Help a 23 year old out with a major life choice

dealbusterium said: Hey guys

I've been perusing the boards for about a year and it seems like the FW community has been nothing short of being a huge help to its members. It seems like you guys would be best adept to answer my question. I am currently 23 years old and in school. I plan to graduate next year with about 73k in student debt (Im in a 6 year pharmacy program, hence the reason for the huge debt). Through working insane hours and investing, I would have about 75-80k saved by the time I graduate next year in May. My question to you FW members is that what should I do with my savings? Should I just throw all my savings into a down payment for a condo or co-op? (I live in NYC so 80k isnt quite enough for a downpayment for a single family home). OR should I wipe out my savings to totally clear my student debt? Most of my debt is in the form of subsidized loans so I'll only owe principal when I graduate. 20k of it is at 5% interest, and another 40k or so is at 6.8% interest. The rest of the loan interest im not too sure of. I plan to make about 120k/year if I sell my soul and work in a retail establishment or about 90k a year if I work in a hospital. Any input would be great guys!

P.S. The home would most likely be partially rented out to help cover the mortgage

1) Investing? In what? If this includes marketable securities/bonds, I'd hesitate to make any assumptions on the value of your assets in 8 months.
2) Buy a home in NYC? Are you 80%+ sure you will be living and working there for the next 5-10+ years? Most college grads don't have this assurance. I wouldn't buy anything until you have a long term job path & family & etc. Who knows where you are going to need to move to in 3 years for a job or anything else.
3) Interest rates are important on the loans. Remember though that they are tax deductible (not sure what income limits are though). So 5% may really only be ~3.5% and 6.8% may only be 5% effectively. If you are happy taking guranteed returns at these rates, pay them off. Here, it sounds like paying down the 6.8% and leaving the 5% would maybe be ideal. It depends on your own preferences though.
4) 120k/yr income is your PLAN...no where near guaranteed.

At the end of the day, I would pay off the 6.8% loans and anything higher rate loans, rent a place that's affordable and modest, convert 12 months of expenses to cash/CDs as an emergency fund from your "investments", then invest the balance of cash/investments you have in a portfolio of 75-85% stocks/15-25% bonds.

kwest said:
4) 120k/yr income is your PLAN...no where near guaranteed.
I agree. IMO, I don't think it's easy to make 120k out of college unless he tries to put extra hours.

I heard that some retailers don't even pay overtime rate. I know a couple people who tried to make extra money by working additional hours right after their graduation but, after a couple years, they don't want those extra hours any more.

Swivelguy said: In your situation, I would:

- Pay off whatever student loans were above the 6.8% (~13k?)
- Hang onto the rest, it's a very solid emergency fund
- Sell whatever it's "invested" in. This sounds like stocks to me, and stocks aren't where you want your emergency fund
- Rent the nastiest, tiny, cheap apartment I could find
- Save up for the 20% downpayment to where you really want to live without touching the aforementioned emergency fund
- Save up MORE emergency fund because your expenses will be higher (and less predictable) once you do buy property

Also, you can never "plan" to make $x/year. you can only hope to make a given salary.

Actually I dont think any of the loan interest will peak over 6.8%. I just meant that I couldnt recall what the interest rate was on the rest of my loans. I do remember 6.8% as the highest I've seen from my statements. Yes I do have the investments in stocks. I understand its a risky move, but I figured that since this is money that I saved as a student I can be risky with it. I will move towards safer investments once I start putting into my future 401k... The thing with health care salaries is that it is pretty stable and you dont find the drastic income differences as you find with fields such as engineering. From the offers being thrown around now, I can see 120k/year as the base salary for retail pharmacy. (Unless medicine goes socialized which I am all for, but that opens a whole different can of worms).

dude! Hail from a fellow pharmacy student. I'm very similar to you financially, with about $70K in Roth IRA, and will be graduating with about $80K in student loan debt. You have a big leg up since you are almost 10 years younger than me.

I just want to throw in a few of my own thoughts:

(1) why stay in NYC? Pharmacy pay does not adjust much to cost of living. Retail pays the same $110-$120K and hospital $90-$100K here in the midwest. If you are willing to move away from the coasts, it's like making 30-40% more.

(2) everyone needs an emergency fund. Keep at least $20-$30K on hand in things like money market. I'm using my RothIRA as kind of like an emergency fund, since the principle could be withdrawn at anytime without penalty.

