New job, what to do with the extra money?

**sweeps** · 03-27-2008, 05:36 PM

Congrats on the new job.

If you're planning on buying a condo in July, you need to be saving up a down payment.

How much are you paying on student loans?

If you want to invest, look at a Roth IRA at Vanguard (or Fidelity or T. Rowe Price). You can still make your $4,000 contribution for 2007. Buy into stocks now while their down.

**disneysteve** · 03-27-2008, 06:27 PM

How about the car? Your lease is up soon. Repeat after me: I WILL NOT LEASE ANOTHER CAR. So do you have savings to use toward the PURCHASE of that next car? Start looking around now to get an idea of what prices are on good quality used cards and what model you would like. Right before your lease is up, go online and start searching for the car you will buy to replace the current one. I'd suggest a limit of 15-20K. Start saving up now with that extra income and you'll have a nice downpayment by August. If you can't afford the car with no more than a 3 year loan, look at something cheaper.

**MoneyenoM** · 03-27-2008, 08:11 PM

For car, agree with Steve. No more lease. car

Go CarBuyingTips.com to get a deal. This website can save your money when you want to buy a car.

**docstudent** · 03-27-2008, 08:39 PM

I graduate in May, and I estimate that my monthly payment will be around $800 a month. I am uncertain about the car situation, but the lease was not a bad option, since I was attending graduate school. However, I now realize that I have nothing to show for it at the moment. Therefore, I might be forced to downgrade from a luxuary car to something more economic. My salary should increase in the fall to about 106G, so I am not too worried about the loan and condo payment. My rent is going to go to $1350 a month, so I might as well get a condo for about 2G a month. My credit score is above 750, and I should not have a difficult time securing a loan, should I dump out my CD to use as a downpaynment? I have about 3G in an emergency fund, or should I save for a year and buy later? Thanks in advance for the input.....

**disneysteve** · 03-28-2008, 04:48 AM

Originally posted by docstudent View Post

My salary should increase in the fall to about 106G, so I am not too worried about the loan and condo payment. My rent is going to go to $1350 a month, so I might as well get a condo for about 2G a month. My credit score is above 750, and I should not have a difficult time securing a loan, should I dump out my CD to use as a downpaynment? I have about 3G in an emergency fund, or should I save for a year and buy later? Thanks in advance for the input.....

Let me preface my comments by saying that I've "been there - done that" as I am a physician as well. I've been through the salary progression of 30K one year, 65K the next, 85K the next and 125K the next. It can be a little overwhelming but the most important thing is to not suddenly feel you have to find a way to spend all of that new found income. Take a breath, slow down and make some logical and responsible long-term plans.

1. You need to maintain adequate savings for short-term needs and emergencies. 3K isn't enough.

2. I understand wanting to buy a home, but don't rush into it. Take a year or more to save up a substantial downpayment - 20% ideally. Keep in mind that owning is a lot more expensive than renting. If a mortgage payment on a condo would be 2K, your actual total expenses would probably be $2,800-$3,000 when you add in taxes, insurance, condo fees, maintenance, etc. Owning will also mean your EF needs to be even larger and you need to plan for that BEFORE buying.

3. Forget the luxury car. Get yourself a 2-3 year old Toyota Camry or something similar. They hold up well, get decent mileage and look nice.

Choices you make now will affect you for the rest of your life. You can choose glitz - luxury car, fancy home, designer clothing, exotic vacations, etc. Or you can choose substance - quality car, modest home, functional clothing, affordable vacations. The 2nd way you get to build a nice big investment portfolio, be protected from the ups and downs of the economy and can look forward to a comfortable and, perhaps, early retirement. The 1st way you end up no better off than folks earning less than half your income. You can find yourself living paycheck to paycheck, struggling to pay the bills, even facing foreclosure on your home. Doctors aren't immune from all of those economic woes but those who follow that path do it of their own making because they had the means to avoid it all.

**MonkeyMama** · 03-28-2008, 05:24 AM

I have to agree with Steve. Out of school we quickly went from $20k income to $60 to $80 to $100 within a couple of years.

We actually just saved the entire difference as we decided what to do. We put 20% down on a home (didn't take long to save) and started a pretty decent emergency fund. I just wanted to say take advantage of these raises and don't live up to them right away (if ever). It makes all the difference in life. For us it meant we were very easily to go back down to $50k/year when we had kids. I have been blessed with big raises since and we divide them between splurging and saving now. But we have no debt or big (near-term) goals. It's a good place to be in. Our life would be so different if we had just lived up to our raises with little thought. (OF course, obviously you are thinking about it!)

One thing to add, as your income increases you hit higher tax brackets. I would have a goal to max out your 401k (can contribute $15,500 this year). It depends on your investment choices of course, but it will significantly help your taxes (you get to keep more of what you make in the end). So I would make that a priority.

I'd say 20% down on a home would be another big priority.

Likewise, build up cash while times are good. You never know when they the tide may turn... I agree that you need a larger emergency fund. Particularly if you are buying a home.

Good Luck!

**CouponAddict** · 03-28-2008, 09:16 AM

Originally posted by docstudent View Post

I estimate that my monthly payment will be around $800 a month. I am uncertain about the car situation, but the lease was not a bad option, since I was attending graduate school. However, I now realize that I have nothing to show for it at the moment. Therefore, I might be forced to downgrade from a luxuary car to something more economic. ....

We were wondering what your interest rate was on your student loans were and what type they are.

Repeat after DR. DisneySteve...........I WILL NOT LEASE ANOTHER CAR!! I will get myself a 2-3 year old Toyota Camry or something similar.

You will find many threads on the lease vs own car.

New job, what to do with the extra money?