Personal Finance: Strategies for Success J. Norman Patton, M.D Cardiovascular Diseases Mayo Clinic – Jacksonville   David ...
Now that I have REAL money <ul><li>What options do I have? </li></ul>
#1 The very expensive BMW  BMW 528i Retail:  $44,745 @ 5% interest Monthly Payment:  $721 for 72 months In 25 years this w...
#2 Try saving for the same time…  <ul><li>$721 per month at 7.5% return </li></ul><ul><li>In 72 months value = $65,307 </l...
$423,377 for the BMW?  For Sale:  2000 Silverton 453 Motor Yacht $364,000 (You’d have $59,377 remaining for fuel!) Delayin...
Overview <ul><li>What this talk will do: </li></ul><ul><ul><li>Present an organized overview of the financial issues faced...
Overview <ul><li>What this talk is  NOT : </li></ul><ul><ul><li>An investment seminar </li></ul></ul><ul><ul><li>A primer ...
Physician financial timeline: <ul><li>Debt management </li></ul><ul><ul><li>Home ownership </li></ul></ul><ul><ul><ul><li>...
Educational Debt know you debt – know your options
Types of loans Subsidized Loans:  no cost to borrower during grace and deferment periods - Federal Subsidized Stafford - F...
Deferment and Forbearance <ul><li>Both options suspend payment for a set period of time if certain conditions are met. </l...
Two New Programs <ul><li>Income Based Repayment </li></ul><ul><ul><li>Monthly payments are driven off of income rather tha...
Planning for the future: College Savings Plans
Saving for College <ul><li>Education IRA (Coverdell Account) </li></ul><ul><li>Uniform Gift to Minors Act (UGMA) </li></ul...
Education IRA (Coverdell Accounts) <ul><li>Similar to a Roth IRA:  Non-deductible contributions grow tax free </li></ul><u...
UGMA and UTMA <ul><li>Allow parents/grandparents to save for their children  </li></ul><ul><li>Tax Free until “earnings” a...
529 Plans   <ul><li>State sponsored savings plan for educational costs </li></ul><ul><li>Each State has a plan and you can...
Personal financial management for physicians <ul><li>POINTS TO CONSIDER: </li></ul><ul><ul><li>Understand and maintain you...
Credit Scores 30% 35% 15% 10% 10% MYFICO.COM
Credit Scores 29% 20% 16% 11% 7% 6% 11%
Plan to Invest <ul><li>Know yourself: </li></ul><ul><ul><li>Understand your OBJECTIVES </li></ul></ul><ul><ul><li>Understa...
Planning to Invest <ul><li>Risk vs Reward </li></ul><ul><li>Asset Allocation </li></ul><ul><ul><li>Liquidity of assets </l...
Planning to Invest: Options <ul><li>Savings, CD’s, Treasuries </li></ul><ul><li>Money Market Accounts </li></ul><ul><li>Mu...
Planning for Retirement <ul><li>Pension </li></ul><ul><ul><li>Defined Benefit vs Defined Contribution </li></ul></ul><ul><...
Planning for Retirement: Time value of money
Final Thoughts…... <ul><li>Next steps: </li></ul><ul><ul><li>Begin the planning now </li></ul></ul><ul><ul><ul><li>Identif...
Helpful Links <ul><li>Loan Locator:  Helps you find your loans  </li></ul><ul><ul><li>https://www.studentclearinghouse.org...
Internet Resources <ul><ul><li>Debt management </li></ul></ul><ul><ul><ul><li>www.bankrate.com </li></ul></ul></ul><ul><ul...
Internet Resources <ul><li>Obtaining credit histories: </li></ul><ul><ul><li>www.equifax.com </li></ul></ul><ul><ul><li>ww...
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Personal Finance Patton/Dahlen 10-1-2009

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Personal Finance Patton/Dahlen 10-1-2009

  1. 1. Personal Finance: Strategies for Success J. Norman Patton, M.D Cardiovascular Diseases Mayo Clinic – Jacksonville David L. Dahlen, Director of Student Financial Aid/Registrar College of Medicine – Mayo Clinic
  2. 2. Now that I have REAL money <ul><li>What options do I have? </li></ul>
  3. 3. #1 The very expensive BMW BMW 528i Retail: $44,745 @ 5% interest Monthly Payment: $721 for 72 months In 25 years this will be worth $0
  4. 4. #2 Try saving for the same time… <ul><li>$721 per month at 7.5% return </li></ul><ul><li>In 72 months value = $65,307 </li></ul><ul><li>No Additional contributions </li></ul><ul><li>In 25 years $65,307 will grow … </li></ul>
  5. 5. $423,377 for the BMW? For Sale: 2000 Silverton 453 Motor Yacht $364,000 (You’d have $59,377 remaining for fuel!) Delaying your gratification will pay off!
