Residential Space A creative outlet during residency, turned ongoing virtual soap box

Dreams of Traveling Deferred  1

Posted on March 17th, 2008. About Money.

I wonder if I will ever be able to afford to travel through Europe again:

1 Euro = 1.575 US Dollars
1 British Pound = 2.00 US Dollars
(courtesy of the Universal Currency Calculator)

Tack on top of the exchange rate that hotel rooms are super expensive in the major cities anyway even with a good exchange rate, and it appears I would be bankrupting myself with mere dreams of returning to Paris or Amsterdam. A hyperbole, of course, but my point stands. It scares me that so many foreign business people are purchasing for sale and foreclosed properties over here – we have gone from a Superpower to the land of bargains for overseas investors.

At least we’re even again with the Canadian dollar – one of those is equal to 1.004 US dollars today.

Kids and Money  1

Posted on December 22nd, 2007. About Money, Ramblings.

Evan and I frequently discuss how we are going to teach Little G and his future siblings fiscal responsibility. Goodness knows, in this era we cannot depend on the government to set a good example. I recently became acquainted with the Seattle-based company, Moonjar, and liked what I saw. The company creates toys and books designed to teach children how to properly manage money. I love it!

Here is their bank for children (subdivided into three sections – for spending, saving, and giving):

CMJTransparentWebBIG

It’s a simple, but brilliant idea. I got one of these for my honorary niece, four-year-old Emilyanne, and I hope that she will put it to good use. When she makes her first million in the market at 16 after becoming a silver-preferred donor to the local symphony, I’ll write another review of the product. I look forward to teaching Gabriel with toys such as this very soon!

Pre-paying the mortgage vs. Saving for retirement  2

Posted on January 30th, 2007. About Money.

A recent family vacation and viewing the Canadian financial channel prompted an impassioned discussion – if a person has extra money left over, what to do – pay off the home mortgage early, or contribute to the retirement accounts?

I say – contribute to the 401(k) (or Roth IRA, or whatever retirement account is available). Here’s why:

Let’s presume a person has a $100,000 mortgage, for simple math purposes. Let’s also assume a 30 year mortgage and a 5.75% interest rate (this seems to be pretty standard when analysts make estimates). This makes the payments $583.57/month. The total amount of interest paid over 30 years on this mortgage is $110,086.23.

Now, if I suddenly have an extra $200/month available to me, here’s what happens if I place it towards the mortgage principal: the loan is paid off in 16.5 years as opposed to 30, and I only pay $54,986.58 in interest, a total savings of $54,876.49 from what I would have paid from making minimum mortgage payments for 30 years. My brother pointed out that, once the mortgage is paid off, the entire $583.57/month + $200/month ($783.57/month) can be placed in the retirement account. If we assume an 8% rate of return on the 401(k), putting $783.57/month into the account for 13.5 years will give us an account value of $231,829.75. Subtracting out our personal contribution of $126,938.34, the pure earnings on the account during this time amount to $104,891.41.

So what did we earn by paying off the mortgage early and then contributing fully to the 401(k)? $54,876.49 (money saved from not paying extra interest on mortgage) + $104,891.41 (earnings on the retirement account) = $159,767.90.

Compare that now to paying minimum mortgage payments for the full 30 years, and putting just $200/month in the 401(k) over this same time frame. After 30 years, the 401(k)’s value is $293,630.08. Our personal contribution to it was $72,000.00, so subtracting that out, our pure earnings are$0 (money saved on interest from paying off the mortgage early, which of course we are opting not to do) + $221,630.08 (earnings on the retirement account) = $221,630.08.

For simplicity of calculations, we have only compounded the interest annually (which, in actuality, the earnings on the 401(k) are continuously compounding as we’re adding money every month and the value of the account is constantly changing). Inflation is also not included (3–3.5%). Finally, we have also not included the tax breakdown (money into the 401(k) goes in pre-tax, thus lowering taxable income and favoring the 401(k) contribution over paying off the mortgage early, since the $200/month would be taxed prior to being put towards the loan; also mortgage interest can be deducted, so it’s not costing as much as it seems to pay the interest as there are breaks for it). And remember – both people still own the same house at the end of 30 years, but one has a retirement account worth $60,000 more than the other. And while home loans are easily available, it’s not as feasible to get a loan just for living expenses during retirement (how do you pay it off, unless you sell your assets?).

So I stand by my assertion that it makes more sense to contribute to the retirement account over paying off the mortgage early. Miracle of compounding interest indeed!

