Hospitalist,  Personal Finance

Personal Finance for Hospitalists

I was always interested in finances. I learnt that handling and moving of money in the right way makes more money.

In our lives, we have dedicated most of our life to learning medicine. We also have a lot of student loan debt. We start earning late in general. But, congratulations on becoming a Hospitalist. You can now start paying off those student loan debts if you have and start saving for future and build a secure financial life.

Earn more. Save more. Make our money work for us.

Let’s dive into more details.

First, Calculate your Current Net worth. Just add all your assets and subtract all your liabilities.

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 do 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 in your retirement 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]. This is your minimum goal. You can aim for any amount higher than this too.

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 0.5 FTE, pay off one mortgage in 8yrs, second mortgage in 10yrs, Have monthly rental of $10,000 eventually etc. You can also list all the big ticket purchases you plan to do like finishing patio for $10K, fencing backyard for $10K, finishing basement $50K, 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 $1,000 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].

How risky you want your investments to be i.e. how much stocks, bonds, and cash constitute your investments? All these numbers are arbitrary but you get the point. You can add any finance related plan that you have for your life in this written Investor Policy Statement. This is required to plan and execute to achieve those goals.

But first, Are you Taking care of your health? Make sure you see your family doctor at least once a year. Exercise regularly. Relax as much as you can. ‘Health is Wealth’. Make sure you get good sleep every night. Avoid Burnout, Avoid Sugar, Eat out less etc.

Now that you know your net worth, retirement net worth goal, financial plan and goals, let us execute the plan.

First Establish a way to “Storing Passwords” as you need a lot of accounts in your personal and finance journey. Some use apps like LastPass, Password, Keeper app, Dashlane app, or a Password secured USB device like This One.

Also, arrange or buy a “Safe Deposit Box” or a storage cabinet made of metal to keep valuables which could be keys or documents or legacy folder or gold etc.

Freeze Your Credit Report, Protect yourself from Identity theft.

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 of these credit bureaus every 4 months.

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 audio 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. If you like audible, you can continue to pay for it after that. I read somewhere that the first personal finance book that you read saves you at least one million dollars in your lifetime.

You can use “Libby app” to access online and audio books from your local library, you need your local library card from your local library to do this. This app has limited audio books though.

Also, 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”. Most of the personal finance books are available for free on YouTube for free.

The following are some of the books I read. I read a lot more but I liked these the best.

Some Personal Finance Books

The Millionaire Next Door-This will teach you how to think to save and not spend

Rich Dad Poor Dad-This will teach you difference between assets and liabilities

The Simple Path To Wealth-This will teach you how to keep investing simple but effective

The Boglehead’s Guide to Investing-This will teach you similar principles as simple path to wealth but with more info

The White Coat Investor-This is for doctors only.

The Boglehead’s Guide to Retirement Planning-This will teach you retirement planning

The Four Pillars of Investing-This book is also is similar to Boglehead’s books above but written by a doctor and I enjoy listening to this.

White Coat Investor’s Financial Boot Camp-This gives all the steps to get your finances in order. The steps are at the end of the audio book.

Physician Philosophers guide to Personal Finance-I read this but this is mainly if you have student loans.

Before taking up Hospitalist 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. Get your Physician Job Contract reviewed-PhysicianContractReview. Look for Loan forgiveness/sign on bonus before signing a contract for a new job. How much % age of salary should be saved? The higher your salary, the higher % you save. 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.

Get “Disability Insurance with own occupation rider” during Residency as it gets costly later year after year. All doctors should have this. This protects your earning power in unfortunate situations. I am not sure about those IMGs on visa.

Buy “Term Life Insurance” if you have dependents as early as possible in residency -Learn about Ladder policies. Look into Term4sale, policygenius websites to get quotes.  Never buy Whole/variable/permanent or IndexedUniversal Life Insurance. Always buy Term Life insurance. The earlier you buy, the cheaper it is. This is also a must for young doctors.

Start saving all the important info in a “Legacy Folder” for your spouse/family to access if anything happens to you unfortunately. It should include copies of Driver’s license, Insurance policies-Home owners, auto, life, disability, Marriage Certificate, Birth certificates, List of medications, Investments, Real estate deeds, Appliance warranties, Passports, Passwords and PIN numbers [of all accounts, online photos, social media, phones, apps in phones, number locks, emails, utility accounts, own websites, loan accounts, cell phone accounts etc], Credit cards and their PIN numbers, Wills, Memberships, Basically, include every detail that your family members can benefit from if you die suddenly [this looks harsh or sad but it is good to do this].

Buy gently used car, not brand new. Do not buy extended warranty on vehicles and appliances.

