After being a student, your income as a new physician will seem like a lot, but you will be surprised how fast you will spend it and how little you will keep. Now is the time to start a "saving" lifestyle, in which you spend conservatively, rather than becoming dependant on a "spending" lifestyle. I have numerous specialist clients who earn over $500,000 per year and can't make ends meet, having become used to big houses, fancy cars, and expensive vacations.

You can spend an infinite amount of time investigating financial strategies. At your age and stage of profession -- and for the next three to five years -- you should devote your energies and thoughts to your profession rather than sophisticated outside investment strategies.

• Remember, it's not how much you make, but how much you keep that counts!
• Consider consolidating your student loans under the Federal Direct Consolidation Loan program. A good strategy for many students is to consolidate loans into the longest period possible at the lowest interest rate possible, resulting in the lowest current monthly payment.This will increase your current borrowing power to purchase a home or obtain other business loans, and increase the money available to fund retirement plans. You can then always pay the loan off faster if you want. (Visit www.LoanConsolidation.ed.gov)

1. If it offers you a lower rate than your current loans.
2. If you have trouble meeting your monthly payments, have exhausted your deferment and forbearance options, and/or want to avoid default.

• Learn to live on 75% or less of your income.
• About 25% of you will leave your first job within 18 months. Rent housing the first year or two until you are sure of your job, like the area, and know the good school districts for your kids.
• Take professional ICD/CPT coding training, which is very high return on investment.
• Buy catastrophic-care medical insurance with a high deductible and low premium, or a Health Savings Account.
• Eliminate or avoid revolving (credit card) debt. Pay off all credit cards monthly.
• Pay as many bills as possible with a credit card that gives travel frequent-flier miles, and use online bill-paying to do it.
• Hire a bookkeeper to do your office and home accounting and bill-paying.
• Fund retirement plans to the maximum possible. Given the income tax breaks, and the deferred income tax until retirement, with the ability to compound returns tax-deferred, I suggest that funding your retirement plan is more important than paying off your student loan or buying your first house. The earliest years of retirement plan funding are the most important because they have the longest time to grow. Have your retirement contribution deducted from your paycheck directly into your retirement plan every pay period, so you never see it, even if you are in solo practice and paying yourself.
• In the stock market, approximately 85% of financial planners and stock brokers don't do as well as the No-Load S&P Index 500 Mutual Funds (NLI500s). Invest 75% in NLI500s, and 25% in money market funds. Leading sources of NLI500s are at Fidelity.com and Vanguard.com.
• Buy disability insurance first, then term life insurance when you have dependants. Do you even need life insurance? It depends. As a young physician, if you are single, with no dependants, and no co-signers on your loans or debts that would burden others upon your death, what purpose would life insurance serve for you?
• If you are a practice owner, make tax-deductible investments in your practice (marketing, revenue-producing skills and instrumentation). If you are employed, have a small side-business for the tax benefits (or have your spouse do it). Don't pay unnecessary taxes. Read the book Small Time Operator, listed below for details, and consult your CPA.
• Buying a new car is a terrible investment. Buy cars 18 that are atleat months old.
• Buy minimal-management income property real estate (or REITs) after the above are achieved.

• Small Time Operator : How to Start Your Own Business, Keep Your Books, Pay Your Taxes, and Stay Out of Trouble, by Bernard B. Kamoroff (good for employees too)
• The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Thomas J. Stanley
• The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham
• More good basic financial planning information is available free online from many sources such as Morningstar.com, Fool.com, and cnnfn.com.

Disclaimer: Keith Borglum is not a licensed financial planner, and all information contained herein is personal opinion, though supported by references. All investment involves risk, and readers are cautioned to obtain independent qualified investment advice from resources of their choice.

Copyright PMM 2005. Reprinted with permission.