Financial Independence No Financial Incentive to Becoming a Doctor vs. Engineer? |
- No Financial Incentive to Becoming a Doctor vs. Engineer?
- US folks friendly heads up: Most states have an unclaimed property website where you can find unclaimed checks made out to you.
- Early retirement fund withdrawal strategies - HOW did you choose yours?
- Penny Jars to FI
- How are business owners and real estate investors comfortable with constantly taking out huge amounts of loans?
- Daily FI discussion thread - March 27, 2019
- Weekly Self-Promotion Thread - March 27, 2019
- Making small steps ....
- Mortgage Recast to Invest and lower Income tax??
- Near FI but insecure.
- This sub is hypocritical/biased (not sure what the right term is)
- Individual financed life insurance - worth it?
- Tips/resources for someone looking to FIRE with a minimum-wage income?
| No Financial Incentive to Becoming a Doctor vs. Engineer? Posted: 27 Mar 2019 03:28 AM PDT Hello FIRE community. I've been lurking here for a while and finally have a question I think is worth asking. My (24) fiancé (24) has spent most of her life with the desire to be a doctor. She pursued a BS and MS in Biomedical Engineering and is finishing an MS in Global Health. She has reached the point at which she needs to make a decision on when and where to apply to medical school. This exercise has caused her to question whether she really wants to commit another 7-10 years in school and training to become a physician or if there is something else she can spend her time doing that would launch an equally fulfilling and meaningful (to her) career. I'm posting here because part of our discussion has revolved around what our home finances would look like over the next 10-15 years in the case that she pursues medicine or something else. We ran some quick numbers on what the opportunity cost between three options was: A) Begin career now as an engineer B) Start medical school in one year C) Start medical school in five years Our assumptions were: - Starting engineering salary (Bay Area): $130,000 - Starting physician salary (taken from average in her desired specialty in CA): $315,000 - Medical school cost: $50,000 / year - Residency salary: $50,000 - Wage growth rate: 3% - Investment rate of return: 7% - Average effective tax rate: 33% What surprised us is how similar her expected lifetime income between the three career options is. If she starts school in a year, being a doctor doesn't return more than a career in engineering until she is 49 years old. If she starts school in 5 years, that threshold moves to 60 years old. Her decision depends on much more than money - she is deciding what she wants to do with her life. But, the financial side is important and needs to be considered, which is why I'm posting here. Has anyone here had to make a similar decision? How did the financial aspect influence your decision making, particularly on your journey to financial independence? Screenshot of spreadsheet calcs: Edit: Thank you all for your considerate responses! We really appreciate your perspectives. I've included some more information below to answer the questions that have been asked a few times. - Financial compensation is not the only factor in her decision to be a doctor, but it certainly needs to be part of it, which is why we've consulted this community to find shared experiences. - Given our experience thus far in the Bay Area, I see the $130k engineering figure as very conservative. I understand these absurd salaries are a point of contention on this sub and frustrate people. It is a very strange bubble to be in, but we are trying to capitalize on it. I'm working in FAANG and she would be trying to join one of these companies. For reference, Google L3 or Apple ICT3 (new grad hire) ranges from $110-200k depending on overtime (many positions are hourly first 1-2 years). Google L4 or Apple ICT4 (next level up) ranges from $130-170k. Annual RSU refreshes vary a LOT, usually between $30-150k. This is my perspective which I'm sure is a jaded from mostly interacting with people in the same boat as me. Others can confirm or refute this assumption. Either way, there is definitely a chance she doesn't land a salary like that! So, I've re-done the spreadsheet to assume a total starting compensation of $110k. The break even points move to 46 and 50 years old. - Someone asked a great question - are kids in our future? They definitely are! We'd like to start having kids around 30 years old. This is one of the other motivators that I wasn't going to touch on in this post, but might as well with all the feedback we're getting. If we want to have a few kids in our early 30s, the added financial stability of front loading her income will make living in the Bay Area trying to start a family more achievable. We're hoping her parents will eventually move in with us to help care for little kids, but that isn't a certainty. Child care is remarkably expensive here. As an anecdote, my co-worker who has 3 young kids pays $7k / month in child care. Needless to say, if she wasn't producing income during this time and her parents aren't able to move in, we'd either have to relocate and recalibrate with new incomes and expenses or reduce our savings rate to near zero (yikes). There is also the important consideration that having kids while being a resident will be very challenging and if her parent's arn't available to help, I would likely need to reduce my work time input to allow more time for the kids while she pursues her career as a doctor. - There have been several comments about the engineering salaries later in her career being really high. I understand the numbers look big, but they need to be taken in perspective with the timeframe we're talking about. A $300,000 income for an engineer seems insane! But 30 year from now it will not. A $100,000 salary would have also looked insane 30 years ago. The assumed wage growth rate of 3% is just outpacing inflation and I hope she would be getting some promotions on top of that! This is the compounding math we use in FIRE predictions working in reverse, come on guys! - I've seen comments going both ways on the assumed medical salary. We don't have great insight into this and there doesn't seem to be a lot of confidence in future medical salary projections. This assumption is for an OBGYN in California. We could be wildly off in either direction! Again, thank you all for taking the time to respond and give us your feedback. We really appreciate it! [link] [comments]  |
