Notes to Instructor—General Instructions Target audience: College students Format: In-person training Time frame: 4 hours, divided into 2-hour segments that can be presented over a two days Instructional method: Combination of lecture, discussion, and interactive exercises Materials: Instructor Guide/PowerPoint presentation Student Workbook: Distributed and used during the workshop Expense Journal: A week prior to the workshop, scholars were given an Expense Journal to keep track of their expenses for that week. They were asked to bring their Expense Journals with them because they’ll need them at different points during the workshop. Contents: Day One: Part One: Introduction to the Workshop—presentation, icebreaker (15 minutes) Part Two: The Future is Now: Your Plans and Goals—presentation, exercises; (40 minutes) Part Three: Looking at Debt and Income—presentation, discussion (45 minutes) Part Four(a): Secrets of Financial Success: Decisions that Put You in Charge— presentation and discussion, exercise (20 minutes) Day Two: Part Four(b): Secrets of Financial Success: Decisions that Put You in Charge— presentation and discussion, exercise (60 minutes) Part Five: Repaying Student Loans: The Basics—presentation, discussion, exercise (40 minutes) Part Six: Where to Get Help: You’re in Charge, but Not Alone—presentation (5 minutes) Part Seven: After the Workshop: Remember this…—presentation, exercise, workshop evaluation (15 minutes)
Notes to Instructor By the end of the workshop, the scholars should be able to articulate their own goals, explain how financial planning will help them achieve their goals, and so forth. The idea is to prevent students from getting stuck in a maze, as the next slide illustrates.
Exercise 1: “A Positive Picture of My Future” Ask students to turn to page 7 of their workbooks. This is a visualization exercise created by Dr. Leon Johnson, Jr. Start by asking the students to think about where they want to be and what they want their lives to look like approximately 10 years from now. It helps to provide them with a guided visualization. Do this by asking them to close their eyes and think about where they will be in about 10 years. Will they be married? Will they have children? Where will they be living--city, country, or suburbs? Will they have a house or apartment--and what will it look like? Where will they be working? Ask them to consider all aspects of their lives--personal, professional, and spiritual. Then ask them to open their eyes and draw a picture that best represents what they want their lives to look like 10 years from today. Tell them they won’t be judged on their artistry. What’s important is content. And if they can’t draw something, they should feel free to use words or to use a combination of words and pictures. When everyone is done, ask for volunteers to share their visions with the group. The purpose of this exercise is to get the students thinking about what they ultimately want out of their lives and to realize that earning a medical degree is just one of many goals they want to accomplish. In many ways, the M.D. degree represents a mid-term goal that helps obtain other mid-term and long-term goals. Thus, it is important to minimize the amount borrowed to get their medical degree so that their financial resources can be directed to other important goals.
Notes to Instructor Part Three: Looking at Debt and Income Time: 45 minutes Instructional method: Presentation, discussion Part Three offers scholars a realistic look at the education debt that medical and dental students acquire, as well as more information about how much money they are likely to earn in these health professions. The basic messages are: You are likely to borrow a lot to go to medical school or dental school. You are also likely to have a high income once you’ve become a physician or a dentist. By controlling expenses now, you’ll have the financial ability to meet your goals.
Notes to Instructor Show the scholars the average indebtedness of graduates from medical school and dental school. They are likely to find these numbers daunting and, perhaps, frightening. At this point, let them know this important concept: Debt is, and always has been, an important tool for acquiring large investments, like businesses and homes. How many people could afford to purchase a house without taking out a mortgage? Without student loans, very few people could afford to acquire a college education, much less a health professions degree. Thus, education debts are a fact of life for most medical students and dental students and, as this workshop will demonstrate, a good investment. The key is to minimize the amount of debt by: being well informed, and choosing actions carefully. Tell the scholars that for the remainder of this portion of the workshop, they’ll be looking at levels of indebtedness in comparison to incomes.
Notes to Instructor The next four slides present information on medical and dental indebtedness at graduation. The slides show indebtedness at graduation for all medical and dental students, as well as for certain underrepresented racial and ethnic groups. The slides show that: Most students borrow. A small percentage don’t borrow. Borrowing among students from underrepresented racial and ethnic groups is somewhat higher than for other students. Although borrowing so much money may be frightening to them, in our society, this is how average people obtain big-ticket investments—they borrow on, or leverage, their future incomes. This is especially true for professional degrees, which are arguably the largest single investment the scholars will ever make in their lives. Further, professional degrees provide some of the largest incomes. In other words, they might have large debts, but they also will have large incomes to repay those debts. To obtain a professional degree, it takes: Time (four to ten years) Energy (perhaps 60 to 80 hours a week while in professional school) Money (the amount borrowed and interest, plus the discounted [or forgone] wages for the period in school or training). You might ask the scholars what they feel is a reasonable amount to borrow to finance a medical or dental degree. Then ask them if they think some students might be “over-borrowing,” that is, borrowing more than they actually need. Ask them why this might occur.
Notes to Instructor Minority students are more likely to borrow and tend to have somewhat higher educational debt than nonminority students. A lthough they are also likely to make sizeable incomes as physicians and dentists, they also tend to make somewhat less than their nonminority counterparts. This means that they need to be even more knowledgeable about their finances.
Notes to Instructor See notes from previous indebtedness slides.
Notes to Instructor See notes from previous indebtedness slides.
Notes to Instructor To recap, let the scholars know that average earnings for physicians in postgraduate training (residency) is approximately $44,669 annually before taxes. Although during at least part of their training they’ll be able to defer payment (if not interest) on their education loans, things will be tight. Once they go into practice, incomes increase significantly, as we’ve shown in this and previous slides.
Notes to Instructor Let the scholars know that earnings for dentists in postgraduate training (residency) range widely and vary from setting to setting. For example, some hospital-based dental residency programs pay stipends that can approximate earnings for medical residents. On the other hand, there are school-based programs, where residents don’t receive a stipend, others where they do receive a stipend (amounts vary), and yet others where residents pay a fee to participate. Similar to physicians, once dentists go into practice, incomes increase significantly. According to the ADA 2005 Survey of Dental Practice : Average net income of all dentists working full-time in private practice is $ 204,500 . Income of generalists is $186,080. Income of specialists is $317,560. Average net income of all full-time new solo general practitioners (who graduated from dental school less than 10 years ago) was $154, 380. However, these averages tell just one part of the story.
Notes to Instructor Medical and dental student indebtedness has increased and continues to increase. While health professionals will continue to enjoy earnings that place them at the economic top of society, younger professionals will spend a higher percentage of their earnings repaying student loans than did those who graduated even just five to ten years ago. This doesn’t mean that young physicians and dentists won’t be able to live comfortably. It does, however, mean that they will have to be much more financially sophisticated than physicians or dentists needed to be in the past.
