2400 Days to Financial Independence

I recently had the honor to virtually meet Mr1500 by PoF’s introduction, who blogs about 1500 days to retirement. I thought it would be fun to share my journey to financial independence as well.

I originally wrote Why I Can Retire at 38, But Won’t on Apr 11, 2016 @ 12:19, which means if I meet my ultra-conservative financial goals (set up for me to surpass easily, building in a positive feedback loop and self-fulfilling prophecy J for the next 6.8 years, I’d be able to retire by January 28, 2023 (Apr 11, 2023 minus 73 days.)

Today (7/25/2016), I have approximately 2375 days (6.5 years) till FI (financial independence.) Rounding it up, I’ll just call my journey “2400 days to Financial Independence.” I’ll be writing at minimum annual posts on my progress to FI and likely will have more posts as I get closer to FI.

What I plan to do when I reach FI, (Cliff note version)

  1. Cut back work to 30 hours/week.
  2. Teach Math and Sciences at Mini’s middle and high school.
  3. Become a yoga instructor.
  4. Resume writing children’s books.

How is my progress to FI? (Cliff note version)

  1. Retirement funds: Exceed target.
  2. Day to day: Feel great and will continue to follow my idiotically simple investment plan.

What I plan to do when I reach FI, (Elaborated)

  1. Cut back work to 30 hours/week. I learned from venerable radiologists that we need to work at least 2 full days per week to stay sharp in our trade.
  2. Get credentials to teach middle/high school math and/or sciences and apply to teach at Mini’s school. Mini has requested repeatedly that I use my wonderful teaching skills on her (she’s witnessed from the innumerable tutoring sessions held at home since she was an infant and the various teaching awards I have gotten.)
  3. Train more intensively to get credentialed as a yoga instructor.
  4. Pick up my college dream of writing children’s book on college level academic subjects.

How is my progress to FI? (Elaborated)

  1. Retirement funds: $47,892.5 in Roth-Vanguard Index funds.
  2. $31,225.97 liquid asset in case I see the dream home.
  3. 7k of credit card debt at 0% interest rate without additional liability under my name.
  4. Mini’s 529 on target to top off at 14k for 2016.
  5. Starting SEP-IRA and maxing Mini’s Roth IRA at 5.5k for 2016.
  6. On target to max out 23.5k of Roth 2016 plus getting ~1k of company 401k match.
  7. Day to day: continue to select lowest fee, most stupid simple index funds.
  8. Invest $ passively and emotion-lessly. Embrace life actively and feeling everything to the fullest.

 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.

Be a Student Loan Terminator. (PMD2)

Do you have student loans? Won’t you love to destroy them and be debt-free? What would you do with the cash flow you free up once your student loans are paid off? I’d like to invite you to join me in a movement to terminate the deadly burden of student loans.

Under my cover as a mom, radiology resident, blogger, gourmet chef, USMLE tutor, my true identity is a terminator, specifically programmed to terminate deadly student debts. Below, I will share my weapons of termination in hopes of eliminating student debt on the scale of an entire generation.

FullSizeRender_1
Intentionally using credit card can help you pay off your student debt much sooner. Borrow the 0% to even negative interest credit cards to pay down your student loan faster.
  1. Credit cards.
  • I charge all my expenses that are chargeable onto my credit cards and funnel my (limited) cash flow towards debts with interests. There are lots of variations in terms of what can be charged on a credit card. Some people’s circumstances even allow them to pay for rent on credit card. At one point, I used to pay my landlord by charging her necessities such as gas and groceries on my credit cards. This takes a little more effort than just writing a check.
    Now, I buy thousands of dollars’ worth of grocery gift cards (enough to last 6-12 months because once a year there’s a 10% discount on gift cards). I also pay my electricity one year in advance. Funneling cash this way, often got me negative 1-5% interest, which gave me more cash to pay down student loans. But there’s a limit to this.`
  • This second method, balance transfer checks, usually allows for more aggressive paying down of a higher interest debt. The cheapest balance transfer checks I got was with Travelocity American Express at 1% transaction fee for 0% APR for a year. So by writing a check of $15,000 towards a debt such as student loan at @ 6.8% interest rate, I would save 5.8% for the next 12 months. The balance transfer transaction fee is charged up front, so just be sure that if your limit is $15,000, that you write a check in the amount lower than the limit enough to pay for the fee. This is to ensure that the check goes through, and you’re not charged an additional fee. (I have never gotten a fee before, as I always err on the safe side.)
  • There is one card that does not charge transaction fee for balance transfer if you use it within 60 days of account opening. You can read about it here.
  • Some banks allow you to open a new checking account by funding it with a credit card. You need to be very cautious with this. You need to make sure that funding is equivalent to a purchase, and not considered a cash advance. When your credit card company processes funding a new bank account as a purchase, that purchase will give you cash back (if your card offers cash back features). When your credit card company processes funding a new bank account as a cash advance, you will be charged an interest of 20-30% starting the day the transaction posts. So this method only works if your credit card company processes your act of funding a banking account as a purchase.