Of course, both options make more sense than blowing a lot of money each paycheck on shoes and purses, a pastime of several colleagues who laugh about not putting money away for anything long-term.

The first “red” in MS Money  0

Posted on June 9th, 2006. About Money.

This is the first time since I became an official investor a year ago where the unsettling sight of red greets me when I load my portfolio in MS Money. I have not lost all gains over the past year, but am now negative for my year-to-date returns, and I must admit – not quite as much fun as it was when it was black. 8) Fortunately, pay day was today, so perhaps I will get a little dollar-cost-averaging in for this pay period before things recover.

I also made my first actual stock purchase about two months ago, thinking I had a good idea, and so far – not so much. From now on if I make a purchase from my taxable investment account, it will be in the form of a mutual fund – either index or otherwise. Unless a company gives me stock as a bonus of some sort, I do not think I’ll be purchasing it again any time soon.

National Healthcare System – The Way To Go  3

Posted on May 4th, 2006. About Health Care, Money, News and Politics.

I attended a conference this morning during which one of my colleagues, a graduating third year internal medicine resident, gave an excellent presentation on the pros and cons of a national healthcare system. Prior to graduating from medical school, I was quite hesitant about this idea. After a year of practicing medicine as a physician, I am in favor of it, because I honestly believe it would provide better care to more people at a lower overall cost.

Let’s be honest – healthcare inflation is drastically out of control in this country. It’s only getting worse – it will not get better. I think that is worth re-stating for emphasis – IT WILL NOT GET BETTER. Healthcare is >12% of our GDP and is rising. More than 40 million Americans are uninsured, and this does not include those on Medicaid and Medicare – also funded by tax dollars. In short, I do not think our current system is sustainable.

I was against this notion for a long time because I possessed several fears: A) Huge waiting lists would arise and it would take months to have a simple procedure done. B) Research and development would be stifled because drug company profits would fall and thus there would be less incentive to fund research. C) Physicians would be paid little for the amount of training they have undergone. D) The quality of care would be compromised.

I will address these points individually, as I believe many people share these concerns:

  • Waiting Lists – I, as an individual with excellent private health insurance, had to wait over two months for an esophagogastroduodenoscopy (EGD). I have had patients this year who have had CT scans in the ER demonstrating masses in their colons, and if they are not admitted to the hospital, then the soonest they can be worked in for a colonoscopy is three months. The truth is, we have horribly long waits today, and if anything a national system will be more uniformly funded in such way that some of these waits can be reduced.
  • Research and Development Dropoff – A national plan would likely involve bargaining with drug companies to label certain drugs in specified classes as “formularies,” that is, first-choice selections that can be obtained at lower cost. I am all for R&D, but much of the funding, even in private companies, comes from the federal government already. The National Institutes of Health (NIH) gives huge grants to the pharmaceutical industry for scientific investigations. In addition, 85% of new drugs are what we call “me toos,” drugs that are not new or innovative, but just different forms of what already exists and offers no added benefit to what is currently available. If anything, I believe that this new system would encourage true R&D – why develop yet another statin when three others, the three that are supported with clinical trials, have been shown to be more effective? They would be motivated to then focus their efforts on creative new approaches to, say, amyotrophic lateral sclerosis (ALS), a disease where no good treatments currently exist.
  • Physician Compensation – There are many models that exist for a national system, including one that supports single-party payer reimbursement. Under similar systems physicians are well-compensated without the hassle of having to jump through twenty different hoops with hundreds of insurance companies (and each company selects their own hoops) to try to get a procedure covered that may end up being denied – and if denied, the financial burden falls on the patient, or if the patient will not pay, the healthcare provider. On the other hand, under our current system, we see many patients without insurance who will never be able to pay the bill. The hospital, or the physician’s office, eats the cost. We are required to treat “emergencies” whether the patient has funding or not – and while this may seem okay to some, why should the hospital, a business, have to eat the cost? Under a national system, the hospital and physician are reimbursed for every patient, patient’s don’t have to worry about hospital bills, and the system comes into better balance.
  • Quality of Care Compromise – It is now difficult for me to imagine the quality of healthcare being compromised. For some of my patients, when they realize that their funding is about to run out, or if they worry that they can’t pay their bill, they leave the hospital prematurely before their treatment has been completed. Because physicians spend so much time on paperwork, there is less time to provide patient care – eliminate the papers, and suddenly we have more time to spend with each patient, or we have time to see more patients to reduce the waiting periods for appointments.

