Student loans can put new graduates in debt for decades. Maintaining your payments, spending less than you earn, and making wise investments can make the process less painful. As of a few years ago, when I did a rough valuation of my practice, I’ve been able to claim a positive net worth. Yet, I still hadn’t paid off my student loans! How is that possible, you ask? Let me explain: Your net worth is the sum of all you own subtracted by all you owe. If you owe more than you own, your net worth is a negative number. So, if the equity in my practice and my home (my two investments) are worth more than what I owe on my practice, home, car, credit cards, and my student loans (my five categories of debt), I have a positive net worth. Yet, until two weeks ago, when I received a letter informing me that I’d paid off my loans, I was still indebted to Navient, one of the many banks that had handled my student loan debt over the last 25 years. I also got a check from them. Apparently, I’d overpaid on my last payment—evidence I’d been paying scant attention to what had come to feel like an invisible albatross. In my case, I owed way more than the average new grad. Granted, I went to a pricey liberal arts school, attended veterinary school out of state, and incurred an extra two year’s worth of debt from an Ivy League business school (despite earning a full-time veterinary income while enrolled). It was a lot. By today’s standards; however, I’d be just about average. After all those years, I’d become accustomed to the feeling of being saddled and ridden hard by debt. So, you’d think I’d have been counting the days. My approach to dealing, however, was to autopay and put it out of mind. It made it less emotionally taxing. This probably explains why the initial feeling was one of underwhelming, mediocre satisfaction. It was a milestone, to be sure, but elation eluded me. That is, until I realized, many hours later, that I’d have $800 more in my pocket every month. What a windfall! Could I afford a horse now? A Tesla? That’s how my brain works. It’s never anything sane and sober like putting the surplus toward an IRA or investing in some merely slightly risky fund I’d spent oodles of time investigating. Nope, not me. Despite having the educational background to know better, my default setting is firmly wired to spend over save and fly blind instead of enjoying the ride. This is probably why it took me 25 years to achieve a positive net worth while earning a generous professional income. If you have more financial discipline than I do, I’m sure you won’t have to wait so long. That, of course, depends of your degree of indebtedness, too. So how should someone with less financial discipline have managed the rest of their life? That, my friends, is the question du jour. More generally, however, what lessons have I learned from a quarter-century of deep indebtedness? Since I now have the credentials to claim freedom from the depths of financial despondency, I thought I’d make a list of these: 1) Know your net worth Don’t wait until you think you might have broken even (like I did). Not only might it depress you to learn you are still not worth anything (financially speaking, of course), it makes more sense to track your progress and enjoy the view. In retrospect, that would have been way more fun than getting a random letter and a check. An anti-climactic experience was inevitable given my approach. Moreover, knowing where you are at, financially, at any given time, makes so much more sense when planning for the future, right? 2) Spend less than you earn OK so that sounds so blandly obvious. Alas, so many of our colleagues don’t even look at the end of the month to be sure (ahem, myself included). It’s like, I already owe so much that ... why not buy the new iPhone? To this point, here is a cliché for you: An empire isn’t built in a day. It’s built every day. I tell myself this often. I think it helps me spend less when I’m really tempted. Again, I really can’t be sure it does much more than make me work harder, so take it with a grain of salt. 3) Analyze a full year of your life Just after tax time is perfect for this kind of introspection. Where exactly has your money gone? Gather your bank, PayPal, Amazon, ApplePay, and credit card statements or wherever/however you spend. Examine. Are you surprised? What would you like to change? Where can you, least painfully, snip and save? 4) Automate and organize your financial life After looking at a whole year, or noting that you just can’t make sense of it, consider automating all your payments and organizing them by category so you can better understand where your money is flowing. Then start keeping track month by month. 5) Pay off your debt, but do it strategically I have never understood why many of my colleagues were in such a rush to pay off their student loans when their interest rates were so low. It’s silly to pay off your student loans because it makes you feel better if you are forgoing the chance to pay off higher interest credit cards, or even your mortgage. Always pay off your higher interest loans first! Moreover, if you get a chance to refinance your student loans with another bank at a significantly lower rate, even if it means carrying debt for 10 or 20 more years, you really should consider it. Who cares if you’re still paying it off well into your 50s? If you are paying a higher rate for your car then, for the love of God, you should really be paying your car off first! Note: It should go without saying that credit card debt should be minimized. Try not to get stuck in that trap, but don’t despair if you do—there’s always a way out! 6) Keep an eye on your credit score This has become something of a game for me. Though it can be frustrating at times, never quite knowing why your credit score took a hit, following its ups and downs is useful as you play the minimize-your-interest game with any debt in your life. And given life’s vagaries, big debt is always a business decision or an unwanted, unexpected expense away. Crap happens, right? None of the above should see you suffering extreme privations. We do earn a professional income, after all. On that note, I have one last recommendation for getting yourself out of debt: 7) Invest in a practice That’s how I finally got to a positive net worth sooner than I ever thought possible: by buying a practice. Because sometimes you have to spend money to make money. (Now we are talking my language.) It’s especially true in our industry, where your biggest investment isn’t in real estate, equipment, or goodwill, it is in you. And what’s a little more debt at this point, anyway? So maybe it is time you rethought your aversion to practice ownership. Need convincing? Go read my two-part series on VPN+ to see if I can’t entice you to take on more debt! Patty Khuly, VMD, MBA, owns a small animal practice in Miami and is a passionate blogger at drpattykhuly.com. Columnists’ opinions do not necessarily reflect those of Veterinary Practice News.
