My Road to Financial Literacy: Debt Management

 

I have had several OMG moments thus far related to my finances and they were not all “big O” moments, if you catch my drift. The first soft OMG was after I graduated from medical school and saw the $100000+ that I owed. I thought to myself, “it’s not that bad, I can pay that off in a reasonable amount of time.” During residency I blissfully ignored a few years of annual capitalization on my lump sum.  I had a little nudge to reality when a financial planner visited my residency to promote retirement (Roth IRA, 401K, 403b) planning and put us on the hook for investing once we became attendings.  I started to pay some interest i.e. minimal payment, when the second OMG moment of how my debt was ballooning became grossly apparent.  Minimum payments were made despite living in subsidized residency housing and not having any dependents – shameful.

Could I have afforded more than the minimum? I didn’t spend enough time on that question to consider doing otherwise.  Perhaps I just didn’t want to pay more than the minimum. The third OMG came when my loan balance was not budging, despite those well intentioned minimum payments. My disclaimer is that this was my only debt, no credit card debt, no mortgage, no car payments, nada!  The fourth, and biggest, OMG moment came when my father passed away in 2014 and I had no one to guide me, ask trusted questions about money or to hold me accountable.

Since then I have grown especially curious about money.  I have scoured the internet with the pros and cons about multiple topics including paying off loans aggressively vs. slowly, to buy or to rent, to lease or buy a vehicle, retirement planning options, investment options, etc. I decided to be more aggressive with paying down debt, with the painful realization that loans don’t passively decrease. I borrowed the money and I am responsible for paying it back in some form or another.

 

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Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Understanding your finances is challenging but we have to start somewhere. I started off trying to track expenses by hand with receipts – failed attempt. I also tried making a strict budget which also failed. Ultimately the best way has been to hide money from myself – for example on-line savings accounts and Credit Unions are a great way to make money less accessible; be sure to decline their debit card offer.  Follow the notion of paying yourself first for retirement, saving for goals and dreams, and debt.  Last priority is what funds remain for choice of lifestyle. The amount allotted in each category is flexible based on your priorities.

 

Within the past two years, I connected with a low fee financial planner who is in line with my priorities. He has been immensely helpful. Let’s face it, though I can advocate for myself, I certainly don’t have the knowledge and experience of the vast financial field.  It’s been 8 years since I graduated from medical school and I am still learning the basics.  So, take your financial OMG moments in stride, get curious, own your debt and be empowered.

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Image courtesy of imagerymajestic at FreeDigitalPhotos.net

~YAY