Learn From My Money Mistakes

This past week I completed my first stint as an attending in the ICU.  With it came the attending paycheck!  I cannot lie, it has been nice finally receiving my first ‘real doctor’ pay.  Completing fellowship has been the culmination of over a decade’s worth of education and training.  Now, in my early thirties, I feel like I can build more momentum towards paying off my student loans.  I have been reflecting on all of the financial decisions that brought me to this point in my career.  I often write extensively about the ‘right’ money choices I have made, but often mistakes tend to offer more opportunities for education.  Here we explore some of my money mistakes, what I took away from the experience, and what you can learn from them!  So please…learn from my money mistakes!

I didn’t learn the value of a dollar early enough

I will be the first to tell you that I had a privileged upbringing.  My father was a dentist and my mother worked in sales.  I was lucky enough to be born into a family that never left me wanting.  I had all the things necessary to be successful.  My parents (baby boomers) were children born in a post-world war era.  As such, their generation was built on the concept of ‘give my children that which I lacked.’  Provide for your children what you yourself did not have.  My family worked tirelessly, lived frugally, and put my sibling and I first.  We had a wonderful childhood with strong role models as we transitioned into adulthood.  I know how lucky I truly am. 

However, it was not until I started residency that I came to a realization.  Despite knowing my family was wealthy and successful, I was never taught the value of a dollar.  As I reflect, I feel as though my parents were so focused on their finances that they never spared the time to teach me their understanding of what a dollar ‘buys you.’  Discussing their investments strategies, the vehicles they use to save, how they diversify their portfolio, etc. 

I get that these are intricate, complex topics not easily understood by a child.  Yet, as I matured these conversations would have been wildly beneficial to me during my ‘debt accumulation’ years.  As you will see in the following topic, understanding the value of a dollar can have lasting impacts on your financial future.  Taking the time to educate your children on money should start as soon as you feel they have the comprehension.  I have previously written about the 11 Money Lessons For My Children.  This is the culmination of what I plan to teach my children regarding money… when they are of age.  Financial education is the gift that keeps on giving…literally!

I didn’t live frugally during medical school

‘Whole Paycheck!’  That is what we used to call Whole Foods when I was in medical school.  It was my most frequented restaurant and grocery store.  With all this money the federal government was providing me, why not live it up!?  Some of the worst advice I ever received came from someone near and dear to me.  “You’re working so hard in medical school, you should take as much money out as you can, you owe it to yourself to live a quality life while you’re in school.”  To this day my stomach churns when I recount this ‘advice.’ 

Yes, medical school can be grueling at times, but that is no excuse to drive yourself into insurmountable debt!  In my reflection, it seems like such a simple concept.  Don’t take all the money the government is willing to loan you!  If you even have an elementary understanding of the power of compounding interest then you would know how stupid that really is.  But I get it… I too have been a naïve medical student, overflowing with altruism and driven by my compulsion to ‘help people.’  The implications of taking out hundreds of thousands of dollars in federal loans was simply not a concern that occupied my day-to-day life.  If I only knew then what I know now.  I do not look back in anger.  Sadly, I just didn’t know any better!

If this article reaches even one single college or university student before they start medical school…don’t be like me.  True, while you are in the throes of medical education, your scholarly work is priority 1, 2, and 3.  But, there is a happy medium to be found.  If it is necessary for you to take out student loans to afford medical school, that is fine.  Most of us do the same.  However, you can minimize your loans and still live a perfectly comfortable life.  It is not one or the other!  Live below your means, be frugal, and pursue as many scholarships as you are able. 

I should have let the military pay for my education

Now, since we are already on the topic of medical education and loan reimbursement, let’s talk about opportunities where others pay your debt.  When I was going through medical school, I had posed interest in the government/military programs that pay for your education.  Now, the tradeoff here is that you then owe the military (approximately) a year’s worth of medical military service for every year of education they pay for.  This can often be postponed following residency (either civilian or military).  Most branches of the United States military provide programs like this (Army, Navy, Air Force, etc.). 

Generally, a typical military educational experience looks something like this…  Before you start medical school, or early on in your first year you meet with a recruitment officer who enrolls you into the program.  There is paperwork, physicals, and other information that is gathered to make sure you qualify (and your medical school qualifies as well).  Once things are approved contractually, that military branch will cover the cost of medical school, living expenses, and often provide a stipend too.  You then work hard and graduate medical school in 4 years.  Following graduation, you either match into a residency program in your chosen specialty through the military match, or you pursue a civilian match.  When you complete your residency, you are then employed by the military as a physician for the number of years they paid for your education. 

This means that, following residency, you work as a military physician for 4 years.  However, know that these positions pay well, offer great opportunities in the military, and often provide great benefits and incentives to further your career.  If you choose to exit the military after those 4 years, you have that option.  Here is the great thing about this… Yes, you owe the government years of your life following the completion of training, but you are getting paid during those years while ‘paying back’ your time.  But also, when you complete your stint in the military, you leave debt free!  For those of you trying to avoid debt at all costs or who find an interest in the military, this is a great opportunity to ‘kill two birds with one stone!’

