“Where Did the Money Go?” – A Financial Update after 1 Year as an Attending

“Where Did the Money Go?”

A Financial Update after 1 Year as an Attending

By: LifeofaMedStudent

1 year down as an attending! It’s been a great year being out of residency and on my own as a physician. This post will be an update to some of the financial goals I had in the first year. While #LifeofaMedStudent isn’t a classic financial blog, I do think to share my own journey, including finances, is beneficial to those younger docs in training and new attendings. The good decisions, bad decisions, and successes along the way help share a behind-the-scenes look at the often taboo topic of money in medicine!

First, a comment on the clinical aspect of being a new attending. I was blessed to find a job that paid well, had a very reasonable lifestyle, and had an older group of partners that have been a great support system this first year. I get to practice typical community hospital-based anesthesia, but also am a major part of the cardiac program – doing everything from routine CABGs, to valve replacements, and a growing interventional side with frequent TAVRs. I sometimes miss the trauma of the big city – there is no rush like seeing “30yo Male, multiple GSWs, vitals unstable, ETA NOW” come through to your pager! But, (thanks to our CRNAs) I rarely get woken up at night these days, and all-and-all life has been very good with this job both professionally and personally.

Heading into a look at the financial side, I want to note that having an anesthesiologist income, in a low-cost of living rural/community practice, in a physician-friendly state…. makes everything easier. It’s ok to care about money and go into medicine. It’s ok to base your specialty choice using future income as a factor (the higher your student loans, the more important that maybe). It’s also ok to ignore income entirely and follow whatever your passion is regardless! Just know the data, know your self, and make the best decision you can at the time. I say all that to lead to this, I’ve (and my family) have done an overall poor job of “living like a resident” the first year out. In spite of this, we have met and in some ways exceeded basically all the financial goals I had in mind for the first year. The reason – the high income of an anesthesiologist allows for it!

Without detailing my exact compensation, I’ll say a typical starting anesthesiologist salary in Indiana is about $400,000. So in the last year, what have we done with that amount of money? (Note: I’m married with one wonderful 2-year-old daughter and an amazing wife who stays at home.) When I detailed my progress in the post “New Attending Financial Steps” here was the 6-month summary at the end of 2017:

“To recap, in 6-months I managed to save ~$43,000 for retirement, pay off $20,000 in credit card debt, and pay off $20,000 in an auto loan. My net worth went from approximately -155,000 in July 2017, to -80,000 at the end of 2017. At a similar rate, I should hit a positive net worth in the second half of 2018, maybe earlier as I really start tackling the student loans! It’ll be so great to get back to ZERO! “

In the first half of 2018, we saved an additional $47,000 for retirement! The breakdown:

• $12,000 toward the 401k.
• $11,000 match (most from anesthesia and a little from the solo401k of #LifeofaMedStudent).
• $11,000 to his/her backdoor Roth IRAs.
• $7000 to a taxable investment account.
• $6000 to our “Stealth IRA” Health Savings Account we are treating as a retirement account.

That means a total of $90,000 toward retirement in the first year! The goal was to save at least 20% of our income and that goal was achieved with a few percent to spare. Woo! Back in March, we also crossed the $100,000 mark for our retirement accounts – another goal checked off in the first year!

Most of the other financial steps typical of a new attending were covered in that previous post, but include disability, life, and umbrella insurance, all of which I had by the end of 2017. I also noted I refinanced my student loans at that time, and have been putting $4-5000/month towards those in 2018. This is part of my goal of having my original balance of $230,000 in student loans paid off in less than 5 years!

Lastly, for 2018 another goal was to start a 529 college plan for our daughter and contribute up to the max tax benefit amount for Indiana of $5,000. We did that back in January and felt great to have prioritized that first, though the stock market hasn’t been particularly kind to that decision.

“Where did the money go?”

With our retirement/financial goals examined, let’s look now look at a rough estimate of just where that anesthesiologist salary went too.

• $400,000 salary + $11,000 retirement match
• ~30% to taxes = $120,000
• $90,000 to retirement
• $40,000 to high-interest debt (credit card & a car loan paid off in 2017)
• $30,000 toward student loans
• $26,000 to the mortgage
• $5,000 toward a 529 account
• $6,000 for the Anesthesia Advanced Exam & an Oral Board Prep Course (I consider this an “investment” of sorts)
• $10,000 to term life and disability insurance premiums
• $10,000 to increase our short-term savings account/emergency fund.

That leaves about $80,000 in lifestyle spending this past year. Not a small amount by any means, and certainly not “living like a resident.” The good news is that while an increase, it wasn’t a massive jump from our spending in the last year of residency when I was able to make a bit over $100,000 with a large amount of moonlighting thrown in. We weren’t saving nearly as much, weren’t paying as much in taxes, didn’t have as big of a mortgage, and didn’t have as large of insurance products then.

