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Started By
Message
Money illiterate but about to make significant income
Posted on 11/13/13 at 2:12 pm
Posted on 11/13/13 at 2:12 pm
About to be done with residency and looking to start with a gross of around $300k/year. Student loans will be paid off (although I think I'm still responsible for the taxes on them), meaning I'll be relatively debt free (other than a few credit cards which will be taken care of with my signing bonus). I'm assuming a net of around $200k/year after taxes, health insurance, etc.
2 questions so start with:
- Is it still recommended to go no higher than 28% of your gross income on your mortgage? I'm basically planning on staying in my rental for another year+ to save up a 20% down payment and then build my "dream house".
- How much of your income do you put away for savings? I can't remember the specifics but I think the hospital will match up to 4% and then another percent on top.
More info: I'm 35 and have 4 kids ranging in ages from 10 years to 8 months. So I've got a lot of cars and colleges to be saving for, as well.
I'll get with a financial planner before I make any major decisions but just wanted some opinions on what to be thinking about.
2 questions so start with:
- Is it still recommended to go no higher than 28% of your gross income on your mortgage? I'm basically planning on staying in my rental for another year+ to save up a 20% down payment and then build my "dream house".
- How much of your income do you put away for savings? I can't remember the specifics but I think the hospital will match up to 4% and then another percent on top.
More info: I'm 35 and have 4 kids ranging in ages from 10 years to 8 months. So I've got a lot of cars and colleges to be saving for, as well.
I'll get with a financial planner before I make any major decisions but just wanted some opinions on what to be thinking about.
15
Posted on 11/13/13 at 2:24 pm to Dale Murphy
quote:
I'm assuming a net of around $200k/year after taxes, health insurance, etc.
Congrats on being rich.
quote:
More info: I'm 35 and have 4 kids ranging in ages from 10 years to 8 months. So I've got a lot of cars and colleges to be saving for, as well.
Nevermind.
quote:
Student loans will be paid off (although I think I'm still responsible for the taxes on them)
This part I don't get. What taxes are you paying? Are they forgiven/paid off by your employer or something?
This post was edited on 11/13/13 at 2:26 pm
Posted on 11/13/13 at 2:29 pm to Teddy Ruxpin
quote:
Nevermind.
Exactly
My employer will be paying them off annually for as long as I'm there. So I may not be responsible for anything. I know if they're "forgiven", it's counted as income and you're taxed on it. Not sure how it works if the employer is paying them.
Posted on 11/13/13 at 2:40 pm to Dale Murphy
quote:
I'm 35 and have 4 kids ranging in ages from 10 years to 8 months.
What have you been living of off??
Before building your dream house, i'd make sure that its going to be a place you will be staying around. I have no idea but it seems like if you are just finishing residency you will possibly be moving around a bit with jobs?
also if you don't mind, whats is your specialty?
Posted on 11/13/13 at 2:41 pm to Dale Murphy
quote:
know if they're "forgiven", it's counted as income and you're taxed on it. Not sure how it works if the employer is paying them.
It all depends how its done. If its a benefit its taxed. If its a reimbursement than its not. Since its your post school employer it will probably be a benefit.
Posted on 11/13/13 at 2:44 pm to Dale Murphy
quote:
I'll get with a financial planner before I make any major decisions
I'm already here brah.
The 28% is still recommended. If you can stick it out and save up your money even better. Put a large chunk down. You should be living as simply as possible for a while. Sock away money in a 529 for the kids. I would also do a custodian account for them but don't tell them they have it. You also need a disability policy and life insurance.
Posted on 11/13/13 at 2:45 pm to Dale Murphy
quote:
I'm assuming a net of around $200k/year after taxes, health insurance, etc.
Not saying this won't happen for you, but I typically don't net anywhere near 67% of my gross after taxes, 401k, health insurance, etc. I made $165,000 last year so I would assume your taxes would be more than mine. It gets better after you've maxed out your Social Security pay in for the year, which is when you make $117,000 I think.
As for the mortgage, there are several calculators online that will give you an idea of what you can qualify for if you were to apply for a mortgage. You input your gross pay and recurring bills and the calculator gives you an idea of what you can afford. Good luck.
