Paying Back Principal During Residency?

[ellorie]

At some point I guess I'm going to have to learn about investments.  Most personal finance stuff I can do, but that piece is kind of a black box.

[rmorelan]

He said I was going to practice feeling comfortable investing money.  When I say it out loud, it all sounds pretty game-y

 

....because it is pretty much exactly that ha  

 

What he really wanted was you to set up an investment account with them so from that point forward - for the rest of your career basically - you do your investments with them. People after all don't tend to move (busy, inertia...). For a small investment now he gets a new client and a long term prospect. 

[rmorelan]

At some point I guess I'm going to have to learn about investments.  Most personal finance stuff I can do, but that piece is kind of a black box.

 

Seriously not that hard. Your read a book or two, takes less than 10 hours and you are pretty much set for life. 

 

oh and it will save you literally millions, ha. There is always that. The truth is they make it hard just you think you need them. complexity is their friend. 

[ploughboy]

But I just didn't feel comfortable with the idea of investing money when I have so little, and so much debt.

 

 

And that should be the bottom line.  You've got to be able to sleep at night.

[ploughboy]

ha awesome. 

 

I get the hate ha. Personally I feel that I understand where they are coming from. You can use them as an important resource, but you have to be on their level with knowledge. How does that go - they need to know you know that they know you know what are doing. That way they don't try to pull anything. 

 

Personally I think I am coming up on 70K paid off in almost 4 years here (not including unrealised profit on the properties). I hope to destroy in practise in about a year all remaining personal debit (I will use extensively debit financing in my real estate investing though forever - I mean that i show that works). This is all about whatever your goals are - it makes logical sense as well to just wait to practise in many ways. Point is to have a plan you are comfortable with. 

 

 

It wasn't even the "Do you realize you're taking on a higher personal tax rate by pulling so much cash out of your corporation?" question.  Which is certainly a reasonable one to ask, because tax deferral is a huge advantage of having a medicine professional corp in the first place. 

 

I don't think I'm in the absolute sweet spot on the "get my debt paid off sooner, pay less in interest, but pay more in taxes while I'm doing it" curve.  However, I'm willing to trade paying more in taxes now for the flexibility and satisfaction of getting rid of that debt much earlier.

 

But that wasn't even what they were asking.  It was a "ohmigod wharrgarbl" email about the amounts involved.  Sigh.

 

Now we're really off-topic. Sorry.

[distressedpremed]

Quick question about income. So it says here: http://www.carms.ca/en/match-process/your-application/salaries-benefits/alberta/  For alberta, the PGY-1 salary is $55,073.  

 

Using these calculators here: https://simpletax.ca/calculator . The take-home is $44,333.00.  

 

So is monthly salary around $3694.42 (number above divided by 12)?  I just want to accurately project and budget for my rent, which is around $1300, and also potentially financing a car as well.  But I want to make sure there's nothing else I'm missing in terms of other deductions.  I know we have to pay for disability insurance and CMPA and yearly college registration fees, etc. 

[thestar10]

Quick question about income. So it says here: http://www.carms.ca/en/match-process/your-application/salaries-benefits/alberta/  For alberta, the PGY-1 salary is $55,073.  

 

Using these calculators here: https://simpletax.ca/calculator . The take-home is $44,333.00.  

 

So is monthly salary around $3694.42 (number above divided by 12)?  I just want to accurately project and budget for my rent, which is around $1300, and also potentially financing a car as well.  But I want to make sure there's nothing else I'm missing in terms of other deductions.  I know we have to pay for disability insurance and CMPA and yearly college registration fees, etc. 

PARA fees, EI, CPP. 

[rmorelan]

2500 or so for that LMCC part 2 surprises some people. I mean it is a one time expense but for many it comes up in around 9 months post starting so it can be a hit. 

[distressedpremed]

PARA fees, EI, CPP. 

 

Great! thanks - didn't know about those.  

 

How much in terms of monthly income then are you looking at on average, being conservative? 

 

2500 or so for that LMCC part 2 surprises some people. I mean it is a one time expense but for many it comes up in around 9 months post starting so it can be a hit. 

