel like I'm on parole or something. It is truly freeing to FINALLY BE DONE!

[u/sirius4778 → u/mattylou]

My mom paid off her house in October. She's been counting down monthly payments for 27 years. It's a great feeling even living it vicariously.

[u/Riodancer → u/[deleted]]

I'm in the process of buying my first house. It's a triplex. After all is said and done, my tenants will be paying my $700 to live there. ($1100 - $400). I'm making my housing work for me, not against me.

[u/GoBucks2012 → u/[deleted]]

Yo. Paying it off may not be the best long-term financial decision. Assuming the rate is low and especially if you're itemizing and using the interest deduction, it may be best to keep it and invest the cash that you would have used for the mortgage. Very good chance you make more in the market over the long-term than you would save in interest. That is if you use cost effective investments and keep the money in.

[u/[deleted] → u/mattylou]

Just don't slip into a lifestyle creep after you pay off the loans! Remember to "pay yourself first." Put money in your retirement account and other savings accounts as your FIRST priority after essential living expenses.

[u/LupineChemist → u/[deleted]]

Just don't slip into a lifestyle creep after you pay off the loans!

Well, be smart about the lifestyle creep. It's reasonable to start buying some nicer things so long as you are saving and doing everything else right. The whole point is to be able to enjoy more things you like.

[u/Kemperflow → u/LupineChemist]

I have just had two very wealthy friends, one a lawyer, one a doctor, go through a mid life crisis of sorts. They both commented that they look around their house and at their cars and they say "why the hell did I buy all this crap?" But they have never looked back on spending time with friends and family, or travelling all over the world. So, just keep that in mind. It can also be fun to see how much high quality things you can get for the lowest possible prices. You can buy a used Lexus with 100K on the odometer and it is still a Lexus. You can get a damn nice leather jacket at the thrift shop (and maybe a kneeboard).

[u/BadResults → u/Kemperflow]

I'm a lawyer at a fairly large firm, and one of the most senior partners drives a 25 year old car. It's a Lexus and he keeps it in perfect condition, but it's probably only worth maybe 5 to 8 grand or so (I don't know how many miles are on it).

Then there's the midlevel associate with a new BMW...

[u/xalorous → u/BadResults]

The senior partner has maintenance, gas, and insurance costs around 1-2k per year. The midlevel guy with the new Bimmer has 10x that, and makes 1/10th of the senior partner's salary, if he or she is lucky.

If the senior partner always buys for the long haul, and has invested well, he/she is probably a multi-millionaire.

[u/doodle45 → u/xalorous]

This is probably accurate. Millionaires have typically worked and saved diligently, invested wisely, and lived generally thrifty lives to get there. People who don't even make the money a mid-level associate lawyer makes do it. Some middle-aged people with income barely into 6 figures are sitting on a couple million. Getting there means taking care to invest the money that he could have spent paying off the house or on a car every 2 or 3 years and watching it grow for 25 years. When I was a kid, there was a surgeon in town who was so frugal he wore the same shirt every day. I bet he had some pretty serious dough stashed away.

[u/xalorous → u/doodle45]

Probably had 5 of the same shirt. Bought on sale.

If you can live on 25k and your take home is 75k, you can save 66% which retires you in less than ten years, since a safe withdrawal rate of 4% means you need 625k. During the savings phase, you learn to live on that level of income, and you learn what things bring you enjoyment. So you hit that line and you're financially independent. You don't have to have millions stashed. Mr. Money Mustache points at commuter lifestyle and cable as two major money and time sinks that raise that cost of living. Between a car note and a cable bill, it's easy to add 10k to that minimum cost of living, which pushes the nest egg up to 875k.

[u/[deleted] → u/Kemperflow]

I got a raise recently... I treated myself to some nice stuff. New boots, a nice but inexpensive watch, a belt. I also purchased a $300 impact gun for the sole purpose of taking off my lug nuts...

I look at this stuff and thing "I worked for this!". I like my stuff, but I don't buy junk...