Notes to Instructor See notes on the previous slide.
Notes to Instructor With an idea of the range of medical and dental education borrowing, the scholars are now ready to learn about the effect of time on money, whether a loan or an investment. This slide and the next show hypothetical situations in which a student has a $100,000 education debt at a 6 percent interest rate and an 8 percent interest rate. These two slides combined illustrate how monthly payments and the total amount of interest that is paid increases as the repayment period lengthens. Another implicit message is that interest rates can change. In the case of a loan, the amount a borrower repays depends on the: size of the loan, interest rate, and length of repayment. The larger the loan amount, the higher the interest rate, and the longer the repayment, the more the loan will cost. The reverse is also true, that is, the smaller the amount, the lower the interest rate, and the shorter the repayment period, the less the loan will cost. Whether someone chooses to have a shorter repayment period, prepay loans, or consolidate loans will depend on a number of factors. For example, a student might not be able to afford a shorter repayment period because the monthly payments are too high in comparison to take-home pay. In this case, a longer repayment period with a lower monthly payment is preferable to defaulting on the loan.
Notes to Instructor This slide illustrates the cost of student loans at an 8 percent interest rate (the preceding slide used a rate of 6 percent). Note: Interest rates on student loans currently range from 5% to 8.5%. These percentages are used for illustrative purposes. The two slides illustrate the considerable impact of changes in the rates that a change in interest rate can make on the cost of a loan. (Students can look at the two slides together on pages 18 and 19 of their workbooks.)
Notes to Instructor This slide shows a popular method of making extra-principal repayments: a half-time payment plan. First, explain to the students what an amortization schedule is and how it works; it’s a readout of loan repayment and includes the balance due--or outstanding principal and the monthly payment, along with the principal and interest components of that particular payment--for every month. Next, explain that the student in this example owes $100,000 and initially had a 10-year repayment schedule that called for monthly payments of approximately $1,200. The student chose to consolidate his loans and selected a 20-year repayment schedule that reduced the monthly payment to $836, which saved him $364 a month. By extending the repayments to 20 years, however, the student ultimately will pay an extra $55,151 in interest charges. Ask the students if they’ve ever heard of someone “paying ahead” on a mortgage. That’s what we are about to do for a consolidated student loan. The student in this example chose to take some of his monthly savings and make extra principal payments on his loan. The half-time payment plan works like this: Make the current monthly payment of $836.44. Cross off that payment on the amortization schedule. Then, go to next month’s payment and write out a second check for the principal portion of that payment, than cross out that payment. In the example above, the principal due for payment #2 is 170.94 (this leaves the borrower with an extra $193 to use--hopefully for savings and investments or other worthwhile uses). In the memo portion of the check, write “apply to principal.” Never, never, never include this extra payment in the same check as the normal monthly payment. (The lender is likely to just place the extra money in escrow and pull it down in the month the next payment is due.) The key to half-time payments is paying the principal before it’s due. If borrowers stick to the half-time payment plan, and for every regular payment due make a second payment that consists of the principal component of the next payment due, they will cut the repayment period in half and significantly reduce the amount of interest they are required to pay. There are a number of different ways to make extra principal payments, including bimonthly payments, a thirteenth payment at the end of the year, using your tax refund, or just simply paying occasionally a bit more each month than is due. The beauty of the half-time repayment plan is that it allows the borrower to extend the repayment period to the maximum--thus reducing the monthly obligation to the minimum--but by taking a portion of the monthly savings the borrower can make an extra principal payment that cuts the repayment period in half. This gives the borrower a great deal of flexibility in repaying the loan. This repayment concept applies equally well to home mortgages and other conventional loans.
Notes to Instructor Tell the scholars this is “insider” information that they otherwise wouldn’t get. Point out that often financial aid officers create financial aid packages by trying to meet “total possible need.” This is well intentioned and appropriate. But when students automatically borrow the maximum allowed, some borrow more than they might actually need. Explain that financial aid administrators usually allow $1,400 a month for living expenses. Ask the scholars if they think they could live on less—say $1,200 a month. Tell them that by living on $1,200 a month, what they don’t spend ($200 per month) has the same effect as receiving an $1,800 to $2,400 scholarship each year. This translates into borrowing almost $10,000 less over four years in school, and reducing potential loan repayments by more than $24,000. More on this concept is coming right up.
Notes to Instructor Part Four: Secrets of Financial Success: Decisions that Put You in Charge Time: 80 minutes total Part IV (a)— Ends Day One : Slides 42 – 48, 20 minutes Part IV (b) —Begins Day Two : Slides 49– 68, 60 minutes Instructional method: Presentation, discussion, and exercises Part Four is really about the “B” word (budgeting), but we avoid using it for the most part because our experience is that most people don’t respond well to the term. It’s too much like a parent telling you what to do. Instead, the emphasis is on supporting a sense of independence by presenting messages about having the capability and options to be in charge of spending decisions. These decisions, in turn, will reduce indebtedness, make it easier to repay the debts the scholars do assume, and keep them away from getting into credit difficulties. It’s in this section that the scholars will learn about spending choices, credit cards, comparing financial aid packages, and alternatives to loans. The discussion and exercises will incorporate their Expense Journals. The basic messages for Part Four are: Everything you spend makes a difference, even small expenditures. You have the capability to make good financial decisions if you have the knowledge. Credit cards will be your undoing unless you are in charge of your spending.
Notes to Instructor Let the scholars know that these quotes are from the book, The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach. Bach has written a number of books on attaining wealth through simple, tried-and-true methods. These methods are simple, don’t have to be painful, and are the true secrets of financial success. Although the book’s focus is on people who are out of school and in the workforce, the concepts are applicable to everyone. You don’t have to make a lot of money to become rich. What you do have to do is: Not to fritter money away on small items because these costs can add up to hundreds and thousands of dollars each year. To “pay yourself first” by putting something into savings every month, even if its just $10, $20, or $50, because over time between what you’ve saved and the returns on your savings, you’ll have a lot of money. To set up automatic systems for saving and paying bills using today’s banking technology. To start now!!! There’s no time like the present to be in control. So, let this afternoon be that start. Note: While automatic payments are a good idea, given the age group of the audience (early college) the materials focus on spending decisions. Direct the scholars to their Expense Journals. Take a minute to ask them what their thoughts were about keeping track of their expenses for a week. Some might have insights into their spending; others might think it was a waste of time. Also, be prepared for some not to have completed the Expense Journal. (Note: Whether or not each scholar has completed the Expense Journal, they can all easily participate in the following discussion.) Ask them to respond as a group to the following questions: How many of you spent money buying a “designer” cup of coffee everyday, or a CD once a week, or other regular “small” purchase, such as breakfast, a sandwich, soda, bottled water, etc? How much did you spend each day on your “small” purchase? How much do you think this adds up to a month? A year? If you saved this amount each day, how much would you have after 10 yrs? 20 yrs? 30 yrs? Now go to the next slide to demonstrate how big a small decision can be.
