Joining the Real World at 25... suggestions appreciated

[pedant]

Thanks again for the responses!

Four Pillars: I think I would likely purchase as soon as I moved back, though it's hard to say. I'm leaning towards investing half and applying half to my debt. Though if I'm only looking at a 4-5 year window before needing the funds again, I may be better off just putting them in a HISA?

GeniusBoy: Thanks! Definitely thinking I'll sell. The hassle of being an absentee landlord and the interest compounding on my debt makes me shudder.

The Royal Mail: The real question is who hasn't come talk to us? The big 5 banks, National Bank, Investors Grp, and about 10 other wealth management companies have given talks. Up until this point, my classmates and I haven't actually earned any money, so no one (that I know of) has had much interaction with the companies. It will be interesting to see what happens.
In terms of future location... I'm from a rural community, and if you'd asked me when I started med school, I would have told you I was going back with no hesitation. However, about half way through, I was drawn to a specialty that requires fairly specialized and centralized facilities, so I'll likely be forever-tied to academic centres.

Steve: Wow! Thank you very much for running that! Amazing! Though, admittedly, it was a little freaky to see the years and my age run by like that.

atrp2biz: I do have disability coverage under my resident's union, but it ends when residency ends, and I want something that I can have when I'm self-employed as well.

[Top_Spin]

Welcome to the forum! Glad to see other people my age are waking up.

(Income when residency is completed in 2015 will be ~$340K/yr)

Is that really how much doctor's make. I wonder if I'll be at that much by 2015...

[steve41]

Is that really how much doctor's make. I wonder if I'll be at that much by 2015...

A hospitalist ( a doc who works in a hospital) probably not, a doctor in practice, most likely, but my guess is that out of that has to come office rent, paying a nurse/receptionist and paying off furniture&medical equipment loans.

[pedant]

Wanted to update:

1. Sold the condo with closing in August. Still not sure what to do with the proceeds which should be around $50K. I'm thinking I'll put 70% on my LOC, and save the other 30%.

2. Signed a return of service agreement worth $20K which I will see in my bank account around August. Don't have plans for this money yet.

3. My residency hasn't started yet, and my debt continues to grow without a paycheque. LOC is sitting at $110,000 @ prime now (moving costs, licensing & malpractice insurance fees, and graduation trip pushed it up).

[marina628]

Congrats on the sell ,if you moved more than 40km away you can probably recover many of the expenses of selling on future tax returns.

[Four Pillars]

Nice work!

Don't worry about the debt. Nothing you can do about it at the present time.

What is a "return of service agreement"?

[pedant]

marina: Thanks! I've never moved long-distance before this, so I was amazed at how expensive it is! Hopefully I'll be able to save my unused tuition credits for another tax year with all this moving expenses. Anyone know the maximum deduction?

Four Pillars: I've signed an agreement with the provincial government to work in the province for 1 year (after I complete my residency c.2015) in exchange for $20,000 now. That's my return of service agreement.

[pedant]

About: 25 yo female graduating from 7 years of post-secondary education this spring, and starting 4yr medical residency this summer.

Moving this summer for residency, plan to return when it's over in 2015.

Living with, but maintain separate finances from, long-term BF.


Numbers:
Gross annual income starting in July: $51,000 (increases about 5K every year)
(Income when residency is completed in 2015 will be ~$340K/yr)

Debts:
Student LOC @ prime: $105,000
Govt student loans: $9,000
Mortgage: $131,000 (Market value ~$200K)
Mortgage details: 5-year fixed rate @ 5.1% from August 2007.

Starting in July, will be renting for $1,200/mo in new city.

Assets:
Car $15,000
TD Balanced growth MF (purchased in 2005) $4,300
HISA @ ING: $2,200
USD Acct @ ING: $1,100
RRSP in a balanced growth fund: $800 ($25/mo)
$10,000 cash gift from parent with stipulation that it be invested in TFSA ($5000 sitting in a TFSA account since 2010 but not invested, $5000 still in chequing account)
Will likely receive a $20K return of service agreement this summer.

Goals
1. Learn more about financial planning
-Working on Canadian Personal Finances for Dummies

2. Start saving for retirement (~30 year horizon)
-Not really sure where to start with this. My RRSP room will be much more valuable to me when my residency is completed and my income skyrockets, but I still feel I should start planning now.

3. Chip away at debt while living within my means
-Could pay large chunk of debt off, depends on condo situation, see below.

4. Invest TFSA funds
-Thinking of opening a TD e-series acct for this and following the couch potato strategy. Can the $5K which is sitting in an RBC TFSA account be transferred to the TD eseries account without "withdrawing" it?

5. Buy a house in 5-7 years
-This would likely be easier if I already own a place and don't sell the condo and can apply its equity. See below also.

The Condo Issue: As I'm moving (and already know I'm renting in my new city), I can sell the condo and take the proceeds from the sale and apply it to debt, or invest some and pay off some debt. Another important point is that if I sell the place now, my penalty for canceling the mortgage will be around $5K. The local market is hot right now, but it's hard to say what will happen next year. I hear a lot of people calling for a correction.