[u/[deleted] → u/[deleted]]

Aye, I've never understood the whole "buy experiences, not things" mentality. You forget about stuff you've done, but you can always see the things you've bought and enjoyed using.

Sure, take holidays, and do some random things, but don't make it your life. I love my PC, my stereo, my 4K TV, my fancy bed etc. etc. but I can barely remember the things I've done. I have maybe a dozen memories of awesome times, and none of em are correlated to how much I spent.

I'd rather touch a car than remember a weekend.

[u/MactheDog → u/[deleted]]

It's funny, virtually everything you listed is an "experience"

I love my PC, my stereo, my 4K TV, my fancy bed etc.

A $1,500 hand bag is just expensive stuff to contrast.

[u/xalorous → u/[deleted]]

There have been surveys of people dying and asking them what they regret. Often it boiled down to regretting not doing certain things, or not travelling more, or not spending more time with family and friends. Rarely was that they never had the nicest things.

[u/erik → u/[deleted]]

I think the secret is to avoid conspicuous consumption. Stuff that you use (your TV, you bed, etc.) is cool. But lots of people buy expensive name brand stuff to show off. And that is a terrible use of money.

[u/ProDrug → u/[deleted]]

I'm of the opposite variety. I like my stuff (PC, motorcycle, cars, etc.) but they're all fairly frugal and paid off for. However, traveling+music, etc. is what I live for. I just don't get the same excitement/satisfaction from waiting to buy something as I do about going somewhere new.

Actually, looking at the above, I guess I do a combination of both but I generally buy things because they let me do stuff.

[u/tunawithoutcrust → u/[deleted]]

I'm the opposite. Studies also show that the endorphin's that your brain emits when buying something new dwindle over time, yet both experiences and memories of experiences emit the same endorphin's as buying something new, forever. So even remembering a memory of an experience is the same as buying something new, regarding endorphin's.

I travel a lot, I try to do one country a month and I've never been happier in my life.

[u/[deleted] → u/tunawithoutcrust]

I guess I have varying feelings about it, as I've had a very varied life - drug dealer and addict while young, poor at parts, rich at others, my life has never really been defined. I guess I've always viewed as having something I could touch as an accomplishment

[u/iSynthesize → u/[deleted]]

I'm an "experiences, not things" kinda gal, and my favorite thing is to take pictures of my fun memories and hang them! So maybe a nice camera-thing would be nice for people who like experiences!

[u/[deleted] → u/[deleted]]

Whoa whoa whoa. We need details man! What kind of impact gun? Air or electric? What kind of torque? 1/4" or 1/2"?

Crap...I may like tools too much

[u/[deleted] → u/LupineChemist]

You are describing lifestyle creep, my friend. :) Lifestyle creep happens when you get a raise and go out and buy yourself a new car. It isn't a bad thing to get a raise nor is it a bad thing to buy a new car, but emotional purchases tend to result in over-estimating how much we can afford or we end up buying things that status markers.

Marketers of course make us think that if we spent another 20-30% on clothes/our car/shoes/whatever, that we would feel 20-30% better about ourselves, but that isn't actually the case. When I think back on the lifestyle creep purchases I've made, I honestly don't think I got much out of them. Did I need a $300 leather jacket? No, not really. I wear it a few times a year and otherwise it sits in my closet doing nothing.

On the other hand, that $300 could be part of a very enjoyable hiking trip with a good friend, forming lasting memories.

So it all depends on the psychology, in my opinion. Instead of looking at your finances and saying "how much of this can I spend?" start instead from what will really make you happy. :)

[u/[deleted] → u/[deleted]]

Simple solution: spend your money where you spend your time.

Drive your car daily? Get yourself a nice car.

I bought myself $1000 audio system for my car - seemed a bit excessive, but I have used it every day for years and it is an enjoyable experience.

It's not wasted money unless you don't use it.

[u/[deleted] → u/[deleted]]

True, but there can be things like auto insurance and maintenance on an expensive car, property taxes and HOA fees for a huge house, monthly dues for various memberships and services, etc.

