Finance for Physicians

What is a health savings account (HSA), and why are so few people utilizing it? The HSA is one of the best tax shelters that exists to build wealth.   

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks about how the HSA works, how to decide if it is a good fit for you, and ways to manage an HSA to maximize its efficiency.   

Topics Discussed: 

Two Groups of People: 

Those who don’t use HSA at all

Those who do, but don’t maximize its efficiency

What is the HSA? Access to an account via a qualified health insurance plan

What is a qualified health insurance plan? Separate part of plan to use HSA 

Why is the HSA a great way to build wealth?

Rollover balance

Invest those dollars 

Offers tax benefits

Decision-making Factors: 

Low utilization of healthcare insurance

Higher expected upcoming healthcare costs

Out-of-pocket costs

Matching HSA funds 

Incorporate tax benefits

Open Enrollment: Run the numbers before you choose an option

Links:

HSA Comparison Template 

HSA Tax Benefits 

Why You Should Pass On Using Your HSA For Current Health Care Costs 

HSA vs. IRA vs. 401k  

Finance For Physicians

What make, model, and year is the car you drive? Thinking about buying a new one? Why? Consider all factors to make the right, not wrong buying decision.    

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks about why he drives an 18-year-old Toyota Avalon. The 2003 vehicle has heated leather seats and a 6-disc CD changer—it’s still in good condition and comfortable to drive.  

Topics Discussed:

Car Buying: How to make a good, solid, level-headed decision

Practical Perspective: Base decision on purpose, need, safety, reliability

Mechanical Issues: Tend to trigger alternative options for an upgrade

Identity and Psychology: What drives car-buying marketing decisions?

Timeout: Do your priorities align with buying a new car?

Key Purposes:

Get from Point A to Point B

Comfort level

Makes you look better

Economic and environment friendly

Consider alternatives

Links:

Edmunds: Cost of Car Ownership Tool (5-Year Cost Calculator)

Why Drive Old Cars?

Finance For Physicians

Sometimes, it takes an unexpected wake-up call to remind you to take care of yourself, family, and finances. You never know when it could be your last day, and tomorrow is not guaranteed.  

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks about a recent personal medical experience and what went through his mind at the time. You don’t know what the future holds. Make sure that your financial planning is in place before it’s too late. 

Topics Discussed:

Optic Disc Edema: Minor eye issue, nothing serious turns into something major

No Joke: Physicians change their tone, confirm serious situation, and trip to ER

Thought #1: Is my family going to be okay financially if I am not around?

Thought #2: Have I been a good steward of my money?

Thought #3: Have I led a meaningful life and taught my values?

Thought #4: Is the business going to be okay if I am not around?

Consider the following: Am I covered financially and independent?

Legal Logistics: How everything gets sorted out and settled

Financial Organizer: Save time and effort with access and passwords

God is first, others second, I am third - culture pushes it the other direction

Links:

Optic Disc Edema

LastPass

I Am 3rd Organization

Buy/Sell Agreement

Finance For Physicians

When you run across something weird or strange, how do you avoid major mistakes and minimize errors? Get a second opinion, especially when it comes to the good, the bad, and the ugly of financial planning for physicians.    

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks to Justin Harvey, a Certified Financial Planner (CFP®), about stories and experiences with physician families. Sometimes, the best and juiciest ones are difficult to change substantive facts enough to preserve client confidentiality. 

Topics Discussed:

Good: Immense value from financial advisors who understand physician finances

Bad: Save documents and keep records on servicer when third-part is paying

Ugly: Ultra high-risk investment activities—bordering on gambling

Understand the Deal: Perform due diligence and review contracts for red flags

Compensation: What money are you leaving on table based on how you’re paid?

Accurate Alignment: Involve spouse for honest answers about financial security

Life Lessons: Follow money, understand incentive/stakes, deal w/ consequences

Moral of the Story: Sometimes, it’s worthwhile to pay a fair fee for a CPA

Links:

Justin Harvey’s Email

Anesthesia Success

Anesthesia and Pain Management Success Podcast

Public Service Loan Forgiveness (PSLF)

501(c)(3) Requirements

Robinhood

TurboTax

Finance For Physicians

Do you have enough money in the bank for your rainy day fund? What amount is too low or too much just in case you need it?    

