Money and Investment

[Taurus]

I want to add that Earnings growth (your money will earn 8% annually) is THEORETICAL while debt incurred is reality. You can work on the former but not without some of the latter as well.

I agree again. One of the beginner investor's mistakes is that he looks at average historical returns or the stock runup or housing values for the last few years and thinks that it will continue, or at least continue long enough so he can sell out. You can't time things.

Debt is a nasty ticking time bomb. Your situation may change and you suddenly find yourself without a lot of cash flow. Suddenly, that $150k grows to $300k.

You sleep much better if you pay off your debt asap.

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[mille125]

Ok I just read some of the Wallstreet and Gas posts, and there were some powerful nuggets of advice for new grads and a few hints at what do with their money once we start getting that long-awaited raise. But I would like to to hear from the practicing attendings where they diverted their extra dough-

Did you pick the debt with the highest interest rate to pay off first -eg mortgage, credit cards,etc. Did you buy that $500 K house and attack student loans?

Someone alluded to a statement that due to the high amount of debt, banks will hesitate to loan you $500 K for a house even up to a year out? Is that right?

(Personal info here, but I am in a similar crowd) My credit report is excellent, but obviously I have a large amount of loan debt, and the printout makes a comment about this and that this might negatively affect my score/buying power.

If this is true, and banks do not put much faith in my income generating power, then it seems to me that paying off those loans, even at 2.87%, might be the way to go first. But in my mind, I cannot justify, since my current mortgage rate is 6.0%. What do you guys think?

My opinion varies slightly from what you have already heard. I would like to stress the following points. I am a young attending (4yrs out from fellowship)

1) A good financial advisor/accountant is a valuable asset. There are several who work exclusively with physicians. I would try to find one of these people. Physicians have a lot of issues that sometimes stump even experienced financial advisors/accountants who arent used to working with us. Talk to some of your faculty members about possible advisors.

2) If you have a good credit score and are a physician, you will have no trouble getting money for your home mortgage. Many banks have special programs for young physicians. Bank of America has one such program (I believe Wells Fargo does as well). Identify yourself as a physician. They are used to seeing very high debt to income ratios and would not be scared by it. There are even some niche banks that will work with physicians with credit scores in the 600-650 range (with a higher interest rate of course). They will even give you zero down options if that is what you are interested in. My wife is also a physician. Together we had 225K in debt after finishing training together (which actually isnt that bad). We had a 710 credit score. We got numerous offers up to 800-900K range, zero down, 6.5% 30 yr fixed. You will not have any trouble if your credit score is north of 650.

3) Concerning your debt, I have a different suggestion. Paying off high interest credit card debt is a no brainer and should be done immediately. However, what should you do with the student loan debt in the 2-6% range. My advise is to leave it alone if you are locked into an interest rate. You can easily get a better return in the market or even in a high interest savings account. I would much rather have my money tied up in stocks giving an 8-10% return than paying off a 2% credit card. Also remember that you are in a HIGH risk, high liability profession. Carrying a little debt around is not a entirely bad idea and may discourage some creditors (as long as it is the right kind of debt) Some states have the home as a protected asset. In these states it makes since to put a lot of money into your home for asset protection. I would not be in a huge hurry to pay off all of your debt. If I have 700k tied up in my home and 50 K in low interest debt, I would be a less desirable target for a malpractice attorney than a physician who has 650K sitting in a bank account or tied up in stocks.

4) I would definitely get a good disability policy. Disability is the most likely catastrophic event that will affect young physicians. Many young physicians have a lot of life insurance with no disability policy. This is very dangerous. I advise you to get a good policy if you do not already have one. It should pay 60-70% of your income in your OWN specialty at a minimum.


Good luck..

 

[mille125]

i think there are multiple ways to skin this cat. i'd suggest hiring (if you haven't already) a good accountant and financial advisor. not as easy to come by as you might expect. fortunately for me, i'll be continuing to use the same advisor my parents have used prior to their retirement. he has made a crap pile of money for them over the past 15-20 years. i will be shopping for an accountant. of course, i've already squirreled away a lot of "untouchable" assets prior to even going down the whole med school/resident/soon-to-be attending path.

despite having an mba myself, i think it's always a good idea to have an extra set of eyes looking at your numbers. some of the stuff you may already know, but they may have other ideas you haven't thought of. consider it a "consult" from another service where you're still the primary. it's a relatively small amount of money that is usually very well spent.

and, to sort of echo noyac, think long-term gains, not short term ones. paying off your entire school loan debt may feel good in the short run, but it may not be the best use of your money.

just my $0.02.

I must say that I have been impressed with "MDTAXES"(www.mdtaxes.com). They give a lot of great advise. They are CPA's who specialize on giving advice to young physicians. I am lucky to already have an accountant that I trust. However, if I were looking, I would consider them.

 

[EtherMD]

There is one important factor that you must consider when deciding about investing vs. paying off debt: Your Income

Where will your income be in 5 years? Will Universal Health Care reduce your income by 30%? Then , you may be forced to sell your stocks in a down-market which results in a loss. What about your home? If your income drops can you make the payments on your loans, mortgage, car, etc.?