  6. 6. Overview <ul><li>What this talk will do: </li></ul><ul><ul><li>Present an organized overview of the financial issues faced by physicians </li></ul></ul><ul><ul><li>Suggest appropriate resources to aid in decision making </li></ul></ul>
  7. 7. Overview <ul><li>What this talk is NOT : </li></ul><ul><ul><li>An investment seminar </li></ul></ul><ul><ul><li>A primer on insurance </li></ul></ul><ul><ul><li>A “how to get the best mortgage” talk </li></ul></ul><ul><ul><li>A sales pitch </li></ul></ul><ul><ul><li>A “we’re going to cover everything you need to know” talk </li></ul></ul>
  8. 8. Physician financial timeline: <ul><li>Debt management </li></ul><ul><ul><li>Home ownership </li></ul></ul><ul><ul><ul><li>College Planning </li></ul></ul></ul><ul><ul><ul><ul><li>Investment Planning </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Retirement Planning </li></ul></ul></ul></ul></ul>Medical School Residency Consulting Staff Retirement
  9. 9. Educational Debt know you debt – know your options
  10. 10. Types of loans Subsidized Loans: no cost to borrower during grace and deferment periods - Federal Subsidized Stafford - Federal Subsidized Direct - Primary Care Loans (PCL) - Loans for Disadvantaged Students (LDS) - some institutional loans Unsubsidized Loans: loans which accrue interest from disbursement - Federal Unsubsidized Stafford - Federal Unsubsidized Direct - most private loans (in-school and residency/relocation loans) - some institutional loans
  11. 11. Deferment and Forbearance <ul><li>Both options suspend payment for a set period of time if certain conditions are met. </li></ul><ul><ul><li>Deferment </li></ul></ul><ul><ul><li>Interest that accrues is paid on behalf of the borrower (subsidized loans only) </li></ul></ul><ul><ul><li>Forbearance </li></ul></ul><ul><ul><li>The student is responsible for interest that accrues on the loan (subsidized and unsubsidized loans) </li></ul></ul>
  12. 12. Two New Programs <ul><li>Income Based Repayment </li></ul><ul><ul><li>Monthly payments are driven off of income rather than amount borrowed, interest rate and loan term. </li></ul></ul><ul><li>Public Service Loan Forgiveness </li></ul><ul><ul><li>Portions of loans can be forgiven after making 10 years of payments. </li></ul></ul><ul><li>Please contact me! </li></ul><ul><ul><li>Simply not enough time to explain in detail in this setting by I am happy to visit with you! </li></ul></ul>
  13. 13. Planning for the future: College Savings Plans
  14. 14. Saving for College <ul><li>Education IRA (Coverdell Account) </li></ul><ul><li>Uniform Gift to Minors Act (UGMA) </li></ul><ul><ul><li>also known as: </li></ul></ul><ul><ul><li>Unified Transfer to Minors Act (UTMA) Minnesota </li></ul></ul><ul><li>529 Plans </li></ul>
  15. 15. Education IRA (Coverdell Accounts) <ul><li>Similar to a Roth IRA: Non-deductible contributions grow tax free </li></ul><ul><li>Allows you to save money for your children’s educational costs </li></ul><ul><li>$2,000 per year per child maximum contribution </li></ul><ul><li>Funds can be used for primary or secondary school as well as post-secondary expenses </li></ul><ul><li>Is controlled by the student when they turn 18 </li></ul>
  16. 16. UGMA and UTMA <ul><li>Allow parents/grandparents to save for their children </li></ul><ul><li>Tax Free until “earnings” are over $750 in one year </li></ul><ul><li>Each parent can contribute up to $11,000 per year without the “gift tax” </li></ul><ul><li>No income limitations </li></ul><ul><li>Child gets “legal” control later…depending on the state (21 in MN; 18 in other states) </li></ul><ul><li>Can use the money now or later for many things … not just educational costs </li></ul>
