Hi Money Minder,
I’m a soon-to-be grad student heading into a 3-year residency. Here’s the financial breakdown:
- Combined salary during residency: $105K
- Savings/Investments: $90K
- Other fixed liabilities: Car payments: $10K per year, Student loans: $6K per year
- House value: $360K
- Planning to put down 20% ($72K) for a $288K loan
At 7% on a 30-year loan, that’s $2,000/mo – around $2,800 with all the extras. Post-tax income is $83,000, leaving $2,783 per month after mortgage, car, and student loan payments – with $18K in savings.
Projected income post-residency: $300-400K
A couple side notes:
1) Wife and I have great credit scores, hoping to refinance to 5% in a few years
2) Dad’s got a solid retirement fund I could dip into if needed
Should I stick with investing the $90K or dive into homeownership?
Best,
Financially Confused
Response from THE MONEY MINDER:
Hello There,
Congratulations on nearing the end of your medical studies and preparing to enter residency! It’s evident that you have put a lot of thought into your financial situation, and it’s great that you have savings and investments to work with. Your plan to put down 20% for a down payment on a house is a responsible decision, but it’s essential to consider how this purchase will affect your overall financial stability.
With your projected mortgage, car payments, and student loan payments, you’ve calculated that a significant portion of your income will go towards these fixed expenses. It’s wise to think about your post-residency income and the potential to refinance your loan at a lower rate. However, it’s crucial to ensure you are not stretching yourself too thin financially, especially during your residency years when the income may be limited.
Considering your investment in the house, it’s important to also evaluate the opportunity cost of not continuing to invest the $90K. While homeownership is a significant milestone, it’s essential to strike a balance between building equity in a property and diversifying your investments for future financial growth.
Given your financial situation and projections, it might be worth considering a more conservative approach. You could explore options such as renting for now and continuing to invest your savings to build a more robust financial portfolio. This approach could provide you with greater flexibility and financial security as you transition into your post-residency career with a higher income.
Ultimately, the decision on whether to pursue homeownership now or continue investing is a personal one that should align with your long-term financial goals and risk tolerance. It’s essential to strike a balance between your current financial commitments and future financial growth opportunities. Remember, your financial well-being is a journey, and it’s important to make informed decisions that set you up for long-term success.
Best of luck with your residency and future financial endeavors!
Farewell from THE MONEY MINDER
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