I agree about disability insurance (see my posts on that thread) but debt is something else. You are taking on a lot of risk when you carry significant debt AND your income level is not secure. In my opinion, Anesthesiologist's income may change dramatically over the next 5 years. Do you have plan to deal with that? Are you hoping that if you must sell your house and stocks SUDDENLY to meet your debt load that this automatically results in a profit?
Both of these assets while excellent long term investments are difficult to time when selling abruptly.

Think about all these issues when developing a plan for what to do with your money.

 

[timtye78]

hey guys thanks for the info, this thread rocks if I do say so myself!

 

[Mman]

My point is that life is more complicated than just the obvious. Student Loan debt while cheap is not something SOME of us want to carry until retirement.
However, for the risk takers out there cheap debt should never be paid off because there is opportunity to earn more elsewhere.

History has shown that this philosophy has its own set of pitfalls. A person can easily get in over his head by ignoring CHEAP debt and purchasing items he may not be able to afford in the future.

Well, let's put it this way. If I take every $$ above the minimum payment on my loans and stick it in a savings account earning at least 2% interest, I am making a profit at ZERO risk. None. The only risk is if the United States government collapses and the FDIC cannot insure accounts. As long as I'm not a ***** and blow the money I can't lose. If the interest rate in the savings account falls, I can simply take the money out of the account and pay it to the loan. If not never falls below the rate of interest on the loan, I end up with free money at the end.

What's the downside? Sleeping easy at night? $170,000 doesn't sound like much money at such a low interest rate and I sleep like a baby. I'm cheap. Nearly 1/4 of my net salary as a resident goes to savings. I won't know what to do with myself when I finally graduate and make anything resembling a real salary.

I am fortunate enough to not need to guesstimate average rates of returns on the stock market to stay ahead of my loan payments, just as long as I can find any account willing to pay me greater than the 1.76% I am locked in at for student loans.

As a simple exercise:

170,000 @ 1.76% over 30 years = $608.15 a month = $218,934 paid off in total over 30 years. In 2007 dollars, I'm too lazy to figure it out exactly but it is more like $110,000 assuming 4% inflation.

Now if I took $170,000 and paid it off today, that'd be nice. However, if I made the minimum payment for 1 year and invested the rest at 5% interest I would have $170,837.31 and have 1/30 of the loan paid off. Rinse and repeat 29 more times and I'll pay the loan off with over $225,000 in savings. That's $225,000 of free cash that would've been nothing if I paid it off ahead of time.

Now that makes some assumptions that are not necessarily going to be true. But the fact is, that if the savings rate ever drops below the loan rate, all you have to do is take the money from the savings and pay it to the loan. It's free money, I'd be a fool to turn it down. 30 years from now, if my extra student loan fund has over $200,000 in it I don't think I'll be worrying about the $608.15 monthly payment being deducted.

It's simple math. For anybody that isn't a compulsive spender and can control their finances, paying the minimum on loans that accrue less interest than your savings is a no brainer. Future income has absolutely nothing to do with it so long as you save the amount you would've paid on top of minimum payments. Universal Health Care? Won't change my savings plans.

 

[Direct Laryngoscopy]

For those that are still in school and about to graduate and have heavy loans www.graduateleverage.com is a company started by some Harvard business student as a project but turn into a service for graduate students with loans. They provide the service for free to students if you sign up (free). They do all types of good things like pull up all your loans, compute these loan companies in the form of APR (like what credit cards do) to show if one company with all the perks are really worth it over the long haul. They also get better loan deals then what is offered on the street, they also work out a plan for you to pay off your loans and consolidate based on the loans company you deal with.

They work with all types of graduate students (MBA, MD/DO, Law, etc). They been to my school twice (just yesterday) and I think its something to check out and consider. For those that are still in school (I'm an MS2). They'll come to your school and give a talk if interested.

 

[Stimulate]

My monthly student loan payment is going to be around $750 (interest rate is just over 2%). So I figure I will put enough in a savings account such that the interest earned alone will be enough to make the monthly payment on the student loan. This way I can set up an auto-pay from my savings to my loan account and never have to think about it or physically write a check, etc. The thought of writing that check each and every month is too much to bear.

I also agree that asset protection (by companies geared for physicians who are familar with each state's laws) is something we should all be concerned with. I know physicians who put money in swiss accounts and assets into trusts, etc. I am going to look into these options as well.

 

[ReefTiger]

"170,000 @ 1.76% over 30 years = $608.15 a month = $218,934 paid off in total over 30 years. In 2007 dollars, I'm too lazy to figure it out exactly but it is more like $110,000 assuming 4% inflation.

Now if I took $170,000 and paid it off today, that'd be nice. However, if I made the minimum payment for 1 year and invested the rest at 5% interest I would have $170,837.31 and have 1/30 of the loan paid off. Rinse and repeat 29 more times and I'll pay the loan off with over $225,000 in savings. That's $225,000 of free cash that would've been nothing if I paid it off ahead of time.

