Based on a series of polls conducted by the Student Doctor Network, students generally understand the current salaries they can expect to receive as a health professional.

The polls asked SDN users to select the salary range for an occupation “without Googling” to find the correct answer.  The results of the polls are available in the SDN poll archive.

Students were most likely to select the salary range into which the actual mean annual wage falls for all occupations except Dentists and Optometrists.  Actual wages used for comparison were determined by the Bureau of Labor Statistics and are accurate as of May 2007.

The range was underestimated for Optometrists and overestimated for Dentists.  In both cases the mean wage lay very close to a break point for the salary ranges available, and a majority of respondents selected either the correct range or the next closest range.

The table below details these wages:

 

For most occupations, while the answer most likely to be selected was the correct one, incorrect responses skewed higher than the actual wage.  For example, 61% of students overestimated the wage for Occupational Therapists (OTD), versus only 12% underestimating the wage.

“The internet makes it easy for students to identify what they can generally expect for a wage following completion of their degree,” said Michael Magatelli, an employment expert and executive coach with the Magatelli Leadership Group of Sacramento, California.  “No student should invest in a degree without understanding the value they are going to receive from it.”

To gain further insight into wages beyond the average salaries referenced above, Magatelli recommends students conduct four to six “informational” interviews.  These interviews will help illustrate any unique costs or required investments associated with setting up their desired practice model.

“Informational interviews, in addition to internet salary information, will provide a more complete picture of the costs of becoming a practicing health professional in your geographic area,” said Magatelli.

Available at: http://www.ama-assn.org/ama/pub/category/5349.html

The MSS Task Force on Medical Education Debt reviewed data that were compiled over the last 20 years from the Association of American Medical Colleges, the federal government, and other sources concerning the cost of medical education and the debt burden of medical students.

Key findings include: the average graduating medical student debt has been rising faster than the consumer price index (CPI) for the past 20 years, and tuition at public and private schools has been growing faster than the CPI over these same 20 years.

If left uncontrolled, these exorbitant amounts of debt may cause shifts in specialty choice, increase burnout and decrease the numbers of minorities in medicine.

Statistics:

• $139,517 – According to the Association of American Medical Colleges, the average educational debt of indebted graduates of the class of 2007. The average debt of graduating medical students increased in 2007 by 6.9 percent over the previous year.
• 75.5 percent of graduates have debt of at least $100,000
• 87.6 percent of graduating medical students carry outstanding loans

Source: AAMC 2007 Graduation Questionnaire

Why medical education debt has increased

Medical education debt is driven by rising tuition. AAMC data show that median private medical school tuition and fees has increased by 50 percent (in real dollars) in the 20 years between 1984 and 2004. Median public medical school tuition and fees increased by 133 percent over the same time period. Other recent 20-year periods show similar trends. Figures 1 and 2 (PDF, 23KB) demonstrate an upward sloping curve juxtaposing the rising debt and tuition—both faster than inflation.

Tuition is just one source of increasing debt burdens. Some other causes include:

• Interest accrued on loans over time significantly adds to the total cost of student debt
• Students now entering medical school with more education debt from undergraduate education
• Increasing numbers of “non-traditional” students who have children to support

Debt crisis harms both students and patients

The increase in debt not only burdens medical students, but can have effects on the entire health care system. Some of correlations found include:

Decrease in primary care physicians

• Students with high debt are less likely to pursue family practice and primary care specialties and instead seek specialties with higher income or more leisure time

Decreased diversity of physician workforce

• The cost of tuition can prevent students from low-income/minority and those with other financial responsibilities from attending medical school
• Physician diversity is necessary to address the needs of heterogeneous, multicultural patient populations

Promoting unsafe physician behaviors

• Residents with high debt are more likely to moonlight
  • Increases fatigue and may contribute to medical errors (see Figure 4 (PDF, 39KB)
• Increasing debt leads to more cynicism and depression among residents (see Figure 5 (PDF, 41KB)

How can we reduce debt?

The MSS has come up with recommendations for legislative and administrative remedies to resolve the medical education debt crisis. These recommendations focus on controlling tuition, the principal component of education costs, but include a number of relatively simple administrative measures that could be taken immediately and at a low cost to individual medical schools.

Federal level

• Reauthorization of the Higher Education Act
• Securing adequate funding for Title VII health professions programs in the FY 2009 Labor, Health and Human Services, Education and Related Agencies appropriations bill and expanding and protecting the National Health Service Corps (NHSC) Loan Repayment Program
  • Read the AMA letter (PDF, 60KB) to the Chairman of the Senate Committee on Appropriations
• Broadening the tax-exempt status of medical scholarships

State legislative options

• Tuition caps
• State tax deductions for loan interest
• State service loan repayment programs

Reform individual medical school financial policies

• Tuition caps
• $50,000 private institutions
• $30,000 public institutions
• Change fee policy

Innovative strategies for reducing student loan needs

• Increasing grants and scholarships
• Collaborate graduate/undergraduate debt counseling
• Collective buying to reduce student expenses

Republished from the AMA-MSS

Available at: http://www.ama-assn.org/ama/pub/category/5349.html

The contract provisions couldn’t look any better:

• $ 300,000 annual salary guarantee
  • sustained by hospital/practice
  • forgiven over 5 years
  • phased out beyond 15 months to full productivity remuneration
• $10,000 sign on bonus
• $20,000 relocation expenses
• 3.5 weeks annual vacation
• 2 weeks annual sick time
• 10 days paid CME
• 401K investment
• Profit sharing/open partnership in 12 months.

But before signing the dotted line, take the contract home, read it carefully and understand it. Equally importantly, get to know the people behind it.

For many doctors soon to complete their residencies, one final round of interviewing is underway. This time, unlike prior interviews, it is an audition for your job post-residency, in your chosen profession. Finally!

However, there are some important basics you should capture in your psyche as you venture in this uncharted territory: know thy prospective employer, and know thy contract. For purposes of illustration, we shall regard the prospective employer synonymous with a prospective partnership.

