Category: Resident financial

Posted on by

What To Do With A Large Windfall During Residency

windfall

You may think it is just a pipe dream, getting an unforeseen large windfall. (and I’ve spoken about small windfalls before). Nevertheless, throughout my years of stewardship in the residency program, I have encountered a few residents who have had a significant life-changing amount of money fall into their hands. Some with cryptocurrency, others with family inheritance, and others with a stock pick that rose much more than expected. So, what is the best way to deal with a substantial windfall like this? OK. It might not happen to you. But it still occurs more often than you might think. And, if it doesn’t happen to you, it is still fun to mull over. So, let’s talk about some general advice about what to do with a windfall.

Give The Large Windfall A Little Bit Of Time To Sink In

In general, when you receive a windfall of a significant amount, your first thought is to do something immediately with the cash hoard. But your brain needs to catch up a bit with the reality of the situation. Typically, it would help if you waited a bit until the initial circumstances of the windfall had settled out. When it comes to money, emotion can interfere with the best and most rational choices that we need to make. So, give it some time. Waiting a bit won’t cause that much harm (just a little bit of a loss to inflation). But the opportunity cost of doing something rash with the money is much worse!

It’s Not All Or Nothing!

Just like you don’t want to put all your money on 00 on a roulette wheel (you will lose much more often than you will win!), don’t put all your money into one financial basket. Diversification is the name of the game. And you may want to consider not putting it all into one debt repayment or investment. Consider spreading out your newfound fortune on a host of different opportunities. It’s tough to predict the future. So, you are generally better off spreading your money into multiple options.

Consider Repayment Of Debt/Student Loans

Although many of your student loans are at low interest (or 0 interest rate currently), you should consider putting a large chunk of your fortune into your student loans. Why even at these interest rates? Well, there is always a risk that you may not be able to complete a residency, or an unforeseen event can happen that can prevent you from paying them back when the interest returns to normal. And student loans are generally not dischargeable in bankruptcy. So, taking these risks off the table is enormous. Furthermore, the peace of mind of knowing that your student loans are significantly smaller or even gone is priceless.

Savings/Investments

In addition to student loans, also consider putting some money away for a rainy day. Some good options you might want to consider as a low-paid resident will be an emergency fund for savings, a Roth IRA, or a hospital 401k if there is a match. And try not to buy individual stocks or bonds. That situation can lead you to a very undiversified state that can lose all your hard-earned money.

Other Depreciating Assets

Finally, if you still have some money left over, there is nothing wrong with a bit of enjoyment in your life. Just beware of taking too much to buy things like cars, boats, planes, or whatever else floats your boat. You may regret it later on. I recommend using no more than 10 percent for personal enjoyment related to these items. Otherwise, there is a good chance that you will regret any rash decisions you make for your future self!

Let A Large Windfall Be A Blessing!

Whatever the reason for the windfall, it is your opportunity to make it into a blessing instead of a curse. It’s an opportunity to make your life better and your future self happier. So, give it some time to sink in; don’t spend it all on one thing; consider repayment of debt/student loans, and enjoy a bit of it. Following these rules will make that obscene sum of money into something more than just a number. Grandma would be proud!

 

 

Posted on by

Be Careful Of Some Of Dave Ramsey’s Financial Advice. It May Not Apply To Radiologists!

financial advice

Over the past six months or so, I started to listen to Dave Ramsey. He is a no-nonsense straight shooter who gives excellent financial advice to folks who call into his show. Moreover, he has an infectious laugh and is very witty. If the topic of finance interests you, once you start listening, it will become addicting! Nevertheless, we as radiologists must be careful when we take some of his advice at face value. Some of his advice does not apply well to late-blooming indebted radiologists who make a very high income. So, what parts of his advice should we think twice about? Here are several recommendations that probably will not apply to you.

Save Only 15 Percent Of Your Income

As radiologists, we are late bloomers. We enter the workforce much later than non-physicians. And we start working a bit after our general medicine colleagues. Therefore, the time value of money does not work in our favor. This rule makes a lot of sense for most people who start working somewhere in their twenties and continue working through retirement. But, for us, we cannot capture the benefits of compounding interest. Therefore, we need to save far more than 15 percent. Fortunately, most of us can do so, given that our salaries are far from the average worker in the United States.

Buy No More House Than 25 Percent Of Take Home Pay With A Fifteen-Year Fixed Mortgage

On this point, we partially disagree. Dave Ramsey is not steadfast with this rule but recommends this protocol to his callers. Spending less on the house allows us the freedom to save for other events like college for kids or retirement savings. Nevertheless, many of us have rapidly rising incomes right after residency. And just because you are making a particular salary directly after you finish does not mean you will stay at that number much longer. Many of you will become partners and shareholders in practices and may have buy-ins that will temporarily decrease your salary. And, you may live in an expensive part of the country. With the expectations for increasing wages, you should be able to buy a bit more house based on a than 25 percent based on a reasonable expectation of making more money in the future. So, consider your future earnings when you buy a house so you don’t have to move twice!

Use Managed Stock Mutual Funds With A Great Track Record Instead Of Low-Cost Index Funds

Generally, most index funds beat managed funds over the long term as an investment vehicle. Dave Ramsey tends to say that his managed funds tend to outperform. But, for most, the outperformance is usually limited in scope and doesn’t last for long-term managed mutual fund holds. Furthermore, the fees in an actively managed fund tend to be a bit higher. So, consider opting for the lower-cost index mutual fund if possible!

Dave Ramsey Financial Advice Doesn’t Talk About Real Estate Syndications As An Option

Since we are high-income professionals, many of us don’t have the time or inclination to buy and take care of houses for investment. Additionally, buying stocks in taxable accounts can cause radiologists to pay significant capital gains and dividend taxes (as high as 33 percent or more if you include both federal and state taxes!). One excellent option he does not discuss is using private syndications and real estate funds as an investment tool for increasing wealth and cash flows and decreasing the tax burdens you might face with other types of investments. These investments can be low maintenance and strategies for building wealth for the high-income professional!

Dave Ramsey And Financial Advice

Dave Ramsey does a great job of spreading great information to the average financial media consumer. But no one is perfect, and personal finance is personal. Therefore, one talking head that generally gives excellent personal finance advice may not apply to your particular situation as a radiologist. So, although this show is entertaining and often relevant, do your due diligence when considering your options!

