Personal Finance: Strategies for Success David Dahlen Director of Student Financial Aid/Registrar

1. Personal Finance: Strategies for SuccessDavid DahlenDirector of Student Financial Aid/Registrar

2. Overview • Goals for this portion of the evening: • Present an organized overview of some financial issues faced by physicians • Suggest appropriate resources to aid in decision making • Seek out trusted resources to help you plan and monitor your finances

3. Overview • What this talk is NOT: • An investment seminar • A primer on insurance • A “how to get the best mortgage” talk • A sales pitch ~ I am not here to sell anything • A “we’re going to cover everything you need to know” talk

4. Physician financial timeline: • Debt management • Home ownership • College Planning • Investment Planning • Retirement Planning Medical School Residency Consulting Staff Retirement

5. Educational Debtknow you debt – know your options

6. 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

7. 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)

8. 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!

9. Planning for the future:College Savings Plans

10. 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

11. Education IRA (Coverdell Accounts) • Similar to a Roth IRA: Non-deductible contributions grow tax free • Allows you to save money for your children’s 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

12. 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 $13,000 per year without the “gift tax” ($26,000 maximum) • No income limitations • Child gets “legal” control later…depending on the state (21 in MN; 18 in other states) • Can use the money now or later for many things … not just educational costs

13. 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.

14. Personal financial management for physicians Understand and maintain your credit history

15. Credit Scores 10% 10% 35% 15% 30% MYFICO.COM

16. Credit Scores 29% 20% 16% 11% 11% 7% 6%

17. 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

18. Planning to Invest • Risk vs. Reward • Asset Allocation • Liquidity of assets • Tax implications • Taxable • Tax deferred • Tax free • Re-balancing your portfolio

19. Planning to Invest: Options Least risk but lowest returns • Savings, CD’s, Treasuries • Money Market Accounts • Mutual funds • Index funds • Stocks • Bonds • Real Estate • Others (Commodities) Most risk but higher returns

20. 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)

21. Planning for Retirement: Time value of money

22. Final Thoughts…... Next steps: • Begin the planning now • Identify your goals and objectives • Calculate your net worth • Assets – Liabilities = Net Worth • Set up a budget and pay yourself first • mint.com • Get help: Identify a professional partner as soon as possible • Get Started!

23. Final Thoughts • Start early • Make it automatic • Keep it simple • Don’t try to “time” the market • Don’t try to pick the winners • Keep long-term goals in mind • Ultimately - get some expert advice

24. Helpful Links • National Student Loan Data System: Details on your loans • http://www.nslds.ed.gov/ • AAMC: General Financial Planning http://www.aamc.org/programs/first/

25. More Links • Debt management • www.bankrate.com • www.myfico.com • Personal Finance • www.smartmoney.com • www.fool.com • College Planning • www.collegeboard.com • www.savingforcollege.com

26. Internet Resources • Obtaining credit histories: • www.equifax.com • www.experian.com • www.tuc.com