Notes to Instructor Walk through this slide with the scholars. If you want to add emphasis, you can animate the slide so the information comes down bullet by bullet. Give the scholars a moment for processing the results. Then ask them to share their thoughts about how this information might influence their spending decisions. Also, let them know that when they borrow the reverse happens. Instead of saving money and earning interest on it, when they take a loan they have to pay back what they’ve borrowed and pay interest on the amount borrowed. Let them know that there will be more on this later when we’ll get into credit cards and borrowing to go to school. That discussion will include more about compound interest, as well.
Notes to Instructor The main point: People who get what they want out of life know how to make decisions about what to spend when and what NOT to spend when. They are adept at cutting costs. There’s another book called The Millionaire Next Door: The Surprising Secrets of Wealthy Americans by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. The book shows how success is not found in the external trappings of wealth dictated by Madison Avenue. Rather, success is reaching the truly important goals you have in life and aligning actions to accomplish and realize those goals. These lessons are extremely useful for students to determine what they really wish to accomplish with their lives and align their professional school financial plans to minimize the cost of their degree. That lets them have additional financial resources to go toward their ultimate goals. Millionaires don’t make their fortunes by earning a lot of money; they get them from saving a lot of money. They buy used cars, cheap watches. And, as Bach says in his book, they don’t look rich. Let the scholars know that, given their projected incomes, every person in the room has the potential to become a millionaire, even taking on education loans. However, this is only likely to happen if they live like students now so they don’t have to live like students later. The next slides explore this concept a bit further.
Notes to Instructor Present these items as helpful and useful things to think about. Don’t preach—just educate. And keep it light and entertaining. Roommates : After deciding to go to professional school, the next single most expensive and/or important decision is whether to have a roommate. Ask students to compare the cost of a single-bedroom apartment and a two-bedroom apartment. Take the difference and multiply it by 12 (months in a year). Then take the number and have it multiplied by 4 (years in professional school). Then have someone multiply that number by 2.5 (the total payment amount if someone consolidates loans for 20 years). That’s how much the decision to live alone can cost you. Roommates also help with utilities, food, and a host of other expenses. Location : Rent and related expenses can vary significantly from one area to another. Uptown, downtown, and outside of town. The goal is to live affordably and safely close to school. Transportation options : Cars are not typically an expense item in a school’s student financial aid budgets. Ask the students if they have to have a car to graduate from medical or dental school. While usually a convenience—a very expensive convenience—it isn’t always necessary. Clip coupons: Ask the students how many clip coupons. This is a small, but effective, way of nickel-and-diming their way into less debt. Cheap eats : Choose inexpensive fun places to eat out for special occasions and pick-me-ups. Remember, takeout and eating out cost more than cooking meals at home, and it’s usually not as healthy. Splurge conscientiously--and carefully. Enjoy life! But something wonderful doesn’t have to be expensive. Just plan your pleasure carefully. Ask the students to come up with other ways to live on less.
Notes to Instructor Remember that any money saved/available while in school is considered a student asset and must be identified as such, and thus a portion will be expected to be used for paying for their education. That’s OK. Forming the habit of saving and paying from current assets, thus reducing loan indebtedness, are good things. Note that living on less is not a sacrifice—it’s an investment. Ask the students to go back to the Expense Journals. Given the preceding discussion, ask them again if they had a monthly budget for living expenses of $1400, would they be able to reduce their spending enough to actually live on: $1350 a month? $1300? $1250? $1200? Note: If you need to, remind the students that the $4.25 on a cup of fancy coffee amounts to almost $130 per month. That alone would bring living expenses down from $1400 to $1270.
Note to Instructor A credit card is a tool that can be helpful--but it must be used wisely.
Notes to Instructor Again, point out that as students living on loan money, they have no income. Unless they can pay off a credit card in full each month, they’re borrowing more money, and it comes to them with a very high interest rate.
Notes to Instructor (According information on the bankrate.com Web site on April 18, 2006, the three major credit bureaus have developed a competing credit scoring product, called VantageScore, which has been presented as easier to understand with consistent scores from credit bureau to credit bureau. At this point, only businesses can purchase VantageScore ratings. Since VantageScore isn’t available to individuals at this writing, the following information still refers to FICO scores.) Most credit bureau scores used in the U.S. are produced from software developed by F air I saac Co rporation, for this reason credit scores are often referred to as “FICO scores.” The credit score is a number between 300 and 850. It is one of the most important factors used by lenders to determine how much credit you can obtain and what that credit will cost you. The higher the score, the better your credit. Credit scores are based on the following factors: 35% payment history 30% amounts/types of outstanding debt 15% length of credit history 10% recent credit sought/gained 10% types of credit in use Having a balance that is over 80% of the available credit is viewed as a negative. Also, simply requesting or initiating a new credit card account can cost you 5 points on your credit rating. A high score can save you thousands of dollars in interest over the course of a loan. A low score can cost you a lot of money in interest payments. A score of 712 (out of 850) is considered by most lenders as a good score/an acceptable risk. Such a score will generally make available a wide array of loans and credit products with attractive rates. However, remember that lenders also often consider factors other than the score. It is also important to note here that a student's credit score can affect the insurance or guarantee fee on his or her loans. An insurance or guarantee fee is charged to a student by the loan’s insurer to insure the loan. Though the fee is usually a certain percentage of the loan’s principal, on some private and alternative loans the insurance fee is figured out based on a student’s credit score. Thus, the better a student’s credit score, the less he or she will pay in fees when relying on private or alternative loans to fund education. However, point out that the majority of funds that health professional students use flow from federal sources that, to date, do not use credit scoring. Visit the Web sites www.myfico.com and bankrate.com to learn more about credit scoring. Students may also want to inform their parents about credit scoring.
Notes to Instructor Raising your score: Apply sparingly . Seek credit only when you need it, not on a whim. Even shopping aggressively online for the best rate on a new loan can lower your score. Too many credit inquiries will count against you. Getting too much credit at once makes a person appear risky. Building up gradually and establishing a good payment history is a better approach. Don’t charge indiscriminately . It can make you look deep in debt, even if you pay it off every month. Avoid maxing out your credit limit . This makes you look risky, borrow less or raise the limit. Pay on time . Late payments do more to hurt your score than anything short of default or bankruptcy. Inspect your credit report . Errors or omissions in credit bureau data are common.