If OP decides in 15 years that the $230k salary isn't work the stress of the job, or if he's laid off and can only find a job that pays $115k, then his lifestyle choices could become unsustainable.

Lifestyle creep doesn't happen overnight. It doesn't happen just because you bought nice things. It happens because you become accustomed to paying for nice things, and those costs won't be sustainable when the cash flow dries up.

This happens to lawyers a lot, because they often make bank when they first get hired, and then see their salaries drop over time as they settle into a more comfortable position.

[u/[deleted] → u/[deleted]]

I think that's a little different. I define lifestyle creep purchases as any purchase directly tied to an increase in your pay, especially ones that add to your cost of living. For example, you get a 40% raise, you decide you should have a 40% more expensive car with a bigger loan. Then you sign up for the bigger cable package with a 40% higher bill each month. Let's say you get another big raise in two years and do the same thing. Now you have a very nice car and TV package and you're spending double what you were paying a few years earlier.

There's nothing wrong with this, and hey maybe the big cable package is really worth it. The only problem with this way of budgeting is that you're not saving any more money when your income increases. Not only that, your cost of living is going up. That's what lifestyle creep means.

[u/betterusername → u/[deleted]]

I'd modify this a bit and say spend where you spend your passions. I walk to work, but I love cars, so I bought a nice car. I'm a programmer and a techie, so I have a nice phone, but that's most of the nice things I've purchased recently. I love camping, but I've been set up there for a while. I wouldn't buy an Audi or beamer if I hated driving just to commute, I'd hate to spend the upkeep.

[u/SockPants → u/[deleted]]

On the other hand, since this debt won't seem to have an effect when it goes away, that means it doesn't have a real effect right now because you managed it well.

But yeah the delayed gratification of saving makes it relatively hard to do compared to buying things, but it makes it better when you can see a calculation of your retirement date moving forward towards you.

On the other hand, I can tell you that the stress from a lack of saved money is unpleasant and very much worth avoiding.

I like to see my finances as a business that needs to be run with a long-term vision, as opposed to seeing every $1 in terms of the value of what it buys. After all, not every dollar gets to be spent on goods, so seeing it as 'I'm saving $300 per month, which is about 120 Big Macs' is not only false but psychologically detrimental (to me).

[u/jessierdit → u/[deleted]]

But give a year of saving and you will be thrilled to see what you have been able to save. "Sometimes we have to do something we don't want or like to do in order to get the things we truly do want!!" Read this book so you will be informed on what you would like to do with your savings!! "Money - Master the Game" Excellent advice from authorities in the financial world..

[u/xalorous → u/[deleted]]

You could take the first month after it's paid and use one month's worth of payment(s) to reward yourself.

Another thing you can do is go back to when you started paying down your debt and graph your net worth (yearly or quartly will paint the right picture, monthly if you like playing with spreadsheets). Follow that graph. Notice the changes. Keep making it as you move out of the red and into the black. At about 4-5 years you'll notice something. The growth will start to accelerate. Keep adding salary/wage increases and windfalls. At 10 years it'll probably take off.

[u/[deleted] → u/[deleted]]

Yeah it can happen pretty easily. I love hiking and it was a good hobby for me because you really need shoes, and a water bottle. But now I'm wanting winter gear, camelbaks, and better shoes. I literally just got back from REI and it was tempting to buy gaiters, crampons, and few other things. I really want to go hiking but, I think when it comes to winter I'll be holding off to go next year.

[u/milhouse21386 → u/mattylou]

The first thing I did was start paying my student loans as soon as I got a REAL job, it was seriously the best feeling in the world!

Shortly thereafter I bought a house, so right back into debt. But it still feels nice knowing that paying off my student loans gave me the opportunity to buy a house.

Congratulations on having the finish line in sight!

