(Ep. 117) The Perfect Income for Peak Happiness as a Student Loan Borrower | Student Loan Planner

Hello, and welcome to another episode of the student loan planner podcast. This is Travis Hornsby, and we're going to talk about what is the perfect income that you need to make to be happy as a student loan borrower today in 2021. So this is a pretty interesting question. You know, you might've heard some studies about what is peak happiness. What is the ideal income that you need to earn? And we're going to talk about what I call the grasses greener syndrome, which is when you feel like, man, if I could only go back in time and choose a different profession that would have made all the difference. I would be so much happier if I could be a bill in the blank instead of a dentist, veterinarian, physician, lawyer, chiropractor, et cetera. Whatever your profession is, it's very common to feel feelings of regret and feeling like, oh man, did I really make the right decision? It's so permanent. Becoming a, a professional takes years of your life and hundreds of thousands of dollars of debt. And so is it better over on the other side of the fence? We're going to be talking about that and we're going to be talking about what is the perfect income that you need to earn as a student loan borrower to achieve maximum happiness. So this is going to be a pretty fun episode. Before we dig into the meat of today's episode, though, I do want to read off a few questions that we got from listeners. So the podcast, you guys are really asking great questions and you can ask your own question at studentloanplanner.com slash voicemail. First, we've got a question from David who's a first year family medicine resident. Hey Travis, I'm a first year family medicine resident and I'm finally in a place where my credit cards are paid off. I'm in a place to start thinking about saving and putting in more in my 401k and things like that. But as, as I look forward to the next three years and I think about buying a house, I'm tempted by the idea of a physician mortgage. And I'm curious what your opinion is on that. And over the next three years, if I should be focusing on getting a 20% down payment for a home without a physician mortgage, or should I focus that potential savings and tax deferred 401ks and even brokerage accounts and then take the $0 down payment option or 5% down payment option that the physician mortgages offer. I just primarily want to hear your pros and cons of a physician mortgage. I appreciate it. The question just in a gist is are physician mortgages a good idea and should you be using one of them? I'm actually a big fan of physician mortgages. They're also called doctor mortgages and a lot more people than just physicians can qualify for them too. So pretty much any medical professional with a doctoral type degree can get one of these. In some cases you can even get a JD mortgage if you're an attorney. So these kinds of mortgages are quite popular in periods where the economy is booming and doing really well. Basically the way it works is you can put down a low, if not existent down payment. So way less than conventional. Conventional mortgage is 20% typically. So you can put down way less than that and your interest rate and your mortgage comes with no PMI. PMI stands for private mortgage insurance. Generally speaking, you might have an additional interest cost tacked onto your interest rate if you put down less than 20%. So if you think about a lot of people buy their first house through something called an FHA mortgage. So you put down, you know, around three, three and a half percent kind of range, and then you might pay an extra half a percent to 1% on top of your interest rate to cover what's basically an insurance of you walking away from the mortgage if things don't work out. Whereas a physician mortgage, you might only pay a tiny bit above the conventional lending rate. You know, is it a good idea to put down 3%, 5%, even zero? Is that a dumb idea? And it really comes back to what is the purpose of a mortgage? The purpose of a mortgage is to buy a house. So the real question here is not, should you use a physician mortgage or not? It's really, should you buy a house or not? So for this person who's a family medicine resident, you'd presume that he's going to be somewhere for three years or so. And then he's going to have to look at where he wants to be in attending. If he's already had conversations with his local area, people in his local area, employers in his local area. And they're like, we really want to hire you on to this area. Then I would say if you live in a low cost of living area, then yeah, it's not a terrible idea to buy a house. You want to buy a house that's less than two times your joint household income. And if you're a resident, maybe you could stretch that to two times your expected household income at graduation. That to say, it's a terrible idea to buy a house in a high cost of living area as a resident in general, it's a bad idea to buy a house as a resident, just period. And the reason is, is because unless you have a promise of a job, if you're in an area where you've already committed to a massive purchase, you might get stuck in that area. And there might be a great job opportunity that requires you to dump that house to move to a new location. And it's worked out the past five years, because housing prices have just gone on a tear because two things have happened. The economy has boomed and interest rates have fallen a lot. So whenever the economy is boomed, a lot more people can qualify for mortgages and whenever interest rates fall a lot, the amount of your monthly payment for a given purchase price of a house for say a $500,000 house, the monthly payment on a 30 year mortgage is way lower when the interest rate falls. So a lot more people can afford to pay way more in housing. So that's why housing's gone way up. It's not because of anything really, it's primarily because of interest rates on mortgages collapsing. So our interest rates on mortgages is going to collapse further, probably not. And so are, you know, housing prices going to boom in the next five years like they have in the past five years, probably not because the housing market is so hot in so many parts of the country. It's a decent chance that the housing market can actually fall in the next five years. In which case you don't want to be stuck with owning a home. If you're also having to look for a new job. So the short answer is physician mortgages are great. I love them, but the main thing you have to think about is not do I do conventional or physician mortgage? Is it a right time to buy a house? If you're ready to be somewhere at least five years and you're able to find a place you like for two times your current or expected household income, then I say, go ahead and do it. And if you're not at that level yet or you haven't gotten a job offer, you're not sure you're going to get a job offer where you're living. When you finish your residency, don't do it. And now we've got a question from a listener wondering what to do with his massive gains from stock market trading. Hey Travis. I think I have an interesting question for you. I'm wondering what to do with all my gains from wall street bets. So I graduated last spring, still haven't even started paying off any student loans. I owe $32,000. I'm making about $50,000 right now. I guess I have about $70,000 invested in tax school, Robin hood brokerage account. So I'm wondering if I should take all my gains out or at least some of my gains out to pay off all my loans all at once. Or should I set up some extended payment plan where I can just pay a monthly fee and keep money invested? And I guess even if it was in like just an S and P fund, it would make more statistically than it would, you know, with simple interest on student loans. I'm kind of wondering, uh, what's the best option here? Okay. Personal story. This is pretty interesting. I actually have a close friend, very close friend who made six figures gambling on GameStop, the stock that