I recently returned from a vacation to Lake Powell. It's always an adventure to go down there since Lake Powell has more coastline than the entire Western Coast of the United States, and I've seen most of it from my little boat. (Yeah, I know, buying a boat is a stupid financial move. Don't remind me.) This trip happened to contain more adventures than usual, including suturing lacerations in the wilderness and getting stranded in portions of the lake where there actually isn't any accessible shore due to the vertical sandstone walls rising right out of the water for miles.
Lake Powell Fun
The Importance of Being a Do-It-Yourselfer
We enjoy camping and exploring and we were at the back of a flooded box canyon when I turned the key to start the engine and the key kept right on turning. The incident caused me to reflect on the importance of being a do-it-yourselfer. When I was a teenager, I often told my dad that when I grew up I was going to make enough money that I wouldn't have to work on my own car. I feel the same way about my boat. But the problem is that I use this boat to go places where there is no one to pay to work on my boat when it breaks. It's either fix it myself or, well, I'm screwed. So I've taken to doing my own maintenance and repairs on the boat, at least most of the time. I carry a repair manual and a toolbox in the boat and have learned to do lots of little repairs.
In this particular instance, I was lucky that someone happened by a few minutes later who just happened to know how to hotwire the ignition. Now I'm proud to say that I too know how to hotwire an ignition. Until I get to the point where I can afford a houseboat with a helicopter on top, I'll probably continue to pick up these little skills.
Financial DIY
Just like with taking your boat 40 miles from the nearest marina, there are also times in your financial life when you may find you need to be a do-it-yourselfer. Perhaps you need a little higher return to reach your goals, and can't afford the 0.5%-1% it might cost you to hire an investment manager. Perhaps you can't seem to find someone you can trust for financial advice. Perhaps you just need to do a rollover away from a high-fee brokerage. Whatever the case, it's good to at least have a repair manual, a toolkit, and a few MacGyver skills tucked away in your back pocket. You might take a look at these “repair manuals.”
How have you “walked the line” in deciding what to do yourself, and when you need to hire an expert?
WCE- Thanks so much for your active blog. I am a 5th year urology resident (in a 6 year program with plans for 1 year fellowship). I considered myself to have gotten an “early start” with investing opening a ROTH IRA in high school, but after reading your blog realize I’m clearly a novice who has really only saved and not invested for the last 10 years. Northstar Resource has actively “recruited” me and after purchasing insurance (life and disability, again after good advice from your site) I am having serious doubts about hiring them to manage my investments. After reading nearly every one of your posts and spending time in the boggle heads forum, I have somewhat convinced myself that I can come up with a reasonable investing plan with a simple asset allocation. However, what I’m not sure of is how to carry out my investments and in which accounts to put my money. My wife and I have maxed out our IRA’s and I recently inherited about $80,000. I have $210,000 in student loan debt (120k at 6.8% and 90k at 4.75 and 2.8%). I am also planning on a applying for the public service loan forgiveness program (I unfortunately just learned about this, again, thanks to this site). My current plan is to pay down some of my student debt (maybe 30k) and invest the rest. My thought is that this is basically “diversifying” my investments, by repaying my loan I am guaranteeing 6% return and taking a reasonable risk with my remaining capital to invest. I don’t’ have access to a 401k at my hospital, and I have hospital supplied health insurance so I don’t think I can open an HSA (backdoor ira). Is my best option to put the remaining money in a taxed investment account? Thanks again for all your instructive posts.
Glad you like the blog and thanks for going through med school and residency. I interact often with some great urologists and it is nearly uniformly a pleasure. I don’t know what it is about that field that draws such fun people.
I have to give Northstar some credit for helping me learn a lot about investing. If they hadn’t ripped me off by selling me loaded mutual funds this site probably never would have been born. My assets went straight from Northstar to Vanguard.
The stuff you’re asking questions about is the easy stuff. The hard stuff is getting your savings rate high enough and deciding on an asset allocation. Deciding which asset goes in which account is pretty simple and choosing investment vehicles for the asset allocation isn’t all that hard either, especially if you’re using index funds. However, you’re mixing this in with a separate question, which is whether you should pay down debt or invest. Here’s a couple of links to past posts you may find helpful on these two separate questions:
https://www.whitecoatinvestor.com/designing-your-portfolio-part-6-implementing-the-asset-allocation/
https://www.whitecoatinvestor.com/student-loans-vs-investing/
If I had a 6.8% guaranteed return investment, I’d max out all my tax-protected accounts (for you this would just be a personal and a spousal Roth IRA-backdoor if necessary- and any 401K available at your spouse’s work), then put everything else toward the 6.8% loan. So if you had $40K to “invest” I’d put $5K into each of your Roth IRAs then put $30K toward the 6.8% loan. This assumes you have an emergency fund and aren’t saving up for a downpayment in the near future. Make sense?
Yeah, makes sense. Thanks for the speedy reply. I do indeed have an emergency fund and am also saving for a downpayment. Regarding paying down the loan, I think my desire to work in a hospital that will qualify for PSLF has made me hesitant to pay down my loan. Some math I did yesterday:
My current payoff amount is 210k. If I go into the PSLF over the next 10 years I will have payed approximately 204k. If I entered a “standard” 10 year repayment program I would pay 279k. By going into PSLF program, I will have essentially payed the same to payoff (plus write off) my loan balance while at the same time preserving my immediately available capital. Of course, this argument crumbles if the PSLF program changes, although I’m not too concerned this would actually happen. This has been a tough decision. As far as Northstar goes, I do think they sold me a decent insurance policy. Again, thanks of much for all of your posts. I’ve been spreading the word about your site with my co-residents and attendings. Thanks.
I still have the disability policy they sold me as well. The life insurance they sold me I am unimpressed with and the mutual funds were a huge disappointment.
How much would you pay if you paid off your loans in 4-5 years? If you’re not trying to get some free money through the PSLF program I wouldn’t drag out a 6.8% loan for a decade.
WCI- Your comment about being “unimpressed” with the life insurance they sold you made me look again at the policy I just purchased from them. I am a little frustrated as I feel like I should have been more informed before making my purchase. I have a 20 year and 10 year term for $1.5m each. After a lot more reading this weekend, I’ve convinced myself that I’d actually like 30 years total with decreasing coverage as I age (perhaps a $1m 30-20-and10 year policy, or some variation). I am unfortunately past my 30 day window to cancel my newly purchased policy. What was your experience with canceling your policy and buying from another company? I’ve read from a few sites that canceling a policy and trying to obtain a new policy this quickly may actually increase my premiums? Thanks
I don’t think that’s necessarily true. I believe you’ll be refunded the remaining premium for your current policy when you cancel it, but check with your agent. I don’t think you’ve made any kind of a serious mistake. It’ll probably only cost you a little time to correct it.