MtoM #115 - Doc Pays Off Student Loans in 30 Months

This is the White Coat Investor Podcast, Milestones to Millionaire.

Celebrating stories of success along the journey to financial freedom.

Milestones to millionaire podcast number 115 emergency doc, pays off student loans in less than three years. If you are finding our podcasts informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors, you can find information on how to manage your student loans, fix and avoid common financial mistakes, understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate, and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and the White Coat Investor can help. All right, let's bring a guest on here. We have a great guest today who's going to talk about his most recent milestone. Let's bring him on. Our guest on the Milestones to Millionaire podcast today is Azar. Welcome to the podcast.

Thanks for having me.

All right, you have accomplished an impressive milestone in an impressive amount of time. So congratulations to you and thank you so much for coming on here. Thank you. To inspire others to do the same. Tell us what you've done.

So I graduated residency in 2020 and had a whole lot of debt at that time. About $250,000 in debt, and I just finished paying that off at the beginning of March of 2023.

Awesome. And I've got the exact amount here. 257,728. 07. That's what you. That you had the day you walked out of residency?

Actually, that's the amount that was on my refinance at the end of 2020. So that's why I was able to get the exact number.

Very cool. Very cool. So it was probably actually maybe even a little more than that. All right, 30 months, you knocked that out. That's pretty cool. What was your average income over that 30 months?

It's been pretty variable. So with COVID we didn't work very much. And so my first year income was probably right around 250. And then last year, I guess the last two years it's been closer to about 305,000, I think was last year. And then I've got my. My wife is a radiology nurse and she just went part time we had a kid, and so she's bringing in about 20. I'm sorry, 45,000 a year now and used to be closer to about 60,000.

Cool. What part of the country are you guys in?

We're in central Virginia, near the Appalachian Mountains.

Okay. So not too high of a cost of living area. Right. And so tell me about this conversation you had with your wife. You know, you're coming out of residency and you're like, I know we're only making, you know, 250, 300,000. $350,000, but we're going to pay off these student loans in 30 months. How'd that conversation go?

So we've known each other since during residency. And so this all started during residency. So our income around that time was less than $100,000. And she's been very supportive of my goal to just get rid of that income or to get rid of that debt. And so we were able to kind of start with our financial journey during residency when we were making less, and that kind of allowed us to budget starting then. And then once we started to make a little bit more, we just kind of expanded the budget a little bit.

How much did you expand it? I mean, we talk all the time about living like a resident and that the truth is, most people know, expand a little bit. How much did you expand?

Yeah, I mean, so during, during residency, we, you know, I lived with four other medical students for about a year and a half of residency, met my wife, and then we ultimately moved in together to a one bedroom apartment. And so it was sort of an expensive part of town. And so we were spending about 1,200amonth total there on kind of living. And now we've got this house that we bought right around the time that we moved for this job. So, you know, mortgage payments have gone up to about 2,000 per month. And, you know, we don't live lavishly, but we are a little more comfortable now.

Yeah, definitely increased it a little bit. Okay, well, that's pretty cool. So what was the secret? How'd you do this?

I think, you know, everyone has said the same thing. It really takes a plan. It takes budgeting. I've got an Excel sheet. My Excel sheet has like eight different pages to it. You know, there's the. There's the day to day or the month to month budget. Then I have a year to year budget where I'm kind of looking forward to what I might need to be spending in future years for certain things. You know, in terms of looking forward to buying a new house sometime in the future and seeing how that's going to fit in. I've got all of my business account stuff so that I know that I'm spending the right amount using my business account every year and kind of using that to its full potential. So I do budget pretty strictly and that doesn't mean that we don't spend money when we want to. We're comfortable when we need to be. But we also understand that we've got goals and we try to make sure that we kind of stick to a little bit of a budget.

So how does it feel to have those student loans gone?

It really feels amazing. I mean, like other people have said, when you first click that button, it's really nothing. You kind of just click a button and you go back to your, your life. But then the next few weeks to be able to start to think about what you're going to be able to do with that, just to give an example, you know, kind of, it kind of gives you a little bit more financial freedom in the sense that, so we've been, we've got a, got a kid, we've got a little two year old, he's about to be two in three months. And you know, I'll work last night I worked until about 3am Then we had a babysitter come for three hours this morning while my wife went to work. And just adding up how much that costs us on a yearly basis, that's about four grand a year just for a few days a month. And so now we're going to have him start school in August and that's going to be ten grand a year. But that's going to give us a lot of flexibility. We're going to be able to, you know, I might be able to do a little bit more flexible working. And so it's just, in that sense, it's just really nice to have that freedom to try to get some flexibility in my life, you know, make some decisions where you might be paying a little bit more for certain things, but in the long run it's, it's to, it's for everyone's kind of wellness.

Yeah, I figure you probably have, have freed up about 10 grand a month, 8, $10,000 a month out of your budget, right?

