Paying Off Your Medical School Debts
Today, many medical professionals rely on loans to pay for their education and training. As a result, they begin their careers with a high level of debt. How quickly that debt can be paid off largely depends on the size of a professional's salary or how quickly a new medical or dental practice can get off the ground and begin generating income.
If you are concerned about paying off your student loans, a good starting point is to list all of your outstanding debts, with their monthly payments, interest rates and times remaining until that final payment. The information on your total monthly loan payments should be included in your household budget in the fixed expenses category. In general, you should try to keep your total debt payments in the range of 15 to 20 percent of your net household income.
That means limiting your discretionary expenses – such as a new vehicle, boat or country club membership – while paying down your educational debt. Regardless of your income level, you should remember the maxim: 'It's not how much you make but how much you keep," that will determine your long-term financial success in life.
The rule of thumb for paying off student loans – or any other type of debt – is to pay as much as you can on the obligation that has the highest interest rate. That strategy reduces the total interest costs you will pay on your debt, and can lower your debt payments dramatically as you pay off one loan after another.
Because credit cards typically carry much higher interest rates than student loans, it makes logical sense to set realistic goals for repaying your overall debt. Consider how much you can afford to pay each month on your credit cards – or a high-rate automobile loan – while paying at least the minimum amount each month on your student loans. If you can pay an extra $50 or $100 a month on each credit card – or write a check for the entire balance to avoid any interest charge – you can make rapid progress toward paying off your debt. Also, you should always make your payments on time to avoid hefty late charges.
Having a clear goal and a solid financial plan are the keys to paying off your medical school loans while still enjoying a comfortable lifestyle.
Adapted from David Katz’ book, “A Financial Prescription for Doctors and Dentists: Strategies for Achieving Your Personal and Career Goals”
David is an Accredited Investment Fiduciary® (AIF) and an Accredited Asset Management Specialist (AAMS®) who advises professionals, retirees, families, and other clients on personal financial strategies. His focus is on financial planning and asset management. David has more than 28 years of investment and wealth management experience, and is the author of two books “A Financial Prescription for Doctors and Dentists: Strategies for Achieving Your Personal and Career Goals”(2015) and “Beyond Performance: How Financial Advisors Deliver Added Value to Their Clients” (2018)
Raymond James & Associates, Inc., member New York Stock Exchange/SIPC
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of David Katz and not necessarily those of Raymond James.
