Personal Finance

Matthew Rensberry, MD, MBA

Introduction

This is an opinionated talk (Mine - though heavily influenced by reputable sources).

NOTE: Financial Advisers do not need to be licensed!

Some Influential Books

The White Coat Investor: A Doctor's Guide To Personal Finance And Investing by James M Dahle MD
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life by Bill Schultheis
The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Thomas J. Stanley and William D. Danko
The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach

Steps to Financial Independence

$1000 in Emergency Savings
Pay off all debt
Fully fund Emergency Savings
Invest 15-20% of income
Save for college
Pay off your house early
Build wealth and give!

– Dave Ramsey –

Harold Pollack's Index Card

Max your 401k or equivalent employee contribution
Buy inexpensive, well diversified mutual funds
Never buy or sell an individual security
Save 20% of your money.
Pay your credit card balance in full every month

Maximize tax-advantages savings vehicles like Roth, SEP and 529 accounts
Pay attention to fees - Avoid actively managed funds
Make financial advisor commit to a fiduciary standard
Promote social insurance programs to help people when things go wrong

Building Wealth

Live your life with purpose and create a better world for others.

Avoid the trap of maximizing your wealth, but not your life.

Wealth

Wealth = Assets - Liabilities

Assets are something that gives you money and financial security, on the long term.
Liabilities are something that requires you to give money and time, or causes you to owe money to others.

Build your wealth mindset!

Rich vs Wealthy

Table 1: Rich Person vs Wealthy Person
Rich Person	Wealthy Person
High income	Having enough money to meet your needs, AND being able to afford not to work if you don’t have to
Spends on Liabilities (Buys expensive furniture, fancy cars, big houses, and designer clothing)	Saves and Invests extra money (Owns assets such as real estate, investments, and cash)
Thinks: Spending money buys a better life quality	Recognizes: Wealth gives real financial freedom to enjoy luxuries in life without suffering a decrease in money
Might carry a lot of debt	Uses debt only for a very clear purpose, such as an investment on a house

A Couple Examples

MC Hammer at one point had $30 million in the bank, a $1 million house with 200 staff members, and a horse stable with 19 racehorses. Eventually, those expenses and his spending, resulted in Hammer declaring bankruptcy in 1996. He ended up in $13 million in debt.

Despite his massive wealth, Warren Buffet still lives in the Nebraska home he bought in 1958 for $31,500. While he did purchase a vacation beach house in California for $150,000 in 1971, he ended up selling it for $7.5 million.

Personal Budgeting (50/20/30 Rule)

Key to growing wealth: Live below your means
Recognize Wants vs Needs - Essential (Food) vs Non-essential (Restaurants)
Saving = Paying off debts = Investing

Simpler => Better

Instead of a 50/20/30 rule think….

80/20

Automate, Automate, Automate!

The only way to improve your financial security is to arrange to automatically save 10-15% of your income before you even have a chance to spend it.

Automate as much of this process as you can!

Step 1: Start an Emergency Fund

Start today! ($1000)
Use a highly liquid account with an acceptable return
- Savings account
- Money market account
- Certificate of deposits (CDs)

Step 2: Pay off Debt

Pay off:

Credit cards
Vehicle loans
School loans

Make it automatic!

Use the Debt Snowball strategy

Account for every income dollar in your budget
Momentum > Math

The snowball turns into an AVALANCHE

Debt Snowball Example

Rank	List of debts	Interest rate	Amount	Month Min
1	Credit Card #1	22%	6000	50
2	Car Loan	8%	17000	500
3	Credit Card #2	20%	20000	100
4	School loan	3%	150000	200
5	House	6%	250000	1,500

How to do the Debt Snowball

List all debts from smallest to the largest with the minimum monthly payment due for each debt
Pay the minimum due on each debt every month and add $100/mo (more, if possible) towards the smallest debt
When the smallest debt is paid off, add that amount to the minimum of the second smallest debt
Repeat until all debts have been cleared

Do Not Carry Credit Card Debt

Pay your credit card balance in full every month

Automate this!

Avg interest rate with an unpaid balance is pushing 17%!

Protect Yourself with a Credit Freeze

Equifax
- Equifax.com/personal/credit-report-services
- 800-685-1111
Experian
- Experian.com/help
- 888-EXPERIAN (888-397-3742)
Transunion
- TransUnion.com/credit-help
- 888-909-8872

Step 3: Fill your Emergency Fund

Emergency Fund

6 - 9 months of expenses

Is it an unexpected cost?
Is it a necessary cost?
Is it urgent?

