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Guidance aimed at those in the medical field, when financing while in Res/Fellowship.

Discussion in 'Model S: Ordering, Production, Delivery' started by JohnSnowNW, Dec 22, 2015.

  1. calisnow

    calisnow Active Member

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    #41 calisnow, Jan 13, 2016
    Last edited: Jan 13, 2016
    You, my friend, will be a fool if you purchase that car. You can't afford it. I understand you've delayed gratification for many years, blah blah etc. etc. But you can't afford it. You're not rich - you're now a high paid wage slave - which is all an M.D./D.O. is until s/he has accumulated a significant net worth. You don't have a net worth - you're less than zero.

    I sound very harsh, I know - but you're not protecting yourself. So you're counting on the markets to give you decent returns and let you retire, eh? You're counting on not becoming disabled in an accident you can't foresee early in your career that prevents you practicing medicine, eh? You're counting on not getting divorced and going through financial hell, eh? You're counting on marginal tax rates not rising, eh? You're counting on reimbursement rates remaining steady, eh?

    I know too many doctors who can't retire because of stupid spending decisions early in their career.

    And I know a few - very few - who delayed gratification early on, piled everything they could into investments, and are now sitting pretty with 8 figure nest eggs.

    How do you plan to purchase your first apartment complex if you don't have the down payment (in addition to the liquidity requirements to get commercial paper) because you blew $100K on a car you didn't need? Do you know how nice it is to make a luxury car lease payment with money generated by other people (i.e. your tenants) instead of your own two hands?

    Sorry man, but every time I see a young doctor driving around in an S Class that s/he paid for with her/his own physical labor rather than by income generated by assets I think 'fricking fool - that's the one who will always be poor.' It doesn't matter if you are pulling in $600K doing interventional cardiology or $800K as a neurosurgeon in some lucrative market in the mid-west - until you are free of your debts and have piled a lot of money into a portfolio you are nothing but a wage slave one disaster/injury/illness away from a lifetime of being poor.

    If you are like 90% of M.D.'s you are financially illiterate (unless you happened to major in finance or econ as an undergrad) due to years of spending all your waking hours studying medicine. You graduate to a high income with no financial acumen, investing skill or entrepreneurial talent. What you have the ability to study 6 hours a day for 10 years, pass grueling exams and then be blessed with a high salary. Why is this relevant? Because if anything happens to you that prevents you from practicing medicine you are most likely not a special snowflake who will be able to replace that 1%'er salary with anything else in life producing nearly as much income. And your wife probably doesn't understand the time value of money.

    THIS IS YOUR ONE SHOT AT BECOMING INDEPENDENT. DON'T BLOW IT.

    I reserve my harshest judgement for financially foolish decisions by M.D.s because they are *sooo cloosee* to becoming financially independent because of their high income (a chance in life 99 out of 100 people will not have) but ONLY if they don't screw up early on with irrational consumption.

    Buying this car is screwing up. It's like running a marathon (undergrad, o-chem, med school, residency, fellowship) then shooting yourself in the foot right before the finish line (asset accumulation).

    Lemme tell ya buddy - a passive 7 figure income off an 8 figure portfolio is nice, realllyyyy nice - you will like it a lotttt when you are 60 and have no memory of that stupid car you thought you needed when you were 32.

    The criticism is born of love for doctors not hate - everyone in my family and most of my friends are M.D.'s. I like to see them succeed, not fail.
     
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  2. calisnow

    calisnow Active Member

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    #42 calisnow, Jan 13, 2016
    Last edited: Jan 13, 2016
    Also - listen to your reasons - they're justifications:

    1 - You think you are saving labor by spending tens of thousands of dollars earned via hundreds and hundreds of hours of your wife's physical labor on a car which doesn't require you to lift a kid out of a seat once or twice a day for a few years? :rolleyes:

    2 - You can't find a safe vehicle in an old depreciated e-class diesel wagon or Volvo?

    3 - You've spent money outfitting your garage for an EV, therefore you are obligated to put yourself in debt to buy one?

    You sound no different than a professional athlete who spent all his life broke and then suddenly comes into money and is justifying unwise spending to himself with ridiculous reasons.

    4 - You think your life will continue to cost $50K? You have a wife you have told us both a - refuses to consider a minivan and b - thinks you worry too much about long term financial planning. She doesn't sound like a saver to me. You wait 'til she gets a taste of that $300K income and starts seeing the pay checks - and come back and tell us in 3 years your life continued to cost only $50K.

