MtoM #28 - EM Doc Pays off $180K in 3 years

This is the White Coat Investor Podcast. Milestones to celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali. This is Milestones to Millionaire podcast number 28. Emergency doc pays off $180,000 in three years. If you are finding our podcast 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 White Coat Investor can help. All right, we have a fellow emergency physician named John. We're bringing on the podcast today. Let's get him on. All right. Our guest on the White Coat Investor podcast is Dr. John Zachary, an emergency physician in San Diego. Welcome to the White Coat Investor.

Thank you so much. Thanks for having me here. Thank you.

We're glad to have you on the podcast to congratulate you on your success, number one, and number two, to share it with other people. So how much debt did you pay off?

So I paid off approximately $180,000 in just about three years time.

And what was your range of income over that time period?

I initially started paying it off right after when I got out of residency. So my income was roughly around $375,000.

Okay, so this is a pretty significant commitment of income to pay that off in just three years. How'd you do it?

So I guess the biggest thing is because it was only $180,000, which I shouldn't say only that still is a decent amount. Personally, I just am not a fan of bad debt. I just not a fan of it. And I just wanted to crush it and just get out of the way as soon as possible just so I can kind of move on to other financial opportunities down the road. So my wife and I and it's my wife and my two kids and I, and we just kind of continued to kind of live like a resident, kind of how it goes. We just continued to do the same thing that we're doing without any big purchases, without any big changes. We kind of kept Kind of stayed on autopilot and kind of lived the lifestyle that we're accustomed to. Getting out of residency, it actually kind of made it kind of easy because when you're in residency, you're already used to that kind of style of living. So it really wasn't a big adjustment. I could see how it's easy for some people to take that big salary and want to splurge and reward themselves with some type of large financial obligation. But we just kind of stayed on autopilot, just committed to just paying the debt down. For me, it really wasn't that hard because we were already used to living like that way, living in that style for the previous three years. So it wasn't too bad. The hardest thing is obviously avoiding temptation. The hardest thing is to not buy that brand new car, to not buy some vacation or whatever it may be. Just kind of keep pressing on.

So simple but not easy, huh?

Simple. Yeah, exactly right? It was simple. You're on autopilot, you're used to it, it's really no big change. But really just staying committed to your goal of paying down the debt and committed to not being distracted from that.

So did you do much saving investing.

Over the last three years during this past three years?

Yeah. When you're paying off the debt?

Minimal. My minimal. I do have some retirements. They were kind of on a lower percentage than normal just because we wanted to kind of shift all the fund funds to the debt and just get the debt over with.

So you're really focused on the debt mostly, it sounds like, correct? Yes. So did it turn out to be easier or harder than you thought to pay it off?

Like I said, it really wasn't that bad because you're used to it. Like we already. Residency for me was three years long, so I was already used to living like that for three years. So it really wasn't any big changes. It was sometimes frustrating when you're kind of wanting to save up for a house or wanting to save up because Maya had a 10 year old Jetta that was literally falling apart and you kind of want to buy a new car. But it was sometimes tough to just like I said before, to avoid those temptations and just stay focused to your goals.

So how does it feel now that the student loans are gone? Was it worth it?

Yeah, you know what? That's the million dollar question. No pun intended. It's debatable. And the reason why I say it's debatable is because, yes, it felt awesome to get rid of school loans. I Did not want to be that physician that dragged out school loans for 30 years and ends up paying like $150,000 in interest when it's all said and done. That is the good part. The bad part is, yes, I totally get the debate or the argument of, well, you know, if your debt is only X percent, like whatever, 2%, and you can get an investment for 10%, then you're really losing 8%. And I get that. And that's kind of where I feel that it was kind of tough for me. But because of my debt was only 180, I knew that I could pay it off in two to three years. That's why I committed to that. If my debt was probably any bigger, let's say if my debt was sometimes, as we know, sometimes there's physicians that leave with 3, 4, $500,000 debt or sometimes even more, then I don't think I obviously wouldn't have committed to that or crushing that debt in a short time period just because that's a big pill to swallow. So part of me is like, you know what? I wish I had that $180,000 in my pocket to invest elsewhere. But part of me is like, gosh, it just felt great to be done with it. Now I'll never have to pay another school loan again. Which is really cool.

Yeah, mixed feelings. I can relate to that. I felt similarly when I paid off my mortgage. I was like, well, it's nice not to have that payment, but it wasn't like, overwhelming relief. I talked to a lot of people doing these episodes, and they just described this huge burden off their shoulders, off their back. That is just wonderful. But I kind of feel about it the same way you did. You know, where you're like, well, I could go this way, go that way. It's really all about how much money I'm putting toward building wealth. And, you know, it's interesting to see how different people feel differently about it.

The reason why is that one of my former co residents, good friend of mine, we're trying to start up our side hustle with multifamily housing investing. So right now I'm kind of saving up. We're saving up for some down payments and some other things, for some apartment buildings. And, gosh, if I had that $180,000 in my pocket right now, it'd be a different story when it comes to buying an apartment building. But unfortunately, I have to save up again. So in that respect, I'm kind of like, gosh, I wish I had that money. Now, because that was really free money. My percentage rate was only really 1.9%, which is, gosh, that's like free money. So that's why I'm kind of mixed. Yes, it's awesome. No school loans. I'm not a person of debt. I have no credit card debt. I have one car loan that's. I only have $20,000 left on this car. So I'm not really a big spender. I just don't like bad debt. You know, there's good debt and there's bad debt and I'm just not a fan of bad debt. And yes, it's great to never have a school loan again, but I do understand that I did or am currently missing out on some possible investment opportunities that could, obviously I could have created bigger wealth if I played my cards differently, but I'm happy.

