Rick and Jackie are facing a major life decision. At age 37, Rick his considering going to medical school. While this move would significantly increase his lifetime earnings potential, it also comes with short-term financial pressures and lifestyle trade-offs.
Investing in You: Increasing Lifetime Earnings
From a financial perspective, Rick’s choice makes sense. His current income is $70k. Over a 30-year career, that equates to lifetime earnings of $2.1M (70×30).
If he completes med school and his income rises to $150k, his 30-year lifetime earnings jump to $4.5M (150×30). That’s an extra $2.4M!
Investing in yourself to increase your lifetime earnings is something we don’t talk about enough in the financial world, but growing your income over time is a sure way to have a more stable financial future.
To Sell or Not to Sell?
One key decision Rick and Jackie faced was whether to sell their home to free up cash for living expenses during Rick’s time in school. Their home equity makes up a big part of their wealth, with a Real Estate Term (Rt) of 3.4 years.
There are pros and cons to consider:
Benefits of Selling:
- Frees up significant liquid assets to cover living expenses
- Eliminates ongoing costs of homeownership (mortgage, taxes, maintenance)
- Provides flexibility to relocate for school or medical residency
- May allow faster paydown of school loans later
Drawbacks of Selling:
- Loss of a stable housing payment (rent may increase)
- Difficulty re-entering the housing market later
- Emotional attachment to the home
- Possible tax implications
Ultimately, it depends on their priorities and their financial picture. If they have sufficient liquid savings, they may choose to keep the house. If cash flow is tighter, selling may be necessary to enable the career transition.
Planning for the Pivot
Rick and Jackie decided the best option for them would be to sell their home and use those reserves to live off, while Rick was in medical school. This allowed Jackie to continue to stay at home with their young children and work part-time from home.
Selling their home would shift their 3.4 years of Real Estate Term (Rt) into their liquid bucket giving them about 3.9 years of spending to live off of while Rick was in medical school.
Be sure to understand where your money is going and to not spend it down too quickly. However, it’s okay to take time for family vacations and make memories, as well as you do it with balance.
Your finances shouldn’t be just about wealth accumulation. Yes, save for the future. But also use your money intentionally to live a life you enjoy. Spend at an appropriate pace. Invest in yourself and your family.
Thinking of making a career move yourself? A financial coach can help you weigh the tradeoffs and make a plan. Schedule a free session to explore your options.