That's exactly right. Yeah. So my, my payments were about 4,600 when I refinanced and then I would put in an extra about 5 to 5 to 6,000amonth. So. So yeah, I've definitely freed up quite a good amount there.

Yeah. How much of that's going to be spent and how much of it is being invested.

So I'm not very financially savvy. I listen to your podcast a lot, but I still don't fully understand retirement accounts and I'm still working on that. I've put a lot of that on the back burner to be able to sort of become financially free. And so these next few years, I'm going to really try to figure out 401k. I have a 401k and I'm pretty lucky. My employer puts in 10% unmatched. So I'm going to try to figure out what I can do with that to really maximize that. I've always thought about real estate. My dad used to do some real estate. He didn't have a lot of success with it. So I've kind of put that on the back burner as well as something that's maybe a little bit more risky at times. But, yeah, I think a lot of it is still going to be saved. We're going to try to get into a bigger house at some point, have some more kids, and that's kind of the plan. We're kind of still figuring out what we're going to do with it.

Cool. Well, the nice thing about student loans is it's. It makes a really easy place to put your money in the beginning. You know, I mean, if you got 6% student loans, well, there's a 6% guaranteed interest rate. You know, it's super easy investment in that respect. Unfortunately, now think now things get a little more complicated for you and you'll have to figure out a little more. You know, some people say, don't pay off debt. Carry your student loans and try to invest in something with a higher return than your interest rate. You obviously chose not to do that. What was your reasoning behind why you wanted to pay off the student loans?

Yeah, you know, I feel like it's a little bit of a prison that you're in when you've got student loan debt. I will say that if I had not refinanced, I probably would have gotten my debt down to a reasonable number and then I would have tried to do a little bit more of CDs and investments, some of the higher yield things, and then just be ready to pay those off. I think that's. It's important to realize that when you've got a lot of student loan debt, the amount of interest that you're giving away at first is a ton. And if you can get ahead of that. I mean, that's kind of the biggest thing I can say. If you can get ahead of that early, if you can get that down to a reasonable number, then you should be able to feel a little bit more free. And so, yeah, I would say that that's the main thing is I understand people who want to put their money in other places. I would just recommend that you try to get it down to a reasonable number so you're not just giving away interest all the time.

Yeah, that freedom doesn't come all at once. Does. Comes gradually for sure.

And it increases each month.

Yeah. Okay, so when you're coming out of residency, you had this goal, you had this plan. Did it turn out to be easier or harder than you thought it was going to be?

I knew it was going to be hard. I mean, I think, you know, you realize it's. There are sacrifices that you're gonna have to make, you know, things that you're not gonna be able to do, events you're not gonna be able to attend. And I think as long as you realize ahead of time that that's, that's how it's gonna go, that's, you know, you can kind of stick to it. And yeah, it ended up being sort of how I expected. And I think I paid it off a little quicker than I expected because like I said, when I was first making a little less during the COVID year, I didn't really know what was gonna happen with my income. But then things really ramped back up unexpectedly. And so, you know, my goal was five years and I was able to do it in 30 months. And so I was pretty excited about that.

What advice do you have for someone that say they're, you know, say they're an intern or a second year resident, they owe 250, 300, $350,000. They're worried about finances, they're worried about being able to pay that off. What advice do you have for them?

Stick to your goal. You know, every, every little thing matters. So when you're budgeting, you know, really pay attention to every little thing. For example, I, I changed my gym membership and it was a difference of going from $30 a month to I was able to find a gym that was $5 a month. It's got everything I need. Basketball in the mornings, that matters. You know, every little thing adds up. So just stick to it. Don't fret over small things either. Every once in a while you're going to have, you know, a situation come up where you're going to have to spend a little money. It might be a little bit of an emergency or just something urgent. Don't fret over it. Just kind of stick to your plan and you'll get there. And, you know, it all works out in the end and it doesn't feel that way for a while, but once you get there, it feels really good.

Yeah. Awesome. Well, congratulations to you, Azar. You have done something awesome. You paid off your student loans in two and a half years. You're now free the rest of your life. You're an emergency, Doc. I mean, you're making 20, 30, $40,000 a month and you now have it all to do whatever you want with. I mean, the part that doesn't go toward taxes. So, I mean, the freedom you have here for early financial independence or to just have the, you know, this fantastic life or to be able to be super generous. The options are yours now. So congratulations to you on your success and thank you so much for coming on and using your own story to inspire others to do the same.

Thanks for having me. I appreciate it.

