MtoM #75 - Postdoc Pays Off High Interest Debt

This is the White Coat Investor Podcast, Milestones to Millionaire. Celebrating stories of success along the journey to financial freedom.

This is Milestones to Millionaire podcast number 75. Postdoc pays off credit card debt. If you're finding our podcasts informative and helpful, we would encourage you to sign up for our monthly newsletter. It is totally free and includes useful, actionable information not available on the regular blog posts or this podcast. It's almost like being in a secret club. The kind of club that can boost your knowledge and enhance your wealth at the same time, with no strings attached. Sign up today@whitecoatinvestor.com Newsletter. You can do this, and the White Coat Investor can help. All right, we've got a great episode for you today. A little bit different from some of the other ones we've done, but I think super inspiring. And I know there's a segment of our audience out there that can really relate to this situation, so I've been looking forward to it. If you would like to be on this podcast, if you would like to celebrate your milestone with us, you can do so@whitecoatinvestor.com Milestones. And I don't care what your milestone is. Whether it's getting back to broke, whether it's paying off a car, whether it's buying a car. I think we did one like that a while back. Maybe it's paying off your med school loans or becoming a millionaire or becoming financially independent or paying off a mortgage. Whatever it is, we'll celebrate it with you and we will use it to inspire others to do the same. Let's get our guest on the line today. All right, our special guest today is Randall Porter. Welcome to the Milestones to Millionaire podcast.

Dr. Porter, thank you for having me.

Tell us a little bit about your professional journey so far and kind of where you're at.

So professional journey has been a little bit circuitous, but in short, finished med school and applied ophthalmology. Didn't get in, unfortunately. And so I've been doing a postdoc the past year, which I'm just now finishing up, and I actually applied this last time around into anesthesia, and we'll be starting residency in a month.

Congratulations on that match. That's awesome.

Thank you.

Not an easy thing to do these days. The match is becoming more and more competitive, and so I think there's going to be more and more people every year in your situation of applying twice for it and trying to figure out what to do with that other year. Which part of the country are you In.

I'm in New York state right now.

And tell us what we're celebrating today.

Paying off all my credit card debt.

Awesome. And how much did you pay off?

I think at its peak, it had gotten to 26 something.

$26,000 in credit card debt. Where did that come from? What did you buy?

It came from having a wedding at a very inopportune time financially. So my wife and I are from Washington state originally, and essentially we were engaged and found out that I was going to med school in New York, and it was either get married before we left when all of our family was together, or try and get everybody over to New York sometime. And so it just made more sense to do it then. But that meant a wedding when we did not have very much money because I was doing research at the time, so.

So you put it on the card?

Yeah, we had help from family, and we just put little things on the card and said, oh, it's fine. Next month we'll have the money. And then another expense would come in and another would come in, and by the end of the year, we had less than 10,000 in debt. But then we started med school and, you know, making negative 80 a year.

So did you continue to spend on the card, or did you. Or was this just all interesting?

It was pretty much interest. I mean, we used the cards, which we probably shouldn't have, but just for our living expenses. But the reality was that when you're getting a small stipend twice a year for med school, and you have to somehow make that work, and then trying to pay off credit cards at the same time, we just couldn't outpace our interest.

What was the stipend from?

From med school, like living expenses through the loans.

Okay, okay, so it was loan money, too. So you get to the end of med school, you're in March of your fourth year, you find out you didn't match, you owe I don't know how many hundreds of thousands of dollars in medical school loans and $26,000 in credit card debt. How'd that feel?

Terrifying. It was a very strange day because that evening, I also found out that my wife was pregnant, which we'd been trying for, for a while, but having that calm on that day, it was just emotional whirlwind.

So at some point after that, you decided you wanted to get rid of this debt. Why? What happened?

Oh, it wasn't suddenly I wanted to. We'd been trying for four years. I'm fairly debt averse, so it was eating at me. But the reality was we just had no means to make it work. And what changed is that all of a sudden I was a postdoc and making a salary.

So what kind of money did you make as a postdoc?

$48,750.

So you're making less than $50,000 a year. You've got $26,000 in credit card debt. At what interest rate? Do you remember what the interest rate was on it?

It depends on which card you're talking about, but around 26 to 29.

So terrible interest rate. It's over half your income, and yet now it's gone. How did it go away?

Two things. One is credit card companies, when you stop paying, as I eventually had to do in med school, will eventually come at you with offers of 40, 50, 60% off to settle it. That helped a lot.

Which is about what you borrowed initially.

