Personal Finance: Strategies for Success David L' Dahlen, Director of Student Financial AidRegistrar

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Personal Finance Strategies for Success
David L. Dahlen, Director of Student Financial
Aid/RegistrarCollege of Medicine Mayo Clinic
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Overview

• What this talk will do
• Present an organized overview of the financial
  issues faced by physicians
• Suggest appropriate resources to aid in decision
  making

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Overview

• What this talk is NOT
• An investment seminar
• A primer on insurance
• A how to get the best mortgage talk
• A sales pitch
• A were going to cover everything you need to
  know talk

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Physician financial timeline

• Debt management
• Home ownership
• College Planning
• Investment Planning
• Retirement Planning

Medical School
Residency
Consulting Staff
Retirement
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Educational Debtknow you debt know your
options
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Types of loans
Subsidized Loans no cost to borrower during
grace and deferment periods - Federal
Subsidized Stafford - Federal Subsidized Direct
- Primary Care Loans (PCL) - Loans for
Disadvantaged Students (LDS) - some
institutional loans Unsubsidized Loans loans
which accrue interest from disbursement -
Federal Unsubsidized Stafford - Federal
Unsubsidized Direct - most private loans
(in-school and residency/relocation loans) -
some institutional loans
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Deferment and Forbearance

• Both options suspend payment for a set period of
  time if certain conditions are met.
• Deferment
• Interest that accrues is paid on behalf of the
  borrower (subsidized loans only)
• Forbearance
• The student is responsible for interest that
  accrues on the loan (subsidized and unsubsidized
  loans)

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Two New Programs

• Income Based Repayment
• Monthly payments are driven off of income rather
  than amount borrowed, interest rate and loan
  term.
• Public Service Loan Forgiveness
• Portions of loans can be forgiven after making 10
  years of payments.
• Please contact me!
• Simply not enough time to explain in detail in
  this setting by I am happy to visit with you!

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Planning for the futureCollege Savings Plans
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Saving for College

• Education IRA (Coverdell Account)
• Uniform Gift to Minors Act (UGMA)
• also known as
• Unified Transfer to Minors Act (UTMA) Minnesota
• 529 Plans

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Education IRA (Coverdell Accounts)

• Similar to a Roth IRA Non-deductible
  contributions grow tax free
• Allows you to save money for your childrens
  educational costs
• 2,000 per year per child maximum contribution
• Funds can be used for primary or secondary school
  as well as post-secondary expenses
• Is controlled by the student when they turn 18

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UGMA and UTMA

• Allow parents/grandparents to save for their
  children
• Tax Free until earnings are over 750 in one
  year
• Each parent can contribute up to 11,000 per year
  without the gift tax
• No income limitations
• Child gets legal control laterdepending on
  the state (21 in MN 18 in other states)
• Can use the money now or later for many things
  not just educational costs

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529 Plans

• State sponsored savings plan for educational
  costs
• Each State has a plan and you can choose any plan
  regardless of where you live
• Investments grow tax free distributions for
  qualifying costs are tax free (no sunset clause)
• Donor retains control
• Funds must be used for educational cost for the
  beneficiary
• Funds can be transferred to another beneficiary
• Financial Turmoil has led to some solvency issues
  with some of these program. Be a good consumer.

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Personal financial management for physicians

• POINTS TO CONSIDER
• Understand and maintain your credit history
• Seek out trusted resources to help you plan and
  monitor your finances

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Credit Scores
10
10
35
15
30
MYFICO.COM
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Credit Scores
29
20
16
11
11
7
6
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Plan to Invest

• Know yourself
• Understand your OBJECTIVES
• Understand your TIMELINE
• Understand your RISK TOLERANCE
• Just do it! (by paying yourself first)
• Use trusted financial experts

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Planning to Invest

• Risk vs Reward
• Asset Allocation
• Liquidity of assets
• Tax implications
• Taxable
• Tax deferred
• Tax free
• Re-balancing your portfolio

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Planning to Invest Options
Least risk but lowest returns

• Savings, CDs, Treasuries
• Money Market Accounts
• Mutual funds
• Index funds
• Stocks
• Bonds
• Real Estate
• Others (Commodities)

Most risk but higher returns
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Planning for Retirement

• Pension
• Defined Benefit vs Defined Contribution
• Tax Deferred Accounts
• 401-K/403-B Plans
• Take advantage of the time value of money
  (compounding interest)

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Planning for Retirement Time value of money
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Final Thoughts...

• Next steps
• Begin the planning now
• Identify your goals and objectives
• Calculate your net worth (Assets -Liabilities
• Set up a budget and pay yourself first
• Get help Identify a professional partner as soon
  as possible
• Get Started!

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Helpful Links

• Loan Locator Helps you find your loans
• https//www.studentclearinghouse.org/secure_area/l
  oan_locator.asp
• National Student Loan Data System Details on
  your loans
• http//www.nslds.ed.gov/
• AAMC Debt Management Session Primer on
  Consolidation
• http//www.aamc.org/students/financing/md2/phase3/
  start.htm
• AAMC General Financial Planning
  http//www.aamc.org/students/financing/md2/phase3/
  pdf/phase3.i.pdf

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Internet Resources

• Debt management
• www.bankrate.com
• www.myfico.com
• www.money.howstuffworks.com
• Personal Finance
• www.smartmoney.com
• www.fool.com
• College Planning
• www.collegeboard.com
• www.savingforcollege.com

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Internet Resources

• Obtaining credit histories
• www.equifax.com
• www.experian.com
• www.tuc.com