Note: this post was written in 2017.
To me, debt is a bad word. You may as well fill in expletives there. After spending the last 2 years of my life dedicated to student loan repayment a negative net worth and minimal savings as a result I’m a bit sour. You can, therefore, expect some funny sarcasm in this post.
Medical school is an efficient way to accumulate substantial debt – if you did not already know that.
I understand there is the common idea of “good debt” i.e. a mortgage and maybe education ( insert any professional degree here ). Borrowing money for tuition could be an investment, but it is a very risky one. The only reason I will consider it a “good investment” is that you remain the common denominator. This means you determine the “returns” on your debt-investment. Both of those words in the same sentence literally make me cringe! But this is what society has made us believe.
I’m just here to share how I got rid of my loans so you can get some inspiration if you want to do same.
Before I do that, let me tell you why I did it.
Bible says; “The borrower is a slave to the lender“. To me, this translates to debt will prevent me from accumulating reasonable wealth. The debt will prevent me from retiring early to enjoy life and practice medicine on my own terms. The burden of debt also has several psychological effects on health including increasing levels of perceived stress and anxiety. A study published in May 2013 looked at the other adverse health effects of debt including an association with elevated blood pressure and poor perception of self-reported general health.
Now that you know why I did it …
How did I do it?
I started off with close to 111k debt burden and a resulting grossly negative net worth = 111,000 USD in debt!
*cringe* Here is how I got rid of
money, I mean debt.
1. I DOWNSIZED.
In the words of Dave Ramsey: “Broke people don’t buy houses”. I believe that. Downsizing my accommodation situation was the single most important decision I made during my debt free journey. I moved out of a three level townhouse with a pool, garage and walk-in closet, all within a gated community in the nicer part of town. I gave it all up! Crazy right?! Then, I, an
almighty attending physician moved into a much smaller space within a safe low-income neighborhood.
Do I regret it?
Because I’m student debt free!
Take that Nelnet/FirstMark Services, Sallie Mae, and Co.
How this applies to you-you can cut back on what you spend your hard earned dollars on. Downsize your living expenses, sell a house, move into an apartment. Downsize your grocery & monthly shopping lists. Cut off the unnecessary country club, gym, and other consumer subscription-based memberships. I didn’t have cable TV for a year and now I can survive without TV! In essence, give less money away to goods and services each month and put that money towards your debt! Trust me – it’s only a good feeling after you’ve eliminated debt! It never feels good during the process.
2. I LIMITED MYSELF TO A BUDGET
Yes, I was, and still (sometimes) am the doctor who is on a budget. Let me burst your bubble with this public service announcement: NOT ALL DOCTORS ARE RICH! This is because all doctors don’t get the same paycheck. There are levels to this medical madness ok? (Clears throat). Doctors in highly compensated specialties can possibly get rich quicker, but due to the time spent in school/training, the interest rate on loans upon completion of residency makes their debt burden astronomically larger. From my studies on the topic; one way to move a steady income earner from a negative net worth to a positive net worth is by deliberate loan repayment. Deliberate here translates into creating a budget.
My budget includes my priorities first. What I call the must-have-goods/services i.e. rent, gas, electric, cell phone bill etc and I stopped shopping
for my weaknesses.
How this applies to you – all cash on pay day should have a label on it. The easiest way to do a budget is to print out your bank or credit statement and go through the outlets that are stealing from your future wealth. Identify them, then starve yourself from these things until you are done paying down your student loans. I can send you an email with my budget template if you’ll like. To get it, subscribe to this site here.
3. I DID THE MATH
Some people don’t even know how deep in the red they are and that’s sad! Adulting means keeping an inventory of everything important; the kids, parents, bills, loan repayments, your health, your sanity etc. If you do not know how much you owe that is a recipe for disaster. You can not fix a problem that you cannot identify. Your procrastination to add up those bills is keeping you from financial freedom, remember that.
How this applies to you – add up all debt from all sources to a total sum of X, then add up all income from all sources to the total sum of Y. Set a time frame for your debt free journey. Mine was 2 years. Then subtract your total must-have-goods-services from your after-tax income. You should have a difference if you live below your means by downsizing. Take that difference and dump a set amount monthly towards your debt. Take risks and go big with the dollar amount you choose to begin with.
4. I GOT A SIDE HUSTLE.
I was available made myself available for every extra shift on the hospital’s work schedule. To you, it may mean working outside of your primary role, creating a business, side gig or even an app shared riding gig i.e. uber etc. All you need is an honest extra source of income to be able to put towards debt repayment.
5. I CUT UP MY CREDIT CARDS.
Needless to explain. This is common sense. I simply wouldn’t add fire to a furnace. Read my post about why I cut up my credit cards for a season here.
6. I READ EVERY BOOK AND LISTENED TO EVERY TAPE ON BECOMING DEBT FREE!
Knowledge is gathering information, wisdom is putting it into practice. I could possibly tell you all the books that helped me on this journey. If you want this information; read this post.
7. I KEPT THE OUTCOMES INFRONT OF ME.
There is a lot of research data to prove that if you’re wise with money you can make a million with whatever you start with. High income doesn’t always equate wealth. Wealth is determined by habits, wisdom, hard work and God’s blessings.
To conclude, there are several other ways to eradicate your debt burden. Some are not included here. In medicine a popular way is to work for an underserved community and receive public service loan forgiveness, military opportunities, consolidating loans etc. What I shared here is what worked for me during this season of life.
Proverbs 22: 7
The rich rules over the poor,
and the borrower is the slave of the lender.