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Ask Dave

Don't Slip Into Doc-itis

Jean and her husband have $170,000 in student loan debt. They bought into a practice, and that debt is another $450,000. Dave says they need to live like students to pay this debt off.

QUESTION: Jean in Spokane is calling because her husband just completed his residency, and they have $170,000 in student loan debt. They bought into a practice, and that debt is another $450,000. He’ll be making about $300,000 a year. Dave tells Jean they need to live like students and pay this debt off quickly.

ANSWER: Let’s do a little math. Let’s live on $50,000 and pay taxes and pay $200,000 a year on this and be done with it before interest rates matter. You do not go buy anything else. You have already bought too much. You don’t buy a house, and you don’t go get a new BMW because you’re a doctor’s wife. You guys have made a freaking mess here, and you better act like it.

Docs do this stuff all the time and wander in there like they think this is all going to be okay, and then it takes them 20 years to clean up this mess because they go buy a bunch of other crap, too. You guys need to live like you’re in residency until you get this mess cleaned up. What we’re talking about here is you’ve got $620,000 in debt. At $200,000, you’ve got three years—at $150,000, you’ve got four years—to clean up this mess. Then you’re going to be so used to living on nothing and won’t have any payments, and you’ll have money coming out your ears. He’ll probably be making more than $300,000 by then. You’ve got three or four more years of hard times.

Knock the student loan out. It’s the smallest one. Just be done with it, and besides that, they’re forever. They don’t go away. The only way a student loan goes away is you die. You have no need to be investing in anything right now until you get this mess cleaned up.

You feel overwhelmed, and I’m not trying to be melodramatic, but I want you guys afraid enough that you focus on this and don’t slip into his peer group, which is buying crap like crazy and comparing where they traveled this summer. You don’t get to do any of that. I don’t want you afraid enough to be stressed out and freaked out, but I do want you afraid enough that you don’t slip into any other purchases and/or let your lifestyle creep up because you’ve got a great income. You do have a great income, and he’s worked really hard to get there. I want him to reap the fruits of it. I love that a doctor makes serious money. I think you ought to because you’ve been going to school for decades while other people just went out and started making money. Doctors have paid a price to get there. If he makes $500,000, it suits me. I don’t care.

Knock the student loan out as fast as we can, then knock that other loan out as fast as you can and keep the lifestyle down.