Now that makes some assumptions that are not necessarily going to be true. But the fact is, that if the savings rate ever drops below the loan rate, all you have to do is take the money from the savings and pay it to the loan. It's free money, I'd be a fool to turn it down. 30 years from now, if my extra student loan fund has over $200,000 in it I don't think I'll be worrying about the $608.15 monthly payment being deducted.

It's simple math. For anybody that isn't a compulsive spender and can control their finances, paying the minimum on loans that accrue less interest than your savings is a no brainer. Future income has absolutely nothing to do with it so long as you save the amount you would've paid on top of minimum payments"

Please do not read my post as an attack on you/your plan, it is not ill spirited.

I understand the concept you're trying to say, but what you said doesn't make sense. What do you mean by "so long as you save the amount you would've paid on top of minimum payments"? What value is that? Certainly you understand that if you paid any amounts over the minimum your time to pay off the loan is less than 30 yrs. Heck, if you just made one extra minimum payment per year you significantly decrease the amount of time and interest you pay on these loans. Why wouldn't you? So you can make $30 more per year (by saving a minimum payment at 5%)? You are really walking the line as far as inflation is concerned as well. I doubt that most would simply put that money in a low bearing interest account when they are tempted by other promises of high returns.

Everything works out on paper, a lesson I've learned the hard way. I think there are too many variables to take into account over a 30 yr time period. I'd prefer to be strongly considering retirement by then rather than making payments on a loan I took out 3 decades ago.

I understand it is personal preference as to whether you are comfortable carrying debt. I used to tell myself I was going to pay the minimums, but have since changed my way of thinking. It is my now firm belief that you will never become wealthy with debt. The borrower is always servant to the lender.

When I finish my plan is to pay off my car, credit cards, and a private loan that is on deferment while keeping a small emergency fund available. Once those are paid (hopefully less than 6 months) I will aggressively build my emergency fund and pay student loans, while saving for house down payment.

I will make sure to save in the 401K up to match the entire time I do the above. I will buy a house ONLY when I can put 20% down and ONLY with a 15yr fixed mortgage. I will stay in this house until loans are paid. By this time it is difficult to know what will be going on in my life, but I am convinced there is no better feeling than to know that what I make is MINE.

At this point I will NEVER have any loan other than a house mortgage again in my life (barring some unforseen disaster). If I can't pay for it in full, then I can't afford it. It has taken a little time for me to realize that I will likely not be able to live "like a doctor" until later in life, but I refuse to be a "normal American". "Normal Americans" live a life in their own world of debt.

 

[mille125]

There is one important factor that you must consider when deciding about investing vs. paying off debt: Your Income

Where will your income be in 5 years? Will Universal Health Care reduce your income by 30%? Then , you may be forced to sell your stocks in a down-market which results in a loss. What about your home? If your income drops can you make the payments on your loans, mortgage, car, etc.?

I agree about disability insurance (see my posts on that thread) but debt is something else. You are taking on a lot of risk when you carry significant debt AND your income level is not secure. In my opinion, Anesthesiologist's income may change dramatically over the next 5 years. Do you have plan to deal with that? Are you hoping that if you must sell your house and stocks SUDDENLY to meet your debt load that this automatically results in a profit?
Both of these assets while excellent long term investments are difficult to time when selling abruptly.

Think about all these issues when developing a plan for what to do with your money.

ok, we get it. you are convinced that universal health care will hit us in the next five years and that our salaries will drop 30% (you say this in every one of your many posts). universal health care may consume all of us or it may be insignificant (i am leaning towards that latter but that is my opinion). no matter what happens, if you develop good habits related to debt management, you can weather any storm. you really just need to be smart. running up a credit card with 18%+ interest, buying a 800K house interest only, or buying extravagant automobiles (which lose 40% of their value just by driving off the lot) are NEVER good ideas unless you are independently wealthy. if universal health care comes or not, you will face peril if you make poor financial decisions. you just need to be smart. I just dont agree with all of this fruitless worrying about universal health care and our salaries (something that may or may not come) just remember what they said about managed care....we all know how that turned out...............

 

[EtherMD]

ok, we get it. you are convinced that universal health care will hit us in the next five years and that our salaries will drop 30% (you say this in every one of your many posts). universal health care may consume all of us or it may be insignificant (i am leaning towards that latter but that is my opinion). no matter what happens, if you develop good habits related to debt management, you can weather any storm. you really just need to be smart. running up a credit card with 18%+ interest, buying a 800K house interest only, or buying extravagant automobiles (which lose 40% of their value just by driving off the lot) are NEVER good ideas unless you are independently wealthy. if universal health care comes or not, you will face peril if you make poor financial decisions. you just need to be smart. I just dont agree with all of this fruitless worrying about universal health care and our salaries (something that may or may not come) just remember what they said about managed care....we all know how that turned out...............

Temptation. Not the Singing Group but the emotion. It will get most of us every time. It is human nature to want to take the easy road. Get a higher return with a little more risk. Next year you up the level a bit and so on.
Before you know it, you have a $800,000 House at 5.5%, $100,000 car at 5.9% and several expensive goodies "interest free" for 60 months. YOu convince yourself the "market" pays better returns so why not borrow the money. ON top of that, you have your student loans from more than a decade ago. This is what happens to a lot of people who focus only on returns and ignore debt.