I could also not sell the condo, rent it out for 4 years, and move back into it in 2015 for a couple of years before buying a house, which is a goal. However, the fixed costs of carrying the condo ($1344) are already higher than what I could rent it out for ($1250-$1300). I have family locally who willingly offered to maintain the property for me free of charge, though they'd prefer if I dealt with finding the tenants myself.

Thoughts?

It's been just over a year since my original post -- figured I should update things!

I'm now just over a month away from turning 26, and just about to finish my first year of residency.

Number as of 04/28/2012

Income: $3000/month (net). $53K/year (gross).

Debts:
Student LOC @ prime (currently 3%): $70,500
Provincial govt student loans: $4000 (in repayment $57/mo)
No more mortgage or condo fees. Condo sold, now renting for $1200/month.

Assets:
ING HISA (1.35%): $12,000
e-series TSFA: $7,475 (20%CDN-index/20%US-index/20%INT-index/40%BOND-index)
RBC TFSA (in cash, still haven't done anything with this): $5128
Chequing #1 (0%): $4700
Chequing #2 (0%): $5200
RRSP (balanced growth type mutual fund): $1500 ($25/mo payments to this, set up by my banker).

I feel like I made the right decision in selling the condo. I applied the proceeds directly to my LOC, and, now that I have an income, haven't racked up much more on it (the LOC made it up to $123K by the time I started getting paid, thanks to hefty moving expenses and a vacation). I haven't done a great job at living frugally this year at all. I eat out way too much (avg. $800/mo, including lunch basically every day at the hospital caf) and travel (mostly for electives but also for pleasure) has cost me just over $10K since July.
Though I haven't needed to dig into my LOC, I received a $20K lump sum for a return of service agreement that I've basically eaten through over the course of the year.

I've got a fair bit of money in cash at the moment, not sure if I should I apply some more of it to my LOC, or move it into my e-series TFSA. Also not sure if I should alter the distribution of my TFSA funds, perhaps with less emphasis on bonds?

My income rises from $53K gross this year to $61K for the next year (July 2012-June 2013). I'm hoping to stay afloat a bit more. I don't know how people have families on $53K/year and I can hardly support myself on it.

[marina628]

My friend is a Plastic Surgeon and we have been friends for 15 years .He was in your shoes or worst at one point ,even spent on average $27,000 a month when he got his full time practice.He is not married but divorce a couple times which is ok since he said average surgeon divorced 3 times lol.Anyway he had me put him on a budget ,even gave me his debit cards and credit cards.In two years his net worth increased $200,000 and debts were zero.He lived on $7000 which excluded his professional fees but was his car ,rent , entertainment and occasional pair of $40 socks .Best advise to you is to ignore that raise and try to live on this budget until you are debt free.You could save more in 5 years living on a reasonable budget than most people can hope to save in a lifetime.

[Causalien]

Hmmm, I am interested in budgeting for pedant. Such a weird income progression compared to a normal career.

There are two things that immediately stood out from my own memory about this:
I think when you have your own practice, the actual net income is around 140k (according to my doctor friend with his own practice).
Doctors, are known by the investment world as the fat sheeps. You are generally ignorant about the shady practice of finances and have too much money and too little time to care about the money. So you are the best type of cash cow for milking. When there's no one else to sell the stocks to, they are peddled to the doctors. Beware.

$51000 * .6 (40% tax rate worst case assumption) = $30,600
30600 - 14400 = 16200
Living cost ~ 300/month = 3600/year. 16200 - 3600 = 12600
Groceries ~=200/month => 2400/year
Lunch ~= $15/day => 5475/year
Coffee = 5/day => 1825

$2900/annum surplus
Student LOC ~= 2115/year
$58 student loan = 696/ year

Final surplus = $89 per year
__________________________________________________ ________
89*4 = 356

4 more years of residence with $5000 increase per year with the expectation to start your own practice in 4 years:
5000*4 + 5000*3 + 5000*2 + 5000 = 5000*(4+3+2+1) = $50000

Assets:
NG HISA (1.35%): $12,000
e-series TSFA: $7,475 (20%CDN-index/20%US-index/20%INT-index/40%BOND-index)
RBC TFSA (in cash, still haven't done anything with this): $5128
Chequing #1 (0%): $4700
Chequing #2 (0%): $5200
RRSP (balanced growth type mutual fund): $1500 ($25/mo payments to this, set up by my banker).

50000 + 12000 + 4700 + 5200 + 5128 + 1500 = $78528

__________________________________________________

So you want to establish your own practice at age 30 and you have $78528 by the end of the 4 year residency.

I am pulling some numbers out of thin air here so this part is very adjustable.

Rent/squarefoot $2. You probably need a 1000 squarefoot place to start off with and that's about $2250/month. = 27000/year
Receptionist ~= $35000/year
Equipment for first year: <insert your numbers here>
I guess you need, inspection bed, table, two chair, scale. Everything multiplied by two for two rooms.
Waiting room chairs * 12. Receptionist table. PC. 10 file cabinets.
Doctors tools

I am just going to put $30000 for equipments.
You'll also need a nurse, so that's another $50000 per year?

$27000 + 35000 + 30000 + 50000 = $142000
Minus assets = $63472.

First year's operation cost can be covered with a bank loan. $63472 is a reasonable amount and the banks should be able to lend you this without problem.

Yes, so if you are able to stick to this general plan, it shouldn't be a problem.