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Principles for Financial Success- Beginning your Residency. Congratulations!. Mortgages, Buying a House, Private Banking, and Basic Financial Planning. Ralph Broadwater, MD Financial Advisor The Busey Investment Group. Mortgages, Private Banking.

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Ralph broadwater md financial advisor the busey investment group l.jpg

Ralph Broadwater, MD Financial PlanningFinancial AdvisorThe Busey Investment Group


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Mortgages, Private Banking Financial Planning


Susan marlowe realtor relo director the janet jones company l.jpg

Susan Marlowe Financial PlanningRealtor RELO DirectorThe Janet Jones Company


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Outline Financial Planning

  • Achieving success- Ralph Broadwater

  • Your Banking Relationship

  • Buying a Home- Susan Marlowe

  • Specific Residency Issues- Ralph Broadwater

  • Questions



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Achieving Financial & Personal Success during your Residency Financial Planning

  • Setting Goals

  • Dynamic tension

  • Principles of Financial Success


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Goals Financial Planning

  • Professional

  • Personal

  • Financial

  • Family


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Why is it important to set goals? Financial Planning

We get used to our lifestyle

  • We all want to retire and enjoy life

  • We will all live longer

  • Inflation will affect our income needs

  • If you don’t save early you are in trouble


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Example: Income needs for retirement Financial Planning

  • $100,000 income

  • Age 30

  • Retire at 55 (25 yr career)

  • 2.5% inflation

  • 10% investment return

  • Live until age 85

  • Deplete savings in retirement


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Savings and retirement Financial Planning

  • At age 55 will need to generate $185,000 for same lifestyle

  • Will need $3 million

  • If start saving and earn 10% return:


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Monthly savings requirements Financial Planning

Start saving at age:

Per year

Per month


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Dynamic tension Financial Planning

  • Enjoying life

  • Saving

  • Maximizing retirement savings

  • Debt management


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Basic Principles Financial Planning

  • Develop goals

  • Take care of the basics

  • Save regularly

  • Maximize retirement savings

  • Don’t develop a consumption lifestyle

  • Start saving now!

  • Pay for professional help

    • accountant


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Take care of the basics Financial Planning

  • Disability Insurance

  • Simple will

  • Personal liability umbrella

  • Adequate insurance (life, health, home, auto)

  • Life insurance trust


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Principles of Financial Success Financial Planning

  • The rich vs. the rest of us

  • Principles from The Millionaire NextDoor

  • Specific suggestions


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Understand Wealth Creation Financial Planning

  • The rich are different from everyone else.

  • They purchase assets.

  • Assets generate income that further increases wealth.

  • Everyone else buys “stuff”; doesn’t increase income or wealth.


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Robert Kiyosaki, Financial PlanningRich Dad, Poor Dad


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Robert Kiyosaki, Financial PlanningRich Dad, Poor Dad


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Robert Kiyosaki, Financial PlanningRich Dad, Poor Dad


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A fundamental law of finance Financial Planning

Expenses will expand to entire income. (No matter how much)


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Pay yourself first Financial Planning

  • Automatic

  • Debit checking

  • monthly


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Successful Investing Financial Planning

  • Slow and steady wins the race

  • Power of compounding

  • Power of tax-deferred growth

  • Maximize both qualified plan and personal savings

  • Annual returns of 7-10%



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“Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”The Millionaire Next Door


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80% of American millionaires are 1st generation rich. income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”

The Millionaire Next Door



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BIG HAT, no cattle accumulators.


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UAMS graduate accumulators.financial demographics


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Class of 2000 accumulators.

Educational Indebtedness

  • 134 graduating

  • $7,042,440

  • 62,879 avg debt

  • Avg debt 77,334/109,264


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Class of 2002 accumulators.

Educational Indebtedness

  • 140 graduating

  • $71,307 avg debt

  • 16 students no debt


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Total Educational Debt accumulators.Class of 1999

UAMS

US

Mean/median debt: 62,177/60,000 (80,462/80,000 US)


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Credit Card Debt accumulators.Class of 1999

US

UAMS

Mean debt: 14,108 (7425 US)


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Millionare Next Door accumulators.Seven Common denominators

  • Live well below their means

  • Allocate time, energy, and money efficiently

  • They believe financial independence is more important than displaying high social status.


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Seven common denominators accumulators.

  • Their parents did not provide economic support.

  • Their adult children are self-sufficient.

  • They target bargains.

  • They chose the right occupation.


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Frugal, Frugal, Frugal accumulators.