My posts are about preparing for the future and being Conservative. All of you spent years for a conservative career in medicine. If you were such big risk takers why choose Anesthesiology as a career? We buy insurance for the small chance something bad happens. Buy a little insurance for yourself by paying off some debt in case UNIVERSAL HEALTH CARE happens. Which is more likely from a statistical standpoint? You become disabled or the Democrats pass a "severe" form of Universal Health Care? I don't want either one to happen to me but I am prepared to deal with both. Are you?

 

[Mman]

I understand it is personal preference as to whether you are comfortable carrying debt. I used to tell myself I was going to pay the minimums, but have since changed my way of thinking. It is my now firm belief that you will never become wealthy with debt. The borrower is always servant to the lender.

When I finish my plan is to pay off my car, credit cards, and a private loan that is on deferment while keeping a small emergency fund available. Once those are paid (hopefully less than 6 months) I will aggressively build my emergency fund and pay student loans, while saving for house down payment.

The bottom line is that there is good debt and bad debt. My debt is good debt. Heck, any debt accruing interest at less than the interest you can make in a savings account is good debt.

I own my car. I have never carried a balance on a credit card in my life. I consider myself as financially sound as one can be as a resident. But paying off the student loans early? Simply not logical. There is absolutely no downside to making the minimum payments and getting paid interest on what I save above that.

The only risk is for people that are incapable of managing their finances and can't handle having extra money around without wasting it.

Why would having a piddly little monthly payment hanging around when I'm 55 hinder my retirement planning when I would have even more cash in the bank than if I paid it off at age 40? I'd be even more likely to be able to retire at an earlier age by not paying off the student loan early. It's simple economics. The longer you take to pay off a loan when you make more in savings interest, the more money you have. I like to earn the most that I safely can.

 

[ReefTiger]

I agree that you are one of the few that can manage money this way, most cannot. You are also lucky to have yours at less than 2%. Mine is less than 3%.

I disagree with there is good/bad debt. The bottom line is it is debt.

Downsides? What if you get sued? What if you get divorced and have no pre-nup? Child support? What if you are wrongfully accused of a crime and have to hire expensive lawyers to defend you (for a non-medical lawsuit)? I could go on and on, but in the end you will still have your good debt.

This is unlikely, but so is disability. My post was to illustrate to others it is not a no brainer.

 

[granolabar2]

I'm only an MS-IV, but I've heard from several attendings that "everyone gets sued. multiple times. usually for things that had nothing to do with the anesthesia (eg. "the terminal patient coded four days after the operation and I got sued")
does anyone have information on how likely it is that lawyers will go after personal "unprotected" assets? isn't that what malpractice insurance is for?

 

[EtherMD]

The bottom line is that there is good debt and bad debt. My debt is good debt. Heck, any debt accruing interest at less than the interest you can make in a savings account is good debt.

I own my car. I have never carried a balance on a credit card in my life. I consider myself as financially sound as one can be as a resident. But paying off the student loans early? Simply not logical. There is absolutely no downside to making the minimum payments and getting paid interest on what I save above that.

The only risk is for people that are incapable of managing their finances and can't handle having extra money around without wasting it.

Why would having a piddly little monthly payment hanging around when I'm 55 hinder my retirement planning when I would have even more cash in the bank than if I paid it off at age 40? I'd be even more likely to be able to retire at an earlier age by not paying off the student loan early. It's simple economics. The longer you take to pay off a loan when you make more in savings interest, the more money you have. I like to earn the most that I safely can.

It is your life and your money. But, will you be ready financially if disaster strikes (Universal Health Care and/or disability)? Will your plan take these into account? When disaster strikes all debt is bad. What matters then is CASH and hard assets. Some assets are difficult to time well (selling a home or stock) and you could lose money.

I agree that you will make money by borrowing it at 2% and earning 6%. It is a no brainer. But, what is your emergency plan if things don't go well? Anesthesiology is going to change a great deal over the next ten years so invest wisely and be prepared for a significant drop in income (we all hope this doesn't happen).

 

[timtye78]

guys, here is more food for thought.

Average medical education debt here in US on the low side, is probably 100K-150K. Sounds like most payment plans are roughly 1,000 per month times 30 years. $12K times 30 years is $360,000 for that medical education in the end. You figure in how many hours you put in during residency, and suddenly it doesn't sound like that great of a financial decision anymore. This is the cheap debt we are all talking about.

Same goes for mortgage: $150,000 house with a 6.0 fixed 30 year note. Payment is around $1300 monthly turns it into a $468,000 purchase. Of course most people won't stay there or even pay the loan off. Not such a bargain.

I read an interesting book by Dave Ramsey, called the "Total Money Makeover." I do not agree with him on everything, but he does seem to offer an alternative money view that seems like something to at least aim for.

Bottom line on his approach:

Create an emergency source of available cash to yourself-this removes the need to use a credit card. List your debts in order of size, and also note the interest rates. Make your minimums on all the debts, and throw anything extra at the smallest one, once it is paid off, then take that payment and add it to the minimum on the next. This kills your debts off one by one, increases the payment you are sending to the larger items.