No debt, of course. Not necessarily risk free. Of course.

Exactly. Exactly. Nothing's ever risk free.

You had to take some additional risk. And as you'll learn as you move into your real estate investing side gig, that leverage works both ways and hopefully most of the time it works out in your favor. So it sounds like what's next for you is going to be moving into some real estate investments. And obviously that'll be a little easier to save up now that you don't have to make student loan payments. So that'll help you save it up a little bit faster. But what advice do you have for somebody who's like you were three or four years ago, sitting there looking at their student loans, wondering how they're ever going to pay it off? What advice do you have for them?

I guess the biggest advice is to have a plan and to stick to it. When I say that is, not everybody can afford to do what I did, or maybe what other people do and this hammer off the debt, some people's loans are possibly too big to where, you know, I, I don't think if I had, like I said before, if I had $500,000 of debt, I don't think I'd be able to live like a resident for five years and just hammer down debt. It might have been different. And some people have bigger families, some people have smaller families. So I can't say to everybody as a blanket statement to, hey, hammer down and buckle up and just pay off your debt, because that's not the right answer for everybody. And that might have not have been the answer to myself or the best answer for myself either. I guess the biggest tip I could say is come up with your Financial game plan. Come up with your financial game plan. Six months out, one year out, three years out, five years out, 10 years out, which is what my wife and I commonly do is we set our short term and our long term financial goals and stick to it. The hardest thing for me was avoiding the distractions, avoiding buying the new car because I have all this money, or avoiding the big vacation or the splurge. The hardest thing is to stick to your plan and not be tempted or pulled away from your plan. My biggest advice is come up with what your plan is depending on how much debt you have, whether if you want to pay it off short term, if you want to pay it off long term. And the best thing you can do is stick to your plan as best as possible. Because it's hard to have one goal for everybody because everybody's in different situations.

Yeah, for sure. Sticking to the plan's the hard part.

Exactly.

Coming up with the plan's hard, but sticking with it's even harder. Especially when it's a multi year plan.

Yes. That's when it's a long term plan. That's when it's sometimes out of sight, out of mind was, oh, yeah, I've been paying this debt off for two years. I could afford a car payment right now. And sometimes you got to correct yourself and stick back to get back to your plan and try to not waver from your original financial goals because that's kind of when you sometimes lose sight and that's sometimes when the plan goes out the window. When your plan goes out the window, what was the point of making a plan to begin with? Just goes out the window.

Exactly.

That's the hardest part, is sticking to your plan, whatever your plan is.

Awesome. Well, thank you for being willing to share your story and for coming on the white coat Investor. Thanks for what you do and congratulations on your success.

Awesome. Hey, thanks so much. Take care.

All right. Lots of things to learn from that interview. First of all, three years. It's great to see people getting those student loans out of their life in just a few years. And I think that's totally doable, especially with the sort of ratios that John had. Right, $180,000. He's making as much in that time period as $375,000, which is about the average for an emergency physician these days. And so it's great. Average loans, average income, and guess what, you can pay them off pretty quickly. There's really no excuse to drag them out for 18 years when John paid them off in three years. Okay. Now, obviously some people have a little bit lower income, some people have a little bit more in student loans. That's obviously going to take a little bit longer. But for the average doc out there, this is still a very doable thing to do this pretty quickly. I appreciated John's honesty about that. Maybe he wasn't 100% sure that he did the right thing, right? He looked at what he could have made in the markets over the last three years and thought, well, maybe I could have done better carrying those loans for a while and investing. The problem is he's looking through the retrospectoscope, right? You always know afterward what the right thing to do is. But in advance, when you actually have to make the decision, you don't necessarily know how it's going to turn out. But the good news is both investing and paying down student loans both boost your net worth. So they're both good things to do. It's not necessarily an either or decision. If you're not sure what to do, you can always just split the difference. But the key is to focus on how much money is going toward building wealth. What your total wealth building ratio is, your savings rate, if you will. And that's really where you focus rather than exactly where it goes. Certainly, once you have student loans paid off, or once you have a mortgage paid off, or once you have a $20,000 car loan paid off, you have more money each month to invest with. And I remember as a new document, there were so many uses for money. I had so many great uses. I needed a bigger emergency fund, I needed a home down payment. It was time to replace a car. You know, we wanted to get a second cell phone that tells you how old we were at the time, right? We needed a second flip phone. And, you know, we had all these great things to do, maxing out retirement accounts. And, you know, some people want to do Roth conversions right, when they come out of residency, but there's money's really limited. But as the years go on and you start knocking things out, right, you save up that emergency fund, you pay off that car loan, or you pay off your credit cards, you pay off your student loans, eventually you pay off your mortgage. And all of a sudden your financial life becomes very simple. And you're either spending it, you're giving it, or you're investing it so that you can spend or give more later. And it becomes very, very simple. So know that those days, we are wondering which thing to do will go away eventually. If you're putting enough money toward your financial goals. Hope that's helpful to you. If you are finding our podcast 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 White Coat Investor can help if you'd like to come on the podcast. If you have reached a financial milestone of any kind, please apply whitecoatinvestor.com Milestones will bring you on the podcast and use your story to inspire your colleagues. Somebody out there is in the situation you were in a few years ago, wondering if they will ever get to where you are today. Let's inspire them. Till then, 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. My dad, your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor, so this podcast is for your entertainment and information only and should not be considered official personalized financial advice.