has been all in the news and all these people on Reddit or speculating in it. This friend happens to be not steadily employed earning like 20 or 30,000. He took like $5,000 of his money and just gambled all of it on GameStop and it made a six figures on it. And so naturally like if you've made so much money on a limited income and it's such a short amount of time, the problem is, is like overconfidence bias. So you look at someone like me, like a personal finance talking head and say, well, you didn't suggest doing that. And so you're an idiot. So why would I listen to you? And that's a natural feeling. So first of all, like, you know, I wouldn't blame this listener if he said, well, you know, this guy, Travis, like why should I trust him? Because I made this amount of money because I took this risk, right? Well, it's the same exact thing as going to the casino. And hopefully most of the wall street bets people know that there's no special skill that resulted in all of these people making so much money. There's no like special strategy that they've been able to identify that's going to be repeatable. And the reason is because hedge funds have never been, you know, had their short positions attacked like this in a coordinated way to essentially pump a stock up and dump it. I mean, cause that's really what was going on, right? So now hedge funds are aware of this and they're not going to fall prey to it a second time in the exact same way. So I think that most of the big gains that have happened in this wall street bets forum are done have happened. And I don't think it's going to happen again in a big way. You know, if this person wants to keep gambling, like think about it like this, like if you go to Vegas, right? Or if you go to, if you've ever been to Atlantic city or something, I know it's maybe been a long time because no one's been able to really go on bachelor bachelorette parties and actually watch a friend lose money at black jack because of the pandemic. But that's the same thing as having a Robin hood account. In my view, if you're putting money in individual stocks, that's fine. Unless you're holding those stocks for like at least 10 years, it's not really investing. It's really gambling. And that's okay. I mean, there's nothing wrong with entertaining yourself with gambling a portion of your net worth. But for this person, I would say, take some chips off the table, right? If you have a friend who's really hot at blackjack, what do you try to convince that person to do? Well, take off half the chips so that we have some money to go spend on, you know, the King crab legs for all you can eat buffet, and then you can go throw away the rest and gamble even more and ride the hot hand. So that's what I would recommend for this person. I would say you have 32,000 of student loan debt. If you know, you've assumed maybe about 30% taxes. So try to sell about 40 $45,000 of your position and literally put it in cash and just hold it in cash. And because this person's kind of a moderate income earner, maybe just wait for a couple months just to see what president Biden is going to do with his student debt cancellation plan. I don't think that it's going to actually end up benefiting this listener. I don't think they're going to be eligible for any student debt cancellation, but you know, a lot of people are a little worried about it. So since student loan interest is zero and payments are zero right now until September, it's kind of a free look to sort of just wait and see. And then when we get confirmation that there's not going to be any cancellation, then take that 32,000 and pay off the loans and then hold back about 10,000 or 15,000 and reserve to pay the income taxes on that. Don't overthink this. This is a lottery ticket that paid off that basically canceled your student loan debt. And congratulations. The reality is is it's probably not going to happen again. And if it does, it could also happen in reverse where you could lose a lot of money too. And so you're sitting on this big gain, benefit yourself from it and then keep gambling with, you know, the rest of it. And then hopefully also set up a regular investment plan alongside the speculating so that you can put maybe some money in index funds on a monthly basis so that you have sort of a really risky approach and then more of a tried and true long-term investing approach. So you can kind of get more balanced out there, but really interesting question. Now we have a question about tax filing status and double dipping on the federal poverty line. Hi, Travis. My question is on tax filing status in community property States. My wife and I are both non-PSLF eligible W-2 employees, and we have approximately $450,000 in student loans that is split pretty evenly between us. Our household income is about 175,000. If we file as married filing separately and split our incomes, my understanding is that would allow us to double dip on the poverty limit deduction, which would save us approximately $2,600 per year. The only drawback potentially would be that we couldn't use the student loan interest deduction, but to my understanding our income is high enough such that we cannot take that deduction anyway. As of now, I don't see any other reason to file married filing jointly as our incomes would be split. So the tax consequences of filing separately would essentially be zero. Is there any other reason for us not to file as married filing separately? Am I missing something? Thanks very much. This is something that a lot of people don't know. If you file taxes separately, you actually are allowed to double dip on the federal poverty line deduction before you have to pay 10% of your income. So for example, if you have, let's say you have income of a hundred thousand and your spouse has income of a hundred thousand, if you file a joint, they're going to give you 150% of the poverty line for a family of two, right? And then they're going to calculate your payment and they're going to give it to you proportional based on the debt you have in terms of who pays what. If you file separate and you're on like a pay or an IBR program, then each person's income is just going to determine their individual student loan payment. If you file separate now, you know, back in the day, I actually used to think that what mattered was, you know, okay, if your family size of two and you file separate, then they give you the deduction of one each, but that's actually not how it works. The way they ask the question on the income driven certifications is what is your family size? And it doesn't ask like that you claimed on your taxes. It's kind of irrelevant. In fact, like if you have a family size of four, and it doesn't, this is not just a community property state thing. This is an every state thing. If you file taxes separately, then you can get the deduction of the poverty line, 150% of the poverty line for family size of four. And your spouse can get 150% of the poverty line for a family size of four deduction too. And so that can actually result in some pretty significant reduction in your monthly payment. You know, we actually model this. If you go to a student loan planner, IDR calculator, if you Google that, you'll find our income driven repayment web-based calculator that you can punch these numbers in easily and just tell if this is something that could benefit you. Now, the listener mentioned, this would save them about $2,600 a year. There's a reason that we don't like to recommend that people do this, even though it could potentially lower their IDR payments a little bit. So the one big reason is people really like simplicity. You know, if you're getting most of the savings, most of the reductions in student loan payments already, the $2,600 is not probably really 2,600. You probably have to hire a tax person and they have to be a specialized tax person to do your taxes the right way in a community property state. So that probably wipes out, you know, $500 or so that you have to pay somebody to your taxes. And then the student loan interest deduction that