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks about setting the cash target. Ideally, you’re not over or under. By knowing what you need to get to, you’re empowered to make better decisions to reduce stress and risks, and increase return on your dollar. 

Topics Discussed:

Before Building Emergency Reserves:

Have at least one month of expenses in checking account

Pay off prior credit card debt and loan balances

Start Building Up Reserves:

Set the target by saving three to six months of income/expenses

Personalize range based on your situation (1 to 12 months)

Risk Factors and Reasons for Reserves:

What do you own that has upkeep costs? Houses, cars, and boats

How large is your household? Single, married, and children

What is your insurance deductible? Change if necessary

How much does your household earn and how secure are earnings?

What percentage of income is being spent versus saved?

How diversified are your income sources?

Ideal Target: Establish emergency reserves and put in a bank savings account

Common Mistakes:

Commingling rainy day savings with other savings accounts

View as insurance policy, not as a return or way to maximize investment

Don’t use credit card or HELOC debt as alternative to emergency reserves

Revisit and adjust ideal target; don’t set it and forget it

Get some kind of return on your reserves, just don’t get greedy

Use actual, not estimated expenses to calculate your rainy day reserves

Links:

How Much Should I Have in My Emergency Savings Account?

Finance For Physicians

Everyone has suffered from lifestyle creep to some extent. Somewhere along the way, you go from eating ramen noodles to the finer things in life. You become used to spending your entire salary.   

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks to Jeff Wenger, a Certified Financial Planner (CFP®), about how to avoid lifestyle creep. What is it? How does it happen? How do you prevent it?

Topics Discussed:

 Tricky Transitions: Going from little income to being paid the big bucks

Keep up with the Joneses: When you make more money, you tend to splurge

Lifestyle Creep: Taking on obligations and a million tiny spending decisions

Hedonic Adaptation: Making progress and adding little pleasures leads to pain

‘Drug’ of Choice: Easier to add comfortable things, than to take them away

Why is lifestyle creep so dangerous? Lack of awareness creates conflict

Symptoms: What you want, not what you need; how disposable income is spent

Risk Factors: Are you a spender? Listen to others and seek expert guidance

‘B’ Word: Be intentional and aware of budget by checking your cash balances

Team Effort: Resist temptation, finger pointing; be accountable about spending

Lifestyle Creep Challenges:

Acknowledge underlying financial issues

Be intentional before spending

Identify highest priorities to align finances

Alternatives: Time, dedication, and intentionality to find free options

Links:

Monitor Spending in 10 Minutes Per Month

Jeff Wenger on LinkedIn

Cash Flow Tracking Excel Templates

What Is Financial Therapy

Wrenne Financial Planning

Finance For Physicians

Have you been paying attention to the financial news? Most of it is covering all the craziness around stocks. GameStop, AMC, and others went way up only to go way back down. These days, everyone has a Robinhood account and is trading stocks on margin. Plus, the COVID pandemic has added all sorts of volatility to the stock market.   

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks to David Blanchett about investing during the craziness of a wild market. David is the Head of Retirement Research for Morningstar’s Investment Management Group and an Adjunct Professor of Wealth Management at The American College.   

Topics Discussed:

COVID: How the pandemic and being isolated at home has affected investing

Day Trading: For better or worse, people want to invest in, buy individual stocks

Today’s Market: Everyone wants to buy and trade to make money, not possible

False Confidence: How long until the bubble bursts because it will, eventually

Winners and Losers: Problem with day traders is they report one, not the other

Can you beat the stock market? First, learn from mistakes made from investing

Smarter than...? Good investing is boring, advisors don’t and can’t time market

Utility Grievance: How much do you like something and quantify preferences?

Weigh Outcomes: Downside of doing it yourself is much worse than upside

Short Selling: Put on your blinders and don’t follow what everybody else does

Links:

David Blanchett’s Website

David Blanchett on LinkedIn

Morningstar’s Investment Management Group

The American College

GameStop

AMC

Tesla

Robinhood

Charles Schwab

Etrade

Warren Buffett

S&P 500

Finance For Physicians

Now that interest rates are as low as they’ve ever been, mortgage refinancing is extremely popular.  But it’s also a confusing process.  Do you know how to figure out when refinancing makes sense?  What are the right rules to follow when refinancing your mortgage? 

