Savings Advice

[arm017]

Gentlemen,

I wish to call upon the sage advice of my fellow B&B brethren. I am a recent college graduate. I have a couple months before medical school starts, and I have been all over the place with saving money. Here's a little background.

Age 14-17: Owned and operated my very own lawn business. Made 15 K- bought my first car

Age18-19: Worked part time throughout college and started my own Roth IRA maxing out the yearly contributions as well as a couple CDs.

Age 20-23: I have BLOWN AWAY my money. Bicycling was the main cause. Also eating out too much. Went into debt!

Age 24: I am about to start medical school now and have stocked up about 15 K toward it to minimize student loans.


So as you can see I have been all over the place with my personal finances, but I would like the advice of my wisdom filled elders. How do you save money? How do you mentally prep yourself to save? I think we all struggle to see a number in the bank account and feel like we can spend it. I ask this for the future. I am not planning on having any revenue till after school, but I want to start training myself for proper personal financing.

I am not as concerned with shaving as a hobby financially because I seem to have a pretty tight grip over AD of any type. Obviously for some on the board, it can put a heavy drain on ones wallet. Thank you for your advice.

[rickboone1]

Save money, turn in your B&B membership card and walk away.

[john.bradburne]

Save money, turn in your B&B membership card and walk away.

+1 hanging around these parts will not help

[saf]

Um you aren't going to save anything not working. Get a sugar momma as fast as you can.

[Vickers]

The main thing is to save a little every month (or week, or paycheck). Make it part of your routine. The fact that you are starting early is awesome. I didn't really start until I was around 26 or so, and I could kick myself for missing out on several years of compound interest.

BTW, you can look at med school as an investment of sorts.

[Go West Young Man]

Have money automatically withdrawn from your bank account on a set schedule, and have it put into an account you can't easily withdraw from.

[Jim]

Saving money is about discipline and perspective Make a plan and work it. You say you are not going to make money while in school, BUT you will be spending it.
Having a budget and planning these expenditures is exactly how you save money in the future.
Eating out/fast food is a money drain. Plan a budget for every thing you can anticipate spending money on. Keep a log of where your money goes.

[turtle]

Cancel your credit card
Cancel your cell phone
Cancel your internet service
If you get any type of paid TV (cable, satellite, etc) Cancel it.
DO NOT EAT OUT (not even ONE MEAL).
Sell your car (no gas, no insurance, no upkeep)

naw.. just cut your throat and be done with it

[kentclark]

If I may put it bluntly, you have at least 7 lean years ahead. The first four you will probably not have any income unless you do some work-study or TA deal (small potatoes) and the next 3+ you will make at or below minimum wage. Nice job maxing out the Roth before; this will serve you well. The 15k will probably cover your first semester of tuition and living expenses. You do need to minimize your liabilities and hobbies.

As a serious side note, if you know certainly that you want to do primary care, I would seriously consider PA. Also consider CRNA. You need to be convinced that this is what you want to do because the grass may look greener somewhere else later on.

[ang]

Read The Total Money Makeover by Dave Ramsey. It will change your view of debt.

http://www.daveramsey.com/store/prod326.html

[Jack Straw]

Something simple that has helped me, is keeping only pocket money in my checking account. Too easy to spend an extra $50 here and there if you have a stockpile a card's swipe away.

Budget not only for basic expenses, but give yourself one nice purchase of $x per month/week/whatever, and the rest should go to savings. You don't want to feel too austere. That way you don't feel guilty about treating yourself, since it's all in the budget.

[Alacrity59]

• Discipline
• Avoid the buy now pay later deals unless you have the money sitting in the bank earning interest.
• Use your credit card(s), keep your money in the bank earning interest and pay them off in full just before due. This establishes your credit worthiness and will enable you to negotiate better rates on your mortgage when you need one.
• Don't accept whatever the bank tells you when you negotiate a mortgage or interest rate on a line of credit. You always get something by asking. (use a mortgage broker! Bi-weekly payments will cut years off a mortgage)
• Buy the least expensive car your ego can live with
• Buy quality not name
• Learn the difference between what you want and what you need.

[datzc]

The universal method of saving is have some taken out of your paycheck before you see it or have a chance to spend it. This only works if you are getting a paycheck, of course, but just about every financial guru (and I've followed a lot of them) recommends having your employer deduct for 401k or flexible spending account or whatever is offered. If none, then instruct your bank to automatically transfer a set amount from checking to saving each payday. Even if you don't have a lot, whether $10 or $50 or $100 or more is a good habit.

The world of student educational debt has changed in recent years. Tuition has outpaced inflation. Interest rates on loans can be over 6% for government and even higher if private. Most professional students (medical, dental, veterinary, law) borrow a lot to get through school thinking it will be easy to pay back once you join the workforce and earn a high income. Unfortunately, this is no longer guaranteed. Recent law graduates aren't finding jobs and the few they find aren't paying well. Doctors are in trouble - especially those in private practice that are reimbursed ridiculously low fees for insurance, Medicaid, and Medicare patients. Malpractice insurance is sky-high.

The wisdom from us old guys is go ahead and borrow for your education (as your ability to produce an income is your most valuable asset) but don't take out the maximum loans, try to work a little part-time (research assistant, guy that stays late and turns out the lights in the anatomy lab, etc.), eat beans and rice instead of steak and sushi, don't take vacations or travel just because you "deserve" it by studying hard, don't keep up with the Joneses (if everyone goes out for pizza and beer, apologize and say you have to stay in and study), and get a bike instead of a car.

Feel free to post more details if you want on your expected per-year loans and we might be able to help you see your future monthly payments.

