How this physician paid off $100,000 in debt in 6 months


First of all, I am far from a financial genius. I am also not a natural saver. Thanks to scholarships and jobs, I made it out of college without loans. But, I took out a $191K for medical school. In the middle of med school, I took a year off to teach. During that year, I didn’t put anything towards student loans and lived it up. Unfortunately, in forbearance, those loans accrued interest and that interest capitalized when I started repayment.

In residency, I started making income-based payments that came nowhere close to touching the principal. My husband and I bought a house in Nashville with nothing down. This turned out to be a great buy, but it is definitely on the “what not do to do as a resident” list.

My first attending job was in beautiful Savannah, Georgia. We bought a beautiful house on an island in an upscale gated community on the water. I had made it! Everyone told us we were living the dream. By now, my loans had grown from $191K to $237K (even after making about $25K in payments in residency). We had $237K in student loans and another $335K in-house loans. Add to that $40K in car loans and another $130K in loans for the Nashville house that we rented out. Altogether, we were a cool three-fourths of a million dollars in debt.

But everyone told us we were doing great! We paid our bills on time. We had no consumer debt. Our credit was pristine. So why were we unhappy? We walked a tightrope of balancing income versus expenses.

We decided to make a change. We had to make a change. We were drowning.

We started a debt snowball. It was initially only an extra $500 or so to the snowball because we were trying to save at the same time. Slowly, we paid off one car.

Then, fate struck.

We were close to paying off the brand new Honda Pilot when someone hit it and it got totaled. We got a $23K insurance payout.

At this point, we could have replaced our old car with a nicer car. We could have put that $23K towards a newer, fancier financed car and had a relatively small monthly payment. I look back at this decision as the real turning point in our thinking. We made the hard call. We would buy another Pilot because we really needed the space, but we would buy a used one. It turned out to be exactly the same year as our old one. We paid for that car in cash and walked away. That felt good.

We felt the frugal juices flowing. I came to the end of my contract. We decided to “deflate” our lifestyle from that of an attending to that of a resident. This required a behemoth overturning of our life. My husband really wanted to go back to New York. So we decided on his hometown — Albany. Yes, we moved from the beach to “the tundra,” as I lovingly call it. Happy husband; happy life.

Buying another house was tempting. But, with New York taxes and the costs of buying and selling, it didn’t make sense. We made the decision to rent the minimum we could be comfortable with. This wasn’t an easy decision. There was a lot of pressure to keep up with the Joneses. We even had to stay with my in-laws for a few weeks to house hunt. We survived and found a place close to the hospital. And miraculously, we are still friends with my in-laws.

Now, we could really accelerate the loan payback. We made a budget and wrote down our true needs. There weren’t many. I refinanced my student loans.

Here was the “aha” moment: starting at $208K at 3.875% interest rate, if we paid $5K a month, the student loans could be gone in 45 months! We would pay $15K total in interest. Or we could cut back even more and pay $7K a month and the loans would be gone in 31 months, paying $11K in interest. So we gave $7K a try.

I started shopping at Aldi instead of Whole foods. We switched to Google Fi instead of Verizon. We cut the cord with cable and started utilizing credit card points for travel. Cooking in large batches and cutting out buying lunch at work made a huge difference. My husband started servicing our cars. I started cutting my own hair. I even made a loan jar of macaroni’s to visually motivate us.

To our surprise, even with two kids in daycare, we could consistently meet $7K a month towards loan payments — sometimes even more.

We were able to put $44K through our monthly budgeting and about $36K from bonuses and tax refunds towards the loan. We had about three months of emergency fund saved up. We decided our debt was an emergency. So, we kept $10K for an emergency fund and put the rest towards the loans. With that extra $20K, we came to the grand total: $100,000 in loan repayment in 6 months!

We are finally moving the ticker and will be rid of this loan monkey on our backs sometime next year. More importantly, though, my husband and I are finally getting back to the spark we had before taking on so much debt. We are living a resident lifestyle, but we have never been happier. Goodbye, lifestyle inflation. We can thrive on less. Hello, to aligning our life, our money and our time to reflect what is really important to us — our family, our time, and our freedom. We still have some debt but we have a vision for our future, and we are walking hand in hand towards it.

And the best part is this: Our journey is just beginning.

“The Frugal Physician” is an internal medicine physician who blogs at the Frugal Physician.

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