wipes that out. And so that's another 500 bucks. And then when you file separately, you can't do a direct Roth IRA contribution. So that wipes that out. And also you have to go through just a more complex thought process of doing your student loan income driven certifications every year. And so is it worth doing that strategy to save about a thousand to 1500 bucks? If this person obviously has thought through this very carefully and knows that they can do this and save some money and they're fine with the extra complications on their student loan strategy, then I would say, yes, file separately, split the income evenly with four maybe nine 58 on your community property, federal tax return and take advantage of the lower income driven payments. As long as you're on pay as you earn, where that's going to not be automatically split up proportionately like the repay program does automatically. So again, this is just something that any other place that does student loan advice would almost certainly miss. This would probably not even understand the listener's question. So that's the benefit of listening and hiring a firm like student loan planner. When you have these questions, it's because it's a lot more complicated than you would think it is. And so that's a really wonderful question. It really shows how technical this stuff can get. So that's all the listener questions that I've got. I want to now focus on the main topic of today's episode, which is what is the perfect income for happiness? Peak happiness is a student loan borrower. Could you have done a different job and been a lot happier with maybe a better income, right? Are you happy with your income? Well, a lot of that has to do with, are you happy with your job? So if you've ever worked at a big company, maybe you've gotten a Gallup survey about, are you engaged? Gallup is this organization that does a lot of surveys and they are very smart about this engagement survey because they sell it to all these big companies and make a gazillion dollars off of it. Because companies realize that they have a bunch of disengaged employees or people that hate their job, it's going to hurt their profitability. And so it's a big thing that executives love to do all the time is ask about employee engagement and track this metric. Would you believe that on a global level, what, what percentage of employees would you say are engaged at work? The answer is 15%, meaning 15% of employees are engaged at work on a global basis. So the rest, the other 85% either actively hate their job or are doing the bare minimum to get through the day. So that's kind of a weird stat. And I know we're talking about the perfect income, right? But I want to talk about engagement first because a lot of times people say, I've got a friend, for example, that says, if I could only make $100,000, that would fix all my problems. And that's not true from a happiness perspective. It is true that happiness is going to be highly correlated with that in the sense of like, if you, if you are happy, it's more likely that you'll make a certain income or above, you know, compared to making 20,000 a year or something like that. I think the main reason though, why you see that correlation is more because people who are highly engaged in their job happen to probably make more money in those kinds of jobs than people who hate their job. Because if you hate your job, you're going to do the minimum. You're not going to probably get promoted as often. You're probably not going to, you're probably going to be more likely to be an employee instead of a business owner, or at least someone that shares in the profits of your, of your company. So in the United States, that's the global average that I gave you, the 15% of people being engaged in the United States, about 33% of workers are engaged. So it's still the minority big time. So that's kind of interesting. So you're more likely to be engaged in the U S and other workforces around the world. So for example, if you're in Western Europe, apparently only 10% of workers are engaged in the United Kingdom. Only 8% are engaged. That's pretty shocking. I guess maybe you're just freaked out about Brexit offshoring your job or something. I don't know what that's about, but maybe that's why Europeans take so much vacation, right? I'm just kidding. So the first point I have to make is in terms of what is the perfect income, the likelihood is that in the United States, you have a greater likelihood of at least liking your job, which probably leads to an easier path at making a certain income or above. It's going to give you a level of comfort that is correlated with at least checking off all the boxes so that then you can focus on self-actualization, right? That's kind of that next level of wellbeing where you're like, wow, I'm really using all my skills and my talents to make a difference in the world. And I'm really happy at doing that, right? That's the top level of the Maslow's hierarchy of needs is self-actualization. And then below that, obviously it's food, shelter, all these other things. One of the ideas behind what is the perfect income is what is enough to have really nice food, to not have to worry about where your next meal is coming from, to have a place that you don't have to worry about living in a damp house or having a leaky roof or something like that, having access to quality healthcare, right? Having good time off to actually enjoy vacations. It's kind of a really interesting question. Now, if you look at the average level of earnings of graduate level professionals, which is the majority of people who listen to this podcast, the USA has the rest of the world beat by a long shot in terms of if you go out and earn this degree, you will get probably at least this level of earning power. So think about being a dentist in Poland. You're going to have a very low amount of income. Partly that's because your patient base that you treat has lower income. So they can't necessarily afford to pay you as much in the United States. Yeah. You have other, other challenges. Reimbursement rates are low with insurance companies, et cetera, but your earnings are going to be way, way, way higher. Despite the dentist in Poland, not having a ton of student loan debt and you having a lot of student loan debt, which we'll talk about more in a second. So this key idea around what's the perfect income. First of all, it's, it's good to try to figure out a way to be engaged in your job. You have to kind of figure out a way to be not miserable, waking up every day and doing what you do for a living. That's step one of reaching the perfect income is you can't be miserable. If you are miserable, you got to work on ways to beat that. I've been in that situation before. So I want to say that's from personal experience. I had pretty much the ideal income in terms of what academics define it as, but I wasn't happy. And the reason I wasn't happy was because of various characteristics about my job. Like having to be in my seat in a specific location from a certain amount of hours a day, especially waking up really early, being in a big organization versus a small entrepreneurial organization. There were specific reasons why I wasn't engaged at work. And I made a change in my life to change that because I wasn't happy. And that made a huge difference. Let's talk about the perfect income. There's a study, a very influential study that you probably have heard cited in the past that says that if you make $75,000 a year, that is the peak level of income at which your happiness is maximized. So in other words, if you make more money starting at zero to $75,000 a year, the amount of happiness you have goes up and up and up and up until you hit 75,000 of earnings. After that level of earnings, there's no longer really a correlation of happiness and income. And that lines up with this idea of the Maslow's hierarchy of needs. And, you know, I apologize to our psychologists and psychiatrists listeners. I'm not a PsyD. I'm not a PhD. You know, I have very limited training in this, but for