finance for physicians confessions of a mba l.
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Finance for Physicians: Confessions of a MBA LTC Ross Colt MD, MBA, FAAFP Deep thoughts on…Money For the love of money is a root of all kinds of evil. (2 Timothy 6:10) “We were so poor my daddy unplugged the clocks when we went to bed.” (Chris Rock)

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deep thoughts on money
Deep thoughts on…Money
  • For the love of money is a root of all kinds of evil. (2 Timothy 6:10)
  • “We were so poor my daddy unplugged the clocks when we went to bed.” (Chris Rock)
  • I try to do the right thing with money. Save a dollar here and there, clip some coupons. Buy ten gold chains instead of 20. Four summer homes instead of eight. (LL Cool J)
  • "People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made." (Joan Rivers)
take home points
Take home points
  • Balance money, time, and life
  • Pay off all bad debt
  • Max out IRA, TSP
money happiness

49%

38%

33%

24%

<$30,000

$30-74,999

$75-99,999

$100,000 +

Money = happiness

But it helps!

  • Americans who describe themselves as “very happy” by household income:
  • There may be other factors…
time money
TIME=MONEY
  • Your time has value
  • How much value is up to you
  • Some may spend time to earn money
    • Example: moonlighting
  • Some may spend money to earn time
    • Example: house cleaner

VS

good debt bad debt

Stock A

Stock A

$40,000

$20,000

Good debt, bad debt
  • Appreciating assets vs. depreciating assets
  • Good debt provides leverage

$200,000

$100,000

($20,000)

($120,000)

100% gain

600% gain

a brief word about real estate
A brief word about real estate
  • Can be very lucrative
  • Remember that time = money
  • How much does stress cost?
bad debt is bad
Bad debt is….bad
  • Credit card debt is very, very expensive
  • Example: You buy a big-screen HDTV for $3,000 on his 18% interest credit card
  • How much does the TV cost you if you pay the minimum each month ($50)?
  • How long will it take you to pay it off?

$18,577.49

52 years!

http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

the power of compound interest
The power of compound interest
  • Resident A: starts saving at age 26, stops age 36, never saves another penny
  • Resident B: starts saving at age 36, commits to save for the rest of her life
  • When will B’s savings catch up to A’s?

NEVER

Each saves $6,500/yr, rate of return 8%

running the numbers
Running the numbers
  • Excel calculator
  • Value of A’s savings at the end of 10 years: $120,000
  • At retirement, A has $1,118,073
  • At retirement, B has $1,087,858
rule of 72
Rule of 72
  • Take your interest rate
  • Divide that number into 72
  • Resultant number is how many years it takes your money to double
  • Example: 9% interest doubles every 8 yrs
different colors of money
Different colors of money
  • Post-tax dollars: what shows up in your checking account
  • Pre-tax dollars: worth about 25% more
  • What stock guarantees 25% return with zero risk?

Pre-tax $

Post-tax $

tax brackets
Tax Brackets
  • Marginal tax bracket (last step) is important
by the way resident salaries
Civilian

R1-$42,000

R2-$44,000

R3- $46,500

Military

R1- $56,000

R2- $60,000

R3- $69,000

By the way…Resident salaries

Staff level (minimum)

MAJ (obligated) $100,000

LTC $180,000

COL $195,000

individual retirement accounts iras
Individual Retirement Accounts (IRAs)
  • Traditional IRA
    • NOW: pre-tax dollars THEN: deferred
  • Roth IRA
    • NOW: after-tax dollars THEN: tax-free
  • Phase-out of deductibility (pre-tax $)
  • Contribution limitation: $5000/year in 2009
thrift savings plan tsp
Thrift Savings Plan(TSP)
  • The military’s 401k- tax-deferred
    • Pre-tax dollars
  • Limit of $15,500 a year currently
  • No employer-match currently
  • www.tsp.gov
college savings 529 accounts
College savings: 529 accounts
  • Sort of like a Roth IRA for educational expenses, but much higher limits
  • State specific plans, many offer discounts on state income tax
  • Variable fees, variable funds
  • Utah is low fees, managed by Vanguard www.uesp.org
emergency fund
Emergency fund
  • Most recommend 2-3 months salary in easy access account
  • Military may need less- high job security
stocks vs bonds
Stocks vs. Bonds
  • Higher risk generally associated with higher returns
  • Dyspepsia factor
  • Research time factor
  • Lemming phenomenon- buy high, sell low
take home points26
Take home points
  • Balance money, time, and life
  • Pay off all bad debt
  • Max out IRA, TSP
questions
Questions?

Treasure indeed…