FIRE Starter 011: An Anesthesiologist and Pediatrician in Debt

The cost of becoming a doctor is staggering in terms of both lost youth and actual dollars.

The couple featured today, presumably in their early 30s, has been digging out of debt for the better part of two years, but they’re still hundreds of thousands of dollars away from being broke.

Thankfully, these kinds of debts are not insurmountable for a dual-physician couple, even if they seem to be relatively underpaid for their specialties. Would you take on additional debt to buy a home in their situation? Read on and answer in the comment box at the end to help this couple out!

If you’re interested in participating in one of three interview series, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes. To see other posts in the series, visit our Q&A archive.

 

 

Getting to Know You

 

Where are you on your financial independence journey? Have you reached a positive net worth? It’s OK if you haven’t! Most of us started out in the red.

We are still very early in our careers! I am less than a year out of residency and my wife graduated about 2 years ago from her residency. Accordingly, we are very much in the red with a significant student debt burden!

We still owe around $535,000 (combined) on our student loans, which is down from our recently refinanced amount of $555,000. This is all debt solely related to in-state, public medical school. Whew!

My wife and I were both fortunate enough to receive merit-based scholarships for most of our undergraduate expenses at in-state, public universities.

My wife’s family generously covered the small residual amount of her living expenses allowing her to graduate from undergrad debt-free! I used a combination of summer savings, part-time work during the school year, and a small subsidized loan to graduate undergrad with only $2,500 in loans.

Fortunately, we did our residencies in a medium-cost of living area that allowed us to make significant financial progress even as residents!

During our first 3 years, we accumulated $60,000 in retirement accounts in addition to our emergency fund, and our retirement accounts further improved to $150,000 by the time I graduated. Right now we have around $200,000 in retirement accounts and a $40,000 emergency fund/potential house down payment for a net worth of -$300,000.

 

Tell us about your household. How many people? Are you supporting anyone outside of your home?

My wife and I have the familiar story of two people who met in medical school, couple’s matched, and got married at the end of 4th year. Now, we are a 2-physician household.

We don’t have any kids yet, but we are hoping to start a family in the next year or two. We aren’t supporting anyone else outside our home.

 

In what field are you working? How is your career going? What do you like best and least about your chosen profession?

I’m a private-practice general anesthesiologist and my wife is a primary-care pediatrician. My career is off to a great start in a very fair and equitable independent group.

I’m on a 2-year partnership track with a very reasonable call schedule. I love the flexibility that my job provides and that I don’t bring my work home with me.

I think that anesthesia is the best field in medicine, and I really enjoy the work. I’m hoping to keep jogging along at a marathon pace, so I can continue to do this for another 20-25 years!

My wife has experienced the challenges of primary care work in two different private practice jobs since graduating. She enjoys the patient population that she works with, but the documentation burden and time spent coordinating care can be onerous at times.

She has worked 4-days per week since graduating but has recently cut back to 3-days per week to find some more balance in her life.

 

What is the most challenging obstacle to making progress towards financial independence?

We live in a beautiful, desirable location with a relatively high cost of living while working for around 25th percentile pay in both our jobs. Our combined salary is about $340,000 right now, with a maximum upside to around $495,000 (combined) starting later this year.

Right now, our biggest obstacle is our student loans ($535,000) and the costs of housing. Because we are both working in private practice, neither of us is eligible for loan forgiveness, and we are hoping to pay off this balance in 5-ish years.

Like most places across the country, home prices in our area have soared in the last couple years. The median home price in our county last year was $550,000 (up from $380,000 two years ago), and we expect to spend around $800,000 on a house when we eventually decide to buy.

 

Investing

 

How is your money invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?

Our money is invested 60% in US Stocks (including a 7.5% small-cap value tilt), 25% International Stocks, and 15% REITs. All of this is through low-cost index funds at Vanguard.

Because of our significant student loans and eventual mortgage, we do not have any bonds. We will probably stay 100% invested in equities and real estate until both of those debts are paid off.

The current plan is to build a “bond tent” that would cover around 5 years’ worth of expenses when we are planning to retire, but that plan has plenty of time to change.

 

Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?

During residency, we did about half of our retirement savings into our Traditional 401(k) and half into our Roth 401(k) + Roth IRA. We wanted to keep the possibility of public service loan forgiveness (PSLF) open for my wife for as long as possible in case she were to choose a job through a 501(c)(3) after graduation.