Knowing thy prospective employers is a must. The interview trail is the time you get to check them out initially. This process is like courting. Naturally, you are anxious to see and get to know them beyond the print of their brochure; as much as they are anxious to get to know you beyond the print in your CV. Have your feelers out just as they have theirs out for you.

First things first, before you head out—you must be content with where you might end up living together (if the chemistry is right, that is) . . . for a while, at least. In this regard, location is key. Are you willing to go practice anywhere geographically as long as the terms are right, as in Alaska, half a world away from your parents in Florida? Here are some questions you must ask yourself first: Do you see yourself practicing in a large city, a small rural town, or on board a cruise-liner? What does your spouse or significant other think? What are the job prospects for him/her? The school system for the kids? Crime in the locality, quality of life benchmarks . . . museums, zoos, parks, housing?

For your job searches, you could either do them yourself or use a recruiter to perform the role of the match-maker. A do-it-yourself approach is handy since you are in control. There are many ways you could start: use on-line searches, journals, medical magazines, periodicals, etc.

If you elect to use recruiters, you could use an outside recruiter or deal directly with internal hospital recruiters. Remember, though, recruiters might occasionally embellish the facts to “set you up” with who they think is best for you. If you are dealing with multiple recruiters, have a dedicated telephone number you can use to deal with them . . . otherwise, you may find yourslef fielding incessant calls throughout the day.

Next, in order to get an idea of who thy prospective employer really is, you should strive to understand the vision the employer embraces. Is the firm “for profit” or a “non-profit”? This is important to know. A vision is the song to which an employer will want to dance with you. For instance, a practice with a vision to generate money will screen you as a potential profit center in its quest to improve its bottom line. Similarly, a non-profit entity serving the unprivileged will screen you as a potential agent in their quest to build their community services. Are you ready to dance to those tunes?

Another aspect involved with knowing thy prospective employer is the culture in which the employer is embedded. Is the culture diverse, brotherly or sisterly? Do people even like each other? Or, is the culture paternalistic and authoritative? Is it what Dr. Grudge says is what goes? Or, is it democratic?

The structural make up of thy prospective employer is equally important. Group practices are usually split into single-specialty groups, multi-specialty groups (that could be individual corporations or hospital-owned), and private hospital-owned practices. Then, of course, there are the Federal government based practices, such as the Veterans Affairs and Medical Corps in the military.

A single-specialty practice provides one specific type of care, e.g. a group of just surgeons providing only surgery to their patient base. A single specialty practice will generate you secure compensation, a consolidated patient base, shared call, camaraderie, and a contained life-style (enabling you to go away on vacations and not worry whether your patients will be seen or not).

On the other hand, a multi-specialty practice is usually much larger and provides a more diverse spectrum of care, e.g. a group consisting of internists, neurologists, physiatrists, and orthopedic surgeons. Naturally, you will find that the compensation is greater and more secure although larger operating and overhead expenses will cut into your earnings. Be aware that when you sign that contract, you agree to pay, in essence, for that fancy MRI suite that your group bought before you even joined it. Nonetheless, a multi-specialty group will also afford you a much broader patient base but with less autonomy in administrative decision making.

A hospital-owned practice is a group affiliated with a hospital and jointly owned by that hospital and a group of providers. Obviously, in this type of opportunity, you will benefit from aligning yourself with a known established entity, access to hospital facilities, resources and services, a large referral patient base, numerous pre-negotiated contracts, and smaller financial risk and liquidity (assuming, of course, that the hospital is financially sound).

Gaining some measure of popularity today is locum tenens—a temporary but generally extended assignment to work in a practice or location for higher pay albeit with lesser fringe benefits. This type of practice varies in character from working in any of the types of groups discussed above. One defining characteristic, however, is the ability for you to remain somewhat detached from the “ins and outs” of the group you may find yourself in.

Federal based practices, such as those in the Veterans Administration Hospitals are part of the United States government. They are heavily regulated, but present with workable hours (typically 8-5 with generous holidays off). The bottom line is irrelevant. And though the pay is lower than that in private practice, you don’t have to worry about overhead expenses. In the same vein, military practices are run and regulated by the US government; however, they are tied to a specific service commitment. You become a commissioned officer, open to climb up the ranks while you serve your country in uniform, don’t have to worry about malpractice, billing, and overhead expenses. However. you might be deployed overseas, or “get to travel” quite a bit.

Regardless, you should examine the financial strength on which the practice opportunity is based. As a lot of experienced practitioners will tell you, courting a financially insecure entity will almost always cause you eventual heartache. Therefore, it would not be inappropriate for you to ask during the interview process about the financial strength of your prospective employer. And before signing the employment contract, you ought to ask for and examine the balance sheet of the firm that is courting you.

The other fundamental imperative is to know thy contract. Much like we are told in medicine, if it is not written down, it was not done; anything not in print within the pages of your contract will NOT be done. If you are verbally promised something, get it in writing: signed, sealed, and delivered. If you want to negotiate a provision, don’t sell yourself short . . . ask for it. If you win approval for the provision, then have it included into the written contract.

The contract has 3 important provisions in it: compensation, termination, and restrictive covenants—in that order of importance most people prioritize them. There are, of course, other provisions in it, such as: working conditions, physician conduct, expectations, and some even have a buy-in option (depending on the nature of practice you are looking at).

Compensation can be determined using various models or formulas. You could get paid via a straight salary based on a regional benchmark, e.g. physiatrists in the geographical Northeast get paid (on average) X amount per annum. Then, there is the salary guarantee paid by the firm associated with the hospital, or paid by the hospital itself with an associated service obligation that you incur if you want the monies paid to you forgiven. For example, General Hospital wants to attract more quality physicians (like you) to its fold. General Hospital then concurs with a multi-specialty group, ABC Inc., which is affiliated with the hospital, to pay you a fixed salary of $300,000 per year for 2 years while you build your practice from the ground, under the auspices of ABC Inc. After 2 years, General Hospital will stop paying you $300,000. By then, it is hoped that you will be making equal to, or even more than, what you made from your affiliated practice (you built in 2 years) with ABC Inc. If you stay for 1 year past your 2 year anniversary, the $300,000/yr you earned for 2 years will be forgiven. But if you leave prematurely, you are obligated to pay the hospital a pro-rated amount of the total sum remitted to you.

