For new docs, hefty IOUs tough to shake

Debt-snared med grads must learn to pay now, spend later

By Ryan Bergen


"Suck it up," says finance guru Gail Vaz-Oxlade of Til Debt Do Us Part
Photo credit: Til Debt Do Us Part

Nine out of 10 residents are over $150,000 in debt when they finish their medical training, according to a 2006 survey. "That's not just debt, that's humungous debt," gasps Gail Vaz-Oxlade who's made a career of helping people with their money woes.

Her 20-plus years of experience and firm but folksy style have earned her a weekly television show, Til Debt Do Us Part - think Dr Phil for the financially wayward.

When it comes to climbing out of debt, the promise of a healthy income may be a beacon of hope, but, says Ms Vaz-Oxlade, young docs shouldn't forget the squeeze of being in the hole.

She doesn't waste time with sympathy. Med school, she says, is a choice, and with a "suck it up" — her tough lovin' refrain — at the ready, she lays out the way to mastering debt:

1 Shed student habits
Whether by habit, or a feeling of need, paid residents who are still dipping into their professional students line of credit they need to smarten up, she says. "If you can't live on $50,000 a year without accumlating debt you are going to have a tough time the rest of your life."

2 Chart your debt like a disease
If debt is a problem, then address it like one. Document income, expenses, interest rates. "If you had a patient, and every single day you went in and took that patient's temperature and blood pressure and whatever vital signs you needed and you didn't chart it, no other doctor on this earth's surface would think you were a smart kitten, would they?"

3 Plot your payment course
Create a montly budget - and follow it. It's not sexy, but it helps to keep track of the periodic expenses that can sometimes be forgotten, but must be paid.

4 Give yourself just a little credit
Treat consumer debt like the plague - avoid it. "You don't deserve [a purchase] if you can't pay for it." Credit card balances, usually the most expensive of debts, should be paid off first. More than two credit cards is too many.

5 Don't live on a prayer
Plan for the future, but live in the present. "It's one thing to say 'I am in hock up to my eyeballs to get this education, but I can ammortize that over 15 years.' It is another thing altogether to say that 'while I am a resident making 50,000 frickin' dollars I feel entitled to driving a fabulous car and eating out regularly.' You are still paying your dues, man."

6 Make like a squirrel
Remember to save a little, too. Ms Vaz-Oxlade recommends a minimum of 5% each month. "You have to have an emergency fund…the next time something happens and you have no stash of cash it pushes you back to your credit."

7 Better shop around
Apply the law of supply and demand. "It behooves [young family physicians] to find a community that wants them and negotiate the payment of their student loan as part of their compensation package. There are communities that are willing to do this."

8 Pawn it off on someone else
Consider getting a financial planner. It's their job to know the arcane but clever financial products that can put idle savings to work.

Avoid the 10 biggest personal finance mistakes

http://www.buffalonews.com/businesstoday/businessfinance/story/134489.html?imw=Y

By Pamela Yip - DALLAS MORNING NEWS
Updated: 08/05/07 5:08 AM

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All of us make financial mistakes, but there are some doozies that can really do lasting damage. We commit those mistakes for several reasons: ignorance, fear, ego, a desire for immediate gratification. Notice that all those involve emotions.

“We make our decisions on an emotional basis — all of us do,” said Rick Salmeron, a certified financial planner and head of the Salmeron Financial Network in Dallas. It can be dangerous.

So in the spirit of helping you avoid committing those financial faux pas, here are the top 10 personal finance/financial planning mistakes many of us make:

1. Not having a goal and a plan for how to achieve it.

Absent winning the lottery or receiving a fat inheritance, financial success doesn’t just happen. You have to know what you want to achieve and then decide how to get there.

2. Not being willing to change your behavior so you can get to where you want to be.

This includes failing to admit that you’re living beyond your means.

Try keeping track of all your expenditures for a couple of months, and you’ll be shocked at where your money’s going. That cup of latte every morning can add up to big bucks by the end of the year.

3. Not paying off your credit card debt each month.

Credit cards can be a great convenience, and they’re necessary today for things such as reserving a hotel room or rental car.

But misuse them, and they can seriously jeopardize your financial future.

4. Making only the minimum payment on credit card debt.

If you carry a balance and you’re making only the minimum payment each month, you’re on a treadmill to nowhere.

“A $3,000 balance at 18 percent interest will take more than 22 years to repay if you only pay the minimum,” said Greg McBride, senior financial analyst at Bankrate.com. “If you pay just $75, but do it every month rather than just the first month, you can repay that balance in approximately five years.”

5. Failing to save at all or to save enough.

What you need is an emergency fund that you can use for unexpected expenses. It also will reduce the need to use high-interest debt, such as credit cards, as a last resort.

Most financial planners recommend that an emergency fund have enough money to cover three months of living expenses.

6. Waiting too long to save for long-term financial goals.

You don’t have to put away a lot all at once if you start early, but you do have to start, and you need to contribute consistently.

One of the best methods is to put your savings on automatic pilot, having a certain amount of money automatically taken out of your paycheck each period and put into another account.

7. Failing to take advantage of benefits provided by your employer, such as your 401(k) or life insurance.

One of the best moves you can make is to start an automatic savings program through your employer’s 401(k). You won’t miss the money, and you’ll have a head start in saving for retirement.

It also will save on your tax bill because the money is taken out before taxes.

If your employer matches your 401(k) contributions and you’re not participating, you’re walking away from free money on the table.

8. Not having any or enough life insurance.

The purpose of life insurance is to provide for your family after you die.

“The probability of getting a flat tire while driving is a fraction of 1 percent,” Salmeron said. “The probability of dying is 100 percent. Would you drive without a spare tire in the trunk? Then why wouldn’t you carry enough life insurance?”

9. Overinvesting in company stock.

Financial planners say you shouldn’t have more than 20 percent of your retirement money tied up in company stock.

10. Letting emotion drive your investment decisions.

You may put too much money in your company’s stock because you fear the unknown of investing in a company you’re not as familiar with.

Likewise, when stock prices fall sharply and your fear kicks in, you tend to sell at a loss and wait to get back in when the market rises back to its original level. Instead, said McBride, “build a well-rounded portfolio that will help you weather the inevitable ups and downs while working toward your financial goals.”