  17. 17. 529 Plans <ul><li>State sponsored savings plan for educational costs </li></ul><ul><li>Each State has a plan and you can choose any plan … regardless of where you live </li></ul><ul><li>Investments grow “tax free” … distributions for qualifying costs are tax free (no sunset clause) </li></ul><ul><li>Donor retains control </li></ul><ul><li>Funds must be used for educational cost for the beneficiary </li></ul><ul><li>Funds can be transferred to another beneficiary </li></ul><ul><li>Financial Turmoil has led to some solvency issues with some of these program. Be a good consumer. </li></ul>
  18. 18. Personal financial management for physicians <ul><li>POINTS TO CONSIDER: </li></ul><ul><ul><li>Understand and maintain your credit history </li></ul></ul><ul><ul><li>Seek out trusted resources to help you plan and monitor your finances </li></ul></ul>
  19. 19. Credit Scores 30% 35% 15% 10% 10% MYFICO.COM
  20. 20. Credit Scores 29% 20% 16% 11% 7% 6% 11%
  21. 21. Plan to Invest <ul><li>Know yourself: </li></ul><ul><ul><li>Understand your OBJECTIVES </li></ul></ul><ul><ul><li>Understand your TIMELINE </li></ul></ul><ul><ul><li>Understand your RISK TOLERANCE </li></ul></ul><ul><li>Just do it! (by paying yourself first) </li></ul><ul><li>Use trusted financial experts </li></ul>
  22. 22. Planning to Invest <ul><li>Risk vs Reward </li></ul><ul><li>Asset Allocation </li></ul><ul><ul><li>Liquidity of assets </li></ul></ul><ul><li>Tax implications </li></ul><ul><ul><li>Taxable </li></ul></ul><ul><ul><li>Tax deferred </li></ul></ul><ul><ul><li>Tax free </li></ul></ul><ul><li>Re-balancing your portfolio </li></ul>
  23. 23. Planning to Invest: Options <ul><li>Savings, CD’s, Treasuries </li></ul><ul><li>Money Market Accounts </li></ul><ul><li>Mutual funds </li></ul><ul><ul><li>Index funds </li></ul></ul><ul><li>Stocks </li></ul><ul><li>Bonds </li></ul><ul><li>Real Estate </li></ul><ul><li>Others (Commodities) </li></ul>Least risk but lowest returns Most risk but higher returns
  24. 24. Planning for Retirement <ul><li>Pension </li></ul><ul><ul><li>Defined Benefit vs Defined Contribution </li></ul></ul><ul><li>Tax Deferred Accounts: </li></ul><ul><ul><li>401-K/403-B Plans </li></ul></ul><ul><li>Take advantage of the time value of money (compounding interest) </li></ul>
  25. 25. Planning for Retirement: Time value of money
  26. 26. Final Thoughts…... <ul><li>Next steps: </li></ul><ul><ul><li>Begin the planning now </li></ul></ul><ul><ul><ul><li>Identify your goals and objectives </li></ul></ul></ul><ul><ul><ul><li>Calculate your net worth (Assets -Liabilities </li></ul></ul></ul><ul><ul><ul><li>Set up a budget and pay yourself first </li></ul></ul></ul><ul><ul><li>Get help: Identify a professional partner as soon as possible </li></ul></ul><ul><ul><li>Get Started! </li></ul></ul>
  27. 27. Helpful Links <ul><li>Loan Locator: Helps you find your loans </li></ul><ul><ul><li>https://www.studentclearinghouse.org/secure_area/loan_locator.asp </li></ul></ul><ul><li>National Student Loan Data System: Details on your loans </li></ul><ul><ul><li>http://www.nslds.ed.gov/ </li></ul></ul><ul><li>AAMC: Debt Management Session – Primer on Consolidation </li></ul><ul><ul><li>http://www.aamc.org/students/financing/md2/phase3/start.htm </li></ul></ul><ul><li>AAMC: General Financial Planning http://www.aamc.org/students/financing/md2/phase3/pdf/phase3.i.pdf </li></ul>
  28. 28. Internet Resources <ul><ul><li>Debt management </li></ul></ul><ul><ul><ul><li>www.bankrate.com </li></ul></ul></ul><ul><ul><ul><li>www.myfico.com </li></ul></ul></ul><ul><ul><ul><li>www.money.howstuffworks.com </li></ul></ul></ul><ul><ul><li>Personal Finance </li></ul></ul><ul><ul><ul><li>www.smartmoney.com </li></ul></ul></ul><ul><ul><ul><li>www.fool.com </li></ul></ul></ul><ul><ul><li>College Planning </li></ul></ul><ul><ul><ul><li>www.collegeboard.com </li></ul></ul></ul><ul><ul><ul><li>www.savingforcollege.com </li></ul></ul></ul>
  29. 29. Internet Resources <ul><li>Obtaining credit histories: </li></ul><ul><ul><li>www.equifax.com </li></ul></ul><ul><ul><li>www.experian.com </li></ul></ul><ul><ul><li>www.tuc.com </li></ul></ul>

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