(3) Consider residency. A clinical specialist in hospitals make about $110K here. Doing a residency does takes time but since my fiancee, who will graduate with me, is going into retail, so it makes sense for me to pursue a higher learning and a different career path. You are very young, you can afford the time too. While residency pays peanuts, you can still pick up retail shift one day a week, $60K/year is plenty to live on in the midwest.

yeah go to europe. i heard the hooker n blow are having a hard time in this economy

I'd move to a state with no income taxes, high growth, low home prices and warm weather. $120,000 is not a lot in NYC.

carbonwallet said: First thing I would do is check out loanconsolidation.ed.gov and find out if you qualify to consolidate your student debt at a lower interest rate than you are currently paying. It is tough to say without more information on your student loans, but there is a calculator on the site that should tell you all you need to know. Since you say your loans are subsidized, I am guessing you are eligible. If you can get a good enough rate, you might want to invest your savings rather than paying down your student debt all at once. You may also be able to deduct your loan interest from your taxes, so having loans isn't so bad. However, at 120k/year salary, you could be making too much to take the deduction.

Assuming you do decide not to pay off your loans, I think whether you buy a home depends more on your personal preferences, the alternate cost of renting, and how long you plan to stay in NYC. If you are thinking of moving in the next couple of years, you might want to stick to renting. If, however, the cost of renting a place is higher than the cost of owning a comparably-sized home, then you should consider buying.

Personally, I would go with renting and invest my savings, but I am not in your situation and do not know the NYC real estate market.

Good luck with your decision.

I have checked on the IRS's website. Educational loan interest is only deductible if your income is below around 70k, so that is out of the question. I was raised with the mindset that owning a place is always better because it builds equity (great how that turned out this year right?), however the NYC real estate market is still pretty stable with prices dropping maybe only 10% at most in my area. Since it seems the recession has reached its peak, I would like to buy something in a down market so I can sell it in an up market. I would finally be able to move out and build equity at the same time. Additionally rent is super expensive in NYC, even if I do choose to live in a suburb of the city (Queens, Bklyn). It just seems more cost-beneficial if I choose a co-op or condo instead. If I bought a place, I would keep it for at least two years to avoid the tax penalties. Even using it as a rental property would be nice as well. Any advice on where to invest my savings if I dont choose the paying off loans or real estate route?

If I were you I would pay any Unsubsidized loans off NOW and then make the final decision on paying your subsidized loans when you start having to pay the interest.

dealbusterium said: The offers I have heard the upperclassmen get is about 120k base salary for retail pharmacies. 120k/year is actually a pretty conservative estimate.
Yeah, and have you heard about the upperclassmen that didn't get jobs at all?

Roughly 20% of the PharmDs graduating from my wife's alma mater this year did so without a job offer in hand. The advantage of "selling your soul" and working retail is that at least you have a chance of a job offer at graduation. With a hospital job, you may not be able to get a pharmacy director to commit, especially in these times. If you wind up unemployed, having to swallow your pride and work as a tech, or as some agency guy, you may wish that you hadn't kept your emergency fund in stocks.

youngchemist2003 said: (3) Consider residency. A clinical specialist in hospitals make about $110K here. Doing a residency does takes time but since my fiancee, who will graduate with me, is going into retail, so it makes sense for me to pursue a higher learning and a different career path.
Just realize that those clinical specialist jobs are few and far between. There are some opportunities for pediatric and geriatric specialists, but general clinical jobs are few and far between. When you do find them, they're often a big lie - the doctors are gods, and don't want to listen to, let alone round with, a pharmacist. Talk to some of these clinical guys and listen to how they're either marginalized into meaningless roles, or really staff pharmacists with a title for show.

Also, you'll run into several pharmacy directors that discriminate against people who have done residencies. The directors know that those people have been led into thinking they'll get to spend their days doing consultations, MTM, etc., and would rather not deal with it. And you might want to talk to some current residents about how much they're enjoying their residency, and how they're treated by the hospital.

In any case, you can sit for a board certification in pharmacotherapy after three years of work even if you haven't done a residency. If you decide to apply for a clinical job, having BCPS after your name will count more than a residency anyway. And, most places, you'll learn more in a year of working than a year of residency. (Sad but true!)

1. Student loans. I would try to consolidate the loans to lower rates. If that is not possible, it really is a no-brainer that you need to use funds to pay off that high interest loans.

2. Jobs. Get the jobs that give you the BEST JOB EXPERIENCE. This will always lead to more. I laugh at pharm students "looking down" on CVS/Walgreen's. Go a few year without a good job and good salary or let there be 10 applicants per job and you won't be condescending anymore.

3. FWF RULES. A) Move to a cheap state. Get out of NYC and move to another region of the country. You can always move back.
B) Live one to two steps below you standard of living for 3 years and have a quarter a million in the bank instead of $70K.
C) Each year I would move $20K in that student loan debt to a 0% CC. That would really help in bringing the balance down.
Keep BTing from card to card OR if you run out of offers just pay if off from savings.
D) Learn the market and buy a foreclosure/distress property and do some work yourself. This is all part of living a couple
of steps below your wage.
E) Get a side business going to boost income and increase your tax write offs.