 

 

 

 

Posted on by

Should You Pull The Trigger In This Housing Market?

housing market

Lately, I have been speaking to some younger radiologists about what to do in this housing market. Interest rates are climbing. With that, housing prices continue to rise, making homeownership even more expensive. Moreover, many folks want to start a family in a “big-enough” house to meet their needs. But, monthly payments are climbing higher and higher to pay off a 15 or 30-year mortgage. Is it worthwhile to wait, or should you jump right into the housing market? Let’s discuss some of the benefits and disadvantages of delaying vs. waiting so you can make the right decision for yourself.

Reasons Why Buying A Home May Not Make Sense In This Housing Market

You Are Not A Partner Or Tenured Attending Yet

This rule works. You never know for sure what will happen before you can claim the status of a shareholder or partner. I know countless stories of folks buying their houses only to discover that they did not receive their vaunted position. Some, then, feel the need to leave. And, with that, you will probably have to sell your house. Rarely, when this happens, do you make money on the transaction because of all the fees and taxes that you will pay with little or no equity. Even worse, if the market turns bad for sellers, you may not be able to sell your house. So, regardless of the interest or economy, it is usually not in your best interest before you know you will stay in the area.

Higher Payments And Not Enough Down Payment For This Housing Market

Getting a mortgage below three percent in the current mortgage market will no longer happen. So, you can expect your payments to be a lot higher than they would have been just a few months ago. This situation is especially true when you have not built up enough downpayment. So, if you don’t have the cash to make the new payments based on higher mortgage interest, don’t purchase the property. You will become “house poor.” And you will not be able to build wealth so quickly outside of your house.

You May Need To Move Again

Maybe you are thinking about changing jobs. Or, you are thinking about buying a house for your current family, but you are about to give birth to a set of twins. If you have a good chance that you will have to move soon after purchasing your house, it is better to delay the purchase until you know what you will need. Transaction costs and taxes for buying and selling real estate are prohibitively expensive. Moreover, these costs don’t even include the hassle of moving and purchasing a place twice. So, if you need to move soon, you are better off waiting until you know what you want!

Renting Can Be Cheaper Than Owning In This Housing Market

In some situations, renting can be a better and less expensive option than owning a place. In high cost of living areas, especially, buying a home can be unaffordable. Mortgage payments can dwarf what you would pay for a monthly rental. But, you need to do the math to see if it works out this way.

Reasons Why Buying A House Now May Not Be So Bad In This Housing Market

Just Because Interest Rates Are Rising Doesn’t Mean Housing Prices Will Fall

Sure, rising interest rates can affect the demand for housing. However, historically speaking, many periods of rising interest rates have not included a time of declining prices. And that is because housing prices are subject to many other factors such as availability, demand, employment in the neighborhood, and more. So, if you buy a house now, it does not necessarily mean you will lose your shirt even though you are paying more for the house and the mortgage interest.

Yes, Interest Rates May Go Down After Going Up- You Can Refinance!

Just because interest rates are high now does not mean that they will remain the same forever. Remember, buying a house is a long-term purchase, and you will likely own it through higher and lower interest rate environments. So, you may have the opportunity to decrease the interest you pay later. The longer you hold on to your house, the more likely that this situation will happen to you.

You Need A Place To Live- So Why Not Build Equity?

Perhaps, you have a family and need a decent-sized place to live now. Sure, you could find a rental now. However, if you have a stable situation, it may pay to build equity in a house. Of course, that assumes that you have saved up for an emergency fund, home down payment, and paid off a significant chunk of your loans. But why not build roots and own something if it makes sense?

You Are In A Stable Situation

Maybe you have become a partner or have loads of family around, and you know that you will be around for a very long time. The longer you stay in one place, the more likely you will ride out any downturns in the housing market. And the more likely that you will come out ahead when you finally decide to move.

Should You Pull The Trigger In This Housing Market?

Waiting to buy a house or purchasing a home is a personal decision based on many factors, some of which I have listed above. So, consider the amount you have saved, your job situation, your family, and the deal you will get when making this decision. Currently, buying a house is not a simple decision as interest rates and prices are relatively higher, but it can make sense!

Posted on by

Inflation And Residency- Not A Winning Combination!

inflation

Many of you have probably noticed the headlines about high inflation rates. Over the past year, inflation has risen by over 7 percent. It may only seem like a number that the talking heads on TV and youtube espouse. And, maybe, you have noticed some increased dollar costs at the end of the trip at the supermarket. Or, perhaps take-out from the restaurants that you like the most are a bit more expensive. Then, of course, your gas tank is a lot more costly to fill. 

Taken individually, it may not seem like much. But it is probably more than you think when you add it all up. So, let’s discuss why folks with fixed, regular incomes like you tend to get battered the most. And then let’s talk about how you can potentially prevent the year from eating up your entire salary.

Why Inflation Significantly Impacts Residents

Annual Incomes Are Already Set For The Year

Often, hospitals create residency salaries before calculating the following year’s cost of living. Therefore, you may notice that your income does not meet the increase in the cost of living for this year. This relative decrease in salary can undoubtedly give you far less room to squeak by.

Most Residents Are Not Asset Owners

People who own assets such as houses don’t have to worry about rent increases because their mortgages don’t change. But unfortunately, most residents are not in that boat. Additionally, trainees do not have as many stocks, cryptocurrency, or other hard assets that rise with inflation. So, you are at a distinct disadvantage.

Increase In Prices Eat Into A Regular Salary Without Much Room For Discretionary Income

First of all, your salary is typical for the United States workforce. But, the ordinary person in the United States lives paycheck to paycheck. So, this increase in prices will take a significant bite out of your annual budget, especially when you have very little room for discretionary income, to begin with.

What To Do To Prevent More Pain!

Moonlighting

Not everyone has this opportunity available. But, if your residency has this option, you may want to think about participating. In-house moonlighting can help defray the additional costs of a high inflation rate, perhaps at the current inflation rate or even more. Plus, it will also allow you to sharpen your independent radiological skills. 

Sharing Apartments/House Hacks

Did you not want to share an apartment with colleagues when we had a more normal inflation rate of two percent? Well, maybe it may make more sense now. Overall, rentals will sharply increase in price this year for much of this year. And so, sharing the entire bill may make a lot of sense.

Or if you are fortunate to already own a property in the area. Maybe, you would want to rent part of it out this year to decrease your costs. This move can also significantly reduce the cost of inflation in your regular salary!

