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You Can Afford to be a Family Physician

You Can Afford to be a Family Physician. Mark A. Goedecker, M.D. York Hospital Family Medicine Residency Clinical Camp April 4, 2009. My Credentials. My wife and I are both family physicians We had >$300,000 (1997) in student loan debt combined Max credit card debt reached $47,000

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You Can Afford to be a Family Physician

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  1. You Can Afford to be a Family Physician Mark A. Goedecker, M.D. York Hospital Family Medicine Residency Clinical Camp April 4, 2009

  2. My Credentials • My wife and I are both family physicians • We had >$300,000 (1997) in student loan debt combined • Max credit card debt reached $47,000 • We had no money invested (as of 7/2000) • I finished residency in 2000 and my wife in 2002

  3. How Are We Doing? • Our credit card debt has been eliminated • Our student loan debt is at $120,000 • We own a house and two cars • We have $200,000 saved for retirement after the stock market collapse • And we are still having fun

  4. “Luck is where preparation meets opportunity.”

  5. What We Will Cover • How much will you owe? • What should you do with ALL of your money (once you have money)? • How much will you make and will this be enough? • What is the future of family medicine?

  6. Student Loan Facts • Class of 2008 • 87% of graduates had debt • Mean debt was $154,000 • 56% of graduates had debt >$150,000

  7. Can I Transfer to a Cheaper School? • In state residents pay $10,234 per year

  8. I Don’t Have It As Bad As Some • Out of state residents pay $74,748 per year • $390,000 for 4 years

  9. So How Much Will I Really Have to Pay Back?

  10. Sample Repayment - $154,000 for 10 years • 6.8% interest rate • Monthly payment of $1800 • Total repayment of $212,000 • But, it could be worse than this….

  11. The Case of Pay Me Some Now or a Whole Lot Later

  12. 10 year repayment Monthly payment $1800 Total interest paid $59,000 Total repayment $212,000 30 year repayment Monthly payment $1000 Total interest paid $207,000 Total repayment $361,000 Student Loan Repayment Original Loan Amount $154,000 at 6.8% Difference in amount paid = $149,000

  13. But many of you have it worse than this….

  14. Worst Case (without college loans) • Max interest rate of 8.25% (Stafford Loans) • Amount Borrowed $250,000 • 30 year repayment • Total amount repaid $692,000 ($436,000 in interest) • 10 year monthly payment would be $3100

  15. But I can deduct the $436,000 in interest on my taxes, can’t I?

  16. Student Loan Interest and Income Tax Deductibility • Up to $2500 of interest may be deducted yearly if you itemize deductions Standard deduction is $6400 for single filer and $11,300 for joint filers

  17. Student Loan Interest and Income Tax Deductibility • HOWEVER, there are income limits • Single filer – deduction is phased out between $60,000 - $75,000 adjusted gross income • Joint filer – deduction is phased out between $120,000 - $150,000 • This is for 2009

  18. What Can You Do Now • Find out: • How much you owe? • Whom you owe it to? • Who services your loans? • What types of loans you have? • Other sources to pay for tuition (more on this later) • Become very good friends with your student loan office employees (or Bill Gates)

  19. What Should I Do With All of My Money Once I Start Working? • Buy a new car (or cars) • Take expensive vacations • Buy a new house • Invest all of your income in the stock market

  20. “The chief cause of failure and unhappiness is trading what you want most for what you want now”

  21. Delayed Gratification • It’s OK to enjoy your salary • Avoid running up large credit card debt if possible (spend what you have but not more than that) • Temptation is to spend and not invest

  22. Credit Card Debt • In 2008, the median credit card debt for graduating medical students was $5500 • Only 37% of people pay their credit card balance off monthly (women are worse than men) • Average interest rates are around 12%

  23. To Invest or Pay Off Debt? • Paying off consumer debt (credit cards, car loans, etc…) is an excellent investment due to: • Higher interest rates of credit cards (12% currently) • Monthly capitalization • High amounts of credit card debt can affect your credit rating • A good investment averages a rate of return around 8%

  24. Paying Yourself When You Have a Salary • When do you pay yourself any money for all of the hard work that you do?

  25. Paying Yourself First • Take money directly from your pay check for investment or to pay off high-interest debt • Have the money removed before you get your 1st check and you will never know that it is missing

  26. True or False • Physicians are bad with managing their finances

  27. “There is little you can learn from doing nothing”

  28. “Investing Like a Doctor” • Making risky investments – get rich quick schemes • Not understanding the basics of financial management • Things that are not taught in medical school or residency • Delayed gratification

  29. Don’t Wait to Invest

  30. Dr. Early Starts investing at age 28 Invests $2000/year @ 10% Stops investing at age 35 Contributes $14,000 Dr. Late Starts investing at 35 Invests $2000/year @ 10% Stops investing at age 65 Contributes $60,000 Dr. Early and Dr. Late

  31. Dr. Early $331,091 Dr. Late $328,988 Who Retires Better Off? • Dr. Early invests $46,000 less but finishes with • $2100 more • If Dr. Early had kept investing until age 65 he would • have ended up with $660,079

  32. Dr. Early and Dr. Late

  33. Lessons from Dr. Early and Dr. Late • Start investing money (or paying of debt) as soon as you have a salary

  34. If You Read Nothing Else • The Wealthy Barber, David Chilton 1998

  35. How Much Will I Make?(And Will It Be Enough?)

  36. Data on Student Loan Debt and Career Choice • Most studies have shown that the amount that students owe in loans does not alter their career choice

  37. “Ideally, students should choose a specialty independently of concern about educational debt and inequities in remuneration, on the basis of the knowledge they have gained from clinical experiences with comprehensive care” Ruth-Marie Fincher, MD NEJM August 12, 2004

  38. How Much Income is Enough? • What is your current monthly budget as a medical student?

  39. How Much Income is Enough? • An income of $90,000 a year or more would put in the top 10% of household incomes in the United States

  40. How Much Income is Enough? My parents annual income: $32,000

  41. How Much Income is Enough? • Ben Roethlisberger’s Salary: $102 million Raucous applause if you’re a Steelers fan

  42. Other Food For Thought • Everyone Makes the Same Salary in Residency • Residents in primary care residencies may have more time to moonlight

  43. Median Housestaff Stipends 2008 • 1st year resident $45,659 • 2nd year resident $47,257 • 3rd year resident $49,095

  44. A Sample Resident Budget

  45. Tax Brackets for 2008 Single Filers • $0-8350 10% • $8351-33,950 15% • $33,951-82,250 25%* • $82,251-171,550 28% • $171,551-372,950 33% • Over $372,951 35% *In your first 6 months of residency you will be in the 15% tax bracket unless you have another source of income

  46. Tax Brackets 2008 for Joint Filers • $0-16,700 10% • $16,701-67,900 15% • $67,901-137,050 25% • $137,051-208,850 28% • $208,851-372,950 33% • Over $372,950 35%

  47. Social Security and Medicare • Social Security 6.2% on all earnings up to $106,800 in 2009 • Medicare 1.45% on all earnings

  48. Sample Resident Budget • 1st year resident $45,659 • After taxes $30,750 • After-tax pay= $2500 per month • This is 2 times the average medical student’s budget

  49. Sample Resident Budget ($2500) Investment (10%) $250 Housing $1000 Transportation $300 Remaining $950 (most student loans will be deferred in residency)

  50. Sample Resident Budget • Remember that paying off credit cards can be a great way to invest the 10% of your salary

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