Posted on 11/13/13 at 2:46 pm to barry
quote:
What have you been living of off??
prolly made 45-55K as a resident plus whatever income his spouse brought in
quote:
i'd make sure that its going to be a place you will be staying around. I have no idea but it seems like if you are just finishing residency you will possibly be moving around a bit with jobs?
if he's getting tuition reimbursement put in his contract, it's prolly a 10 year commitment to get them paid off by the employer.
Posted on 11/13/13 at 2:48 pm to Toula
quote:
if he's getting tuition reimbursement put in his contract, it's prolly a 10 year commitment to get them paid off by the employer.
Once i saw the part about tuition i figured it would be long term.
Posted on 11/13/13 at 2:49 pm to JonTheTigerFan
quote:
Not saying this won't happen for you, but I typically don't net anywhere near 67% of my gross after taxes, 4
yea if he's making 300k, he's gonna be in the 33% tax bracket so take home will probably be closer to 150
Posted on 11/13/13 at 2:51 pm to Dale Murphy
quote:
Is it still recommended to go no higher than 28% of your gross income on your mortgage?
These vary - I like 25% of net, but many places use 28% of gross - I would recommend 15-year mortgages though - you start paying more principal than interest on Month 1 (or nearly so) - it takes years and years to do that with a 30-year.
quote:
- How much of your income do you put away for savings? I can't remember the specifics but I think the hospital will match up to 4% and then another percent on top.
Excluding any matching from your employer, 15% of your gross income should be going to retirement. Since you're 34, I would suggest starting at 18% and see just how much that hurts. Remember $1 saved now (at 6%) is worth $4 or $5 in 20 years - time in the market is the key to retirement.
Also, with your high income, you probably need professional advice - I would go ahead and kick the minimum to get the full match from the hospital - (Let's assume that's 5%, but I cannot dispute your 4%) - then you want to put another 10% in a private IRA, and you are probably in the traditional camp already. But, depending on your projections and retirement tax rate, ROTH might be appropriate. Your tax adviser can help you.
As far as specific details, you want a low cost, index fund, such as those offered by Vanguard. That will give you the most reliable return, over time, and the Bogleheads will tell you (rightly so) that lower fees is just the same as higher yield. They have nearly identical effects over time.
Posted on 11/13/13 at 2:57 pm to Dale Murphy
I'm pretty sure there are specific mortgage programs out there for doctors. A friend that is a doctor is buying a house and he got a preferred rate. Then again, he isn't starting out like you are.
Best of luck to you.
Best of luck to you.
Posted on 11/13/13 at 3:13 pm to barry
quote:
What have you been living of off??
Been living off of about $60k/year and struggling. Renting a place now that will suffice for another year or so. At least long enough to save quite a bit.
I'm a doctor. Will be working out of town but commuting from my hometown. No plans on moving. Kids are in school here, etc.
Posted on 11/13/13 at 3:18 pm to Dale Murphy
If your wife is good with money, I'd task her to manage a budget for you. Mo' money, mo' problems...
Posted on 11/13/13 at 3:19 pm to Dale Murphy
Posted on 11/13/13 at 3:19 pm to JonTheTigerFan
quote:
but I typically don't net anywhere near 67% of my gross after taxes, 401k, health insurance, etc.
Health insurance for my family will only cost me around $350/month. With 4 kids, I'll get a lot of deductions, etc.
Which reminds me, Broke, one of my peers started an LLC for write off purposes. Good idea? Not even sure if the hospital I'll be working for would allow that, but it gave me something to think about.
Posted on 11/13/13 at 3:27 pm to lilsnappa
whitecoatinverstor.com is a wonderful site, not just good advice for doctors, either.
Posted on 11/13/13 at 3:27 pm to Dale Murphy
quote:
Health insurance for my family will only cost me around $350/month. With 4 kids, I'll get a lot of deductions, etc.
My health insurance is $296 per month and dental is $70. I have the same amount if dependents also.
Posted on 11/13/13 at 3:28 pm to Dale Murphy
quote:It is treated as if your employer pays you, and you repay the loans.
Not sure how it works if the employer is paying them.
Posted on 11/13/13 at 3:29 pm to Ace Midnight
quote:
These vary - I like 25% of net, but many places use 28% of gross
This is a huge variance and one I have always been curious about. If this guy makes $300,000 gross and $200,000 net, the mortgage advice difference is $7,000 a month (28% of gross) or $4,167 a month (25% of net).
Based on my experience, the 25% of net is a much more realistic number of what the average person with a couple of kids and other average expenses can afford to pay on a mortage.
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