Strict Budgeting For Times Of Inflation

Lastly, if you are a prodigious spender, you may want to rethink this lifestyle, especially this year. Budgeting and tracking expenses closely can help decrease your annual costs and prevent the paycheck-to-paycheck lifestyle with high credit card debt. Use a spreadsheet or an application. Either way, this method may help to avoid overspending related to inflation!

Inflation And Residency

More than any other time in your career, inflation can eat away at a higher percentage of your annual income since your residency salary is relatively lower than what you will make eventually. Also, most residents don’t have the assets to decrease the influence of an inflationary world. Therefore, it can be tougher to make ends meet than a typical year.

Nevertheless, you can use some of these tools to prevent inflation from impacting too much. And hopefully, we will see some improvement in the following years and get back to a baseline lower inflation status!

 

 

 

 

Posted on by

New Tax Laws Cancelling The Backdoor Roth IRA- A Major Loss For Radiology Residents!

backdoor roth IRA

Debt, burnout, declining reimbursements are some of the issues new radiologists need to face. But, yes, the hits keep on coming. Now, new radiologists also have to contend with a potential loss of the Backdoor Roth IRA. Again your future has just become murkier.

Right now, in Congress, Senators and representatives are duking it out over taxes and how to raise money for a multi-trillion-dollar spending bill. One of the line items on the agenda is the cancellation of the Backdoor Roth IRA, as the public perceives it as a tool for the rich to save on taxes. So, what exactly is a Backdoor Roth IRA, and how will this affect you? And, most importantly, what you can do to help to stop it.

What Is A Backdoor Roth IRA?

Let’s first start with what a Roth IRA is. A Roth IRA, which many of you know, is a post-tax account that accumulates tax-free for the rest of your life. Most residents should put as much into this account right now while they have a low salary and are underneath the income limits. The Roth account allows any future earning on this money to grow tax-free in perpetuity, even when your income climbs as an attending.

A Backdoor Roth IRA is also a Roth IRA. But most radiologists cannot put money into a Roth IRA directly because there are income limitations (you need to make below 140,000 as a single filer and 208,000 as a married filer in 2021). 

However, there has been a loophole. Any high-income earner can first put money into a Traditional nondeductible IRA and immediately convert it to a Roth IRA. Now, you essentially have the same Roth IRA as any earner below the limits has. 

Why Is/Was It Such A Great Option For Radiologists?

I have been using this savings vehicle since we were allowed to start in 2010. It has allowed for outsized tax-free earnings on money that I have put in the account. Not having this account would have significantly negatively impacted my savings. It is truly one of the last tax breaks for high-earning professionals like radiologists.

Because of the power of compounding, the younger you are, the more beneficial the account is. So, any resident should be concerned about Congress eliminating this Backdoor Roth IRA because it impacts you more than someone like me who has already been depositing into this account for years.

Moreover, you never had to pay another dime of taxes on the money you put inside the account. Granted, at present, it is only 6000 dollars per individual or 12,000 dollars for a couple. But, that number rapidly increases over time with the tax-free earnings and rising yearly contributions pegged to inflation. Over the long run, it was an excellent tool for avoiding tax drag on your accounts.

Finally, some radiologists may be in a high tax bracket when they retire because they may have most of their savings in 401k type accounts. It allowed for some money not to be taxed and hedged your bet about future taxes and earnings on your withdrawals.

What Can You Do Prevent Congress From Cancelling The Backdoor Roth IRA?

Every radiology resident should be writing to their congressman and asking them to refrain from canceling the bill. You have so much debt. You don’t start earning real money until late in life. And, you have been taking on the burden of Covid. I see this as a stab in the back for all future high-earning physicians. Of course, radiology residents are not a large bloc of citizens. But, every person counts. So, consider writing to your congressman to add to the lobbying in your congressional districts!

Posted on by

How Much Headstart To Retirement Do Radiology Residents Without Student Loans Get?

headstart

Due to my fascination with this topic and the bewildering debt of new residents, I wondered how much headstart you would get to accumulate five million dollars if you had no student loans vs. substantial student loans. So, I have decided to use the following numbers for student loan debt- 0 dollars (paid for by a rich Mom and Dad) or 500,000 (private schools, no help, or excessive spending). 

This time around, we will make the following assumptions: Either you will live in a relatively low-cost-of-living area and have a decent attending lifestyle or live in a relatively high-cost-of-living location with a proper attending lifestyle. I chose these assumptions because they are within reason for many residents. Of course, you can live with more or fewer expenses, but this will have a significant impact on the outcomes.

Also, we will have you save for college for two kids (twins), starting as an attending on day one. We are using the magical five million dollar amount because it is the amount that studies like Medscape’s annual net worth survey use for a reasonable retirement amount. We will calculate everything for inflation using that 3 percent inflation rate. Again, based on the survey, this will be a one-income family with an average radiologist salary of 413,000 dollars. Go directly to the end of the blog to check out the final numbers and conclusion!

Low Cost Of Living Area With Student Loans Of Five Hundred Thousand Dollars

Low cost of living areas with significant student debt

Additional numbers for this assumption:

  1. The house will cost 500,000 with a down payment of 100,000, saved over your first five years of working. (20,000 dollars saved per year)
  2. You will pay off student debt over ten years at an interest rate of 4 percent (5062 dollars per month*12 months)= 60744 per year.
  3. Practice puts away 30,000 dollars, including a match, into your 401k starting 1st year.
  4. Investment rate of return 8%
  5. Federal Income Taxes after deduction will be 76182 dollars per year based on an internet calculator.
  6. State Income Taxes are 0 dollars.
  7. You have twins beginning at the of your attending work and are putting away 556 dollars per month per kid to get to 250,000 dollars at age 18. (13,344 dollars per year)
  8. Rental of a three-bedroom house for five years at 2500 dollars per month

First five years

Total Salary 413000

Expenses

401k: 30,000 (383000 left)

Taxes: 76182 (Federal) + 0 (State) (306818 left)

Loan payments and house savings and children 529 plan: 60744 (student loans) + 20,000 (house down payment) + 13,344 (529 plan) (212730 left)

Rental/heating/electricity  30000  (182730 left)

Subtracting food for family 10000 (172730 left)

Transportation expenses for two cars/insurance 10000 (162370 left)

Vacations 10,000 dollars (152370 left)

Computers/Cellphones/Electronics/Cable Bill 3600  (148770 left)

Preschool/Day Care Expenses for two kids 24,000 (124770 left)

