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Money, Time, Expense Reimbursements

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jonc101 edited this page Jun 10, 2024 · 24 revisions

Personal Finance Primer (How to Make You All Millionaires)

  • Did you realize you have a second job that you are likely completely untrained for and making many common mistakes in? (Finance / Pension Manager)
  • How much does that fancy car or other luxury item really cost you? (Opportunity Cost)
  • Start saving at 25 vs. saving MORE at 35? (Unintuitive Exponential Growth)
  • Pay down debt or invest? Or both? (Math vs. Human Behavior - Asset Allocation vs. Leverage)
  • How will you react when your home and investments lose half of their value? (e.g., 2008-2009 financial crash) (Risk Tolerance)
  • How much total compensation are you getting from a job vs. your salary? How much do you take home vs. goes to taxes? (Mental Accounting / Compartmentalization - Tax Optimization)
  • Roth IRA vs. 401k/403b vs. regular (taxable) investment accounts? (Tax Preferred Accounts)

Workshop Presentation

Building Net Worth and Cash Flow (Real Life Report Card)

Most people live paycheck-to-paycheck, just trying to cover their monthly payments (cash flow). This is important to know where your money is going, but you also need to track your net worth every year. Though many of us like getting straight A's and padding our CV/Resume, banks won't care when you're applying for a mortgage/loan. They'll want to see your "real life report card" (e.g., debt-to-income ratio, credit score, net worth balance sheet).

Many of you are likely broke, with a negative net worth having more (student loan) debt than assets. This makes you poorer than a penniless homeless person living under a bridge. Compounding interest means time has an exponential impact. The sooner you can claw out of high interest debt and instead start investing, money starts working for you instead of against you, even while you sleep.

To achieve financial independence / retire, you need your passive investment income/growth to cover your expenses. A common heuristic is that you can safely withdraw ~4% of your retirement/investment savings per year. To achieve this in ~25 years, do not incur anymore debt and commit 20-25% of your gross income towards building your net worth.

Home mortgage, business, and education loans can be reasonable exceptions for incurring debt towards something that produces more value over time, while credit cards and car loans are NOT. https://www.whitecoatinvestor.com/how-to-think-about-debt/

Building your net worth can mean paying down debt, saving cash, or investing. If you're not sure which one to do next, these frameworks offer some simple and reasonable guidance. Though ultimately it's the total amount of margin that you put towards any of these steps that matters more.

Broader FAQ

A broader FAQ intended for physicians, but applicable to any who will end up with a high income job after years of training. https://www.whitecoatinvestor.com/faq-frequently-asked-questions/

Covers a good range of other questions such as...

  • Should you buy disability insurance?
    • Probably once you have an income, since most of you reading this will have most of your wealth coming from your future income. How would you care for yourself if you suddenly became disabled in a terrible car accident?
    • Rule of thumb: Buying insurance is a money losing proposition (it has to be for insurance companies to stay in business), so DON'T buy extended warranties on computers and appliances that are replaceable. Instead, buy insurance when the potential cost of loss could be catastrophic and bankrupt you (e.g., health and liability insurance).
  • Should you buy (term) life insurance?
    • Yes, once you have someone whose life depends on your income (i.e., children).
    • While you're at it, setup a Living Trust and Will, which avoids a lot of red-tape to take care of your heirs/successors if you were to unexpectedly die in a global pandemic.
    • Note that your employer provided insurance does NOT really count. It likely covers way too little, and you'll lose it if you ever leave your job, which is exactly what would happen if you got sick.
    • Note the distinction between cheap term life insurance is what you want, and not expensive whole life insurance which looks like an investment but not worth it when you can just invest yourself without the extra fees.
  • What should I invest in?
    • If you have no idea as a trainee, at least just max out your Roth IRA every year and buy a low expense ratio total stock market index fund or target date retirement fund and forget about it. You can revisit and get fancier once you're out of training and earning more income to think about, but getting fancier is actually LESS likely to yield a better result. https://youtu.be/mW0HdLFXhRQ
  • Should I buy a house?

