For an audio version of this post, please click on the speaker icon (top left).
Welcome to this episode of The Doctor’s Bill (Can You Afford It?).
Wonder if you should buy that big ticket item or not?
Well here’s your chance to have a wealth management expert, Johanna Fox Turner, of Fox & Company Wealth Management analyze your overall finances and make a final verdict on whether or not you can indeed swing for the fences and splurge on yourself or whether you should just walk away.
[Johanna and I have no current financial relationship]
Disclaimer: This is not meant to be a substitute for paid professional advice but only meant to serve as a suggestion/guideline.
The following are the details from our submission form:
Item/Experience Desired:
A 1 bedroom apartment in Manhattan.
Approximate Cost:
$1M
What is your planned time line for this purchase?
I want to purchase this within 10 years, a few years after finishing residency in 2023.
How do you plan on paying for this item/experience?
Mortgage.
On A Happiness Scale of 1-10 (10 Being Happiest), rate what this item/experience will do for you A) Short Term and B) Long Term:
A) 10 B) 7
Age:
25.
Gender:
Male.
Occupation:
Resident.
Marital Status:
Single.
Any Children (If so please provide ages)?
0.
How Many Years Till Planned Retirement?
25.
What is your total household income?
$64k.
State Income Tax (if Any)
$2,400.
What is your % Annual Savings Rate? (savings/gross income)
30%
Estimated Annual Living Expenses (Current):
$20k.
Estimated/Desired Annual Living Expenses (In Retirement):
$60k.
Market Value of Primary Home [For Renter =$ 0]
$0.
Additional Real Estate Holdings Equity (Market Value-Debt):
$0.
Current Liquid Asset Value (Savings, Checking, Etc.):
$0.
Retirement Assets (401k/IRA/HSA):
$20k.
Brokerage Account (Taxable):
$5k.
Miscellaneous Asset Value (Please elaborate):
$0.
Mortgage Balance:
$0.
Student Loan Balance:
$40k.
Additional Liabilities:
$0.
Unfunded Future College Costs & Years Left Till Needed:
$0.
Other Unfunded Goals and Years Remaining (Today’s Dollars):
$0.
Any other pertinent information not addressed?
Will be an attending with a salary bump to $250k in 2023.
I hope to save for a 20% downpayment while in training.
So does our young physician-in-training get to be part of the wolves of Wall Street pack?
Or does getting digs in Manhattan cause him to give up his Financial Liberty?
Click on the Doctor’s Bill Image and find out the verdict:
Click on the Bill (image) and find out if can afford it or not
After you see the verdict please come back to this page and comment whether you agree or not with the decision (and no cheating by looking at comments first!)
If you would like to submit your own Doctor’s Bill request please fill out the submission form.
Note:
If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”
Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
NOTE: The website XRAYVSN contains affiliate links and thus receives compensation whenever a purchase through these links is made (at no further cost to you). As an Amazon Associate I earn from qualifying purchases. Although these proceeds help keep this site going they do not have any bearing on the reviews of any products I endorse which are from my own honest experiences. Thank you- XRAYVSN
Agree completely with both reviewers. Predict our surgeon will encounter a life partner and form a relationship that will upend all financial plans. Life is what happens while you are making plans for the future.
Appreciate the feedback Norseman. It is hard to predict 5 years out even when you are established and with a family so this situation will confound it even further.
Thumbs down, but honestly less because of projected costs and more because of place in life. The reality is wants and needs in a place of residence change over time. There is no guarentee the new job will work long term. A spouse could come into the picture that wants you to move. You might even change your mind on kids. A starter home might be ok just starting out, but I wouldn’t buy a million dollar home. The transaction costs would be so high it would be like having a boat anchor keep you in Manhattan
Appreciate the detailed analysis FTF. Yes a million dollar anchor would likely tie you to one place even if you don’t like it, another sunk cost fallacy example.
I agree with the thumbs down. I am a proponent of not having a home mortgage that exceeds 2.5 times ones income. This home is quite a bit over that figure. Thanks Xrayvsn for your faith in my book The Doctors Guide to Starting Your Practice/Career Right.
Dr. Cory S. Fawcett
Prescription for Financial Success
Appreciate you dropping by and sharing your wisdom. I wish that book was around when I graduated.
If I was 25 again, I’d want the freedom rather than the apartment.
You will have lots of time to get tied down by house, spouse and likely kids.
The frugality rocks though.
Appreciate the input DMB. I agree that being tied down comes soon enough no need to rush it
That’s crazy. Life is going to change a lot. Why buy something so expensive that will tie you down. It’s best to wait like 10 more years. If she still wants a $1M apartment, she can buy it then. The finance will be a lot better in 10 years.
I am completely onboard with this analysis. At 25 you still have so much ahead of you that you can’t possibly predict which path you will take. What seems like a great idea at 25 might be frowned upon at age 35. Committing yourself to a million dollar anchor is not advisable at this stage.
It’s great he’s planning this far in advance for a large purchase. That makes the rate of success on the purchase a lot higher. I echo the same sentiments of the people who have commented. Life will change and what he wants today will not necessarily be what he wants in the future (especially 10 years out). Also, his future income is too low to support a property which is 4x his future income, especially factoring the high cost of living in NYC. I would say plan for the purchase (need to keep this as a goal) and figure out… Read more »
Very wise words indeed. Boosting income will certainly benefit this doc if it truly is his desire to own a piece of Manhattan