Straight salaries are generally reviewed annually with a perspective for possible increments in salary. Cash or non-cash bonuses could be also given if your productivity increases within the time period you are being reviewed.

The initial salary guarantee, paid by the practice or the hospital (or even by both) generally relapses when the specified time period ends. Then, your remuneration is determined by factors based on productivity.

Other aspects to know relative to compensation are: the population mix your practice will have, who the main payers are—self pay, private insurance, commercial insurance, Worker’s Compensation, Medicare/Medicaid. Also relative to your compensation is the following: bonuses, moving expenses, and the availability of pension/profit sharing plans, equal partnership opportunity, 401K/403b matching funds, fringe benefits, and mal-practice coverage. Know these well before you sign that contract!

Last but not least, you should inquire about loan forgiveness packages. This is a great provision that almost all physicians out of residency will appreciate. You might be offered anywhere from $50,000 to $150,000 (or even more) paid to you in either installments or in a lump sum. Negotiate the terms to your benefit; some employers pay the funds to the school loan creditors directly or give you the money directly. And, if you wish, you may apply the proceeds to pay off other debt. Remember, though, a loan forgiveness package is usually tied to a commitment, e.g. General Hospital gives you $150,000; for every year you work for General Hospital, $30,000 will be forgiven. If you leave General Hospital in 3 years, you will have to pay them $60,000.

In regards to termination, you should know the required time length required for you to submit your written notice. Different employers require different time intervals: at least 30 days, 60 days, or even 90 days. Also, inquire how much time is required to remedy a breach of contract towards the nonbreaching party.

For restrictive covenants, prime consideration is focused on the clause of noncompetition. This specific clause tells you two important things: the “Period of Noncompetition,” and the “Area of Noncompetition.” The Period of Noncompetition tells you how long, from the time you are terminated, you will NOT provide services as a physician, whereas the Area of Noncompetition tells you the radius, in terms of distance, you will NOT be allowed to practice from the nearest facility/clinic run by your employer.

As you endeavor to find the perfect post-residency match—please take the time to get to know your employer in terms of location, vision, culture, structure, and financial strength. Also, learn your contract well in terms of compensation, termination, and restrictive covenants. Above all, remember that a contract can be negotiated to your benefit. Congratulations on graduation and good luck!

SDN Staff Writers

For some, the answer to the question, “Why do you want to study medicine?” is a simple one: to make money.  These individuals, however, are in a shrinking minority, a recent survey has found.  Kaplan Test Prep and Admissions examined the responses of 914 students in its medical and law school preparatory courses to examine their motivations for professional study.  It seems that even as the traditional financial windfalls associated with medicine continue to wane, students’ passion for medical study is as fiery as ever.  In fact, less than half of pre-med respondents indicated their future earning potential “very much” or “somewhat” influenced their decision to study medicine.  But what does this mean?  Pre-professional students are notorious for their exaggerated claims of altruism while the true and ulterior motivation remains the big salary.  …or at least that was the belief. 

So, what’s the primary reason pre-meds gave for wanting to pursue medicine? “We wanted to get a better understanding of why our students chose medicine. We wanted to know what makes them tick,” said Matt Fidler, Kaplan Test Prep and Admissions’ Pre-Health director, “The biggest reason was the desire to help others and make a difference.”  As verboten a response as it is during medical school interviews, Fidler’s survey suggests there may just be a hint of truth in it.  Skeptics have long maintained that “helping others” and “making a difference” are merely lip service made by pre-professional students to get into school so they can earn the big bucks.

The survey by Kaplan found that while only 49% of pre-meds reported being primarily motivated by money, 71% of pre-law students indicated as much (based upon survey results of 453 Kaplan LSAT students in February 2008).  Since law and medicine are both potentially lucrative fields, what could account for the difference?  Of the over 400 pre-medical students surveyed, 89% listed either a desire to help others, a genuine interest in the sciences, or personal exposure to medicine as the impetus for their decision.  “We think it’s great for them to pursue medicine with such passion,” Fidler said.

And passion they must have!  While many individuals may report feeling squeamish at the mere mention of blood, these pre-meds are aware of and feel prepared for what they will face: a mere 12% say that the sight of blood makes them feel dizzy or faint, and only 11% are concerned about working with cadavers.  The survey results further indicate that these iron-stomached students decided to pursue medicine as their career path in large part during adolescence, giving them ample time to prepare academically and emotionally for the road ahead.  While the ability to earn a decent wage is a concern for students in all fields, perhaps it is not the critical factor for pre-meds it was believed to be.

These statistics are based on the responses of 461 Kaplan MCAT students in January 2008.  To what extent these results are generalizable to pre-medical students as a group remains to be seen.  This is the first time Kaplan has asked its students questions of this type, though it does survey its students on other important topics on a regular basis). Fidler indicates they plan to continue to do so in the future.  “We just think students are interested in learning about their peers’ motivations to go to medical school,” he says.  It will be very interesting indeed to see if this trend is observed in future Kaplan courses as well as outside the classroom!

“Never buy a plane or horses just out of residency!” said my soft-spoken attending, staring at me intently. “I did, and I learned my lesson well.”

Indeed, he did. He was newly married, had no money in his account . . . and salivated when his first sizzling $13,000 monthly paycheck was deposited. A year later, he had a $1 million home with land and horses, a Jag, and a Cessna. He was living life in the fast lane! Needless to say, the cost of managing his horses ate into his finances, the Cessna broke, and he and his family were left financially devastated. They had minimal savings, high consumer debt, and no money invested in anything.

