Other than Retirement
Wes Flores
Scenario # 2 : Buying a Big Ticket Item
If you ’ ve always wanted a condo on Rivera Maya or a yacht , with the financial rewards of being a successful physician , you should be able to make that a reality without being financially irresponsible .
Start with a Plan
Regardless of what you are saving or investing for , start with a plan . Even if the time horizon for achieving the goal is short , plan on investing rather than parking the money in a savings account which won ’ t provide any growth .
Plan on putting at least 20 percent down on any purchase .
Financing Your Fun – A Second Look at Home Equity Loans
After the housing crash and ensuing financial crisis , home equity loans got a bad rap . Indeed , many people found themselves in deep financial trouble after using their house as an ATM . But generally , medical professionals are high earners in high-demand , stable occupations .
If you have significant equity in your home , using it to finance a second home or other big ticket expense is often the most practical , cost-effective way to buy . In fact , it may even be a better option than cash if you ’ re purchasing an appreciating asset such as property . Here ’ s why :
Home equity loans carry better interest rates than a new loan from a financial institution .
The interest expense on home equity loans is tax deductible . If adding a monthly payment to your budget isn ’ t a big deal , using the bank ’ s money at 5 percent interest is likely preferable to using all your own cash , which could be earning 8 percent interest in an investment account .
Of course , you should never get fully leveraged on your home , but if you have $ 600,000 equity in a $ 1 million home , taking out $ 250,000 to buy a dream may be reasonable .
Scenario # 3 : Setting Your Kids Up for Success with a College Savings Plan
Physicians value education , and there are few things more important than your children ’ s education . Regardless of your specialty or how many children you have , the fact of the matter is that your kids will not receive any type of need-based financial aid no matter how expensive the college is .
Financing Higher Education Easy as 5 , 2 , 9
Over the decades , various states have offered various savings plans to entice parents to start a college savings plan . The 529 College Savings Plan is one of the best vehicles for saving for the rising cost of a college education . Most states offer their own 529 vehicles handled through an outside investment firm , but administered through the state treasurer ’ s office .
There are a number of benefits to the 529 :
While 529 contributions are not federally tax deductible , most states allow part or full deduction on state income taxes .
529 plans grow tax free and can be withdrawn and used for qualified education expenses tax free .
In some states , 529 plans are creditor protected .
Typically , you can start a 529 through the state website or a financial advisor . Generally , states allow anyone – resident or not – to invest in their 529 plan , so don ’ t feel obligated to purchase your state ’ s 529 plan . Shop around . However , some states will tax earnings on an out-of-state 529 plan and may not allow the tax deduction on the contributions to an out-of-state plan .
TODAY ’ S PRACTICE : CHANGING THE BUSINESS OF MEDICINE 50