With salary prospects of over $100K, $80K in bank, and $80K in student loans, the only reason you will not be financially secure in 10 to 15 years is your ignorance or just laziness.

dealbusterium said: I was raised with the mindset that owning a place is always better because it builds equity

This is not true. If your options were to buy a house for $1000/month for some number of months or rent for $1/month for the rest of your life, renting is better. Obviously, if the rent were $1000/month for the rest of your life, then buying is better. So somewhere between $1-1000 you will be indifferent between the two.

One other thing to take into account that I don't think anyone's mentioned in this thread is that if the following statements are true (or at least OP believes they will be true with very high certainty):
- OP will stay in a particular area for awhile.
- OP is going to be purchasing a condo or whatever.
- OP knows that the interest rate on the loan for said condo will be higher than the interest rate on his student loans.

Given the above, it would be better to keep some or all of the student loans and borrow less for the condo.

Dazarath said: dealbusterium said: I was raised with the mindset that owning a place is always better because it builds equity

This is not true. If your options were to buy a house for $1000/month for some number of months or rent for $1/month for the rest of your life, renting is better. Obviously, if the rent were $1000/month for the rest of your life, then buying is better. So somewhere between $1-1000 you will be indifferent between the two.

One other thing to take into account that I don't think anyone's mentioned in this thread is that if the following statements are true (or at least OP believes they will be true with very high certainty):
- OP will stay in a particular area for awhile.
- OP is going to be purchasing a condo or whatever.
- OP knows that the interest rate on the loan for said condo will be higher than the interest rate on his student loans.

Given the above, it would be better to keep some or all of the student loans and borrow less for the condo.

In that scenario of course it is much better to rent. However with studios approaching at least $1000/month in a suburb of Manhattan (Queens/Bklyn), it seems more feasible for me to build some form of equity. It seems the consensus on FW is that I should rent a dirt cheap apartment first for a few years and to pay off my higher interest rate student loans. I am sure that my student loan interest will not be tax-deductible because I will be making over the IRS's limit as referenced above. BTW are there pharmacists or pharmacy students replying here? Just interested because it seems like several of the people replying have some pharm experience. I am up for anything! Moving out to the Midwest to make my income stretch is no problem for me since I've been in NYC all my life. I do have plans in the future to go back to school for an MBA but that will cost another 90k for two years of FT school. I need another nest egg for that. I seem to be a glutton for punishment.

ThePessimist said: dealbusterium said: The offers I have heard the upperclassmen get is about 120k base salary for retail pharmacies. 120k/year is actually a pretty conservative estimate.
Yeah, and have you heard about the upperclassmen that didn't get jobs at all?

Roughly 20% of the PharmDs graduating from my wife's alma mater this year did so without a job offer in hand. The advantage of "selling your soul" and working retail is that at least you have a chance of a job offer at graduation. With a hospital job, you may not be able to get a pharmacy director to commit, especially in these times. If you wind up unemployed, having to swallow your pride and work as a tech, or as some agency guy, you may wish that you hadn't kept your emergency fund in stocks.

youngchemist2003 said: (3) Consider residency. A clinical specialist in hospitals make about $110K here. Doing a residency does takes time but since my fiancee, who will graduate with me, is going into retail, so it makes sense for me to pursue a higher learning and a different career path.
Just realize that those clinical specialist jobs are few and far between. There are some opportunities for pediatric and geriatric specialists, but general clinical jobs are few and far between. When you do find them, they're often a big lie - the doctors are gods, and don't want to listen to, let alone round with, a pharmacist. Talk to some of these clinical guys and listen to how they're either marginalized into meaningless roles, or really staff pharmacists with a title for show.

Also, you'll run into several pharmacy directors that discriminate against people who have done residencies. The directors know that those people have been led into thinking they'll get to spend their days doing consultations, MTM, etc., and would rather not deal with it. And you might want to talk to some current residents about how much they're enjoying their residency, and how they're treated by the hospital.

In any case, you can sit for a board certification in pharmacotherapy after three years of work even if you haven't done a residency. If you decide to apply for a clinical job, having BCPS after your name will count more than a residency anyway. And, most places, you'll learn more in a year of working than a year of residency. (Sad but true!)

Haha someone has a jaded view of pharmacy. I most likely will not be pursuing residency (The clinical side is not really for me.) I am interested in industry so I may pursue a fellowship. The BCPS is a great recommendation, I would much prefer to sit for that certification than to spend an extra year of academia for residency. Retail pharmacy post-grad seems like the best option for me considering the pay/job market/flexibility.

