Regardless of profession, financial advice is the same

Personal Finance editor HELEN HUNTLEY E-mail: Click here Archive

By HELEN HUNTLEY

Revised August 2, 2000

© St. Petersburg Times, published July 23, 2000

Q. I am a doctor in my early 40s. After paying back my student loans and eliminating our mortgage, I have saved only a small amount for retirement. Where do I go from here? After the costs of college, medical school and the "salary" of a residency, how does one make up lost economic time? Believe me, with the costs of overhead and insurance restrictions, doctors don't make as much as you think!

A. The "secret" of making up for lost time isn't any different for doctors than it is for other people. The tried-and-true method of accumulating wealth is to spend less than you make and invest wisely, diversifying your portfolio with stocks, bonds and cash. If you are trying to do it in a hurry, you should do both those things more aggressively: save a bigger chunk of your income and invest more of your portfolio in stocks.

One obstacle well-paid professionals often face is inflated lifestyle expectations, either their own or other people's. You and your family have to decide what trade-offs you are willing to make to achieve your financial goals.

For starters, I recommend reading Charles B. Carlson's recent book, Eight Steps to Seven Figures (Doubleday), which offers investment strategies based on the experience of real-life millionaires.

I favor an approach based on stock index funds and high-quality bonds (municipal bonds for high earners), supplemented by individual investments in companies you have researched.

No doubt you have read about or heard stories from colleagues about people who hit it big with investments that made them wealthy overnight. Some of those stories are no doubt true. But for every such bet that pays off, there are many more that do not. You just don't hear people bragging about them.

Your ability to wipe out your debt is a positive sign that you are up to the challenge ahead of you. You already may have a higher net worth than some of your colleagues who have more retirement savings but are carrying substantial debt.

Q. I recently changed jobs and have $26,000 in my previous company's 401(k) plan. I will not be eligible to participate in my new company's 401(k) for a year and am uncertain what would be the best thing to do with this money in the meantime. I could transfer this money to my IRA, which has about $14,000 invested in mutual funds. The administrator of my current plan said it would be better for me to leave it there until I can roll it over to the new plan. The new plan has different funds. What would be your suggestion?

A. The simplest approach would be to leave the money where it is until you can transfer it to the new 401(k). That's what I recommend, assuming you are reasonably satisfied with the fund choices you are offered and the way the plan is administered.

You could transfer it to your existing IRA, but if you did, you would be giving up the right to later roll it over to your new employer's 401(k) plan.

Q. Is interest on a motor home tax-deductible as interest on a second home? I know many people deduct it on their income tax forms, but when I have questioned various tax preparers, some say yes and some say no. Who's right?

A. Motor homes may qualify as a second residence if they have living quarters, which means sleeping accommodations, a toilet and cooking facilities. The same rule applies to boats.

The interest is deductible if you itemize deductions on your tax return.

Online money map

If you want to organize your finances but the thought gives you a headache, try out ihatefinancialplanning.com (http://www.ihatefinancialplanning.com). The company sells financial plans, but it also offers some valuable free information, dispensed with humor.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731, or to huntley@sptimes.com by e-mail.

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