My wife and I met and fell in love in medical school. We each graduated from undergrad without debt thanks to scholarships, working, and help from family but we attended an expensive private medical school and graduated with a significant amount of debt – mostly due to the high cost of tuition, but also due to taking out the full cost of living expenses allowed and living more comfortably than we probably should have (a trip to Cabo San Lucas and a particularly lavish dinner at Fogo de Chao are among my more prominent memories). White Coat Investor didn’t exist when I started medical school and even if it did I probably would not have been a devotee as a 21 year old MS1. The couples match and dual residency interviews proved to be a grueling and expensive process – one that many physician couples know well. But the possibility of not matching in the same city compelled us to interview broadly and rank many programs. Thankfully we were both hard workers and had done well on board exams and clinical rotations and matched in our second ranked combination of programs in an amazing (but expensive) city. In order to finance the couples match/interview process we took out a $20,000 private loan at 8.5% interest (>$40,000 by the time it was paid back after residency). Talk about ouch.
Residency was a busy time. We were finally making money! We elected not to sign up for Income Based Repayment for a few reasons. We were in a high cost of living city and did not have a tremendous amount of extra money. I was training in a high paying specialty and had no plans to work for a nonprofit and also had doubts about whether the Public Service Loan Forgiveness program would truly honor its commitment to forgive loans for those working for nonprofits for 10 years. My wife was in a primary care specialty and could have potentially benefitted from PSLF, but we did not pursue this option and instead put our loans in forbearance. It was painful watching the debt accumulate, but what choice did we have? We did a few things right, like funding our respective 401(k) accounts and benefitting from a modest employer match. We avoided the numerous predatory financial “professionals” that our respective programs inexplicably sent our way: the Northwestern Mutual insurance agents offering to take us out to Ruth’s Chris Steak House but of course actually pedaling whole life insurance; “student loan advisors” offering to basically fill out simple IBR paperwork for you in exchange for a small $1,000 fee. Even as a financially unsavvy junior resident I remember thinking how much money would an insurance agent have to make off of my future income to justify taking out an entire class of residents to a $100 per plate dinner? The whole thing struck me as a lot like a timeshare presentation. This instinct served me well. The fact my program director sent those emails to us and yet never provided any form of financial education for the residents is bewildering to say the least.
We rented an apartment and later a house in residency. We had the first of our three children, saved a small amount of money, and towards the end of residency I started to take an interest in personal finance and discovered White Coat Investor and eventually many of the excellent personal finance/investing books available. I took counsel in one of the few attendings at my program who had spent the majority of his career in private practice and learned as much as I could about the different practice models in my specialty, what groups to look out for in the region, etc. Our job search was much less expensive and much more fruitful than the couples match.
Prior to finishing residency (but while still young and healthy) we signed up for own occupation disability insurance coverage based upon our new attending contracts. We took out term life insurance policies with highly rated companies. Based on my new found knowledge and our new lucrative attending contracts we refinanced our student loans through Sofi at less than 4% each – a substantial savings over our Stafford and Graduate Plus loans that averaged a little over 7%.
We took jobs in the same region of the country that we did residency. I landed a partnership-track position with an excellent physician owned practice and my wife landed an employed position with a great physician-friendly practice. We have made a few mistakes in our first three years in private practice, but a lot more positive steps. I became a partner in my group, we have had two more children, and settled in our new community. Once a month, I update our debts/assets in Excel – a process that we find affirming. Our first month in private practice our net worth calculation read a shocking -$726,000. Three years later (in a couple of months) we will have a positive net worth.
The graph of debt vs. time has not been quite so smooth. We have had a few hiccups including selling the house we initially bought when we started our attending jobs and purchasing a more expensive house (but a much better home for us). We also financed a new car when one of our vehicles started to break down and became too unreliable. Even though selling our first home was never the original plan, we made the most of it by saving a lot of money on real estate commissions through a for sale by owner sale and netting $70,000 in profit thanks to a market uptick (fortuitous timing). We bought our new home for sale by owner and were credited the commission amount off the listing price. By our math we saved about $90,000 through this process and ended up with a home we plan to be in until the children leave for college.
We meet once a year with a fee only financial advisor (the time for which is paid for by my group practice) to discuss asset allocation (a subject of a future post but exclusively low cost equity index funds through Vanguard), review changes in net worth and debt over the past year, and to discuss our plan moving forward. This advisor meets with most of the new physicians at my large practice. At our first meeting he told me that we had the dubious distinction of having the most student loan debt of any couple he had ever met with. At our last meeting he commented on how impressed he was at the progress of the turn around and how he was looking forward to our net worth vs. time graph starting to take on an exponential rather than liner curve in the years to come. At this point we don’t have a lot of questions for our financial advisor given my new-found interest and self-education in investing and personal finance but we still find the annual meetings to be a useful “state of the union” exercise.
Being a bit of a math nerd, I have fun playing with compound interest calculators and doing future value calculations to project our future portfolio. In order to be conservative, these calculations assume that we keep working at the same jobs for the same income and that our house does not increase in value.
I plan to update this post periodically to track our progress and share both our successes and failures in our pursuit to attain financial independence.
Share your story in the comments. What have you done well and what could you do better?