    • As a trainee, almost certainly not. Even after you graduate and starting getting your first big paychecks, probably not immediately. There's enough likelihood you will move or change jobs shortly after starting your first one such that you should be sure you're going to stay in one place for many years before buying (otherwise you'll lose too much to the transaction costs of buying and selling property). Note that this doesn't mean you can't live in a house. Just means you may be better off renting frugally first. But you're just throwing away money on rent? True, but you also throw away money on transaction costs, property tax, mortgage interest, repairs/maintenance and opportunity cost of capital when you own. The money you save on those things could be invested elsewhere instead of your home.

      Sensational but pointed commentary on why the house you live in is more of a consumption item that you're deciding to spend money on, and not a value generating asset/investment. https://youtu.be/-KhBRpKCfvQ?si=wRsb3QDnP8XCYB1e

      Analytical breakdown to weigh whether buying or renting makes more sense. https://youtu.be/Uwl3-jBNEd4?si=DBeNrSFt2z3_5kRp

The above is all pretty simple and mundane, and completely NOT a get-rich-quick, Silicon Valley approach to land millions of dollars from venture capitalists to build a business and cash out after a billion dollar valuation. Having an entrepreneurial spirit to translate your research discoveries into practical businesses can be a great high variance outlet. Nonetheless, the simple (but not necessarily easy) approach above is perfectly effective and entirely likely to result in you becoming a millionaire by your 40s.

Building wealth is surprisingly simple (you've learned much harder things in your primary studies), but that doesn't make it easy. (Losing weight is also simple, but extremely hard, as it's driven more by our human behaviors.) Building wealth requires income, a plan and systems. Even better to have automated "pay yourself first" systems to avoid decision fatigue and behavioral errors (that's why 401k/403k paycheck contributions and paying down mortgage debt into equity are such reliable methods).

Time vs. Money

Particularly for clinical fellows, beware that your time is now much more valuable than money. Don't grind away on admin tasks that can be delegated. Feel free to buy software, tools, etc. if they make your work more effective and efficient. Rough rule-of-thumb: if we can pay $100 to get back an hour of your time to do more work that only you can do, it's worth it. Try working through this online survey to assess what your time is worth. Grad students, maybe don't do this, as it will be too depressing. I still value your time though!

FYI: All of the above should be considered for educational entertainment purposes. I am not a financial advisor, accountant, or lawyer, so always make decisions for your own individual situation.

Resources and Reimbursement

Laptop

You'll need a Stanford-encrypted device to work with patient data. Minimum spec recs (2024):

  • 16GB+ RAM (Recommend 32GB+)
  • 512GB+ SSD (Recommend 1TB+)

To order a new device:

  1. Get authorization from Dr. Chen.
  2. Just pick something from an (online) store and have admin staff purchase for you. There are internal IRT request methods (linked below), but they have often been a disaster with dropped messages and lack of follow through. The flip side is that you will have to take care of the initial software, encryption, and network compliance setup that IRT could do.

Other Purchases

For other work-related purchases (e.g., extra monitor for desk, office chair, software licenses, etc.), probably easiest to just find the thing you want on the web and email the link to the admin staff to purchase for you. This way you won't have to incur a credit card charge and be stuck waiting potentially months to get reimbursed. Just CC me on the request so I can confirm the appropriate charge account, and make sure the items are delivered to the office (not home) to make it clear they are business (not personal) expenses.

Stanford Medicine Box

For undergraduates or those with previous Stanford University Box accounts, you will need to convert to a Stanford Medicine Box. To do so, opt-in to Stanford Medicine Box via this form here: http://med.stanford.edu/box/opt-in.html

Conferences / Travel

If you want to attend a conference, the lab will generally cover expenses if you get a first author paper or oral presentation accepted at the conference (or have "credit" from a recent first author paper published in a journal). If you get a paper accepted at a conference, you're also in a very strong position to find a (student) travel award to cover expenses.

Stanford policy is that any travel expenses (airfare, hotel) have to be booked through internal systems (you're not supposed to just book a hotel online yourself).

  1. Before your trip/conference, have our admin support book the travel for you and potentially fill out the following form: https://web.stanford.edu/group/fms/fingate/docs/certification_student.pdf

  2. Keep a receipt of all expenses

  3. After your trip/conference, email our admin support (see group website) and copy Jonathan with line items and a total expense to be reimbursed.

Publication Expenses

If you get a paper accepted for publication with an option for Open Access, generally okay and better for us to just pay for Open Access (increases accessibility and citations) in the vain of open science practices.

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