Yeah. And then the other aspect is my parents helped out. They said, we see that this is eating up all of your money and livelihood. So it's essentially an advance on my inheritance.

They said, so they gave you a little bit of money. You got some discount. How much of it did you pay off using your earnings?

Using just my earnings, it was about 60% or so of the final amounts, not of the original 26,000. But that's also not counting all the payments during med school, which, I mean, I'd have to go back to see how much that is, but.

So did it end up being easier or harder than you thought to get rid of this debt?

Oh, way harder. Way harder. Yeah. No, my. Like I said, when we took it on initially, it was just, oh, a few hundred here, 1,000 here, different things, getting ready for the wedding. And we really thought it wouldn't be that hard to pay off. But the second your income dips and you can't keep up with the payments, it snowballs insanely at that interest rate anyway.

Tell me about the conversations you had with the credit card companies when you're trying to negotiate the balance down.

Yeah, it was tough. There were, you know, we would call them and tell them, we're not making any money right now. We're doing the best we can. Some of them were somewhat nice and would give at least a couple months or something where they said, you don't have to make a payment. Others said, noted, but it doesn't change anything. Eventually, it just became impossible to deal with for me. And that's when I stopped making payments and had to come back to it later.

So how does it feel now? To have that high interest debt gone.

Oh, it's amazing. It's so freeing. And I mean, yeah, we still have 383,000 of educational debt with now a.

Plan to pay that off.

Yes. And I've been doing my PSLF certifications. I don't know if I'll stay in academia or what, but no reason not to take advantage while I'm here at a postdoc and then in residency and prepare myself.

So if you could go back to past you just got engaged thinking about paying for a wedding using a credit card, what advice would you give yourself?

Smaller wedding. It was tough. We wanted a smaller wedding. And the reality is that you also want to invite everyone you can from your family, and it just makes it too big. So as wonderful as it was to have everyone there, I don't think it's worth five years of misery financially.

What do you think your family members that came to the wedding would think if they knew what you had gone through the last five years to pay for that wedding?

I think they'd be horrified. I think they would feel really. Yeah, I think they would understand, put it that way, if we had decided to go smaller. But even we had no idea.

Somewhere out there, there is a doc, there is a med student, there is a newly graduated dentist, there is a resident that has $20,000, $30,000, $50,000 in credit card debt. What advice do you have for them?

First of all, it's doable. So don't give up. Because I know I was in that position of just saying, I, I can't, but you can and, you know, just tackle it head on. If you are in med school and you're not making money, reach out to the credit card company. Some of them will settle with you for much less. I'd say do that regardless of if you're making income or not. And then if you're in residency or you're an attending, cut your expenses until you can pay this stuff off. Because we were living on very little in med school trying to make payments, and you can definitely do it on a resident salary.

So what's next in your financial goals?

Next will be maxing out retirement accounts. We've got a little bit in IRA and I'd really like to max out our IRAs and then our 401, or I guess 403, that I'll be starting up here.

Awesome. Well, Dr. Porter, congratulations on your success. You've wiped out a lot of debt. Congratulations on that. Congratulations on your recent match and wish you the best of luck as you progress down the Milestones to Millionaire.

Appreciate it. Thank you.

I hope you enjoyed that episode as much as I did. You know, I've told you before, we will celebrate any milestone with you. If you've accomplished something and you're proud of it, let's use it to inspire others to do the same. There are docs, there are trainees that have significant financial strains, significant financial problems in their lives. This is a good example of one with a whole bunch of credit card debt that was at 26% plus. That stuff grows quickly at 26% plus. And so we want to celebrate those just as much as we celebrate the DECA millionaires and the people that are financially independent, four years out of residency and those sorts of situations. It's not that we're not impressed with those people, is simply that we want to provide experiences across the spectrum from struggling desperately financially to being super, super successful. Because all of us are at a different point on our pathway on these Milestones to Millionaire. And we want somebody that we can relate to and we want them to inspire us to take the next step and to make progress on that pathway. If you're finding our podcasts informative and helpful, we would encourage you to sign up for our monthly newsletter. It is totally free and includes use actionable information not available on the regular blog posts or this podcast. It's almost like being in a secret club. The kind of club that can boost your knowledge and enhance your wealth at the same time, with no strings attached. Sign up today@whitecoatinvestor.com Newsletter. You can do this and the White Coat Investor can help. Till next time, I'm going to sign off here. This is the Milestones to Millionaire podcast. Keep your head up, shoulders back. You've got this and we can help. We'll see you next time.

The hosts of the White Code Investor podcast are not licensed accountants, attorneys or financial advisors. This podcast is free entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.