WSJ: Middle Class Family Finances

[Abe]

I have a hard time understanding people with those kinds of high incomes who take out loans (outside of mortgages and old student loans) that they can't afford to pay off at any moment. To me you basically can't afford a new bathroom if you HAVE to take out a loan. Now, a low-interest loan because you don't want to cash out investments and it makes it easier to cash-flow, fine, but credit cards? At over $100k? I'm no great mustachian, so when I shake my head they must be ridiculous.

I'm not making excuses for them, but part of it is that with school, they just get so numb to debt, it just doesn't register anymore and they've programmed themselves to not worry about what they can pay off over time, because if they did, it would drive them insane. Also, most of them have never had a full time job, so have no sense of what "normal" is.

Most med folks I know graduate with the equivalent financial knowledge of a typical 17 year old. Many of my classmates didn't understand the basics of income tax just months before they graduated and started cashing 5 figure paycheques...and didn't know how to calculate how much to put aside for taxes.

They also jump from school into basically their 30s, so the stuff that others build up over time: cars, house, furniture, wedding, kids, etc, they tend to slam into all at once as they try to catch up with their peers. They can only conceptualize monthly payments. The big picture is almost unfathomable.

This just gets them even more numb to debt and payments.

Again, none of it is excuses, but I spent A LOT of time talking to doctors and dentists about their personal finances. It's a story I saw play out over and over and over again.

These aren't stupid people, there are reasons so many of them fall into the same traps. I've hosted events where I started with the question "okay, who here has a doctorate?" and followed with "good, now let's try to keep that in mind when this finance talk starts making you feel dumb"

I agree with the above regarding education but would characterize residency as, in fact, 1.5 - 2 full time jobs. I do agree that graduating from medical school, most of my peers didn't have full time jobs other than studying, which pays -$40k. Some had part-time.

Didn't know that dentistry pays so poorly compared to medicine and has higher debt. That sounds bad.

[Abe]

Average debt (undergrad + med school): $200k
Average primary care physician salary (after single person taxes and retirement contribution, using CA as example): $140k

$140k/12 = $11.7k per month

Average US salary (after taxes): $44k/12 = $3.7k per month

$11.7 - $3.7 = $8k more per month than average US worker.

Time to pay off $200k debt at $8k/month, assuming 7% interest rate = 28 months
Same at $4k/month: 60 months

It's not hard. It's just math. No whining allowed from MDs. It's what I tell my junior trainees when they're working 80 hours a week for $15/hr  (60,000/80*48 = $15).

As far as I can tell from your math, given the opportunity cost of getting the MD, a career in software with and undergraduate degree would be more lucrative. Some complaining might still be in order, because working 80 hours a week is dumb in any profession and I'm not at all convinced that it is good for the doctors or the patients.

Yeah, I am all about complaining about the work hours. That was dumb. I was being more specific about the after-training money situation with debt vs. salary. At that point the whining should end, especially if you're doing so while parking a clown car.

[Metalcat]

I agree with the above regarding education but would characterize residency as, in fact, 1.5 - 2 full time jobs. I do agree that graduating from medical school, most of my peers didn't have full time jobs other than studying, which pays -$40k. Some had part-time.

Didn't know that dentistry pays so poorly compared to medicine and has higher debt. That sounds bad.

Yes, I wasn't really counting residency. The dentists often don't have paid residencies, they usually pay an extra couple hundred grand to become specialists.

I don't know if dentistry has higher debt than medicine, I just know it's a lot higher than the 200K quoted above, especially for specialists where it's a few times that. I've seen a lot of US orthodontists with close to 7 figures or debt.

Dentistry is also very over saturated in a lot of areas, so it can take a long time to build enough clientele to consistently be busy.

I do find that the doctors I've worked with generally tend to be a little better with money than the dentists, because they get used to residency income. Having had a lower paying, full time job really does make a huge difference for perception of money.

The dentists who go from 0-60 financially tend to be more discombobulated by it.

ETA: incidentally, I previously thought I was responding to the anti-mustachian thread about two high spending dentists, which is why I focused so much on dentistry. Oops.

[ColoAndy]

$700 in minimum monthly credit card payments???  What the heck?  I would love to interview those couples.

[Tempname23]

I'm in Canada and dental school debt is way more than that here, so I can only imagine what it is in the US. I also know A LOT of new grad dentists in the US who take years to build up their career to making that level of income, so it's not quite as rosy as all that.

It's years brutal and abusive schooling and then years of brutal and abusive work, all to basically live on minimum wage well into your 30s. It's depressing and demoralizing.
I have a lot of patience for their whining.

Here are dental college costs of a dental school I'm familiar with.
https://tinyurl.com/y2973qlk This doesn't cover it all, 1st year, you have to buy about $10,000 worth of tools, it gets reduce somewhat for subsequent years. Running about $63k a year. Then add the cost of living.

[Bloop Bloop Reloaded]

Is it true that the average "primary care physician" (I assume this is what we call a GP) only makes $140k a year in the States? That seems an incredibly low amount given how long the training is and how large the student debt is.

[dandarc]

Sounds about right. The big money is made by the specialists. Even longer training there.

[Bloop Bloop Reloaded]

Damn. Yeah, I was talking to a few surgeon friends and they all only gained full consultancy qualifications in their mid-30s!!!

So what I took from that is that the money in medicine is a lot worse than I thought. Particularly if you're minded to retire in your 40s rather than your 60s. No doubt you can rack up a lot of money as a doctor in the latter part of your career if you're going to stay till retirement age.

[Abe]

Is it true that the average "primary care physician" (I assume this is what we call a GP) only makes $140k a year in the States? That seems an incredibly low amount given how long the training is and how large the student debt is.

$200k not including retirement contributions, health insurance or pensions.

[dandarc]

Might be interested in whitecoatinvestor.com - I believe the author was able to get the military to pay for all training, but of course there are big tradeoffs to consider with that path as well.

[dandarc]

Is it true that the average "primary care physician" (I assume this is what we call a GP) only makes $140k a year in the States? That seems an incredibly low amount given how long the training is and how large the student debt is.

$200k not including retirement contributions, health insurance or pensions.

Glad that's gone up some recently.

[martyconlonontherun]

I want to know the details on why someone would trade in their case to save 10% on the monthly payment. Reminds me of a couple decades ago when people would lose thousands trading in a SUV because gas was too expensive. You could save that $100 a month by driving less and not eating at mcdonalds 2* a week. Just seems like a overreaction without the benefit.

[Just Joe]

Some people don't think about that. Back when gasoline started climbing here after Katrina happened and reached over $4 a gallon, I finally did the math to see what our four cylinder actually cost to drive each day.

Wow - a real cost to run across town and back. Especially since DW and I were young and not earning much. So we did the obvious thing and drove less.

Many years later, a good weekend is if we don't start a car at all. A real trick considering the part of the country where we live. Can't walk anywhere. I can ebike and that's my preferred.   

[Chris Pascale]

Edit: reading comprehension fail. Cut "by $100" not "to $100".

I thought it was a $100 payment, also. Then again, I really can't comprehend such a car payment.

We have 3 vehicles - no payments. When my oldest got my 2014 Kia Forte she forked over $2,000 in cash. I then took that with another $6,000 and bought a 2016 Nissan Sentra. Our old van just got a 50k mile engine for $3,500.