2. Refinance

For a while residents and fellows have no refinancing options to lower their student loan interests. However, mid 2015, private banks began to offer student loan refinancing to residents and fellows so no one needs to suffer the 3-7 years of debt snowballing at 6.8+% during training. The only drawback is that you forego loan forgiveness when you refinance. (My mentor Dr. James Dahle @ whitecoatinvestor.com commented that “student loan refinancing isn’t new. It just went away for a few years. My class all refinanced at 1-2% back in 2003.”) To think that the refinancing option disappeared for a while and all the PGY’s who suffered through their debt snowballing during training, until 2 private banks come along and start refinancing student loans during PGY.

  1. Home equity loan.

Home equity loan is frequently much cheaper than 6.8%. It’s a perfectly simple, passive, effortless way to make your hard earned dollar go further. With lower interest rate, every dollar you dedicate to your debt pays down a greater percentage of principle.

For 7 more ways to terminate your student loan, read the full article  published on Physician’s Money Digest here. 

Then make comment or ask questions on this blog, drwisemoney.com; I usually answer them within 24-36 hours.

Landmines of Physician Home Purchase. (PMD1)

After purchasing my 1st home as MS4, refinancing it as PGY1, then attempting to refinance it as PGY2, I’m now preparing to purchase my 2nd home.

Honestly, working with so many mortgage officers over a spectrum of mortgage companies in the past, I felt lied to and talked down to 99% of the time, and hence developed a severe aversion to the mortgage industry. Here to share my past woes & my recent pleasant experience with you and hope that you will avoid the negative experiences I had gone through before working with the most awesome mortgage banker, Travis Woods from BOA, ever.


February-May 2014: BBVA Doctor’s Loan

  • Mortgage banker was based in Florida while I was in California. This made things difficult. Our time zone difference made a serious lag time in our communication.
  • Banker had 30+ year experience in the industry; I had 0 (yrs). Serious asymmetry in knowledge. Banker tried to be sympathetic and stoop down to my level of lack of knowledge (I was learning really hard on the side & running all the numbers by myself in the dark, trying to keep up.) Banker got inpatient at times, understandably so.
  • The entire mortgage process was fear ridden. I insisted on getting a 30 year fixed rather than ARM. He did try to get me to see ARM could be better. I didn’t appreciate his wisdom.
  • Results: 4.375% 30 year fixed with 11% down Doctor’s Mortgage.
money eating mortgager
image courtesy of http://www.zerohedge.com/

January-March 2015: Multiple Mortgage Companies to Refinance My 1st Home

For 7 more ways to terminate your student loan, read the full article  published on Physician’s Money Digest here. 

Then make comment or ask questions on this blog; I usually answer them within 24-36 hours.

Is Revised Pay As You Earn (REPAYE) Repayment Plan for you?

 

 

IBR Paye RePaye Refi

For larger or printable view, click Here.

Benefits of REPAYE Plan

The REPAYE Plan enables 5 million more Direct Loan borrowers to cap their monthly student loan payment amount at 10 percent of monthly discretionary income, without regard to when the borrower first obtained the loans. The REPAYE Plan improves upon the current Pay As You Earn Plan while extending its protections to all student borrowers with Direct Loans.

In addition to the monthly payment cap, REPAYE will forgive remaining debt after 20 years for those who borrowed only for undergraduate study and 25 years for those who borrowed for graduate study. 

The REPAYE Plan also will provide a new interest subsidy benefit to prevent ballooning loan balances for those whose income-driven payments cannot keep up with accruing interest.

