I think I inherited a gene that makes me hate debt. Or maybe it was learned? My Dad never even had a mortgage. I am so grateful for that. As I teach my kids, interest is something I receive it isn’t something I pay. How about you? I understand the intellectual arguments for leverage, but I still hate it. On the other hand, I have benefit from using “good debt.” I grew up poor and needed loans for college and medical school. I borrowed to buy a house, to buy into our private practice’s building, and to buy shares in an ambulatory surgery center.
Every dollar sent to a financial institution for interest payment is a dollar that won’t be working for your future goals or financial freedom.
I know college and medical students and even medical residents who are quite lackadaisical about the debt they owe. I had a buddy in medical school who went on an expensive vacation. I asked him how he could afford it. He said, “What’s another grand or two of student loans?” Well, it is a lot. Do everything you can to keep loan debt to a bare minimum. If you don’t, you will likely regret it later. If you already took out all the loans, focus your efforts on paying them off.
If you are a medical resident it is tempting to put off paying loans until you get a “real job” as an attending. This is called forbearance and it is a bad idea. Make payments while working. Many residencies pay 60K per year (more than the income of the median household in the U.S.). You may also be able to moonlight on the side. Paying $400 a month during a 3-5-year residency puts you way ahead on your payment schedule. If needed, you can pay 10% of your discretionary income through a program like Income Based Repayment (IBR).
After residency “loosen your belt” a bit and spend some money. Base your spending on a percentage increase (e.g. 10-20%) over your spending during residency. Don’t base your spending on your income. The two should be completely disconnected. If you are eligible for a Public Service Loan Forgiveness (PSLF) program, then go for it. You may put aside cash just in case that system fails though. If you are not going the PSLF route, then refinance to the lowest rate and attack that loan. Get “gazelle intense” as Dave Ramsey would say. If you save half of your income you likely can wipe out the debt in 2-3 years. At a physician salary that is quite possible. The average primary care doctor makes $200K and specialists now earn >$300K.
When starting in private practice my wife and I drove used cars, made our own meals, traveled by car and bus, rented an apartment, etc. I also worked on boosting the income side of the equation by entering a successful private practice and boosting my procedures. The “excess” funds from income and investments went to killing all debt. We paid off my student loans in 2 years and then worked on the other debt. When it was gone we felt like we got a pay raise. Without payments, we could invest much more each month.
My hatred of debt really boosted our early Financial Independence. I wish the same for you.