I should have researched PSLF more

Many of you have previously read my writings on how my wife and I are working to eliminate our medical education debt.  We started with a combined debt of $670,000 and we pay approximately $100,000 towards it each year.  Then we refinanced our federal student loans to capitalize on a lower interest rate, further expediting the rate we can tackle our debt.  We choose refinancing over PSLF for many reasons, but I do wish I would have educated myself about the program more. 

For those whose loans qualify, PSLF offers a means of making the minimum payments to the government for 120 confirmed payments… then your debt is forgiven!  There are many caveats.  To name a few, these include employment at a hospital that qualifies, making certified payments monthly, maintaining enrollment in the correct repayment plan, etc.  This process can be a headache for many, but the benefits can mean the forgiveness of hundreds of thousands of dollars of debt. 

When my wife and I initially moved to our current location, she was poised to start a private practice position.  I was transitioning into fellowship.  She would be entering a career path that made her ineligible for PSLF.  I had approximately $342,000 of personal medical education debt that had an average interest rate of 6.7%!  We were drowning…  We thought our primary breadwinner was going to be in a career that did not qualify for PSLF and we had to get my interest rate lower.  As such, we refinanced…twice, actually.  Once you refinance your debt, you are no longer eligible to receive PSLF.  We refinanced and never looked back. Why would we?  It is not healthy to dwell on what would have been if we chose to pursue PSLF.  

To those who remain candidates for loan forgiveness, do your research.  Ask questions.  Really consider all of your options and weigh the opportunity costs before you make an irreversible decision like refinancing.  For us, refinancing was the right decision at that time.

I never appreciated the impact of location on finances

Where you choose to call ‘home’ can have huge impacts on your expenses.  There is relatively wide variability in the cost of living across the United States.  For us, we choose to settle down in a coastal city in the southeast.  As such, the cost of living is relatively high.  Remember the benefits of going where you are needed versus where you want to be.  I get it, you have worked too hard to not live exactly where you wish.  True.  But if you are willing to compromise (even a little) on your location, you can save yourself hundreds of thousands of dollars in the long-run. 

I remember when my wife received a job offer to practice emergency medicine in rural Montana for approximately $800,000!  All of our monetary woes would have been things of the past.  However, at the time I was still pursuing fellowship.   We wanted to start a family and our relatives all lived in the southeast.  The idea of living in Montana was great, but we would be sacrificing so much.  Family would be thousands of miles away.  We would have to start our lives anew.  We would not have immediate help in the area.  What would it mean for our careers?  All of these were concerns that influenced our future.  As life would have it, she never took that job and we put roots down in the Southeast. 

I do sometimes think about what life would have been like if she took that job.  Between the two of us we would have been making well over $1,200,000 (before taxes).  Homes would have cost less and day-to-day life would have been less expensive.  But who cares?!  We would be making far more money than we knew what to do with!  However, there is not enough money in the world to pull me away from the close proximity of family.  Today, we live comfortably making a combined household income less than my wife would have made in Montana…  I can still sleep at night.  Don’t underestimate the importance of location when thinking about your finances.  Location and lower costs can boost income.  All things that can greatly expedite your financial goals if you are willing to compromise. 

I never appreciated the cost of childcare

Childcare.  Wow…what an expense.  I previously wrote a post about The Cost of Childcare.  When my daughter was born, I was still in fellowship and my wife was working in an academic career.  We did our research, but nothing could prepare us for the expenses that come with child rearing. 

When our first child was born, the expenses began.  Because of the variability of my wife’s emergency medicine schedule and my long critical care schedule, daycare was not an option.  We considered the benefits of an au pair, but given the size of our home it was not feasible.  Thus, we ended up hiring a nanny.  We pay her $21 an hour, before taxes.  She works 40 hours a week and is a W-2 employee.  We pay $3,360 monthly to employ her so we can maintain our careers.  It is a necessary expense, but I had no idea the burden it would become on our finances. 

Bringing a child into this world has been, by far, the greatest privilege I have ever had.  It does not come without some growing pains however.  The cost to employ another to care for your child borders on the ridiculous it seems.  Consider your options (family, daycare, au pair, nanny, stay-at-home spouse) while determining what is right for your family and budget.  For us, a nanny was the only option that allowed us to maintain our careers, but it came with a hefty price.  Keep this in mind as you start a family or decide you wish for more mouths to feed. 

Take home points

Part of learning is making mistakes.  Honestly, I have learned so much more from my mistakes than I ever did by ‘getting things right’ on the first try.   In my experience, finance is no different.  If you start early and work hard to educate yourself, you will stumble.  Fortunately, time is on your side.  Make mistakes early so when you come into your ‘real doctor’ salary, you know how to handle that responsibility.  If you do these things early and often, then you will be all-the-more prepared to reach your financial goals.  I hope you have learned from my mistakes.  As always…

Stay Motivated!

The Motivated M.D.

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