It’s been 12 months since I started work as an attending, marking the very bottom of our net worth at -$161,000. We had no emergency fund, a five-figure investment portfolio, almost $20,000 in credit card debt, two car loans, and $200,000 in student loans. While all that still put me in a better financial position than many of my colleagues (and certainly better than current students who are graduating into $300k+ student debt), the prospect of digging out of that hole was daunting to say the least.
Fortunately, I had a big shovel.
Let’s take a look at what is possible when a new attending lives below their means, while still spending freely and living comfortably.
The top line story is that in one year our family saw our wealth increase by $194,000 and entered positive territory, despite a temporary salary cut and one of the most bizarre market crashes in history due to COVID-19. Not too shabby. This did not come from funneling money into any one place, but rather was the result of a balance between saving, investing, and paying down debt. This balanced strategy functions as a hedge, and it should save me from too much FOMO, regardless of what the market or my variable student loan interest rates do.
One of the most common debates in personal finance is over what constitutes a prudent emergency fund. Many people get antsy when their money sits uninvested, but the obvious counterpoint is the importance of a safe pool of cash should you suffer a major financial setback like losing your job or incurring a medical expense.
This gets especially heated in physician and other high-income circles. Why would I keep any money on the sidelines when I am bringing home five figures every month and medical services will always be in demand? Even putting frivolous spending aside, there are so many other excellent uses for my money like retirement accounts and aggressive debt repayment. This is certainly the camp I found myself in as I completed training.
Well, we now know that something can in fact reduce demand for physicians, especially those who perform elective procedures like myself. In mid-March I abruptly stopped seeing patients in clinic and was performing about one injection per week, only in cases when thought it might keep the patient out of the emergency room. As this situation stretched into April, I began to truly fear for my hospital system and my job, compounded by the fact that I knew there would be nowhere else to find work if I were to be let go.
Consequently, I started hoarding cash to build up a three month emergency fund, and our savings increased by $26,000. I fully intend to keep at least this much in cash, perhaps even extending it to a six month fund.
While this was by far the mostly volatile area of our finances, it probably did the least to keep me up at night. From February 20th to March 23rd, our investment portfolio dropped by $46,000 (or 31%), even with continued 403b contributions. Despite this, the knowledge that the vast majority of of this money is earmarked for retirement (and the rest is for our kids’ college, 15+ years from now) was enough to calm most worries.
This is made up of maxed-out 403b contributions (no match, sadly), backdoor Roth IRAs, and 529 accounts for our two boys.
We just made our backdoor Roth IRA contributions for 2020, and between contributions and gains our investments have seen an increase of $80,000.
This has been a major relief to get rid of. I opened a credit card near the end of fellowship with an 18 month 0% APR period and a credit limit over $20,000(!). My intent was to use this for daily expenses through the fellowship-to-attending transition, and then pay it off after my first year of attendinghood. This is basically what ended up happening, but I somewhat underestimated the stress of such a large amount of credit card debt hanging over my head, even if it wasn’t costing me interest. It did allow me to do some temporal arbitrage and I’m sure I made a modest amount of money by doing this, but I don’t know that I would necessarily recommend it or plan on ever doing it again.
Our credit cards are now paid off in full every month, and getting rid of this balance raised our net worth by $12,000.
Finally, how much progress have I made toward the namesake of this blog?
As I’ve outlined on several of my recent monthly checkup posts, the rates on our student loans have reached truly ridiculous lows, with both hanging out at <0.7% for several months now. There’s no way for rapid pay down of loans like that to make any financial sense, so I have been putting the bare minimum toward them for the majority of the past year.
The more substantial work on this side of the ledger came from paying off both of our car loans in their entirety. This has been a nice little boost to cashflow moving forward, and it gives us peace of mind knowing that we are free and clear should there ever be a need for a new vehicle.
Along with investments, this represents one of the top contributors to our increased net worth, with $76,000 of progress.
Overall, a balanced approach toward wealth growth has gone a long way in my first year as an attending. Hopefully this represents the bare minimum, and it’s even farther uphill from here!