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Save, Save, Save accumulators.


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Creating wealth accumulators.

  • Set goals (have a plan)

  • Take care of basics

  • Maximize tax free earning (retirement plans)

  • Save routinely

  • Measure progress


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Barriers to Success accumulators.

  • No clear goals or plan

  • Inadequate protection (insurance)

  • Consumption lifestyle

  • Trying to time the market

  • Chasing performance

  • Acting on hot tips

  • Starting to save too late

  • Behavioral Finance Issues



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Specific Issues During Residency accumulators.

  • Should I participate in my institution’s retirement plan?

  • Should I save into a Roth IRA?

  • Should I buy a home?

  • Should I consolidate my student loans?



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Resident Salary accumulators.UAMS 2003-2004


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PGY-1 Salary accumulators.$36,500/yr


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PGY-1 Salary accumulators.$36,500/yr with retirement savings


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Growth of Retirement Savings accumulators.5 yr residency

Annual savings

7%

8%

10%

18,926 contributed


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Growth of Residency Retirement Savings accumulators.lifetime

8%

10%

7%

18,926 contributed


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Retirement Savings During Residency accumulators.Summary

No saving

Saving


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Summary accumulators.retirement decision

  • Take home pay only reduced by $215 per month

  • Saving $298 per month

  • U.S. government is paying for $996/$3576 of annual retirement (28%)

  • Money comes from reduced taxes

  • Choice: pay the tax or pay into your retirement (free money)


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You have a choice accumulators.

  • You can spend all of your take home pay: consumption lifestyle OR

  • You can plan to save

  • $298 per month x 5 yrs

  • Either have a few more CD’s, clothes

  • Or have between 347,000 –1.1 million dollars in retirement


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Consider a Roth IRA accumulators.


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Consider Roth-IRA accumulators.

  • tax free growth

  • no tax deduction

  • income at retirement is tax free

  • AGI

    Single $110,000

    Married filing jointly $160,000


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Roth IRA assumptions accumulators.

  • $3000/yr during 4 yr residency

  • age 26-30

  • 7%,8%,10% returns


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Roth IRA accumulators.

Age

7%

8%

10%



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Consider Buying a House accumulators.

  • If > 3 yr residency

  • Don’t over buy

  • Buy for resale

    • Neighborhood

    • Schools

    • Comparables

  • Don’t plan to make money on resale


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Buying a House accumulators.

  • Improved lifestyle

  • More room and amenities for the money

  • Government pays part of your “rent”

  • Tax benefits


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Example accumulators.Buying a Home

  • 27% tax bracket

  • 100,000 home

  • 100% mortgage (no down payment)

  • 5.7%

  • 30 yrs


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New home cost accumulators.

Per month

Per year


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New home: True cost accumulators.

  • Mortgage Interest and Property taxes are itemized on tax returns as a deduction ($6,948)

  • At 27% bracket you pay $1,876 LESS taxes

  • This is equivalent to reducing your monthly payment from $713 to $557

  • So it really only costs you $557/mo to own a $100,000 home


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Apartment vs. Home ownership accumulators.

apartment

Home ownership



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I don’t know. accumulators.

  • Look at cost of consolidation

  • Interest rates

  • Does consolidation effect deferment or forbearance?

  • Is there a prepayment penalty?

  • Is simplification important to you?

  • Is the company reputable?



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Recommendations Residency

  • Write down your goals

  • Take care of the basics

  • Develop a relationship with your personal banker

  • Save 10% of your gross pay


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Recommendations Residency

  • Save for Retirement (Roth vs. 403b)

  • Consider buying a home

  • Hire an accountant to do your taxes

  • Keep credit card debt to a minimum

  • Use a balanced no load mutual fund for investments

  • Review goals annually


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Wealth Accumulation ResidencyTypical New MD

  • Assumptions

    • age 30

    • 25 year career (retire at age 55)

  • Annual Savings

    • $30,000/year into Qualified Plan

    • $1,000/month

  • 7-10% investment returns


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Wealth Accumulation ResidencyNew MD

7%

8%

10%

Age


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Week 4-Last Chance Course Residency

April 21-25



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Topics Practice of Medicine

  • Financial Planning

  • Money Management

  • Risk Management

  • Real Estate

  • Insurance

  • Behavioral Finance

  • Debt Management

  • Investment specifics

  • Wisdom from Private Practice

  • Seminars


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Individual Sessions Practice of Medicine


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Questions Practice of Medicine


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