5 Ways to Optimize Wealth Building Before Your First Attending’s Check

A dollar invested in PGY1 has nearly one more doubling time compared to that 6-10 year-later-invested dollar in your first few attending years. And if you invest this PGY1 dollar in post-tax vehicles such as Roth IRA or Roth 401k, the tax savings is incredible since you will be paying the cheapest taxes as a PGY1 as opposed higher tax brackets as attending physicians or retired physicians.
I hear you, money is tight as PGY’s. I know what it’s like, I made 50k in 2015. Without depriving myself or my loved ones, I was also able to stow away 23.5k of post-tax dollars in my Roth IRA (5.5k limit) and Roth 403b (18k limit) combined. Here are some tips on how to optimize wealth building as PGY’s.

1.       Devise a student loan termination plan.
Sitting on 7% interest rate while you work 80 hrs/week training hard is not a good idea. Check out if REPAYE with federal interest subsidy actually benefits you, if not, consider refinancing your student loans ASAP.
Even just lowering your interest rate by 1-2% will save you a large sum over 6 years of training, on a 183k average student loan PGY1 graduate med school with in 2015.
Important bonus of refinancing is that the required monthly payment is $100/month with DRB, $0/month with linkcapital. This means you will free up some cash to invest and build wealth.

2.       Set a goal.  Pay yourself first.
How much do you want to save this year? Be realistic but add 10% to your realistic goal. Let’s say you decided that you want to max out your Roth IRA this year at 5.5k. Divide 5.5k/12 month and put this as the #1 expense on your budget. Set it as non-negotiable. Trust me, if you prioritize paying yourself first, you will find the money to do so.

3.       Budget and automate accordingly.
Set up automatic withdrawal biweekly or monthly to invest the money into your Roth IRA, ideally in a low cost Vanguard index funds. This way, you don’t ever see that money in your bank, or not for long. You won’t miss it. It will go straight to work for you and will grow at a conservatively speaking 8% annualized rate when you buy and hold for at least 10 years.
After you’ve paid yourself by automating the regular investment into your Roth IRA, start making the rest of the budget. You may have to a little more creative and resourceful with your expenses, but it’s both and rewarding. Don’t see budget as a set of limitations, it’s tool to help you accomplish your financial goals.

4.       Use credit to help you build wealth.
If you are a bit more adventurous, you can even use credit (cards) to help you build even more wealth. You can separate your budget into chargeable vs. non-chargeable expenses. Charge every dime you can onto a 0% APR credit card such as Citi Simplicity (longest 0% APR for 21 months), this way, every month, you have additional cash flow to invest. Credit cards lending me 0% to negative interest money allowed me to save 23.5k on 50k income in 2015. The balances I charged onto credit cards were paid off with additional income with the 2016 pay raises and some internal moonlighting and tutoring.
Point is, if you can borrow at 0% or negative interest (with cash rewards, etc.) and direct your cash flow towards investment earning 8% in the long run 18-21 months in advance of having to pay that debt balance back, why not?

5.       Buy assets before buying liabilities.
Good job for paying for your education. Your degree, your mind, and your time are the 3 biggest assets you’ve ever invested in. Assets make you money; liabilities spend your money.
So before you buy new car with payments and interest rate of 3+%, be sure that you are saving as much money as possible in Roth IRA or Roth 403b. The retirement account dollars earning you 8% is an asset; the car costs you 3% to service, insurance (the more expensive the newer/the more costly the car), depreciate like crazy the moment you drive it off the lot is clearly a liability.

 Personal Finance, Investing, Retirement, Practice Management, & Lifestyle More articles like this on Physician’s Money Digest.

Mini-Retirement at 36 Instead of Full Retirement at 38

As I have great reasons not to retire as soon as I reach financial independence at 38, I also love the idea of mini-retirement by Tim Ferriss. Even though I don’t foresee myself paring down to 4 hour work week and raking in $40,000/month like Tim does, I will definitely enjoy plenty of Mini-retirements before I fully retire.

So I started talking with Mini’s dad about our first family mini-retirement.

We both believe that traveling around the world and learning from various cultures will enrich Mini’s life beyond conventional schooling. Since Mini’s started school 1 year younger and has always been the youngest in her class, we thought it would be nice to give her an one year vacation after high school graduation and college acceptance (in which case, she will defer for a year.) The year Mini finishes high school, I’d be 40, seems like a logical time for an extended family vacation.