Sadly, these experiences are common.

Recently, one financially savvy resident in our program sent an email to all the residents regarding the utility of opening up a Roth IRA account — even while in training. One resident (who I will call Joe), upon reading the email, developed jitters about his future retirement — despite the high income he would most likely earn as a practicing physician. Joe was not feeling desperate about his bright future; rather, he was unsure about soundly managing his finances to prepare for retirement.

“What? . . . Man, thinking about that stuff makes me sick to my stomach,” said Joe, eyeing me peevishly, his voice resonant with hopelessness. “No one ever taught me much about investing, let alone money matters.”

“Well, we all have to start from somewhere,” I replied.

Joe looked at me as if I had told him to leap off the Eiffel Tower.

I pressed on. “We all can certainly learn. Investing is, after all, not nuclear science.”

And, sure enough, it isn’t. We don’t have to go crazy when we hit that high-income bracket after our training — finally! No purchasing horses, planes and RVs.

Indeed, there is a stereotype that physicians, dentists, and other health professionals have limited knowledge in matters related to investing. No doubt, we have been trained to provide optimal care to patients, and we make life or death decisions without hesitation. However, the mere thought of investing unsettles many of us in the health professions.

A recent comprehensive survey conducted by the Consumer Federation of America and Wachovia revealed that 52% of Americans were not saving enough money. 72% identified unexpected major expenses, job loss and consumer debt as obstacles to saving, while 37% cited impulse spending as the culprit [1].

Interestingly, the same report illustrated that while most Americans were generally pessimistic about how they perceived themselves, other Americans saved for their futures—individuals in high income brackets (those making $75,000 and above per year) were more than twice as likely to have saved enough resources to sustain themselves in emergencies and cater for their retirements versus those making $25,000 and less per year.

One more interesting thing was that when the survey respondents were illuminated about the “miracle of compound interest,” the interest to save was gendered in about 80% of them. What they were simply told was that saving $200 a month for 30 years at a conservative 5 percent interest would accord them over $300,000 in their retirement [2].

However, I would argue that the strict terms “saving” and “investing” do not necessarily mean the same thing. Investing money entails saving while mere saving does not entail investing. To illustrate, if you put an initial $1,000 (e.g., from a tax refund) in a mutual fund with a 9% compound interest and made consistent $300 monthly contributions into it, you would generate, over 25 years, a total of $345,745 [3]. Now, that is true investing! On the contrary, if you were to take the initial $1,000 tax refund, clip it into your mattress and religiously deposit the same $300 monthly contributions in that “mattress account” for 25 years, you would end up with a relatively shabby $91,000 [3]. Now, that is simply saving. Moreover, the benefit of saving alone would not be sufficient to beat the rate of inflation — which now runs about 4.31% per annum and is projected to climb higher [4].

For the sake of brevity, I will deal with investing as it relates to achieving a good retirement nest egg versus attaining other goals, such as saving money for a child’s college education, buying a home or boat. These are important goals, but considering that as we get older we are bound to face a future punctuated by inflation, increased health costs and uncertain Social Security benefits — the need to invest then for retirement should predominate.

Before discussing some vehicles of investment, however, I will point out some important principles. While not professing to be a financial guru, I have had enough business courses to be considered knowledgeable. I have also read widely, as I still do. I have owned 4 homes, opened and managed my children’s UTMA accounts (my teens now have ROTH IRA accounts), ran my own karate studio/fitness club, and I have been investing for my retirement for several years now. A word of preface: the investing I am talking about is NOT a “get-rich-quick” scheme. It is dedicated financial investing. So, enough said, let’s explore the principles.

Firstly, you must start paying yourself. Moreover, the earlier you begin, the easier it will be to build up a comfortable retirement nest egg. If you start at age 25, for example, investing $300 per month, you will get a handsome $1,047,302.35 by age 65 — assuming you earn 8% annually. If you start at the age of 45, and invest along the same terms, you will earn $176,706.12 at age 65. To play catch-up with the 25-year-old, the 45-year-old would have to invest $1,800 per month for 20 years to earn $1,060,236.75. So, suffice it to say, in the area of investing, paying yourself first over a period of time works to your advantage. If you start late in the game, you will have to invest a larger amount. Either way, you end up doing better than the guy who invests nothing.

Secondly, you must take advantage of what Einstein called the 8th wonder of the world: compound interest. This phenomenon occurs when interest is added back to principal, and the growing amount plus interest generates more interest, interest then is compounded upon interest and so on. An investment vehicle with compound interest is therefore a must in one’s financial tool chest. It generates capital growth and appreciation, often outpacing the rate of inflation.

Thirdly, you ought to know that the stock market has historically performed well against all other vehicles of investments, and beaten the rate of inflation as well. Hence, despite the bearish moments (what investors call corrections) in the market, of late, investing in the stock market still comes far ahead in comparison with other investments. For the last eighty years, for instance, the S&P 500 has returned an annual 10.4 percent gain [5]. Likewise, bonds have historically grown at 5.4% annually. Hence, if you are going to invest your hard-earned dollars, it better be in stocks versus bonds, precious metals or your local bank’s savings account or even certificates of deposit. However, unlike savings accounts or certificates of deposit, stock funds are not FDIC insured, which means you could stand to lose your principal when the market hits rock bottom and stays there. But the probability of that happening is very low. Remember that time is on your side if you have many years until retirement; the market highs will even out the lows. If retirement is just around the corner, then amassing your earnings in a less volatile and FDIC insured instrument (like a CD) would be optimal.

Fourthly, having said all the above, you ought to build your investments in a Roth IRA (if you are an individual earning less than $114,000 or a married couple earning less than $166,000, per current IRS income eligibility limits). Your accumulated earnings, blessed by the charm of compound interest, will be available to you in retirement — absolutely tax-free! If the income limits do not permit you to invest in a ROTH IRA, then you could still invest in a traditional (non-deductible) IRA — or even in a 401(k) or 403(b). You would get the benefit of compound interest, a reduction in taxable income, and tax-deferred growth.

