Late bloomer...


Recycles dryer sheets
Aug 17, 2004

I am a physical therapist. I have my own practice. First year in business, and I am schedule to make about $140K gross.

27 years old. Professional for 2.5 years now.

$10,000 in my IRA.
$10,000 cash in a ING account.

Will try to maximize my IRA and SEP contributions this year, I first need to situate myself so that my only monthly obligations are:

1. Business rent
2. Personal rent (who's for me living in my office?)
3. Student loans
4. % to my billing company
5. Utilities

Which I am about 3 months away from accomplishing.

In 2005 my goals are to:

1. Determine whether expanding and incorporating are worth it (time and money vs. headache).
2. Start my financial snowball.

So far I have met with a planner. He wants me to have
a. $20K in liquid form (not there yet)
b. get personal health insurance (done)
c. get long term care insurance (done), disability (done), and life insurance (done).
d. achieve my goals from above and then start stockpiling money away.

What do you think so far?

Incorporate for protection, not convenience.

I'd think that you'd want to be incorporated to shield your eventual assets from liability/malpractice lawsuits. It's a hassle to incorporate but the alternatives are even worse.

There are many books out there that discuss the differences & pros/cons among Schedule C, S corps, LLPs, & LLCs. Oddly enough one of the most understandable writers is Diane Kennedy, who unfortunately has chosen to associate with Robert Kiyosaki. If you can find one of her books like "Real Estate Loopholes" or "Loopholes of the Rich" in a library and stay away from the "Rich Dad" dreck, it'll take you through the process while discussing the pros & cons.
I think you are far too young to be buying long term
care insurance.


I second the comment regarding long term care insurance. If you got extra funds, bump your disability after you have maxed your Roth and SEP.
You did not mention if you have any dependents--if not I would question how much life insurance you really need. I hope you bought term and not from your financial planner. If fact if your planner sold you the life insurance I would encourage you to look for a different planner--one who is fee based.
At your age, disability and health insurance are your two biggest risk areas.
IMHO, quickly excused yourself from any "financial planner" who sells what he recommends--you are most guaranteed to be paying too much.
A comment on forming an entity like a corporation to shield yourself from personal liability: The "shield" will protect you from liability for debts of a business you do not personally guaranty. However, it will not protect you from debts resulting from your own negligence or intentional acts. If I as a lawyer make a mistake, not only is the corporation I work for liable, I am as well. Needlless to say, I believe malpractice insurance is a necessity. On the other hand, if my corporation borrowed money it couldn't repay, or it couldn't make its rent payments, only the corporation, not me, it responsible for that debt, unless I signed a guaranty that the debt would be paid.

... unless I signed a guarantee that the debt would be paid.
Which, unfortunately, most commerical lenders will want you to sign unless your business has significant capital assets (like real estate) that they can collateralize.
Agree that LTC insurance at age 27 is an expensive waste of your funds. While LTC is an up and coming insurance product that many folks like (I do not), you would be better to wait until you are in your 50's or 60's to purchase it. Yes the rates at age 27 are much cheaper, but there is a reason for that- very few claims to pay. The LTC policies sold today will be quite different than what will be sold 10-20 years from now as this is a realatively new (25 yrs) product that has not had time to have a large claim history established as life insurance has.

Suggest that you look into Vanguard for a Roth IRA. Low cost, no commission, large fund selection but often not mentioned by planners as they do not get to carve out a big chunk of commission or fees.

What kind of life insurance did you purchase? If it was not term insurance, it is not too late to review your selection.
Listen to Nords... If a business is worth doing, its worth insuring. Be realistic. At this stage your biz is closer to a piggy bank than a fort knox... insure it as such. As a PT you likely need professional liabilty ins. and general liability ins. probably as a S corp. Consult with an atty. and your CPA. If you're lucky both policies will total less than $6K/yr. or 500/mo. cheap peace of mind.... Today everyones walking around with a banana peel in their pocket, looking for a place to fall. Protect yourself and your family.

BUM ;)
Do consult that attorney about incorporating. A friend tried to talk me into creating an LLC myself for my business (psychologist). My attorney said, in Connecticut it won't protect you from anything. Professionals, including most health professionals, do not get the same protection from an LLC that I get as a real estate investor, for which I DO have an LLC.


Good work! You should have no trouble working toward that ER!
Thanks everyone. I will talk to a fee-based financial planner, my CPA, my attorney...

The thing I need to research on now is:

1. Being in California, is an LLC or a Professional Corporation or (other) a better fit for me?
2. What are the investment options in an LLC, PC, or other? I LOVE the SEP's capacity for me to invest $40,000/year pre-tax (assuming I make $160K).

Thanks again. I'll update my status after consulting with the aforementioned...
Good that you got Term instead of Whole Life--the more fundamental question is do your really need anymore than what it takes to handle your final affairs.
Without dependents, or outstanding obligations, you may be doing the equivalent of buying car insurance when all you ever ride is the bus :D
Too many planners will sell you anything you say yes to whether you need it or not
Oh, I forgot to mention that I owe $150,000 in student loans. Someone would have to pay my student loans, right? I signed for them by myself.

I have a nephew and 2 nieces that are my beneficiaries...
Oh, I forgot to mention that I owe $150,000 in student loans.  Someone would have to pay my student loans, right?  I signed for them by myself.

No. If you die before you pay them off then they'll take a cut of your estate and if there's not enough estate they lose and you win (sort of). I wouldn't bother with insurance to cover a loan in this case.
How do you figure out how much of my estate they would "take a cut" of?

$150 000 in student loans? That's the most ridiculous thing I've read at this site. :'(
$150,000 in student loans ?? That's nuts!!!!!!!!!!!!!

Listen. If you want to go into hock to finance
your education, it's okay with me. Honestly though,
anyone who owes a dollar after they graduate
is not paying attention. There are many many programs
to finance your college education. Not taking advantage
of them is crazy. You people paying big bucks to send your kids to college need professional help. I'm not kidding! You might as well burn the money in your yard.

John Galt
Back at the 'old plant' over 15 yrs ago - in a twist on 'putting hubby through' wife (Chem. E.) with two kids quit - went to med school - came out with 200k in student loans. Hubby sayed at the plant ,(mech. engr.) - he got the luxury of giving me by layoff notice in 1992.

BTY - She's a shrink.
LRAO:  They'll take from your estate whatever is left owing on the loans.  If you've got a $200K estate and you owe $150K then you've got $50K left to go to whomever is in your will.  If you've got a $100K estate and you owe $150K then the lenders are out $50K and whomever is left in your will gets nothing.  If you don't have dependents then this doesn't seem to be a problem.  If you've got a wife and kids then get the insurance.

Zipper:  $150K is apparently quite common for the medical profession in the US.  It's pretty expensive here for just a standard undergrad degree.  I know the shock on student loans but that's because it costs a BMW car (3, 5 or 7 series depending on the program and school) per year in the US unlike in Canada.  IIRC my share of the rent on a townhouse for a semester was more than my semester's tuition when I was an undergrad.
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