Our pleasure. Hope you enjoyed that interview as much as I did. You know, it never gets old to see people taking their student loans in the corner and just crushing them with an anvil. I mean, it works. If you throw $10,000 a month at your student loans, they will go away very quickly, I promise. The plan does work. Now, that means you've got to keep your lifestyle down enough that you can still do that. But that's very doable, right? You're used to living on a resident income or something similar to it. If you just keep doing that for a little bit longer, you can have medical school be paid for in a lot of ways. You're not done with medical school until you've paid for it. All right, I wanted to talk with you a little bit today about disability insurance and how to shop for it. I keep seeing questions on the WCI subreddit in the WCI Facebook group group on, you know, the WCI forum. And the title is almost always the same, right? Is my Disability Insurance Offered? Good. And they post a screenshot or something of, you know, the offer they got from. From an agent. And they're expecting somehow that the community is going to be able to look at that and say, oh, yeah, that's good. Well, that's not how you shop for disability insurance. You don't go talk to an agent, get an offer, post it on Reddit and ask if it's good. That's not the way you shop for it, the way you shop for it is you go to an independent agent, somebody that can sell you a policy from all of the big five or six companies, and they help you to get the policy that's right for you. They're going to make about the same amount of commission no matter which policy you buy. Yes, they've got a conflict of interest, but that conflict of interest is mostly to get you to buy a bigger policy with more bells and whistles. Right? And for the most part, the folks on our recommended list, they make plenty of money. They don't need to do that. They're in the education business. Mostly. They just want to teach you about these policies. They know you're going to buy one. They know they're going to make several thousand dollars from selling it to you. And it doesn't really make that big of a difference if they make $4,300 or 4, $4,600 from their commission for selling it to you. They don't care that much. Right? They just want you to have the right policy because then you're happy with it and you refer your friends to them. But there is a right policy for you, and it depends on your state. It depends on your specialty, it depends on your gender, it depends on your health status. It might depend on your dangerous hobbies as well. And so the way you figure out which one's right for you is you look at all of them right, or have them do it for you and put them in front of you and they can educate you on the differences between the different policies. Maybe this one is a little more expensive, but look what it gives you that the other one doesn't. Is that worth another $30 a month to you? Those are the kind of questions you deal with, going over these policies with them and then together with them. Now that you have the prices, now that you know what the policies include, you can make an educated decision of which one to buy. But there is no step in that program where you then go post it on the WCI form and say, is my disability insurance offer any good? Because we have no idea. We don't know your health status. We don't even know your age most of the time, don't know your gender, might not even know what state you're in. Right. And we don't have access to the software for each of those companies to tell you what the quote would be with principal. You know, if all you did was go talk to Berkshire or all you did was go talk to the standard or whatever. You know, chances are good that that's not the best policy for you, that it's one of the other four or five companies that has the best policy for you. And so if you've only looked at one, if you've only talked to an agent for one, you probably have the wrong one. Maybe you lucked out and got the right one, but you probably have the wrong one because you went through the process wrong. So that's how you buy disability insurance. And they'll talk to you about all the different riders, right? They're going to talk to you about a residual or partial disability rider. You should get that. That's the one that covers you if you're partially disabled or when you're coming back from disability insurance. If you are offered a cost of living rider and you're relatively young, you're in residency or you're just out of residency, you're in your 30s, maybe even your 40s, get that rider. Because if you get disabled, you want that benefit to go up each year. As you go through your career, you have bad inflation like 20, 22, you're not going to want that to happen very many years without an adjustment being made. If you're buying it at 56, it probably doesn't matter that much. This thing's only going to pay until you're 65 or 67 anyway. If you're buying it as a trainee, you're in residency or fellowship or whatever, you probably want a future purchase option rider of some kind that allows you to buy more insurance once you're making more without having to requalify. Even if you take up scuba diving, even if you develop a heart murmur, even if you have diabetes, you want to be able to still buy more insurance because you probably can't afford as much as you want. They probably won't even sell you as much as you want as a trainee. So if you're buying it during training, get a future purchase option. But the other riders, the retirement riders, the student loan riders, the catastrophic disability riders, those are kind of gimmicky. I would rather see you spend more money on a larger business base benefit. Instead of getting $10,000 a month, maybe you get 12 and a half thousand dollars a month instead of getting those riders, for instance. Now, how much do you need? You need enough to cover your living expenses and the way you want to live, right? Just barely. Way you can squeak by on discount groceries and never going on a trip, but the way you want to live, plus enough to save for retirement. Because remember these things stop paying at age 65 or 67 or something. And if you haven't saved something for retirement along the way, you're going to be living on Social Security at that point. So this is expensive stuff. You get sticker shock usually when you buy it because it costs money, 2 to 6% or so of the amount of income that you protect. But if you need it, you'll be really glad you have it. It's pretty darn useful in the event that you lose your most valuable possession, which is your ability to turn your time into money at a very high rate. If you're like most white coat investors and when you become financially independent, you can drop it and save those premiums. Let paying that premium every year motivates you to save a little bit more money to reach financial independence a little bit sooner. If you are finding our podcasts informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors, you can find information on how to manage your student loans, fix and avoid common financial mistakes, understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate, and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and the White Coat Investor can help. Keep your head up, shoulders back. You've got this and we can help. We'll see you next time on the Milestones to Millionaire podcast. The hosts of the White Code Investor.

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