Finances 101

Discussion in 'Horn Depot' started by naijahorn, Oct 30, 2007.

  1. naijahorn

    naijahorn 250+ Posts

    So, I'm about to finally graduate medical school and I have never been a financial wizard, but with a hefty loan tied to my *** and a wonderful interest rate of 8.75%, I need to learn quickly.

    Any books or websites out there that you would recommend to explain the basics of personal finances in the US (savings, stocks, funds etc) to a layperson?

    I'm also setting up a meeting with a financial advisor, but I wanted to educate myself as much as possible.

    thanks.
     
  2. tropheus

    tropheus 1,000+ Posts


     
  3. naijahorn

    naijahorn 250+ Posts


     
  4. Anastasis

    Anastasis 1,000+ Posts


     
  5. tropheus

    tropheus 1,000+ Posts

    I think fee-only is the term. Seriously, run away from life insurance as an investment vehicle, its generally not a good idea.

    I am very much an alternative investment guy -- business and real estate, so I'm not going to give any advice on what you should do other than stay away from life insurance as an investment. I'll let everyone else chime in about 401k's, etc.

    The bottomline though, you have to own your financial future or someone else will.
     
  6. Traffic

    Traffic 500+ Posts

    Can you find a way to renegotiate your loan to get a lower interest rate? It doesn't seem right that your rate is more than double your fellow students.
     
  7. midtown

    midtown 1,000+ Posts


     
  8. naijahorn

    naijahorn 250+ Posts

    Hmm, thanks for the advice.A couple of questions, which will expose my utter financial ineptitude:

    (a) How does one even invest in life insurance? That doesn't even make sense to me. I assume you aren't talking about purchasing a life insurance policy. I agree with your statement about the bottomline tropheus
    which is why I want to learn about financial stuff as much as possible.

    (b) Traffic
    , it is the price I pay being an international student. I just spoke with some classmates again, and some of their loans are at 1.76%. Of course, all my loans are private loans (I'm not eligible to receive Federal Loans, which makes sense) hence the higher rates and shorter grace periods and repayment time. [rant]It sucks. Why my parents didn't just have all of us here, I don't know. Getting into med sch was hell because of this--Hopkins (we'll take you if you drop a $175,000 deposit, Michigan & Pitt (we'll take you if you get a green card in 3 months time)--etc, and it screwed me when it came to loans also. Beggars have no choice, and hell to be honest I'm very grateful I could even get the private loans. Life could be much worse.[/rant]
     
  9. jimmyjazz

    jimmyjazz 2,500+ Posts

    1. Are you married? Or a parent? Or both? Then life insurance -- TERM life insurance -- makes sense. Life insurance as an investment is largely a bad place to put your money.

    2. Learn how to manage your own money. Until then, do not feel bad about putting your money in "safe" investments. You will experience many bull markets in your life, and about the same number of bear markets, too. Don't be in a hurry.

    3. if you buy a house, you're in real estate. If you buy into some mutual funds, you're in stocks. Diversify.

    4. Warren Buffett is not an idiot. Neither are his friends. (My opinion.)
     
  10. Wild Bill

    Wild Bill 1,000+ Posts

    naija,
    I feel your pain. Congrats on graduating med school. I'm a LOT older than you, graduated from UTMB in 1984, so I was fortunate to only owe around $20,000. However, the interest was around 10%. A few recommendations:

    Pay off the loan as quickly as you are able (probably not during your intern/residency).

    Don't take any loans out except for a house or cars. Pay off credit cards so there is no balance left.

    You only need term life insurance now (if you are married). Other kinds are OK if you have lots of income because you can invest the money tax-free.

    Just worry about making it through residency because it is Hell. Investments can come later when you actually make some decent money (assuming we don't get HillaryCare).

    Good luck and God bless! [​IMG]
     
  11. TheFied

    TheFied 2,500+ Posts

    book

    I read this book after I graduated from grad school and before I started working. Great book. Written by the guy who came up with the idea for index funds / random walk. He breaks down investing and saving and all that. Great book. I have read it 2 times.
     
