Now is the best time to begin preparing

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Now is the best time to begin preparing For your
career as a Chiropractor Today we will be talking
about some things you can do to prepare
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You can have anything you want--if you want it
badly enough.                                 
      You can be anything you want to be, do
anything you set out toaccomplish, if you hold
to that desire with singleness of
purpose.                                         
                                                  
      -A Lincoln
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Preparing for Practice Understand financial
principles and Get Financial Life in Order Set
goals for yourself/your practice Visit
practices Read books/go to seminars Talk to
advisors Most important, keep notes
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Principle 1 TANSTAAFL There aint no such
thing as a free lunch You cant get something for
nothing Involves COST/BENEFIT analysis
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In considering COST/BENEFIT analysis, two related
principles The first is Opportunity
Cost Opportunity Cost of a decision is the
value of the next best alternative that must be
foregone (sleeping vs. class)
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In personal finance, opportunity cost relates to
spending, saving, investing decisions. What else
could you do with your money? Opportunity costs
involve money, time, and psychic pluses or
minuses. Example buying a home vs. renting
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The second principle is Diminishing marginal
utility Utility is the ability of a good or
service to satisfy a human want Marginal
additional, one more Marginal Utility is the
extra satisfaction derived from having one more
unit of something. Marginal utility ALWAYS
diminishes with additional consumption! (I cant
believe I ate the WHOLE THING!)
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In economic decision making, marginal cost and
utility can be compared. For example, do you want
a front-row seat at the concert for 60 or a
back-row seat for 25? The concept of marginal
utility helps determine extra benefits from a
decision. It asks the question Is the additional
satisfaction worth the additional cost?
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Properly valuing costs and benefits of
alternatives is a KEY to rational financial
decision making Remember that marginal utility
(satisfaction) ALWAYS diminishes with
consumption. Choices are made on the basis of
cost/benefit analysis of opportunity cost (with
some intangible psychic factors thrown in.)
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TANSTAAFL applies especially to Risks and Rewards
of financial decisions You cant have high
returns (rewards) on investments without risks A
low-risk investment will yield low return
(reward) A high-risk investment will (may?) yield
high returns
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Principle 2 Keep a watchful eye on the financial
environment I. The business cycle and the state
of the economy To make sound financial
decisions, you need to know the current state of
the economy and where it is headed in the next
few years
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The Business Cycle is the upward or downward
movement of economic activity that occurs around
the growth of the economy Business cycles vary in
duration and intensity but all have 4
phases Boom - a very high peakDownturn - fall
from the peakTrough - bottom of the
downturnExpansion - upturn
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Since World War II The average cycle has lasted
60 months (5 years) The longest was 117 months,
the shortest 28 months Average length of
expansions 51 months average length of
recessions 11 months What goes up must come
down, and vice versa.
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Obtain info about the economy from A. Gross
Domestic Product value of all goods/services
produced by each country in a year It reports
economic activity, which is an indicator of the
growth of the economy Growth rate of 2 or less
is considered low 4 or more is considered
vigorous
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• Leading Economic Indicators
• Index of Leading Economic Indicators is a
  composite of 11 indicators which offers a
  reliable prediction of future direction of the
  economy
• Some of the key indicators
• New housing startsConsumer good orders
  Consumer confidenceUnemployment claims new
  business formation

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Understand and use the concept of Inflation.
Inflation affects purchasing power.
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• Consider the impact of Inflation
• Inflation is a steady rise in the general level
  of prices.
• It is measured by the Consumer Price Index a
  market basket of goods and services that a
  household might purchase.
• Inflation is affected by the costs of goods and
  services, but also by the EXPECTATION of
  costs/prices

