Help with budget and amount to spend on a car?

[ArrowPHX]

I know this is very simple, but I have looked at several websites on how to make a budget... but I want some peoples opinions on how much I should spend on a car.

Firstly, (and unfortunately) I am in a lot of debt from medical school and undergrad (~162k). I also work about 100 hours a week right now and haven't done a great job planning my financial future. I don't have ANY savings, I used any extra money to pay of all my private loans while in residency because they never qualify for loan forgiveness and the interest rates are high.

The good news is that I start as an attending in my surgical subspecialty in 6wks and will be earning 284k and get 20k loan repayment a year (for doing some ultra rural work). I will work ~45hrs a week so my situation will be a lot better (particularly emotionally... its 4:32am and I just finished work


the salary is ~15.3k/month after taxes. I want to get a really nice car but I feel pretty guilty about it when I feel like I need to be saving money. I'm 31 years old and have spent the last 13 years in training.... I want to have something nice but still feel bad/selfish about getting a luxury item.


My dream car is a MB e350 well optioned with a panoramic sunroof, nav, and harmon kardon system... it comes in about 58k. But I think I will end up buying a lexus is250 or a really well optioned camry just because they cost ~20k less.

other stuff:
My rent is 590 a month (living with friends in a nice apartment), no credit card debt, educational loans are being paid off by the loan repayment program. I fly to Latin America 4x a yr to do charity work, it costs about 1000 each time so that's an extra $333 a month. I don't have any other abnormal costs, no gf/wife or kids... no expensive hobbies etc.

What sort of advice could you give someone like me? I will probably lease the car because I don't want a car older than 3yrs... not worth my time or energy to take it to the shop; i'd rather be operating or seeing patients.

Thanks.

[frugalgirl]

First, you really do need to have some idea of how much money you are spending. When you have a lot more time on your hands six weeks from now, take the time to write down your purchases and how much you spend each month. The last thing you want to do is to start living the high life and not be aware of what you are doing with your money. You may be surprised at how much (or how little) certain things cost you. Don't forget to include things like insurance.

You need to set some financial goals as well. For instance, do you think you may want to buy a home some day? Do you think you might want to get married? When do you think you might want to retire? What kind of lifestyle do you want to have in retirement. Do you have disability insurance in case something happens and you lose your career?

Once you have set some goals and know what your monthly spending is like, then you can decide how to allocate the rest of your money. With an income that high, you can probably afford any car you want.

If I were you, while I was still used to living frugally and unmarried, I'd pay off those high interest student loans as soon as possible. This allows you to be financially-free in a sense. If you ever get married, buy a house and have some kids, you will be glad to not have to think about student loan payments.

[disneysteve]

Welcome to the site. It is nice to see another doctor joining the conversation. I'm a family practice doc, in practice since 1993, and there are a couple of others docs and residents who hang out here.

Let me speak with the voice of some experience. Don't give in to "doctoritis." It is extremely common for newly minted doctors to start getting those huge paychecks and want to make up for all those years of living lean and struggling to get by while watching their non-doctor friends who have already been in the workforce for 8 years and are enjoying life.

You have $162,000 in loans! Yes, you are going to be making a tremendous salary and yes, you are getting a sweet loan repayment deal (for how long, by the way?). Still, don't go nuts and think you have to live like someone earning 300K. YOU DON'T and YOU SHOULDN'T!

You have a wonderful choice to make that few people get. You can either live modestly, pay off debt quickly and build a tremendous amount of wealth, allowing you to live a life of ease for many years to come or you can crank up your lifestyle to match your income and make yourself dependent on continuing to maintain that income for the rest of your life to support that lifestyle.

As for your specific question:

Don't lease a car - ever - under any circumstances. It is a complete and total rip-off. You are much smarter than that. If the only way you can afford the car you are looking at is to lease it, you are looking at the wrong car.

I totally agree with buying used. 2-3 years old is a nice sweet spot for used cars. They are still like-new as far as condition, still have warranties and have already suffered the steepest depreciation.

Go for more modest luxury at this point in your life. The 38K Lexus is probably reasonable for you. I'm not a car guy so I can't give specific advice. I drive a 1998 Toyota Camry that I bought used as a dealer demo in August 1998 and my wife drives a 2000 Toyota Sienna bought used (for cash) in September 2002.

Speaking of paying cash, there is absolutely no reason for you to finance a vehicle. You can save enough to pay cash within a few months, not something the average person can accomplish.

Good luck and congrats on completing your training.

[BuckyBadger]

How is your malpractice insurance paid? Do you have to budget for that?

[bjl584]

I know this is very simple, but I have looked at several websites on how to make a budget... but I want some peoples opinions on how much I should spend on a car.

Firstly, (and unfortunately) I am in a lot of debt from medical school and undergrad (~162k). I also work about 100 hours a week right now and haven't done a great job planning my financial future. I don't have ANY savings, I used any extra money to pay of all my private loans while in residency because they never qualify for loan forgiveness and the interest rates are high.

The good news is that I start as an attending in my surgical subspecialty in 6wks and will be earning 284k and get 20k loan repayment a year (for doing some ultra rural work). I will work ~45hrs a week so my situation will be a lot better (particularly emotionally... its 4:32am and I just finished work


the salary is ~15.3k/month after taxes. I want to get a really nice car but I feel pretty guilty about it when I feel like I need to be saving money. I'm 31 years old and have spent the last 13 years in training.... I want to have something nice but still feel bad/selfish about getting a luxury item.


My dream car is a MB e350 well optioned with a panoramic sunroof, nav, and harmon kardon system... it comes in about 58k. But I think I will end up buying a lexus is250 or a really well optioned camry just because they cost ~20k less.

other stuff:
My rent is 590 a month (living with friends in a nice apartment), no credit card debt, educational loans are being paid off by the loan repayment program. I fly to Latin America 4x a yr to do charity work, it costs about 1000 each time so that's an extra $333 a month. I don't have any other abnormal costs, no gf/wife or kids... no expensive hobbies etc.

What sort of advice could you give someone like me? I will probably lease the car because I don't want a car older than 3yrs... not worth my time or energy to take it to the shop; i'd rather be operating or seeing patients.

Thanks.

I agree with Steve. Go used. 2 to 3 years old. If you want luxury check into a BMW 5 series. That's my favorite.

[Frugal]

Personally (and this is just my opinion), I would not spend money on a new car if I were in your situation. I would buy a used car, and wait a few years to upgrade until things were more stable.

[disneysteve]

Another thing to consider - your first job may or may not last long term. I have many friends who left their first jobs after residency within a year or two because they just weren't a good fit. I got lucky and stayed at mine for almost 7 years, though at that point, I was unemployed for about 3 months. Fortunately, I had plenty saved up by then and was able to live just fine. Had that job change happened much earlier, that 3 months without pay would have been a much bigger problem.

Get yourself financially set before buying the toys. 6-month EF. Pay off your debts as much as possible. Live lean until you are sure the job is a keeper.

[feh]

.... I want to have something nice but still feel bad/selfish about getting a luxury item.

Listen to the little man in your head. You have huge loans to pay off; get something practical and inexpensive.