Notes to Instructor Let students know that a person who is denied credit has the right to ask for a free copy of the credit report from the credit bureau that issued the report. Beginning on September 1, 2005, each of the nationwide consumer reporting companies began providing consumers with a free copy of their credit report, at a consumer’s request, once every 12 months. The three nationwide consumer reporting companies have set up one central website, www.annualcreditreport.com, where students can order their free annual report.
Notes to Instructor Anyone can ask for a credit report at any time. In most instances, credit bureaus will charge a fee for a copy that’s not associated with a credit check. Although there is controversy surrounding fees, it’s wise for individuals to review their score, especially when planning on any major purchase, which would require credit approval to finance the purchase. Mistakes in the credit report, which the credit score is based on, can cause people to be placed in a higher credit risk category, thus being charged higher interest rates or outright credit denial. In fact, it’s common for credit reports to contain errors. Tell the scholars to check their credit histories regularly and before applying for loans or credit. As identity fraud becomes more common, increasing numbers of students, particularly undergraduate students, are finding out when they apply for private or alternative loans for medical or dental school that their identity has been stolen and they cannot readily obtain the loans they need. Though these problems can be straightened out, it requires a lot of energy and time—usually six weeks to a year or more—and in the meantime students will not be able to take out private or alternative loans. So, if someone is planning to rely on private or alternative loans to pay for medical or dental school, it’s important to check credit reports early. In addition to credit bureaus, there are some good resources about credit scoring and identity theft. These include the websites on this slide.
Notes to Instructor Tell the scholars that if they already are in over their head, this is a last resort. Let them know the following: This is for consumer debt, such as credit card debt, auto loans, and so forth. The National Foundation for Consumer Credit is a non-profit organization that can negotiate payment terms with your creditors. But, being in a situation where you have to negotiate payment terms could have a negative impact on your credit report, and your ability to obtain other types of credit (including alternative education loans) in the future. Now that we’ve discussed credit, we’re going to move on to financial aid and the part that loans play in being able to pay for medical school or dental school.
Notes to Instructor Impress on students that their professional careers begin NOW--not after graduation. This is also true of financial planning. It begins NOW--not after graduation. Millionaires don’t get wealthy all at once. It’s a long-term journey of small individual steps that get them into and out of debt and on to saving money and investing. That’s what we have been illustrating throughout the workshop. Little, sometimes seemingly insignificant, ways to minimize expenses and maximize resources result in less debt and a mindset and behavior conducive to achieving mid-term and long-term goals. A key to good financial planning is good record keeping. With student financial aid, this means that students should have a folder (or a box) with all the correspondence about their applications for financial aid and the paperwork associated with their student loans. With this information in hand, students are in a position to begin actively managing their student loans.
Notes to Instructor Part Six: Where to Get Help--35 minutes So far, the workshop has focused on tools and habits that students can make use of to limit their debt and repay loans successfully. This section of the workshop shifts the focus to where students can get help. The four books listed on this slide are great resources for learning about and planning personal finances. Remind students they can check them out of the library or buy them in paperback. The workshop has already touched on The Millionaire Next Door. The Wealthy Barber discusses how to get on the road to financial success using a fictious barber to make the points. The Richest Man in Babylon , first published in 1926, remains one of the most successful and most popular books ever written about investing and financial planning. The author presents timeless lessons using parables. Jane Bryant Quinn is a financial columnist for Newsweek and author who writes about money in a readable and easily understandable way. Making the Most of Your Money goes into depth about many of the things we’ve touched on in this workshop.
Notes to Instructor Here are three popular magazines that address investing and financial planning. The fourth magazine, Medical Economics, provides excellent information to physicians about the “business side of medicine.”
Notes to Instructor The Right Advisor is a site launched by Dalbar and Microsoft that lets you search for financial planners who fit your profile. You receive the names of all kinds of planners in your area who meet your criteria. All advisers have at least five years of experience, a clean record with financial regulators, and a background in the specialty requested. The Financial Planning Association (FPA) maintains a site that finds the names of Certified Financial Planners in a specific area (or call toll-free at 1-800-282-7526). The Association of American Medical Colleges (AAMC) Web page has information on financial planning (including financial planning for pre-medical students), sources of aid, and careers in medicine. It also has links to AAMC Web pages about the medical school application process and issues pertaining to minorities in medicine. The financial planning material is Monetary Decisions for Medical Doctors , which is nicknamed MD 2 (“MD Squared”).
Notes to Instructor Part Six: Where to Get Help—20 minutes So far, the workshop has focused on tools and habits that students can make use of to limit their debt and repay loans successfully. This section of the workshop shifts the focus to where students can get help.
Notes to Instructor How do you select an accountant or financial planner? The same way you would select a physician--by referrals and references. Graduates should join their local professional society and ask fellow physicians who they use. It’s important that an accountant and financial planner have the experience provided by having other physicians as clients. Tell students that although they will be among the most highly educated individuals in society, their training and experience have not been directed toward financial planning. Other individuals have been training in these areas, and young physicians need to work with these people and have them assist in putting together an action plan that will enable them to accomplish their goals and vision. Point out that accountants assist in minimizing the amount of tax they will need to pay, and financial planners help them make the most of the money that they have left over after paying taxes. Make certain that the students understand that they will need the services of these individuals early in their career . Tell them not to make the mistake of thinking, “I’m not making enough money to need an accountant or financial planner. I’ll go to them when I’m making some real money.” Attorneys are necessary to assist in negotiating through our increasingly complex business world; they also work on wills, contracts, and estate planning. Bankers are important individuals who can help in obtaining funds necessary to buy into professional practices. While they are students, point out that they should get to know the financial aid administrator at their school, and make him or her a member of their current financial team.
Notes to Instructor Tell students that although technically student loan interest is deductible, because of the average high earnings most health professionals enjoy, they are likely to have only a few years to deduct the interest they pay on their student loans. Generally, this would include their years as residents. This also applies to the Lifetime Learning Credit. Considering that most fourth-year students make a tuition payment during the year in which they graduate, they should be able to qualify for up to $2,000 of a Lifetime Learning Credit that year. Considering that health-professions graduates don’t make that much money during their first year of employment (as residents), they can use all the help they can get. Certain income limits apply for these tax credits and deductions, so instruct students to see if they are eligible by going to the IRS Web site.
Notes to Instructor These ten facts are, more or less, self-explanatory and allow the presenters and the students to draw on and share their own experiences in communicating lessons learned or expressed by these ten facts. Read them, in order, and then elaborate on them. If time permits, ask for feedback from the students. Consider adding some drama by presenting the facts one at a time.