Automate this!

Step 4: Saving/Investing

Saving = Paying off debts = Investing

Fiduciary Standard

Make financial advisor commit to a fiduciary standard

Save, Save, Save

Save 20% of your money.

Saving = Paying off debts = Investing

Why 20%?

Your time to reach retirement depends on only one factor: Your Savings Rate

How much do you take home
Home much can you live on

Savings Rate	Years Until Retirement
5 %	66
10 %	51
15 %	43
20 %	37
25 %	32
30 %	28
35 %	25
40 %	22
45 %	19

Assumptions:

You can earn 5% investment returns after inflation during your saving years
You’ll live off of the “4% safe withdrawal rate” after retirement, with some flexibility in your spending during recessions.
You want your ‘Stash to last forever, you’ll only be touching the gains, since this income may be sustaining you for seventy years or so. Just think of this assumption as a nice generous Safety Margin.

Your time to reach retirement depends on only one factor:

Your savings rate, as a percentage of your take-home pay

Your savings rate is determined entirely by these two things:

How much you take home each year
How much you can live on

The most important thing to note is that cutting your spending rate is much more powerful than increasing your income. The reason is that every permanent drop in your spending has a double effect:

It increases the amount of money you have left over to save each month
It permanently decreases the amount you’ll need every month for the rest of your life

Reference:

The Shockingly Simple Math Behind Early Retirement

How to Lose Money in the Stock Market

Don't gamble in the market

Never buy or sell an individual security

GOOG
WMT
DIS
TGT
HD
etc…

Fees! Fees! Fees! (fees)

Pay attention to fees - Avoid actively managed funds
80% don’t do as well as the market after 5 years!

Table 2: Active vs Passive Managed Funds
	Active Managed	Passive Managed
Avg annual fee	0.76%	0.08%
If 10k over 10yrs with 5% return	$15,150	$16,165

Difference: $1,015

Minimize Fees

Buy inexpensive, well diversified mutual funds

Invest with Index funds (Funds that track an index):
- Diversified
- Have low expense ratios

How to Lose Money in the Stock Market

Invest in Index Funds (frequent trading)

Table 3: A Real Example of two Russell 2000 Index Funds:
Fund	Symbol	Expense Ratio
iShares Russell 2000 ETF	IWM	0.19%
Vanguard Russell 2000 ETF	VTWO	0.10%

How to Lose Money in the Stock Market

Lower your taxes! (taxes)

Maximize tax-advantages savings vehicles such as:
- 401k/403b Retirement Accounts
- 529 Education Accounts
- Roth IRA Accounts
Tax Loss Harvesting

Why prefer saving in a tax advantaged account?

Table 4: Effective Federal Tax Rate = 20%
	Pre-tax Version	Post-tax version
Wages	$200,000	$200,000
Retirement Savings	$6,500	$6,500
Taxable wages	$193,500	$200,000
Tax rate (20%)	$38,700	$40,000
Take Home Pay	$154,800	$153,500

Difference: $1,300

Over 30 years, investing that extra $1,300 (with 6.5% growth) = $119,586 in additional savings just by using a pre-tax retirement fund!

Claim your full compensation

Maximize your 401k or equivalent employee contribution

Automate this!

Tax Loss Harvesting

What should you invest in?

Depends on your risk tolerance…

Asset characteristics:
- Stocks: More volatile (go up and down faster and more frequently)
- Bonds: Safer (do not go up or down as fast or often)
- Domestic: US based (generally regarded safer)
- International: Not US based (higher risk but likely more growth)

Simple Option - Just 1 Fund:

A Target Fund like: BlackRock LifePath Index 2045

Slightly More Complicated Option - 3 Fund Portfolio:

Table 5: Choose Your Risk tolerance
	Conservative (20/80)	Moderate	Aggressive (80/20)
US Stock	14%	34%	64%
Intl Stocks	6%	33%	16%
Bonds	80%	33%	20%

AH Options for a 3 Fund Portfolio

Domestic Stocks
- BlackRock Russell 3000 Index
- SDA U.S. Equity Market Fund
International Stocks
- BlackRock MSCI ACWI ex-U.S. IMI Index
- SDA International Equity Index Fund
Bonds
- BlackRock U.S. Debt Index
- SDA Total Market Bond Index Fund

