The Decision: Where to Put Your Money
A bonus. An inheritance. A tax refund. Or an amount you've saved up. It doesn't much matter how the $10,000 comes your way.
The $10,000 question is whether you should apply it to debt, spend it, save it, invest it, or some combination of these strategies. The answer often depends on where you are in your life and stage of your career.
We've taken three potential scenarios based on those variables and looked to some experts for their advice for physicians who are young and have just started to save; midcareer, with some money already in the bank; and later in their career, looking toward retirement in the near future.
Out of the Gate
What's the four-letter word that's top of mind for most physicians who haven't been practicing very long? Debt, of course. You're all too familiar with the heavy weight of student loans, but there could also be credit card balances and auto loans nipping away at just-blossoming salaries.
Apply it. "Pare down debt with at least a portion of the $10,000," suggests personal finance expert and radio talk show host Ilyce Glink, a personal finance author and columnist. "Let's say you pay a $25 minimum each month on a $3000 balance at a 17% annual percentage rate. By the end of the 10 years it will take you to pay it off, you will have paid $2241.14 in interest charges."
Stash it away—but at arm's length. Also, start funding a liquid "rainy-day" account that you can tap if you lose your job or experience another unanticipated event, such as a car or medical emergency, that might require your having to spend thousands of dollars. As a rule of thumb, it's best to tuck away an amount that comes to about 3-6 months' worth of living costs. If your non-student loan debt isn't too significant, set aside the whole $10,000; otherwise, use a portion of it and supplement with automatic payroll deposits until you reach your few months' goal.
Where should you park the money? First and foremost, it must be liquid—easy to get hold of, and not invested in any securities you'd need to sell in order to free up the cash. "Although banks aren't paying even 1% interest," says Glink, "they're still the safest place to stash it." You'll get a slightly better rate with online accounts as opposed to brick-and-mortar banks. Glink suggests considering an app called MaxMyInterest.com, which automatically shifts your cash among a series of FDIC-insured online banks in order to optimize your interest rate.
Multiply it. If your non-student loan debt isn't weighty and you already have a rainy-day fund, open or add it to index mutual funds for long-term investment and savings in a low-cost brokerage account. Start simply, with one of the major, no-load (ie, no sales charge) index mutual fund companies, such as Vanguard (www.vanguard.com; 877-662-7447), Fidelity (www.fidelity.com; 800-343-3548), or T. Rowe Price (www.troweprice.com; 800-225-5132). "A basic, well-rounded portfolio could consist of a total stock market fund, a total bond market fund, and an international stock fund," advises Glink.
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Any views expressed above are the author's own and do not necessarily reflect the views of WebMD or Medscape.
Cite this: Marcy Tolkoff. Where Should You Invest $10,000? - Medscape - May 04, 2016.