Notes to Instructor For Fact 6, tell students that if they don’t keep good records, they’ll have trouble getting all the information because no organization or individual is likely to have a complete record of a student’s indebtedness. They consciously need to be their own best information resource!
Notes to Instructor For Fact 10, tell students that the default rate on education loans for medical students is very low.
SMEP Financial-Planning Workshop
“ You’re Still In Charge” A national program supported by The Robert Wood Johnson Foundation with direction and technical assistance provided by the Association of American Medical Colleges and the American Dental Education Association. The SMDEP Alumni Financial Planning Workshop:
The Original Workshop’s Objectives <ul><li>Articulate your own goals </li></ul><ul><li>Explain how financial planning helps achieve your goals </li></ul><ul><li>Describe the benefits of borrowing wisely and the pitfalls of not borrowing wisely </li></ul><ul><li>Understand how small decisions lead to big results </li></ul>
My Future* *Exercise created by and courtesy of Dr. Leon Johnson, Jr.
Looking at Debt and Income <ul><li>Average debt at graduation: </li></ul><ul><ul><li>Medical School $122,279 </li></ul></ul><ul><ul><li>Dental School $145,465 </li></ul></ul><ul><li>The keys to managing your debt: </li></ul><ul><ul><li>Be well informed about borrowing </li></ul></ul><ul><ul><li>Choose your actions carefully </li></ul></ul>Sources : AAMC 2007 Medical School Graduation Questionnaire (average total educational debt); ADEA 2006 Survey of Dental School Seniors
Debt Levels of Medical School Graduates, 2007 Source : AAMC 2007 Medical School Graduation Questionnaire http://www.aamc.org/data/gq/allschoolsreports/2007.pdf
Debt Levels of Black, Native American*, and Hispanic/Latino Medical Graduates, 2007 * Native American includes Native Americans and Native Alaskans. Source : AAMC 2007 Medical School Graduation Questionnaire, Non Program Evaluation R Table
Debt Levels of Dental School Graduates, 2006 Source : ADEA 2006 Survey of Dental School Seniors
Debt Levels of Black, Native American, and Hispanic/Latino Dental Graduates, 2006 Source : ADEA 2006 Survey of Dental School Seniors
Medical Residents & Practicing Physicians <ul><li>Average 2006-2007 Medical Residency Stipend: $44,669* </li></ul><ul><li>Median Physician Compensation </li></ul><ul><ul><li>All Primary Care $171,159** </li></ul></ul><ul><ul><li>All Specialties $322,259** </li></ul></ul>Sources : *2007-2008 AAMC Survey of Housestaff Stipends, Benefits, and Funding (Autumn 2007 Report) **Medical Group Management Association (MGMA) Physician Compensation and Production Survey: 2007 Report Based on 2006 Data
Dental Residents & Practicing Dentists <ul><li>Dental Residency Stipends : </li></ul><ul><li>Vary from $0 to approximately what medical residents earn </li></ul><ul><li>Some residency programs require trainees to pay a fee </li></ul><ul><li>Average Net Dentist Income*: </li></ul><ul><li>All full-time in private practice $204,500 </li></ul><ul><li>Generalists $186,080 </li></ul><ul><li>Specialists $317,560 </li></ul>*Source: Table 18: Net income from the Private Practice, Age, and Hours Worked for Solo Dentists by Hours Worked/Year, 2004. (ADA: 2005 Survey of Dental Practice)
Repayment Schedules for $100,000* Repayment Period Monthly Payment Total Paid Interest Paid 10 years $1,110 $133,225 $33,225 20 years $716 $171,943 $71,943 30 years $600 $215,838 $115,838 * at a 6% interest rate; dollars are rounded
Repayment Period Monthly Payment Total Paid Interest Paid 10 years $1,213 $145,594 $45,594 20 years $836 $200,746 $100,746 30 years $734 $264,154 $164,154 *at an 8% interest rate; dollars are rounded Repayment Schedules for $100,000*
ALTERNATIVE REPAYMENT SCHEDULES FOR $100,000 TERM PMT/MO. % PAID $ PAID COMMENT 10 Yrs. $1,213 $45,593 $145,593 Standard Pd. 20 Yrs. 836 100,744 200,744 Consolidation 20+ 1,007 50,538 150,538 Paid in 10 yrs. 30 Yrs. 734 164,157 264,157 Maximum 30+ 801 82,245 182,245 Paid in 15 yrs. + monthly pmts. Gradually increase throughout repayment period
“ It’s too easy for you to borrow the max.” Max Student Loan! Max Mortgage! A Dirty Little Secret
The SMDEP Financial Planning Workshop Secrets of Financial Success: Decisions that Put You in Charge
Secrets of Financial Success <ul><li>“… human beings don’t want to be controlled. We want to be in control. ” </li></ul><ul><li>“ The only way to get the financial future you want is to begin creating it now!” </li></ul><ul><li>“ The problem is not how much we earn…it’s how much we spend.” </li></ul><ul><li>“ Most of us don’t really think about how we spend our money—if we do, we often focus solely on the big ticket items while ignoring the small daily expenses that drain away our cash.” </li></ul>Quotes from: The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach, Broadway Books:NY, 2004
How a small Decision is Really a BIG Decision <ul><li>Designer Cup of Coffee: $4.25 a cup/day </li></ul><ul><li>Cost per month: ~$129.00 </li></ul><ul><li>Cost per year: ~$1550 </li></ul><ul><li>If you didn’t spend this amount every day and saved it, you’d have: </li></ul><ul><ul><li>~$21,375 after 10 years </li></ul></ul><ul><ul><li>~$60,030 after 20 years </li></ul></ul><ul><ul><li>~$130,360 after 30 years </li></ul></ul><ul><li>*Based on www.bankrate.com “Simple Savings Calculator.” Assumes 6% annual interest rate compounded monthly and an initial beginning balance of $129. Dollars are rounded. </li></ul>
Tips for Making BIG/ small Decisions <ul><li>Buy a previously owned car </li></ul><ul><li>Shop at consignment stores </li></ul><ul><li>Buy groceries in bulk </li></ul><ul><li>Watch for sales </li></ul><ul><li>Avoid credit card debt (don’t use a credit card unless you can pay it off in full each month) </li></ul><ul><li>Cut costs wherever reasonable </li></ul>
<ul><li>Consider: </li></ul><ul><ul><li>Roommates </li></ul></ul><ul><ul><li>Location </li></ul></ul><ul><ul><li>Transportation options—Do I really need a car? </li></ul></ul><ul><ul><li>Coupons </li></ul></ul><ul><ul><li>Cheap eats </li></ul></ul><ul><ul><li>Splurge conscientiously—and carefully </li></ul></ul>Living on Less as a Student
<ul><li>Approach student life with an LBYM* attitude </li></ul><ul><li>Aim for living on 70% of what is available to you </li></ul><ul><li>Put the other 30% in an interest-bearing savings account or money-market fund until needed—or reduce how much you borrow </li></ul><ul><li>Pick up cost-saving tips from Motley Fool’s “Living Below Your Means” discussion board at: </li></ul><ul><li> www.fool.com </li></ul>Living Below Your Means (LBYM) *Living Below Your Means and LBYM are trademarks of The Motley Fool, Inc. (Registration is required to use the Web site. It’s free, although some of Motley Fool’s services are not free.)