| Posted: 26 Mar 2019 08:22 PM PDT Google 'unclaimed property state name' Just as a general heads up—most states have an unclaimed property website where you can search your name (and common misspellings of your name) and claim any outstanding checks that have been made out to you. If you have moved around a lot, you likely have some random money that never got forwarded to you. Cheers! Edit: As per u/ennsy below resources for Canadians [link] [comments]  |
| Early retirement fund withdrawal strategies - HOW did you choose yours? Posted: 27 Mar 2019 09:35 AM PDT Right off the bat, this post is NOT asking how to withdraw money once you FIRE. We've had plenty of those posts, including this one. Dividends, Roth conversion ladders, rental income, side gigs are all options people are using to fund their early retirements after the accumulation stage. We've got plenty of threads on this. We also have plenty of threads on how to navigate the accumulation stage (max savings rate, look to increase your income, move to a LCOL area, buy and hold index funds, etc). But I feel like a lot of folks in here get so focused on the accumulation stage that they don't necessarily understand how it plays out down the line. I think the thread I linked to above exemplifies this. Don't get me wrong, adopting a FIRE lifestyle is extremely beneficial in and of itself. But I'm wondering if people put as much thought on the method by which they'll access all their funds in the future as they do on maximizing their savings rate in the accumulation phase today. If they do, I'm curious HOW they choose said method. So, I thought I'd ask the following: For those who are in the accumulation stage:
For those who have FIRE'd already:
Hopefully we can get a good discussion going on this. And if it's a repost.... Well then I hope we can at least offer updated responses that I'm sure people will still benefit from. [link] [comments]  |
| Posted: 27 Mar 2019 10:06 AM PDT I went to a parenting class recently and the concept of the series was about parenting through the phases. One of the effective visuals they recommended was having a big jar filled with almost 1,000 marbles to represent the each week you'll have with your child before they become an adult. We stole the idea with some changes. First, instead of marbles, we used pennies. The ages of our kids range from 4-10. I calculated how many weeks until they graduate high school and figured out the appropriate size jar to get to hold all of the pennies. That way, we can see that if a jar is half full, then we're half way to the end. (.75 liter, in case you're curious - Bormioli Rocco B0727PL21D Fido Clear Jar .75 Liter 25.25 oz). Each week, you take a penny/marble out of the jar. You reflect on the previous week and think forward to the next week. It helps you to really appreciate each week and understand, this life's time is really limited! How does this relate to FI? I'm copying the idea. I'm going to use 3 jars (most likely) each one a different size.
So each Friday, I'll take a penny out of each jar when I leave. It'll represent the progress in time to get to each goal [link] [comments]  |
| Posted: 27 Mar 2019 12:13 PM PDT I see business ownership and real estate investing as a good path to fatFIRE but it seems like taking out large amounts of loans are unavoidable in these fields. I just got done paying off my student loans and some credit card debt. I shutter at the thought of going 100's of thousands of dollars into debt to buy real estate or a business. To continue the success, you would need to take even more loans. I know a family friend who is nearly $11 million in debt from buying an apartment building as well as $5 million in debt for replacing machinery for his businesses. To him its normal, everyone who works with him does it. How are people like that not worried about markets crashing or their business failing? How do they get any sleep at night knowing they have that much to pay back? This is a mindset that I, as an employee cannot grasp. [link] [comments]  |
| Daily FI discussion thread - March 27, 2019 Posted: 27 Mar 2019 01:08 AM PDT Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| Weekly Self-Promotion Thread - March 27, 2019 Posted: 27 Mar 2019 01:08 AM PDT Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. [link] [comments]  |
| Posted: 27 Mar 2019 10:36 AM PDT Starting my journey towards FI. I am 42, very lucky to be a SW engineer in California, Net Worth = ~$300k mostly in index funds, 401k and real estate. My salary increased a lot in the past few years, and lifestyle creep happened slowly but surely. Now I feel I have almost a responsibility to FIRE instead of increasing my life style. What I did in my first week: - Saved $15 a month on garbage collection by switching to the smallest size. We are working towards becoming a zero waste for the past 6 months (like we buy stuff in bulk, bring our own containers to the grocery store, stopped buying stuff with too much packaging). I feel like frugality and ecology are actually connected. - Saved $10 a month on internet by renewing engagement for 12 months. I do not have any alternative to Xfinity anyway. :( - Cancelled Netflix ($15). Time to watch again this pile of DVDs under my TV. - Stopped daily coffee shop stop ($4 about 10 times a months). Daily coffee shop stop is part of culture here in California (if you can afford it), but when you realize how much money it costs in the long run, that's as expensive as smoking. - Next in line: not renewing Amazon prime and Costco (these things do not "save" money, they give you more incentive and opportunity to buy more...), continue to sell the stuff I do not use (minimalism is also connected to FI I think). What about you ? What did you do in the past month to tone down expenses ? Any tip to share ? [link] [comments]  |