The thought of a family sabbatical in year 2024 after Mini gets accepted to college seems incredible.

So I presented this high school graduation/college acceptance gift idea to Mini. She was thrilled, but quickly proposed an alternate plan.

Pensively, Mini said, “I kinda want to spread that fun year out. Remember about the mini-retirements in that book you read me [4-Hour Work Week by Timothy Ferriss]? I want to do that… I want to have 4 breaks instead of 1 long one.” 

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Lola has always been really tolerant when being used as a pillow.

Quite an outside-the-box thinker, Mini has always been. As her mom, I tried to practice good parenting and always give her 2 options… The thing is she always comes with a 3rd self-made option that I’m may be prepared for 🙂 However, this time her proposal actually does work better. Mini wants four 3-month-trips: 1 at elementary graduation (in 2 years), 1 at middle school graduation (in 4 years), 1 at high school graduation (in 8 years), 1 at college graduation (in 12 years), instead of the 1 year-long vacation when she’s 17. This will be her first taste of mini-retirement, and likely firsts for her dad and me. Based on Mini’s proposed plan, our first family mini-retirement would happen when I’m 36 instead of 40. I like rewarding ourselves a little sooner 🙂

However, our first mini-retirement in 2018 will be cut short because I’ll still be in residency and simply can not take a 3 month vacation without impacting my training gravely.

So we plan to take a 3-week family vacation instead and enjoy the balance of the 3 month trip for after I reach FI in 2023.

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Lola, our beloved dog (whom we rescued from the streets, not via a shelter, on the day of my 31st bday) will definitely come along for our family mini-retirement planed by Mini Wise Money.

Mini’s first destination of choice is Hawaii.

Research she has done so far:

  • Price of a used sailboat: 12k
  • Distance between Tucson and Hawaii: 2,897 miles
  • Max speed of sailboat: 30.8 miles/hr
  • With the assistance of a calculator & assuming average 15.4 mi/hr: 16 days round trip Tucson to Hawaii
  • She plans to stay on Hawaii land for 3 days to explore.
  • Mini assigned 2lbs/meal for Dad, 1lb/meal for DWM/MWM/Lola each: 5 lbs of food per meal for the family
  • Total # of lbs of food for 19 days trip to Hawaii: 285 lbs of food (including 57 lbs of dog food for Lola)
  • Adults need 3L/day, Mini needs 1.5L/day, Lola needs 1L/day
  • Water distiller costs: $700

Planning in Mini’s own words:

“My Trip To The Hawaiian Islands

the whole trip is 2,897 miles from Tucson,AZ to The Hawaiian Islands.

the boat can go from 15. 4 mph-30.08 mph.

to go there and come back it could take 8-16 days.

we will be exploring/camping for 16 days so the trip would be 24-32 days.

we will need 537 lbs. of food and 8 liters of water a day all together.

89.5 pounds of it will be lola’s food (3 bags) and one liter of the 8 liters of water is hers.”

Definitely much more research & planning is necessary for our family mini-retirement, we will keep you posted!

But it’s a start! Mini’s spending her first day of summer vacation 2016, dreaming and planning away.

Researching and plugging number into her new best friend, the calculator.

Allowing me to blog 🙂

Ways to fund our first family Mini-retirement:

  • Mini recently started a new business, in addition to her freelance artwork, and Walkie Dogie (pet care service).
    • She loves tie-dye and will start accepting orders after she returns from Shanghai in late July. Here are some of her work.
  • DWM will add to travel fund with summer camp (starting 2017) proceeds.
  • We will be asking family who showers Mini with gifts to donate to her mini-retirement fund instead.
  • We will run a couple fund raising such as Tie-Dye apparel sales, Cook off by Wise Money Gourmet.
  • DWM will donate 20% of DWM blog proceeds to this travel fund.
  • Got ideas for us to make this dream come true? Share below!

 

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Mini with best friend modeling their own artwork at local bowling alley.

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 If you like this article, you might enjoy other DWM articles on Personal Finance, Investing, Retirement, Practice Management, & Lifestyle.

All articles by DWM are for informational purposes only and not intended as a substitute for professional advice. Please consult a professional accountant, financial adviser or lawyer, before making financial decisions.

