Mortgages, Buying a House, Private Banking, and Basic Financial Planning
Outline • Achieving success- Ralph Broadwater • Your Banking Relationship • Buying a Home- Susan Marlowe • Specific Residency Issues- Ralph Broadwater • Questions
Achieving Financial & Personal Success during your Residency • Setting Goals • Dynamic tension • Principles of Financial Success
Goals • Professional • Personal • Financial • Family
Why is it important to set goals? We get used to our lifestyle • We all want to retire and enjoy life • We will all live longer • Inflation will affect our income needs • If you don’t save early you are in trouble
Example: Income needs for retirement • $100,000 income • Age 30 • Retire at 55 (25 yr career) • 2.5% inflation • 10% investment return • Live until age 85 • Deplete savings in retirement
Savings and retirement • At age 55 will need to generate $185,000 for same lifestyle • Will need $3 million • If start saving and earn 10% return:
Monthly savings requirements Start saving at age: Per year Per month
Dynamic tension • Enjoying life • Saving • Maximizing retirement savings • Debt management
Basic Principles • Develop goals • Take care of the basics • Save regularly • Maximize retirement savings • Don’t develop a consumption lifestyle • Start saving now! • Pay for professional help • accountant
Take care of the basics • Disability Insurance • Simple will • Personal liability umbrella • Adequate insurance (life, health, home, auto) • Life insurance trust
Principles of Financial Success • The rich vs. the rest of us • Principles from The Millionaire NextDoor • Specific suggestions
Understand Wealth Creation • The rich are different from everyone else. • They purchase assets. • Assets generate income that further increases wealth. • Everyone else buys “stuff”; doesn’t increase income or wealth.
A fundamental law of finance Expenses will expand to entire income. (No matter how much)
Pay yourself first • Automatic • Debit checking • monthly
Successful Investing • Slow and steady wins the race • Power of compounding • Power of tax-deferred growth • Maximize both qualified plan and personal savings • Annual returns of 7-10%
“Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”The Millionaire Next Door
80% of American millionaires are 1st generation rich. The Millionaire Next Door
Physicians, in general, do not tend to be wealth accumulators.
Class of 2000 Educational Indebtedness • 134 graduating • $7,042,440 • 62,879 avg debt • Avg debt 77,334/109,264
Class of 2002 Educational Indebtedness • 140 graduating • $71,307 avg debt • 16 students no debt
Total Educational DebtClass of 1999 UAMS US Mean/median debt: 62,177/60,000 (80,462/80,000 US)
Credit Card DebtClass of 1999 US UAMS Mean debt: 14,108 (7425 US)
Millionare Next DoorSeven Common denominators • Live well below their means • Allocate time, energy, and money efficiently • They believe financial independence is more important than displaying high social status.
Seven common denominators • Their parents did not provide economic support. • Their adult children are self-sufficient. • They target bargains. • They chose the right occupation.
Creating wealth • Set goals (have a plan) • Take care of basics • Maximize tax free earning (retirement plans) • Save routinely • Measure progress
Barriers to Success • No clear goals or plan • Inadequate protection (insurance) • Consumption lifestyle • Trying to time the market • Chasing performance • Acting on hot tips • Starting to save too late • Behavioral Finance Issues
Specific Issues During Residency • Should I participate in my institution’s retirement plan? • Should I save into a Roth IRA? • Should I buy a home? • Should I consolidate my student loans?