Finance 101 for New Radiologists

Maybe you’re in the beginning stages of your residency or maybe you’re about to officially embark on your radiology career. Either way, there’s a chance you have questions about how to best set yourself up for financial success.

Financial experts at RSNA 2016 offered guidance specifically for you. Ross Cameratta, financial advisor with North Star Consultant, Inc., presented tips you can start to implement today.

Debt Management
It’s important to remember, first, that not all debt needs to be repaid immediately unless you can’t bear having it hanging around. Any debt at a 0% to 5% interest rate, such as a mortgage, can actually be beneficial to you in the long run for tax purposes, but debt with interest rates above 8%, including credit cards, should be paid down as quickly as possible.

Your student loans, though, hover in the grey 5% to 8% area, and Cameratta said there are several ways you can choose to pay down these loans. Choose the path that’s best for you.

1. Forbearance: This option allows you, based on your income in residency and the size of your loans, to defer payment until after you finish your education. The loan does accrue interest, and it’s added on to the overall amount of the loan once you begin repayment.

2. Standard repayment: Like a mortgage, you can go to a lender and have your monthly payments calculated out for 5, 10, 15, 20, or 30 years. This would be your payment for the life of the loan.[[{"type":"media","view_mode":"media_crop","fid":"55362","attributes":{"alt":"Ross Cameratta","class":"media-image media-image-right","id":"media_crop_8736718380198","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"6930","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"float: right;","title":"Ross Cameratta","typeof":"foaf:Image"}}]]

3. Income contingent programs: This program is a way for you to get out from under your student loan debt within 10 years without having to pay all the money back, but you must fulfill certain requirements. You must make 10 years of on-time, qualifying payments, and you must work for a 501c3 non-profit institution. Prove you’ve done that, and the federal government will forgive the rest of your loan tax free.

4. Refinance: You can also take your student loans away from the government and move them into the private market if you choose to go into private practice. Banks might be able to offer you a better interest rate than the government can. Be warned, though, that once a bank buys your loan, the government will never take it back. You could benefit from leaving your loans with the government for six months before deciding if private practice is, indeed, the career path for you.

Emergency Reserves
Saving money during residency is hard, Cameratta said, but it’s necessary. Your goal should be to build up between 3 months and 6 months of on-hand cash reserves either in checking, savings, or money-market accounts. This money can protect you and keep you afloat in case anything unforeseen happens in your life.

Get into the habit early, he said, of automatically putting away at least $50 into savings. It helps form a habit, and you can increase the amount as your income grows. It can also help you kick-start your retirement savings.

Risk Management
There are policies that are meant to simply protect you from things you don’t see coming – disability, life, auto/home, and umbrella insurance.

1. Disability Insurance: This type of insurance can be particularly helpful, especially if you are the breadwinner in your family. If you lose the ability to work, disability insurance can help you and your family maintain your lifestyle without descending into debt. Shop around for the best policy that will meet your needs.

2. Life insurance: You can choose between term insurance for 10, 20, or 30 years, or you can choose a whole-life policy that stays with you forever. Premium rates, based on your health rating, are locked in, so your payments stay the same. 

3. Auto/home insurance: These are largely required by state law wherever you live. Check your state requirement to ensure you’re covered at least to the minimum standard.

4. Umbrella insurance: Largely overlooked, umbrella insurance can come in handy if you’re ever sued or involved in an accident. It can protect your major assets, such as your home or income, by adding an additional layer of insurance coverage.

Retirement
At the beginning of your career, the end of your career seems far away. But, it will be here sooner than you think, Cameratta said. Making plans for retirement now will only help you in the longer run.

Overall, he said, you should try to save 20% of your income for your retirement years. Take advantage of every avenue available to you to pad your nest egg.

If your employer offers a match, do it – it’s free money. If not, a Roth IRA is a good option. You can put up to $5,500 into it annually. Other employer-sponsored programs, such as the 401k and 403b, also work well. You can put a maximum of $18,000 into them yearly pre-tax, reducing your taxable income.

Mistakes to Avoid
Planning for your financial future can be complicated and overwhelming, especially as you’re starting a career. There are common pitfalls you can avoid to stack the deck in your favor and set yourself up for greater success.

1. Don’t overbuy your first home. Keep the sticker price to between 2-to-2.5 times your family income.

2. Don’t spend too much or put away too little money into savings.

3. Don’t put off saving money. Start now.

4. Choose a strategy for your debt and risk management.

5. Engage in estate planning. Set up a will or trust.

6. Automate your savings contributions. The more you spend the money, the harder it will be to convince yourself to save it.

7. There’s never a “right” time to start building your financial strategy. Get started now.

8. Don’t go it alone. Educate yourself and work with a professional who can guide you on which options and strategies are best for you.

9. Avoid getting all your financial education from Google. As a healthcare provider, your financial needs are different, and most financial advice won’t apply to you.

10. Make provisions for your retirement on your own. Don’t assume employer-based retirement plans will be enough to sustain you.

DISCLOSURE LANGUAGE: North Star Consultants, Inc. - Insurance Products and Services.  CRI Securities, LLC (CRI) - Securities and Investments. Securian Financial Services, Inc. (Securian) - Variable Products and Securities.  North Star Resource Group (NSRG) offers securities and investment advisory services through CRI and Securian, Members FINRA/SIPC.  CRI is affiliated with Securian and NSRG.  NSRG is not affiliated with Securian. NSRG is independently owned and operated. 2701 University Ave. SE Minneapolis, MN 55414.  Ross is a registered representative and investment advisor representative of CRI and Securian. 1896637/09-2017