MtoM #45 - Pediatrician Pays off $185K in 3.5 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 45. Pediatrician pays off 190k in four years. Do you ever find yourself wishing there was somewhere to go to ask your finance, insurance or investing questions? The White Coat Investor community is a great place to turn. We have a thriving community across all of our social, Facebook, Twitter, Instagram, Reddit and our WCI forum. We have been discussing solutions to your money problems since 2011. Join the Conversation with thousands of other white coat investors. Follow WCI on your favorite social media platform for financial resources, tips and strategies. Just head to your platform of choice and search for the White Coat Investor. You can do this and the White Coat Investor can help. All right, let's get our guest on the podcast. Okay. I am here with Mitch Peterson, a pediatrician who has accomplished a milestone recently. Welcome to the Milestones to Millionaire podcast.

Thank you. Appreciate it. It's nice to be here.

So tell us what your milestone is. What have you done recently?

Well, it was like last February, so not too recently. But we were able to pay off our student loans. About $185,000 in student loan debt that we paid off. I finished residency in July 2017, so a little less than three, two and a half years, I guess. Is that what that would be? Yeah.

2017 to early 2021. Three and a half, right.

Three and a half years.

Well, still well done. Three and a half years, $185,000. Well done. Congratulations.

Yeah, we're excited. Yeah.

So what was your average household income over that time period?

I don't know what the average. The first year combined residency and my first year attending salary would probably been like 120, and then the next year was 150, and the next year was 170, and then 210, something like that.

So you certainly didn't do this by making $800,000 in a year. You had to do some hard work, it sounds like, to pay off these student loans. So how'd you do it?

One of the most important parts for us, and I think it's really worth saying that we are very lucky to have very generous and well to do families like my parents, my wife's parents, my grandparents, her grandparents have all been very successful and that's helped us in direct ways. Like there was a little bit of inheritance that came our way and we did put it towards student loans. But then also there's sort of this financial privilege that happens where when they take us to really nice vacations and they buy our kids gifts and they take us out to dinner all the time, that it's kind of like much less pressure to do that ourselves. It makes it really easy to live frugally. So I think that was a big component, is that we have these people surrounding us who are very generous to us and make it easy to not spend very much money. But then we also rented. We had a good situation where we had pretty affordable rent, so we rented that whole time until we bought a home in October of 2020. So in the last 3 months, we had a home and we were paying off loans, but our rent was low enough that we could. I mean, our loan payment was essentially like a mortgage. So we were paying like $3,500 a month. And then whenever extra money would come our way, we'd throw it at the loans. And right after residency, I consolidated and refinanced the loans using the link on the WCI website and found a good rate. It was interesting. I used a variable rate because it was the lowest of the two on your podcast and on your blog, it said, yeah, use a variable rate. It's lower. The odds that the rate's going to jump up significantly over the short time period are so low. And so I did that in September of 2017, and that fall, they jumped up by, like, 1 or 2%. I was like, no way. Like, what are the odds that I did that? But then, you know, and I was like, I should have just come to the fixed rate. And then over the next two years, they dropped significantly again. So crystal ball, as cloudy as ever. But anyway, those are some of the things that we did.

Yeah. Yeah, that's what my. That's what my shirt says today. I've got my crystal balls cloudy shirt on, so.

Oh, nice.

Yeah, that's for sure. I'm glad it worked out for you. But that is the risk that the rates go up significantly early in the loan. All right, well, I mean, you got some family help, but clearly you didn't get that much family help because you had student loans.

That's true, that's true. They did a good job. I feel like they did a good job with letting us go. And I appreciate that, Honestly, our families probably could have done more without it affecting them much, but they were like, no, no, this is your deal. You're going out there, take out your loans, and you do your thing. So they did a good job of teaching us, I think, financial independence and letting us kind of do our own thing, which I'm grateful for. Like, we really wanted that, you know, as much as they just give us things. And it's hard to claim that we had much responsibility for a lot of it. It does feel nice to feel like we were on our own and kind of doing it ourselves and accomplishing it ourselves.

Yeah. Now, what was the hardest thing as you did it? Was there something you wanted to buy and didn't because you were trying to pay off the student loans?