Step 5: College funding

529 Plans

Asset protected
Tax advantaged

Types of 529 plans

Savings plans
- More common
- Function much like a savings account
- Can withdraw for educational purposes tax free!
Prepaid plans
- Less common (only 11 states have them including FL)
- Directly "pre-paying" for tuition
- Based on current tuition rates

Savings plans
- Savings plan 529s are much more common. They function much like a savings account, where you deposit money, it grows within that account, and then you can withdraw it to spend on educational purposes.
- Individual states have differing tax rules and transfer rules when it comes to 529 plans. Figure out what you need to have in the plan, what you want, and shop/compare around.
- 529 Plans can be asset protected and tax advantaged.
Prepaid plans
- Prepaid plans are less common (only 11 states have them including FL), but they usually mean that you are directly "pre-paying" for tuition at public universities within that state by buying tuition credits at that school. These credits are based on current tuition rates and thus are a bargain if your child is going to go to that school.

Step 6: Pay off Home Loan Early!

Purchasing a Home:

Aim for a payment less than 25% of your monthly take-home pay
15-year fixed-rate mortgage
Put at least 10-20% down (Avoid PMI)
Remember additional costs (like maintenance and repair)

Example Mortgage

Assumptions (April 2024):

Average home price in Orlando: $372,206
- Typical rent in Orlando: $1,960/mo
Current 15 year home interest rate: 6.44%
Current 30 year home interest rate: 7.17%

Example Mortgage (Same house)

$300,000 home and you have a 20% down payment ($60,000) to avoid PMI

Mortgage Term	Interest Rate	Monthly Payment	Total Interest	Total Cost
30-year fixed	7.17%	$1,624.22	$344,719.20	$584,719.20
15-year fixed	6.44%	$2,082.75	$134,895.00	$374,895.00
Difference		$458.53	$209824.20	$209,824.20

Example Mortgage (Same monthly payment)

Assume you budget that you can pay max of $1,800 a month with a 20% down payment

Mortgage Term	Monthly Payment	Asking Price	Loan Amount	Total Interest	Total Cost
30-year fixed	$1,800.00	$332,467.18	$265,973.74	$382,026.26	$648,000.00
15-year fixed	$1,800.00	$259,272.65	$207,418.12	$116,581.88	$324,000.00
Difference		$73,194.53	$58,555.62	$265444.38	$324,000.00

Can buy 28% "bigger/better" house but pay 100% more.

Pay it off faster!

Use biweekly payments

Take your monthly mortgage amount and divide in half
Pay that payment every 2 weeks
Over the course of a year, you will pay an extra full payment towards the principal cutting off years of payments!

(Alternatively: Pay an extra 10% monthly)

Make it automatic!

Step 7: Build wealth and give!

CHANGE THE WORLD!

Make a difference

Seek opportunities

Insurance Information

Life insurance
Long-term disability
Homeowner's Insurance
Health Insurance

Life insurance

The sole purpose of life insurance:

To replace your income in case you die, so that your dependents can maintain their current lifestyle

All policies are one of two types:

Term policies (or pure insurance coverage)
- Buy enough term coverage to fill your needs
- Match the term of the policy to your needs
- Buy when you're healthy
Many variants of ~~whole life~~ (which combine an investment product with pure term insurance and build cash value)
- ~~Whole life~~ policies are high commission products
- ~~Whole life~~ is expensive
- ~~Whole-life~~ policies are built on assumptions

What should you do?

Term life policy
8 - 10 times your yearly income
Keep your investing and insurance strictly separate.
- There are better places to invest - without the high commissions of whole-life policies

Long-term Disability Insurance

Usually cheapest through your workplace.
30% of the workforce today will become disabled before they retire
- The average monthly benefit from Social Security disability has been $1,004 a month - You need a backup plan!

Homeowner's Insurance

Get a homeowner's policy that has guaranteed replacement costs

Say no to mortgage insurance policies

These pay off the balance on your mortgage if you die

Money Tools/Websites

Budgeting: Personal Capital / Spreadsheets (Vertex42) (Google) / HomeBank
Investing: Fidelity / Personal Capital / Vanguard / SoFi
Taxes: FreeTaxUSA / TurboTax / H&R Block
Banking: Ally Bank

Table 6: Roboadvisors:
	Vanguard Digital Advisor	Sofi Invest
Rebalancing	Yes	Yes
Tax loss Harvesting	Yes	No
Active/Passive investing	Passive	Active and Passive
Management fee	0.15%	0%
Account minimum	$3000	$5
Human Advisor Support	No	Yes
Fractional Shares	No	Yes

Connect with Me

Website: anchor-dpc.com
Facebook: MatthewRensberryMD
LinkedIn: Matthew-Rensberry-MD
Twitter: @RensberryMD
Email: Dr.Rensberry@anchor-dpc.com

Build a Legacy Drawer

Cover Letter
Will and Estate Plans
Financial Accounts
Funeral Instructions
Insurance Policies
Important Documents
Legacy Letters
Monthly Budget
Tax Returns
Passwords

Organize your Legacy Drawer so a specific document can be found in 30 seconds.

