Should You Pay Off Your Debt First?

Is there a better option than to pay your debt first?

Ever since we started teaching at medical centers and universities we have received all kinds of questions pertaining to the dilemma of carrying so much student loan debt. With the average doctor coming out of medical school with a hundred or more than $200k in education loans, it’s no surprise which financial area is the greatest burden.

The big question that comes up from those doctors who are just getting started is, “what should my strategy be?” Doctors would ask if they should pay it all off first, make the minimum required payment amount or somewhere in-between.

debtThe answer you should expect to hear from a professional who specializes in working with doctors is it depends on your financial plan, goals and objectives. If the goal is to grow your wealth efficiently so that you have the most available at retirement or to be used for most other purposes then the likely answer is NO. You should NOT pay off all of your loans first.

Initial objections to this are, “but my interest rates are really high and I’m not likely to get a high enough return somewhere else,” or “I’ll have more to save and invest once I’m done paying off my loans so I can make it up then.”

These are really good points but the problem is that the math doesn’t necessarily line up with the logic. The best thing you can do is have your advisor model it out for you. If you do xyz, how will that look in the future? With reasonable assumptions for inflation, taxes, health care, life events, growth rates etc, your advisor should be able to make a projection of what life would look like either way.

This is the kind of management information that makes these kind of financial questions easier to navigate rather than just going off of your gut or what someone else is suggesting. You’d be much better off by having the facts to back it up to see what the real difference is.

With the hundreds of doctors we’ve consulted with who fall into the camp of “trying to do the right thing with their debt,” they’ve been able to see that there’s more than one way to approach this. Most of the time it makes more sense to follow the 50/30/20 rule we’ve shared in other podcasts.

There is a bright side to the debt that has been accumulated. You know what it is. Having a career with a significant, predictable income is rarely able to be duplicated in many other professions. This earning power is very valuable and instead of being all negative Nancy about it, take it for what it is, an investment for you and your family.

Now it’s just a matter of finding the best way to manage it.

As you may have found across the financial industry, the best place to get financial advice is from a fee only financial planner and investment advisor. We agree which is why we are one. Talk with your advisor, run the calculations or contact us and we’d be happy to help you run the numbers.

There’s no reason why you have to make the decision without having clarify. After all that’s what we are here for.


doctors life podcast

The Doctor’s Life Podcast Episode 043- Are Taxes Robbing You?

Are Taxes Robbing You?

It’s a good question. You put in the effort to earn your paycheck, and the government wants to say they are taking “their” share. Are they taking more than they should? How will you know and fix it?

Dave Swan is back on The Doctor’s Life Podcast to help you with what to look for if you believe taxes are robbing you and how to take your money back! All episodes of The Doctor’s Life Podcast are available here, iTunes, and Android. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast. Continue reading…


Do Contract Reviews Work?

Contract reviews can be expensive. Do contract reviews work?

Anticipation is defined as a feeling of excitement about something that is going to happen or the act of preparing for something. On average, physicians spend at least 10 years in training and preparing to step into their career. When that day finally comes you’re presented with a 10 – 30 page document outlining and describing in great detail the minutia of the offer. In most cases, comparing the awareness level of what’s actually included in the contract or isn’t included, is a bit lopsided. On one side of the table is the health care organization or practice with their team of attorneys and on the other side of the table is, you. Being presented with the offer usually leads to many different emotions, all in the midst of trying to evaluate the compensation, benefits, implications, ramifications and details of a legal document.

The majority of physicians who are presented with a job offer and contract usually feel that they either can’t negotiate, shouldn’t negotiate, or that there really aren’t areas for negotiation, that the offer is what it is. Continue reading…


doctors life podcast

The Doctor’s Life Podcast Episode 042- Pay off Student Loans First or Save?

Do you pay off student loans first or is it better to come up with a plan?

Should you pay off student loans first or should you start saving? What’s the right way to pay off student loans?

Justin Nabity is back in The Doctor’s Life Podcast studio to answer these confusing questions, and you might be surprised. All episodes of The Doctor’s Life Podcast are available here, iTunes, Android, and on SoundCloud. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast. Continue reading…


doctors life podcast

The Doctor’s Life Podcast Episode 041- “The Splurgers”

There comes a time in your career where you believe you have enough income to purchase anything and everything you’ve waited on. It might be that car you’ve dreamed about or that vacation home on the lake. And then the bills start coming in. Oops!

