New graduates who opted to continue their education often struggle with a significant amount of debt, especially residents. Over the past seven years, the average medical school debt has increased from $173,000 to $190,000; approximately 25 percent of graduates shoulder more than $200,000 in debt. These numbers are substantial (and they don’t include additional financial obligations). We’ve compiled four quick ways to tackle paying down your medical school debt without feeling overwhelmed, with guidance from Michael Kalscheur, CFP, partner and senior financial consultant with Castle Wealth Advisors, LLC.
Accept that paying your debt is important but that it will not happen overnight
Kalscheur has seen the devastating impact debt has on residents and new physicians, which is one of the reasons he is so passionate about helping young clinicians commit to becoming debt-free.
“I often reference Dave Ramsey,” he says, “a multimillionaire who seemed to have it all but went bankrupt because he didn’t control his debt. Being prudent and without debt are far more enviable than overextending yourself and trying to pay what you cannot afford.” Becoming debt-free is an important goal to work toward. However, it will take time, so be patient and focus on controlling expenses and simultaneously building your savings.
Establish a budget but keep it flexible
No matter what you earn as a young clinician, it’s easy to spend above your means. The first step to creating a budget is to take a realistic look at how much money you take home versus your expenses and additional spending—such as student loans, car payments and maintenance, rent and household expenses, and other bills.
If you spend every dollar you earn, it’s difficult to get ahead, so ensure that you have a money cushion and consider living just below your means. If you purchase a home with a 30-year mortgage, pretend it’s a 15-year mortgage or pay extra toward the principal each month, making additional payments to satisfy the loan early. If you receive a raise, put that additional income into your cushion of cash.
While you do not have to follow your budget religiously each month, it is imperative to review it when you consider borrowing additional money. If you cannot look at your budget and honestly say, “I can afford this new debt without touching my savings,” then you should not assume another loan.
Don’t live outside of your means
Banks and other lending institutions are willing to loan you money for extravagant purchases, but you should become comfortable living within your earnings right out of residency. Never borrow money just because you can or make financial decisions to try to impress your colleagues or friends and family.
Although some hospital presidents and physicians who have practiced for decades climb behind the wheel of a Porsche or Lexus, it’s more sensible for you to either purchase or lease a reasonably priced economy car. Don’t take out another considerable loan for a luxury vehicle fresh out of training. Instead, spend your young working years positioning yourself to comfortably enjoy life’s finer things, like an expensive vehicle, in the future.
Maximize your income by moonlighting or working additional hours
Seek opportunities to earn extra money. Deciding to accept locum tenens jobs while you have a permanent position and/or picking up extra shifts at your healthcare organization are two excellent ways to supplement your income. Before you know it, you could be depositing tens of thousands of dollars into your savings account, even after taxes.
Call Medicus Healthcare Solutions at 855.301.0563 to explore locum tenens opportunities with an experienced recruiter, and read our blog for tips, the latest news and trends, and other helpful information.