There is more good news! Because of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), signed in May 2006, a high income earner will be able to convert the traditional IRA funds into a Roth IRA, with half of the converted amount taxed in 2011 and the other taxed in 2012. So, high-income earners can still contribute to a non-deductible IRA today knowing that in 2010, they can convert their precious monies into the coveted ROTH IRA.

On a different note, a 401(k) is typically a plan set up by an employer, such as a corporation or a government body. You could also easily set up a 401(k) plan if you are self-employed. Another plan, the 403(b) is an investment retirement tool available to you if you are employed by a school or by a recognized non-profit. Like the 401(k), your pre-tax dollars are invested in the 403(b) account on a tax-deferred basis until you get to withdraw them in retirement. However, from as recent as 2006, 403(b) and 401(k) plans could also be invested with post-tax dollars, permitting tax-free withdrawals in retirement.

As many of you already know, there are plenty of ways to invest. But now I’d like to focus on mutual funds, regular index stocks, and Exchange Traded Funds.

A mutual fund is a corporation that pools together investors’ money, and invests it in areas that bring the optimal return — in accordance with the goal(s) of the fund. You become a shareholder by buying shares in the fund. Your money is then managed by a group of professional managers who diligently research and invest your money in stocks, bonds and money market assets. This approach offers you the advantage of diversification, reducing the risk of placing all your eggs in one basket.

Mutual funds have distinct strategies of investment. Some are growth-oriented, i.e. they invest in the stock of fast-growing companies. Some are value-oriented (equity-income or growth-and-income funds) that invest in companies that pay dividends. Finally, some are sector-oriented, i.e. they invest in specialty areas (such as technology and healthcare). Others have an international flavor. The approaches to investment can be conservative (desirable if you are closer to retirement age or cannot stomach steep changes in the stock market), intermediate, or aggressive (desirable if you are far from retirement age).

Naturally, the mutual fund managers charge a nominal annual fee — usually ranging from 0.5% to 2.5% of assets. An expense of 1% or less is desirable. Some funds charge a sales fee; these are called load funds. Others with no sales fee are called no-load funds. Most financial experts recommend no-load mutual funds for optimal investment return.

For many of us who don’t have the time to follow individual stocks on a daily basis, mutual funds are a great deal. For some mutual funds, monthly contributions as low as $50.00 can be made in lieu of the high amounts needed to open a new account (great for health practitioners in training). This dedicated monthly contribution also offers you the advantage of dollar cost-averaging (when the price of shares is low during one month, you get more for your money and vice versa). The right fund for most people then would be a low cost, no-load mutual fund with automatic monthly contributions.

On the other hand, another vehicle called Exchange Traded Funds (ETFs) exists. An ETF is an index fund, somewhat different from a regular index fund that you see a lot of people (like residents) buy into and then sell each day. A regular index stock is priced once a day after market closing while an ETF is invested in an entire index (like the S&P 500) and is constantly priced throughout the day. Moreover, an EFT is usually bought via a brokerage or discount brokerage—and will cost you commission/brokerage fee associated with buying and selling.

While ETFs and regular index stocks are viable options of good investment, they are best left to the seasoned investor who can stomach frequent fluctuations in the market and has loads of money to spare. Financial advisers will commonly advise you to refrain from these vehicles if you are committed to making monthly contributions over time, versus lump sum investments. For periodic investments, therefore, staying with mutual funds is paramount.

In a nutshell, pay yourself first by investing in a low cost, no-load mutual fund ROTH IRA or 401(b)/403(b). You can invest automatically, either through your employer’s retirement plan or by setting up a regular deposit into a mutual fund. If a ROTH IRA is out of the question because of high income, you can consider a traditional IRA with an eventual conversion to a ROTH IRA in 2010 (great idea). Other good options for high income earners (not significantly discussed in this article) would be participation in specific 401(k)/403(b) plans, company pension plans with high contribution limits, Keogh accounts (for self-employed practitioners), and salary deferment plans.

References

1. http://www.consumerfed.org/pdfs/CFA_…lease_12_10_07.pdf, pg 2 & 3.
2. http://www.consumerfed.org/pdfs/CFA_…e_12_10_07.pdf, pg 3.
3. http://www.planningtips.com/cgi-bin/savings.pl
4. http://inflationdata.com/inflation/i…/inflation.asp
5. http://www.iht.com/articles/2006/01/02/news/bxsmall.php

Seroquel, with its connotations of well-being and peace, sounds like the name of a bird or a midlevel car. It doesn’t sound like something that causes weight gain or blurred vision while treating psychosis, nor does it sound like something associated with financial strife. The pills, tiny, white and innocuous, don’t LOOK expensive. But at nearly $600 for a month’s supply, the cost easily exceeds rent for many people.

When I started the drug, I dutifully paid the $30 co-pay and let my insurance company handle the bulk of the cost. What I didn’t realize was that each month, behind this co-pay, the insurance company received a bill for $595.00, whittled down to a “negotiated rate” of $498. While I took for granted that my insurance company shouldered the burden of my monthly costs, both for Seroquel and several other psychotropic drugs, I didn’t realize that the benefit had an annual cap of $2,500.

I came to this realization a few months into my policy year when my pharmacy bill, usually under $200, mysteriously quadrupled. After leaving the pharmacy in tears, minus my drugs, I called my doctor to bewail this misfortune. I called my father to ask for money, and I started an Internet search for solutions. I’d heard about Canadian pharmacies and cheap drugs, so I focused my efforts there.

A Google search for key words Canadian Pharmacy yielded over 8 million results with just about every iteration of the words Canada, Pharmacy, Drugs, and Prescription. The pharmacies boasted “discounts of up to 70%,” “easy ordering,” “legality,” and they featured pictures of smiling, care-free gray-haired seniors.

