Author Archives: Dr in Debt

7 Reasons Physicians Need To Send Their Children to Private School

If you have school age children, investing in your children’s education is one of the wisest investments you can make.  There is no greater investment for your children’s future than education.  However, education is also one of the most expensive decisions you can make.   There are seven reasons why physicians spend tens of thousands of dollars a year to send their children to private schools despite the high costs.

In today’s world of increasing college education costs, is the cost of private school for your children worth the investment?   Like most financial decisions, the answer is, it depends.   Let’s look at two young physician families with three children at home.

Our first family is the Tutelage family.   The Tutelage family is a few years out of residency.  They recently purchased a house and are still paying down their medical school debt, now about $150,000 combined.   They have three school-aged children, ages nine, seven and five.  Mrs. Tutelage went to a private religious school and would like the same experience for their children.  The Tutelage family firmly believes in investing in a good education and make many sacrifices to send their children to the best private school in the city.    Luckily they don’t live in New York City and the private school in town is a bargain at around $20,000 per year per child.Private School Tuition

Despite private education for their children costing over $60,000 per year,   the Tutelage family continues to prioritize their children’s education over other luxuries.  With a combined income of $320,000,  The $5,000 / month they have to save just for school is a considerable outlay,  almost 30% of their take-home earnings each month.

Can a school really be worth 30% of your take-home income each month?   For the majority of Americans, the choice of public vs. private doesn’t even enter the equation because they cannot afford the tuition. The question for us today is, are physicians in that group?

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Should Physicians Invest in a 457(b) Plan?

The Hidden Danger In Your Hospital’s 457(b) Plan

As an employed physician, are you tired of seeing half your paycheck go to taxes?  Employed physicians face a lack of tax-sheltered savings space compared to their business-owning counterparts.

After you max out your 401k/403b, there are few options for tax-deferred savings.  There is an option offered by some hospitals and health systems, the 457(b) plan.

On the surface, the 457(b) plan appears to be just what employed physicians need,  more tax-deferred savings space!

An Introduction To The 457(b) For Physicians

The 457(b) plan is an employer-sponsored, tax-deferred deferred compensation plan.   The information found online can be very confusing because the same section of Internal Revenue Code covers the 457(b) plan offered to 2 different types of workers:

The first type of 457(b) is provided to state and local government employees. Think teachers, police officers, firefighters, and other civil servants. These are known as governmental 457(b) plans

The second type of 457(b) is offered to high paid (top-hat) employees of nonprofits like hospitals and charities.  Think physicians and administrators.  These are known as non-governmental 457(b) plans.

Although they have the same name and fall under the same section of the tax code, they have very different rules that apply.  If you left a non-profit hospital to work for the VA, you cannot roll a non-governmental(hospital) 457(b) plan into a governmental(VA) 457(b). They are separate programs with the same name.

For example, If you left a non-profit hospital to work for the VA, you cannot roll a non-governmental(hospital) 457(b) plan into a governmental(VA) 457(b). They are separate programs with the same name.

For the rest of this post, I will be referring to non-profit 457(b) plans.

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The High costs of Being Busy

The High Costs of Being Busy

How are you today?   The common refrain we greet each other with,  rushing to the next pressing item of our day.   More often than not, the response has become “busy.”  You likely respond with it yourself more than you would like to admit.  Being busy seems to have a positive connotation that we associate with being important or doing well.  Because of these positive connotations, we often forget to consider the high costs of being busy and find ourselves in constant motion.

As a high performing professional, balancing your expanding responsibilities at work and your family at home is challenging.    If you are working on a side hustle, then there isn’t’ any time left over.  You have too much work and too little time to fit it into.

All this busyness has costs.  You intuitively know this, but the list of costs doesn’t show up as a line item in your budget.  Many of them are subtle and only show their true cost over time.

If you take the time, you find that it adds up to a significant amount of money each month.

Have you stopped to think what you could save by slowing down?

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The Most Important Financial Vital Signs

11 Most Important Financial Vital Signs of Personal Finance

How is your financial health?   Are you financially ill yet you don’t have any symptoms?  Without regularly checking your financial vital signs,  you could have a lingering problem for years costing you thousands of dollars and not even know about it.

When you visit a doctor for a clinic appointment, one of the first things that happens is a nurse will take your vital signs. Height, weight, blood pressure, heart rate, oxygen saturation, pain, and temperature. The physician uses these vital signs, along with the physical exam and other information to make the diagnosis and guide your treatment.