Cons of REPAYE vs. IBR or PAYE

  1. REPAYE will count your spousal income for payment requirement regardless how you file (where as IBR/PAYE don’t count your spousal income if you MFS, married filing separately.)
  2. REPAYE does not have a payment cap (where as IBR/PAYE cap your monthly required payment at 10 year standard payment on the loan amount you entered IDR with.) This means for those going for PSLF, you pontentially will pay back more on REPAYE compared to PAYE/IBR after training/lower income years.
  3. If you are currently in IBR/PAYE, to switch to REPAYE, you will be entered into 10 year standard repaymen plan first, then make at least one payment, before you can elect REPAYE. Plus, your interest accumulated under IBR/PAYE will capitalize when you leave IBR or PAYE.

Learn More About REPAYE and Other Income-based Plans

The REPAYE Plan became available to borrowers on December 17, 2015.

For more information on REPAYE, read the Department of Education’s REPAYE Plan press release and REPAYE Plan blog post.

Interested in learning more about income-based repayment options? Visit StudentAid.gov/idr or contact your federal student loan servicer.

Borrowers can apply for REPAYE—or any other income-driven repayment plan—on StudentLoans.gov.

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.

From Josh, America’s Coach in Physician Home Buying

[Josh is a good friend of mine who has a great deal of knowledge and expertise in physician home mortgage.  I’m happy to share a series of educational posts from him regarding this topic. So here you go, Josh’s debut on DWM. The Mettle Group is a sponsor of this website.]

 

Second 3 of 6 Steps to a Flawless Home Purchase

 

  1. Carefully Select Your Realtor

It is so important that this is not just someone who’s qualified in helping the average person move across town.  You are looking for someone with relocation, ideally physician relocation experience.  You should be able to find such realtors through an online search, via referral from the medical department you are joining, a colleague who has recently relocated to the area or through a referral from a loan officer specializing in physicians.  If you can’t find a realtor with experience with physician relocation, then the next best thing is a realtor who specializes in relocation because that person will have a little more specialized knowledge of the potential pitfalls and be attuned to serving clients remotely.

Remember, the timing of your employment contract start date, relocation and remote closing all add complexity to the transaction.  The realtor who is the biggest short sale or foreclosure specialist in the county might be capable of doing amazing things for his short sale clients, they may be busy and sell more homes than anyone.  BUT that same busy realtor, if not experienced in the nuances of relocation, is more likely to forget the remote closing timeline and leave you keyless on move in day.  I see it much more frequently than anyone would like.

A great realtor will map out the transaction with you, pull out a sheet of paper and talk through all the dates with you and map out the transaction. That way when he is structuring the offer and the deadlines, everything flows and matches, so you don’t get to the end of the deadline, and realize, you’re family is homeless for two weeks because of a delay on the seller’s side or because the Realtor and loan officer we’re not in communication about when your loan could close.

  1. Stay in Communication

Make sure everyone is on the same page and has the same dates in mind for the loan approval, wiring of closing funds, loan document signing and move-in date. This is especially important for relocating physicians who often have movers scheduled and a relatively short timeline to move in and get settled before starting their new position. Make it a point early in the transaction, even before you write up your offer or go house hunting, to get your loan officer and Realtor on the same page.  This is important that these two advisors are in communication about loan type, financing and appraisal deadlines, as well as the all-important closing and move in date.

What can happen in a transaction is that everybody gets focused one thing, like the appraisal or the outstanding final signed employment contract or whatever the potential hang up might be and they take their eye off the relocation piece and end up missing a date.

If you get into the habit of staying in communication with your realtor and loan officer throughout the transaction, you’ll prevent a lot of problems. It is as easy as firing off an email to both parties saying: “Hey, team, I’m selling my house on Wednesday and I’ll be in Ohio that day, I need to move in and have keys Friday afternoon for the Arizona home. Everybody on board, do you see any problems with those dates?”; “Hey, did you get everything you need from me? Is there anything else you need?”; “My financing appraisal deadline is coming up this Friday. Just wanted to make sure that was on everybody’s radar and we were not going to have any problems with that.”; “Hey, team, Just verifying that financing and appraisal deadline is next Monday, which means my earnest money is nonrefundable. Can you confirm we are good to pass this date?”; or “Hey, team, closing deadline is a week away. I’m confirming that everything is set and my family will be in a moving van on Wednesday.” For anything having to do with deadlines or the dates you will be traveling, I would recommend being in direct communication with both the Realtor and the loan officer.