Eager to take advantage of “savings up to 70%,” I went to one of the web sites where Seroquel, sold as generic quetiapine, was available for $99.00. Before completing the purchase, I had to fill out my primary physician’s name, phone number, medication list. I had to answer a series of yes-no questions about whether I was a smoker, had arthritic disorders, glaucoma, etc. I sent my prescription with payment and received my 90-day supply of quetiapine.

The legality of the importation of such drugs is called into question by the federal Food and Drug Administration. Any drug manufactured in the United States cannot legally be imported from another country (21 U.S.C. § 381(d)(1)). Also, any drug not approved by the FDA (21 U.S.C. 331(d) 355(a)), nor any incorrectly labeled drug may be imported (21 U.S.C. § 353(b)(2)). http://www.fda.gov/ora/import/kullman.htm. It is, however, legal to import drugs which are approved by the FDA, not manufactured within the U.S., and which bear correct labeling. There is a stipulation making legal the import of experimental treatments of serious diseases given that these treatments do not pose a serious risk. http://www.fda.gov/ora/import/traveler_alert.htm

Most drug companies do offer aid to individuals unable to afford prescriptions. Generally, patients must submit an application to the necessary drug company explaining their lack of income, insurance, savings, and just about any other means to pay for drugs.

Any denied claims may be appealed, accompanied by a detailed letter describing the inadequacy of the insurance, income, and savings in the face of mounting health care bills. Those who are poor and adequately persistent may be supplied with free drugs.

Finally, drug samples often are used to satiate patients. While organizations such as No Free Lunch condemn the use of lavish dinners, pens, samples, and any number of ploys meant to influence physicians, these items are heralded as useful to those who cannot afford dinners, those who need pens, and patients who cannot afford their drugs. Samples are not intended for use by those unable to afford drugs, although this does happen.

During my own quest for affordable medications, I broke federal laws, I groveled, and I misused drug samples. Due to the obvious stigma associated with my desired pills, I found myself additionally handicapped. If I’d been attempting to eradicate pimples, erectile dysfunction, or joint pain, I would have felt more comfortable asking for advice and help — or, at least, moral support. But I worried that if I spoke of MY problems, I’d field questions about the exact nature of my illness, the specific drugs involved, etc.

I’ve managed to convince AstraZeneca and other drug companies that I qualify for their charity programs. I have a steady supply of free, legal drugs. And, more importantly, I’m aware of some of the obstacles future patients of mine may face. Even though I don’t plan to become a psychiatrist, I’m more aware of the needs and potential problems patients suffering from any chronic medical problem.

On September 7, 2007, the House and Senate approved the Conference Report (100-317) for H.R. 2669, also known as the “College Cost Reduction and Access Act”. This Act was signed into law by the President of the United States on September 27, 2007 with an effective date of October 1, 2007.

Why should you care? The Act, while providing additional benefits to undergraduate students, eliminated the economic hardship deferment qualification known as “20/220”, used by many health profession students to delay loan repayment while in residency or fellowship. Prior to the passage of the Act, a borrower would be eligible for the economic hardship deferment if they met two requirements: 1) employed full-time with federal education debt burden equal to or greater than 20 percent of monthly income and 2) the requirement that income minus the education debt burden was less than 220 percent of the greater of the minimum wage rate or the federal poverty line for a family of two.

Under the new rule, in order to qualify for the economic hardship deferment, a borrower’s income cannot exceed the greater of either the minimum wage rate or 150 percent of the poverty line applicable to the borrower’s family size with no regard to the amount of repayment of loans. According to the American Medical Association (AMA), 67 percent of medical residents qualified for economic hardship deferment under the 20/220 criterion. As the American Association of Medical Colleges (AAMC) states the average medical student debt is over $120,000 a year for public schools and $160,000 for private schools, this new revision creates a fiscal dilemma for many residents.

Many organizations, including the AMA and AAMC, are lobbying for change because during the deferment period, the federal government pays interest on the subsidized portion of the loan, but interest continues to accrue on the unsubsidized portion. The AAMC reports “…at the end of a student’s three years of residency, the $120,000 median debt of a 2006 public medical school graduate using the federal direct loan program will have grown to $151,342, and the $160,000 median debt of a private medical school graduate will have grown to $205,707. These graduates’ monthly payments will be $1,718 and $2,336, respectively, if they pay over the default period of10 years, and $1,022 and $1,389, respectively, if they extend repayment over 25 years.” If the borrower is not eligible for economic hardship deferment or eligibility for economic hardship deferment has expired (either through no longer qualifying or having used all 3 years) this debt will be increased by the compounded interest on the subsidized Stafford loans (approximately $34,000 for the average public medical school in 2006) that usually are interest-free during deferment in residency.

The only options other than deferment are: repayment, pursue an income-contingent repayment plan available through the U.S. Department of Education, or go into forbearance. Forbearance is available for the entire duration of a medical internship or residency, regardless of the length of the program. Laws regarding forbearance are not impacted by the Act. Under forbearance, no payments are required; however interest continues to accrue and the federal government no longer pays interest on the subsidized portion of a borrower’s loans (which could be up to $8,500 of your Stafford loans a year.) An additional difference between deferment and forbearance is interest may be capitalized under forbearance, adding insult to injury in the form of additional debt.

On November 1, 2007, the AMA reported that the Department of Education has granted an extension until fall of 2008 for correction of this provision. On November 2, 2007, Senator Richard introduced a bill, S.2303, to amend the Higher Education Act of 1965 regarding the definition of economic hardship as well as there are revisions to the Higher Education Act circulating through Congress. So please remember to contact your Senators and Congressperson to support this new legislation! The AMA has a web site to make it easy to send a message to your Senators and Representatives and voice your concern.

AMA Statement
Introduction of bill S.2303
AMA Letter writing campaign
AAMC Updated Medical School Tuition and Physician Indebtedness

Students spend years learning chemistry, organic chemistry, physiology, and the health sciences to achieve their goals of becoming a doctor, nurse, pharmacist, or health care professional. After all of the didactics during college, medical school, or professional school, one of the most important skills students are not taught is money management skills.