[arm017]

Thanks for the great replies. It has definitely starting to jog my mind.

[devorenm]

I'm in the soon to be in med school boat myself and It seems to me that you shouldn't really be saving any money right besides a couple grand in an emergency fund - you need everything else to be liquid. You are going to be borrowing money for med school at a much higher interest rate than you would be earning in any type of investment account, CD, savings account, etc. The difference between 150k in debt and 130k in debt doesn't look to be all that much but over time (especially if you are going to defer it through residency as well) it adds up.

[devorenm]

• Discipline
• Avoid the buy now pay later deals unless you have the money sitting in the bank earning interest.
• Use your credit card(s), keep your money in the bank earning interest and pay them off in full just before due. This establishes your credit worthiness and will enable you to negotiate better rates on your mortgage when you need one.
• Don't accept whatever the bank tells you when you negotiate a mortgage or interest rate on a line of credit. You always get something by asking. (use a mortgage broker! Bi-weekly payments will cut years off a mortgage)
• Buy the least expensive car your ego can live with
• Buy quality not name
• Learn the difference between what you want and what you need.

The Credit Card thing may be true in Canada but in the United States you actually need to carry a balance in order to establish a credit history.

[jwcarlson]

Well... "saving" would imply you intend to grow your savings account... but it sounds like you are wanting to know how to spend less. Nit picking maybe but that's a big difference.

If you're interested in a Dave Ramsey book PM me, I think I have two copies of Total Money Makeover. I'm not a devout follower and the ideas he lays out are very very simple, but sometimes it helps to have someone give it to ya straight. :)

The bottom line is that saving up money takes discipline and you and everyone in your family needs to be dedicated to it. If you want to save but your wife could care less, you're already in a sinking ship. It's a lifestyle change.

My wife and I have been married for 2.5 years. When we got married we had $110,000 in student loan debt. Today we have about $50,000 and haven't paid any extra for about 6-7 months. However, we just saved up $20,000 for some medical treatment our insurance doesn't cover.

Between the two of us we make a pretty good amount of money, about $100,000/year. You can do the math... after taxes and everything and about $900/month in rent - we don't waste much money. We don't live like we're homeless though. We have an awesome TV, we travel to see our families frequently (driving), we eat out on occasion, we have smartphones, and we occasionally buy some "extras".

If you can find a high interest checking account that can be very nice. We get 4% interest so if you're carrying a $20,000 balance like we were for awhile it amounts to somewhere around $60/month in interest. You've gotta know where you can cut expenses and not feel the "hurt" so much. We cancelled cable and extras which was $150/month down to just internet ($65) and NetFlix ($8).

[Jim]

The Credit Card thing may be true in Canada but in the United States you actually need to carry a balance in order to establish a credit history.

I would have to disagree with that- to establish a credit history you have to use credit and and pay in a timely manner. How a credit score is established is very complex. If you had a credit line and never used it that would keep your score very low.

[Bertilak]

The Credit Card thing may be true in Canada but in the United States you actually need to carry a balance in order to establish a credit history.

I would have to disagree with that- to establish a credit history you have to use credit and and pay in a timely manner. How a credit score is established is very complex. If you had a credit line and never used it that would keep your score very low.

Yes, you have to show a balance. This is determined by what the CC company reports to the bureaus, which is the amount of the bill. If the amount is zero nothing gets reported. This does not help you establish a credit history. If you wait for the bill before paying, the most common situation, your records will show a balance and therefore help you establish a credit history. Better yet is to pay it down to zero each billing period to avoid any finance charges which can be over 20% APR!

How do I know this? Read on ...

I ran into some trouble in this very area. I switched to a card with a great cash-back feature. The new card had a fairly low credit limit. Since I used it so much it often went above 50% of the limit and the credit bureau dinged me for too high a credit balance, even though it was paid completely every cycle. To resolve this, I decided to pay the card down weekly so it never showed a balance. One month my last payment didn't make it in until AFTER the bill was sent. To the credit bureau this looked like an inactive line of credit suddenly becoming active. A warning sign so another ding. Of course I didn't understand that since I had NO inactive line of credit that I suddenly started using. A chat with the credit card people told me all of the above. So I asked for an increase in the credit limit (to help stay under 50%) and also made sure the last payment of each period was sent in AFTER the billing period closed (so the bureaus would see an active line of credit).

[jazzman]

I would have to disagree with that- to establish a credit history you have to use credit and and pay in a timely manner. How a credit score is established is very complex. If you had a credit line and never used it that would keep your score very low.

Good advice. Giving money to a bank in the form of credit card interest is by far the worst waste of resources imaginable.

I know many doctors who were in medical school when I was in law school. My best advice to the OP would be to repeat what others have said here: have money taken out of your paycheck and put it into safe, tax-deferred investments. You probably won't be able to do much of that that before you finish your residency, but when you can, pick a dollar amount that you can live without, add a little to that number, and make sure it never gets into your checking account. You won't miss it because you won't really see it.

When you start saving in this way, look into investment vehicles that mix equities and safer investments with an eye towards your hoped-for retirement date. The fund will automatically change the mix from riskier to more secure investments over the decades. Anyone who started with that approach 30 years ago would have a nice chunk of change today (but, of course, there are no guarantees for the future).

You'll probably need other savings vehicles to cover needs you might not be thinking about at this stage of your life--buying a home, providing for your children's educations, paying for much-needed vacations, and collecting expensive shaving creams, stereo equipment, Scotch, and cigars. Therefore, you cannot afford to donate money to banks in the form of credit card interest. Good luck!