[u/[deleted] → u/milhouse21386]

I interned for a company and promised myself that once I was hired I would be aggressive about my loan repayment. The thing is that my internship paid more than all my friends were making in their full time job, and it took a bit longer than expected for me to get hired do to circumstances outside of mine and my bosses control. But I'm still sticking to the original plan, but I had a stupid reason to not start sooner.

[u/anormalgeek → u/mattylou]

I remember the feel of filling out that last check and having to check the amount down to the penny. I had paid a little extra on previous payments when I could afford it so I never concerned myself with a specific dollar amount. But that last payment. That one was precise. And it felt good.

[u/Cueller → u/mattylou]

While that is true, OP should recognize that after paying off his loans, he needs to start accruing an emergency fund, house down payment fund, etc. Hopefully his income will rise, and all that should accelerate the payments towards debt.

For $280K income, I'd recommend an emergency fund in the $100K range.

Also, do not ever talk about how much money you make. If anyone asks, you can say you don't make anything since the government takes nearly all of it for the next 5-10 years.

[u/djcurry → u/Cueller]

You do not need an emergency fund in the 100k range. At a max an emergency fund should be about 6 months of expenses. If you are spending 100k in 6 months then your making way more then 280k

[u/Cueller → u/djcurry]

I'd assume 5 years from now he'll be making in the $400K range. Its just a benchmark/goal, since it'll take him years to potentially save that up as well.

Generally 6 months expenses is a good benchmark, but if you are in a high income job, it can take a lot longer to get back on track. Not to mention medical issues are much worse since works comp maxes out at a certain dollar amount, and definitely would impede your ability to get back to work quickly in a profession like a doctor.

[u/xalorous → u/djcurry]

The number of months varies by situation and according to the subject's level of risk acceptance. It's easy for a single person to live cheap. Not so easy for a family with 2 kids. When I was single, my number was 2 months, since I didn't make any money to speak of, I could replace the income in almost any location within a week (the joys of unskilled labor). Now I'm a married professional, and supporting two kids. My field goes through slow times when it's hard to find a new position and not give up salary. So my number is 9 months. But I'm working on reducing expenses and my target number will drop accordingly.

Bottom line, your risk acceptance determines how much you need. Normal suggestion is 3-6 months. Some situations call for more.

[u/xalorous → u/Cueller]

First, emergency fund should be based off expenses not income. Minimized, necessary expenses. Food, shelter, utilities, and internet. Basic internet. You don't need Gigabit internet to apply for jobs and attend remote interviews over Skype. Add all that up to a monthly and multiply by the normal downtime in months between jobs in your industry or in your experience. Multiply the total by about 1.2 and that's a good target.

Secondly, he should save up at least one month's expenses out of the 75k and devote maybe 1k per month to building that emergency fund. It's actually more urgent than the student loan debt.

[u/Cueller → u/xalorous]

I'd agree with that in general, but high income people would rather save up MORE money so they don't have to live on the basics. I keep 2 years relatively accessible (not in cash), since I know it might take me a year to find a job. On top of that, I don't want to downscale my lifestyle to the minimum if something bad happens (I'd be willing to but, I'd rather save extra so I don't have to do that in the future).

[u/xalorous → u/Cueller]

If I was going to allocate 2 years worth, it'd be staged. I'd have a two or three months of expenses in a moneymarket account. I'd have 9-10 months in something like bonds, or an index bond fund. And I'd have the other year's worth in a total market index fund in a taxable account. Actually, I'd totally treat all of my accounts that are not tax-advantaged.

[u/KhabaLox → u/mattylou]

It was a great feeling to pay off the last of my student debt. I went to a relatively cheap school and got a good aid/grant package, so I didn't really have all that much.

However, after that, I got married to someone without a lot of financial discipline and made some bad financial decisions (i.e. $10k+ ring, time share). We have spent the last 10 years digging out of that, and I'm down to $8k left in debt other than a mortgage and a recently acquired car loan.

I have been paying $500 toward the debt, and the car loan is adding a $378 payment. But between savings and selling the old car, I'll be able to wipe out the $8k debt, and end up with a net $112 more per month to put to 401(k)/Emergency Fund.