Notes

Cover Letter - This is simply a letter stating the purpose of the Legacy Drawer. Nothing fancy, just a way to introduce your loved ones to the contents of the drawer.
Will and Estate Plans - All information pertaining to your will and estate, including names of the executor and Power of Attorney should be located in one file.
Financial Account - Anything that has money in it and your name on it should be listed in the Legacy Drawer. This includes account names, amount and account numbers.
Funeral Instructions - All details and specifications for funeral plans should be listed so the family can fulfill your wishes. If you are married, you need one for you and one for your spouse.
Insurance Policies - All insurance information, including health, car, disability, term life, etc., should be combined into one single document for easy reference. List the type of insurance, who the policy is for, contact information and policy numbers.
Important Documents - Any legal or other important documents you have should be noted in the file. This includes deeds, birth certificates, Social Security cards and titles.
Legacy Letters - Since the intention behind the Legacy Drawer is to keep your legacy going after you've passed away, it's a great idea to include letters to your loved ones.
Monthly Budget - Add a copy of your written budget, so your spouse or loved ones know how to operate your household once you're gone. This will help your family keep track of bills and focus on more important things.
Tax Returns - Keeping tax returns in your Legacy Drawer is like an insurance policy for yourself in the event that you get audited from the IRS. Hopefully you never have to pull them out, but if you do, at least you are prepared.
Safe Deposit Box - Keep copies of all your Legacy Drawer papers in a safe deposit box - you can never be too careful. Include information in your Legacy Drawer on where your safe deposit box is and who has access to it.
Passwords - Write down all passwords, combinations, usernames and PIN numbers. This information allows your loved ones access to any documents, money or information that is left when you are gone.

	Pre-tax Version	Post-tax version
Wages	200000	200000
Retirement Savings	6500	6500
Taxable wages	193500	200000
Tax rate (31.8%)	61533	63600
Take Home	131967	129900
Difference:	2067	-2067

Personal Finance

Matthew Rensberry, MD, MBA

Introduction

Some Influential Books

Steps to Financial Independence

Harold Pollack's Index Card

Building Wealth

Wealth

Rich vs Wealthy

A Couple Examples

Personal Budgeting (50/20/30 Rule)

Simpler => Better

Automate, Automate, Automate!

Step 1: Start an Emergency Fund

Step 2: Pay off Debt

Use the Debt Snowball strategy

Debt Snowball Example

How to do the Debt Snowball

Do Not Carry Credit Card Debt

Protect Yourself with a Credit Freeze

Step 3: Fill your Emergency Fund

Emergency Fund

Step 4: Saving/Investing

Fiduciary Standard

Save, Save, Save

Why 20%?

How to Lose Money in the Stock Market

Don't gamble in the market

Fees! Fees! Fees! (fees)

Minimize Fees

How to Lose Money in the Stock Market

Invest in Index Funds (frequent trading)

How to Lose Money in the Stock Market

Lower your taxes! (taxes)

Why prefer saving in a tax advantaged account?

Claim your full compensation

Tax Loss Harvesting

What should you invest in?

Simple Option - Just 1 Fund:

Slightly More Complicated Option - 3 Fund Portfolio:

AH Options for a 3 Fund Portfolio

Step 5: College funding

Types of 529 plans

Step 6: Pay off Home Loan Early!

Example Mortgage

Example Mortgage (Same house)

Example Mortgage (Same monthly payment)

Pay it off faster!

Step 7: Build wealth and give!

Insurance Information

Life insurance

All policies are one of two types:

What should you do?

Long-term Disability Insurance

Homeowner's Insurance

Say no to mortgage insurance policies

Money Tools/Websites

Connect with Me

Other Slides If Appropriate

RoboAdvisors

Former Slides Saved for Reference

Roth for High Earners (Min taxes)