Probably a house. Like, starting from the year my wife and I got married between our junior and senior year of college. And we lived in the house that my great grandparents owned. So it was like an old, old home. And then did medical school in Houston and we found a pretty affordable place that was older. And then we moved into my wife's grandparents home when we were in residency. So it was. I mean, we've just been living in an old small bathroom, you know, trying to fit in the shower places. So just. I think that one of the hardest things was not upgrading our living accommodations, but that was probably the hardest.

Now go back to where you were four years ago, looking at this debt, wanting to pay it off, and now being here on the far end of it, did it turn out to be easier overall or harder than you expected it to be?

It's great. Now on the other side of it, it's great. You know, I think our personalities, my wife and my wife's personality. My personality are such that we had always kind of wanted to do this. This is kind of how we envisioned it even before we'd become part of the white coat investor community, which happened like my third year of residency. We'd always said, like, hey, if we're going to be making whatever it is, 150, $200,000, and we have $200,000 in debt. Like, how many years can it really take to do that? You just keep living cheap and you pay off the loans. So it had always kind of been our plan to pay it off quickly. Of course, through the white corner of US community, I felt like we really were able to establish the actual plan of how to get that done. I think it was about what we expected. And I wouldn't say that it was hard for us other than the living situation, for sure. It would have been nice to move into a home right away.

How's it feel? How's it feel to have all those student loans gone, to have the monkey off your back?

Feels great. Yeah, it feels great. Although it did just Sort of get replaced by mortgage payments. So it wasn't like a whole bunch of new freedom for us. But it feels good. It's nice to have that behind us. You know, I have my spreadsheet where I keep track. Once a month I'll go through and keep track of our net worth. And it was really nice to see that student loan negative number dwindle down and be zero. And it's been like I said, what has it been, seven, eight, nine months or something? And I still just leave that zero in place. Cause I just love seeing no student loans subtracting off from the net worth value. So it feels nice. And you know, right after it happened, we were like, we should celebrate, we should go do something. And we had a trip planned to Phoenix with our family for spring break and we went. And we never really could bring ourselves to like do anything really big other than that. So we're just not big spenders. Very, very much. But it feels really nice not to have student loans.

That's awesome. You know, the nice thing about that mortgage is at least you can sell the house. You can't really sell your brain and get rid of the debt.

That's true. In fact, after I think I posted about our paying off student loans on the website and mentioned that I had rented instead of buying, and somebody's like, well, if you bought, you would have been able to accumulate based on the housing market rise, like so much more money. I was like, yeah, that's true. So it wasn't necessarily the. Not that you can predict the future housing market, but if we had purchased right when we got out of residency, we certainly would have more equity on our home.

Yeah. The problem is that cloudy crystal ball again.

Right, right.

So some people suggest that, they say you should carry your student loans, you know, especially if they're low interest rate loans and invest in something with a higher return than your interest rate. Now they're not usually talking about buying a house when they're saying that, but people say that all the time. Drag your loans out. What do you say to someone like that?

You know, I think that's, that's, that's a financially true statement. So my grandpa tells a story about his dad that I, I think has really influenced my financial life quite a bit. My grandpa was born in 1937, turned 84 last year, this year. And he talks about how in the late 20s, his dad was doing well at the steel mill down in Provo and was doing well enough that he bought a fancy new car. I don't remember what kind of car it was, but bought this new car and was happy to have this new car driving around. And it wasn't much long after that that the Great Depression hit and that he was just so mad to have this fancy car sitting in the driveway. Like, why did he do that? And he made it like on a reasonable assumption that his finances were going to be similar in the next month and the next year, that they were in the past month and the past year. But you never know. And so that's really influenced me to say that I know what my salary was last year and I know what the healthcare looks like. But the pandemic, if anything, has showed us how quickly things can change and everything's not quite as sure as we think that it would be. So I think that financially, sure, like if you can beat the percentage rates of a loan in a market, that's great. But there's something to not having debt hanging over you because it provides, I think, some safety. And behaviorally I like that. I like being low debt. We're throwing extra money at our house, trying to pay off our mortgage because I don't like having debt. Kind of opens you up to some financial freedom and safety, even if it's not the mathematically correct.