| Mortgage Recast to Invest and lower Income tax?? Posted: 27 Mar 2019 10:31 AM PDT I recently sold a house and put the money down on my current mortgage. (Had 2 houses, now have 1). The sudden principal drop free's up the option to recast the new low principal amount to the original loan term, saving $700 a month in principal payments. The recast costs $250. My question is, should I do a recast on my mortgage, and up my 457b/403b contributions? I am thinking the income tax savings makes this all worth it. Details below: Current mortgage amount about $25000, 3.8% interest rate. Mortgage payment monthly $800. (Not counting taxes, etc.) Paid off in 30 months. Recast $25000 my Mortgage payment drop to around $100-125. (Not counting taxes, etc.) Paid off in 26 years at minimum payment, but I could pay it off at anytime with a lump payment. Current Income, married filing joint is $110-120k. (Wife's income varies). This puts about us about $8-18k into the 22% bracket after the standard deduction. If I invest the additional $700/mo in 457b, it drops our taxable income completely out of the 22% bracket. My original thought was to pay the house off for psychological benefits and to guarantee a "3.8%" return on the money. Now I am thinking I was really wrong. Help please. [link] [comments]  |
| Posted: 26 Mar 2019 11:21 PM PDT Near ready to pull trigger on my 9-5 but feel insecure on FI readiness. What if downturns reduces the portfolio? What if health care costs goes up? What if the benefits I give up is essential for the future? What ifs... Any suggestion how I can get pass that point? [link] [comments]  |
| This sub is hypocritical/biased (not sure what the right term is) Posted: 27 Mar 2019 03:04 PM PDT I made a post here a few days ago about how I achieved financial independence and to my surprise it was not well received at all. However, a similar post got thousands of upvotes. I want to understand why. I would argue that turning down a job at Microsoft in 2004 and starting a software company was a very risky move not long after the dot com crash and I can't believe that this subreddit approves of the idea. In my situation, I made an investment after completely paying off all of my debts, while holding a well paying software developer job in a safe company and gaining experience/connections. I would argue that what I did was less risky. If his company didn't work out, it would have been much harder for him to recover than for me. Also I want to add that when I graduated college, I was in quite a bit of debt and was not lucky enough to have my parents pay for my schooling or get an athletic scholarship. I just wanted to point out that we both took a risk, but for some reason this sub likes one type of risk, but not the other. [link] [comments]  |
| Individual financed life insurance - worth it? Posted: 27 Mar 2019 06:48 AM PDT Hello, Long time lurker and was wondering if I could get some input on the benefits/drawbacks on individual financed life insurance. The proposal is I borrow 3.5M dollars and pay only interest for 10 years at 75k from 44-53. I don't make any withdrawals until 66 upon which the principal is projected to be 9.6M. At that point I borrow 450k tax free against the principal until 83. Additional data: Guaranteed floor rate of 0% year one 6.09% year after. On track for FI but wondering if these things are even a good idea. I can attach the illustration if that helps. Edit: The principal is invested and projected to grow and pay the loan off. I just need to have collateral as seen in the illustration at https://m.imgur.com/a/t92o719 Edit2: The supposed benefit of this is borrowing money, investing it in market, it grows for 10 years, pays off the principal and then I can borrow against my life insurance and not pay taxes. At my previous company all the execs did this as a benefit. Edit3: This is life insurance outside of work by paclife. My stats: 3m cash in high yield savings 1.2 in investments 1.5 in real estate with 700 debt 575 income Save an additional 2k a month 6 % 401k with 100% Match 10% post tax Roth Backdoor. Has no one heard of these before? Final edit: Just wanted to thank the few people who actually answered. The reason I was looking at it is my friend and I sold our business and after talking with Financial planners this was suggested as a way to ensure retirement as well as a death benefit to increase wealth for my kids. I had never heard of it and was curious if other people had. To the commenters on why I don't retire. I love what I do, I have to stay with the company that bought mine for 2 more years and adding extra money to my bank account doesn't seem like a bad idea. Plus at 45 I will be bored by staying home. [link] [comments]  |
| Tips/resources for someone looking to FIRE with a minimum-wage income? Posted: 26 Mar 2019 11:27 PM PDT I'm wondering if any of you have suggestions for someone like me who doesn't have good employment prospects. I am, however, willing to live frugally, and I've been able to save up 20k from low-wage jobs over the last few years by living at home. I don't have any debt. I want to move out though, but I still want to keep saving money. Any suggestions? Should I invest in index funds? A Roth IRA? Should I save up enough for a down payment on a house, then rent it out with a 15-year mortgage and move in after the tenants have paid it off? I'm willing to live out of my car, take up seasonal work, live an unconventional lifestyle, and do what I gotta do. I'm an American with EU citizenship, so I'd consider moving abroad and trying to find some kind of low-paying online work, like data entry or freelance writing. Do you guys have any suggestions? [link] [comments]  |
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