Ramsey sees debt as the 'root of all evil' as far as finances go.
Investment advisors seem to be off two major schools of thought-either the
ones that say throw anything you can at your 401k, or don't start investing until you are out of debt.

my two cents to add fuel to the fire...
Probably the safest way to go in life is a balanced approah-pay towards your debt, pay towards retirement, don't be too exstravagant in lifestyle, pay everything in cash, etc

 

[militarymd]

Do what makes you happy....

In my group of relatively young anesthesiologists ....ie BC within last 2 years to me BC in 1998....here is the spectrum of behaviors:

- living paycheck to paycheck.....lots of debt...fancy house, car, airplane, and biannual carribean vacations where movie stars go.

-me...driving a 15 year of truck with 130,000 miles.....no debt...and single biggest expense per month is my wife's credit bill...which I fight with her on a monthly basis to keep down....and putting every single cent into various investment and retirement account possible.

- and everything in between.

Do what's comfortable for you.....I don't think there is a right answer

 

[SexPanther]

For those that are still in school and about to graduate and have heavy loans http://[B]www.graduateleverage.com[/B]/ is a company started by some Harvard business student as a project but turn into a service for graduate students with loans. They provide the service for free to students if you sign up (free). They do all types of good things like pull up all your loans, compute these loan companies in the form of APR (like what credit cards do) to show if one company with all the perks are really worth it over the long haul. They also get better loan deals then what is offered on the street, they also work out a plan for you to pay off your loans and consolidate based on the loans company you deal with.

They work with all types of graduate students (MBA, MD/DO, Law, etc). They been to my school twice (just yesterday) and I think its something to check out and consider. For those that are still in school (I'm an MS2). They'll come to your school and give a talk if interested.

I second this recommendation. My wife used it for her optometry school loans and they hooked her up with a great company offering low rates and performance incentives (once they kick in we're looking @ ~1% interest rates!). I used them to consolidate the 1st 2 years of my education and they'll get the nod when I graduate to figure out my next move with my loans.

They are in it to get us the best deals possible and their customer service is excellent!

 

[The_Sensei]

-me...driving a 15 year of truck with 130,000 miles.....no debt...and single biggest expense per month is my wife's credit bill...which I fight with her on a monthly basis to keep down....and putting every single cent into various investment and retirement account possible.

Well.....you're not always driving that truck.

 

[johankriek]

I'm sitting here with around $170,000 in debt. I plan on deferring as long as possible and paying the minimum as long as possible because my loans are locked in at 1.7% interest annually because I hit the jackpot graduating in 2005. I have plain old savings accounts at places like ING and HSBC paying over 5% right now. It'd be financial suicide to pay off loans that accrue less interest then you can make by saving/investing.

How on gods green earth did you all get such low interest rates on your loans.. Im locked in at 6.25 percent of 200K. sucks.. I consolidated in July of 2005. is there anyway i can get it down to 4 percent.. anybody know?

 

[johankriek]

I'm only an MS-IV, but I've heard from several attendings that "everyone gets sued. multiple times. usually for things that had nothing to do with the anesthesia (eg. "the terminal patient coded four days after the operation and I got sued")
does anyone have information on how likely it is that lawyers will go after personal "unprotected" assets? isn't that what malpractice insurance is for?

that my friend is what the stresses are in being a physician.. Being sued and losing your license, money, and everything you own... and having nothing else to fall back on.. after a few lawsuits. regardless.. some insurance companies will not insure you..

go to any state board website... california my state has a laundry list of physicians every month whose licenses have been revoked and suspended for incompetence, negligence, failure to complete medical records, all sorts of things.. same with many other states...

 

[mille125]

Temptation. Not the Singing Group but the emotion. It will get most of us every time. It is human nature to want to take the easy road. Get a higher return with a little more risk. Next year you up the level a bit and so on.
Before you know it, you have a $800,000 House at 5.5%, $100,000 car at 5.9% and several expensive goodies "interest free" for 60 months. YOu convince yourself the "market" pays better returns so why not borrow the money. ON top of that, you have your student loans from more than a decade ago. This is what happens to a lot of people who focus only on returns and ignore debt.

My posts are about preparing for the future and being Conservative. All of you spent years for a conservative career in medicine. If you were such big risk takers why choose Anesthesiology as a career? We buy insurance for the small chance something bad happens. Buy a little insurance for yourself by paying off some debt in case UNIVERSAL HEALTH CARE happens. Which is more likely from a statistical standpoint? You become disabled or the Democrats pass a "severe" form of Universal Health Care? I don't want either one to happen to me but I am prepared to deal with both. Are you?

this is not rocket science......putting your money in a high yield savings account (5.5%) instead of paying down a 2% student loan is hardly risky....if anything it is quite boring and it is not ignoring your debt.....EVERYONE should have a three to six month emergency fund to ride out "disasters".........as I have said before if it comes down to a lawsuit against you (the guy with zero debt) and me (the guy with some debt) the lawyers will come after you...this is a fact of life.....i am not criticizing you for paying off your debt...i actually applaud you for your discipline (many people cannot do this even if they wanted to)... that is one strategy..however, ether, you need to realize that there may be multiple good solutions to the same problem (they teach you this during your oral board exam if you can still remember)..you should stop being so arrogant to think that your solutions are the only solution (JUST LIKE YOUR UNIVERSAL HEALTH CARE)......if you stop and listen and open your mind you might learn something worthwhile....