my limited understanding, the idea is first you got to cover all those food, shelter, vacations, like some of these kind of minimal level of happiness thresholds. And then once you've hit all those things, then you're looking at self-actualization, which is basically fulfilling your potential and feeling like you fulfilled your potential. So Angus Deaton and this psychologist, Daniel Kahneman, a Princeton university study from 2010 is what came up with this $75,000 amount of earnings to have peak happiness. The problem with that is that study was from 2010. So if we adjust to that for inflation today, that would be $90,000 in 2021 dollars. So in other words, that study was from a period of time where the perfect level of earnings for peak happiness was that's in 2010 dollars, 75,000 a year. So really it's about $90,000 in today's dollars. Or if you look at Instagram every day, it's 900,000. I'm, that was a joke. I'm just kidding. Right. But you know, the idea is is about $90,000 a year gets you to the level at which you can attain that top level of the pyramid of feeling like you've made it psychologically, right. A feeling like you've fulfilled all your potential. So what is $90,000 a year by you? And most of the parts of the country, it buys a place to live. Now you might say, ha ha ha. I live in, you know, Atlanta or Nashville or San Francisco or New York and $90,000. I could, if I got the very peak of the peak level of mortgage qualification, I could get, I'm going to be living in some dangerous neighborhood or something, or in a one bedroom studio condo kind of place. But in most parts of the country, it does buy you a place to live. Now you would adjust that $90,000 to different parts of the country too. So for example, I use this a nerd wallets, cost of living calculator, and I put in, you know, what is $90,000 in St. Louis equivalent to in other parts of the country? So apparently 90,000 a year in St. Louis is equivalent to 205,000 a year in San Francisco. And I punched in some different areas. So 90,000 a year, I just use St. Louis cause it's a big city, but it's in the middle of the country, right? It's in the Midwest. So it's probably a good proxy for the average sort of cost of living of the country. So in DC, 90 K in St. Louis would be equivalent to 168,000. In New York, 90 K in St. Louis would be equivalent to 261,000. And then obviously if you live in a rural area, then 90,000 in St. Louis would be equivalent to maybe like 50, 60,000 in a really rural area. One thing that could be leading to unhappiness is if that's the ideal income, then a lot of people that are in a place like San Francisco or New York are not hitting that ideal level of income. And so you don't feel like you have your basic needs met of having your own castle, having your own sort of shelter, food, sort of needs met and wants to, it's not just needs. Obviously you could live just fine. A 90,000 a year in New York city. If you run a place, have roommates, right? I mean it's possible. It's just not, you're not going to have that ideal level of things checked off. Now here's where it comes into play. If you're a student loan borrower. So I said $90,000 a year in earnings, but what if you have student loans? That's going to change that peak happiness income level compared to other people. And why is that? Recall that I talk a lot about how if you're feeling like you're really screwed, you shouldn't be feeling that way because the worst case scenario is your student loan debt. If it's federal is an income tax, it's 10% of your income, but they give you a big deduction before they take 10% based on how big your family is. And then they also are going to ask you to put away a certain amount of money every month in a investment account to cover the future tax liability. Now they're not going to ask you for that. This is something you just have to figure out and figure out how to do that on your own. But that's what you need to do is put anywhere from what we say is like 10% of your income after accounting for that deduction works out to about six to 9% of your income, like after accounting for that deduction. And then the tax bomb usually ends up being two to 10% of your income for the tax bomb. So I would say for most people covering the income based payment and the tax bomb is going to cost you anywhere from 10 to 15% of your income. That means for peak happiness, if you wanted to adjust for like a typical range of your income getting hit with covering the tax bomb, covering your student loan payments, you would divide 90,000, which is this peak happiness income from this study in 2010 adjusted for inflation. So 90,000 divided by a hundred percent minus either 0.1 or 0.15 depending on how much you're assuming you're losing to student loans as if it were an income tax. So if we say 90,000 divided by 0.85 that's about $105,000. So in other words, if you have half a million dollars in student loan debt, but you have 105,000 of income and you'll lose 15% of that in student loans, your net income after accounting for all student loan costs, it's about 90,000, which according to the study is going to make it possible so that you can achieve peak happiness because you can get a lot of your needs met. Now the problem is why do I get so many frustrated dentists emailing me from San Francisco? Well it's because in San Francisco if you adjust 105,000 in like, you know, a random part of the country for cost of living in San Francisco, it's like 241,000 and obviously if you're an associate dentist in San Francisco, you're maybe making 120 to 150,000 you feel like you can't buy a house. You feel like you can't afford the basics. Same thing in New York city. If you're, you've done your one year residency that's required in New York city to practice dentistry and now you're an associate and you're competing with, you know, a gazillion other dentists for patients and you're going to have to accept whatever job that they offer. That means that's going to push down incomes and so you're not going to have as high of an income offered to you. Then you're actually like below this sort of peak level of income for happiness as a student loan borrower. So if you have 500 K of student loan debt, it actually doesn't really affect you that much in terms of you being able to attain your optimal level of happiness. It's kind of a lot of it has to do with what part of the country are you in and what is your income potential in that area? Some professions are lower income professions and that's okay. We need you. If you're a public servant, hopefully public service loan forgiveness could soften the blow of that lower income dealing with your student loan debt. But consider being a teacher in a place like San Francisco or New York city. We're really only make sense financially. If you have a partner or a spouse that needs to be there to get the much higher income opportunities that exist there or it makes sense. Obviously if you're just in love with that area and you understand you're going to have to sacrifice a lot with working a lot harder, having less opportunities to own your own place, to achieve levels of financial independence that you're looking for. If you're okay with those sacrifices mentally, then it's okay to live in a high cost of living place like that. Right. Or maybe let's say your family has been in New York for many generations and you have a special deal where you get some sort of special program with rent control for, for teachers or, you know, there's some programs, I think in San Francisco, they're like that. So then maybe then that would make sense. But I can tell you from a personal level, I agree that happiness and income are not super correlated. Once you reach a certain level, you know, my income has been very volatile in different years. In some years I've made, like when I, when I quit my job and I was only earning income from investments, my income was maybe like 20, 30,000 in years where I was working as a bond trader, maybe it's around a hundred thousand. And then obviously running a business that's been more