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks about how physicians can capitalize on record-low mortgage rates. Compare and analyze all mortgage options that incorporate closing costs and other complexities. The decision to refinance is not so clear-cut and straightforward.   

Topics Discussed:

Why refinance? New loan costs + closing costs > existing loan costs

What? Find and set up a new mortgage to pay off old, existing mortgage

How? Depends on the specifics of the deal

What drives mortgage interest rates? Market or economic factors:

10-year treasury rate

Supply and demand

Credit score

Percentage of home equity

Debt-to-income ratios

Loan payoff term

Loan size

What is the true cost of the loan? Add closing costs, interest and sometimes PMI

Break-Even Point: When interest rate savings equal closing costs

Long-term Costs: What’s the cross-benefit of keeping and paying fees?

Amortization Schedule: Run numbers using calculator for current/potential loan

Other Considerations: Compare rates, different lenders, and loan estimates

Links:

Historical 30-Year Mortgage Rates

Mortgage Amortization Calculator

Credit checks shouldn’t hurt you (within 45 days)

Loan Estimate Explainer

How Physician Loans Work

Finance For Physicians

Interest rates are super low right now, so learn how to navigate student loans to take full advantage of unique benefits from the federal government. 

In this episode of the Finance for Physicians Podcast, Daniel Wrenne talks about what you can do—given the low-interest rates—in relation to your student loan debt.  

Topics Discussed:

Federal and Private: Student loan types

10-Year Treasury Yield: What drives federal student loan interest rates

Refinance? Not an option with federal student loans

Private Student Loan Rates: Based on financial requirements; no closing costs

Prime and LIBOR: Interest rate indexes are trending down

Considerations: Refinance from federal to private student loans?

One-time Option: You can’t go back—once you’re out, you’re out

Interest Subsidies:

Unpaid: Federal student loans don’t charge interest on existing interest balance

RePAYE: At least half of monthly accrued interest that is unpaid, is forgiven by the government

20- or 25-Year Forgiveness: Income-based or income-driven repayment plans where the remaining balance is forgiven at end of the time period

COVID Forbearance: 0% interest and zero-required payments on all loans owned by the federal government

Refinance Waterfall: As you pay off the private student loan, consider a new refinance; shorter the term, better the interest rates

Links:

Historical 10-Year Treasury Yield

Current Federal Student Loan Rates

WCI Student Loan Refinancing

Historical Prime Rate

Common Bond Student Loan Refinance Rates

Public Service Loan Forgiveness (PSLF)

Avoid Leaving Money On The Table With Federal Student Loans

Finance For Physicians

Should you aggressively pay off your federal student loans, or consider Public Service Loan Forgiveness (PSLF)?  

In this episode of the Finance For Physicians Podcast, Daniel Wrenne talks about different financial scenarios, opportunities, and strategies to avoid leaving money on the table when it comes to federal student loans.  

Topics Discussed:

Aggressive Payoff: Low payment in-training (under IBR or PAYE) + high payment in-practice = no PSLF value

IBR/PAYE payment cap can lock in PSLF value even for physicians with ultra high in-practice income or with very low debt balances

Verify current and future employer’s PSLF qualification status

Normal PAYE Payments + PSLF: 120 PAYE payments under the payment ceiling = PSLF Value

PSLF value originates from making qualified payments below the payment ceiling (less is more)

Income driven repayment always lags actual return because it’s based on your most recent tax return AGI

Payments Cap In-Practice + PSLF: PSLF value exists even when you hit the payment cap in-practice

COVID Forbearance counts toward PSLF and adds huge value

Strategies to reduce AGI and increase PSLF value

RePAYE + Exceeding PAYE/IBR Payment Cap: Beware no payment cap

In some cases, you can switch from RePAYE to IBR or PAYE (income must be under a certain threshold)

FFEL and Perkins Loans do NOT qualify for PSLF (however, there are steps to work around this)

Very payments by submitting employment certification (and always double check the math)

Links:

Public Service Loan Forgiveness (PSLF)

Federal Student Aid: Income-Driven Repayment Plans

IRS - Tax Exempt Organization Search

Finance For Physicians

Wrenne Financial Planning