How We Paid Off $209,000 of Debt in 2 Years

I have been blogging for about a year now.  During that time, I have written a lot about personal finance.  I predominantly provide financial insights through personal experience.  For those who don’t know me, I am a pulmonary and critical care physician, married to a beautiful emergency medicine physician.  What blossomed alongside our relationship was approximately $670,000 worth of medical education debt.  You read that correctly.  Combined, we accumulated almost three quarters of a million dollars’ worth of debt.  Since that time, we have implemented habits that allow us to pay off our debt quickly.  As we near the end of this calendar year, I have been using prior year’s budgets to make sure we stay on track with our debt this year.  As I looked back, I realized that even during the global COVID pandemic, as well as with market volatility, we have managed to be successful with debt elimination.  I realized we have exceeded our annual expectations!  Here is how we paid off $209,000 of debt in 2 years…and we’re just getting started!

How we accumulated our debt

Before I get ahead of myself, let me explain how we accumulated our massive debt.  My wife and I met in medical school in 2012.  We both attended a four-year state university for medical school.  We both relied on government loans to afford our education and our lifestyle during those four years.  It was an investment in our future, and a necessary evil.  However, following graduation and transition into residency, the weight of our debt burden hit us like a truck.  We realized that, combined, we had approximately $670,000 worth of educational debt.  To make matters worse, at that time our federal loan interest rates averaged approximately 7%! 

As we navigated residency together, we simultaneously pursued personal financial education.  From The White Coat Investor, to blogs like Physician on FIRE, Financial Success MD, Financial Samurai, and beyond, we taught ourselves the intricacies of debt elimination and more.  I would be lying if I didn’t say that we periodically had physical manifestations of stress from our debt alone.  Looking at our debt totals felt like staring into the deep dark of space.  The amount just seemed so vast.  How could we ever begin to make a dent…especially on a resident’s salary?!

Well, nothing good comes from sitting around…we needed to take action.  That is exactly what we did.  I will spare you the details, but as our life would have it, we refinanced multiple times to get the lowest interest rate possible.  With Public Service Loan Forgiveness (PSLF) no longer an option, we took to forming a series of habits to destroy our debt. 

When we started making ‘real money’

The last thing to touch on before I describe how we pay off 6-figures worth of debt annually, is to describe our income.  For readers not in the healthcare field, you may not understand exactly how our reimbursement evolves.  The majority of medical education debt is accrued while in medical school.  For a majority of physicians (both M.D.s as well as D.Os.) this is four years of education. 

Following graduation, you ‘match’ into a medical specialty (residency) of your choice.  These residencies can range from 2 to 8 years or longer depending on your chosen specialty.  Despite being a physician (in-training), resident salaries are generally on the order of ‘middle’ 5-figures.  These numbers vary based on geographic location, cost of living, and years in training.  For the most part, salaries range from $40,000-$65,000.  By no means a bad income.  Resident salaries are just shy of the median U.S. income (based on 2020 Census Bureau statistics.) 

‘Doctor money’

Following completion of residency, then physicians either further specialize (often continuing resident level reimbursement) or they start independent practice.  Independent practice is often when the physician salaries you hear about begin.  A multitude of factors can influence physician salaries, but by all intents and purposes, physicians can easily make 6-figure salaries (or more)!  By this point, individuals are often in their 30’s or older and only now have the income to support real impacts on debt. 

For my wife and I, she completed her training a few years before me.  As such, she started making a ‘real’ physician salary before I did.  During the two years I am discussing in this article, (calendar years 2020 and 2021) my wife was a practicing attending emergency medicine physician and I was still in training (receiving a resident level salary).  I did have the opportunity to moonlight during these years, allowing me to bring in 5-figures worth of supplemental income.  So…for the remainder of this article, understand that my wife was the main breadwinner and I was contributing what I could. 

Living below your means

First and foremost, my wife and I lived well below our means over the past few years.  A single physician salary is a healthy income as it is.  If you include my resident level salary, we had more financial flexibility than we ever previously had in our lives.  As such, we built an itemized budget and worked to live on half of what our take-home pay was. 

The phrase ‘live like a resident’ gets tossed around a lot.  The point is simple, live like you are still in training…and that is just what we did.  We already had a pretty good life when we were both still in training.  We at least never needed anything.  Yes, of course, we have endless ‘wants’ but we know how to distinguish the two.  We always could afford a roof over our heads, a comfortable home, a full pantry, and enough to cover unexpected expenses. 

Because of this, when our incomes started to climb, we did not feel compelled to have our lifestyle match our salary…so we didn’t!  We were maybe a little more likely to splurge here and there.  Maybe we would eat out once a month now.  Maybe I would buy local IPAs instead of Coors, but the difference was negligible.  Living on far less than you make is likely the single most impactful habit you can form as you work to eliminate your debt.

Pay yourself first

Another important habit we formed was prioritizing payments towards our debt immediately when our paychecks were deposited into our bank accounts…we ‘paid ourselves first.’  I consider retirement contributions and debt elimination to be an investment in yourself.  You should be prioritizing yourself.  In practice, both of us are paid on the last business day of the month.  When this money hits our checking accounts, we spend that following weekend discussing how to best prepare for the month ahead.  We generally spend about half an hour (normally during our child’s naptime) in front of our computers, discussing where money is needed.