Clothes 5ooo dollars (119770 left)

Life and Disability Insurance  9600 (110170 left)

Dues and License and CME 5000 (105170 left)

Miscellaneous Entertainment  10,000 (95170 left)

Saved

Remaining available to save around 95170 per year (not including 401k)

30,000 dollars in 401k

Assuming an 8% rate of return on 125170 over five years- 734334 dollars in savings

Following five years (Own house)

Expenses

401k: 30,000 (383000 left)

Taxes: 76182 (Federal) + 0 (State) (306818 left)

Loan payments and house savings and children 529 plan: 60744 (student loans)  + 13,344 (529 plan) (232730 left)

Salary after mortgage payments and taxes (400,000 mortgage -30 year fixed at 3.5 percent 1796*12 (211178 left)

Salary after property taxes and insurance 12000 (199178 left)

Home maintenance= 5000 (194178 left)

Subtracting food for family 10000 (184178 left)

Transportation expenses two cars/insurance 10000 (174178 left)

Vacations 10,000 dollars (164178 left)

Computers/Cellphones/Electronics/Cable Bill 3600 (160578 left)

Education and Expenses for two kids 12,000 x2 (136578 left)

Clothes 5000 dollars  (131578 left)

Life and Disability Insurance 9600 dollars (121978 left)

Dues and License and CME 5000 dollars  (116978 left)

Miscellaneous Entertainment  10000 (106978 left)

Saved

Remaining available to save around 106978 per year (not including 401k)

30,000 dollars in 401k

Assuming an 8% rate of return on 136978  over five years +734334 in savings= 1882500 dollars

Following eight years (Student Loans Paid Off)

Savings After Expenses

Savings now 106978+60744 +30000 (401k)=197722 dollars per year

Assuming an 8% rate of return on 197722 over eight years +1882500 in savings= 5587000 dollars or 3428000 in today’s dollars

Next 5 Years (No More 529 plans)

Savings now 197722+13344= 211066 per year.

Assuming an 8% rate of return on 211066 over five years +5587000 in savings= 9447000 dollars or 4786000 in today’s dollars with 3 percent inflation

Following ten years (No More Kid Expenses)- if you were to go past 5,000,000 dollars

Saving now: 211066 +24000= 235066 dollars per year

Assuming an 8% rate of return on 235066 over ten years +9447000 in savings= 23802000 dollars or approximately 9.0 million in today’s dollars with 3 percent inflation

 

Changed Assumption: No Student Loans In Low Cost Of Living Area: How Much Headstart?

First five years:

Savings: 125170+60744 (headstart without loan)= 185914 per year

Assuming an 8% rate of return on 185914 over five years- 1090000 dollars in savings

Following five years (Own Home)

Savings: 136978+60744=197722

Assuming an 8% rate of return on 197722  over five years +1090000 in savings= 2762000 dollars

Next eight years

Savings= 197722

Assuming an 8% rate of return on 197722  over five years +1090000 in savings= 7215000 dollars or approximately 4.23 million in today’s dollars with 3 percent inflation

Next 5 Years (No More 529 plans)

Savings now 197722+13344= 211066 per year.

Assuming an 8% rate of return on 2110666  over five years +7215000 in savings= 11840000 dollars or approximately 5.99 million in today’s dollars with 3 percent inflation

Following ten years (No More Kid Expenses)- if you were to go past 5,000,000 dollars

Saving now: 211066 +24000= 235066 dollars per year

Assuming an 8% rate of return on 235066 over ten years +11840000 in savings= 28960000 dollars or approximately 11.9 million in today’s dollars with 3 percent inflation

 

High Cost Of Living Area With Student Debt Of Five Hundred Thousand Dollars

High cost of living areas with significant student debt (500,000)

Additional numbers for this assumption:

  1. The house will cost 1,000,000 with a down payment of 200,000, saved over your first five years of working. (40,000 dollars saved per year)
  2. Student debt will be paid off over ten years (4049 dollars per month* 12 months), or 48,588 per year.
  3. Practice puts away 30,000 dollars, including match, into your 401k starting 1st year.
  4. Investment rate of return 8%
  5. Federal Income Taxes after deduction will be 76182 dollars per year based on an internet calculator.
  6. State Income Taxes will be around 6 percent or (413,000*0.06)=24,780 dollars.
  7. You have twins beginning at the of your attending work and are putting away 556 dollars per month per kid to get to 250,000 dollars at age 18. (13,344 dollars per year)
  8. Rental of a three-bedroom house for five years at 4000 dollars per month

 

First five years

Total Salary 413000

Expenses

401k: 30,000 (383000 left)

Taxes: 76182 (Federal) + 20290 (State) (286528 left)

Loan payments and house savings and children 529 plan: 60744 (student loans) + 40,000 (house down payment) + 13,344 (529 plan) (172440 left)

Rental/heating/electricity  48,000  (124440 left)

Subtracting food for family 10000 (114440 left)

Transportation expenses for two cars/insurance 10000 (104440 left)

Vacations 10,000 dollars (94440 left)

Computers/Cellphones/Electronics/Cable Bill 3600  (90840 left)

Preschool/Day Care Expenses for two kids 24,000 (66840 left)

Clothes 5ooo dollars (61840 left)

Life and Disability Insurance  9600 (52240 left)

Dues and License and CME 5000 (47240 left)

Miscellaneous Entertainment  10,000 (37240 left)

Saved

Remaining available to save around 37240 per year (not including 401k)

30,000 dollars in 401k

Assuming an 8% rate of return on 67240 over five years- 394446 dollars in savings

Following five years (Own house)

Expenses

401k: 30,000 (383000 left)

Taxes: 76182 (Federal) + 20290 (State) (286528 left)

Loan payments and house savings and children 529 plan: 60744 (student loans)  + 13,344 (529 plan) (212440left)

Salary after mortgage payments and taxes (800,000 mortgage -30 year fixed at 3.5 percent 3592*12 (169336 left)

Salary after property taxes and insurance 14,400 (154936 left)

Home maintenance= 10000 (144936 left)

Subtracting food for family 10000 (134936 left)

Transportation expenses for two cars/insurance 10000 (124936 left)

Vacations 10,000 dollars (114936 left)

Computers/Cellphones/Electronics/Cable Bill 3600 (111336 left)

Education and Expenses for two kids 12,000 x2 (87336 left)

Clothes 5000 dollars  (82336 left)

Life and Disability Insurance 9600 dollars (72376 left)

Dues and License and CME (5000 dollars per year)= 67376 left

Miscellaneous Entertainment (10000 dollars per year)=57376 dollars

Saved

Remaining available to save around 57376 per year (not including 401k)

30,000 dollars in 401k

Assuming an 8% rate of return on 87376  over five years +394446 in savings= 1092000 dollars

Following eight years (Student Loans Paid Off)

Savings After Expenses

Savings now 57376+60744 +30000 (401k)=148120 per year

Assuming an 8% rate of return on 108480 over eight years +109200 in savings= 3596000 dollars

Next 5 Years (No More 529 plans)

Savings now 148120+13344= 159454 per year.