Perhaps the biggest reason I am in favor of this system is because it would bring preventive healthcare to the forefront of medicine and reduce the cost of catastrophic medical complications. For example, in Quebec a $2 copay was added for each prescription picked up at the pharmacy and a small copay (don’t know the amount, but it was similarly small – less than $5 per visit) was added to each visit. The number of ER visits shot up dramatically and the number of dollars spent on inpatient hospital admissions skyrocketed. Now, a system is in place with no copays for anything, and their healthcare spending overall is back down significantly. I have seen several studies outlining this and it really does appear to be effective.

There are multiple propositions on how to fund such a system. For starters, the taxes we pay for Medicare would go to the new system. It has also been estimated that the amount of tax required would be anywhere from 8 to 17%. It sounds expensive, and it is, but consider that employers providing health coverage (even with copays) pay anywhere from 7 to 25% of each employee’s annual salary to provide this benefit. Employers could still bear this cost, or else be able to increase salaries such that the federal tax could be removed from the employee’s paycheck.

Consider this – uncontrolled diabetes over years often leads to kidney failure, blindness, non-healing skin wounds that lead to amputations, and premature nursing home placement. If I have a patient with early diabetes and without insurance, she can either A) go to her physician for her checkups every two to three months and obtain her oral medication or her insulin free of charge, or B) she can act noncompliantly with her recommended care because she has no money and no insurance – and then, 15 years later, we have a woman in florid kidney failure, on dialysis three days a week (hugely expensive), going blind, in a nursing home at the age of 60, and draining the system of thousands of dollars a month. It sounds dramatic, but I cannot count the number of cases I have seen almost exactly like this one. I know people often think of a nationalized system as a “liberal” idea, but I insist that it is a fiscally conservative notion, and one that must be considered before being cast aside. Over a ten year period, it is estimated by healthcare economists that a nationalized single-party pay system would save over a trillion dollars – yes, that actually says trillion. A thousand billion. That’s $100 billion dollars a year.

If you have read this far, I applaud your attention span. If you would like to learn more about a national single-party pay healthcare system, one website many of us like is that of the Physicians For a National Health Plan. I am also including a link to the Physicians’ Proposal for such a plan that was published in the Journal of the American Medical Association in 2003. There are many excellent resources listed in the bibliography for more information. I welcome comments on this issue, as always, and hope to hear what you have to say.

Thoughts on Personal Finance  0

Posted on March 11th, 2006. About Money.

My sister-in-law, Martha, recently constructed a blog post, explaining her views on personal finance, not over-spending, and expounding on how at times she feels she is one of the only young adults concerned with money, investing, saving, etc. Then, in a subsequent post, she recounted several expensive purchases she had made recently and humorously wrote something along the lines of “so much for being financially responsible.” 🙂

I appreciated this post, because it is a concept to which I can totally relate. As many of you know, I am regularly posting diatribes about personal finance and money, and ranting about how people my age are clueless about money. I recently completely paid off my American Express card’s balance, the only credit card on which I owed a cent (the HELOC on my home doesn’t count, methinks). Swelling with pride over this victory, and beaming at my lack of credit card debt, suddenly I was faced with standing in a wedding. This required a plane ticket to South Carolina, a hotel room, a bridesmaid’s dress – and before I knew it, American Express and I were once again well-acquainted. Back into the desk drawer it goes until the balance is gone.

On a brighter note, yesterday was payday, and the 403(b) increased again. In addition to this and my Roth IRA, I also opened a taxable investment account with Fidelity a few months ago. I just can’t seem to get enough.

Huge Surprise  0

Posted on February 27th, 2006. About Money.

The title has sarcasm behind it, for those who may not interpret my tone correctly.

I saw this article on the Money site – basically, it explains that there has been a boom in new housing construction (although it’s now falling back a bit), thus making houses that are new-ish (1-4 years old) difficult to sell.

It confirms what Evan and I have professed over the past year – about how houses are not always sure things when it comes to income from an investment. Not that we’re speaking from actual experience or anything… (yeah, right)

Seattle Housing Market Likely Strong  0

Posted on February 20th, 2006. About Home, Money.