Learn various ways to Reduce Taxes [Max out 401K, Max out governmental 457b, Max out Roth IRA to prevent future taxes, Tax Loss Harvesting-sell losing stocks before the year end –>keep in money market fund for more than 31 days to prevent Wash Sale and buy the same fund if you want after that, Avoid selling funds before keeping them for more than 12 months to avoid short term capital tax, Use tax efficient funds in Taxable accounts, Keep turnover low, Do not sell often, Sell appreciated shares after Jan 1st to delay paying taxes until next tax season.]. Do not worry it is too much to learn this way but do research on these topics.

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, for Asset protection.

Name beneficiaries on all investment and insurance accounts online.

Learn what it means to say 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.

Earn extra with Moonlighting. For hospitalists, this is the best way to earn more money. If you have some other adult other than you and your spouse to help take care of your kids at home, you can do a lot of extra shifts during your off time.

If you have student loans, do not go into forbearance, check if you are eligible for PSLF.

Open 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 Pros and Cons of Real Estate Investing VS Stock Market Investing

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 there are not many restrictions to sell those stocks when you want to.

*Governmental 457 Plans-$19,500, [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.

Backdoor Roth IRA for high earners“. For step by step process of Back door Roth IRA, read here. Also, read here to know how to avoid mistakes doing Backdoor Roth IRA.

*Non-Governmental 457 Plans-$19,500, you can lose this money if employer files for bankruptcy.

529 Education Savings Plan(s)- distributions for Qualified college Expenses are tax-free. One can Superfund a 529 if you have money which means parents can make 5 years of contributions to a 529 plan at one time while still qualifying for the annual gift tax exclusion. So, $75,000 can be contributed per parent to a 529 account as lumpsum without paying any extra tax.

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 asset allocation plan. Target date funds re-balance automatically.

Student loans

Refinance through White coat investor

or

Physician On Fire

Real Estate

Tips to First Time Home Buyers

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 in those houses.

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

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.

Marriage

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

Drop, Dosh, Rakuten, Ibotta-These give cash back when you shop online.

Trim (cut your monthly bills and pocket the savings)

Options to Save time

Amazon prime: saves time.

Instacart: saves time for groceries

Robovacuum-Roomba

Robo lawn mower

Use Snowplow service, Lawn and Mowing service

Apartment or Townhome living to avoid lawn mowing, snow cleaning work

Google “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. lol.

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.

Use property management company if you have rental properties.

Use apps to contribute for parties or gifts at work place-Cash app, Venmo.

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 so you can wash more clothes with each wash.

Buy electric car to avoid going to gas station.

Don’t read personal finance books. Listen to them on Audible.

Some Personal finance websites

Physician On Fire

White coat investor

PassiveIncomeMD

The Physician Philosopher

Facebook Groups

Physician Advisors, CDI, UM

Physician On Fire

White coat investors

PassiveIncomeDocs

Doc to Doc rentals and Houses for sale

Physician Finance

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

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 stuff that you don’t need

Buying too much of a house in the beginning of the career

Buying brand new cars

Buying land for investment

Buying Annuities

Buying individual stocks or trading in options

Using Expensive financial advisors

Buying Front load or Deferred load mutual funds/commissions while buying and selling mutual funds.

Buying actively managed mutual funds as opposed to passive index funds, due to high costs

Speculating-bitcoin especially “HODLing”-buying and holding for long term is called HODLing in bitcoin terms. lol. If you know trading and wanna trade then it is up to you.

Burnout-You can follow The Happy MD

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.]

Aoid 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

Free software for Filing Taxes by yourself

Turbo Tax, H&R Block, FreeTaxUSA, TaxAct, irs.gov,

CreditKarma

Finance related Courses

Fire your financial advisor

Conferences

PIMDCON 2020 October 10-11 / Los Angeles, CA

Work from home/Side Gigs

Telemedicine for hospitalists by Eagle Hospitalists

You can start an YouTube Channel-especially if you have an attractive face.

Utilization Management/Chart reviews /Physician advisors, CDI, UM

List of Physician Side Hustles from PIMD

Young kids finances

Look into UTMA/UTGA accounts

Charity

Utilize Donor Advised Fund

Contributing appreciated funds from your taxable account rather than cash

Medical Surveys

Medical Surveys for hospitalists

During the year of job change or low income years

You can do the following to minimize taxes:

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

Social Security, earliest at 62yrs. Make an account here if you want to know how much SS money you get, It is a govt website and it is secure.

Some people use Annuities or IULs to pay for expenses in their retirement.

529 with penalty- if you did not need that for education.

Inherited / gifted money if you are lucky-Cash, IRA, 457b from parents.

Disclaimer: 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.

It 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 learn about personal finance quickly. 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. As always, do your own research before doing anything with your money.

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