Assuming an 8% rate of return on 121824 over five years +3596000 in savings= 6220000 dollars or 3155000 in today’s dollars with 3 percent inflation

Following ten years (No More Kid Expenses)

Saving now: 159454+24000= 183454 dollars per year

Assuming an 8% rate of return on 145824 over ten years +5428000 in savings= 16080000 dollars or approximately 6.06 million in today’s dollars with 3 percent inflation

 

Changed Assumption: No Student Loans In High Cost Of Living Are: How Much Headstart?

First five years:

Savings: 67240+60744 (headstart without loans)= 127984 per year

Assuming an 8% rate of return on 127984 over five years- 751000 dollars in savings

Following five years (Own Home)

Savings: 87376+60744=148120

Assuming an 8% rate of return on 148120  over five years +751000 in savings= 1971000 dollars

Next eight years

Savings= 148120

Assuming an 8% rate of return on 148120  over eight years +1971000 in savings= 5223000 dollars or approximately 3.07 million in today’s dollars with 3 percent inflation

Next 5 Years (No More 529 plans)

Savings now 148120+13344= 161464 per year.

Assuming an 8% rate of return on 161464  over five years +5.223 million in savings= 8.622 million dollars or approximately 4.37 million in today’s dollars with 3 percent inflation

Following ten years (No More Kid Expenses)- if you were to go past 5,000,000 dollars

Saving now: 161464 +24000= 185464 dollars per year

Assuming an 8% rate of return on 235066 over ten years +8.622 million dollars in savings= 21.3 million dollars or approximately 8.03 million in today’s dollars with 3 percent inflation

The Final Numbers (How Much Headstart Will You Get?):

Low Cost of Living Area and High Student Loans: After 23 years, you have saved 4.78 million dollars in today’s dollars. After 33 years: 9 million dollars in today’s dollars

Low Cost of Living Area and No Student Loans (Headstart): After 23 years, 5.99 million saved in today’s dollars. After 33 years: 11.9 million dollars in today’s dollars

High Cost of Living Area and Student Loans: After 23 years, you have saved 3.15 million dollars in today’s dollars. After 33 years: 5.42 million dollars in today’s dollars

High Cost of Living Area and No Student Loans (Headstart): After 23 years, you have saved 4.37 million in today’s dollars. After 33 years: 8.03 million dollars in today’s dollars

Does Student Debt Prevent A Reasonable Retirement?

In a high-cost-of-living area and with lots of student loans, you will need a long career, over 30-something years, to accumulate that mythical number of 5 million dollars. But, if you have no student loans and live the same way, you will have a headstart of less than ten years of working if you desire to retire earlier. On the other hand, those with high student loans and who live in a low-cost-of-living area can reach that mythical number of 5 million dollars around the twenty-something-year mark.

You may want to work for an entire thirty-something-year career. And, of course, you may not want to live to save money. Also, there are lots of factors that should go into where you should live. But, for those of you with lots of debt, the debt will significantly impact the number of years you will need to work to accumulate your desired nest egg. Without that student debt, you may have a headstart and more flexibility in your decisions. Just something to consider!

 

Posted on by

Will I Be Able To Save Five Million Dollars As A Radiologist With Large Student Loans?

five million

There is something mythical about the number five million dollars. Medscape’s annual net worth survey for physicians uses that barrier as one of the leading wealth accumulation goalposts for their survey and has been doing so for years. The media has created a monicker that they love to use as well called pentamillionaire. And, it is a number that makes sense for those of you that eventually want to retire in today’s dollars.

Imagine. You can reasonably safely withdraw 4 percent of five million dollars per year and have an income of about two hundred thousand dollars while still allowing for capital appreciation. It may not be a king’s ransom in some parts of the country. (California, New York) But, it is undoubtedly a decent nest egg that can allow most folks the ability to live out their years comfortably. This five million dollar number most likely seems very large to those of you in residency that live frugally off of much smaller dollar amounts. But, believe it or not, it will all seem like a lot less when you live like an attending. 

Additionally, inflation will most likely eat into the principal of this dollar amount so that we will account for inflation on that five million dollars in today’s dollars. We will assume an inflation rate of 3 percent to be conservative.

Is It Even Possible To Achieve Five Million Dollars With High Debt Loads On One Radiologist Income?

So, I ask: Is it even possible to save this much with all the student debt you have accumulated and salaries that may not keep up with inflation? Let’s do the calculations for two sorts of residents: Those of you who decide to live in high cost of living areas with significant student debt; those who choose to live in low cost of living areas with considerable student debt. You can skip to the bottom if you want to see the final results. Or, you can peruse all the nitty-gritty details if you are so inclined.

Assumptions For Accumulating Five Million Dollars

We will assume in all cases that you have higher than average debt (400,000 dollars) when you finish residency, that you have a family of four, with a spouse that is taking care of the kids and is not working. We will assume that you want to buy a decent size four-bedroom house in a nice area. Let’s also start with the assumption that you will male the mean income for a radiologist based on the 2021 Medscape compensation survey (413,000). Of course, you can make more or less depending on the practice. But, for simplicity’s sake, we will use this number.

Then we will assume that on average inflation rate is around 3 percent, with a worst-case scenario of radiology salaries that are relatively stagnant due to declining reimbursements. And, we will assume an interest rate on student loans of 4 percent. Finally, we will take that you will put aside a nice chunk of change for each of your kids to go to college (250,000 dollars). Of course, I want to make these circumstances as if you live like an attending instead of a resident. And, then we will go through how long it may take you to accumulate this amount of wealth given your circumstances as a radiologist.