Many students have trouble distinguishing between wants and needs, and without basic skills to manage money, students can find themselves deep in debt. With higher income potential, people without adequate knowledge of money management can get into significant financial problems even after obtaining their high-paying job. For instance, I have physician colleagues in their sixties who own luxury homes and live lavish lifestyles. But because of money management problems, these physicians have filed for bankruptcy.

I have not always been wise with money and budgets. However, I’ve learned a lot about accounting, financial management, and investments after medical school through my involvement with investment clubs, building home-based businesses, and starting a publishing company. My wife and I have also led financial management home study groups for our church. After talking to students and residents about money management, I realized that many students and young physicians do not know how to handle money.

One factor is that many students have parents who wanted only the best for their kids and, in most cases, provided it. Students may not have to exercise fiscal responsibility when parents are providing financial assistance.

Here are 10 money management tips to help you get started in the right direction for a more financially secure future. Although students may not have high incomes, one major advantage most students have is time. Time can be used to make more money by utilizing compound interest. Start using these tips, save more money, and make your money work for you.

1. Save your money: Money will work for you when you save. Saving $20 per week in a money market fund that yields 5% interest will give you $13,472 in 10 years. In 40 years, you will have $132,403.
2. Use cash accounting: My wife and I use cash to pay for our weekly expenses. When the cash is gone, then we don’t spend. Use your credit cards sparingly because it is too easy to “charge it.”
3. Pay your credit card balances in full: More than a third of those who owe more than $10,000 on their credit cards have household incomes under $50,000. Pay the entire balance in full. Let’s consider how using credit cards can cost you a lot of money. Instead of saving $20 per week, you decided to spend $20 per week, purchase a new TV and gaming system, a new computer, and some furniture on your credit card. You’ll have a balance of about $3,500. Because the credit card gave you one year interest free as a promotion, you don’t make any payments for the first year. Then you pay the $50 per month minimum payment. With an annual percentage rate of 15% and minimum payment of $50 per month, it would take you 162 months (i.e. 13.5 years) or $8,100 to pay for your purchases. If you default on your payments, credit card companies will increase your interest to as high as 29%. Now your minimum payments are $85/month for 194 months, which costs you $16,490 to pay off your $3,500 balance. Avoid helping the credit card companies make money from your spending by paying your credit card balance in full.
4. Make a budget: The only way to know how much money you can save and spend is to make a budget. This way you can keep track of your money.
5. Shop for the best deal on a checking account: Look for no-cost checking. Better yet, if you open a money market account, then you can write checks and use your bank card to withdraw from the money market account. Currently, money market funds are paying about 5% interest a year and some are also insured by the FDIC.
6. Set limits on entertainment spending: Look for cheaper alternatives to the ski trip to Aspen, going out to the movies, and going to the clubs.
7. Look for scholarships: There are thousands of scholarships available. Find them and fill out an application.
8. Don’t eat out all the time: Eating out can be a huge money pit. Budget for dining out, and try to cook at home to save money.
9. Walk or ride your bike: During my ocular pathology fellowship at UCLA, I biked 4 miles to work everyday. I saved a ton of money on gas when prices were above $3 per gallon!
10. Get a part-time job with tips: Jobs with tips can pay very well. Remember to set some of your earnings towards a savings plan and do not simply work for spending cash.

These basic principles in money management can help you get on the right track to financial freedom and greater wealth. With discipline and knowledge, you’ll be more prepared to spend, save, and invest your higher incomes when you start your career.

Credit cards are a part of most students daily lives but they can be as much a curse as a blessing. Properly managing your credit cards is essential to a healthy financial future.

Building your credit history

It is good to have at least one national card (Visa, MasterCard, Discover) on hand to help you build a positive credit history and to provide security in emergencies. When you decide to apply for a card, compare annual fees, interest rates, and introductory offers. And to keep yourself out of debt, try to do the following:

• Pay your balance each month to avoid interest charges
• Pay your bill on time to avoid late charges
• Avoid cash advances, which come with large finance charges and interest that begins accruing immediately.
• Use your credit card once a month to build a good payment history.
• Avoid cards that attempt to charge you an annual fee.

What if you can’t get a credit card? If you have no credit or bad credit, your first card may be a bit more difficult to obtain.

If bad credit is the culprit, do what you can to clean up your history. If it’s something you can pay off, do so and talk to your creditors. Some of them will remove bad marks if you make repayment arrangements. Some companies offer cards specifically to people with bad credit. If you have to start there, keep in mind that they will probably have higher rates and stricter regulations. As soon as you have made enough on-time payments to get a regular card, transfer the balance away from the starter card.

If you just don’t have any credit, there are a couple easy ways to start it. Once you have that first card and make on-time payments for a few months, more opportunities will open up.

• Ask someone to cosign on a card for you to help build credit history.
• Obtain a secure credit card. This is a card that you would deposit funds into and use based on the amount of funds you have available. This is a great way to build credit. Most banks will offer you an unsecured credit card within 6-12 months after opening a secure credit card.