A Primer on Financial Planning <ul><li>Back to the Basics </li></ul><ul><li>Again! </li></ul>
CHECKING ACCOUNTS <ul><li>Go to a local - medium size bank </li></ul><ul><li>Balance your account each month </li></ul><ul><li>Obtain check protection </li></ul><ul><ul><li>Line of Credit </li></ul></ul><ul><ul><li>Attach to Savings Account </li></ul></ul>
SAVINGS ACCOUNTS <ul><li>Save to Spend Accounts </li></ul><ul><li>Save to Invest Accounts </li></ul><ul><li>Should attempt to accumulate 6 to 9 months of living expenses </li></ul><ul><li>Little to No Risk </li></ul><ul><ul><li>Savings Accounts </li></ul></ul><ul><ul><li>Money Markets </li></ul></ul>
CREDIT CARDS <ul><li>OK, How many of ya got ‘em </li></ul><ul><li>& </li></ul><ul><li>How many have ya got? </li></ul>
Credit Cards The Good Part <ul><li>Credit cards aren’t bad </li></ul><ul><ul><li>credit-card debt is bad! </li></ul></ul><ul><li>Can carry instead of cash </li></ul><ul><li>Helps track spending </li></ul><ul><li>Covers emergencies </li></ul><ul><li>Can sometimes get monetary benefits--miles on an airline or a yearly cash-back bonus </li></ul><ul><li>Only need one card </li></ul>
Credit Cards -- The Hard Part <ul><li>Up to you to use them wisely </li></ul><ul><li>Easy to live beyond your means </li></ul><ul><li>Dangerous when used to supplement your income </li></ul><ul><li>High interest rates </li></ul><ul><li>Can end up ruining your credit rating </li></ul>
The Basis for Credit Scoring* <ul><li>Past payment history </li></ul><ul><li>Amount owed on credit that’s been extended </li></ul><ul><li>Length of time credit has been established </li></ul><ul><li>Search for and acquiring new credit </li></ul><ul><li>Types of credit established </li></ul><ul><li>*For more information on credit scoring, go to: </li></ul><ul><li>www.myfico.com </li></ul><ul><li>www.bankrate.com </li></ul>Your credit score is based on:
<ul><ul><li>Apply for credit only when you need it </li></ul></ul><ul><ul><li>Don’t charge indiscriminately </li></ul></ul><ul><ul><li>Avoid maxing out on your credit limit </li></ul></ul><ul><ul><li>Pay on time </li></ul></ul><ul><ul><li>Inspect your credit report </li></ul></ul>Raising Your Credit Scores
The higher your FICO® credit score, the lower your payments! <ul><li>For example, on a $300,000 30-year, fixed-rate mortgage </li></ul><ul><li>FICO® score APR Monthly payment </li></ul><ul><li> 760-850 5.617% $1,725 </li></ul><ul><li> 700-759 5.839% $1,768 </li></ul><ul><li> 660-699 6.123% $1,822 </li></ul><ul><li> 620-659 6.933% $1,982 </li></ul><ul><li> 580-619 9.312% $2,482 </li></ul><ul><li> 500-579 10.276% $2,694 </li></ul>Interest rates accurate as of May 19, 2008:
Finding Your Credit History <ul><li>Equifax Credit Information Services </li></ul><ul><li>PO Box 740241 Atlanta, GA 30374-0241 </li></ul><ul><li>(800) 685-1111 </li></ul><ul><li>www.equifax.com </li></ul><ul><li>Experian 475 Anton Blvd. Costa Mesa, CA 92626 </li></ul><ul><li>or </li></ul><ul><li>955 American Lane Schaumburg, IL 60173 </li></ul><ul><li>(888) 397-3742 </li></ul><ul><li>www.experian.com </li></ul><ul><li>Trans Union Corporation PO Box 2000 </li></ul><ul><li>Chester, PA 19022 </li></ul><ul><li>(800) 888-4213 </li></ul><ul><li>www.transunion.com </li></ul><ul><li>Full name (including Jr., Sr.) </li></ul><ul><li>Complete addresses for the last 5 years, including zip codes </li></ul><ul><li>Social Security number </li></ul><ul><li>If married, spouse’s full name </li></ul><ul><li>Year of birth </li></ul><ul><li>Copy of driver’s license or current billing statement </li></ul>Include the following information with your request: To request a free copy of your credit report : www.annualcreditreport.com
<ul><ul><li>Errors happen a lot </li></ul></ul><ul><ul><li>Errors can reduce your credit score </li></ul></ul><ul><ul><li>Checking your credit history helps catch identity theft </li></ul></ul><ul><li>Sources: </li></ul><ul><ul><li>www.myfico.com </li></ul></ul><ul><ul><li>www.annualcreditreport.com </li></ul></ul><ul><ul><li>www.ftc.gov </li></ul></ul>Correcting Errors in Your Credit Scores and Dealing with Identity Theft
A Last Resort for Help with Your Credit Score The National Foundation for Credit Counseling www.nfcc.org 1-800-388-2227
Investing for Retirement -Life Stages- <ul><li>Starting Out 100% Equities </li></ul><ul><li>Growing Families 90% Equities & 10% Fixed Income </li></ul><ul><li>Sandwich Generation 80% Equities & 20% Fixed Income </li></ul><ul><li>Empty Nesters 35% Equities, 35% Fixed Income & 10% Short Term Investments </li></ul><ul><li>Retirees 45% Equities, 40% Fixed Income & 15% Short Term Investments </li></ul>
What is the most powerful force in the Universe? According to Albert Einstein Compound Interest!