High cost of living areas with significant student debt

Additional numbers for this assumption:

  1. House will cost 1,000,000 dollars with a down payment of 200,000 dollars, saved over your first 5 years of working. (40,000 dollars saved per year)
  2. Student debt will be paid off over 10 years (4049 dollars per month*12 months)= 48,588 per year
  3. Practice puts away 30,000 dollars including match into your 401k starting 1st year
  4. Investment rate of return 8%
  5. Federal Income Taxes after deduction will be 76182 dollars per year based on a calculator
  6. State Income Taxes will be around 6 percent or (413,000*0.06)=24,780 dollars
  7. You have twins beginning at the of your attending work and are putting away 556 dollars per month per kid to get to 250,000 dollars at age 18. (13,344 dollars per year)
  8. Rental of a 3 bedroom house for 5 years at 4000 dollars per month

First 5 years

Total Salary 413000

Expenses

401k: 30,000 (383000 left)

Taxes : 76182 (Federal) + 20290 (State) (286528 left)

Loan payments and house savings and children 529 plan: 48,588 (student loans) + 40,000 (house down payment) + 13,344 (529 plan) (184596 left)

Rental/heating/electricity  48,000  (136596 left)

Subtracting food for family 10000 (126596 left)

Transportation expenses 2 cars/insurance 10000 (116596 left)

Vacations 10,000 dollars (106596 left)

Computers/Cellphones/Electronics/Cable Bill 3600  (102996 left)

Preschool/Day Care Expenses for two kids 24,000 (78996 left)

Clothes 5ooo dollars (73996 left)

Life and Disability Insurance  9600 (64396 left)

Dues and License and CME 5000 (59396 left)

Miscellaneous Entertainment  10,000 (49396 or around 50000)

Saved

Remaining available to save around 50000 per year (not including 401k)

30,000 dollars in 401k

Assuming 8% rate of return on 80,000 over 5 years- 469000 dollars in savings

Next 5 years (Own house)

Expenses

401k: 30,000 (383000 left)

Taxes : 76182 (Federal) + 20290 (State) (286528 left)

Loan payments and house savings and children 529 plan: 48,588 (student loans) + 40,000 (house down payment) + 13,344 (529 plan) (184596 left)

Salary after mortgage payments and taxes (800,000 mortgage -30 year fixed at 3.5 percent 3592*12 (141492 left)

Salary after property taxes and insurance 14,400 (127092 left)

Home maintenance= 10000 (117092 left)

Subtracting food for family 10000 (107092 left)

Transportation expenses 2 cars/insurance 10000 (97092 left)

Vacations 10,000 dollars (87092 left)

Computers/Cellphones/Electronics/Cable Bill 3600 (83492 left)

Education and Expenses for two kids 12,000 x2 (59492 left)

Clothes 5000 dollars  (54492 left)

Life and Disability Insurance 9600 dollars 44892

Dues and License and CME (5000 dollars per year)= 39892

Miscellaneous Entertainment (10000 dollars per year)=29892 dollars

Saved

Remaining available to save around 29892 per year (not including 401k)

30,000 dollars in 401k

Assuming 8% rate of return on 59892  over 5 years +469000 in savings= 1040000 dollars

Next 8 years (Student Loans Paid Off)

Savings After Expenses

Savings now 29892+48588 +30000 (401k)=108480 per year

Assuming 8% rate of return on 108480 over 8 years +1040000 in savings= 3080000 dollars

Next 5 Years (No More 529 plans)

Savings now 113480+13344= 121824 per year

Assuming 8% rate of return on 121824 over 5 years +3080000 in savings= 5240000 dollars or 2655000 in today’s dollars with 3 percent inflation

Next 10 years (No More Kid Expenses)

Saving now: 121824+24000= 145824 dollars per year

Assuming 8% rate of return on 145824 over 10 years +5428000 in savings= 13240000 dollars or approximately 5 million in today’s dollars with 3 percent inflation

 

Low cost of living areas with significant student debt

Additional numbers for this assumption:

  1. House will cost 500,000 dollars with a down payment of 100,000 dollars, saved over your first 5 years of working. (20,000 dollars saved per year)
  2. Student debt will be paid off over 10 years (4049 dollars per month*12 months)= 48,588 per year
  3. Practice puts away 30,000 dollars including match into your 401k starting 1st year
  4. Investment rate of return 8%
  5. Federal Income Taxes after deduction will be 76182 dollars per year based on a calculator
  6. State Income Taxes are 0 dollars
  7. You have twins beginning at the of your attending work and are putting away 556 dollars per month per kid to get to 250,000 dollars at age 18. (13,344 dollars per year)
  8. Rental of a 3 bedroom house for 5 years at 2500 dollars per month

First 5 years

Total Salary 413000

Expenses

401k: 30,000 (383000 left)

Taxes : 76182 (Federal) + 0 (State) (306818 left)

Loan payments and house savings and children 529 plan: 48,588 (student loans) + 20,000 (house down payment) + 13,344 (529 plan) (224886 left)

Rental/heating/electricity  30000  (194886 left)

Subtracting food for family 10000 (184886 left)

Transportation expenses 2 cars/insurance 10000 (174886 left)

Vacations 10,000 dollars (164886 left)

Computers/Cellphones/Electronics/Cable Bill 3600  (161286 left)

Preschool/Day Care Expenses for two kids 24,000 (137286 left)

Clothes 5ooo dollars (132286 left)

Life and Disability Insurance  9600 (122686 left)

Dues and License and CME 5000 (117686 left)

Miscellaneous Entertainment  10,000 (107686 left)

Saved

Remaining available to save around 107686 per year (not including 401k)

30,000 dollars in 401k

Assuming 8% rate of return on 137686 over 5 years- 807690 dollars in savings

Next 5 years (Own house)

Expenses

401k: 30,000 (383000 left)

Taxes : 76182 (Federal) + 0 (State) (306818 left)

Loan payments and house savings and children 529 plan: 48,588 (student loans)  + 13,344 (529 plan) (244886 left)

Salary after mortgage payments and taxes (400,000 mortgage -30 year fixed at 3.5 percent 1796*12 (223334 left)

Salary after property taxes and insurance 12000 (211334 left)

Home maintenance= 5000 (206334 left)

Subtracting food for family 10000 (196334 left)

Transportation expenses 2 cars/insurance 10000 (186334 left)

Vacations 10,000 dollars (176334 left)

Computers/Cellphones/Electronics/Cable Bill 3600 (172734 left)

Education and Expenses for two kids 12,000 x2 (148734 left)

Clothes 5000 dollars  (143734 left)

Life and Disability Insurance 9600 dollars (134134 left)

