Personal Finance in One Page
This page is set up to try to help you set your financial goals, make plans to achieve them, keep finances stable, prevent you from selling low and buying high and remove emotions out of investing. This page also helps you to make an Investor Policy statement, set specific and attainable financial goals and open required financial accounts to help in your success for your financial journey. This page also makes you learn about personal finances quickly, thereby saving your time and money thereby helping you prevent burnout, keep you young and healthy. You can use this page to teach others about personal finance. You can use all these benefits towards career development by minimizing your time on social media. I read at least 10 personal finance books, listened to hundreds of YouTube videos, podcasts, read hundreds of blog posts and thought I should help others by sharing what I learnt. I am not a financial advisor. This is not a personal advice.
The steps are described, as we go down this page, starting from ‘medical student to retirement‘ using minimal words to get a good grasp of entire finance journey quickly.
Thanks for visiting this page. Hope you are doing well !!
Here is some Motivation to save!!
Before we go further, here are Some general principles in personal finance
Let’s dive into more details.
First, Calculate your Current Net worth. Set a future goal of how much Net Worth you want to have at retirement. You want to accumulate at least 25-30 times your annual expenditures in retirement. For knowing that, Learn to use a MONTHLY BUDGET-You can use apps like Mint, YNAB, EveryDollar, or create your own Excel sheet. Per Trinity study, if you withdraw 4% of your money per year, your retirement nest egg will never dry up. So your goal can be that your yearly expenditures should be 4% of your retirement nest egg. That’s why you need 25 times your annual expenditures as your retirement nest egg to retire [25X4=100].
Make a Very Specific Future goal for your finances i.e. your “Investor Policy Statement”-Where you want to go in life, How much you want to have in future etc. For example, you can decide to retire at 55yrs of age or in 2030, work from home 0.5FTE, pay off one mortgage in 8yrs, second mortgage in 10yrs, Have monthly rental of $4500 eventually etc. You can also list all the big ticket purchases you plan to do like finishing patio for 10K, fencing backyard for 10K, vacation 5-10K yearly, saving for car-20K, down payment for house-50K, prepping for pandemics-3K, accumulating $160K in taxable account, keeping $50K in checking account, paying off student loan by 2025-$50K yearly, putting $250 monthly in each kid’s 529 to eventually save $200K for education, acquire 25 times annual expenses of total savings by retirement [1-5M or what ever your retirement number is based on your annual expenses]
But first, Are you Taking care of your health? Make sure you see your family doctor at least once a year. ‘Health is Wealth’.
First Establish a way to “Storing Passwords” as you need a lot of accounts in your personal and finance journey.
Check your Credit Report for Free. The website FreeCreditReport dot com is not free. You can get a credit report once a year each from Experian, Equifax and TransUnion. Order one report from each every 4 months.
Make your Professional Resume
Read at least one or two Personal finance books by borrowing from the library or if you have Amazon Prime account, you can get a couple of books for free if you try Audible for 30 day FREE trial. I listened to both “Simple Path to Wealth” and “The White Coat Investor’s Financial Boot Camp” for free like that.
You can use “Libby app” to access online and audio books from your local library, you need your local library card to do this.
You can go to YouTube and search for review of any of the personal finance books and listen to them during your commute. For eg. search for “The millionaire Next Door review”.
Some Personal Finance Books
Get “Disability Insurance” during Residency as it gets costly later year after year
Buy “Term Life Insurance” if you have dependents -Look into Ladder policies, Term4sale, policygenius. Never buy Whole/variable/permanent or IndexedUniversal Life Insurance. Always buy Term Life insurance.
Start saving all the important info in a “Legacy Folder” for your spouse/family to access if anything happens to you unfortunately
Buy gently used car, not brand new. Do not buy extended warranty on vehicles and appliances
Buy simplest possible Equipment to keep yourself in good physical shape e.g. Dumbbells, treadmill etc. If you have time for gym-then it is ok.
See an estate lawyer to make ‘Living Revocable Trust’, your Wills, Estate planning, Power of Attorney, Asset protection
Prepare a well Written “Investor Policy Statement“
Name beneficiaries on all investment and insurance accounts online
Learn how to Put investments in appropriate type of accounts
Buy “Umbrella insurance” for 1-2 Million or amount equal to your assets, usually it is $250-500 per year depending on your situation i.e. things you own, bundle with your auto and home insurance to get discount
Make sure you get good sleep every night
Start investing in 401K if your program/job offers.
Earn extra with Moonlighting
If you have student loans, do not go into forbearance, check if you are eligible for PSLF
Take a Brokerage account to start investing in taxable account if you have more money to invest from Vanguard or Charles Schwab or Fidelity or T. Rowe Price etc
Determine your Asset Allocation=What %age of Stocks, Bonds, Cash each, More stocks % during initial Wealth accumulation stage, Increase Bonds during later Wealth Preservation stage
Learn about Three Fund Portfolio if you are overwhelmed by all the investment options
Have some idea about Real Estate Investing VS Stock Market Investing
Take advantage of low income to invest in Roth IRA
Rollover old 401K from residency to IRA and then Roth IRA
Physician Job Contract Review-PhysicianContractReview
How much % age of salary should be saved? The higher your salary, the higher % you save.
