How to plan financial future, not what you think

[Stolenspatulas]

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I am taking a year-off before med school and am working in research currently ($25K/yr).

I am finally starting to save a few dollars even though this pay sucks and my expenditures, especially medical school related, have been huge.

I was wondering if people think investing is even an option? Is it futile to put some money into mutual funds? meaning, medical school will bankrupt you anyway so why even try to invest?

Part of me thinks that I should just blow this money this year, buy a big TV, travel, etc.

My reasoning is that I may then get a better financial package (ie I am poorer so I'll get more grant money). I do not want to save money if that just means I'll get less financial aid. Also, is it unreasonable to begin a 401k at this time, in any possible way? There is a big advantage in beginning retirement savings as early as possible.

Any thoughts? I would appreciate if some admins chimed in. Thanks.

 

[DropkickMurphy]

I am taking a year-off before med school and am working in research currently ($25K/yr).

I am finally starting to save a few dollars even though this pay sucks and my expenditures, especially medical school related, have been huge.

I was wondering if people think investing is even an option? Is it futile to put some money into mutual funds? meaning, medical school will bankrupt you anyway so why even try to invest?

Part of me thinks that I should just blow this money this year, buy a big TV, travel, etc.

My reasoning is that I may then get a better financial package (ie I am poorer so I'll get more grant money). I do not want to save money if that just means I'll get less financial aid. Also, is it unreasonable to begin a 401k at this time, in any possible way? There is a big advantage in beginning retirement savings as early as possible.

Any thoughts? I would appreciate if some admins chimed in. Thanks.

Find a way to hide the money. I'm thinking Cayman Islands. Either that or mayonnaisse jars out in the backyard.

 

[braluk]

Or someone's rectum...any takers

 

[Towelie]

Put some into a ROTH IRA. These are great retirement accounts that are tax free when you take out the money. Given your low salary (I'm in the same boat), I highly doubt that you will be saving enough to have more than a negligible impact on your financial aid.

 

[DropkickMurphy]

For Braluk:

 

[etf]

head over to the investments forum, and you'll get some insight. for what it's worth, i'd save the money and put it into a mutual fund - you'd be surprised how little chunks of money here and there add up.

 

[monwilli]

I've been putting money into my IRA and 401K. Even if it is $25/mo every bit helps!

 

[mshheaddoc]

I am taking a year-off before med school and am working in research currently ($25K/yr).

I am finally starting to save a few dollars even though this pay sucks and my expenditures, especially medical school related, have been huge.

I was wondering if people think investing is even an option? Is it futile to put some money into mutual funds? meaning, medical school will bankrupt you anyway so why even try to invest?

Part of me thinks that I should just blow this money this year, buy a big TV, travel, etc.

My reasoning is that I may then get a better financial package (ie I am poorer so I'll get more grant money). I do not want to save money if that just means I'll get less financial aid. Also, is it unreasonable to begin a 401k at this time, in any possible way? There is a big advantage in beginning retirement savings as early as possible.

Any thoughts? I would appreciate if some admins chimed in. Thanks.

first off, i'm requesting to move this to the finance forum where you will get serious responses.

Ok, you aren't going to be saving THAT much money making that much for only a year so don't worry about "being poor" when you apply for financial aid. That won't be a worry and any monies you get from the school itself will be based off your parents income as well so that is said there.

Investing ... honestly, the earlier you start the better. There is no harm in having some "money stashed away" that you can use. Even if its only a few thousand dollars. I would suggest that you do start the 401K and IRA vehicles. They are your protected vehicles. Your 401K will be matched by your employer (read: free money) but you have to usually be vested for a certain period of time.

To understand 401K plans ... read these links:
https://www.oppenheimerfunds.com/investors/ret_plans/401k.jhtml
http://www.401khelpcenter.com/mpower/feature_110702.html
http://en.wikipedia.org/wiki/401(k)
or just search 401K on google. These are some of the first hits I got. There are better sites but that's not the main point I'm making.

Roth IRA's are only eligible to those who make less than $52K if you participate in an employer retirement program. Here the link that lists the requirements. Max these out while you can. These are tax-free when you withdrawal after 70.5 yrs of age and you will not be able to get these after you finish residency/fellowships.

Traditional IRA's anyone can have. You can direct where you want them invested. Many use mutual funds because its all about diversification.

If you have specific questions you want to ask, fire away. But I would try to at least save a little in these vehicles if you can and you have the money to blow. You can spoil yourself a little as well but that $100 can grow alot over the next 8 years of training with compound interest and choosing the right investment vehicle.