successful than I thought it would be. Some years it's been multiples of that. I think that study of the 75 K of earnings back in 2010, which is like 90 K today, I feel like that's kind of true. Cause yeah, I don't feel super different in terms of my happiness level. Once I'm able to take my family out for dinner or go to a fancy trip to Europe once or twice a year or fund my daughter's five 29 plan for college. Like once I'm already doing that, it's kind of everything else above that level is gravy in terms of your happiness, like your ideal level for happiness, ideal income for happiness. I should say, you really want to think about, am I making enough to hit these thresholds of happiness for my specific area of the country? And if I'm unhappy, it could be about something that's not related to your income at all. Because a lot of times when I have people say, well, I'm so fed up with being a fill in the blank, it's usually because they think that they could be like, for example, in dentists say they're frustrated. They're like, well, I wish I had just been a nurse practitioner. So I could work three and a half days a week and make 150,000 a year. It's like, well, wait a second. You could do that too. But the problem is, is you're competing for jobs in the most competitive area in the entire country. And being a nurse practitioner is not necessarily going to change, you know, going to fix that. Right. So let's talk about job regret. Because I think sometimes people phrase job regret. Like they talk about regretting their profession because of the income that they're earning relative to the burden that they've experienced. And the burden can be financial from having a lot of student debt. It can be a burden from just being attacked online. Like a lot of business owners are sometimes by like really mean people, like mean customers that accuse you of being greedy just because you can't lose a thousand dollars to treat their pet, you know, on, on paying for all the, you know, everything out of your own pocket. Maybe you're frustrated with maybe the clients aren't coming in as fast as you thought they were going to as a small law practice owner. Maybe you're frustrated because you feel totally deceived by your school, your chiropractor, your acupuncturist. And you feel like, Oh my gosh, this, this school totally lied to me and just took advantage of me. And, uh, I wish they had told me the truth. If I, if I could only go back in time and fix it. So let's talk about the phrase, the grass is greener on the other side. Apparently this originated from a poem in the 1500s and it originally went something like this. Basically they would say, well, the harvest is always more fruitful in another man's field. So that's using the agrarian gendered language of the 1500s, right? Because a lot of people were involved in agriculture. So in other words, it's talking about income, that origination of that phrase. It's really talking about the other man or woman, the other person has more than me. And if only I was over in their fields, which are way more fertile than mine and way better than mine. If only I was over there, I would be happy. It's kind of interesting because it basically talks about contentment and feeling like somebody else has it better than you. And if only you could kind of trade your spot in life with theirs, everything would be fixed. But this is a warning about contentment that's been around for thousands of years. It's, it's something that humans, we have struggled with for thousands of years. Think about the 10 commandments. Thousands of years ago, the 10th commandment warned the Jewish people against coveting another person's property. And so in other words, this is something that we've struggled with for as humans forever is feeling like we're not happy. If only we had a little more, if we only had a better profession, if only we had less complaining customers, if only we had, you know, less corporate dentistry in my area, right? So if you feel like you went into the wrong field because of your student debt or job market saturation or working conditions, aren't great, or patients are accusing you of being greedy, or maybe you should have, if you only could have gone back in time and, and done DERM instead of doing family medicine, this is really an ancient feeling. It's not totally about the student loan debt. It's just a new kind of take on a very old feeling similar with the Wall Street bet stuff. It's pure greed and fear, fear and greed. Those are the two motions that rule our behavior and investing. And it's just, you know, when things were getting really insanely frothy over there on the Reddit forum, it was just human emotion of greed. It's been that way for a long time. In terms of you being content and having the income that you need, I do think that there's an income level above which you would want to try to hit. I do think that's the case, but I want to talk about this last week's episode or a couple of weeks ago, I did an episode about how you're a Clydesdale, not a pony. And you know, the Clydesdale is the giant powerful muscular horse from the Budweiser commercials that can pull a wagon loaded with a gazillion kegs of beer with no problem. And a pony is something that can carry a five-year-old girl at a birthday party. And you know, if you ask the pony to pull the wagon, pull the beer, it would sort of just sit there and say, I can't do it. Luckily I got a lot of people reaching out and saying this, this podcast episode really made them feel empowered. Luckily I didn't get a lot of people reaching out being like, you're calling me a horse jerk. So luckily I didn't get a lot of that reaction, but you know, much like you, a Clydesdale carries a huge burden, the giant harness with a massive thousands of pounds of weight. There's massive amount of weight on a Clydesdale shoulders. That's just like you. That's maybe why at some point you maybe felt career regret or feeling like if I could only make a little more income, if the Clydesdale doesn't follow a straight path, it could run off the road and not get where it wants to go. Right. But if the Clydesdale stays on track and stays on the, on the path to pull its load, a Clydesdale is one of the few horses that can achieve whatever it wants in terms of its muscular power of accomplishing things because it's so powerful. Kind of like you, you're a lot more financially well off than you think. You have so much more potential than you realize in terms of what you can accomplish because you have the muscles of a Clydesdale, not the lack of ability of a pony, right? If you have a high school degree, your chances in life in this economy are extremely limited. Maybe you could go to North Dakota and drive an oil rig truck, but then the oil boom busts and then suddenly you're out of a job. Maybe you are working at a factory, but then the factory closes up and then all the jobs go out of your town and now you have a mortgage with no ability to work because you can't work from anywhere with a high school degree. Now you might say, well, that's limiting belief. You could do more. You really do have an easier path in this country if you have an education and especially if you have a lot of education, your unemployment rate, if you look at unemployment rate by education level, it's horrible if you went to high school and didn't finish. It's okay. If you went to high school, if you have a bachelor's degree, it's better. And then if you have a professional degree, even in bad economic times, your unemployment rate is in the single digits and it's in the low single digits. And this is pretty much regardless of what's going on in the economy. You're a lot better off financially than you think compared to 80, 90% of people. Even if you have a ton of student loan debt, why because your student loan debt is really an income tax. It's a silly system, but it dresses up this huge financial obligation as a debt when it's really not a debt because it's owned by the department of education and you know, politicians get to sort of wave their magic wand and