Your financial vital signs are similar.  They can be used to diagnose and treat trouble with your personal finances.   They include things like your monthly budget,  savings percentage and debt to income ratio.  Your should record these numbers on a regular basis to trend how you are progressing on your goals.

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5 Reasons Millennial Physicians Should NOT Buy a Home Right Out Of Residency

5 Reasons Millennial Physicians Should NOT Buy a Home Right Out Of Residency

As of 2014, there were a dozen medical schools with the AVERAGE student loan debt over $200,000.   I work with some residents that finish their training with over $500,000 of student loan debt.  It has been stated many times before, but this is a major problem for our generation of physicians.

The average millennial physician’s starting financial situation is so much worse than previous generations that they should not be buying a home until they are five years out of training and have their student loans under control.

We could be outraged over this unfairness, but that will not change our circumstances.  Instead,  you are going to crush that debt on your way to financial independence.

We have to live life as it is, not as we want it to be.

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Doctor in Debt: Annual Letter 2016

Welcome to the first Annual Letter for Doctor in Debt.  Now that 2016 has wrapped up, and we are just hours away from a new year, I cannot help but get excited to see what 2017 will bring.   Before we kick off next year,  let’s see what this year brought us.

What I Accomplished in 2016

2016 was a year of action for me.   I tend to be a perfectionist by nature, and this trait worked well for me in school and at my day job as a physician,  but waiting for perfection as a writer is counter productive.  I had started then stopped the process of blogging at least a dozen times, but 2016 was the year that I sat down and made it happen.

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How a Personal Line of Credit Saved Me From a Cash Crunch.

What is a Personal Line of Credit

A personal line of credit is an unsecured revolving account with a variable interest rate allowing you to borrow money as you need it.  Essentially, you can use it as a credit card to cover significant expenses at places that don’t take credit.

The Major Benefits of a Personal Line Of Credit:

First,  I would like to be clear that you never want to borrow money unless absolutely necessary.   I use a personal line of credit to smooth out major expenses and want to share what I learned looking for and setting up my account.

Warning:  If your problem is an imbalanced budget, a personal line of credit is not the answer.  Borrowing for routine living expenses is a sure-fire way to end up in the poor house.

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Weekly Roundup Number 1: November 6th

START HERE:

What else was Interesting for your casual reading?

+ The Secret Algorithm Behind Learning:    I am always looking for ways to learn information faster.  This is an excellent Quick Read on a few items I was doing and some that I was not.
+ Their Up is My Down: This great post resonated throughout the FIRE community.  It touched the nerve of being able to find your tribe of like-minded individuals online even if your real world community surrounding you values different things.  It’s probably something that all
bloggers could relate to at some point or another.

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Financial Narrative

Supercharge Your Debt Reduction by Changing Your Financial Narrative

Supercharge Your Debt Reduction by Changing Your Financial Narrative

Which kind of statements do you use more frequently?   “I live a charmed life. Things always work out for me.” OR  “I can never catch a break. Things are never easy for me.

The stories we tell ourselves about money interplay with our sense of personal and social identity and can have a profound effect on our financial lives.    As you transition from being a “poor resident physician”  to “rich doctor”  the financial narrative you tell yourself can change.   This change in narrative sets the stage for financial mistakes that will follow you for years if not identified and corrected.  You can supercharge your debt reduction by changing your financial narrative around a well-planned goal.

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Medical School Loans

5 Steps to Repay $1,000,000 in Medical School Loans and Mortgage Debt in 10 Years or Less

The correct response to this sort of debt is, “AAAAAUUUUUUGGGHHHH!!!! THERE IS A CLOUD OF KILLER BEES COVERING EVERY SQUARE INCH OF MY BODY AND STINGING ME CONSTANTLY!!!! I NEED TO STOP IT BEFORE I AM KILLED!!!”

–Mr. Money Mustache

For some reason, I didn’t mind accumulating a few hundred thousands of dollars of student loan and mortgage debt within ten years of medical school.  Being a little naive,  I figured I could just turn on the savings and retire that debt as soon as I wanted.   I had no reason to think otherwise.   All my life I had been told that debt was safe, if it was the right kind of debt.  As long as I wasn’t carrying around 5 figure credit card balances, I was to be commended for doing an excellent job managing my debt. I was never a free spender and was very diligent with my budget working my way through college.  When I entered medical school, I was told, borrow as much as you can, focus on your studies.   You won’t have any trouble paying it back.

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