 

[Jocomama]

mshheaddoc is right on with her advice. "Do you concur, doctor?" "Yes, I concur"

first off, i'm requesting to move this to the finance forum where you will get serious responses.

Ok, you aren't going to be saving THAT much money making that much for only a year so don't worry about "being poor" when you apply for financial aid. That won't be a worry and any monies you get from the school itself will be based off your parents income as well so that is said there.

Investing ... honestly, the earlier you start the better. There is no harm in having some "money stashed away" that you can use. Even if its only a few thousand dollars. I would suggest that you do start the 401K and IRA vehicles. They are your protected vehicles. Your 401K will be matched by your employer (read: free money) but you have to usually be vested for a certain period of time.

To understand 401K plans ... read these links:
https://www.oppenheimerfunds.com/investors/ret_plans/401k.jhtml
http://www.401khelpcenter.com/mpower/feature_110702.html
http://en.wikipedia.org/wiki/401(k)
or just search 401K on google. These are some of the first hits I got. There are better sites but that's not the main point I'm making.

Roth IRA's are only eligible to those who make less than $52K if you participate in an employer retirement program. Here the link that lists the requirements. Max these out while you can. These are tax-free when you withdrawal after 70.5 yrs of age and you will not be able to get these after you finish residency/fellowships.

Traditional IRA's anyone can have. You can direct where you want them invested. Many use mutual funds because its all about diversification.

If you have specific questions you want to ask, fire away. But I would try to at least save a little in these vehicles if you can and you have the money to blow. You can spoil yourself a little as well but that $100 can grow alot over the next 8 years of training with compound interest and choosing the right investment vehicle.

 

[Miami_med]

This may go against the grain on some, but most of the loans that you are going to borrow are now between 6.8 and 8.5%. Student loans now have HIGHER interest rates than safe investments. If you save the money in a savings account until you start school, and then you apply it against or in lieu of a grad plus loan, the 8.5% annual unsubsidized interest you save over 4 years of med school, 3-9 years of residency/fellowship, and 10-30 years of payback will put you farther ahead at the end of the day.

Rates of return on low risk retirement investment vehicles, like the 401k, are likely to be worse than 8.5%. You will thus pay MORE in loan repayment than you've gained in saving interest, for a net loss.

Another thought, my wife and I had a few thousand dollars saved when I got into medical school. This has been a godsend. When the new semester starts, and I'm waiting for my loan check, I can pay my rent. This will buy peace of mind that is infinitely more valueable than the interest on a small amount of savings. Having to put ANYTHING on a credit card will pretty much kill any benefit to saving.

 

[Miami_med]

I'll point out that the above advice only works if you are taking out loans. If not, it is obviously better to invest money over blowing it on useless things from a financial perspective. The wisdom of investing young does get turned on it's head when you are about to borrow huge sums of money at what is now no longer a favorable interest rate.

 

[mshheaddoc]

Rates of return on low risk retirement investment vehicles, like the 401k, are likely to be worse than 8.5%. You will thus pay MORE in loan repayment than you've gained in saving interest, for a net loss.

Actually, I think they need to be smart about investments. My return was over 15% last year on my 401K and because I was an IDIOT and didn't fix my 401K assets by re-allocating them into my primary funds I wanted, I missed out on 25-30% return. (I fixed contributions instead -w hich NOTHING is going in there ... I'm an idiot sometimes).

My funds are with ML and they have some HOT funds in my portfolio. Granted, its "retirement" money I'm investing in agressive markets but this is "downfall money" Its better to have this downfall money to fall back on if you need it b/c you can get around the tax consequences (at least somewhat) if you need these funds for early withdraw. Plus its great to have a back up if you need it 😀

 

[etf]

Actually, I think they need to be smart about investments. My return was over 15% last year on my 401K and because I was an IDIOT and didn't fix my 401K assets by re-allocating them into my primary funds I wanted, I missed out on 25-30% return. (I fixed contributions instead -w hich NOTHING is going in there ... I'm an idiot sometimes).

My funds are with ML and they have some HOT funds in my portfolio. Granted, its "retirement" money I'm investing in agressive markets but this is "downfall money" Its better to have this downfall money to fall back on if you need it b/c you can get around the tax consequences (at least somewhat) if you need these funds for early withdraw. Plus its great to have a back up if you need it 😀

i'm assuming ML = merrill lynch. if so, have you shopped around other places for the same type of funds for less cost? bank/broker sponsored funds tend to be the worst ones, because they usually charge high management fees.