change the terms whenever they feel like it, but for various reasons. And so far that payment obligation has been going down and down and down. Basically it's an income tax, but it's becoming a lower and lower and lower income tax because you went from ICR, which is 20% of income to IBR, which is 15% of income to pay, which is 10% of income. And now president Biden wants to allow undergraduates to pay only 5% of their income. Who knows if that'll happen, but it's going down, down, down. And so the impact of your student loan debt is less and less over time. Eventually it's going to hit a lower bound, right? Because I don't think you're going to see student debt cancellation for everyone. I don't think that's really ever going to happen primarily because it's an easy issue to demagogue. If you give away student debt cancellation to folks with bachelor's degrees and higher, then you know, you're going to get a lot of questions from more working class States of why don't I get some cancellation of rent? Why don't I get cancellation of credit card debt or something like that? So I think that it will see some limited student debt cancellation. I think that's going to happen at some point, but it's going to be limited. In other words, if you're not struggling economically, I don't think it's going to help you very much. In fact, I don't think it's going to help you at all unless you're in default or making an income below 50,000 or something like that. And that's just speculation. Virtually any dentist, veterinarian, physician, nurse practitioner, some lawyers, some physician assistants, a lot of different professions that follow our stuff. You could hit this ideal income number of at least a hundred ish thousand as a student loan borrower. Now, once you're above that level of income, there's not much of a relationship between your happiness and your income beyond that point. And again, you know, that's not everyone. I know a lot of professions. You're listening out there. You're like, Hey, I'm never going to make more than 40,000 as a social worker. And that's okay. You know, obviously if you are married to another social worker, you could hit that level of income potentially, especially in a lower cost of living area. I mean, that's good because if you think about it, you do have a path forward. You have a wonderful path forward. In fact, compared to the vast majority of people who, I mean, you want to think about the deaths of despair. We definitely have deaths of despair and professional jobs. We have deaths of despair that are unfortunately predominantly suicide in, you know, certain professions. And it's a complicated mix of reasons. If you didn't know that you could pay your student loans as a tax, and you didn't know that your debt is really not something that ever traps you. I could easily see that causing someone despair and then layer that on to, you know, mental health issues that someone else is dealing with already and then layer on the abuse of patients layer on the stress of not being able to treat, you know, certain patients for income reasons, like as a veterinarian, you want to be healer, but instead you have to put down pets that you could treat because the person, the owner can't afford the treatment. Right? So there are deaths of despair and professions that listen to our stuff. I don't want to downplay those. In fact, it's more likely the suicide rate in a lot of professions is higher than it is for the country as a whole. And that's, that's, that's something that definitely needs to be talked about more. And that's kind of one of the reasons why I wanted to talk about this podcast today is to show you that the solution out of feeling unhappiness or depression or anxiety, it's not hitting 200,000 a year or 300,000 a year. It's not going to make you happy. I will say that it would probably be helpful if you're in San Francisco, if you could think, Hey, could I move to maybe Sacramento and still potentially be happy where I could actually own a house and maybe own my own practice and feel like I'm less under the gun and like childcare would be a little cheaper too. And, and I would have a little more flexibility in my life. Maybe. Think about the Clydesdale analogy. If a Clydesdale doesn't know that the harness can be used to pull the giant wagon, it might just stay put and not make a lot of progress. It, you know, imagine if the Clydesdale tried to push the wagon instead of pull it, well, it might make some progress, but it's going to be very difficult. It's not going to be very efficient because putting on the tool of a giant harness that does, you know, efficiently distributes the load so that you can make progress towards your goals, right? That's the efficient way of approaching a problem. You can still approach it other ways. It's just not going to be very efficient for the Clydesdale to push the wagon instead of pull it with a specific tool that was made for that purpose. That's exactly how I feel when people are trying to pay off their federal student loans and they owe four times as much as what they earned. It's like, dude, you could push the wagon as the horse, or you could put the harness on which is income driven repayment and saving for your tax bomb and investing instead and putting money into 401k accounts and investing in starting your own business and buying a house, starting a family, get married. You could literally do all of that with the tool that was created for pulling the terribly heavy load of the student loan debt, which is the harness, right? Of the Clydesdale, which is the income driven repayment plans. You could use that tool or you could listen to the angry people yelling at you. The old personal finance personalities, the, you know, the random uncle that blames millennials for everything. And they're out there yelling on the side of the road, push the wagon, dang it, push the wagon. You have to push the wagon. That's how I did it. So go push the wagon. We, you know, we didn't have those kind of fancy harnesses back in the day. So you got to go do it the hard way, do it the way I did it, except they're not going to be the ones that are going to do it for you. They've got a loud opinion and it's confusing as to which one's the right thing to do. Obviously, if, if you have a, a small wagon, right, relative to your income, you've got a small amount of student loan debt. You have a debt to income ratio below 1.25 to one, then yeah, it's not as heavy, right? So you can pay it off and that's the right thing to do, right? I'm just trying to show you an analogy here. You know, it's just interesting because people don't really view forgiveness as something that is really a tool. It's that's all it is. Like what is a 401k plan? Is it a thing that you desperately need? No, it's just a tool to build wealth. That's all it is. Same thing with income driven repayment plans. It's just a tool to build wealth. It might be an irrelevant tool, but it's a tool nonetheless that you just have to decide if it's a tool you need to use or not. So let's take a look at a dentist who's feeling regret because of her debt and feeling like, Oh, I'm not making the right income. I wish I could redo this. So she's like, well, I could have made about the same amount of money if I had a bachelor's degree. Maybe if I'd only got a tech job at Google, things would all be different. The problem with that analogy is that getting a job as a coder at a big company like Google, it's not an easy job to get or keep. Most likely with a bachelor's degree, maybe you'd be earning 60 to 80 K a year. And even if you're a dentist associate, you could come out ahead making 120,000 and losing 15% of that to saving for the tax bomb. Plus making your income based payments. Because losing 15% to loans on that 120 K of income as an associate dentist is like a hundred K after the loan impact. And yeah, I could use the same example for a whole host of professions, physical therapist, PA, physician, lawyer, et cetera. Your profession might have some downsides. I mean, it might be more physical. Maybe it's harder