For months now, as the pessimistic “experts” have predicted that the general housing market is nothing more than a bubble that is about to burst, I have insisted that the Seattle housing market is more immune to this gloom-and-doom forecast. My argument goes something like this:

  • The median income for the city is very respectable, and from what I am observing, those who are relocating here are educated, employable people.
  • There are a vast number of companies headquartered here that are going strong – the best known are Microsoft, Boeing, Amazon.com, Starbucks, and Real; biotech continues to grow as well in the South Lake Union area. In short – there are jobs (well-paying, stable jobs).
  • It may be a shock to people from the Carolinas (as it was to us) to learn how much housing costs here (I challenge anyone to find a nice three bedroom, two bathroom 1800 square foot house for less than $325,000+ in Seattle or in any town within ten miles). However, folks from California are flooding into the city because the housing, relatively, is so affordable. Real estate is not nearly as expensive as it is in San Francisco or Los Angeles. Yet, Seattle is just as nifty of a city (I would argue, even niftier) than these two locations. A well-kept secret.
  • Therefore, with employed, educated individuals quickly relocating to this area and wanting to invest in property, I’m doubting that there is a bubble here, ready to burst.

Anyway, an article in The Seattle Times peaked my interest (thanks to Evan for showing it to me). Lawrence Yun, the senior economist for the National Association of Realtors, studies home trends across the nation regularly (he is located in Washington, D.C.). According to this article, he “predicts that the Seattle area will lead the nation’s major metro areas this year in home-price growth, even as prices moderate in some cities and perhaps fall in others.”

I have included a table from the article, demonstrating that the median home price in Seattle has increased by 56% from 2000 to 2005, as compared to San Francisco’s 60% (from a much higher starting point) and Los Angeles’ 124% (also from a much higher starting point). The other part of the table outlines job growth, which shows that the U.S. average is currently at 1.5%, San Francisco is at 1.6%, and L.A. is at 1.2%. I am pleased to see Seattle’s employment growth rate at 3.3%, more than double the U.S. average.

seattlerealestate.gif

I would love to see this on the one hand – my condo would appreciate, and I could finally pat myself on the back for making a smart investment decision. However, should I remain in Seattle following my neurology residency, it doesn’t help my situation if I want to move to a larger place. If my condo is worth $500,000 by then, it will just cost me $1,000,000 for a house. I suppose it only makes a difference if one sells and moves to a less expensive area. But then – interesting cities are expensive for a reason. People want to live in them, and they are willing to pay for such exciting and amazing lives.

Ramblings on jobs  2

Posted on February 15th, 2006. About Money.

First of all, congratulations to those who were insightful enough to major in engineering as college students! You engineers have done it again – for the umpteenth consecutive year, engineers are the highest paid employees when graduating from college and accepting their first full-time jobs.

According to this article and several others I located to confirm this point, chemical engineers are in the lead for the highest straight-out-of-college salaries, followed by electrical/computer engineers, while mechanical engineers hold the #3 spot. Unfortunately, their salaries have not been increasing tremendously, but their professions are still considered quite lucrative. Salaries aside, engineers are intelligent and loveable people, and I’m very happy to be married to one. 😀

Now…as for what I believe to be the *worst* job ever – it has to be Scott McClellan’s position. Who could possibly want to be the press secretary for this administration? Having to face the media day after day, justifying the actions of the president and his cabinet? Wow – no thanks. Evan and I were watching McClellan explain why the White House waited 24 hours before releasing the story about Dick Cheney’s accidental shooting of his fellow hunter over the weekend, and I thought – this poor bastard. He has to answer for every mistake made. Surely they don’t pay him enough for this.

Oil Prices  2

Posted on January 30th, 2006. About Money, News and Politics.

As many of you who know me are probably well aware, the rise in oil prices over the past few years has not bothered me. (Warning – here comes another list.) This is primarily because: A) I hardly ever drive, B) Gas is not nearly as expensive here as it is in Great Britain, and C) My hope is that expensive gasoline will force people away from gas-guzzling SUVs and towards more energy efficient vehicles and transportation modalities.

I have heard quite a bit from the media recently about Iran, oil hitting $68/barrel, blah blah blah…and then I found this most excellent graphic at http://money.cnn.com :

Oil through the ages

I especially like that the price of a barrel of oil is adjusted for inflation so that I can relate to how much of a burden the price really was. I am discounting the 1864 value since these folks were not dependent on automobiles, but the 1979-1980 value is interesting, isn’t it? Oil has been (when adjusted) higher than $68/barrel before with the masses panicking, and things cooled off. I expect the same may happen this time around as well. Then, perhaps the panic will be over how oil stocks are “tanking.” Too soon to tell, though.

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