The Traditional contributions decreased our adjusted gross income (AGI) on our taxes which accordingly reduced our monthly payments through RePAYE during our residencies.

When it was clear that she wasn’t planning to work for a 501(c)(3), we did a Roth conversion on the entirety of our Traditional 401k, so now we are 90% Roth IRA and 10% Taxable.

Things won’t stay this way for very long. We will both qualify for our workplace retirement plans in 2023, so Backdoor Roth IRA + taxable is where everything will be saved this year.

 

Do you have investments in an HSA? How about 529 Plans?

We have never had a high-deductible health insurance plan, so we do not qualify for an HSA. We don’t have any kids yet, so we haven’t had a reason to contribute to 529 plans.

As we live in a state without state income tax (and therefore no tax advantage to contributing to a 529), we are unlikely to use them unless we move to a different state.

Our taxable account is invested extremely tax-efficiently, so there is little incentive to add 529 plans when we can likely cash-flow our children’s education expenses in the future.

 

What has been your best investment?

Our best investment was the $9.99 that I spent on The White Coat Investor: A Doctor’s Guide To Personal Finance And Investing in 2017. While I understood the importance of saving money and spending less than we earn, I had no understanding of the financial jargon associated with retirement accounts (Roth, 401(k), IRA, etc) prior to reading this book.

My medical school mentor recommended reading The White Coat Investor after we submitted our rank lists for The Match. Because I read this prior to receiving our first paychecks as residents, it allowed us to hit the ground running from the start of residency!

We established a financial plan and knew exactly how we would spend, save, and invest even before that very first paycheck. We have made tweaks and adjustments to our financial plan as our lives have changed, but it’s remarkably similar (just a bit more complicated) than it was 4 years ago.

 

Your worst investment?

Fortunately, we have successfully avoided committing significant financial mistakes, thanks to early financial literacy! There really isn’t anything that we would do differently with our finances since graduating from medical school.

 

Start receiving paid survey opportunities in your area of expertise to your email inbox by joining the Curizon community of Physicians and Healthcare Professionals.

Use our link to Join and you'll also be entered into a drawing for an additional $250 to be awarded to one new registrant referred by Physician on FIRE this month.

 

FIRE Kindling

 

What attracts you to the FIRE movement? Do you think you’ll retire early when you’re in a position to do so?

We try to live very intentional lives. As long as my wife and I have known each other, we have prioritized our medical school educations and residencies in order to become the best doctors that we can be, learning as much as we can to help as many patients and families as possible.

This has required a lot of personal sacrifice along the way. The whole time, we have desired to spend more quality time together and to re-prioritize our lives so that work is no longer our number one priority.

Now that our training is complete, we have tried to build our ideal lives together, and we are often inspired by the Venn diagram from a 2016 WCI article that described maximizing the overlap between “your current life” and “your ideal life.” We keep this Venn diagram at the top of our financial plan!

 

(Link: Using a Venn Diagram to Decrease Burnout | White Coat Investor The WCI article was adapted from Dike Drummond of The Happy MD who originally wrote about it in 2013, but WCI is where I saw it. Stop Physician Burnout: TheHappiest Doctors Build this Venn Diagram)

 

Because of these things, we are attracted much more to the FI part of the FIRE movement than the RE part. We share the same desire that many physicians have which is to keep working, but to work less.

My wife has already made moves to help better realize this ideal life, and we are hopeful that part-time work at 3 days per week will give our family the balance that we need.

I plan to continue working full time for at least 10-15 years, but would like to cut back to part-time or a no-call position in my early 50s.

All of this is still a long way into the future for us, but we know there are many things we will physically be able to do in our 50s that will be much harder if we wait till our 70s. Also, no day is guaranteed, so we are balancing enjoying our time now while saving for the future.

 

How do you anticipate your life changing post-FI?

After achieving financial independence, we will no longer need to work to earn money, so we can shed the less desirable parts of our work (for me, that is overnight call and weekends).

I would like to continue to work in a part-time capacity after achieving financial independence as practicing medicine allows us to help people while giving our lives some structure and sense of purpose.

 

What steps have you taken to hasten your time to FI?

Paying yourself first” is our favorite way to save for the future! While it is easy to get caught up in the math and strategies for maximal optimization of personal finance, with appropriate financial education and literacy this part is actually fairly simple.