Dues and License and CME 5000 dollars  (129134 left)

Miscellaneous Entertainment  10000 (119134 left)

Saved

Remaining available to save around 119134 per year (not including 401k)

30,000 dollars in 401k

Assuming 8% rate of return on 149134  over 5 years +807690 in savings= 2061000 dollars

Next 8 years (Student Loans Paid Off)

Savings After Expenses

Savings now 119134+48588 +30000 (401k)=197722 dollars per year

Assuming 8% rate of return on 197722 over 8 years +2061000 in savings= 5918000 dollars or 3476201 in today’s dollars

Next 5 Years (No More 529 plans)

Savings now 197722+13344= 211066 per year

Assuming 8% rate of return on 211066 over 5 years +5918000 in savings= 9934000 dollars or 5033000 in today’s dollars with 3 percent inflation

Next 10 years (No More Kid Expenses)- if you were to go past 5,000,000 dollars

Saving now: 211066 +24000= 235066 dollars per year

Assuming 8% rate of return on 235066 over 10 years +9934000 in savings= 24854000 dollars or approximately 9.4 million in today’s dollars with 3 percent inflation

 

Can You Accumulate Five Million Dollars In A High or Low-Cost Area?

The results are stark. Yes, you can accumulate 5 million dollars in a high cost of living area in today’s dollars with high student loan debt if you are willing to wait 33 years based on these numbers. On the other hand, if you decide to live in a low cost of living area, you can expect to accumulate 5 million dollars 10 years earlier. Now, money may not be everything. But, if you decide you want to change your lifestyle earlier than you expect, there will be many more doors accessible to you in your career if you choose to live in a lower-cost area. And, if you wanted to work a whole 33-year career, you would accumulate a large nest egg for your heirs. Something to think about!

 

Posted on by

The Doximity IPO: What To Do With A Small Windfall As A Radiology Resident?

windfall

Last week many residents throughout the country had the foresight and were lucky enough to get involved with the Doximity initial public offering for stock. It was a rarity because, unlike most IPOs, only doctors could get in on the initial public offering (IPO) action instead of the finance guys. Physicians were able to purchase up to 250 shares. In a few short hours, what was initially an investment of up to 26 dollars a share (6500 dollars), climbed to 55.98 dollars. On that one day alone, you could have made ((55.98-26)*250 or 7495 dollars. That would represent a 115% profit in one day. Not all bought the maximum number. Regardless, although not life-altering, for a resident, that means a significant sum of money compared to a typical resident salary. You could call it a sort of windfall.

Sure, there is lots of information out there about windfalls for physicians. Check out some of the articles on the white coat investor- My Experience With A Windfall. Or, you can read about What To Do With A Windfall.

But, most are not specific to your situation. Some may tell you might plunge that money back into the market. Others say take it and pay off your credit card debt. (Those folks should probably not have done the Doximity IPO in the first place!) And, others may decide to repay some more interest on your student loans. But what is the right place for you to plug that money in as a radiology resident? Are the considerations different for a radiology resident than other types of physicians?

Personal Finance Is Personal- What Is Right For You Might Not Be Right For Everyone (Except For Credit Card Debt!)

First of all, anyone with credit card debt should probably remove that debt immediately from your life. That is a no-brainer. Of course, that simple tenet is not just for the radiology resident. But, it is indeed a personal situation. Anyone paying interest over 10-15 percent is slowly getting their financial life sucked away like a Hoover.

But let’s assume that you are without credit card debt and have a decent amount of student loans. Currently, most of you have loans that are accruing very little interest because of the low-interest-rate environment and all the deferments from the pandemic. So, it is reasonable not to plug all the money back into the student loans. On the other hand, debt can be burdensome and a proverbial noose around the neck for others. What to do next depends on your tolerance for debt and your financial situation.

Where Should The Windfall Go If Not Student Loans (Think Roth!)

If some of the windfall is not going back into student loan debt, where should it go?. To answer this question, if you haven’t done so already, it is time to get a head-start on investing. You are already behind the eight-ball as a physician. So, filling a Roth IRA with an index fund would probably not be a bad start for most of you. One of the best financial decisions I made many years ago was to start a Roth IRA when I was in residency. A small amount has significantly increased in value over time. So, with this small windfall, consider taking some of the money and adding it to a Roth IRA.

Reasons For Radiology Residents In Particular To Choose The Roth IRA

How does being a radiology resident change the equation about where to put the money? Well, because you are more likely to make a higher salary than your pediatrician and internal medicine colleagues, you may want to consider putting more into investments than loans.

In particular, for two reasons, the Roth IRA even makes more sense for the radiology resident. First of all, your salary will be higher as a radiologist, so you will have to pay more taxes on the amount of post-tax money you put in than your lower-salaried colleagues. So, now is even a better time to take advantage of your low tax situation.

Second, you can afford to be a little bit more aggressive than other specialties. More future dollars allow you to put more into stocks because you can afford more risk. So, putting more away into investments can make more sense.

A Small Windfall And Investing For The Radiology Resident

Opportunities arise from time to time, and you may find new money, such as the Doximity IPO. As a radiology resident, your situation may differ slightly from other physicians. So, based on your risk profile, consider taking a bit more of your windfall and investing in a Roth IRA. That’s what I would do if I had a few extra dollars and were still a radiology resident!

 

 

 

Posted on by

Why Do Radiologists Overall Have A High Net Worth?

high net worth

As some of you know, income is merely a snapshot of the overall financial health of the profession. On any given year, that can change on a dime. Procedure reimbursement can change. Codes can vary. And, professional or technical fees rarely stay the same.

However, most financial surveys report on physician income, ostensibly the real marker of physician economic well-being. But, what is the one long term indicator of a medical specialty’s financial health? Well, it’s going to be a long term indicator of physician savings, their net worth!

More to the point, each year, Medscape publishes the physician debt and wealth report. And, this information is more telling about the long-term state of our profession than any other survey out there. Therefore, I look at these statistics very carefully to see how we compare to everyone else out there in the medical world.

And, this year I found something interesting. On one of the last Medscape survey slides (#23 to be exact), our specialty has the highest percentage of physicians with a net worth over 2 million, tied with a few other specialties (plastic surgery and orthopedics). At the same time, we have the lowest percentage of physicians with a net worth under 500,000 dollars (slide #22). However, we are not quite at the top for the proportion of physicians over 5 million dollars (slide #4). And, on another presentation on physician income on the 2019 Medscape Physician Compensation Report, we are only tied for 5th highest mean income.

