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.
Net Worth
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.
Cash
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.
Investments
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.
Credit Cards
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.
Loans
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!
Congratulations on your progress! You cut down your debt by a ton. It does, indeed, help to have a big shovel.
Do you have any further plans for debt reduction in the coming year, or is it time to coast into a luxurious spendy attendinghood?
Thank you! If rates stay where they are, minimum payments for a year will come out to sound $41,000, and I don’t expect to put much more than that toward them. I don’t intend to inflate spending any at this point, as we’ve been pretty comfortable living on about $85,000 a year. Extra money will go toward taxable brokerage and probably a down payment.
That sounds very smart. I think that in 10-15 years, your future self will be happy with that move.
Great blog. Thanks for sharing.
I’m just starting being an attending and my financial life mirrors yours. Thinking about starting a blog merely for following my own journey and personal accountability.
Anyway, when you say you’re living on 85k per month, do you mean you simply earmark 7k per month towards living expenses? Before you paid off your car, was car loans in this pile? I guess I could look back and read old posts, but I’m on mobile so that’s a little cumbersome.
Thank you! Glad you’re enjoying it!
Yes, our monthly ‘budget’ comes out to just under $7,000 a month. I’m not obsessive about it; sometimes we’re a little above and sometimes a little below, but that’s the goal. I do NOT include in that number any non-revolving debt. So car and student loans were not included, but rent and insurance premiums, etc are. This means that total monthly ‘spending’ has been more in the neighborhood of $11k, when you include loan payments.
Blogging has been fun, even though I’m clearly not as a natural a writer as many folks who do it. The accountability part has been huge. Just don’t expect to make any money from it lol.
That net worth increase is huge!
How long do you plan to continue to “live like a resident”? Any big expenses coming up in year two?
Cheers!
-PoF
Was not expecting anything like this in the depths of the lockdown in late March… No big expenses coming up (two newish cars and no travel planned 😬). Will be starting to save for a down payment, but otherwise very content with our five-figure lifestyle for now.
Dr. PIB,
I recall the sense that the first attending year felt like a baller lifestyle upgrade – even if my living quarters more closely resembled a college senior’s dorm with a couple of non-inherited articles of furniture.
Have you felt the same sense of amazement with minor upgrades on the way? And can you name me a few of the treats you’ve given yourself this first year as models of indulgence within reach?
Congrats on the big win,
CD
Thanks CD!
We’ve definitely made some upgrades, though for better or worse some of the spending we might otherwise have done this year got curtailed by a stupid virus.
We’re still renting, but a house instead of a tiny apartment, with a yard and more than enough space to run around inside for our boys. I drive a fully loaded new-to-me Subaru that I call my anti-Tesla insurance, though I got that near the end of fellowship. The only real splurge purchase I’ve made has been a nice big TV last fall, which turned out to have been an excellent ‘investment’ for COVID. We also bought a bunch of google devices to put around the house that have been nice for music and weather and what have you.
Other than that the income has really just bought security and comfort from knowing that we can cashflow necessary expenses like clothes for our children as they grow, or a new laptop for my wife when hers dies. And we don’t have to stress about buying brand name ketchup at the grocery store.
Cheers!
AMAZING job. Living on $85K/yr is very impressive. (We spend 75% that much on childcare alone . . .). Am going to take a deep dive into your spending!
We have a low cost of living area and inexpensive habits (for now!) working in our favor. Thanks for reading!