Look for Loan forgiveness/sign on bonus before signing a contract for a new job
Read the job contract a few times and understand every word of it. Seek help from friends for sure or professionals if needed to see if terms are reasonable
No lifestyle creep/Live like a resident/have a garage for your car though so you don’t waste time cleaning snow before going to work
Learn the “Order of investments”
Save “Emergency Fund” of 3-12 months expenses for bear markets, job change or health issues in an online only High interest savings accounts or CDs or cash
Pay off credit card debt/ High interest debt
The 401K or 403B -Pretax money of $19,500 to 401K from your salary in addition to match/contribution from employer for both wife and husband if both work
Employee Stock Purchase Plan (ESPP)-Buy if they give good discount and if not many restrictions to sell
*Governmental 457 Plans-$19,500, Better IRA [better than Non Governmental 457]
Max Out Your Health Savings Account (HSA)– $7,100 of your income per family, it has Triple tax advantages-tax-deductible in the year of contribution, grow tax-free and no tax when withdrawn to use for eligible health care expenses only. Fidelity offers HSA account, Vanguard does not.
*Non-Governmental 457 Plans-$19,500,No rollover in to IRA, can lose if employer files bankruptcy
529 Education Savings Plan(s)- distributions for Qualified college Expenses are tax-free, Superfund a 529 if you have money
Develop a “Side Hustle” for 1099 income And do a (Simplified Employment Pension) SEP IRA
Pay off your Mortgage if you want peace of mind
Cash Balance Pension Plan if you have one
Check the account balances and “Rebalance your portfolio” Periodically to bring back %age of Stocks and Bonds to your initial plan. Target date funds rebalance automatically.
Military on Deployment can contribute up to $57,000 a year into the TSP
Cash flow and Leverage are the key points for rental properties
Learn about “BRRRR method“
Learn how to “create an LLC“
Learn how to take and use “HELOC” to buy more properties
Learn how to do “1031 exchange” for same kind of properties to delay paying taxes
Buying your first rental property-Don’t buy very costly houses, Do not put too many bells and whistles
When is the best time to “refinance a real estate property”?-If your home or current mortgage meets one or more of these conditions, it’s time to consider refinancing: Increase in home value, Interest rates are low, Your current mortgage is relatively new
Contribute to an individual 401(k) [=solo 401(k)] or a SEP IRA-$57,000 in contributions
Hire your kids and put their wages into their Roth IRA
Things to do in the Beginning of the year
Front loading Roth IRA, 401K, 457b if you like to do and if your employer will still match your contributions
Things to do towards the End of year
Tax Loss Harvesting in your taxable account
Tax gain harvesting in UTMA
See if Prenup is right for you.
Avoid Divorce at any cost
What to do when Buying a house
Yes, you can buy or sell a house without a realtor but you need to learn pros and cons
Physician mortgage loans-you can avoid PMI by lower down payment, usually have high interest rate if you don’t shop around well
Always Get rid of PMI either by paying more than 20% down payment or with physician loan
You can get CCTV wiring, install down sprout system underground, Get larger garage for easy parking etc if you are building a new house
Solar Panels on your house-Some like and some do not. Do your research
Home warranties are a rip off. Most do not like to pay for those memberships as they delay repairs, replacements of appliances by several weeks during which time you will be off heating or fridge or whatever appliance broke
How to Save Money
Credit card rewards-Use credit cards wisely to your advantage.
Buy cars with Cash if you can to save interest on loans
Take High deductible insurance if you are very healthy and invest in HSA for utilizing triple tax advantages
Keep deductibles high for auto insurance to decrease premiums
Shop at Aldi if you like as it is cheaper
Shop around for auto, home and liability insurance for a better rate periodically at least every 2 years or use TRIM app to do that for you
Shop for used items if possible
Buy gently used car in very good condition
Live close to work place to save time and gas money
Move to a lower cost of living area if it is possible
Take kids to Dollar Stores for play toys and buy multiple toys for cheap. They are happy and you save money
If you had to pay a late fee to either credit card or to phone company etc, always call them and request them to waive
Call cell phone company and ask what your average data usage is and see if you are overbuying unnecessary data service
See if your health insurance pays your gym membership
Apps to save money
Options to Save time
Snowplow service, Lawn and Mowing service
Apartment or Townhome living to avoid lawn, snow cleaning work
Konmari method of closet storing
Outsource House cleaning, Car cleaning
Use Nanny for kitchen work if needed, Use Care.com to find people
Teach the kids to do their work-e.g. making their bed, laundry, etc. A ‘Paid Chore List’ that pays the kids when they complete any chore.