The frequency of your communication may vary depending on the transaction, but I think once or twice a week is probably the recommended dosage.  That’s not too much and not too little.  If you send communications a couple times a day or daily, you’re going to drive everybody crazy.

Even if you are working with a great Realtor and loan officer team, keep in mind that things happen. The loan processor goes on vacation, the kids get sick, real-life stuff happens and things can slip through the cracks.  As a consumer, if you’re not communicating what your expectations are with the deadlines, you’re leaving yourself open to possible mistakes.

 

 

  1. Be Proactive

Take responsibility for the deadlines you sign on your purchase agreement and ensure you don’t lose your earnest money.  This is truly your responsibility and all you have to do is to be aware of your inspection, appraisal, financing and settlement deadlines.  I find most home buyers rarely even know the deadlines in a purchase agreement even exist.  It’s extremely seldom that we get any kind of communication from the client following up on these dates.  This is typically because the Realtor rushed through the purchase agreement and did not bring it to your attention, but at the end of the day this is on you, it’s you who is risking your earnest money.  You can do this simply by paying attention to the dates in your purchase agreement and set yourself reminders to follow up with your real estate and mortgage team before the dates are upon you and your money is lost.

Follow this advice and you have a 99 percent chance that your transaction will be a successful and enjoyable one!

The following success story is from one of our favorite physician clients, Dr. Peters, who orchestrated the perfect transaction.

Dr. Peters had built a conservative home in a great new neighborhood when he was new into practice.  They had purposefully bought a smaller, less expensive home so they could focus on eliminating all debt, which he did over the next six or seven years.  Several years after he had built his home, the house directly across the street from him was built and from the minute it was framed, it was his wife’s dream home. It was bigger, with nicer finishes, on a better lot and of course more expensive.  It was what they wished they could have built when they built their home, but they felt it was out of reach until they had finished paying off their student loan debt.

Dr. Peters stuck to his plan and paid down all of his student debt.  Shortly thereafter, as luck would have it, the owners of the house across the street, told them that they were going to sell their home.

Dr. Peters started researching lenders. He called a few doctor friends but nobody had particularly enjoyed the lenders they had worked with and he was unable to get a good referral. He went online and searched for “physician home loan” and came upon our site.  He called me and we had a nice conversation discussing his situation.  He had some unique factors and had made a few investments that had gone bad.  Although he had paid off all of his debt, he hadn’t accumulated the savings that he would have liked for a down payment.  I advised him a physician home loan without mortgage insurance was his best option because he needed a jumbo loan size with less than twenty percent down.

After our conversation, Dr. Peters continued his due diligence by visiting our website and reading all the testimonials.  He knew two of the clients who’d given us testimonials. One was a doctor and the other was a member of Utah Medical Association Financial Services and coincidentally Dr. Peters’ financial planner.  He called them both to ask them about their experience with us.

When we had our second phone conversation, Dr. Peters was certain that he was comfortable moving forward with us.  We had a great relationship and trust because he really had done his due diligence and research upfront.  I advised him, before you write your offer and become completely emotionally attached, allow me to gather all of your documents, complete your Credit and Income Approval and ensure you will qualify without any surprises.  Dr. Peters was very prompt in getting me all the documents we needed and we submitted his file for Credit and Income Approval.  Within twenty four hours, the file came back, underwriter approved.

He then was able to make a very strong offer to his neighbor, saying we’re completely qualified, already having been through underwriting, we have our down payment ready and we’re willing to make you an offer with no realtors involved and we’ll close in two weeks.  Of course, the seller took the offer and Dr. Peters got a great price on the house.

We closed two weeks later and his wife finally got her dream home.

Seeing success stories like Dr. Peters is what it’s all about for us.  I hope you will take these Six Steps to a Flawless Home Purchase to ensure that your loan process goes as smoothly and is as stress free as possible.

Josh Mettle is an industry leading author and mortgage lender, specializing in financing physicians, dentists, fellows, PhDs, and physician assistants.  You can get more great physician real estate and mortgage advice at http://www.utahphysicianhomeloans.com/ or his book site: www.whyphysicianhomeloansfail.com.  Josh is also a fourth generation real estate investor, and owns a number of rental homes, apartment units and mortgages.  Josh is dedicated to helping physicians become more financially aware and able, download Josh’s latest tips and advice at www.physicianfinancialsuccess.com.
Copyright© 2016 JLM Industries.  All Rights Reserved