MtoM #40 - Dual Family Doctor Couple pays off $400K+ 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.

Podcast number 40. Family docs pay off massive debt and service obligation in less than four years. Love what you hear on the podcast. Looking for more great White Coat investor content? Head over to our YouTube channel where you can watch video recordings of our podcast, short snippets of financial tips explained succinctly by me and others, and deep dives into topics for more in depth learning. You can even learn all about real estate with webinars from our real estate partners. Check out all this and more@YouTube.com thewhitecodeinvestor you can do this and the White Coat Investor can help. We have two guests on this podcast we're gonna bring on momentarily. They each paid for medical school in a different way, and so I find that very interesting. But the good news is they are both done and able to move into the rest of their career at relatively young ages without these obligations and debts hanging over their heads. So let's get them on the podcast. So my two guests on this podcast are Raquel and Brad. Welcome to the Milestones to Millionaire podcast.

Hey, thanks for having us.

Thank you so much. It's an honor and pleasure to be here.

Great to have you here. We are celebrating with you today, basically paying for medical school, and you two did it in two different ways. And we're going to explore both of those today. But let's start with the debt. How much did you guys pay off.

Between undergrad and med school? For me, I had accumulated about $390,000 of debt and Raquel had an additional about $24,000 of debt. So just north of $400,000.

$400,000. And we should mention that each of you are family docs.

Yep. Yes.

You know, not exactly plastic surgeons and spine surgeons. So you said you paid that off over how long?

So we paid off the $24,000 during residency. I was one year behind Brad. And then basically during residency, we did the income based repayment. So sometimes it was zero, sometimes it was a little bit more. Once Brad graduated in 2017, we started paying aggressively and paid off the last one at the end of 2020.

Okay, so that was over how many years?

So three and a half years.

Three and a half years. $400,000 in three and a half years. Congratulations. That's awesome.

Thank you.

Yeah, thanks.

You should be proud of that. I mean, that is not a small feat, right? I mean, we get lots of People on the podcast and they're like, yeah, I wiped out my $100,000 in loans on, you know, in six months, what are you making? 800,000. Well, you know, it's not as, you know, as it is with other people, and that's okay. Well, we're going to feature both of you and we're going to celebrate with everybody. But let's be honest, sometimes it's harder than other times. What was your average household income over that time period?

So during residency, about 100,000. We were both making about 50,000. And then the year that he was attending and I was in Residency was about 260,000. And then when we both were attendings, it was between $450 to $500, depending on RVQs and things like that.

Okay, so those are average family medicine incomes if you look at the salary surveys you guys made about what family docs make. So how did you pay off all this debt despite only making family doctor salaries?

Yeah, well, I think to start, we were both on the same team with just making that our primary goal, that we wanted to get rid of that as fast as possible.

So we took, you know, we read the White Coat Investor, and I think that's what really got us started. And so we made an investment personal statement, which did take a while, but it was really helpful. We did a budget. We consolidated his federal loans into one, and then we eventually refied it into a floating rate so that we could get a lower initial rate. And then when that hit about 5%, we refi it again into a floating fixed rate about 3.5 or 3.25. And then basically we just. $10,000 a month out of your attending paycheck went to the. Went to the loan. It required about 3,300. And so we were just trying to pay down to principal as fast as we possibly could. Any extra work bonuses we had went straight to the principal. And we were living on less than we make. You know, we bought an affordable house, we bought used cars, minimal lifestyle, inflation when we became attendings, all the usual.

Things, it turns out they work. How about that?

Yeah. Yes, exactly. And it was helpful to have the, you know, in your book, the outline of kind of priorities. That really helped us too, I think, with. Because during this time, we still invested, you know, we got our Roth, backdoor, Roth and things like that. So we weren't just throwing it out, the debt. We were also, you know, saving for the future.

You're building wealth in both ways, paying off debt and investing.

Yep.

So, I mean, you paid off this debt in four years. Was it easier or harder than you thought it was going to be at the beginning?

I think it was probably a little bit easier, actually, than I thought it was going to be. I think I was the one initially that read the book and was real excited about stuff, but I was probably the one that was also more scared at the beginning. I'm more of the spender, she's more of the naturally frugal one. And so for me, just taking all of our extra resources and trying to put it towards this goal initially was a little bit scary for me. But as it turns out, it was really pretty easy. You just gotta, gotta do it. And it was month after month, paycheck after paycheck. Every little bonus or extra thing we got, we just tried to chip away and it came down pretty fast.

Now, Brad, your debt level is higher than average. What were you thinking and feeling in medical school as that debt accumulated, as it's getting bigger and bigger and bigger? Do you remember what that felt like?

Yes, I do. So I went to an osteopathic school in Kansas City. Really great education there, enjoyed my time, but it was a little more expensive than if I'd gone to the state school. And, yeah, year after year, as that kind of accumulates. And then we actually got married at the beginning of residency, and we're having kids. Some of those other responsibilities start piling up, and I realize we got to do something about, about all this debt. We don't want to be in this position for the next 30 years. We want to be able to do the fun things that we've dreamt about.

Now let's turn the page a little bit. Raquel, you paid for medical school in a different way. Tell us how you paid for medical school. And. And now where you stand with that?

I graduated from college in 2009 and worked for as an MA for one year. And I knew I wanted to do primary care. That was my heart. So 2010, I applied to the National Health Service Corps. That was years and years before I knew anything about what my life was going to look like. So at that time, they had a scholarship program. It's a little bit less common now, but basically I signed up before I even started medical school, that they would pay for my medical school, give me a stipend, and then after residency, I would owe them one year per year of tuition. So it was a good deal in that sense because now it's usually, you know, 20% for a year or something like that. But because of this scholarship program, it was more stringent requirements of where I could work. And that made it a little bit hard for us as well, because he has family that works here in the town where he grew up. And so we really wanted to be here establishing a practice. And, you know, there isn't FQHC here, but it was just kind of details like that, where you're signing up for something so far in advance to when you're actually going to practice, that it kind of did add some different stressors. But the debt, you know, the money part was nice because the government, through this program, paid for it, and I still could earn money as an attending.