$2500??? wow I could thinking of getting a new laptop...guess that's out of the question.  

So much more expensive than Part 1. 

[Mithril]

Yeah, but you can offset some of the cost by claiming it as a tax expense under tuition credits.

 

If you have tuition tax credits left over then it should take care of all of your income tax in the first two years of residency. My paycheque was around $2k biweekly or more depending on call. I had decided to pay income tax at the end of the year rather than with every cheque so that I paid less in interest to the bank over the tax year.

 

Also, specialty exams are around another $3k. CCFP for family med was just under $3k.

[thestar10]

I can't speak for Alberta (since in in ON) but I think the simplest way is to ask a resident in your program for breakdown and or a cropped picture of their pay stub.

 

You will also have call stipends on top of your salary (depending on how many calls you do these are not insignificant) and you can ask your program to not deduct income tax depending on how many tax credits you have left over from school

[thestar10]

Also, specialty exams are around another $3k. CCFP for family med was just under $3k.

Royal college exams are 5k. 

[rmorelan]

Yeah, but you can offset some of the cost by claiming it as a tax expense under tuition credits.

 

If you have tuition tax credits left over then it should take care of all of your income tax in the first two years of residency. My paycheque was around $2k biweekly or more depending on call. I had decided to pay income tax at the end of the year rather than with every cheque so that I paid less in interest to the bank over the tax year.

 

Also, specialty exams are around another $3k. CCFP for family med was just under $3k.

 

Ours is 5K ha

[Mithril]

That's robbery.

[ellorie]

Highly recommend stashing call stipends in a savings account.

 

By the time I got there, I had enough to pay for the LMCC without needing to take it out of my line of credit.  I don't factor call stipends into my budget at all, just immediately sock them away for big expenditures like exam fees.  Now that the LMCC is done, it's become a PGY5 savings plan for Royal College, CPSO, etc.

[rmorelan]

That's robbery.

 

kind of yeah. Nice end of training whammy. You have to pay for the exam, then pay to get registered in a province - all up front costs before you can do anything. 

 

you have no choice.....and they know it ha

[rmorelan]

Highly recommend stashing call stipends in a savings account.

 

By the time I got there, I had enough to pay for the LMCC without needing to take it out of my line of credit.  I don't factor call stipends into my budget at all, just immediately sock them away for big expenditures like exam fees.  Now that the LMCC is done, it's become a PGY5 savings plan for Royal College, CPSO, etc.

 

ha, that is what I did - and the total call amount you are right - it covered both my part 2 and as of a few months ago my licence exam. Working on the registration fee now, and I think I might get that covered to. 

 

While only 65ish dollars a call shift given enough time it adds up (I have about 175 call shifts to do in total). 

[ellorie]

Nice  That's what I'm hoping for - though I think I won't put away as much as you, because I am in a large call pool and therefore do call at a relatively low frequency (not complaining, I'm into it )

[distressedpremed]

Again, a highly ignorant and dumb question so my sincere apologies in advance...but how do I accurately check how many tax credits I have remaining? 

 

Edit: spelling 

[ellorie]

If you log in to CRA online you can find it there.  Go to "Tax Returns" and then click "Carryover amounts"

[rmorelan]

Again, a highly ignorant and dumb question so my sincere apologies in advice...but how do I accurately check how many tax credits I have remaining? 

 

online is probably best - everyone can have an online account with revenue canada to follow all the important credits (TFSA remaining, tax credits, returns......). 

 

a google search will get you there, and you can go from there. 

[distressedpremed]

Awesome thank you guys!!! 

 

Rmorelan, what's a good book to start learning about all this financial hocus-pocus as a resident 

[distressedpremed]

Yeah, but you can offset some of the cost by claiming it as a tax expense under tuition credits.

 

If you have tuition tax credits left over then it should take care of all of your income tax in the first two years of residency. My paycheque was around $2k biweekly or more depending on call. I had decided to pay income tax at the end of the year rather than with every cheque so that I paid less in interest to the bank over the tax year.