Wait a year before you buy anything- buying isn't as bad as what some clever fatwalleters are determined it is. 5 years ago buying was 'the only way to go', now renting is 'the only way to go'- the truth is in the middle. One thing for certain real estate is a long term thing- buying a house isn't the problem for you, it's selling that can get bad- you will lose 6% roughly through realtor fees. And if you paid too much or the market drops a little, say you're out 10%. So for a 200k house that's a 20k loss- assuming you can sell it. Anyway, just graduate and work for 1 year. If you like your job, the area, etc, (you will figure this out in 6 months easy) then buy and enjoy. If you don't, assuming you've leased, you have a real easy out (letting you get further training, move jobs, move states).

wrong post. My delete.

tripleB said: CapEx said: lonestarguy said: I'd move to a state with no income taxes, high growth, low home prices and warm weather. $120,000 is not a lot in NYC.

I'm moving there in January and can't wait. (well, minus the property taxes and wanting to kill yourself in the summer)

Florida or Texas?

Florida is not a high growth state anymore. It has low home prices again. Tennessee is another state besides Texas that might met my criteria besides Texas.

Not sure what it is you asked for advice, and what it is that needs advice.

1. Move away from NYC if you can. Pref to a city with the best cost of living / quality of living combo,
2. Don't buy a house. Yet. We will tell you when to buy a house. Esp now, esp in NY, houses are too expensive. Wait until there is blood in the streets,
3. If your money is NOT in retirement accounts, do the following:
- pay the minimum on the 5% loans,
- pay a little extra on the 6.8% loans (e.g., maybe 2x the minimum),
- pay as much as you can on the higher loans (assuming they are NOT like 6.81%).

The rationale for NOT paying the 6.8% accounts FASTER is very simple. Inflation might go up, and once you send something towards the loan, it might not be possible to get that money back and invest. I.e., optionality is lost,

- with the remainder of the money, open 2-3 rewards checking accounts and diligently get the highest interest. You can definitely get 4%, and depending on where you can open accounts, you might be able to get some 5% as well.
4. If your money is in retirement accounts, do some research on what asset classes to invest in. Ideally, you should have been fully invested through the downturn, and if you had cash, you should have gone all stocks, all aggressive. Right now, stocks have just gained 50%+, so another huge rally is highly unlikely.

u2head8 said: kwest said:
4) 120k/yr income is your PLAN...no where near guaranteed.
I agree. IMO, I don't think it's easy to make 120k out of college unless he tries to put extra hours.

I heard that some retailers don't even pay overtime rate. I know a couple people who tried to make extra money by working additional hours right after their graduation but, after a couple years, they don't want those extra hours any more.

I disagree, make sure you read that he is a pharmacist (or almost is). I do not know the AVG income for a pharmacist, but I would assume its in the lower 6 figures.

I am an Emergency medicine resident and have been flamed on here for saying 'guranteed 250K+ in 2 years' and everyone says its not. There are some degree avenues that are 'for sure' salaries minues a HUGE government change (probably most likely these days), or personal destructions (rape a patient, kill a spouse, etc).

What we need to do is warn the 'business degree' person who is talking about they will no doubt be making 100K+ when they graduate...good luck.

motuwallet said: this both a question and/or potentially useful comment: this ~120k-ish + side job money sounds pretty good for someone coming out of school, but what's the potential 10 or 20 yrs down the road in this kind of work? my impression of the pharmacy industry is that there's not much upside and that you're glorified pill counters profiting from the FDA. could be totally wrong.

also on a less offensive note is living in CT an option that could reduce your taxes? definitely do not buy a house.

Pharmacy salaries have steadily risen throughout the past decade, mostly due to the major shortage caused by the aging baby boomers. The job outlook in 10-20 years still looks good. The baby boomers will require our services. Pharmacists as practitioners do not profit from the FDA. Insurance companies, the government (Medicaid/Medicare) and patients reimburse us for our services. Doctors get reimbursed by the same parties as well. Pharmaceutical companies require FDA approval before any new medication can be marketed. The FDA is cautiously strict about the drugs they approve. The EU has a process that involves much less red tape. Big pharma is currently in a slump. The giants are gobbling each other up to increase their patent lifelines. Its not as lucrative as it once was back in the heydays of the 90s. However, there are still opportunities in the corporate world if one likes that kind of atmosphere.

Regarding the "glorified pill counter" remark, would you trust anyone else to review your medication profile for life threatening interactions? Would you trust anyone else to dispense your meds? Who ensures that the IV meds you get in the hospital is compounded under sterile conditions? There is a reason we go to school for 6-8 years.

CT sounds great! I have not done research but how is the state tax situation in that state?