So why is it that we do not have the highest income but yet we have a higher percentage of physicians with a net worth of over 2 million dollars? Moreover, why do we have a lower portion of radiologists with a net worth of greater than 5 million dollars than many other specialties?  Let’s dig further into the weeds.

Radiologists Are Not Show-Offs

You probably know a few radiologists that drive their 100,000 dollar Tesla and live in a castle. However, overall, radiologists are not ones to take all the credit. And, from my experience, most are more humble, similar to how we need to work within our profession.  And, this personality trait more typically describes their more simple spending patterns.

What do you do if you don’t spend much on things to display to the world? You save or at least get rid of debt!

Many Years Of Good Fortune

For years, radiologists have been blessed with more and more new procedures and technology. And, each year, private insurers and the government continues to reimburse reasonably well. This pattern has become long standing for years and years. Regular salaries mean more saved wealth!

Additionally, even in the leaner times, newer radiologists could command a higher salary than most other professions out there. So, even recent grads will tend to have lower debt loads and higher net worth than other specialists.

Skewed Age Of The Measured Population

Elsewhere in the survey, you will note that the older the physician, the more net worth saved. And, the population of radiologists slightly skews to older age compared to some of the other professions. We can still work into our 70s, 8os, and even 90s (if we are lucky!) All we need is a set of glasses and some insurance credentialing, and we are good to go! Therefore, savings can take the same overall weighting as well.

We Do Not Have As Many Income Extremes

What exactly explains why radiologists less commonly have a net worth over 5,000,000 dollars compared to some of our other subspecialty brethren? At least, this is my explanation. We can’t sell eyeglasses in our offices (as some ophthalmologists do) and engage in businesses that involve patient purchases. And, we need to take all sorts of insurance to make ends meet. (Many physicians in other specialties have concierge practices that don’t!) So, as a whole, we tend not to have some of the upper extremes of income that other medical specialties can provide. Therefore, most of us do not accumulate the more substantial assets (over 5 million dollars) that other specialties more often do.

Radiologists And High Net Worth

So, these are my explanations for the overall state of financial affairs for the average radiologist in the community. Remember. Not all of us adhere to these rules. You will undoubtedly find impoverished debt-ridden radiologists as well as radiologists who live more similarly to Jeff Bezos than the typical physician. But, based on being in the trenches, these overall patterns seem to explain the survey results. Shoot me an email or message if you think differently!

 

Posted on by

Tracking Net Worth As A Resident: Does It Make Sense?

Every once in a while, I like to discuss resident finances because understanding how to manage money must begin early. Why? Because small mistakes as a resident become large errors later on in your career. At the same time, many of you have little or no practical know-how about financial matters. Part of it likely relates to the lack of experience. And, the other part connects to the lack of education about finances for residents. I get it. However, I will pitch to you why I think it becomes incredibly important to start tracking your budget, credit, and investments when you have less than nothing, so early in your career. In order to do so, first I will go through the definition of net worth. Then, we will discuss why it is so important to follow it. And finally, I will give you some simple tools for monitoring net worth.

 

net worth

 

What Is Net Worth?

The official financial definition of net worth is assets minus liabilities. That may not mean much to some of you. So quickly, we will define the terms.

Assets are anything that you own of value. That would include investments like stocks and bonds. Or, palpable things like real estate, cars, jewelry, baseball cards.

Liabilities are anything that you owe to others. For most of you, the first type of liability you probably think about is student loan debt. But, credit card debt, personal loans, and car loans count as well.

So, in order to come up with your present net worth, you need to subtract the liabilities from the assets. And, for a good chunk of you, that number is going to be negative. But, don’t worry! That is entirely normal any time during residency or as an early radiology attending.

Reasons For Tracking Net worth

The Trend Is Your Friend- Are You Becoming Richer Or Poorer?

Like anything else in medicine, the trend is often more important than the absolute value.  What do I mean by that? Well, let me give you an example of PSA levels in a patient with prostate cancer. If you look at one PSA level without any context it essentially becomes meaningless. PSA levels can relate to prostate inflammation, other nonspecific biochemical properties of the body, as well as cancer. However, if you perform serial PSA levels and notice an increase over time, well, that takes on some significance. You worry about recurrent prostate cancer or metastatic disease. Likewise, tracking net worth works in much the same way.

As a resident, if you notice that your net worth is negative, it’s not a big deal (everyone has a negative worth!). However, just like PSA levels, if you notice that your net worth significantly declines month over month and year over year, well, that could mark that you need to change your financial habits. Maybe, you need to spend less. Or, maybe you should consider taking that moonlighting gig if available. Bottom line. You do not know what actions to take unless you begin to track your own net worth.

Net Worth Tracking Should Become Habitual

Later on in your career, not knowing your net worth can lead to catastrophe. Many attendings learn too late that they have been spending more than they earn. And, where does that lead you? You will be forced to work longer than you want with shifts that you may hate to earn extra money. Even, patient care can suffer because you become more worried about your next paycheck than what may be best for your patients. Maybe, you read more films than you should.

On the other hand, forming a habit of monitoring what you have now can help you to change your behavior. If you notice a steep decline, you can stem the outflow of assets.  And, if you start tracking your net worth early, you will continue to do so later on in your career when money mistakes can matter even more. Why wouldn’t you want to form these good habits now?

Tools For Tracking

So, what are the ways that you can track your own net worth? First, you can use an old-fashioned excel spreadsheet. I have been doing that for years. And, it certainly helps to keep track of the large assets or liabilities. But, if you want to break down exactly where your cash flow goes, consider one of the online net worth and budget trackers.

The one that I have used for several years that is free is Personal Capital (Yes, I am an affiliate and if you are interested, click on this link!).  I prefer Personal Capital because I have found it to be very useful for the granular tracking of net worth. It is very easy to tie/link investment accounts, credit card accounts, mortgages, and individual assets to the system to make accurate tracking of your net worth fairly easy. And, it adds graphs and easy to use interfaces to capture the trends of what goes on with your finances. That’s exactly what you want from a net worth tracker. (It takes a bit more work to do the same from a spreadsheet)

Bottom Line

Net worth tracking should become a tool in your arsenal to prevent financial mismanagement. Consider practicing it now both to change your current behaviors as well as to maintain good habits throughout the rest of your career. As Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure”. This certainly applies to tracking your own net worth!