Now, halfway through your payback period, the federal government basically stopped making people with federal loans make payments and their interest rate went to zero percent. But you'd already refinanced into private loans at that point. How did you feel seeing that happen to others?

I was fine with that. That didn't bother me. I have kind of. So I actually initially was planning to do a fellowship, pediatric fellowship. And so I had consolidated my loans into the pay as you run program at a medical school with the intention of. Because I would probably have ended up working for fellowships in pediatrics, almost always at academic hospital. So we probably would have gone for loan forgiveness. But I really don't mind paying back my loans. I kind of feel like I borrowed them. The government gave me that money and this is what I'm going to do and I'm going to pay them back. So it didn't bother me that maybe other people were getting a better deal or something. I feel like these are my loans and I'm going to pay them back.

Let's go back to a few years ago, four years ago, or maybe even eight years ago. Somebody's sitting in your situation. They're coming out of medical school, they owe all this money, or they're coming out of residency and they owe all this money. What advice do you have for that person?

Oh, it's not unique to me. I think it's your advice. I think it's great advice. Don't let the lifestyle creep happen too quickly. Feel free to, you know, take. Take a little bit. Give yourself a little bit of a raise. I think it's a really nice accomplishment to finish training and be done with residency and be an attending, but a little bit goes a long way. And to avoid lifestyle creep as long as you can find out the best way to get rid of your homes, whether that's refinancing or going for loan forgiveness, and just knock it out. Like, you know, everybody has different risk tolerance. Everybody has a different way. They like to handle that. But I think it sure feels good to just knock them out and knock them out quickly. And we're grateful that we did. We're happy that we did. It's funny, in the end, like, looking back, it's like, that wasn't very long. It didn't take that long to do that, and it wasn't that restrictive. But again, part of the not being that restrictive is that we've got people taking us nice dinners and going on nice vacations. So I understand that it's a little bit harder for other people who don't have that sort of release valve to help them feel like they're celebrating nicer things, but I'm grateful that we did, and I would recommend it to anybody.

Awesome. Well, congratulations to you on your success. This is a big accomplishment. You should be congratulated on it. It is no small task. Thanks to pay off $185,000 in loans in three and a half years on a pediatrician's salary. It is no small task. You should be proud of yourself, and I know your story will be inspiring to others who want to do exactly what you've done. So, Dr. Peterson, thank you. Coming on the milestones to Millionaire podcast.

Well, thank you. I really appreciate everything you've done. The books, the blogs, the website. I still remember when I finished residency and just listening to podcasts one through 20, trying to figure out what Roth meant and what these investment accounts were and how to. Anyway, it's been just incredibly helpful. I got the buyer financial advisor class. We've done that one. So you've been a huge help to us financially. So this tons of money. So I appreciate it.

Well, it's our pleasure. Thank you so much. All right. That was great. You got to love pediatricians. You know, I'm not sure who are the nicest docs in medicine, whether it's the pediatricians or whether it's the oncologist, but they both got to be up there at the top. You know, just so humble, so acknowledging of the help that they've received and yet still have done a fantastic job on not a ton of income. You know, well below the average physician income and just barely below the average amount of student loan debt. And still three and a half years. They paid off their debt faster than I paid off my commitment to the military. So I say that's very, very well done. Hope you can take some lessons from that and apply them in your life. Whatever your financial goal may be, if you want to come on this podcast and share your latest financial milestone, we'd love to have you. Whitecoatinvestor.com Milestones is where you apply and we'll get you on the podcast and celebrate with you and use your experience to inspire others to do the same. Do you ever find yourself wishing there was somewhere to go to ask your finance, insurance or investing questions? The White Coat Investor Community is a great place to turn. We have a thriving community across all of our social Facebook, Twitter, Instagram, Reddit and our WCI forum. We have been discussing solutions to your money problems since 2011. Join the Conversation with thousands of other White Coat Investors. Follow WCI on your favorite social media platform for financial resources, tips and strategies. Just head to your platform of choice and search for the White Coat Investor. 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 White Coat Investor and the Milestones to Millionaire podcast.

My dad, your host, Dr. Daly, 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.