Our retirement contributions are automatic (more on that in a moment), but our debt payments are not (all) automatic.  We do have required monthly payments but we always pay more than is required.  With our target goal of paying $100,000 annually, this roughly comes out to $8,333 a month.  So, we subtract each of our monthly payments from our goal of $8,333 a month and the difference is the extra we contribute.  Simple. 

Make it automatic

As I alluded to previously, a major reason many individuals struggle to pay down their debt is they cannot get out of their own head.  Making large regular contributions of your hard-earned salary is psychologically taxing.  For this reason, I highly recommend ‘removing’ yourself from the equation entirely.  Many loan servicers, including federal loans, allow you to make automatic contributions.  Further, they often allow you to change the date of your required minimum payment too.  If your reimbursement is on a cycle similar to mine (payments received at the end of the month), then work with your loan servicer to have your payments withdrawn a few days after payday…automatically.

This can be anxiety provoking for many as they linger on the ‘what ifs.’  What if there is an unexpected expense?  What if I have car or AC trouble?  Fair questions and legitimate worries…but this is why I harp so hard on the importance of an emergency fund.  It should be your first financial goal before any of this!  If you have followed my previous advice and built an emergency fund of 3 to 6 months living expenses, then you are already prepared for any unexpected expense.  Therefore, when automating your loan payments, you remain stress free!

Put all extra income towards debt

After about a year of my wife earning our first attending income, I was finishing my first year of fellowship.  Generally, if you are in good standing with your fellowship program, you are allowed to moonlight as long as it does not interfere with your daytime obligations or call responsibilities.  This was crucial for me.  I was never allowed to moonlight in residency.  As such, our family had a years’ worth of time to adjust to one physician’s attending salary.  Now we were graced with the opportunity to supplement my ‘resident’ salary.  I took to moonlighting as an internist approximately 3-4 times a month.  This would often double my monthly income, and then some!  But this did not change my lifestyle.

As a family, we made a promise that until we were on more solid financial footing, we would put all extra income towards our debt (or replenishing our emergency fund if we were forced to use it).  We were already adjusting to an improved lifestyle with one of us making ‘real’ doctor money.  We had everything we needed.  The extra money from moonlighting was icing on the cake!  If you can be at peace with knowing that your efforts are strictly for debt elimination, then routing your excess income towards debt is digestible.  This is easier said than done, but can really allow you to make big dents in your debt. 

Track your progress

I previously wrote a post called Graphing Our Loan Repayment Progress.  With this post I hoped to motivate others through a graph depicting my own repayment progress.  The budgeting spreadsheet I use (the very same one I giveaway for FREE just by subscribing to our newsletter), has a tab that tracks our loan progress.  This tab also houses a graph that shows our monthly progress.  A graphical representation of our progress has proven to be incredibly motivating as we continue this marathon of debt repayment. 

As cliché as it may seem, a picture really is worth a thousand words.  When we struggle to make payments, falter in our motivation, or just get complacent, this graph reminds us how far we have come!  Years and years of hard work have led us to a point where we can afford to make consistent, impactful contributions.  I encourage each and every individual reading this to do the same. 

Utilize what motivates you

Lastly, I challenge you all to lean on what internally motivates you.  If you find this article speaking to you, then I would assume we share similar levels of debt aversion.  However, this is not always enough.  There are many ways to tackle debt, from which loans to prioritize to how you celebrate your victories.  From the debt snowball approach (eliminating your debts from smallest to largest) to the debt avalanche (paying off your debts from largest to smallest) and every approach in between, do what you feel motivates you best. 

For my wife and I, we use restaurant dates to both support local business and celebrate our financial achievements.  Sometimes it is as simple as enjoying a beer on the patio and saying ‘thank you’ for supporting each other and sharing our priorities.  No matter where you find your motivation, use it as the fuel to charge your debt repayment journey. 

What the future holds

This year, we are on track to fall just short of our $100,000 annual goal.  When all is said and done, we will likely pay closer to $95,000, give or take.  I am at peace with this, but it was a struggle to get here.  I am very internally motivated when it comes to our finances.  This is something born out of the persistence needed to pay off our mountain of debt.  For better or for worse, I am plagued by my need to eliminate our debt and reach our goals. 

Thankfully I have my incredible wife to keep me grounded.  She reminds me that this year we bought a car (in cash) after ours was totaled.  We paid for a new roof after a tree impaled our home!  We renovated the patio room associated with that very same ‘tree’ incident too.  Our one-year-old daughter is busier than ever and we have another baby due this month too.  Oh, and did I mention I started a blog?  So yeah…I still consider the year a success!

Take home points

Debt elimination requires a ‘long-term’ mindset.  You cannot start this journey expecting to be debt free overnight.  However, if you can incorporate some of these habits into your life, then that journey may be quicker and less rocky.  No trail is without hiccups and road blocks though.  When you meet these barriers, lean on what motivates you.  From a much needed date night to a small splurge purchase, you deserve it.  Keep your eye on the prize and you will be well on your way to financial freedom.  Good luck!  As always…

Stay motivated!

The Motivated M.D.

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