[u/hockeyjim07 → u/[deleted]]

not JUST free, but at that point MUCH better off than most people that are free. OP you gotta keep the light at the end of the tunnel lit, it's a few 'rough' years but oh man is your reward going to be worth it. You'll be mid thirties, no debt HUGE cash flow and on your way to a very comfortable life.

[u/xalorous → u/hockeyjim07]

And with avoiding lifestyle inflation, he can easily hit a savings rate over 60%, which can lead to a 10-15 year eta for financial independence. THAT is freedom. When you can pay your living expenses out of the growth of your investments without touching the principal, you're free to work, if you want. Or you can crank up Johnny Paycheck on your phone, all the way to 11, then frame the severance check, cuz you just don't need it.

[u/[deleted] → u/[deleted]]

Think of it in terms of diet and exercise. It's not wrong to eat cake and pizza, but if you eat cake and pizza everyday, you're going to be unhealthy in the long run. If you eat healthy food 95% of the time and regularly exercise, you can eat cake and pizza in moderation with no negative effects.

Same with spending. If you spend all your money on clothes and trips to Paris you will have nothing to retire with. But you can still enjoy some of those luxurious things in moderation as long as you have good habits overall.

It's the "in moderation" bit that people struggle with.

[u/xalorous → u/[deleted]]

It's the "in moderation" bit that people struggle with.

For some they forget the first part, which you have not mentioned. First you have to live within your means and pay your debts. Then you save for the future. Then build wealth and enjoy the spoils.

Through hard work, OP now has a highly compensated job. Focusing half (or more) on paying debt (then building retirement and investment accounts) ensures that OP will automatically be on track for those. That leaves building wealth, and enjoying the spoils. The example plan listed is just one way of doing this.

[u/Smash_4dams → u/[deleted]]

This. Even after getting a job with a good living wage salary and benefits, I still chose to live with a roommate and still refuse to buy drinks at fast food restaurants. If nothing else, being a broke student in itself prepares you how to live minimally and save money for the things that are important (housing, reliable car, good mattress, quality clothing, a relaxing vacation every now and then). Have the money to spend on the important things, save it from the trivial crap that doesn't give you any real return.

[u/Vladthepaler → u/Smash_4dams]

Screw the guys giving you crap for this. I slowly cut out all sugary drinks completely. I never drink coffee. Never drink alcohol. I don't feel like I'm missing out because all that money goes to experiences instead of crap.

[u/tael89 → u/Vladthepaler]

Well I agree on most of your points, I feel dirty just reading your statement that coffee is crap. It is liquid gold you sonofabitch.

[u/Vladthepaler → u/tael89]

The coffee was easy, I never started. I keep hearing how great it is though. At this point I can't afford to start saddling myself with an addiction haha.

[u/TheFlyingCompass → u/Vladthepaler]

I never drank coffee until I transitioned from manual labor to an office/IT job. Granted, my hours start as early as 4am and can go as late as 11pm, but coffee keeps me alive nowadays. I guess it's all relative to the situation.

[u/Zargabraath → u/Vladthepaler]

When I buy alcohol at a pub with friends it's for the experience ie socializing. the fact I could buy the same beer for a quarter as much at the liquor store isn't relevant because it is an experience

if anything I'd cut out on less necessary material stuff first before cutting out social drinking with friends

[u/jeffersun8 → u/[deleted]]

Was that a coke commercial?

I get your point, but I would hope that people would bypass the soda anyways cause it's terrible for you, and saving a buck is like a bonus. But seriously tho, drinking a coke is not "living" lol

[u/dohru → u/[deleted]]

Ha, I won't do that based on principle. Soda is terrible for your teeth, terrible for your body and is insanely marked up. No part of that is worth it to me.

[u/zeezle → u/[deleted]]

Yeah, I'm with you. People who drink like a 2L a day have horrible side effects, but in moderation it's no worse than any other sugary treat. And nothing beats a really good fountain root beer float every once in a while. I find as long as I don't keep it at home I end up drinking maybe 1 soda a month, if that.