for you to work remotely. Maybe you have to be in your office to actually earn a living. Maybe you can work anywhere though. That's maybe a positive. It probably is a little easier for you to get a job in most any city in the country. One thing is that's a positive for your profession is the less desirable the places to live. In a lot of cases, the more money you can make as a healthcare professional. And again, you're rarely going to be unemployed for long. Whereas the next tech crash we have a lot of people could be out of work for a while. Same thing with the oil boom. Remember how that was the hot job, but then you know, the oil markets fell a lot and then all this people got laid off. So a dental veterinary lawyer, physician kind of profession, any of those degrees are better than pretty much any bachelor's degree job you could think of. Unless you're like, Oh man, I wish I could work from anywhere. That's my number one goal. Well, okay. That's just like a specific thing. That's a specific desire. Now what about like a field like chiropractic or acupuncture or naturopathic medicine where you feel like maybe you were just deceived by your school and maybe as a chiropractor, you're only earning 50,000 a year. Well remember that you could go back to school for limited if no negative impact because it's just an income tax, right? So that means if you take on an additional $300,000 of student debt to go back to school to become a nurse practitioner, let's say you could do that and you just have to look at the pros and cons of doing that. And if you feel like that field would give you more income and you'd have a better quality of life and you wouldn't be as stressed, then it'd be a good thing to do. If you feel like you are able to treat, you know, patients that would otherwise not get any access to any kind of treatment or relief from pain or you really enjoy what you do and you're okay making less money, then that's fine. Then good, right? At least you're using your hands and actually going in and talking to people day in and day out instead of sitting behind a computer and just being bored out of your mind and letting your eyes go to nothing while you stare at a bright screen all day. So there's, there's positives and negatives about any field, even pharmacists. I've talked about pharmacists having a severe oversupply problem. Now thanks to the pandemic, they're in hot demand. I don't know if that's going to last, but you know, isn't it kind of interesting that even things seem like slam dunks in terms of trends end up reversing themselves. What about a, I'm a physician, but I should have been a dentist or I'm a dentist, but I should have been a physician. Well, you can make that change, but it would involve a ton of lost earnings and it's not a guarantee. You'd be happy if you made the switch. So for example, let's say you're frustrated with low reimbursement rates from Delta Dental, right? Or other insurance companies. Well, if you changed professions, by the time you started earning significant money, they might've made a change with Medicare reimbursements that hurt that profession. So usually there's a way to fix most problems in a profession. Even if it's not perfect, there's a way to fix most of the problems that make you unhappy. And it's really about, yeah, get to a level of income that's above the median income in America, where you can at least buy a house where you can have good vacations, enjoy yourself, drive something that's safe. Send your kids to a good school district, reach that level of income. And you know what? Having a professional degree, even with half a million dollars in student loan debt is one of the best guaranteed paths to that, that you can get in America. That is why, even though the attractiveness of a lot of fields has fallen, they're still filling up all the seats with students. And the reason for that is because would you rather be a professional with a single digit unemployment rate, making six figures, where that six figure income is under pressure? Or would you rather be somebody with a bachelor's degree constantly at risk of losing your job or having a company you don't enjoy working with anymore, working on projects that don't make you fulfilled? It's about the availability of substitutes in terms of, is your profession as bad as you think it is? And in most cases, it's way better than you really realize because of what else is out there. Now you want to go where there's here's some of the ways you can fix some of the problems if you're unhappy in your profession. So one would be moved to a new area. Obviously if you move to a place where there's less competition, maybe reimbursement rates are better for your profession. Also maybe one of the problems is your hours are the problem. Maybe you're working too much. Remember that idea that if once you hit that about a hundred thousand, 105,000 of income above that level of income, you're not going to necessarily be a whole lot happier. In other words, your happiness is not going to change a whole lot once you're making more money than that. Obviously in San Francisco, New York, maybe that's about two or 200 to 50 maybe in rural areas it's less, but get to that level of earnings either individually or as a family and then see if you can reduce your hours. See if you can be living in an area where you don't have to sell your first born to be able to buy a house. Basically take any professional degree and hopefully you're doing something more enjoyable than sitting at a desk and pumping out boring projects and reports for big business. If you have a professional degree, you also have a lot easier path to owning your own business. You might say, hold up, but what about private equity? You know, I'm getting killed with all these private equity shops that are way outbidding me for every practice. It looks good for acquisitions. And I just can't find a place to buy. Well, do you want to, you know, have to worry about getting outbid by private equity and still having practices that are available out there? There's thousands of practices listed on, you know, online for classifieds right now that you can go out and buy as a healthcare practitioner and that probably have about a 99% chance of success. Or would you like to go out with a bachelor's degree in business or hospitality and go try to open your own restaurant and then risk your life savings and have a 50% failure rate. So as a business owner with an advanced credential, like a, one of the ones that you probably have, if you're listening to this, it takes hundreds of thousands of dollars to get that credential. And then you have to pass a board exam and get a license to be able to compete and offer services in that field. You know, so there's all these protections for professionals that provide a competitive moat that protect you from the impact of competition, which lowers earnings. I mean, cause that, that's a big impact on the bottom line is how much are you earning every year? It's a big impact competition. That is the downward impact on revenues from competition is a big impact on what you take home. So to do certain dental procedures, for example, you have to have a dental license in some States. Maybe they're trying to have mid-level providers exist, but we'll get medicine. Did PAs and nurse practitioners destroy medicine? Maybe it puts some downward earnings in certain fields, downward earnings pressure on certain fields, but it didn't destroy medicine. Physicians still make plenty of money and a lot of money more so than the United States and other places. So if you really want to focus on making a big income, that's your main thing. Just pick the right area of the country or pick the right specialty. And remember that you just have an income tax. So if you really, with your student debt, that is. So if you're really frustrated with your student loan debt and you really wish you'd gone and I'm going to make an extreme example here, but if you just wish you'd gone off and joined the circus, you know, that's what you really wish you've done. I wish