Additional time spent maximizing is limited by ever diminishing marginal utility. We have pretty much followed the simple advice offered by WCI “financial waterfalls.” Tax loss harvesting is probably the last tax optimization strategy that is “worth it” for us.

Conversely, the behavioral component of personal finance is so much more important! After establishing financial literacy, my absolute favorite finance book is The Psychology of Money by Morgan Housel.

When my wife finished residency, we stayed in our same rental house and didn’t inflate our lifestyle. Combining the increase in income with the 0% interest, $0 monthly payments for federal student loans as part of the CARES Act allowed me to max out my 401(k) during my PGY-3 and PGY-4 years as my wife wasn’t eligible for workplace retirement accounts.

Money is fungible. When my wife’s 21 year old vehicle needed to be replaced last year, we bought a 7-year old used car instead of buying something new or “luxurious.”

Since finishing my training, we have moved to an area that is considerably more expensive, but we do a financial “check-in” every 1-2 months. We do a “reverse budget,” monitor our spending, and track our progress using Personal Capital.

Both my wife and I are fairly debt-averse and are hoping to pay off our student loans within the next 4-5 years. Right now we are using around 50-60% of our gross income to build wealth.

 

Are your friends, family, or coworkers aware of your interest in financial independence?

I’m pretty open about our desires to get ahead financially, and I think a lot of people see our desire for financial independence based on how we live our lives. In the right company, it’s something that we talk about (tactfully).

 

What advice do you have for others beginning their own FIRE journey?

While there is no better book for high-income professionals than Dr. Dahle’s, there is a lot that can also be learned from I Will Teach You to Be Rich by Ramit Sethi. He advocates for automating your finances as much as possible, using the Pareto principle to avoid losing the forest for the trees, and spending lavishly on the things you enjoy while avoiding wasting money on the things you don’t care about.

Feeling whole and happy as a person is just as important as financial success. I believe there is lots of value in the philosophy of Stoicism (and it’s very different from what people associate with the word “stoic”).

I would highly recommend A Guide to the Good Life: The Ancient Art of Stoic Joy by William Braxton Irvine. Practicing negative visualization has allowed me to feel gratitude for so many parts of my life and has allowed me to be a more empathetic and compassionate physician.

 

Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.

We are currently renting a house, but have to find a new place this summer as we are unable to renew our lease. By this summer, I will be halfway through my 2-year path to partnership.

We were hoping to stay in this rental for 2-3 years total to make some progress with student loans and ensure that the job was a good fit prior to purchasing a home and taking on additional debt (a mortgage).

After being here for a year, we know the area well and the jobs have been a great fit, but a house would likely cost around $800,000. A comparable rental runs $2,500-3,000 per month.

Unfortunately, my crystal ball is cloudy and we don’t know if housing prices will go up, stay the same, or go down in the next 12 months.

I’m estimating that we would need to stay in a purchased house for around 5 years in order to break even with transaction costs. Jobs in medicine are less predictable and more volatile than they were a couple decades ago and changing my job would essentially force us to relocate to another city.

In this context, how would you make a decision to buy a home versus continuing to rent? Do you think it is better to use a “doctor loan” with less than 20% down or a conventional loan with a 20% down payment? Any advice would be greatly appreciated!

 

PoF: Catch all the future interviews from those just getting started, at a crossroads, or at the end of their FI journey with a free subscription to Physician on FIRE.

 

 



 

I thank today’s interviewee for sharing their story, and I’ve shared my feedback privately with them. I wouldn’t want my opinions to influence yours. Please give your take and answer any questions they have had in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.

 

13 thoughts on “FIRE Starter 011: An Anesthesiologist and Pediatrician in Debt”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. good post. You guys are clearly smart and did your research early which puts you in a great position. Would love a follow up a few years down the line.

    Agreed you can’t really make a housing decision based on where you think the market will go, buy when it makes sense for you based on your personal and professional life.

    The main thing that concerns me is the 25th percentile. but to be fair I am not in anesthesiology, and maybe that is worth the sweat equity buy in. My understanding in speaking to some friends is there are better jobs out there where you could make a higher amount even during your employee period. Since you’re paying off such heavy student debt it may be worth looking into job arbitrage. I always like keeping my ear to the ground in terms of other job opportunities and making sure I understand my market value. Just something to think about.

    sad that even in state tuition can reach those levels.