Where did you end up serving to pay that obligation off?

So there is a local fqhc. It was one number off. And by the grace of God, we asked for, you know, we kind of said, hey, this is the situation. Like, he's already working here for a year. We plan to be in this community for years and years, raise our kids here. And so they gave me. They said that they would accept that site for me to. To fulfill my. To fulfill my time.

Awesome. So it worked out very, very well for you?

It did. I mean, but it's not. I accepted less money than he's making. I didn't have the greatest boss ever there. There are some issues working at sites where you don't have. You don't feel like you can just leave and go find a different, better job. So. But yes, it did work out. And we just. I just completed my contract two days ago, so.

Awesome. That's really great. I know that feels. I spent four years in the military paying off my obligations, and, you know, I was paid well, less than market rate. And when they said jump, I said, how high? So, you know, whether you pay for your school with a contract or where you pay for it with debt, there is a payback either way, and they're going to get their pound of flesh. So now that your student loans are gone, your obligation is gone, Raquel, and your debt is gone. Brad, how do you guys feel?

Oh, it feels great. It's very liberating. Well, as you can imagine, when we were putting $10,000 per paycheck, you know, into student loans and stuff, when that is done, that frees up quite a bit of cash flow, and so it's just kind of liberating. It's fun. Our investment accounts and other accounts have now just kind of started to grow. We've been able to grow more wealth on kind of the investment side of Stuff, save for kids, for college. It's nice having that buffer. More of a. More than just an emergency fund. I mean it. With all the uncertainties of life and different expenses and stuff that can come up. We're grateful that we're just in a better position to be able to handle that type of stuff. We're blessed to be in this position.

Feels good to have control of your entire paycheck, doesn't it?

Yeah, for sure.

So let's go back to four years ago. Let's imagine there's somebody else out there in your situation coming out of training twice the average debt of what doctors graduate with on average, maybe an obligation, wondering if they can ever pay it off. What advice do you have for that couple?

So honestly, I would say read the White Coat Investor because it's just, it's so clear for our profession and just, you know, everything you laid out. So it's just an amazing resource actually. Take the time to sit down and write an IPS and do the hardware. It took grad mostly a lot of time to get it started, but then once you have it, it's there and you can refer to it and it just is. It's kind of like a guideline that you don't freak out or you know, forget when it's Christmas time or something. You know, another thing that we talked about is, you know, work on your marriage, stay married. That's a really important, especially as a dual earner income. You know, it's important that we made sure that we weren't getting burned out and, and things like that. So that protects our wealth and our future. And then, you know, we kind of said keep your hamster wheel small. So we all have, you know, recurring costs, but let's, you know, try to keep that as small as you can so that you're not climbing this giant wheel every month. You just, you're rotating just a small amount of cash, relatively speaking. So kind of keep that lifestyle inflation down. You know, we, we've enjoyed our life. You know, we haven't, we haven't been living on rice and beans or anything like that. We've been happy while we're, while we're really chipping away at this. So I would say kind of don't look to the future, get big eyes and, and go buy all the stuff. Kind of really keep your mind focused on what is actually important that will actually bring you happiness.

That's good advice. Brad, anything to add?

No, I don't think so. I think Raquel hit the nail on the Head as usual. I think the IPS was a big benefit even to our marriage, just that we were both on the same page. We kind of had a chance to write our thoughts down on what our goals were, and we continue to use that. And it's just been very beneficial to being on the same page, which I think is kind of the key to enjoying our life and making sure that we are still spending money on the stuff that really brings value to our life, even during this whole time with aggressively paying stuff down.

Okay, so you have just freed up $10,000 a month from your monthly budget. How much of it is going to go toward wealth building and how much are you guys going to spend and enjoy?

So we are spending and enjoying just a little bit more now compared to previous, but to be honest, I think we live pretty comfortably. I don't lack for anything. There's not really stuff that I feel like we're missing. So we're actually. We're using most of it still just to build wealth.

Awesome. Well, congratulations to you guys. You've done a fantastic job and gotten that debt monkey off your back. And I'm confident that your story will provide inspiration to somebody else that's wondering if they can do what you've done. So thank you for sharing your story with the Milestones to Millionaire podcast, and thank you for being here today.

Thank you so much.

Thank you. Thanks for all that you've done for us today.

We've appreciated it.

All right. That was great having them on. I love the contrast, right? One person paid for school with debt, one with an obligation, and both had their pluses and minuses. But in the end, it's kind of the same thing, isn't it? And that's what I found when I was paying off my obligation. It took me four years to pay it off. And sometimes it takes people longer than that to pay off their student loans. Sometimes you can do it faster. But either way, there is a price to be paid if you can't pay cash for your medical schooling. For those who aren't aware, an ips, an investment policy statement, is basically a written investing plan, and they credit that with a lot of their success. And certainly Katie and I credit a lot of our success to also having a written investment plan. It certainly helped us dramatically in our first few years out of residency, and we still follow our written investing plan. Love what you hear on the podcast. Looking for more great white coat investor content? Head over to our YouTube channel where you can watch video recordings of our podcast. Short snippets of financial tips explained succinctly by me and others and deep dives into topics for more in depth learning. You can even learn all about real estate with webinars from our real estate partners. Check out all this and more@YouTube.com TheWhiteCoatinVestor. You can do this and the white coat investor 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.