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Inflation also affects borrowing, savings,
investing, through its effect on interest
rates. So is inflation good or bad? It depends
on whether youre a borrower (good) or lender
(bad) Or if you are a saver (good) or spender
(bad)
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BUT, although as inflation rises, and your
savings rates increase, inflation also erodes
savings. If the inflation rate is 2 and your
bank account has a 2 interest rate, you are
losing money, because you also have to pay taxes
on your interest earnings.
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EVERY SAVINGS, INVESTMENT DECISION YOU MAKE MUST
TAKE THE INFLATION RATE INTO CONSIDERATION!
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Principle 3 TVM Time Value of Money Make
your money work for you. Based upon principle of
compounding Money can earn a positive rate of
return over time, as a result of earned interest,
compounded
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Calculating the time value of money allows a
comparison of money to be received in different
time periods or in different cash-flow patterns
over time. Do you want your lottery winnings 1
million now or 60,000 a year for 20 years?
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Hole-in-One Winner Won 1 million! or did
he? He won 25,000 a year for 40 years 1 million
_at_ 7 interest compounded yearly for 40 years
14.9 million 25,000/year for 40 years 5.3
million
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Future Value is simply the sum to which a dollar
amount invested today will grow given some
appreciation rate. 800 invested at 5 interest
today has a future value of 1021 in 5
years Present value is the value in today's
dollars assigned to an amount of money in the
future, based on some estimated rate-of-return
over the long-term. If I need 10,000 in 5
years, Ill need to invest 6712 now at 8.
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Calculate time value of money based on Rate
(interest) Time (number of months/years)
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Also consider whether interest is Simple or
Compound Simple interest computed on principal
only, assuming the interest is not
re-invested Compound interest calculates the
interest on the interest as it is re-invested, in
addition to the original interest COMPOUND
INTEREST is best for savings/investing, worst for
loans, credit
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Example 1 Invest 2000 a year from age 21 to
age 59 Total 500,000 Example 2
Invest 2000 a year from age 31 to age 59 Total
250,000 Example 3 Invest 2000 a year from
age 21 to age 31 Total at age 59
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350,000!!! Example 3 uses the Time Value of
money and compounding to exceed the total for
Example 2 The moral Save NOW!
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RULE OF 72 A handy formula for figuring the
number of years it takes to double your
principal, using compound interest. Interest Rate
divided by 72 doubling time If interest is
compounded at 7 a year, the original sum will
double in 10.3 years. If the rate is 6, it will
take 12 years to double.
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Principle 4 Consider the tax implications of
financial decisions The first you make are
taxed at a lower rate than the last you make,
so Consider the MARGINAL tax rate the rate on
your LAST dollar earned

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For savings/investments Tax-exempt no tax due
(tax sheltered) Tax sheltered returns are much
greater than returns on which taxes must be paid
(more money remains available) Examples
tax-sheltered annuities, municipal bonds
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Tax-deferred investments/savings You dont owe
taxes on these now Examples 401 (k),
IRA Deferring taxes moves the tax to a later
period (say, after retirement), when you may be
at a lower tax rate and making less money
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2000 US tax rates For single taxpayers Up to
26,250 15 26,251-63,550 28 For married
taxpayers Up to 43,850 15 43,851 -
105,950 28
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Get your financial life in order Right
now Check your credit rating Go to Equifax.com
or Transunion (TUC.com) and purchase a credit
report AND obtain your credit score, sometimes
called a FICO score
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The FICO score is a number between 300 and 850
that lenders use to determine your credit risk.
A FICO score is a snapshot of your credit risk
at a particular point in time. The higher your
credit score the more likely you are to be
approved for loans and receive favorable rates.
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• What affects the credit score?
• How you are paying your accounts
• How much money you owe
• How long your accounts have been open
• What different types of credit you use
• How much credit you use compared to the amount
  you have available
• How often and how recently you have applied for
  credit

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Do inquiries lower my credit score? Not really.
Inquiries have less importance than
delinquencies, balances owed, and the length of
time you have used credit. Inquiries are usually
more important on your credit score if you have a
limited credit history.
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• Improving your credit score
• Check the report for accuracy clean up
  inaccurate information
• If several years have passed, you can petition
  the creditor to remove a damaging incident
• Maintain a good credit standing pay off at least
  the minimum on cards every month

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Prepare and Maintain a Personal Financial
Statement List all assets (items of value
owned) Home? Car? Investments? Cash value of
life insurance? Keep track of changes in value
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Keep track of liabilities (loans, other
payables) Credit card balances Mortgages, car
loans Student loan amount Note that student
loans are payable by you (not your
business) Interest you pay on student loans can
lower your taxes
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• Set goals for yourself/your practice
• Visit practices
• Read books/go to seminars
• Talk to advisors
• Most important, keep notes

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The first day of your career as a Chiropractor
begins NOW! Start working on your goals and
your success will be assured!