  12. Stuck_At_Work

    Stuck_At_Work 1,000+ Posts

    I'm studying and taking evening courses through UT to educate myself on all these matters. These courses are all educational requirements to become a CFP. As an engineer, I'm pretty good with numbers already. Before I started learning all the details, I would offer my friends plenty of advice. Now that I've started learning all these details, I realize there is SO much to know before you offer anyone advice. So... with that... I would find myself a fee-only CFP. We're talking 1,500 bucks a year in flat fees that will hopefully pay off in the end.

    As for your question about using Life Insurance as a wealth growth vehicle.... don't worry about how it works.... just avoid it for now.

    Frankly, with 8+% loans, you might as well forget about investing too much money in commodoties. Save up an 'emergency fund' and then start paying off those loans. Talk to a CFP. See what they can do for you.
     
  13. MGS

    MGS 500+ Posts

    Read The Millionaire Next Door It doesn't give you investing advice, but it talks about how having a thrifty lifestyle can make a huge difference.

    According to the book, most doctors are terrible with money. They get caught up into a lifestyle where they blow a lot of money, and end up heavily into debt.
     
  14. El Sapo

    El Sapo Bevo's BFF

    Two years ago I was $8000 in debt, waiting tables for a living, renting my house and barely breaking even. I could see no way out.

    I read ( many times, cover to cover) :

    The Richest Man in Babylon
    Rich Dad, Poor Dad

    I read other books, but these were the two I went back to again and again.

    I am now debt free, own my own home, and have started 3 businesses that are carrying me and then some. I am now self-employed and my businesses earn for me whether I work or travel. I did this without your level of formal education.

    If you are hungry enough to want out, you are smart enough to get there. Hope this helps.
     
  15. Utkclack15

    Utkclack15 100+ Posts


     
  16. Wild Bill

    Wild Bill 1,000+ Posts


     
  17. El Sapo

    El Sapo Bevo's BFF


     
  18. sawbonz

    sawbonz 500+ Posts

    Congratulations! If you don't mind sharing, what are you doing your residency in?

    Are you currently paying the interest on your loans, and if not is it being deferred or capitalized into principal, ie are you paying interest on your interest?

    At interest rates that high, the only investing I would be doing is paying down principle. Where else are you going to get a yield of 8.75% after taxes (anybody knows of a way, please pm me)?

    Unless you are married, or have kids, do NOT get any life insurance, term or whole.

    If you are married or have kids, get a $1M five or ten year term policy for your residency years. If you're healthy, it should run around $50 per month.

    There are some tax advantages in the far long-term to getting a whole life policy in terms of "borrowing" against the accrued value in your retirement years, but the only people I know with these policies are the old guys who bought them while young. Most younger docs I know have a 20 year term policy for 5-10 times annual income, and feel like other investment vehicles are cheaper, if you will, than whole life policies even when the favorable tax implications are considered.

    edit for rex

     
  19. Mike_Tyson

    Mike_Tyson 500+ Posts

    Awe ****. I just sunk $20K into life insurance. JK! JK!

    I have no knowledge about this either, learning myself as well...but when searching for books get the ones by Russians who made money in America--legit money. Seriously, those guys seem to know their stuff.
     
  20. TheFied

    TheFied 2,500+ Posts

    There is an an old adage that I follow.

    The more complicated an investment vehicle, the more you avoid it.

    Case in point, whole life, universal life. These are very complicated. What is taxable, what isn't. What is your "insurance", what is your "investment".

    I like to keep it simple. I have my investments and I have my insurance. I got the most simple life insurance you can get. My wife & I both have $500k 30 year Term Life Insurance. We got it about 6 months ago and fortunately both tested to the highest physical standards (which means our premiums are the lowest).

    We pay $110 per month total via Farmers Insurance.

    Term Life is simple. You pay that amount, the same amount for the term of your insurance. You collect if you die, you don't collect if you live.

    A friend of mine asked me what I thought of Universal Life. I told him. He didn't agree with me. He is getting it. Oh well. When I told him that I preferred to separate my investments from my insurance, he asked me "well you are paying $110 per month for 30 years, do you feel like you are throwing that away?" No, I don't. Insurance is just that. Insurance. It is in case **** happens.

    We have separate investments that we also have. Those are our investments. I don't need to tie those to my insurance. I am paying $110 per month for the next 30 years to protect "in case **** happens".

    Another thing to consider is make sure that your insurance company is highly reputable. I believe there are ratings. Look those up and only get the highest rated ones.
     

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