 

[mshheaddoc]

i'm assuming ML = merrill lynch. if so, have you shopped around other places for the same type of funds for less cost? bank/broker sponsored funds tend to be the worst ones, because they usually charge high management fees.

I have considered rolling it into an IRA but I honestly haven't had the time to really look at the fees and options. I'm in the process of figuring out how much ML is charging me ... of course its BURIED in the statement and I have no idea how much they are ripping off of my profits. 😡

 

[etf]

I have considered rolling it into an IRA but I honestly haven't had the time to really look at the fees and options. I'm in the process of figuring out how much ML is charging me ... of course its BURIED in the statement and I have no idea how much they are ripping off of my profits. 😡

do you have access to the prospectus - it's usually online. i checked on some ml funds, and it looks like they are charging a load of 5.75%, which is a load of crap. i'm pretty sure you can do a lot better elsewhere, so when you get a spare moment, check into it.

 

[mshheaddoc]

You know what kills me is the "class of shares" which isn't designated outright in our statements. I've only found front loads that high on certain shares (class A usually) but haven't found anything other than that. They get you when you cash out ... I wish they didn't try to hide everything. I called at 5mins before they closed and by the time I got through their damn automated system to customer service it was 7:01. Yeah I was a little pissed tonight.

 

[etf]

You know what kills me is the "class of shares" which isn't designated outright in our statements. I've only found front loads that high on certain shares (class A usually) but haven't found anything other than that. They get you when you cash out ... I wish they didn't try to hide everything. I called at 5mins before they closed and by the time I got through their damn automated system to customer service it was 7:01. Yeah I was a little pissed tonight.

is your account actually at merrill lynch? for those willing to pay loads, class A is usually the best, because class b/c shares, while have a deferred load, charge MUCH higher expense ratios to make up for it.

 

[mshheaddoc]

well with the 401K they don't give you an "option" of where you purchase and they also don't tell you on your statements either. Its not AT ML its through their benefits online portion of ML so I think they restrict what options you have for purchasing .... I'm sure they get you with the dividends taking their fees off of there ... I really for the life of me have NO idea where they are hiding the fees on this statement.

 

[Miami_med]

Actually, I think they need to be smart about investments. My return was over 15% last year on my 401K and because I was an IDIOT and didn't fix my 401K assets by re-allocating them into my primary funds I wanted, I missed out on 25-30% return. (I fixed contributions instead -w hich NOTHING is going in there ... I'm an idiot sometimes).

My funds are with ML and they have some HOT funds in my portfolio. Granted, its "retirement" money I'm investing in agressive markets but this is "downfall money" Its better to have this downfall money to fall back on if you need it b/c you can get around the tax consequences (at least somewhat) if you need these funds for early withdraw. Plus its great to have a back up if you need it 😀

That's great 👍

I will point out though, that the 15% isn't normal in the long run. You must be in an aggressive plan (oops, just realized you already said this). 15% up one year may be 15% down the next. I was just pointing out that the OP can get a defacto guaranteed return of 8.5% by applying the money against a grad plus. You're right that it is possible to do better, but nobody can give you a promise of 8.5% for a minimum of 17 years, which is what the OP is saving. The last 13 years of this will be compound interest.

That being said, I hope you prove me wrong and do much better yourself. I tend to be reasonably conservative.

 

[mshheaddoc]

is your account actually at merrill lynch? for those willing to pay loads, class A is usually the best, because class b/c shares, while have a deferred load, charge MUCH higher expense ratios to make up for it.

Ok so ML is telling me I don't get any fees and since I can't find any on my statement, I ahve to say that's a pretty sweet deal. Granted my investments are limited ... I have to say I don't mind not having to pay fees. 🙂

 

[masterMood]

Ok so ML is telling me I don't get any fees and since I can't find any on my statement, I ahve to say that's a pretty sweet deal. Granted my investments are limited ... I have to say I don't mind not having to pay fees. 🙂

it's like you guys are speaking a completely different language 🙁


is the FAQ enough to gaint he knowledge and confidence necessary for finance? aye yay yay

 

[The White Coat Investor]

Ok so ML is telling me I don't get any fees and since I can't find any on my statement, I ahve to say that's a pretty sweet deal. 🙂

Ha ha ha ROFL. You don't really believe them do you? Consider reading any book by John Bogle to learn about fees.