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  • Investment questions for a resident

    I have no idea what I am doing half the time. I read a ton of blogs, participate in a bunch of forums but still cannot guide my way through the financial journey. I am a second year dental resident, buying a practice once I am doing for around 800k, current doc is collecting around 400k take home with a  1.3million dental collections average yearly. 130k in student debt at 5.8% interest.

     

    I have 20k in the bank for savings

    Residency stipend is 50k, we pay 10% to church tithing/donation monthly

    3kids and wife

    Wife has an IRA of 12k (from previous job we are just letting sit)

    Not sure where to go or what to do next (hire a financial advisor? Invest? etc)

    -My current plan is to move my savings account to a online bank that has a APY of at least 2% or more (Ally, VMXX, Marcus by GS) - Any thoughts?

    -Not open a vanguard or roth at this time (people are saying that the government controls that and at any time they may increase the tax, age to pull out money etc) so sounds unreliable

    -Open a wealthfront account and robo advise with 100-200$ monthly.

    Anything else one would suggest? We are looking at buying a house a year after working in the practice after residency (so two years from now)

    I am a newbie and need all the help I can get.

     

  • #2
    Open a Roth and max it out asap. Vanguard isn't a type of account. It's a company, through which you can have numerous different types of accounts.

    Wealth front is last thing you should be doing. You probably have access to a 401k or 403b or an hsa. Do those.

    If you're going to add 800k debt to 130k I wouldn't be in any hurry to buy a house.

    Your wife is staying at home I'm assuming?

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    • #3
      If you read a bunch of blogs and participate in multiple forums what are you learning from them? Like the vanguard thing for example is pretty egregious. I guess pay more attention or try to comprehend what you're reading?

      Comment


      • #4
        -20k is not worth moving to a high yield account, 1% of 20k is $200/year, that's what you're going to make over your current bank.

        -You need a larger e-fund w/ 3 kids, I would say at least 40k.

        -the fact that you said "a vanguard or a roth" indicates that you need some systematic financial education like taking Jim's course (with your wife).

        -the fact that you said "the gov't controls that ... so sounds unreliable" indicates that you need some systematic financial education like taking Jim's course (with your wife).

        -$200/mo into a robo would be only a fraction of what you need to save for retirement

        -I think you need to learn a lot before you even think about buying a house

         

        Good luck, it gets easier, we are here for you (totally serious)

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        • #5
          -Don't even think about buying a house

          -Increase your EF

          -Max out roth IRAs for you and your wife

          -Make sure adequate insurance is in place

          -Hire an independent expert to evaluate the practice you are considering buying

          -have a plan for student loans

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          • #6
            Thanks everyone.

            Setting up a vanguard now to put money into a roth  (Does it matter if I start with a traditional IRA and convert the 5500k I am putting in or just set it up as a roth from the beginning? What do I do next year when my effective income is above what I can max for a traditional roth?...I've heard of doing a backdoor IRA but still not sure how to actually convert that w/o a financial advisor)

            * In regards to the future...my wife will be employed by the practice LLC I will be buying

            * I will technically be employed by the LLC and pay myself a salary of 120-130k (will take out quarterly draws from the business throughout the year*)

            -Will continue to increase EF
            -Adequate insurance? I have life and disability, health covered by residency, when I graduate I plan on going on christian care ministries for their health insurance.

            Already had an expert eval the practice (1.3 collections, selling for a little under 800k (negotiating around 750-770) doc's take home last year was 485 after taxes) )

            - Will skimp on the online savings

            -Where do I find out about Jim's course? Is it the online one?

            -Isn't staying liquid prior to buying a practice to obtain financing at this point important as well?

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            • #7




              Thanks everyone.

              Setting up a vanguard now to put money into a roth  (Does it matter if I start with a traditional IRA and convert the 5500k I am putting in or just set it up as a roth from the beginning? What do I do next year when my effective income is above what I can max for a traditional roth?…I’ve heard of doing a backdoor IRA but still not sure how to actually convert that w/o a financial advisor)
              Click to expand...


              Set up a Roth IRA at Vanguard (or Fidelity, or Charles Schwab) and contribute to it directly this year.  Next year, you'll need to open a traditional IRA account at the same firm to do a Backdoor Roth.  It's easy enough to do:  you make a non-deductible contribution to the traditional IRA, wait a couple of days until the contribution clears, then you roll the money directly from the traditional IRA account into the Roth IRA account you already have.  This can be done entirely online with just a few mouse clicks (although you may have to wait a few days before the newly-deposited money can be moved from the Roth IRA's settlement account into whatever fund you want to invest it in, which is a minor issue); no need for a financial advisor's help.  Then when it's time to do your taxes for 2020, you fill out IRS Form 8606 indicating that you converted a non-deductible traditional IRA to a Roth IRA.  It's not hard.

              And I agree with the others:  you'd benefit a lot from either reading Jim's book or taking his online course.  It's a small outlay of time and money for a big benefit.

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              • #8
                Thanks Artemis, I think I will purchase the online course in the next week. When I do the backdoor roth, how do I continue contributing to it? Will I always have to contribute to the traditional and then move it to the existing roth year after year? Thanks again.

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                • #9
                  Only if your income is above the limit for a direct contribution

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