How to manage a significant drop in income

So… I’m going to be seeing a significant drop in income for the next 5 years minumum. I’m currently on around 350k as a Doctor, but I’m changing my day to day job and have been accepted to a speciality training program. Once I finish training I’ve been informed by peers that full time earnings are around 750k. Whilst I’m training I’ll probably sit around 100k.


My wife and I don’t own property yet. Should we try to secure something before my income drops or hysteria wait another 5 years for things to triple?

Our long term goal is to purchase a nice (150m+ high ceiling) apartment in a particular suburb in Sydney east. They go for around 2.5 at the moment.

thoughts?

 

Is it really worthwhile for the additional training? Or continue with the $350k/year nonstop? From a long term financial standpoint?

 

A Bird in the Hand is Worth Two in the Bush.

 

Go for the purchase now. It's not a vast sum and 5 years is a long wait. Of course it would have been better to buy ten years ago or 1 year ago but that's the dilemma for most. In fact that 2.5 million is probably now 3.5 million

If you're a spender u may have to kerb your spending habits

 

See a mortgage broker and check that you’ll be able to keep up with the payments while your income is reduced.

 

If I was in your shoes and had any substantial savings, would purchase a PPR (even a unit, if thats my budget) - not dream home, just to get by for next 5 years. Possibly with cash. With income of $350k - I hope you have substantial savings by now. That way, I wont have mortgage payments for next 5 years and could save max I could.

You have serious income to build wealth. Either way you go, you will be fine. As long as you don't try to keep up with Jones.

 

Hard to see how you can seek a new loan based on facts being disclosed. I had a specialist client. He made millions a year. Then had a car accident that resulted ina personal inury that wasnt insured or capable of being sued for. Affected some fine motor skills in his hands. He couldnt regain that same skill level and reverted to general medicine.

Lesson in this could be not spending today based on future income as its not assurred. If you buy in at a high price and property markets fall you be unable to payout the loan for example and may even be unable to keep it.

 

It's all about perspective. to @RobS1993 it's a 57% drop in income.

 

Probably you should take advantage on the current low interest rate as we all know that in 5 yrs time the rate will be higher than now.
Also you can consider in purchasing investment properties "positively geared" (perhaps commercial property in your situation which has a long WALE at least 3-5 years with options to renew) while you have the borrow capacity, use the positive cash flow to either fund your rental or even considering to buy a property to live in and sell that in the future and purchase your dream home.
Just my opinion, hope this helps

 

I hope there has been more research than just asking a couple of peers before you embark on something like this.

 

A pretty harsh reminder about dangers of assuming income will stay at that level or increase in future. Was his name Stephen Strange by any chance?

 

For a year's course to earn double is a no brainer especially if under 40yo.
Fear of something that has a very small chance of happening is silly, though gaining traction lately.
I'd do the course without hesitation.

On the spending...that's a deifferent issue. If after 10+ years on 350k and no assets or prevision for future income you would have to radicslly reassess your spending habits.

 

The main thing is working out your new budget. Can your sustain payments on a $2m loan on your new salary?
This might be a situation where fixing your loan might be attractive so that you know your repayments for that time period.

 

Oops my bad.
It depends on on age imo. Still <40 I'd do it.
Over depends on many factors.

 

An earlier thread by the OP mentioned that their partner was earning 100-150k.

So I wonder if the ‘100k for the next 5 years’ is taking this into account or not?

 

Thank you all so much for the comments. Admittedly we have allowed lifestyle creep to affect us and so it will be very difficult to adjust going forward. Once you’ve been accustomed to a base level of discretionary spending it’s very hard to adjust down. It’s why most doctors despite good income are very poor. We will work on this.

We do have assets in crypto and ETFs but considering our household income it’s embarrassingly low. But we are young and have only recently started earning this. Income was much lower previously.

It’s not purely a financial decision to change to another specialty, it’s also for longevity of career and I’m working like a dog to earn my current income. I’ll work less and earn more once I complete training in an area I enjoy. To add a spanner to the works 5 years is if things go according to plan, it could take as much as 8 years with failed exams etc. But even so I think doing a job you love is worth it in the long run.

Regarding the income I’ve just included my own as my wife will have to leave her job as my position is in a different state and we have been thinking more about having kids (previously were adamant about being DINKS). This will be 100k on 80 hour weeks!

I have to ask, if we didn’t disclose my plans to a broker would there be any issues if we secured a loan now with my current income?

 

With your wife being in IT, I can’t see any problem with her getting a new, well-paying job. And being able to work from home too, and even part time.

Which city will you be living in for the next 5 years?