Honestly, though, I guess I never really planned to live like a resident anymore, even if it’s a phrase I almost always recommend. I planned for us to save about that much, meet those goals. Once we were, I shouldn’t be surprised that we then spent what was leftover, for better or worse! That’s the benefit of an anesthesiologist income – the balance of what we feel is a generous lifestyle, in a low-cost of living area, all while meeting the financial goals that are important as a young physician. That included two family vacations, a weekend in Vegas, a surprise hot tub rejuvenation, a couple of fancy dinners, and a few semi-luxury items we each had wanted for a while, and a pretty financially care-free day-to-day life.

Did I do everything right? Nope, definitely not. Matter of fact, there’s a decent list of things I’ve done wrong both in the past and currently. That’s what I like about blogging about money, it keeps me honest when I slip up. Here’s a small list of some of the questionable financial decisions I’ve previously talked about:

• Multiple financial mistakes in residency – listed here: Top 5 Financial Mistakes I’ve made during Residency.
• I bought a home as a resident (definitely wrong).
• Used a physician home loan to immediately purchase a house as an attending instead of saving up for a 20% down-payment. (I was smart enough to keep the purchase price less than 1x income)
• Besides not really living like a resident and significantly speeding up some of those financial goals, I also previously noted that I was over a year late on refinancing my student loans when I knew PSLF wasn’t going to be an option.

Then most recently, I somewhat sheepishly (at least in the financial blogging community) admit to having fallen into buying a “doctor car” trap I swore I wouldn’t do previously. Actually, in my case, it was actually a “doctor truck.” I did at least buy (finance) one a couple of years old and with a little above average miles for the year to get a decent deal. BUT, honestly/admittedly no one with >$200,000 in student loan debt has any business buying anything with “Denali Ultimate Package” on the sticker.

Like any good husband, I fully blame my wife. After being an attending about 8+ months, I finally was starting to look to replace my 225,000 miles Honda that smokes every time you drive it with a truck arguably needed in our rural area. My wife, wanting to classically “reward me” for finally making it through training and all smart financial moves we had been making, told me to stop worrying for once and please “don’t go buy some little wussy truck.”

This was one disagreement I didn’t mind losing – challenge accepted! In her defense, the month I bought it one of my partners hurt his knee and I picked up all his call for about 6 weeks, which took care of a very large down-payment. Of course, instead of financing an awesome truck I shouldn’t afford, I could have used that down-payment to buy a decent one out-right. Overall the wrong financial move I know, but not something I regret.. most days.

Net Worth Update:

So the bottom line, after a year of being an attending how did those above financial decisions change our net worth? Really positive, luckily. My original goal was to hopefully get back to zero net worth within a year. I started at NEGATIVE -$155,000 as of July 1st, 2017. After 1 year our net worth increased to POSITIVE $50,000, a total increase of over $200,000.

How did we get that much improvement? Well honestly, it’s as simple as “made a bunch of money” and “didn’t spend it all.” If you look back up at the list of financial goals from that “Where did the money go” list, almost all of them increase net worth. Add to that some luck – Zillow thinks our house value has gone up by $30,000 this year. Add some generosity – I was “gifted” a 1981 Corvette from my dad which he bought after finishing Chiropractic school in 1982 worth about $20,000 but ultimately priceless to me. (Ok yeah, the last $50,000 wasn’t anything I actually did). 

I wanted to meet the Physician on Fire pledge of “The Live on Half Challenge” and less than $300,000 after-tax income increasing our net worth $150,000+ certainly should qualify. This amount of spending won’t get me a crazy early retirement, but that’s never been a goal of mine anyway. What this should all do is set me up nicely to practice medicine on my terms in about 15 years – which for me probably won’t be fully walking away, but cutting back to less than full-time for another decade.

All in all, I’m happy with how the first year turned out. I have a job I love, that is very rewarding, and I am making what I consider good decisions financially. Maybe not great, but at least good, goal-based decisions. The key is having a plan and sticking to it! I know where the money is going on a monthly and yearly basis before the checks even hit the bank account. Again, big benefits of having a salaried position in a higher-paying specialty, something I understand isn’t the situation for everyone. The basic principle of “paying yourself first” would apply broadly though – save 20% to retirement, refinance student loans to pay off in less than five years, hit the major aspects of income protection, and then finally spend what’s leftover. I’m just lucky as an anesthesiologist there is still plenty left over for us to use as we desire.

While I may detail and examine most aspects of our financial life, we don’t worry day-to-day about money anymore. THAT is a great feeling that we honestly didn’t have even with a low 6-figure income at the end of residency. With good fortune and continued good financial planning, hopefully, the next financial update is also as positive. But of course, the hard part isn’t doing it for one year, it’s doing it for a career!

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