    5 - The last indication you aren't frugal is that you clearly have a deep emotional desire to purchase/lease a very expensive toy. If you indulge those tendencies once you are feeding them - one desire leads to another, to another.

    But some part of you knows this isn't wise - and you're here, getting told it isn't wise. You have DECADES ahead of you to enjoy your future wealth, but only if you make your wealth.

    Lastly, with all due respect, your wife sounds financially ignorant. No offense to her - I'm sure she spent a decade studying science and medicine. But now that she has a high income she needs a financial education to understand how to take care of that income - and I don't mean seeing a financial planner. If you want to invest in your future the right way you need a real education in the fundamentals of econ and finance. It won't take long - go take three undergrad classes together online or at night.

    The following three classes, followed by reading the two books I recommend afterward, will pay you far more $ per hour spent studying than how ever many hundreds of dollars per hour your wife earns as a physician. This mini-education should be required for all doctors because it will pay dividends all your life.

    1 - Accounting - just one quarter/semester - you need to understand the basics of the three financial statements
    2 - Corporate finance - (discounted cash flows, time value of money, modern portfolio theory [and its detractors who claim it is non-sense - you NEED to understand MPT because most financial planners believe in its tenets - but other people think it is based in non-sense]). If you two go to a financial planner not knowing what MPT is and the controversy between those who believe in efficient markets and those who believe in behavioral finance and the promise of value investing - then you will be in no position to judge the wisdom or folly of the advice you receive from the financial "professional."
    3 - Econ 101 - macro or micro

    Then after those three classes (or before - but at LEAST before you go see a financial professional) read Seth Klarman's classic "Margin of Safety" and Benjamin Graham's eternal "The Intelligent Investor."

    You are a valuable professional, a CPA is a valuable professional, a tax attorney is a valuable professional. An economist is a creature of dubious value, and an investment adviser / financial planner is even lower down the evolutionary rung. They aren't scientists or even professionals - they are people pretending they can predict the future based off very imperfect, untestable, over simplified models of the world. If you absolutely must pay a financial planner then pay by the hour.

    Do not pay a percentage of assets under management.

    But do pay for the best lawyer and best CPA you can find.

    Best of luck, save all you can - don't buy that car for another 5 or 10 years. :biggrin:
     
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  3. GoTslaGo

    GoTslaGo Learning Member

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    Wow! Great advice regarding finances and financial literacy!

    I am unfortunately too busy to take classes. Do you have any recommendation on the textbooks for the 3 basic classes? I've tried to wade through online stuff, but I realized I'm becoming an old dog and still like flipping pages.

    I already have Graham's "Intelligent Investor" and will look into getting "Margin of Safety".

    Thanks for posting!
     
  4. JohnSnowNW

    JohnSnowNW Active Member

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    I do appreciate the financial advice, but I feel I have to respond to a few points.

    This was a comment on needing a larger vehicle, not a comment on needing a $100k + vehicle.

    No, because those lack AER.

    Absolutely not. The context of the question, and subsequent response was why we weren't interested in getting a vehicle without AER...not why me must have the Model X

    Your narrow view into my personal life doesn't give you an understanding of our personalities, or spending habits. The Model X happens to be expensive, we're not interested in it because it's expensive.

    See my previous responses.

    Now, that aside, we've been considering canceling our Model X for some time now. It looks like I may have convinced my wife to do so. We wouldn't be canceling it for the financial concerns you have. One of the means of keeping our costs down have been the area of the city we've chosen to live. It's not a "bad" neighborhood, but it's not a wealthy one. Our concern has always been that purchasing the Model X while living here would make us a target. Unfortunately, our neighborhood has seen an uptick in crime over the last 6 months...and the issue would be that the lease payment on the Model X would mean that, if we were to begin to be targeted, our options would be limited.

    The fact is that we really want the Model X, but not for any of the reasons you believe we want it. We also are very frugal, regardless of your insistence that because we are trying to make the Model X work, we aren't.

    Again, I appreciate your advice...but I'd prefer not to have someone explain my own values to me.
     
  5. ChadFeldheimer

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    Apologize for the stupid question: what's AER?

    Also, I don't understand the issue with the lease payment after being targeted (presumably vandalism or theft?). You'll have accounted for the likelihood of that scenario via your insurance premiums. In the case of a car theft (absent recovery), your insurance pays out the value of the car, and you use that money to pay off the lease. For me, I would think the bigger concern ought to be regarding personal safety of your family due to the potential for targeted crime.