10 - 20 - 70 Budget <ul><li>10 - Sock away 10% of each paycheck in a retirement fund, preferably in before-tax dollars through an employee savings plan, such as 401(k) plan or 403 (b). </li></ul><ul><li>20 - Put 20% in a “save to spend” fund, preferably in a money market account. </li></ul><ul><li>70 - Deposit the remaining 70 percent in a checking account to use for your routine living expenses. </li></ul>
Personal Finance Resources: Books <ul><li>The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley and William D. Danko </li></ul><ul><li>The Wealthy Barber by David Chilton </li></ul><ul><li>The Richest Man in Babylon by George S. Clason </li></ul><ul><li>Making the Most of Your Money by Jane Bryant Quinn </li></ul>
Personal and Professional Finance Resources: Magazines Smart Money www.smartmoney.com Money www.money.com Kiplinger’s Personal Finance www.kiplinger.com Medical Economics www.memag.com
www.morningstar.com Good articles on aspects of mutual-fund investing www.vanguard.com Teaches basics of mutual fund investing and retirement planning www.fidelity.com Good mix of education about mutual funds, individual stocks and bonds, annuities, and insurance Personal Finance Resources: Web Sites
www.financenter.com Basic information on personal finance (such as auto loans, home loans, insurance) www.fool.com Educational, often humorous, look at the world of investing Web Sites ( continued )
Getting Help from Professionals <ul><li>www.therightadvisor.com </li></ul><ul><li>www.fpanet.org </li></ul>Financial-Planning Web Sites
Your Financial Team <ul><li>While In School </li></ul><ul><ul><li>Financial Aid Officer </li></ul></ul><ul><li>As a Post-Graduate </li></ul><ul><ul><li>Financial planner </li></ul></ul><ul><ul><li>Accountant </li></ul></ul><ul><ul><li>Insurance Broker </li></ul></ul><ul><ul><li>Attorney </li></ul></ul><ul><ul><li>Banker </li></ul></ul>
THERE ARE TWO KINDS OF PEOPLE IN THIS WORLD Spend Save Save Spend
Thanks for Coming & Remember You’re still in charge!
Investment Glossary <ul><li>Balanced Fund: A mutual fund that invests in both stocks and bonds: usually with an unbalanced ratio of 60:40 </li></ul><ul><li>Bear Market: When stock prices generally fall as a whole. Bear markets are usually brought on by fears of declining economic opportunity </li></ul>
Investment Glossary <ul><li>Blue Chip Stock : Dubbed after the blue chips in poker; the most valuable ones. These are shares in older, established companies, e.g., IBM, At&T, and GM. They have a long history of growth dividend distribution. The 30 Dow Jones Industrial Average are all blue chips. </li></ul>
Investment Glossary <ul><li>Bond : A formal IOU (“certificate”) from a corporation, the U.S. Treasury or local governments to back a debt with interest at a specific time (“maturity date”). Unlike stockholders, bondholders own only the debt, not a share in the corporation. </li></ul>
Investment Glossary <ul><li>Bull Market: When the price of stocks generally rises. </li></ul><ul><li>Certificate of Deposit: Similar to a regular savings account, but they pay higher interest because the length and amount of deposit are locked in, from 14 days to several years. This is the most common type of money market instrument. CDS cashed in before matrity are subject to substantial penalties for early withdrawal. </li></ul>
Investment Glossary <ul><li>Diversification: Reducing risk by investing in more than one type of security, such as stocks, bonds and money market devices. Mutual funds provide individuals with instant diversification by investing in many different securities </li></ul>
Investment Glossary <ul><li>Dollar Cost Averaging: The strategy in which an investor buys the same dollar amount of a stock at regular intervals, regardless of the changing price of the stock. Since shares are bought at both high and low prices, this strategy averages those costs out over the long run. </li></ul>
Investment Glossary <ul><li>Front-End Load: Up front commission fee (“or load”) investors pay when they buy shares in a fund. Loads are calculated as a percentage, such as 4 or 5% of the amount that an individual invests into a mutual fund. Investors pay this load to receive assistance in their investing from a registered representative. </li></ul>
Investment Glossary <ul><li>Growth Stock: Shares, usually in small companies with potentially bright futures and fast growth. </li></ul><ul><li>Income Stock: Shares of companies with a history of paying high dividends, but lacking fast growth. Utilitiy companies, such as gas and electric firms, with a constant customer base and income flow are some of the best known income stocks. </li></ul>
Investment Glossary <ul><li>Money Market Account: Accounts opened at financial institutions where the money is invested into safe, short-term debt instruments, such as CDS and U.S. Treasury bills. They usually pay a higher return than regular savings accounts. </li></ul>
Investment Glossary <ul><li>Mutual Fund: An investment company that pools money of individuals and invests it into stocks, bonds and other securities, under the guidance of a professional manager. A mutual fund offers shareholders the benefits of portfolio diversification: owning a wide set of shares to spread risk, gains, and losses. </li></ul>
Investment Glossary <ul><li>Net Asset Value: The price of one share of a mutual fund, calculated by adding the toal investments in a fud, subtracting costs, and dividing by the total number of shares. </li></ul><ul><li>No-Load Mutual Fund: A mutual fund that does not impose a sales charge, or load, when purchased. There may be a fee to withdraw your monies from the account. </li></ul>
Investment Glossary <ul><li>Rate of Return: How much money you get back for your investment. For stocks, it’s the annual dividends divided by the purchase price. For bonds, it’s the acutal amount of interest earned. </li></ul><ul><li>Stock : A security that represents partial ownership in a corporation. The value of a stock generally reflects the financial performance of a company </li></ul>
Federal Direct Consolidation Loan Program <ul><li>http://loanconsolidation.ed.gov/ </li></ul><ul><li>To qualify for a Direct Consolidation Loan, borrowers must have at least one Direct Loan or Federal Family Education Loan (FFEL) that is in grace, repayment, deferment or default status. Loans that are in an in-school status cannot be included in a Direct Consolidation Loan. </li></ul><ul><li>Borrowers can consolidate most defaulted education loans, if they make satisfactory repayment arrangements with the current loan holders or agree to repay their new Direct Consolidation Loan under the Income Contingent Repayment Plan. </li></ul><ul><li>Borrowers who do not have Direct Loans may be eligible for a Direct Consolidation Loan if they include at least one FFEL Loan and have been unable to obtain a Federal Consolidation Loan with a FFEL consolidation lender or have been unable to obtain a Federal Consolidation Loan with income-sensitive repayment terms acceptable to them, or intend to apply for a loan cancellation under the Public Sector Cancellation Program. </li></ul><ul><li>Borrowers who have only a Direct Consolidation Loan cannot consolidate </li></ul>
Federal Direct Consolidation Loan Program <ul><li>Standard Repayment Plan: </li></ul><ul><li>You will pay a fixed amount each month until your loan(s) are paid in full. Your monthly payments will be at least $50 for up to 10 to 30 years , based on your total education indebtedness . </li></ul><ul><li>Graduated Repayment Plan: </li></ul><ul><li>Your minimum payment amount will be at least equal to the amount of interest accrued monthly. Your payments start out low, and then increase every two years for up to 10 to 30 years , based on your total education indebtedness </li></ul><ul><li>Extended Repayment Plan: </li></ul><ul><li>To be eligible, your Direct Loan balance must be greater than $30,000 and you will have up to 25 years to repay your loan(s). You have two payment options: </li></ul><ul><li>Fixed Monthly Payment Option -You will pay a fixed amount each month until your loans are paid in full. Your monthly payments will be at least $50. </li></ul><ul><li>Graduated Monthly Payment Option - Your minimum payment amount will be at least $50 or the amount of interest accrued monthly, whichever is greater. Your payments start out low, and then increase every two years. </li></ul><ul><li>Income Contingent Repayment Plan (ICR): </li></ul><ul><li>Monthly payments that are based on a borrower's annual income, Direct Loan balance and family size, and are spread over a term of up to 25 years. </li></ul>
Taxpayer Relief Act of 1997 and 2001 <ul><li>Student Loan Interest Deduction </li></ul><ul><ul><li>up to $2,500 deducted from your taxable income </li></ul></ul><ul><li>Lifetime Learning Credit </li></ul><ul><ul><li>up to $2,000 credit against your federal income taxes for qualified tuition and related expenses </li></ul></ul><ul><li>For more information on tax credits and deductions go to: </li></ul><ul><ul><li>www.irs.gov </li></ul></ul>Source : IRS Publication 970, 2004.