Nick Schneider is back on The Doctor’s Life Podcast with a couple of stories of clients that believed they could afford a few immediate purchases that ended up (almost) throwing them off-track of their financial goals. All episodes of The Doctor’s Life Podcast are available here, iTunes, Android, and on SoundCloud. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast.


doctors life podcast

The Doctor’s Life Podcast Episode 040- Should You Get Disability Insurance Without an Exam?

Do you need the disability insurance exam?

You have options when it comes to disability insurance. One of those is if you should take the disability insurance exam or not. What is actually in that medical exam and does it matter?

Justin Nabity is back in The Doctor’s Life Podcast studio to answer these questions. All episodes of The Doctor’s Life Podcast are available here, iTunes, Android, and on SoundCloud. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast. Continue reading…


ira

How Much Money Do You Need to Retire?

“So, how much money do I need to actually retire?”

This question came up when we were at the American Academy of Ophthalmology conference in Chicago speaking with a group of eye surgeons. The moment it was asked, I was thinking to myself how am I going to give him a simple answer for this because are so many variables that come into play. He was looking for an exact number. For any fee only financial planner out there, we all can share the same sentiment…it’s like where do we begin, which layer do we start with.

Is there a specific dollar amount that has to be achieved in order to be able to make it? You may have heard $3M or $5M or some other number. Well there are two different numbers to consider. There’s the amount you must have saved by retirement and there is the total amount of spending over the course of retirement with the latter being much more significant. Continue reading…


Mid-Year Tax Changes That Will Help You

Making mid-year tax changes can completely change your outlook for the year

Mid-year tax changes are a great way to make sure you’re even with the government come tax season. Remember, if you get a large refund, you’ve given the government an interest-free loan straight from your pocket!

One of the easiest ways to reduce your household income tax liability is to maximize your contributions to tax-deductible vehicles such as 401k, 403b, 457b plans. Each of these allow you to put away $18,000 which means you could take a tax deduction of $54,000. How much tax would this save you if you were in the 35% income tax bracket? That would be $18,900. Simply by shifting your income from once place to another can provide that much tax relief.

taxesSo what happens to the growth inside of these accounts and the income that you can take in retirement? Continue reading…


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The Doctor’s Life Podcast Episode 039- Do You Need a Contract Review?

Are you getting paid what you’re worth?

Receiving a contract will always make you a bit excited. Be it your first contract or your 12th in your career, it always elicits some emotion. Maybe it’s that raise you’ve been looking for or a piece of the partnership you’ve been fighting for. The problem is these contracts are always written by lawyers, not doctors.

Dave Swan is back on The Doctor’s Life Podcast to tell you what to expect with a contract review and if you may need it. All episodes of The Doctor’s Life Podcast are available here, iTunes, Android, and on SoundCloud. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast. Continue reading…


What Is Disability Insurance?

So what is disability insurance?

I’ve been in the financial services industry for a little over 10 years working with clients helping them be successful now as well as plan for their future. Over this time, I’ve made a few observations. One common observation is that while we each have our own unique and personal goals and things that are important to us, generally speaking, we all tend to want the same things. Whether it’s the desire to pay off debt so that you have more money to put towards your actual goals, or wanting to be able to travel regularly, we all want to be able to afford things that will allow us to create memories and have meaningful experiences with family and friends. Whatever’s included in this list for you, usually all of these things, in some form or fashion, take money to accomplish.

We give presentations across the country to doctors in training and physicians in practice with the intention of educating physicians in areas that you really don’t get much time to focus on. Most of the time, at the end of our presentations, the questions range from student loan repayment options, ways to reduce taxes, job search, and questions about investing. Accomplishing these things of course are all predicated on the assumption that you will continue earning an income to fund these things.

As a physician, your biggest financial asset, the most important thing you have as far as a financial resource goes, is your earnings potential. Another way to put this is that the basis for all you want to accomplish, any goal you have now or in the future, almost always assumes you have income. You’ve spent countless hours crafting your career and preparing to transition into practice. What if, your income stopped, or was reduced due to illness or injury? How would you handle that? Continue reading…