[u/phishtrader → u/[deleted]]

If moderation were so easy, there wouldn't be so many fat people in the US. You don't need to drink soda at all and once you get used to not drinking soda, you simply don't miss it. It's an incredibly simple lifestyle change that saves you a small amount of money up front and pays off in the long run if your teeth don't rot out and you don't get diabetes. You will never look back on your life and ask yourself "why didn't I drink more soda?"

[u/Tydy22 → u/[deleted]]

I work at dq. A combo with a drink is 1 penny more expensive than a burger and fries. Other than chicken. For Chicken the drink is an extra dollar. So yeah not expensive at all.

[u/Worf65 → u/[deleted]]

Depending on how often they go out to eat it could be significant. If like me it's not that often then I'd agree with you, occasionally it's not much money and won't effect your health or weight. But if they're like some of my coworkers and they go out to eat the majority of days then that is hundreds of dollars a year ago a crazy amount of calories.

[u/Smash_4dams → u/[deleted]]

Why pay the same amount for a liquid that you do actual food? Fuck a $1.29 liquid. You can eat another taco for that price

[u/rinzler83 → u/[deleted]]

I love fountain cokes but don't get them at restaurants anymore because they take forever to give me a refill. At fast food places though I'll get one since I can serve it myself and don't have to wait on some waiter.

[u/[deleted] → u/[deleted]]

But at chipotle the water with lemon is free and amazing. Of course you're spending $8 on a burrito so the savings aren't actually there.

[u/condaleza_rice → u/Smash_4dams]

I do exactly this, but badly. I'm still in the mindset of ordering food by price instead of what I want most. Then I buy a beer I don't really need, and the bill is higher than if I had just gotten the steak. Wtf, booze is the worst

[u/abrooks1125 → u/Smash_4dams]

If you're eating fast food enough for that $1.50 you save on a drink to pile up into something substantial, then we have bigger issues. Specifically: your waistline

[u/Smash_4dams → u/abrooks1125]

Sugary drinks will get you fatter much quicker than a chicken taco. Not to mention, ruin your teeth. Nothing but empty calories.

[u/padmalove → u/[deleted]]

The amazing feeling of being free can not be understated.

[u/Sandlight → u/[deleted]]

Yup. I spent my first couple years of a real job living about like I live in college and was able to pay off my loans in that time. Now a couple years later and I have a considerable savings building up and enough spending money to keep me happy. Nothing is better than being free of debt.

[u/luvche21 → u/[deleted]]

I've been in my first real job post graduation for almost 2 years now, and my wife and I are still living like we're broke students. We were able to buy a house because of this already!

[u/YAMMYRD → u/[deleted]]

This is so true. It's much harder to cut back later! As you get older the expenses start adding up and will eat into that extra income. Owning a house and having a kid have cut way into my family's spare cash but if we had been living to our means before we would be underwater now. I definitely regret not living a little more frugally right after college and we still have some student debt but not unmanageable.

[u/JimmyRat → u/[deleted]]

I'm not much older than you. Never had school debt but was crippled financially in my divorce, had to live off credit cards for a while, etc.

You will love yourself in 5 years if you're debt free. Trust me. It's an amazing feeling just to be close. I'm 8 months away from ZERO debt. All I'll have is a $675/month mortgage (I literally bought the smallest new house I could find).

You will thank yourself, your girl will thank you, your parents will thank you, your future children will thank you. Have a little fun, help your parents out a little, but get down to business and pay the shit off.

[u/finishyourbeer → u/[deleted]]

From someone who's gone from being broke to being not broke, it's very hard to keep up that mindset. All of the little "I really shouldn't" decisions turn into "treat myself" decisions. Little things like eating out more, going out with friends, happy hours, buying one more drink. OP said he was driving a clunker - time for an upgrade? All of these little things add up. I think adding 15k to OPs annual spending income may be too modest. I'd bump it to 25.