Lifetime Learning Credit <ul><li>Income limits increased. The amount of your lifetime learning credit for 2008 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $47,000 and $57,000 ($94,000 and $114,000 if you file a joint return). You cannot claim a credit if your MAGI is $57,000 or more ($114,000 or more if you file a joint return). </li></ul>
Student Loan Interest Deduction <ul><ul><li>Your student loan interest deduction for 2008 is generally the smaller of: </li></ul></ul><ul><ul><ul><li>$2,500, or </li></ul></ul></ul><ul><ul><ul><li>The interest you paid in 2008. </li></ul></ul></ul>
Student Loan Interest Deduction <ul><li>You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. </li></ul><ul><li>The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040. </li></ul><ul><li>You can claim the deduction if all of the following apply: </li></ul><ul><li>You paid interest on a qualified student loan in tax year 2008 </li></ul><ul><li>Your filing status is not married filing separately </li></ul><ul><li>Your modified adjusted gross income is less than $65,000 ($135,000 if filing jointly) </li></ul><ul><li>You and your spouse, if filing jointly, cannot be claimed as dependents on someone else's return </li></ul><ul><li>A qualified student loan is a loan you took out solely to pay qualified higher education expenses. See the instructions for Form 1040 to determine if your expenses qualify. </li></ul><ul><li>If you file a Form 2555, Form 2555EZ or Form 4563, use Publication 970 instead of the worksheet in the Form 1040 Instructions. </li></ul><ul><li>The deduction will start to phase out when the modified AGI exceeds certain amounts. To determine when the deduction is phased out, please refer to Publication 970 , Tax Benefits for Education . If you paid $600 or more of interest on a qualified student loan during the year, you will receive a Form 1098-E (PDF), Student Loan Interest Statement , from the entity to which you paid the student loan interest. </li></ul>
Retirement Planning <ul><li>There are several different plans that individual and corporations may utilize to invest monies for future retirement needs. Here is a brief description of some and the available maximum contribution to each </li></ul>
Retirement Planning <ul><li>Keogh Plan: This plan is for self-employed individuals and the maximum contribution in any given tax year is $30,000. Money is contributed on a pre-tax basis. </li></ul><ul><li>SEP-IRA: This plan is also for self-employed individuals and the maximum contribution in any given year is the lesser of 15% of income or $22,000. Money is contributed on a pre-tax basis. </li></ul>
Retirement Planning <ul><li>Traditional IRA: This plan is for individuals without a corporate sponsored retirement plan, but are considered employees. The maximum contribution is $3,000 in any given tax year. Money is contributed on a pre-tax basis. </li></ul>
Retirement Planning <ul><li>Roth IRA: This plan for individuals that may or may not possess a corporate sponsored retirement plan. The maximum contribution is $3,000 in any given tax year. Money is contributed on an after tax basis. </li></ul><ul><li>401(K): This retirement plan is employer sponsored. It will allow you to invest money on a pre-tax basis and your employer may “match” your contribution. </li></ul>
Retirement Planning <ul><li>Traditional IRA: This plan is for individuals without a corporate sponsored retirement plan, but are considered employees. The maximum contribution is $3,000 in any given tax year. Money is contributed on a pre-tax basis. </li></ul>
Your Professional Practice An Investment <ul><li>A professional practice has equity </li></ul><ul><ul><li>Records </li></ul></ul><ul><ul><li>Real Estate </li></ul></ul><ul><li>Private Practice =‘s Higher Income </li></ul><ul><li>Tax Advantages </li></ul><ul><ul><li>Lease car </li></ul></ul><ul><ul><li>Write off’s and deductions </li></ul></ul>
Ten Facts About Loan Repayment <ul><li>(1) You are obligating a portion of your future income every time you borrow. </li></ul><ul><li>(2) You can end up paying back as much as $3 or more for every $1 you borrow. </li></ul><ul><li>(3) You don’t pay interest on the portions of a loan you have already paid off. There is also no prepayment penalty on student loans. </li></ul>Source : The Debt Management Workbook: A Five-Step Plan for Successfully Repaying Your Educational Loans ; National Medical Fellowships, Inc., and Ruth Beer Bletzinger; U.S. Department of Health and Human Services; 1993
Ten Facts About Loan Repayment (4) Repaying your student loans can get complicated because there are so many organizations involved with your loans. (5) Even if these organizations make mistakes, the responsibility for repaying your loans is yours. (6) You are the best source of information about your loans, if you keep good records. (7) Some of your loans will probably be sold from one organization to another. Source : The Debt Management Workbook: A Five-Step Plan for Successfully Repaying Your Educational Loans ; National Medical Fellowships, Inc., and Ruth Beer Bletzinger; U.S. Department of Health and Human Services; 1993
Ten Facts About Loan Repayment <ul><li>(8) When your expenses exceed your income, financial problems inevitably result. </li></ul><ul><li>(9) If you are delinquent or in default on your education loans, EXPECT THE WORST! </li></ul><ul><li>(10) With a certain amount of planning, the odds show you will successfully repay your loans. </li></ul>Source : The Debt Management Workbook: A Five-Step Plan for Successfully Repaying Your Educational Loans ; National Medical Fellowships, Inc., and Ruth Beer Bletzinger; U.S. Department of Health and Human Services; 1993