10 // THE NEW GASTROENTEROLOGIST WINTER 2017
but dividends issued from stock or stock mutual funds are
taxed at lower long-term capital gains rates. Similarly, when
you sell a stock or a stock mutual fund, the appreciation is
taxed at long-term capital gains rates under most circumstances. As you are able to set funds aside, make sure that
you are using tax-advantaged investment vehicles.
5. Consider no-load mutual funds. When investing in
the stock market or otherwise, consider no-load mutual
funds such as those offered by Vanguard that do not require an “investment adviser.” Such funds do not have sales
charges and save you money. The greatest chance you have
of underperforming the market relates to the expenses associated with investment, more so than the particular investments selected. Since almost all advisers underperform the
market, you should consider investing on your own, minimizing costs, and watching your funds grow. As a younger
physician with many high-income years in front of you, a
good portion of your investments should be in equities to
enjoy their appreciation over decades. With bank interest
rates being minuscule, there is no reasonable alternative.
6. Develop a budget. If you or your spouse has an issue
with shopping or overspending, it is imperative that you
develop a budget: first allocating funds to long-term savings
such as a retirement plan, next to short-term savings, then
to unavoidable recurring costs such as rent or mortgage,
student loans, food, and discretionary expenditures. The
perfect time to put this in place is when you go from the salary of a resident or fellow into a full-time job and your pay
increases by multifold. Read the book The Millionaire Next
Door: The Surprising Secrets of America’s Wealthy by Thomas
J. Stanley and gain control, as it is easy to do otherwise with
an unprecedented and significant salary jump. If you start
to live on your new salary, you will never be in a position to
amass wealth and retire comfortably.
7. Send your kids to public, not private, school. For
each of your children, would you rather pay astronomic
tuition bills for 4-8 years of college or 16-20 years counting
grades 1-12 in private school? When you have children ap-
proaching school age, choose an A+ school district and send
your kids to public school, not private school – they will
still get into competitive colleges. This can save hundreds of
thousands of dollars per child.
8. Fund a 529 plan. Whether or not you currently have
children, you can fund a 529 plan to enjoy tax-free growth
and plan for education expenses of children or future children. If you do not have children yet, you can name yourself
or a different party as the beneficiary and then change it
after children are born. If you do not have children, you can
either use the 529 for someone else or cash the investment
and recover the money including growth/loss thereon.
Trying to fund college educations out of current income is
difficult, and it is better to prefund than to pay back student
loans over many years.
9. Draft a will. If you are married or have children or
both, it is imperative that you have wills drafted so that your
wishes are implemented upon your passing. Many tax advantages are available without using complicated trusts and
it is important that you maintain up-to-date wills should the
10. Purchase disability and life insurance. Your most
valuable financial asset is your income stream over the
coming years. Protect it with adequate private disability and
life insurance policies. Policies provided by your employer
typically end upon termination of employment and having a
portable policy is important.
These tips will help you maximize your financial position
over your work life and through retirement. The best time
to get on the right track is yesterday; the second best time is
today. Staying in shape financially is easier than messing up
and then attempting to fix it. n
In my experience, the variance in accumulated wealth between doctors
approaching retirement usually does not relate primarily to income differences
but rather to spending control and financial knowledge.