 

[The_Sensei]

I was wondering the same thing myself...

 

[timtye78]

So....do lawyers have access to our financial information even prior to a lawsuit? Say it ain't so..geez.

 

[kifaru]

Say you have $100,000 to invest,how would you go about it? Not that I have the money but I have been thinking of various ways to invest and want to see what you guys would do

 

[mille125]

So....do lawyers have access to our financial information even prior to a lawsuit? Say it ain't so..geez.

I hate to tell you that they can and they do. They can get almost any information about you for a fee. The fee is on the order of 40-150 bucks. Believe me, if they want to sue you they will gladly pay it. It is not fair, but this is the way of the world. Examples:

1) 18 yr old "steals" grandmother's car and rear ends a gentleman down the street resulting in an "injury". Kid's family is poor. Grandma has 500K sitting in a bank account for retirement. PI lawyers sue grandmother for the kid's accident....

2) Gentleman falls at a neighbor's house injuring himself. Neighbor has not money and is poor. XYZ concrete company just poured driveway 6 months ago. PI lawyers sue XYZ concrete company.

3) Dr. X is in pain management and Dr. Y is a neurosurgeon. Patient had series of three injections without relief. Patient subsequently sees neurosurgeon for surgical procedure. Pain worsens. Dr X has 2 million dollars in assets mostly in bank accounts. Dr. X has no debt. Dr. Y has also has 2 million dollars in assets. 80 percent of this is in his house and retirement. 20 percent is in an FLP or trust. Dr Y also has some debt. Both have similar malpractice limits. PI lawyers WILL find a way to sue Dr. X.........


The moral of the story is the protect yourself.......Sometimes it may not be a bad thing to look poor on paper........

 

[mille125]

Say you have $100,000 to invest,how would you go about it? Not that I have the money but I have been thinking of various ways to invest and want to see what you guys would do

this isn't the correct answer for everyone. But in my situation, I would max out retirement, pay off high interest loans (if any), but the rest into my house. You can get a good return on investment and the money is 100% protected from creditors. This is a conservative approach. Some will tell you look at stocks, mutaul funds, etc....I am also interested in other responses.

 

[Mman]

How on gods green earth did you all get such low interest rates on your loans.. Im locked in at 6.25 percent of 200K. sucks.. I consolidated in July of 2005. is there anyway i can get it down to 4 percent.. anybody know?

Well, you should have consolidated in June of 2005 because I'm pretty sure the student loan rate shot up big time on 7/1/05. Student loan rates change on July 1st every year. I graduated in April 2005 and the federal student loan interest rate was around 2.5% or so. When you consolidate through various programs they give you bonuses for making so many payments on time and this and that. When it all factored in, it's slightly above 1.7%. Like I said, I got real lucky on the timing.

 

[foil]

Research this:
http://www.wealth4freedom.com/truth/3/powerfortress.htm

http://www.youtube.com/watch?v=A4kxTkhwR_Q


Then turn an Oh-my-gosh into profit.

Research what stocks these guys own, they should weather any future upset.




foil

 

[ambientbaby]

Hey Matt, can you give us some insight into your picks?

 

[loveumms]

I'm very new in this personal finance area - I've been trying to read up and educate myself so when I graduate I have a chance at managing my future income.

Here is what the graduateleverage website says about student loans ... kinda found it interesting!

"Don't pay off your student loans early

At today's interest rates, your federal student loans are probably the least expensive debt you'll ever incur. These rates are so low—well below 5 percent—that it's actually wise not to pay them off before they're due. This may seem counterintuitive, but it makes great fiscal sense when you take inflation and the time-value of money into account.

Though the interest rate is a fixed value, the real interest rate to which your loans are subject is a bit more complicated. Because it adjusts for inflation, a real interest rate is a more accurate measure of a debt's cost. Consider this hypothetical case: A student graduated last year with a rate of 2.875 percent on his consolidated loans. During the past few years, the inflation rate has hovered at about 3 percent. By subtracting the inflation rate from the interest rate, we discover that the current real interest rate on this student's loans is negative 0.125 percent. In other words, you're making money by borrowing money.

So while it may be true that federal student loans accrue interest, it's also true that they can accrue interest at a negative rate when adjusted for inflation. As odd as it may seem, your low-interest loans are working for you. Any prepayments made would actually increase your real cost of borrowing."

 

[mille125]

I'm very new in this personal finance area - I've been trying to read up and educate myself so when I graduate I have a chance at managing my future income.

Here is what the graduateleverage website says about student loans ... kinda found it interesting!

"Don't pay off your student loans early

At today's interest rates, your federal student loans are probably the least expensive debt you'll ever incur. These rates are so low—well below 5 percent—that it's actually wise not to pay them off before they're due. This may seem counterintuitive, but it makes great fiscal sense when you take inflation and the time-value of money into account.