I had been a trapeze artist instead of a, you know, an occupational therapist. I really wish I could change it all and go back and do that one thing. That's okay. As long as you have an emergency fund and I'm imagining they're not going to have a lot of circuses until the end of the pandemic. So maybe you're building up that emergency fund with this pause and see a loan payments to go fulfill your dream post pandemic of being a trapeze artist. And then remember you have an income tax for your student loan debt. And so if your income's below a certain level, you won't have to pay anything and worst case scenario, you're paying, you know, a couple hundred to a few hundred dollars a month for the tax bomb, plus the 10% of your income for the student loans. So you can literally do anything you want to do. The problem is, is that there's a lot less job security and earnings potential and doing something like being a trapeze artist than doing whatever degree that you got your credential in. Now you're probably better off trying to make the most financially of the degree that you have. It's unlikely that anything else would have been way better because you already have a pretty good deal. The median household income in the United States is $67,000. Most of our individual clients earn more than that. And those that are not making more than that are generally in passion jobs where you do them because of the impact you have on people and people that are in those passion jobs. If you're married a lot of times, you know, you can beat that median earnings level as well. And if, you know, even if you're a social worker or, you know, one of these mental health counselor and one of these much lower paying fields, teaching, for example, hopefully you have some other benefits that somebody making a similar amount of money and in a different field with a bachelor's degree might not get. So if maybe like summer's off or maybe better health insurance or a better 401k match, or maybe a pension, you can really look at it glass half full glass half empty. And I think as a student loan borrower with a professional degree, you have a lot more potential and power than you ever really realized. So the ideal income, just to recap from this Princeton survey, if we adjust for student loans and inflation based on this study, ideal income is about $105,000 above that level. It's probably not going to have a big impact on your happiness below that level. It could. And remember that in different areas of the country, you might need to earn 250,000 to have that 105,000 ideal income because of high cost of living in places on the coasts. So maybe you need to consider relocating. Maybe you need to consider owning your own business to hit that income goal to try to achieve optimal happiness. Remember that you have choices. You can optimize your lifestyle. You can work fewer hours. You can do a lot of things that other people can't do. To borrow from the founder of Vanguard, Jack Bogle, he told a story in a book called Enough that I highly would recommend if you're struggling with contentment. He tells the story of about how near the end of his life, his net worth was about $50 million. He explained the reason why that was was because he structured Vanguard to be owned by its clients instead of by him. So he essentially sold all of his equity in his business to the mutual funds of basically the investors at Vanguard so that they would be the owners of the firm and so that the incentives would be to drive down costs instead of for him to make maximum profits. And so he estimated that because of that decision, instead of a $50 million net worth that he had, he could have had a net worth of about 50 billion and that's pretty interesting. And so he explained the reasoning behind this. He told a story where the writer Kurt Vonnegut and Joseph Heller, two famous writers are at a party hosted by a hedge fund manager. And Vonnegut tells Joseph Heller that the party's host, the hedge fund manager earned more in a single day of that party than Joseph Heller's Catch-22 novel has earned in its entire lifetime of copies being sold. But Heller tells Vonnegut, I have something that he will never have. I have enough. So think about contentment. How can you practice it? How can you set yourself up for it? You need the tools to manage the loans. You need the harness. You need to figure out what the right harness is to pull the weight of the giant wagon loaded with the beer kegs as a Clydesdale, which is what you are, not a pony. And so giving you the tools and figuring out exactly what tools are optimal for this problem. I think that's why our clients have rated us about 4.96 out of five stars and about almost 800 reviews. It's because we give you the tools to pull the weight and get to your goals as efficiently as possible and to live a life that's not burdened by debt. Instead you are a powerful person that can achieve anything you want to achieve. And for those of you also that are looking to be business owners, remember that there's this promotion right now where you can get a 1% fixed interest rate for 18 months if you apply by the end of March. So if you're interested in learning more about that deal, especially if you're a healthcare professional that's looking to be a business owner or refinance existing business debt this year, reach out to podcast at studentloanplanner.com and we'll put you in touch with that group that's offering that promotion. And also, you know, we love answering your questions on the podcast. Go to studentloanplanner.com slash voicemail. If you want to ask a question that we'll cover in a, in a future show, don't focus so much about what the neighbor has. Don't focus on the other person's harvest on the other farmer's field. You being a professional, you making the decisions that you made has given you the tools to be wildly successful. Maybe it's not exactly what you want. Maybe it's not, maybe you're not making the income you think you need, but remember that you have a ton of options. So don't let the burden of student loan debt get you down. Instead realize that you are so lucky compared to so many others in this country where people feel hopeless. People feel like they don't have any path forward at all. And that's just because they don't have the earning potential that you have. They don't have the options that you have. And I'm not going to pretend that you're not dealing with struggles and that you're not dealing with really serious challenges. You are, this is a terribly pandemic that we've all lived through and the stresses that are normally on our lives, I think have been magnified by this year. And so don't let yourself fall victim to depression, anxiety, et cetera. I think things are going to start getting better. I think that once you start getting access to a vaccine, once people are able to travel guilt-free again, once conferences start up again and we can see one another in person and share a drink together and laugh together, have everyone from our families in one place again together, I think things are going to get so much better again. And so just remember that, you know, if you're feeling down about your income, not being where you want it to be, it's not because you're not making enough income probably, especially if you're making over a hundred thousand a year, it's not an income problem. It's something else in your life that I would encourage you to reflect on and identify what it is so that you can overcome it. I hope this show has been helpful to some folks out there. And I really hope you have a really wonderful week. It's like freezing cold in this part of the country where I'm at. So I'm looking forward to better temperatures. I'm letting looking forward to getting a vaccine at some point. I'm looking forward to a lot of things. So hopefully you can think about what, what can you look forward to what's on the path ahead. And luckily you're a Clydesdale that can pull anything because you're that powerful and nothing needs to get in your way. Thanks so much for listening to today's show.