Don’t waste too much time on Facebook discussions
Pay bills automatically-autopay
Live close to work place
Don’t argue which is better among Real estate vs Stocks. lol.
Interlink financial accounts like your different checking accounts, credit card accounts to pay with more than one checking account etc.
Various things to keep the young kids engaged in a healthy way, so they don’t waste your time -Rubik’s cube, Amazon echo dot etc.
Instacart app for ordering groceries from nearby stores if you are too busy to go shop
Use property management company if you have rental properties
Online shopping at Amazon prime 30 day FREE trial membership
TSA Precheck & Global Entry, Airline checkins membership if you travel too much
Say “No” to people, places, events, engagements, holidays that you do not find fulfilling or worth your time
Big washing machines for laundry if you are buying new
Buy electric car to avoid going to gas station
Don’t read personal finance books. Listen to them on Audible.
Do not forget to Take care of your Health
Eat out less
Invest in yourself
Some Personal finance websites
Some Number rules
1% rent to cost ratio of rental properties: Divide Rent by Cost of your property. The higher the better. 1% is great. Most are less than 1%.
4% draw in retirement: Research shows you can draw up to 4% per year of your savings per year so retirement funds don’t run out before you die.
Rule of 72 for doubling money: Dividing 72 by yearly interest you get on your savings gives the number of years your money will take to double with compound interest
If you are interested in Leadership
FACP-After being a member of ACP for a few years
SFHM-After 5 yrs of being a hospitalist
CHCQM-if you want to be a physician advisor
MBA-If you want to go into administration
MMM-If you want to go into administration
CPE-Get certified as a leader if you have MMM, MPH or MBA
Some Finance Calculators
Compound Interest calculator
How much social security you will get
Net worth calculator
Just google them to find them
Things to Avoid
Most doctors feel Private cord blood banking is not recommended but donating to Public Cord Blood Bank is ok.
Whole/universal/variable life insurance, Just do Term life insurance
buying stupid things
Buying too much of a house in the beginning of the career
Buying brand new cars
Buying individual stocks or trading in options
Expensive financial advisors
Front load or Deferred load mutual funds/commissions while buying and selling mutual funds
Actively managed mutual funds as opposed to passive index funds, due to high costs
Speculation-bitcoin especially HODLing. If you know trading and wanna trade then it is up to you
Burnout-You can follow The Happy MD
Suicide-No situation is worth taking your valuable life. Seek help if needed
Don’t spend money insuring things you can afford to replace easily by yourself, like your cell phone and other electronics
Leasing the car. [ “Leasing is Fleecing”-Dave Ramsey.]
avoid holding the same mutual funds that you have in the taxable account in any other account to avoid inadvertent wash sales when tax loss harvesting.
Majority recommending to avoid taking a loan from 401K. I took it and don’t regret it as I invested that loan money in good appreciating properties
Filing Taxes by yourself
ABIM pass books and courses: Med study, Awesome review
Hospital Medicine focused MOC exam: Spark from SHM
PIMDCON 2020 October 10-11 / Los Angeles, CA
Work from home/Side Gigs
YouTube Channel-especially if you have an attractive face
Utilization Management/Physician advisors, CDI, UM
Young kids finances
Utilize Donor Advised Fund
Contributing appreciated funds from your taxable account rather than cash
sell stocks from taxable account to live off of for the first few years until Roth conversion ladder kicks in.
Money needed to retire=Number of years you expect to live after retirement X Your expected annual expenditures in retirement
During the year of job change or low income years
Move funds from Old 401K to IRA and do Roth IRA conversion for tax efficiency.
With draw money from taxable account to pay minimum taxes
Funds in Retirement / Drawdown strategy
Estimate your fixed costs in retirement: Property taxes, living expenses, travel expenses, health insurance, Food, long term care etc.
Cut your expenses down: Move to less costly area, Downsize to a smaller house, Stay healthy, Move to a different country if that is an option. Your annual withdrawal rate should not be more than 4% of your retirement nest egg.
Make sure you do not have any debt or mortgage.
Have 2 yrs worth of cash during retirement as market correction typically lasts less than 2yrs.
May be you have a part time job or a side gig that gives you some money to use in retirement, one can try youtube channel if they have handsome/beautiful face.
Use Rental income money if you have rental properties.
Use dividends and capital gains from Taxable accounts if you retire early.
You can withdraw from 457b with out penalty if you retire from your job.
At 59.5 yrs, you can start withdrawing from 401K, If you leave the job, you can move 401K to Traditional IRA and then to Roth IRA by 70yrs of age as much money as possible to avoid RMDs
HSA money can be used for eligible health care expenditures if you had been saving and investing in HSA account if you had High Deductible Health Plan.
Do not EVER use Roth IRA money if you want to give all that money to your kids, No RMDs with this money.
If you retire early, use “Roth conversion ladder“
Some people use Annuities or IULs.
529 with penalty if you do not need that for education.
Inherited / gifted money if you are lucky-Cash, IRA, 457b from parents.