4 Reasons MS & PGY Should Start Building Wealth Today

Many of us have our mind set on starting to build wealth when we finish training. Some say, “I’ll be making so much more money that what I save now will not matter in comparison.” Others say, “I just can’t squeeze out anything, we are maxed out on our current income. There’s nowhere to cut.”
The truth is if we set our mind to It, there are always more solutions than problems. If most people have pre-determined that they will Not set any financial goals while in training, then there will not be creative ways to accomplish those goals.
I hope the reasons I listed will encourage us med students and residents to take action today to build our net worth. Your older, more tired, more taxed self would thank you tremendously if you start saving in training.

1.       Develop and practice good habits.
One of my finance heroes Robert Kiyosaki (author of Rich Dad Poor Dad), said that people with money trouble on little income, will only have more money trouble on high income. A larger paycheck is not the solution money problems, more money only accentuate one’s bad money habits.
A bit counterintuitive, but there are way too many sad live examples. 60 year old with 500k saved after 30 years of making ½ million per year. Then you have a janitor who left 1 million behind for the school he cleaned and served for 3-4 decades.
Be faithful and multiple what you consider little income today (50-70k) in MS/PGY’s, you will find the same principles you live by compound your wealth exponentially when you get that 3-4 pay raise.

2.       Invest in your greatest asset: your mind.
If you are going to read one money book in your entire lifetime, do it today. The sooner you read it, the more dividend it will pay you over your life time.
Learn about money, it’s so much easier than medicine. If you ever pick up a 2nd money book, you will see repeating themes. One good investment book where the basics are covered is all you need to successfully DIY your personal finances. Look here, this money guru who read 250+ great investment books and live and breathe money matters, have a 3 fund investment portfolio I could come up with while still on the ½ of my first investment book.

3.       Dollar invested today works longer for you. 1-2 more doubling time.
A dollar invested as MS1 has 1-2 more doubling time compared to that more-than-a-decade-later-invested dollar in your first few attending years.

4.       Lowest tax bracket going forward. Buy investment on sale.
If you invest this MS1 dollar in post-tax vehicles such as Roth IRA, the tax savings is incredible since you will be paying the cheapest taxes as a MS1 (I made less than 15k as a MS1) as opposed higher tax brackets as attending physicians or retired physicians.

 Personal Finance, Investing, Retirement, Practice Management, & Lifestyle More articles like this on Physician’s Money Digest.

Dear Colleagues, We are Here to Help

I recently read a white coat investor post about a couple who’s in their mid-40 with 5 kids, 2 in college, with 300k debt still and little aggregate savings. It broke my heart and motivated me to work harder to reach more of my colleagues so that they can avoid or get out of these dire financial circumstances.

 

First off, I think this couple did a few things right:

  1. Their hearts have been in the right place, serving their community.
  2. They have built their children one of the greatest inheritance there is, siblings.

 

For those who find themselves in similarly dire financial situation as this couple (and I agree with WCI, their situation is not at all uncommon), the first step is to record a snapshot of liabilities and assets, as WCI call it add up the damage.  Then setting goals and plans to accomplish them. Downsizing is really not as bad as we all think, upgrading is not as great as we believe. I wrote and recorded the 30 day mindful financial practice YouTube videos to invite everyone (struggling or not) to join me on a journey to master their money and accelerate building net worth (decrease debt and/or increase assets).

 

Trimming off the fat and focusing on saving and paying down debt is actually incredibly rewarding and freeing.
When we look at the rest of the world and appreciate how $38/month can support a child’s every need in El Salvador, we actually may find spending (on a worthy cause) harder than saving money. If there’s no worthy cause, saving money can be the natural “default.”

 

For those of us who are fortunate to have learned from WCI or other mentors early on (in med school) and become debt free and on track to early financial independence, it behooves us to reach out and help our colleagues.

 

And for our colleagues who are struggling financially, please don’t feel shame or guilt, ask for help.

 

We walked in the same shoes, faced the same challenges (high tuition, high interest, kid, etc.), and have only managed a little differently, leading to different results today. We’d be more than happy to share what we’ve learned: our mistakes, failures, and successes.