Credit card benefits: shopping for the right card

All credit cards offer some kind of benefits, but often they aren’t as good as they sound. Restrictions can eliminate or lower your benefits and raise your rates, so make sure you read all the fine print before you sign anything. One late payment can also change your entire agreement, even if that specific card payment is not late. Many companies will routinely run your credit report and if you have paid anything late they can penalize you on their card. Some common card benefits and their pitfalls include:

• Low balance transfer rate –- If you transfer the balance from another credit card, they will give you a lowered rate. There are a couple things to watch out for. First, how long is the low rate good for? For many cards, your balance transfer goes up to the regular rate after as little as 3 months. Look for one that offers the lower rate for the life of the loan. There may also be a one-time fee, usually a percentage of the balance transfer. There is one major potential drawback – if you charge anything else to this card besides the balance transfer, your payments will likely go towards your lower interest balance first. Depending on the company, they may allow you to specify that any additional payment above the monthly minimum be applied solely to the higher-balance new charges.
• Lower introductory rate — Again, how long is it good for? 12 months is average but there may be restrictions and the length is often based on your credit report. Make sure you find out how long your specific period is. Also, is interest charged retroactively on any balance not paid when the introductory period ends? This is common with store credit cards. What will the post-introductory rate be? Often companies use a low teaser to cover up a high regular rate.
• No annual fee — This is often for the first year only. There are so many options available it is rarely to your benefit to take a card with an annual fee.
• “Points” systems — Some cards offer points as a benefit. Find out what specifically you can get with your points. If there’s nothing you need they won’t do you much good.
• Fraud protection — The law limits your liability anyway, so protection shouldn’t be a big part of your decision. If it’s free, it certainly doesn’t hurt. But it’s not really something worth paying for.
• Membership rewards — Many companies give you a percentage of your charges back at the end of the year, but not always for all charges. There are usually some types of charges excluded, such as utilities, or it may only apply to purchases at specific retailers.

This leads us to a question many students have asked: “Can I pay for my tuition with my cash-back credit card and then pay off the balance with my student loans?” The answer is: quite possibly. But it’s up to you to consider the possible benefits and drawbacks of doing so.

Credit cards can be a lifesaver during your college years. They can help you build a credit history and provide a safety net for emergencies. They can also cost you a fortune if not handled properly. Use care with your credit and graduate with a clean report.

There are many lenders competing to meet your federal student loan needs, all with different terms and benefits. Which one is right for you? There are a few things you should know to help you choose.

Choosing a Lender for your Stafford and PLUS Loans

You have filled out your FAFSA and received your award letter — now it’s time to pick a lender. If your school is a Direct school you can only get your loans from Uncle Sam. This takes away the burden of choosing a lender but Direct loans do not offer much in the way of repayment incentives after you graduate. That’s not all bad though, you can still consolidate with a different lender once you graduate to get some interest rate reductions.

For non-Direct schools you have to choose from the over 3000 lenders that are capable of issuing federally backed loans. This can be a daunting task but there are a few things that can narrow them down.

• If your school still has a preferred lender list, start there. Ask the financial aid office how they screened the lenders on the list. Do they have an arrangement with them or were they chosen by performance? Some lenders will set up a fast-track system with schools to make the loan process easier on them so they are put on the preferred list. But that doesn’t benefit the student in any way. Remember: you are not required to choose a lender from this list. Federal law guarantees you the right to use any lender you wish, but your school may have some insight on the lenders on their list.
• Talk to your fellow students. Who did they use and were they happy with them?
• Use the Internet – research any lenders that look promising.
• Don’t forget your credit union if you or your parents are members.
• What origination fees do you have to pay?
• Do they offer deferral throughout residency?
• How easy is the application process? Can you apply online? How long do you have to wait to find out if you are approved?

Ask plenty of questions, take notes and arm yourself with as much information as possible. Keep in mind that lender’s terms and benefits may change over time so it is a good idea to look around every year at potential lenders. There is no inherent benefit to keeping the same lender all through your schooling — especially if you plan to consolidate after graduation. So if you find a better deal – take it!

Choosing a Lender for Your Federal Consolidation

You may choose to consolidate with your original lender but chances are you can find a better deal by shopping around. It doesn’t require any more work on your part to use a different lender for consolidation and will only add about 2 weeks to the process. Find the best deal you can, whether it’s from your current lender or a new one.

The fixed base interest rate for a consolidation loan is determined by a federally mandated weighted average calculation that every lender must use. The base interest rate should be the same no matter which company you speak to. The term of your loan is also determined by the federal government based solely on your loan balance. Your base interest rate, length of loan and deferral benefits will be the same no matter who you call. So why choose one lender over another? There are three points you should consider when comparing lenders: repayment incentives, the incentive terms and customer service.

Repayment Incentives

The government sets your base interest rate but there’s nothing that says a lender can’t charge you less in the form of repayment incentives. Some common repayment incentives are a percentage off of your interest rate for an automatic deduction from a checking or savings account, an interest rate percentage reduction after a certain number of on-time payments, or reduction or repayment of origination fees. Some companies offer cash up-front rebates for consolidation or rebates after set time periods. The lender should be able to provide you with an amortized repayment schedule showing you exactly what the loan will cost you. This will make it easier to compare lenders with different types of incentives.

Incentive Terms

Incentives aren’t any good if you can’t earn them or keep them. It can be harder than you think to make 24-48 on-time monthly payments. Ask the potential lender what percentage of borrowers actually receive their deductions. Don’t be surprised if it is only 10-20%. The first payment is the most commonly late payment and depending on the lender’s policy you could be disqualified before you even get started.

Questions to ask about their program:

• Once earned, are the benefits permanent?
• If a benefit is lost, can it be re-earned?
• Is there a grace period for late payments?
• Will using deferral or forbearance time affect benefits?
• If the loan is sold, will it retain the benefits?

Customer Service – The Deciding Factor?

• Can the lender provide all the types of loans you are interested in and handle your post-graduation consolidation or will you need multiple lenders?
• How hard is it to get an actual person on the phone?
• Are the customer service personnel friendly and knowledgeable?
• Do they have a Web site with 24 hour access to your account?
• Can you apply online?
• Do they have flexible repayment options?

These are all important questions when choosing a lender. No amount of incentives are worth it if you cannot deal with the company. Be sure to choose a lender who will treat you as a valued customer. This is another area where your school’s financial aid office can be handy. Students will often ask for their help when they have a problem with their lender, and they may be able to tell you some lenders to avoid.

Your student loans are a long-term commitment. Making an informed decision is imperative to your financial future. Start early so you don’t have to rush, gather as much information as possible and make your choice wisely!
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