    I wouldn’t take things too personally, that’s the downside of sharing details on the Internet, there will always be criticism you don’t expect. The criticism is not without validity considering this is a FIRE starter post, and decreasing your income early on is the opposite of goals, but I don’t think we have the appropriate context to criticize. You have to do what’s best for your family and mental health status first and foremost. Best of luck. would love an update after you’ve made partner

    Reply
  3. I feel like you are way ahead of the curve in what you’re doing and don’t need anything more than time to figure out the next steps. Great job!

    Also, I am opposed to all the passive aggressive comments about your wife. You guys are grownups. Sounds like you’re doing great, and with more thoughtfulness than most of your peers. Carry on, and good luck!

    Reply
    • Hi Reagan! Thanks for the kind words! We were pretty surprised to see such disparaging remarks from a couple commenters, but they must not understand what it’s like to be in our situation. I am extraordinarily thankful for everyone who works in primary care (and especially my wife) because it is very hard work that is unfortunately under-rewarded, overburdened by bureaucracy/documentation, and under-compensated in our healthcare system. We definitely feel like we are on the right track and if we can stay the course, we will be extremely successful in achieving our goals. Cheers!

      Reply
  4. The pink elephant in the room is that you are on partnership “track” for two reasons. First, to enrich your partners like they enriched their employers when they first started, and second, because you may not work out and they will let you go.

    Only you know if there is any history of that in the company, but if there are only a few partners, anything could happen.

    So my advice is do not buy a house until you are made a partner. You can’t predict housing prices any better than you can predict stocks. It’s random whether houses will be more or less in 1.5 years.

    Another issue is that your wife is not interested in paying down the debt; she is interested in having a wonderful lifestyle and having YOU pay down the debt. That’s all fine, as long as she is much hotter than you deserve.

    Reply
  5. dominating job you guys! well done! sounds like you will already make a very intentional and informed decision on the purchase of your home not sure if the hive mind can give any additional insight!

    I would recommend practicing “local” geographical arbitrage in making your home purchase decision. I live in NJ, Bergen County which is right next to Manhattan and property taxes and housing prices are astronomical! However, what you get for your money differs drastically within the county. We looked at a house In a Tenafly New Jersey that was $1.2 million and had a property tax of 40,000/year. This town is closer to the city, has very good public school systems. The house had 0.3 acres and 4 bedrooms. However we ended up going to upper Saddle River New Jersey within Bergen County which is further away from New York City but the same 1.2 million gets a much bigger house of 5 bedrooms, 0.85 acres, and property taxes 24,000 a year. Also has highly rated public school system compared to Tenafly, New Jersey. People in Tenafly, New Jersey are paying a premium for being closer to New York City but I work here in New Jersey so I do not need the close proximity the city. But even the town next to me called Allendale, New Jersey the same $1.2 million house will be the same size and same property size however the taxes would be 40,000 a year! It is the town next to me! I am saving $16,000 a year and property tax just by being in a town next over! Multiply that and compound when I invest that in my taxable account and I am sure I’m saving hundreds of thousands of dollars for my retirement!

    also, I would continue to rent until you really need the space. If you don’t really have kiddos yet, you might be paying a massive amount of mortgage/house maintenance for awhile in a house you didn’t really need yet. God forbid you are unable to get pregnant as well. My wife and I had 4 miscarriages and luckily had not committed to a house yet. Luckily it was really a subclinical hypothyroid problem and after 25mcg of synthroid, we now have 2 kids. We bought the house when my first child was 6 months old. We already got a handle of how much childcare costs, which made budgeting for housing expenses and mortgage easier.

    and finally, not really finance advice but related to above, if you guys do have trouble getting pregnant/sustaining a pregnancy, check your wife’s TSH! high normal is actually hypothroidism when trying to get pregnant. Would have saved us a trip to the IVF doc knowing this!

    Reply
    • Hi Rikki! Thanks for the advice about local geoarbitrage and conceiving! (Never thought I would put those two things in the same sentence!) I’m so happy you were able to fix the pregnancy issues so you can have the wonderful family you now have. Local taxes around here seem to be pretty consistent, but we are working hard to make sure we don’t buy more house than we need. We like the thought of ownership even if we are “renting” from the bank for the first chunk of the loan. We are very thankful we are in a more affordable market than the NYC area. Congrats on your success!