Though the interest rate is a fixed value, the real interest rate to which your loans are subject is a bit more complicated. Because it adjusts for inflation, a real interest rate is a more accurate measure of a debt's cost. Consider this hypothetical case: A student graduated last year with a rate of 2.875 percent on his consolidated loans. During the past few years, the inflation rate has hovered at about 3 percent. By subtracting the inflation rate from the interest rate, we discover that the current real interest rate on this student's loans is negative 0.125 percent. In other words, you're making money by borrowing money.

So while it may be true that federal student loans accrue interest, it's also true that they can accrue interest at a negative rate when adjusted for inflation. As odd as it may seem, your low-interest loans are working for you. Any prepayments made would actually increase your real cost of borrowing."

This is exactly would I have been saying to Ether for the past two weeks.............It makes absolutely no sense to pay off these loans....Ether

 

[EtherMD]

This is exactly would I have been saying to Ether for the past two weeks.............It makes absolutely no sense to pay off these loans....Ether

I understand this is your opinion. If you are able to develop a plan for your life that includes your student loans for thirty years then go for it. My point is that there is much more to life in the real world than just theoretical earnings and gain.

There is peace of mind and personal satisfaction. I don't believe in long term debt and think the field of Anesthesiology will change dramatically over the next ten years. New graduates should prepare for this scenario which I hope does not occur. This means if you end up earning $200,000 per year can you afford everything in your life? This includes your home, car and student loans. At today's income levels, you may have a lot of disposable income for vacations, fancy watches, luxury cars, etc. Is it nor "better" to spend this extra disposable income on paying off debt rather than getting more stuff you don't really need?

In my opinion, if you want to view your student loans as an investment because you will earn 3-4% a year in interest on the money I understand your reasoning. But, many people will easily spend this extra money (small amount) on luxury items and non-essential goods instead of using it to grow wealth. Many will buy an even bigger home and a more expensive car than they would have if they dedicated themselves to paying off debt. This is what I see in the real world: theoretical earnings and lots of real spending.

So, by dedicating yourself to paying off debt, living modestly and preparing for a financial crisis in the future (universal health care) the new graduate MAY end up much better off. Remember, it is not just what you earn but what you spend that matters most in growing wealth.

This is my opinion. Many of you may disagree and see the easy, quick buck as a "no-brainer." Fine. But, I posted this before and I am saying it again:
If disability and/or universal health care hits YOU are you preapared?
Will you need to sell those stocks and your home at a loss? Will you be forced to sell your BMW for a 10 year old Honda? Is that 3% a year growth on your debt really goiing to make you wealth? Or, is developing a plan that includes preparing for Universal Health Care down the road a better way to go?

 

[EtherMD]

I posted my opinion on debt and student loans. It is just one opinion. I would like to add that many financial advisers will tell you to carry a 30 year mortgage on your home for life. I don't agree and carry a 15 year mortgage. There is a lot to be said for living within one's means and preparing for the future whatever it may bring. This must include disability and Universal Health Care both of which would be devestating to one's income. This is why I have extra insurance (umbrella policy), good disability covergae (costs more than any earnings growth from student loans) and live within my means.

Ever heard of Suzy Orman? She is a financial talk show host on cable TV. At age 55, she should own a significant stock portfolio for herself; but, she doesn't and owns 90% plus bonds for her 25 million dollar portfolio. Why?
She is risk aversive in her personal life but "preaches" the benefit of a diversified stock portfolio to all of America.

Every graduate needs to be comfortable with his/her level of debt at graduation and after a few years of work. As an individual you must be comfortable with that debt load and develop a diversified plan for earnings and debt. Again, are you prepared if disaster hits?

 

[lushmd]

Speaking of mortgages, just a little pearl I picked up from one of the FP docs that I am presently rotating with: pay your mortgage bi-weekly instead of monthly (akin to paying an extra month's payment per year, thus allowing you to pay off your mortgage sooner without really noticing too much of a difference in your bank account month-to-month).

 

[lushmd]

Ever heard of Suzy Orman? She is...55...and owns 90% plus bonds for her 25 million dollar portfolio...Why?

I am no financial guru, but it seems to me that you have answered your own question. She is 55 (nearing retirement age) and has $25 million (and thus has no need "grow" her funds): as such, she will of course have her money in a safer place than the stock market (she has more than enough to retire comfortably and, at her age, it is more important to preserve assets than risk any significant loss). This idea of decreasing exposure to risk with age is simply sound practice (IMO); FYI, this is the rationale behind "lifecycle" mutual funds.