    Finally, and I'm sorry, but my humble opinion: You can claim to be frugal and no one will have any evidence against - up until the time you confirm the X =) I think just about anyone would agree that all claims of frugality are null and void at that point.
     
  6. JohnSnowNW

    JohnSnowNW Active Member

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    AER = All Electric Range

    Personal safety is the concern, not any damage associated with vandalism. However, we replaced our garage door (not the automated one) earlier this summer, and had to replace it again this fall after someone tried to break-in. It was more that my wife wouldn't feel comfortable in the house, or I really, if we started having to deal with potential break-ins. Having the lease payment would reduce the funds we could allot to moving into a new house/paying the mortgage on the current one. So the concern is that we would be inviting unwanted attention, and then be trapped for longer than we'd like.

    The way I described my concerns to my wife was this: If we bought the Model X, we'd be the only house within a ~15 sq. block area that was driving a vehicle worth over $40k.

    Well, again, the Model X is/was the one exception. However, I do see your point.
     
  7. ChadFeldheimer

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    Oh I see, thanks. From the context, it sounded like AER was a safety feature - I couldn't figure it out!

    When you lease a car, you aren't completely stuck with it until you've made all the payments. You can pay a penalty to terminate the lease early (not recommended with a Tesla lease as you basically end up giving up the $7500 federal tax credit baked into your lease payments - this bit is a little complicated, so I can explain further if you want). Or you can find someone to assume your lease.

    Nonetheless, your flexibility is greatly reduced - and it's obviously not great to paint yourself into a financial corner.
     
  8. JohnSnowNW

    JohnSnowNW Active Member

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    Just wanted to update this thread. We decided to cancel our Model X reservation, did so earlier this morning. :crying:

    We've decided we're going to replace both of our ICE vehicles with PHEVs (leased for 3 years), mine will be replaced with a Volt, and later this Fall we will replace my wife's with the Mitsu Outlander PHEV. This will allow us to put the money we'd save from not getting our Model X into the down payment for a new house (that we weren't previously planning on buying for at least 5 years). Our neighborhood has changed, over the last 6 months, in such a way that we just don't feel comfortable owning the Model X. We will then plan on revisiting the Model X when the lease for the Outlander is up, and definitely will replace the Volt with the Model 3.

    This was a compromise, as we had to give up the 7-seat option...but I just can't get my wife to go for a van (Chrysler Pacifica PHEV), and the means to get into the 3rd row of the Volvo XC90 T8 is just ridiculous.

    Anyway, we're both heartbroken, but this was the best decision for our family. Thanks again, for taking the time to put in your $.02.
     
  9. Zaxxon

    Zaxxon Supporting Member

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    Tough call, but it sounds like you made the best choice for your current situation. We're also unsure as to whether we'll actually order ours. Need to see it in person first.
     
  10. tmac

    tmac Member

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    Wow what an interesting story: I want to wish you and your wife the best of luck. I am 19 years out of residency and have one more year of double college tuitions. So I have given up on new Model S but set my sights on used Certified Pre Owned Model S or waiting for the Model 3 like you.

    Sound like you have figured out a nice compromise but in future you might consider a used Model S with rear facing seats? That would give seating for 2 adults, 5 kids?


    VOLT discussion: I think this is a great choice (says the man who leased one then bought one used)
    Good luck with the VOLT I love mine. You can pick up a used Volt cheap I payed too much 19K for 25,000 miles but others note 17K or lower are possible.
    In summer I can eke out 45-50 EV miles driving like a granny , but winter is tough in Maine (and Minnesota) , 25-30 EV miles is good!
    Of course the NEW volt is even better I bet I could get 60-65 EV miles in summer on 2016 model: this is amazing if you consider a Leaf I3 only gets 85 miles then is SOL!

    Anyway: Enjoy !!
    Peace
    Tom
     
  11. aus

    aus Member

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    OP, what specialty pays $300k starting???
    That's an insane number. Congrats to her. Hope they don't work her to death.

    Why not get a used Leaf or even lease a new Leaf. My buddy gets HUGE discounts on them every 2-3 years. I understand it's not as safe, but it's a great deal on a decent car.

    I agree with others that a safer home should be your primary concern, so adding a payment isn't a good idea until you get the house.

    Is your wife's moonlightling 1099?
    Is her future job W2 or 1099?
    That is a HUGE factor when leasing a car that I haven't seen brought up yet. If she's getting 1099, lease what you want since you'll be writing it all off.
    .
     
  12. GoTslaGo

    GoTslaGo Learning Member

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    You made the right decision. Putting off the X to get into a safer neighborhood is definitely the right move.