      Reply
    • Overall sounds like you guys are doing great. I am shocked by that student loan number though. Too bad one of you can’t do student loan forgiveness.
      As much as having your own home sounds fun, I also would wait a few years when you have more information on where your careers are going and are in a lower debt position.
      I am also surprised by the negative comments about the wife based mostly on negative assumptions. One of the biggest threats to your long term earnings is burnout. So if she works less days, but can keep it up longer, based on finances alone you might be better off. And hopefully both happier! I could comment too, based only on assumptions, that statistically wives do more housework and cooking. I didn’t hear anything in your article that made it sound like either one of you weren’t doing “their fair share” to contribute to your family. Thus the criticisms feel unfounded.

      Reply
  6. I’m about a year ahead of you in private practice anesthesiology. Sounds like we’re on a similar trajectory! We ended up renting a year and a half and purchased a home a few months ago for around what you’re planning to pay. My goal was to minimize the interest rate, so I ended up paying 20% down to do so and purchased a little towards points to lower the rate. We pulled that trigger when I was confident I was a good fit for our group and we liked the area of town where we wanted to end up. The goal is to stay put for at least a decade if possible. I worked my tail off for eighteen months to get our down payment, but it sure was nice to secure 2.5% for 30 years, especially when the Fed signaled their intention to raise interest rates. I found it difficult to qualify for a mortgage initially because of how I am paid and our aggressive payments towards student loans, but US Bank and Laurel Road worked with me when they more fully understood my payment structure. Good luck making this tough decision. With your debt aversion and frugal stance, I suspect you guys will do just great regardless of what you do.

    Reply
    • Thanks for the advice Marcus! We didn’t have any luck with Laurel Road or US Bank, but have found some other lenders that have been very easy to work with. Sounds like there is a lot of variability from state to state. We’re still going back and forth about 0-5% down vs. 10-20% down. Unfortunately interest rates are up pretty substantially (yet still low when zooming out to a 40-year perspective), but mortgage interest rates won’t hinder us in achieving financial success.

      Reply
  7. OP, note there are two tax advantages to a 529. One is you get a deduction on state taxes. As you notes, you won’t get that deduction due to no state tax. However, the gains in the 529 are all FEDERAL income tax free if used for college. If you put the money in a taxable account instead, yes you get the flexibility to use that money however you want. But you’ll pay capital gains on any gains. In a 529 all gains would be free. So you are losing something by doing taxable over 529.

    I’d love an update in 2-3 years with this person. That’s a huge loan burden and I don’t quite understand how it got that high with in-state public medical school. I can understand 300-400k but my goodness, over $525k? Maybe it’s the interest that accrued during residency. I’d pay that down more before you get a mortgage but I think given you are a dual-MD couple, you can manage both.

    That said, while I understand the wife’s desire for balance, working 4 days a week didn’t provide enough balance and so you’re at 3 already with that loan burden and no kids? Will the wife want to cut back more when there is a child, or will 3 days a week provide enough balance? Personally I’d have stayed at 4 and realized not working 5 days a week is nice and gone to 3 once there were kids. Without knowing her and making a huge assumption on my part, I just get concerned that she might feel out of balance once there is a child and want to cut back to 1-2 days per week given that 3 is now what she’s used to, and it sounds like by the time there’s a child there will still be a hefty student loan balance over $100k.

    Reply
  8. This is a tough one. Personally I love the flexibility of renting and we did rent from 2019-2022. But in a high inflation volatile housing market, rental prices can change quickly and we went ahead and bought (at a similar price point to what you mentioned) when our rental company sent us our new rate (a 20% increase – ouch!).

    I think if you feel there’s a good chance you will stay in the area for 5+ years, buying makes sense. Personally we did the 20% down because the interest rates were much better than the “doctor loan”options and thus seem like a better bet over the long term.

    I think home ownership is actually very overrated and I miss renting already but the stability can be important.

    Reply
    • Thanks for the advice SHU! People pursuing financial independence are usually bigger fans of renting and doctors are usually bigger fans of buying, which always makes for great discussions in the Physician on FIRE community. There are lots of “hidden” costs associated with owning a home which are easy to gloss over when the desire to buy a home starts burning. If we could stay in our current rental for longer, then we would, but we are definitely experiencing that disrupted stability than you mentioned. Moving every year or two is a lot of work!

      Reply

Leave a Comment