 

[mille125]

Speaking of mortgages, just a little pearl I picked up from one of the FP docs that I am presently rotating with: pay your mortgage bi-weekly instead of monthly (akin to paying an extra month's payment per year, thus allowing you to pay off your mortgage sooner without really noticing too much of a difference in your bank account month-to-month).

this is a good strategy....there are a few banks that will set this up for you for a fee (which makes me laugh)...you can do it for yourself for free.....it typically takes 7 to 8 years off of a 30 yr mortgage

 

[EtherMD]

I am no financial guru, but it seems to me that you have answered your own question. She is 55 (nearing retirement age) and has $25 million (and thus has no need "grow" her funds): as such, she will of course have her money in a safer place than the stock market (she has more than enough to retire comfortably and, at her age, it is more important to preserve assets than risk any significant loss). This idea of decreasing exposure to risk with age is simply sound practice (IMO); FYI, this is the rationale behind "lifecycle" mutual funds.

Wrong. 55 is NOT nearing retirement age and in fact, the recommended stock exposure is still 30% or more. Suzy has $1 million in the stock market and $24 million in bonds. This is not what most financial advisers would recommend for wealth growth and not what I would be doing with my money even with $25 million dollars.

This woman gives advice to millions of people on cable TV. Yet, when it comes to her own money she follows a different path. Typical of many financial advisers who want you to bet on the market and keep good debt while they pay off their own debt and play the market conservatively.
Many financial Advisers want you to carry a mortgage for life because you can earn more money in the stock maket. I prefer the "conservative" approach and like little debt of any kind.

That said, a new graduate that has 2-3% interest on his/her student loans should save money, buy a home and invest in the market. But, I also believe that addressing the student loan debt should be a consideration as well because there is satisfaction in not owing money forever and being prepared if disaster strikes. Again, what is your plan if disaster hits Medicine and Anesthesiology? Will your overall debt be too much? Are you prepared to cope with the student loan debt and all your newly acquired debt as well?
You will need to make payments on ALL the debt (good and bad) so developing a plan is important. This means you need to factor ALL debt into your plan for coping with disaster. Remember, selling your home and/or your stocks SUDDENLY may result in a substantial loss. Many people will be tempted by the high returns of the stock market over a money market/municipal bond fund and thus increase the likelihood of using cheap money to make a lot more money. This increase the RISK of losing money in the short term (3-5 years). Thus, be careful to "walk the walk" with your student loan money and not play high stakes poker because the interest rate is low.

 

[mille125]

With all due respect, I think that "disaster" is a strong word to use for decreased medicare reimbursement. Lets be real. If you become disabled and lose your ability to work (HIV needle stick, ski accident, etc.) that is a disaster. Having your salary reduced to 200K is hardly a disaster......

 

[EtherMD]

With all due respect, I think that "disaster" is a strong word to use for decreased medicare reimbursement. Lets be real. If you become disabled and lose your ability to work (HIV needle stick, ski accident, etc.) that is a disaster. Having your salary reduced to 200K is hardly a disaster......

Fair Enough. I was just trying to get my point across. For those living on $350,000 per year from paycheck to paycheck (I know quite a few) a drop in income to $200,000 would be quite a problem. In our society there is both overt and sublimal pressure to live the good life/American dream. This means spend, spend and spend some more. Nice cars, luxury homes and lots of expensive vacations really eat into a salary-even a $350,000 a year one.
Remember, Uncle Sam is going to get about 35% of that $350,000 right off the top.

 

[mille125]

Fair Enough. I was just trying to get my point across. For those living on $350,000 per year from paycheck to paycheck (I know quite a few) a drop in income to $200,000 would be quite a problem. In our society there is both overt and sublimal pressure to live the good life/American dream. This means spend, spend and spend some more. Nice cars, luxury homes and lots of expensive vacations really eat into a salary-even a $350,000 a year one.
Remember, Uncle Sam is going to get about 35% of that $350,000 right off the top.

ok........i agree with you on this one...........debt management counsellor..now that is something that I should think about..there would be no shortage of clients, that's for sure,

 

[matt1234321]

pcu is a great buy even at 70. almost a 10 percent yield and its gonna keep goin up. copper prices sky rocketed and the demand just keeps growing. CHINA

This one should hit 80 quickly. I'm goin out on a limb ad say one month. LOL

 

[matt1234321]

Well, what can i say? Research and a open ear. Medical is a little risky, but the gains are tremendous.The FRO was a solid play if u got in on it at 31. PCU will be a solid play if you get in right now at 70.

10 percent yield is hard to beat.

I also expect this one to do far better than the fro play in the long run. You could grab PCU and close your eyes for a couple years.

 

[matt1234321]

man, an unstable market is the best time to invest. everything is on sale. lol

 

[toughlife]

Any of you would care to comment on the pros/cons of stocks vs. index funds?

 

[toughlife]

I opened a bank account last year in another country whose currency is also the US dollar. My goal is to stash money there when I begin to work as an attending. I also have citizenship in that country so I have access to anything and everything there just like the locals.

Are savings in international accounts off-limits to lawyers in the event of a lawsuit?

 

[matt1234321]

well how bout them apples? i hope you guys got in

 

[ambientbaby]

I almost got in PCU at 66, but I balked. Now I am paying for it. I got in AUY under $14, should go much higher as the dollar weakens.

 

[matt1234321]

indexes arent bad. less homework

stock market is far better if you know where to put the money and do the homework.

 

[matt1234321]

yeah i got in at 68.75. I would try to ride this to 85 but i dont wanna push my luck. lol