    Personal story, my wife was getting gas near our old house in her new BMW 5 series (years ago). As she set up the pump, the armed security guard came out (mid-day), told her to go into the gas station to wait, and proceeded to pump the gas for her. This was a self serve station. Needless to say we moved afterwards (there were other things too).

    Remember, it's just a car. There will be better and newer ones in the future.
     
  13. calisnow

    calisnow Active Member

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    Several specialties are over $400K out the gate, including neurosurgery, orthopedic surgery, some cardiology and others.
     
  14. jjchan

    jjchan Member

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    Just stumbled on to this thread. What has not been addressed is that her contracted position may turn out not to be as ideal as she anticipated. Last I read, the average physician moves 3 time in his/her professional life time (I certainly did move that many times in my professional life!). She'd hate to be stuck because of increased financial obligations.
     
  15. JohnSnowNW

    JohnSnowNW Active Member

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    It's cardiology, and the hours are pretty good comparatively. She's actually taking a position that pays a bit less so she can spend more time with the kids (and me I presume). Well, that and she likes the hospital that offered the position.

    The Leaf's range is just slightly too little for some of the possible driving we'd need to do, but it's not 100% off the table. I don't like that it has lower scores for rear-side impact, however.

    As to the W2/1099 I'm not entirely sure, my wife would know.

    Yeah, I think that would make us seriously consider the neighborhood as well. We've had other instances too. I decided to put up a camera facing our rear door and detached garage. Since doing so I've caught multiple people opening our rear gate to check if our garage door is locked or not. This is pretty common for the area, but without the camera I wouldn't have realized the frequency. It also caught a woman trying to steal our kids' plastic picnic table...which I found especially irksome.

    None of these are particularly worrisome, but when you consider that we don't have any overt signs of having anything worth stealing I was concerned what the escalation might be when we did.

    This is true, though it would have been unlikely that she'd move within the time-frame of the lease. Not impossible, but unlikely.
     
  16. aus

    aus Member

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    OP, reportedly there's a longer range Leaf coming this year.
    As for the W2 vs 1099, that's a HUGE deal when it comes to leasing cars. If it's 1099, a decent accountant can make most, if not all of her moonlighting money disappear.

    I could see the surgical specialties, but the local Cards guys don't make that much after expenses, but they do have a HUGE office that they don't really need. I'm in OC.
    .
     
  17. JohnSnowNW

    JohnSnowNW Active Member

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    That's good to know, these sorts of things were going to get ironed out during our meeting with a financial adviser later this month. I will certainly be asking about that. We have never leased before, so this is all new to us.


    One of the other hospitals she works with starts their General Cardiologists out around $500k. One of her friends in the same program that is going into interventional will be moving to another city in MN, and starting out at $700k+
     
  18. calisnow

    calisnow Active Member

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    Okay so after lecturing you on spending too much I do agree with you about the Leaf's lack of safety - I wanted one myself as a second car but the safety ratings are not great. I will say this - buy the safest car you can reasonably afford - one of my family members was an orthopedic surgeon. He was a passenger in a terrible car accident which almost ended his career - broke both legs, both arms, his hip, a shoulder and more. Spent over a year in rehab. He had paid through the nose for the world's best disability insurance (which I recommend your wife does, given her earning power) and would have received $20,000 a month for life if he had not been able to get back to work. But if he had been in a safer car the injuries would not have been nearly as severe to begin with.

    People pulling down $500K a year should not be driving around in Leafs - it isn't worth the downside risk. Seriously have you looked at big ole depreciated diesel S class Benzes? Pick one up for $10K, super safe, relatively economical to drive. Or a big ole Volvo.

    - - - Updated - - -

    I was thinking the cardiology sub-specialties who do lots of procedures. And I'm no salary expert but I was also thinking of places where the income is greater - not OC and L.A. More like the mid-west markets where they have to pay insane amounts of money to attract specialists. I've always heard its tougher to make great money in places like OC/LA/NY/SD because they are so saturated and all the docs want to live there.
     
  19. CSFTN

    CSFTN Member

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    Wanted to add my thumbs up to his thread. Smart, mature decision. You will be better off for it.
     
  20. jaipurking

    jaipurking Member

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    I think you need to buy happiness Once you have it out of your system you can make logical decisions about random expenses in life like cars. I did the same and bought an S-Class AMG Mercedes. Now I think and plan a lot more before I consider a car. Again I think go ahead and get the car , your wife has the most secure profession today and is almost guaranteed to make more over the next years. Congratulations on your new car b
     

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