 

Also, specialty exams are around another $3k. CCFP for family med was just under $3k.

 

yeah...wow I just figured out how to look at my income tax credits and I have quite a lot, so this makes life a lot easier during PGY-1

[rmorelan]

Awesome thank you guys!!! 

 

Rmorelan, what's a good book to start learning about all this financial hocus-pocus as a resident 

 

you know people ask me that and I had a hard time answer it - I figured out why eventually. This has become a bit of a hobby for me, so like all people really interested in a hobby you learn about and then eventually reach the point where you know all this high level minutia and can talk about that minutia for a long time ha, usually to other people interested in the hobby. It is like people are really interested in sports know all the players and stats. If those people talked to me I wouldn't know a damn thing about what they are saying. doesn't mean I cannot enjoy a sports game, just that I am not that commited ha So I like a lot of parts of a lot of different books, and am biased by my own personal style/approach. It is personal finance after all - it is a PERSONAL. 

 

Still that is completely useless and worse really off putting. Snobbish of course, and that is annoying as I really think everyone should know this and the fine details after a point are completely useless. You could on a napkin, a single napkin, in 5 points set anyone really up for life.  

 

so some thoughts

 

“I Will Teach You To Be Rich” by Ramit Seth is a great book to start with. Covers the basics and if you follow that book you would make it to the end just fine. There are minor points about his investing strategy I don't like but that is just because I am pretty aggressive as an investor knowing that I really don't need the money any time soon, and the tax effects are better my way slightly. Also it is like most books US specific so instead of RRSPs and TFSAs you get IRAs etc. Just go past those sections. 

 

The wealthy barber and the wealthy barber returns are a great set and have Canadian editions. WB was the first book I read on finance when I was 14 ha. I was a strange child. It made everything clear, and still is the foundation for everything to me. The follow up WBR talks about index funds which is the key investment change form the first book that is critical. Other than that the book holds up very well. I would say you need to read both at this point. 

 

By the way both book are super easy reads, and for the people that don't like math they are great - there is almost none. 

 

Other books I liked where the millionaire next door - to truly show that the average millionaire is really low key. or as the simpsons put it you don't get rich by writing a lot of cheques.

 

None of those are pure investing books per say - the idea that you can go out and pick particular stocks etc seems kind of silly to me when you see how that plays out for almost everyone. It is kind of gambling - which is fun and exciting but not my cup of tea. Index funds work well for me instead. 

 

If you are interested in real estate investing we can go over that. The second investing book I read was about that and was the basis of starting doing that. 

[ralk]

Honestly, I was pretty against it, so I don't really remember.

 

I remember them telling me something about having options depending on risk tolerance and they showed me a breakdown.

 

But I just didn't feel comfortable with the idea of investing money when I have so little, and so much debt.

 

He then told me that if I didn't make money on it, it would be good "practice" for when I have more money and need to invest it.

 

I think I did open a TFSA but I never put anything into it.  I thought about it, but I didn't feel comfortable with my understanding of what to expect and why I should do it.  So I didn't do it.

 

They (MD Financial) offered up a lower-risk mutual fund using pretty much the same argument. There's some logic there, in all honesty - the historical average rate of return (and likely future rate) is above the prime rate we're paying on our LOCs. There's always a risk the fund loses money, but it's low, and there's a greater risk it earns less than the prime rate on debt (so becomes a relative loss), but the most likely outcome is coming out ahead.

 

And while I agree that the "practice" angle is a bit silly in general, I think it has some small merit here. Once we start up in practice, the optimal investment strategy will involve large amounts of money in higher-yield, higher-risk vehicles, and the sooner that starts up, the better. That's a perfect opportunity for costly mistakes to be made for those who have no idea what they're doing. That said, there's plenty that investing in a low-risk mutual fund won't teach and most of what it will teach can be learned just by reading about finances.

 

Still, I'm considering putting a small amount of money towards this. It'll be a tiny fraction of what will go towards debt payments, since I'm pretty debt-averse too and I'll learn as much from having hundreds of dollars invested as I will with thousands.