 

Don’t despair, you’ve accomplished much harder things in life already including medical school and medical practice, and raising a family. Money matters are simple. It’s just a matter of practicing a few boring, simple, and old principles.

 

I like the quote, “When money is lost, nothing is lost; when health is lost, something is lost; when character is lost, everything is lost.”

 

You’ve got character, and hopefully you are healthy too. We can take the money issues on together. By “we” I mean you, your family plus many successful physician or non-physician financial masters like WCI, PoF, Futureproof MD, Passive Income MD, and a whole host of financial independence/money bloggers. Let’s take heart and build a better future starting today. No matter how little a step, taking the first step here and now is the only way to start our journey.

If you like this article, you might enjoy other DWM articles on Personal Finance, Investing, Retirement, Practice Management, & Lifestyle.

All articles by DWM are for informational purposes only and not intended as a substitute for professional advice. Please consult a professional accountant, financial adviser or lawyer, before making financial decisions.

10 Heart & Wallet Healthy Habits

 

  1. Make and drink organic fruit/veggie/seeds smoothie.

Daily organic smoothie is way cheaper than Starbucks Latte and does incredible things for your bowels, energy, and health.

smoothie

  1. Cook at home.

Cooking with your spouse can be the start of a romantic date. Cooking with your kids is a great way to get them excited about eating healthy wholesome non-processed foods.

  1. Massage your spouse.

Talk about getting a work out and occasionally getting the reciprocated massage is an added bonus.

  1. Walk your dog.

Explore nature, your neighborhood with your curious dog is quite refreshing.

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  1. Create something (with your kid).

Teach kids to create rather than consume: you are raising and wealthy entrepreneur rather than a poor consumer. It’s incredible that kids derive more joy from building a castle from cardboard boxes with their parents than getting a $400 Disney Princess castle.

MWM found a great youtube video teacher who taught her how to draw an eye :)
MWM found a great YouTube video teacher who taught her how to draw an eye 🙂 We started this together, after the initial challenge, MWM finished it on her own and enjoyed a wonderful send of fulfillment from tackling something new.
  1. Home Yoga with YouTube instructors.

Mindfulness on Yoga mat is useful for all aspects of life, from professional, psychological to financial. Staying fit saves a lot of money. For example, I fit perfectly into formal dresses purchased when I was 18. 14 years later, I did not have to upsize my wardrobe at all, saving me thousands of dollars easily annually.

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7. Write.

Writing is a great way to process our experiences, reflect, learn, and solve problems. Not to mention if you submit your articles to forum like Physician’s Money Digest, where your articles become passive sources of income and great way to reach out and help others.

8. Read.

I’m the person who reads the least in our family from my parents, my sister, to my 8 year old kid. But I do notice reading 1-2 pages of a good book gives 5-10 ideas/solutions. I’m still reading Rich Dad and Poor Dad, and have applied what I learned from the book in innumerable ways already.

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  1. Use high quality meat as flavoring.

People say cut out meat from your diet. I love meat so much I can’t even though I know I’d live longer if I’m vegetarian. Then I realized I don’t really enjoy eating chunks of meat, in fact the most delicious part of a rack of baby-back rib is the bed of caramelized onions under the rack of ribs from the 3-5 hours of slow cooking. So 1 rib with lots of caramelized/rib flavored onions, with roasted vegetable medley on red quinoa and rice is not only heart healthy but also wallet friendly J Not to mention what you’d save from medical bills dealing with potential gout and CV disease if you eat chunks of meat rather than savoring it with lots of delicious, flavorful vegetables.

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Brought these dishes to work for a weekend call. Everyone told me the caramelized onion was incredible, even better than the tender baby back rib with meat falling off the ribs.
  1. Watch good documentaries on Netflix.

Feed your brain and heart good foods like you feed your body. Since watching a movie is a passive pastime, make sure it is good quality, educational, and add to your life rather than leaving you empty, in want, tempted to consume more food or material objects. We love watching documentary about health, foods, education, parenting and sports. These documentaries inspire, empower, and uplift us. And it costs nearly nothing considering the Netflix subscription is $7.99/mo. (even cheaper if you split between households with multiple login names.)

11. Bonus:

Financially fit people are usually less stressed out and enjoy greater (heart) health. People with robust cardiovascular system, probably have better cerebral perfusion and make logical wallet friendly choices. See the positive feedback loop?