Dr. Jenn MD got a full ride to college and medical school, married her college boyfriend, and got a job near family when she graduated. What could go wrong? Debt, of course.
Not too many people feel bad for a doctor in debt. After all, doctors drive fancy cars, make six figures, and take exotic vacations; luxuries that the average person doesn’t have. It took not having the money for an unexpected $14,000 tax bill from the IRS (more on that later) to realize she was $1.9 million in debt.
So far, $1.2 million of the original $1.9 million has been repaid in almost seven years. Here’s her story.
Life Was Practically Perfect
Growing up, my parents were a loving, middle-class family and money was never a real worry. School was also relatively easy as I was a McDonald’s Black History Maker of Tomorrow and also received a full-ride college scholarship for undergraduate and medical school while I was still in high school.
To keep my scholarship through undergrad and med school, I only needed to maintain a 3.6 GPA and graduate. A piece of cake right?
While I ended up graduating from undergrad debt-free, I decided I wanted to attend a higher ranked medical school and would have to pay my own way. I did get a scholarship that paid half of the costs for the first two years of school; with tuition at $40,000 per year, this assistance was still a lifesaver.
Do I have any regrets of giving up my full ride? Absolutely not! I think my decision to attend a different medical school was an important transformation for myself and my career. I also married my college boyfriend, matched in Urology, and have three lovely children.
Life was going pretty well until this point (or so we thought).
The $14,000 Straw That Broke the Camel’s Back
After completing my first year in practice, I gave my tax documents to the accountant like usual, expecting to receive a tax refund just like every year before.
Instead, our accountant sent an email saying we owed $14,000 to the IRS. I thought it must be a mistake, and had a second accountant prepare a return too. Guess what? They came back with the same answer–you owe the IRS $14,000.
Keep in mind, this was after having income tax withheld from every paycheck that year. Because I came from a middle-class family, I didn’t have a rich uncle who could just lend me enough cash. My only option was to setup a payment plan with the IRS to pay off the balance.
I felt that I had failed my family, and was ashamed that I didn’t have anyone to ask for help. I was afraid that I had been tasked with this role of being the breadwinner and I was steering my family right into disaster.
To top things off, I had the bright idea to make a spreadsheet of all of my debts in order to figure out how this happened. Well, there it was. I owed a total of 1.9 million dollars. And, I was just starting my career. I don’t cry often, but that night I did.
That moment was the proverbial straw that finally broke the camel’s back for us.
How We Got to Be $1.9 Million In Debt
Sure, I was a doctor making low six figures and my husband was a high school guidance counselor at the time. With two steady paychecks coming in, we had continued to spend without really thinking about setting something aside for large, unplanned expenses.
After the initial feelings of anger and shame, I realized it was time to get to work and get out of debt. The $14,000 tax bill was only the tip of the iceberg and it wasn’t until I made that spreadsheet with all my debts that I realized we were $1.9 million in debt from the following expenses:
- Student loans for me and my husband
- Our primary residence
- Two rental properties (One planned and one default landlord)
- Two car loans (Range Rover and Chrysler Pacifica)
- Personal credit cards
- Business credit cards
- Child-tutoring loans
- Personal loans from family
Like many Americans, we were living paycheck to paycheck, and we’d thought nothing of it. But something had to change soon. We couldn’t keep doing this.
Making a Plan to Get Out of Debt
Our debt-free plan started slowly because I didn’t know where to turn for help originally; like so many others that are living paycheck to paycheck.
So, my first steps were listening to the Dave Ramsey podcast, reading personal finance blogs, and participating in the Bogleheads forums where I could ask my own money questions.
I would operate all day and make investing and retirement goals at night.
Learning more about money was just the start. We took drastic steps to cut our spending and put the savings toward our bills including:
- Making a budget
- Snowballing loan payments
- Paying with cash instead of credit
- Selling our high maintenance luxury cars and buying used with cash
- Refinancing our mortgage
I also kept my spreadsheet and updated it every month. We challenged everything we were spending our money on and cut wherever possible. This included selling our two rental properties; they were both out of state and we didn’t have the time to properly manage them. I learned the hard way that rental real estate is not really passive income unless you have a management company. Managing real estate from a different state is a setup for disaster.
Our #1 Challenge…Delayed Gratification
Regardless of how much debt you have or even how many zeros are behind your paycheck, you won’t be able to get out of debt until you learn the value of delayed gratification.
Overcoming instant gratification was our biggest challenge. If we wanted something we bought it today and would figure out how to pay for it later; usually with the smallest monthly payment possible so we still had enough money to pay our other bills.
This mindset worked until we received that $14,000 tax bill and didn’t know how we were going to pay it back.
I’ll be honest, practicing delayed gratification was extremely difficult at times. For the last decade, I had been working and training 100+ hours a week to become a physician. I finally started earning a significant income to reflect those years of hard work and my reward had been buying new cars, clothes, exotic vacations, and the other “trappings” of consumerism.
But we put on the blinders to these luxuries and focused our after-tax money on debt repayment. Once we began making progress and could start seeing the light at the end of the tunnel, we became more confident in our mindset change and delayed gratification.
Helping Others With Debt
As I started to become money-smart and get my own financial priorities in order, I began to ask my colleagues about financial matters and business decisions. Until I started asking these questions, I didn’t realize that I knew more than some of them; and I was the one nearly $2 million in debt!
In time, I found myself answering financial questions from my colleagues and doing quick counseling sessions between patients. This is when I realized I wasn’t the only one needing a financial education. More importantly, other physicians and high-income professionals had similar financial situations as me and didn’t know how to reverse their situation.
That’s when I decided I could use my own experience to develop a platform to help my fellow physicians and high-income earners to get out of debt and stop living paycheck to paycheck, and become Financially Fit Physicians! So, I started the Financially Fit Physicians private Facebook group as a safe place for physicians to ask questions and discuss personal finance and debt management.
I also wrote a book–Financially Fit Physicians: 10 Steps to Financial Freedom— to help physicians get out of debt and begin to actively manage their finances.
If You’re Deep in Debt and Don’t Think You Can Escape It…
I have one final piece of advice if you’re deep in debt and don’t think you can escape it: Get angry with your debt and develop a plan to become financially fit and free.
Don’t settle for making minimum monthly payments that stretches loans out to 10 or 20 years. You need to be aggressive in your payments to get traction. The goal is to be financially fit and free.
By being aggressive with your payments, practicing delayed gratification, and seeking advice from others, you can become debt free!
Thanks for sharing your story, Dr. Jenn!